Automation key for treasurers to keep up with liquidity management challenges

The next step on treasurers’ digital journey is automating their liquidity and cashflow processes

The past few years have seen several treasury tech solutions appear on the scene, such as multi-bank connectivity and cloud-based SaaS TMS/ERP solutions due to increased demand for a more intelligent and connected treasury function. The aim for most of these solutions is to automate more mundane processes and provide better access to real-time data. Banks have not stood idle, and they too have begun to offer automation tools and real-time data access through their own tech but also through APIs.

“We see an increase in demand around automation, productivity improvements and having more controls,” says David Rego, head of global liquidity, deposits and escrow solutions at Standard Chartered. One process that Rego says is seeing strong appetite from his clients is event-based liquidity structures.

Sweeping and other automated liquidity management processes traditionally occur at the end of the day, but under criteria set up by the treasury department they can also be done during the workday if need be. Rego gives the example of a corporate who has multiple accounts across entities, where a payment needs to be made from one account that has insufficient funds.

“We will trigger the liquidity structure to run (using rules set by the client), with full intercompany limit structures overlaid,” he says. “Surplus balances will be swept to the account with an insufficient balance whenever a payment fails due to shortfall.”

Rego adds this would only occur if certain requirements were met. If nothing is triggered, sweeps would occur at their normal time. But by setting up event-based triggers, treasurers gain extra flexibility, reduce manual processes, and can have better control through the bank’s liquidity management tools such as these “just in time” sweeps.

Cross currency transactions are another time-consuming task treasurers face, often requiring manual intervention. But through customised automated FX sweeps, treasurers can simplify and automate FX position management using rules set by themselves.

Real-time data via APIs

The pandemic has refocused attention on cash and liquidity management. And while the global economy is slowly returning to pre-pandemic levels, uncertainty over variants is still causing unease and supply chains remain affected. Cash visibility therefore remains vital and its elevated importance could be one of the long-lasting consequences of pandemic.

In most treasuries, information such as the amount of cash relative to expenses and other liabilities is typically only shared once a day. Plus, with operations in different time zones and involving multiple currencies, information from different markets can take some time to arrive at a regional or global treasury centre – hindering the monitoring of positions.

This needs to change, and many treasurers are demanding for a more frequent reporting to give them better visibility and control of their cash.

To meet this pressing need, banks are utilising APIs to speed up information flow.

“For example, treasurers can benefit from timely access to their global balance positions, inter-company loan positions, reports and more, through engaging dashboards and analytics models,” adds Rego. Added to the reporting are self service capabilities that allow for control of intercompany limits and interest setups, suspend/resume sweeps, and online simulation of sweeps using latest balances. These provide treasurers with visibility and control at their fingertips and can add significant value.

“With open banking and regulatory changes also taking place, we will see a lot more movement into fully API-based balance reporting and potentially multi-bank cash concentration through open banking schemes.”

Planning for the future

Rego believes adopting a more incremental approach to new tech and processes is a must, especially as the treasury function becomes more digital and data driven.

“What is important is that treasury teams should be continuously reviewing the outcomes of what they're seeing on the flow and the structure that they've set up,” he says.

With the pandemic having accelerated digitalisation trends, clients will likely move parts, or all their business, to some form of digital business model. Treasurers must engage early with relevant stakeholders to understand how real time exchange of data, instant money movement, taxation rules and many related changes will improve or impact overall treasury management disciplines. Treasury teams will need diverse skill sets to manage these transitions and can also lean on expertise outside of their organisation.

“It's going to require the treasury teams to actively engage with their own organisation teams and also their banking and technology partners,” says Rego.

And this is where banks can directly help. To facilitate these increasing demands on the treasurer, banks such as Standard Chartered are always looking for ways to improve and automate cash visibility and create smart rule-based automation to return time back to treasury teams.  

The article was also published on The Global Treasurer.

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