Bank Treasurers Can Be Key Players in Driving Efficiency – Fintech Singapore

Time Stamp: October 5, 2023 12:26 AM
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Before 2008, the role of the bank treasurer broadly revolved around reporting, balance sheet management and cash management.

This changed when the global financial crisis saw well-established financial institutions run out of liquidity and eventually fail. Today, treasurers are increasingly influencing the future direction and steering business strategy in the board room.

With their broad perspective and influence over funding, liquidity and risk and compliance, one of the important areas treasurers can make a significant impact is identifying and driving efficiency.

But first, it is important to be clear about what efficiency means in the context of treasury, as it is a widely used term that is open to interpretation.

In some contexts, efficiency can be about using all resources to their full capacity, but this is not the kind of efficiency being discussed here.

After all, treasury operations require plenty of extra headroom to allow for events outside a bank’s control particularly in these unpredictable and volatile times.

Efficiency is about making the most of available resources. If one can reach optimal efficiency across four key treasury resources – systems, data, processes and people – performance gains are sure to materialise.

Financial services software and cloud solutions provider Finastra identified the key challenges in each of these areas and outlined guidance for overcoming them in a recent whitepaper “The Efficiency Drive: The Importance of the Treasury in Optimisation”.

Drive for system efficiency against fragmentation

Treasurers today need clear oversight of all transactional and trade flows to avoid failures that risk reputational damage, financial losses and even disruption to the wider market.

As the role of treasurers has grown, so too has the number of tools required to perform these responsibilities. However, this has led to most established financial institutions having fragmented systems, with different areas typically managed on separate platforms.

This means significant operational effort reconciling data from different sources, in different formats, from different platforms.

This leads to heavy reliance on manual processes, which increases risk of error. Error rates in manual trade input are often between 10 and 15%, making a strong case for automated reconciliation.

Harnessing data for enhanced performance

Another key issue for treasurers is data. Screening, normalising and interpreting ever-expanding real-time data feeds has become a challenge for the computing power available, and the priority for many treasurers is compiling dynamic, real-time data with batch data, which needs to be standardised into a single format to maximise its usability.

Bad quality data can be damaging to balance sheet management and ultimately to the overall client experience.

AI and machine learning can make a big impact here, for instance by identifying misspellings and duplications. An abbreviation of a word like ‘Limited’ can convince some systems that it’s dealing with more entities than it actually is.

But, to benefit properly from these new technologies, organisations will also need to invest in a robust data architecture.

Streamlining processes for maximum output

Often there are multiple areas within treasury operations where process efficiency could be improved. Process and procedures in treasury are for the treasurer to design, but it can be a challenge to choose which to prioritise.

These rules can be used as a guide:

  1. Understand your organisation’s processes at a granular level. Knowing at what point in BAU cycles liquidity squeezes and pinch points may occur is invaluable. End of day/month/quarter/year, due dates, or expiry dates for multiple equity derivatives trades maturing at once, are all examples of possible stress events that treasury can manage with forethought.
  2. Know your treasury’s pressure points. Identify those points that are most likely to come under strain.
  3. Prioritise pressure points. Assign a hypothetical ‘cost of failure’ to each pressure point, observing the magnitude of knock-on effects, value of transactional throughput, or to the number of clients potentially impacted.
  4. Reconcile regularly. Surprises crop up from time to time in treasury, but by reconciling frequently, the efficient treasurer stops these becoming risk events.
  5. Forecast regularly. Use AI to model forecasts from golden data sources to identify future liquidity surpluses and shortfalls. An accurate snapshot of cash flow enables a company to better manage its debt obligations, understand its capabilities and guide direct future investments. Treasurers need a crystal-clear view of their organisation’s future cash requirements in order to safely navigate regional volatility and inform operational strategy.
  6. Define your measures. Whether one chooses EBITDA, ROCE, STP rates, FTE costs, net interest paid / received, or some other yardstick to measure their efficiency levels, share that selection with stakeholders and use it consistently.

Critical intervention of treasurers beyond automation

Despite all the efficiencies gained through automation of manual processes, only expert intervention can evaluate all the possible ramifications of a serious disruption, and then mitigate its impact.

The quantity of expert resources required will depend on the frequency and magnitude of incidents needing resolution. As mentioned already, at a strategic level, treasurers bring considerable value to board level business strategy discussions.

With markets still unsettled by geo-political and economic volatility, it is reasonable for the treasurer to spearhead efforts to navigate financial institutions through such a challenging period.

From siloed to seamless: Unifying treasury solutions

Efficiency in treasury has positive knock-on effects on operating costs, management of risk, trading performance and business growth.

By consolidating operations onto a single platform, such as those offered by Finastra, organisations can make substantial gains simply through process consistency, streamlined workflows and centralised data.

Finastra has proven treasury solutions with over 400 clients globally and over 30 years working with global, regional and local banks for best market practices.

The solutions help banks transition from outdated, siloed systems to efficient, cost-effective platforms that help treasury teams make the best use of time and resources in order to add greater value to their organisations and their customers.

Find out more about how Finastra’s treasury solutions can help your business find efficiencies and grow here.

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