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Treasury resources optimization by automation

When human resources (FTE's) are scarce, and many treasuries department are in this situation, the only solution is creativity applied to maximize process automation. We are never as automated as we think we are. Challenge the way you have done things so far and ask yourself how to do them more efficiently. The best way to reduce risks and to scale up is to automate the most manual processes. The hardest part is to get rid of the weight of these habits.

Automatization, how far can we go?

Often when we talk about automation, the definition and the conception differ from one person to another. To automate a process is to allow a machine to do most of the work and limit human intervention as much as possible. That brings scalability, 24/7 action, real-time information, and dramatically reduces errors and fraud. If you don't know what a machine can do, you may think that what you are doing is the best that is possible, what is wrong most of the time. You may think that a good old XL spreadsheet will do and that it takes a certain amount of time to accomplish a certain task anyway. This is what I call "treasurer fatalism" or the complacency of habit, conservatism through resistance to change. I assure you that some treasurers will be buried with their procedural manual, unchanging bible, and sacred word. Isn't it time to question ourselves? Asking how to do things better and safer is a very healthy and recommended attitude. The mindset and openness to change is the beginning of progress and the sine qua non condition.

Parallel between FX management and Asset Management

If I may, I would like to make a comparison between FX management and Asset Management. Indeed, the management of excess liquidity is and remains very manual. It is true that we start with the TMS (i.e., Treasury Management System) and cash flow forecasts, in the short and medium term. However, very often (not to say too often), the production of cash-flow forecasts is semi-manual and done on XL spreadsheets. From these forecasts, the treasurer will estimate what he/she can invest and for what period. Then the investment will often be made outside a dedicated platform, even though it exists. TMS are often ill-equipped to manage Money Market Funds and other short-term investment products. There are solutions to integrate, automate and enhance the whole liquidity management process, like Cashforce, Cashlab, Treasury Spring or Calastone,… The source of data on underlying cash-flows is also essential. It is often lacking or not reliable enough (as for FX, the source of FX exposures must be accurate and directly connected to the management of currency hedging). Moreover, for excess liquidity management, when the amounts to be invested are identified, treasurers may use platforms to automate and accelerate the management of the investments and the related reporting. The idea is to interface and interconnect the whole chain. There are also new solutions like Treasury & Banking Platforms as a Service - TBP (e.g., FENNECH), which enable automation of the whole chain.

On the FX processes side, the economic situation and crises can upset the management and force the investment portfolio to be readjusted regularly. Having a reliable ad hoc tool is therefore critical to ensure optimum placements, best execution, confirmation, reporting, revaluation for accounting purposes and accurate monitoring. The automation from A to Z makes management more efficient, faster, more secure and dedicates human resources to analysis or strategy rather than to basic execution. A parallel can be drawn with FX management which can also be automated by having a CMA (i.e., Currency Management Automation) system in place, connected to the TMS and other data sources on the underlying exposures. The idea is to add the missing piece(s) to enable automation of all FX processes and kill spread-sheet-based management.

Information and diagnosis

I like this parallel, mentioned earlier, because it shows that this is a second area of the treasurer's activity that can be improved. Believing that we are completely digitalized because we have a platform will be the shortcut taken by some, convinced that they know what "digitalization" means. On this kind of long road, you must know where you must go to know that you have arrived. When you don't know how far to go, you can stop before the final or desirable destination. This is the common mistake often made and the naivety of some, or the arrogance perhaps of thinking they have arrived when they are only halfway. But the starting point is often information and its sources. There are solutions and to discover them, reading, attending conferences, exchanging, allow to understand what can be done and remains the best advice. Do you know that some treasurers do none of this? They wouldn't understand why their doctor doesn't take refresher courses or their airplane pilot doesn't go to simulator tests, while they remain passive. Starting with an external diagnosis is the best advice to estimate what can be improved and automated further. The objective is to identify what can be managed more efficiently, by using a TBP or a CMA solution depending on the need, and measure precisely the benefits to be gained.

The missing link(s)

The problem with treasury processes that remain (very/too) manual is that we approach treasury management part by part. Silos should be linked and interfaced, at the very least, or integrated into one or more tools, if necessary. What should be avoided is repeating the same entries, manual transfers, exports, and other recalculations in third-party tools. Automation means systematic approaches and speed of execution, without any delay. The art comes from integration and requires the right tool because no TMS, for example, does everything by itself. The recommendation is to take a process from the beginning to the end of the chain and to revisit it completely to see where there would be wastage, intermediate manual processing and therefore operational risks or time wasting. A good "workshop" or "brain storming" to review a way of doing things is a starting point for any change. It's like quitting smoking, deciding to do so is already half the battle. The rest will follow naturally, because there are solutions, for example, for processes related to FX management, asset management, trade finance, working capital, liquidity management, or more generally to the production of various reports. We can only advise a treasurer willing to consider more automation of FX management, for example, to use the online tool of a specialized provider, such as KANTOX, for example, to precisely estimate the achievable return on investment on a CMA. And sometimes the tool will allow for better application of the hedging policy, better alignment with it, and the ability to deal with previously excluded currencies, giving operations a competitive advantage. We can even retro-calculate the gain of hedging strategies applied mechanically and systematically 24/7. The exercise is amazing and useful to sell the project internally to the CFO. The same thing can be done with a "payment factory" tool. And we all know that today, there is no IT project without a solid ROI. If you don't have (enough) human resources, it's better to be smart, creative, and ready to revisit age-old and unchangeable processes. Isn't progress about questioning yourself? It seems to us that when we talk about automation, we should consider it on the whole chain and not by part(s) or by silo(s). To automate only parts of a complete process is not to automate and is not fully optimal. In any case, for FX, there are solutions, and treasurers can only be happy about it.

François Masquelier, CEO of Simply Treasury – Luxembourg

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).


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