Treasury Operations Transformation: A Comprehensive Analysis with TIS Experts
The world of treasury Operations and finance is exciting, full of challenges, opportunities, and constant evolution. It’s a dynamic landscape that requires professionals to stay ahead of the curve, focusing on immediate hurdles and long-term strategic shifts. Welcome to our maiden panel discussion featuring the thought leaders from TIS, the Treasury Intelligence Solutions Company. Our distinguished panel comprises Joerg Wiemer, John Paquette, and Nicolas Christian, bringing industry experience and insights.
Joerg Wiemer, who spearheaded the treasury department at SAP before founding TIS, has held the CEO’s position and is now contributing his strategic acumen as the Chief Strategy Officer. John Paquette, a Vice President at TIS, brings valuable insights from the US market. At the same time, Nicolas Christian, founder of the renowned cash flow forecasting tool Cashforce, enriches the discussion with his expertise in communication as the Chief Communication Officer at TIS following the acquisition of Cashforce by TIS in June 2022.
Our panellists’ consolidated experiences promise to make this discussion enlightening and exciting, each bringing a unique perspective. We’ll delve into the treasury industry’s adaptive and innovative responses to changes in banking practices, digital transformation, and fraud prevention.
Here’s a peek into what you’ll learn:
- The Expanding Strategic Role of Corporate Treasury Departments in Companies
- The Crucial Nature of Managing Cash and Cash-Related Data in Our Rapidly Evolving Tech World
- How TIS’s Think Tank Views the Competition for Talent
- Why Cash Flow Forecasting Is Now the Heart and Soul of a Company
- The Potential Impact You Can Achieve with Efficient Research Management
- Why Fraud Prevention and Payment Security Should Top the Priority List for All Companies
- And Much More!
Join us on this enlightening journey as we dissect a series of insightful discussions from treasury experts. Let’s dive in!
The Rising Strategic Influence of Corporate Treasury Departments
One of the emerging trends in corporate finance is the increasingly strategic role of treasury departments. This trend stems from several factors and has significant implications for businesses.
The Gold Mine of Treasury Data
Joerg Wiemer, Chief Strategy Officer at TIS, highlighted the significant value inherent in the treasury team. According to Wiemer, treasurers want their teams to be seen as strategic advisors and thought leaders within the company. This desire has its roots in their vital role during financial crises. When times get tough, the treasury team becomes a lifeline, providing crucial insights into the company’s financial health.
Wiemer shared his experience as head of treasury at SAP, particularly during the financial crisis. He stated that treasurers sit on a gold mine of data, particularly cash flow data, that allows them to take on a strategic business partner role.
Simply put, cash flow is the lifeblood of a company, offering real-time and truthful insights into its financial health. This contrasts with accounting, which Wiemer describes as “an opinion maybe from yesterday at best”. The idea is that properly collecting, structuring, and analyzing this data can transform it into actionable information. The data can be used to reduce currency risk, increase yield optimization, and generate revenue.
This transformation of the treasury team from a cost centre to a profit centre could be facilitated by leveraging the available data. Wiemer recommends that treasurers strive to become more strategic by orchestrating and converting their data into actionable insights.
The Decline of the Treasury Silo
John Paquette, a Vice President at TIS, agreed with Wiemer’s points and further noted the trend towards treasury becoming less siloed. He explained that treasury teams who have invested wisely in technology had realized their potential as strategic business partners.
According to Paquette, Treasury teams are in a unique position to see certain trends or issues before the rest of the business because they directly handle the cash flow. For instance, they might spot a Days Sales Outstanding (DSO) rise earlier than the Accounts Receivable (AR) department. This allows them to share insights and provide strategic recommendations for improving Treasury operations.
The Demand for Quick, Insightful Decisions
Nicolas Christian, Chief Communication Officer at TIS, further emphasized the importance of treasury in facilitating fast and effective decision-making. He noted that in today’s rapidly changing economic landscape, exacerbated by crises like COVID-19, company leaders must make quicker decisions that could dramatically alter the company’s course.
The data and insights from the treasury department are critical in this context. Christian confirmed that, in recent years, the role of treasurers has evolved to become closely tied to the management and C-level teams of organizations, making them more strategic than ever before.
Navigating Economic Uncertainty in 2023
As companies try to navigate the economic turbulence of 2023, they face a landscape filled with numerous unknowns. In this context, Nicholas Christian, Chief Communication Officer at TIS, shares his views on how these uncertainties might affect business strategies and decision-making processes.
Embracing Uncertainty in Strategic Planning
The year 2023 is painted with a broad stroke of uncertainty. This encompasses multiple facets of the macroeconomic environment and other business-influencing variables. Some of the uncertainties companies must consider are currency volatility, supply chain disruptions, and geopolitical tensions.
Christian believes these uncertain factors should be embedded in every company’s strategic planning process. Businesses should incorporate these uncertainties instead of shying away from them into their forward-looking plans.
The Role of Scenario Planning
Given this backdrop, scenario planning becomes a vital tool for company leaders. It involves thinking about different future situations (or scenarios), each influenced by a specific set of variables. By mapping out these scenarios, companies can prepare for various potential futures instead of fixating on a single expected outcome.
Christian explains that navigating 2023 will be about manoeuvring between these pre-constructed scenarios. By observing which scenario starts to play out, companies can adjust their actions accordingly, staying agile in the face of changing circumstances.
However, Christian acknowledges that predicting the exact nature of what will happen is difficult due to the prevailing uncertainty. Yet, this shouldn’t deter businesses from strategic planning. Instead, it emphasizes the importance of flexibility and adaptability, allowing companies to adjust and respond swiftly to any unexpected scenario.
Why Cash Management Skill Sets Are Top Priority for Treasury Departments
In the shifting landscape 2023, cash management remains a pivotal function in treasury departments. With insights from John Paquette, Senior Product Manager of Global Liquidity at FIS, and Nicholas Christian, we delve into why mastering these skills is more important than ever.
1. Economic Uncertainty
The shadow of economic uncertainty and the potential for a downturn are key reasons for the renewed focus on cash management. Increasing borrowing costs and an unpredictable financial environment make careful day-to-day cash management a priority.
This means closely monitoring what a company does with its cash daily, enabling it to react quickly to any shifts in the economic landscape.
2. Technological Transformation
The second reason revolves around technology. With advancements like open banking APIs, artificial intelligence, and machine learning, cash management is undergoing significant changes.
These technologies offer treasurers new ways to handle cash on a day-to-day basis. One key focus area is real-time cash management. This approach offers companies a more strategic view of their finances, allowing them to make swift decisions based on up-to-the-minute data.
3. A More Strategic Treasury Role
Thirdly, the role of the treasury is becoming increasingly strategic. Treasurers are not just generating reports but using them to strategically manage daily cash.
Treasurers can use a wide variety of tools that weren’t previously available. These allow them to optimize idle cash or find innovative solutions for cash shortfalls. For instance, treasurers can leverage supply chain financing arrangements to take advantage of early pay discounts. Instead of investing in short-term cash investment products, they might do this by optimizing yields more effectively.
The Need for Data Analytical Skills in Treasury
According to Nicolas Christian, the treasury teams of the future will need to be data-savvy. Analyzing data is not just an engineer’s job; treasury personnel must be trained to be proficient data analyzers. This shift is critical for these teams to become truly efficient with the data they have at their disposal, closing the skill gap in many treasury departments.
Upskilling in Treasury: How to Harness Technology and Attract Talent
As host Hussam describes it, the gold rush of data is here. It’s not just about having access to this data but being able to extract value from it. The guests discuss this challenge and the importance of upskilling treasury teams.
The Necessity of Technology in Upskilling
Joerg Wiemer emphasizes the importance of technology in attracting and retaining talent. Treasury departments must have cutting-edge technology to attract and engage new talents. No one wants to work with outdated systems and data-collection processes.
Making your workplace attractive with state-of-the-art technology can motivate your team and streamline processes. It can automate daily cash management processes, freeing your team to focus on strategic topics. This approach will lead to more fulfilling work for your employees and increase the strategic influence of the treasurer.
The Shift in the Job Market
Hussam points out that treasury systems are getting smarter, which changes the skills required in treasury organizations. It’s not just about data entry anymore. Employees need to make sense of data and derive value from it.
Moreover, the job market has changed. It’s no longer employers who hold all the cards. Employees now have more choices and are likely to choose technologically advanced organizations that allow them to add value and drive business decisions.
The Power of Embracing Technology
Nicolas Christian shares an example of a company doing well in this area: Kellogg’s. Thanks to its tech-savvy lead treasurer, the company recently won awards for best technology solutions and cash forecasting initiatives.
This leader’s vision of embracing, testing, and sometimes being the first to adopt new technologies makes the company an exciting place for new hires. It provides a workplace where employees can step out of their comfort zones, challenge themselves with new technologies, and feel inspired by their leader’s enthusiasm.
This environment fosters happy colleagues and, as seen in the case of Kellogg’s, leads to more success. This case highlights the importance of upskilling in treasury and its benefits to an organization.
Treasury Technology Investment Decisions in 2023
In this conversation, Guillaume asks John Paquette about the main drivers for investment decisions in treasury technology during 2023 and onward.
Main Areas of Investment
According to a survey launched by John’s company, the main areas where treasurers aim to invest are cash management and payments. These areas significantly impact the company’s Treasury operations, and investing in technology that can streamline these functions can make a significant difference.
Selection Criteria for Treasury Technology
Treasurers strongly emphasize modern analysis technologies like artificial intelligence (AI) and machine learning when choosing technology. They also appreciate the support for modern banking protocols, like open banking APIs and innovative solutions by SWIFT, such as Swift GPI.
This selection criteria is not necessarily based on the maturity of these technologies. Instead, it’s about ensuring they’re on the right path. They don’t want to invest in what could soon become outdated or legacy technology. Instead, they prefer innovative providers who can guide them through adopting these advanced technologies.
Global Standardization and Real-Time Cash Management
For larger companies, standardizing processes globally and ensuring data consistency is crucial. Considering their many banking relationships worldwide, they seek automation, control, and uniformity. However, achieving this consistency can be challenging given the varied adoption of technologies like open banking APIs.
Despite these challenges, companies are interested in exploring use cases such as real-time cash management. They need technology providers to help them navigate these waters and implement these solutions, precisely what John and his team aim to do at their company, TIS.
Treasury Functions Benefiting from Advancing Technologies
Guillaume asks Joerg Wiemer about the treasury functions or domains that benefit most from advancements like open banking, AI, APIs, and real-time technologies.
Data Analytics in the CFO’s Office
According to Joerg, the office of the CFO is a primary beneficiary of better data analytics and actionable data insights. These advancements can provide a “data lake” filled with valuable information, from historical and projected cash flows to granular details about working capital diversions and individual invoices.
This comprehensive view of a company’s financial health is a “gold mine” of data. It benefits not only the treasurer but the entire office of the CFO. Here’s how:
- Accounts Payable (AP) Teams: AP teams gain from clean, end-to-end processes facilitated by secure ERP environments. Generating payment runs and managing the banking portfolio becomes easier, thanks to cloud platforms like TIS.
- Controllers: Controllers have daily access to bank statements and can drill down into performance KPIs for cash flow conversion, providing a deeper understanding of the company’s financial status.
- Internal Audit: The ability to track and trace everything happening within the CFO’s office gives auditors the clarity and transparency they need to perform their role effectively.
Collaborative Benefits of Data Analytics
Ultimately, Joerg emphasizes the importance of teamwork in maximizing the benefits of these data insights. When all parts of the CFO’s office can access and act on this information, the entire team – and the company– stands to benefit.
Changes in Cash Forecasting Requirements and Expectations
Lets discuss how cash forecasting requirements have evolved with data availability and what treasury professionals, CFOs, and CEOs now expect from these forecasts.
Faster Answers and Higher Frequency
Nicolas Christian highlights the increasing demand for speedy insights and high-frequency responses. Previously, treasury departments might have been contacted by the CFO every month. New questions arise on a weekly, if not daily, basis, driving the need for frequent and in-depth analysis.
Greater Depth of Analysis
Organizations now require a deeper analysis of cash flow drivers to understand what consumes or generates cash. They want to identify trends, patterns, and variables influencing these drivers. Expectations around what can be done with data have also increased significantly.
Scenario Building and System Accommodation
Nicolas points out that scenario building, or creating different cash flow forecast scenarios, has become mainstream due to the COVID crisis. This approach requires accommodating systems that can handle these requests, a task that was previously managed with simpler Excel files.
Extracting Business Insights from Forecasts
There is now an expectation to extract business insights from cash flow forecasts. The forecasts are being used to derive insights, such as noticing early payments from top suppliers or excess cash that could be invested in a dynamic discounting program.
Role of Working Capital Insights
Joerg Wiemer brings in the importance of working capital insights. By managing working capital effectively, organizations can generate capital for reinvestment and accelerate growth. This aspect is closely tied to successful cash forecasting.
Cash Forecasting Solution Expectations
John Paquette mentions some basic things companies are looking for in cash forecasting solutions:
- More Accuracy: Companies want their cash forecasts to be highly accurate, as these forecasts are vital for managing cash effectively.
- Extended Forecast Horizon: Companies want to extend their forecast horizon beyond 10-12 weeks to 26 or 52 weeks, aiding in more strategic treasury activities.
- Faster Forecast Creation: Companies want to create cash forecasts faster and more ad-hoc, especially for managing cash.
- System Integration and Collaboration: There’s a market need for better system integrations and collaborative platforms where business units can provide and confirm forecast inputs.
- AI and Machine Learning: The market is looking for insights not readily accessible at the surface level. AI and machine learning can provide deeper insight than normal human data analysis.
Payment Security and Protection of Sensitive Data in Treasury Management
Let’s dig into a topic that might seem unexciting but is vital: payment security. This is about keeping your company’s money and data safe from fraud. As boring as it might sound, it’s super important. So, let’s have a closer look at the experts’ thoughts.
The Concerns and Solutions
Fraud can keep a Chief Financial Officer (CFO) up at night. Imagine opening an email that tricks you into sending money to a fake supplier. Sounds like a nightmare, doesn’t it? The reality is it happens more than you might think. But don’t worry; advancements in technology are here to help.
Joerg Wiemer, advises that companies should first clean up their processes. You know what they say, a cluttered house equals a cluttered mind. The same goes for a company. A company with different e-banking tools across multiple countries is like a disorganized house. There’s too much going on, and it’s easy to lose track of things.
So, the first step is to streamline and automate the process. This is like tidying up your house. When everything is in order, seeing what’s going on becomes easier. And it’s not just about making things neat. It’s about making the company’s data more visible.
Making Use of the Data Lake
Once a company controls its processes, it can start using its data. This collected information, referred to as a ‘data lake’, can be used to reduce fraud risks. Think of the data lake as a big pond filled with information that you can use to catch the ‘fraud fish’.
One innovative solution is using the data lake to apply customer intelligence. This involves looking at the payment patterns across all clients. If a supplier that has never been paid before suddenly pops up, it might raise a red flag. But if multiple clients have consistently paid a supplier, then it’s probably safe.
Using Artificial Intelligence
The cherry on top is when artificial intelligence (AI) is added. AI helps to recognize patterns across different data sources. It’s like having a smart detective that can spot the ‘fraud fish’ before anyone else can.
However, it’s important to have the right system in place. One that doesn’t just give you a box of tools and expects you to find the patterns yourself. A good AI system will leverage customer intelligence first, reducing false positives and saving time.
Remember, your company’s money and data are like its lifeblood. They need to be protected. So, having a system that streamlines processes, makes data visible, applies customer intelligence, and uses AI, is like having a top-notch security system for your company’s financial health.
How Does Technology Help in Combating Fraud Risk in Treasury Operations?
In this final section of the podcast, the conversation pivots towards the role of technology in managing fraud risks. The host asks John Paquette how technology can mitigate or even combat fraud risks that are rapidly increasing in today’s digital age.
Rise in Fraud Threats
John first emphasizes that fraud threats are on the rise. He mentions various studies indicating increasing fraud threats, losses, and the number of organizations affected. Interestingly, investment in technology to counteract this trend isn’t keeping up with the increasing fraud rate. This is concerning, especially for those involved in Accounts Payable (AP) and treasury roles who deal with fraud daily.
Companies have been trying to reduce fraud risk through operational activities, like eliminating manual payments or outsourcing supplier wire instruction maintenance. Despite these efforts, the threat and impact of fraud are still rising. John stresses that these measures alone aren’t sufficient and that technology needs to backstop these processes.
Fighting Fraud with Automation and Data
One of the key points John emphasizes is that fraudsters are using automated methods and sharing data within criminal networks. These advanced strategies are increasing the sophistication and volume of fraud. John suggests using the same tools as the fraudsters to fight back effectively: data and automation.
The initial step is to get as much data as possible into the fraud detection tool. This data includes the company’s historical payment activity, community data from a broader community with similar suppliers, and account validation services available globally. This comprehensive dataset becomes the basis for fighting fraud on a global scale.
Next, there’s a need for advanced detection and analysis technology. Fueled by abundant data, this technology can significantly help in fraud mitigation.
Making a Case for Technology
John also discusses how treasury professionals can make a case for investing in fraud prevention technology. Two main reasons can be highlighted:
- Fraud Loss and Reputation: Even minor fraud losses can harm a company’s reputation, especially since these incidents need to be reported to the board. Companies want to avoid the embarrassment and reputation damage that comes with fraud incidents.
- Operational Efficiency: Using technology to validate transactions upfront can prevent operational inefficiencies like payment returns. Companies can avoid returned payments and ensure suppliers receive payments on time by ensuring that account and routing information is correct.
Connecting with TIS
To wrap up, the host asks where interested parties can learn more about TIS and the solutions they offer. John suggests LinkedIn for one-on-one conversations and their website, www.tispayments.com, for detailed information, success stories, and white papers.
In summary, technology is pivotal in managing and mitigating fraud risks. Its importance will only grow as fraudsters employ increasingly sophisticated and automated methods. Investments in technology will combat fraud and bring operational efficiencies, making it a compelling case for treasury professionals.
Conclusion
In today’s ever-evolving financial landscape, treasury professionals must stay abreast of the changing dynamics and challenges. From exploring how the banking industry can better accommodate small and medium-sized businesses to understanding the hurdles that stand in the way of these organizations’ growth, we delved deep into the world of treasury operations and finance.
We discussed the impact of digitalization on the banking and treasury industry, acknowledging its capacity to simplify processes, enhance efficiency, and offer superior customer service. We also learned how adopting digital solutions allows for effectively managing working capital and strategic cash, ultimately enabling companies to unlock hidden profits.
One of the most vital discussions revolved around fraud risk mitigation. We discovered that the increasing sophistication of fraud calls for innovative solutions. Technology, particularly automation and data, emerges as the hero, providing a powerful tool to combat fraud risks. However, as we learned, businesses should not just invest in technology but also adapt their operational activities to fully leverage its benefits.
In closing, treasury professionals need to recognize digitalization and technology’s opportunities, from transforming operational efficiency to combating fraud. Navigating the future of treasury operations will require a blend of traditional financial wisdom and an embrace of cutting-edge technology. By harnessing this dual approach, professionals in the field will be well-equipped to turn challenges into opportunities, steering their organizations towards a prosperous future.
