Staying Ahead: Focus on What is Trending Within Treasury Automation

Staying ahead of competition requires continuous development of treasury automation and use of modern technology. Treasurers should look for ways to use latest technologies to increase profitability and efficiency, especially in FX management, a still highly manual process.

When your resources are limited, their allocation and efficiency become a key priority. Treasurers are now expert in searching these ways of enhancing cash management, because in the meanwhile, their job becomes more complicate for many reasons and combined challenges. If you don’t have the resources, you must have ideas to do your job better!

Virtuous trilogy

Treasurers ideally are looking for an FX management organization fully automated. Their credo is: automation – efficiency – cost optimization. Top of mind for most Head of Treasury we can find automation of daily chores. Today, CFOs require to get real-time access to information and to get tools to support collection and visualization of exposures. It is a baseline requirement, they all have. Treasurers therefore required deal execution as part of automation process, to increase productivity and control. Trading in the FX and money markets requires real-time updates of rates and exposures, especially at time of increased volatility and geopolitical risks. They simply need platforms (SaaS solutions) to connect existing software’s and exposures data repositories, as well as portfolios of hedging instruments and, in between, the execution platform(s) to perform these hedging strategies automatically and 24/7.

The problem with TMS non-native SaaS solutions, they are less agile, comprehensive, and equipped for a real-time efficient FX management. They simply don’t have the scalability and capacity to measure up to what is expected from treasury. Modern technologies and solutions like KANTOX or DEFTHEDGE, requiring use of API’s enable to connect to other tools upstream and downstream, for better efficiency, Straight Through Processing (STP) and automation of execution without interruption.

Automation, a way to attract and retain talents in treasury

When we focus on (hyper-)automation, we can expect to help people thrive and really enjoy (more) what they do. Bringing the technology is an additional motivation often undervalued. It may help teams reducing the manual work and the error-proneness of spreadsheets and copying figures from one system to another (i.e. export/import of files is what I call the “Financial/Treasury Supply Semi-Manual Reporting Chain - exhausting). Our vision at Simply Treasury is that we should harmonize, automate straight-through processing with modern tools. It is also a great motivation factor for teams. Treasury teams should start working “smarter”, automating what can be further automated and dig into processes to eliminate manual or semi-manual ones freeing time for the development work.

Historically, the main reasons for automatizing treasury tasks have been cutting costs, ensuring higher financial returns, and avoiding human errors. There are still drivers. However, automation has also become a retention factor, for keeping people and employees motivated. Treasurers want to use their skills in analyzing risks, hedge risk exposures on other tradable markets and be more a partner to management and to the operating businesses. We all too often forget that the new and latest generations are motivated by other factors than their elders. The job, the quality of the job, the content and the tools are much more important than we think. Generations Z & Y tire more quickly and are more focused on efficiency. They are therefore looking for automation, not out of laziness and to work less, but to work better and to occupy themselves with more rewarding tasks, to have a greater impact on the company through their work and to play a more analytical and strategic role than a purely executive one. They are intelligent and know what they want, while at the same time acting in the best interests of the company. These generations are and will be the drivers of change as the baby boomers retire. It's time to automate what hasn't yet been automated. When we "sell" a project, such as an investment in a CMA tool, we never highlight this "staff motivation" element in the ROI’s. And yet it's a qualitative element, and an important one, when it comes to building staff loyalty. A treasury employee who has a quality job and isn't drowning in operational and administrative work is a "happier" employee. Let's not forget this element, even if it remains tricky to present to a CFO.

In-House FX Management improves cash management

In a high for longer interest rates period, more than ever, the demand to automate in-house banking and software has increased. It is a tool to keep cash within the group and to enhance pricing mechanism and financial governance. The objective is also to reduce costs related to FX trading with external banks. Centralizing all foreign exchange (FX) transactions virtuously increases global visibility, enables positions to be offset (where possible), and enables FX to be managed centrally at a single point (because the machine doesn't care about time zones or when an identified risk needs to be hedged). Centralization within an IHB (i.e. In-House Bank) also makes it possible to cover and hedge all currencies and thus offer operational staff the possibility of invoicing or being invoiced in the local currency of the counterparty (which is still highly appreciated), while retaining control of exchange rate risks. This shows the power of the new Currency Management Automation (CMA) solutions, which can handle the entire process from A to Z, end-to-end, from the identification of an exposure to the settlement of the transaction and its currency hedging. It is therefore a panacea for managing foreign exchange risk, which remains one of the treasurers' priorities according to the annual EACT survey. What's more, as explained above, CMA solutions are an ideal complement to TMSs and their weaknesses or shortcomings, offering a decision-making tool, sophisticated reporting and automated execution day and night. We're delighted that the treasurer will finally be able to devote himself to other, more interesting and rewarding tasks.

François Masquelier, Chair of ATEL / CEO of Simply Treasury – Luxembourg June 2024

_{Disclaimer: This article was prepared by François Masquelier in his personal capacity. The opinion expressed in this article are the author’s own and do not necessarily reflect the view of the European Association of Corporate Treasurers (i.e., EACT).}