Smart(er) Treasury

Today, especially after a long and severe health crisis, followed by a war in Europe, more than ever, treasurers must rethink their IT tools organization and their often very complicated architecture, to make the whole more efficient, more integrated, more reactive, and adjustable. They need to be able to adapt quickly to events (and their consequences) that we have seen can be surprising, lightning-fast, and dramatic. In this context, the notion of hyper-automation and what I call "smart treasury" must be considered to become resilient.

Be a smarter Treasurer!

In recent years, treasury management has evolved like no other function or profession in finance can claim to have evolved. Our function has intensified, become more complex, developed, expanded, and continues to do so. Technology is not the least of the reasons for this fabulous and unique evolution. A metamorphosis that is far from over. This is one of the reasons why our job is so exciting and varied. I wouldn't have wanted to do anything else in my professional life. But any job is worth taking care of, especially when you've just been through a storm that has shaken up many a treasurer. After this COVID crisis and this war in Europe, more than ever the treasurer must be smart, sharp, proactive, and agile. They must also become more resilient and be able to adapt to any new situation, even unforeseen. Because of crises, financial regulations always come back in force, with their impact on our work and organization. So, to be "smart" is to put in place the structure and the ad hoc tools to survive and adjust when necessary, by exogenous or endogenous events. If the treasurer were an animal, he would be a chameleon.

The treasurer is a beacon in the night for finance

Today, organizations must deal with a number of events, such as mergers & acquisitions, IPOs, private equity buyouts, spin-offs of non-core activities, digital transformation of the underlying business, etc. To become more resilient, you need to rely first on solid technology, then on a flawless organization, on complementary and competent staff and finally on a visionary and agile management. Not the least of these is the support of the CFO. The beginning of the rebuilding process starts with a review and reorganization of the IT architecture. To do this, there's nothing like starting with a quick audit to map the existing system and draw up a future roadmap. Because rest assured, the treasury function is not finished evolving and rapidly. To avoid becoming obsolete or risky, we must adapt intelligently and move towards what I call "Smart Treasury". Not so simple, but not impossible...

Revamping

A review involves, as explained earlier, an inventory followed by a "road map" of what should be implemented according to objectives, risk appetite, strategy, and internal policies. This is an exercise that can be done at almost no cost (at least the high-level analysis). The second step will consist in better synchronizing with the underlying businesses and operations, improving coordination and efficiency. The business requires more proximity and interaction between treasury and operational businesses. Do not hesitate to benchmark yourself with your peers. Treasurers' associations and consultants are there to help you. Talk to your colleagues! Look for the best technologies with the right partners to implement them. There are specialists out there, consult them.

Next, look to create and build connectivity of the entire treasury ecosystem. Everything needs to be truly and fully STP and interfaced, integrated, and linked, without risk. Everything must be automated. Hyper-automation is what you should be looking for and any manual operation should be ruled out entirely. Don't settle for the existing, partially manual processes because you're used to them, because they don't work so badly, because changing things is always complicated or whatever other bad reason. It can be done, there are solutions, like F3 from FENNECH. If there is one priority above all others, it is security and automation that allow to mitigate the risks. It is also necessary to invest in human capital to adapt it to present and future needs. We need to have intelligence available in the teams. We also need to look for IT solutions that are truly "native SaaS" and not pseudo-SaaS, like most, built on old technologies as too many IT vendors propose. Partnering with banks, the treasurer's best partner, API's and fintech's also seems to me the absolute panacea.?

Finally, an obvious recommendation is to invest in human capital. Here I recommend "human intelligence" and more specific competence with another knowledge than your own. Diversification is an overused but important word. Diversification of talents and skills is the key to success. No “cult of youth”, but expertise not necessarily in treasury, that's what we need.

Successful Digital Journey

A trip can only be successful if you know where you are going. Many digital journeys are started without knowing where the treasurer intends to go. This is the beginning of failure. You can't improvise digital transformation and whatever your means, you must define your destination. This is often the first pitfall encountered. The reasons are known, the motivations obvious, the means too often limited and the desire sometimes absent. From there, I advise to set the objective and the steps to reach it. The world is de-globalizing, the supply chain is chaotic or interrupted and markets are volatile. In this context, becoming more resilient makes sense. A CFO will never contradict you on such an objective if your strategy is defined and holds up. The goal is to put in place an organization that can easily adapt and limit operational and fraud risks. Being more efficient should be the primary objective of an annual CFO review of a treasurer. And how can this be achieved? By automating what isn't. It's the little bits of hand-crafted processes and the lack of automated links between processes that can break the chain or increase risk. Humans don't like change and treasurers even less. Yet, change is the best guarantee for survival. Digital transformation must be designed, thought out and never comes easily. Don't rely on the CIO to help you define it. Be executors and transform your organization by strengthening your internal controls and security. And then get closer to operations, because in the end, they are the ones you need to serve better. Automation is virtuous and should not be feared, but revered. Changing the TMS is certainly a digital step that is sometimes necessary, but to be satisfied with it would be to believe that this tool alone represents the digitalization of which it is only a link, albeit an important one. Smart treasury" requires being an innovative, curious, convincing, and proactive "smart treasurer". Be the one to succeed in this transformation! In conclusion, I like to refer to Seneca’s quotes: "There is no favorable wind for him who does not know where he is going".?

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Fran?ois Masquelier, CEO of Simply Treasury - April 2022, Luxembourg

Disclaimer: This article was prepared by Fran?ois 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).