BNP Paribas: Harness data analytics to build a world-class cash management system
In today’s digital age, corporations and financial institutions have access to more invaluable data than ever before. Unfortunately the vast majority of data is ignored.
According to research by Forrester, between 60% and 73% of all data within an enterprise goes unanalysed. This is despite more companies talking about big data, using technology to capture more data, and acknowledging the value of this information*.
For treasurers, increasing automation and digitisation of the cash conversion cycle that includes everything from payments and receivables to supply-chain management are driving exponential growth in the 3Vs of big data: volume, variety and velocity.
So, how are corporate treasurers dealing with capturing this potential wealth of data? Do they possess the right tools to analyse and act on it? And how are banks helping treasury teams use data efficiently?
Behind the curve: How treasurers currently use data
While technologies such as artificial intelligence and blockchain show promise, most companies are still in the early stages of their digital journey.
Data usage varies significantly across companies. Some treasurers mainly use data for compliance purposes and tax analysis, but not for cash management or liquidity optimisation. Others have been primarily using data to manage their foreign exchange (FX) exposure.
Some large treasuries have embarked on complex transformation projects that involve consolidating data under a single enterprise resource planning (ERP) system and are hiring data specialists to build their analytics capabilities.
Data use: Key challenges and risks
Despite its abundance, timely data isn’t always available in readily useable forms, primarily because of the lack of standardisation amongst the key providers, e.g. banks and regulators. For example, the reconciliation of customer invoices and associated collections continues to be a major pain point that hinders corporates seeking to optimise their working capital and liquidity requirements.
“Data aggregation can also be challenging because information is often siloed in different ERPs, data servers and shared service centres - even spreadsheets. This poses significant challenges in managing working capital, liquidity and risk, and in ensuring policy compliance,” explains Krishna Sampath, head of liquidity advisory APAC, BNP Paribas.
The absence of data-sharing amongst various corporate functions and divisions severely limit treasurers’ ability to assess and forecast their company’s liquidity positions. Without improving liquidity management, companies find it hard to reduce interest expenses and debt, and to deploy excess cash profitably.
Timely data analytics is increasingly crucial amid constantly evolving sanctions regimes, breaches of which could have significant financial and reputational impact. Global treasuries in particular deal with voluminous cross-border payments and must ensure these adhere to treasury and corporate governance policies. Risk management requires immediate alerts on any deviation so that suspect transactions can be investigated and remedied.
A role for bank: Trusted partners to help navigate the data labyrinth
Banks recognise the importance of embracing a data-driven approach, and in some cases collaborate with financial technology (fintech) firms to do so. This hybrid model allows clients to benefit from innovative products with faster time-to-market cycles that are secured by banks’ security platforms, which are compliant with data privacy and data-sharing regulations.
“We have noticed our clients get more comfort in knowing a fintech solution is offered through our own secured platform and it has gone through our strict due diligence and risk management reviews,” said Manon Breuvart, head of corporate deposit and liquidity APAC, BNP Paribas.
For example, BNP Paribas partnered with Cashforce, a digital cash forecasting and treasury management solution focused on analytics, automation and integration. The platform integrates seamlessly with clients’ ERP, accounting and banking systems, ensuring the use of receivables and payables data for accurate cash forecasting. An embedded simulation engine allows for scenario modelling to determine the impact on future cash positions and working capital requirements. The next step is to add artificial intelligence to the platform to increase its predictive forecasting capabilities.
To free up working capital and improve receivables management, BNP Paribas collaborated with a fintech to co-create a solution for a client that allows for the effective capture and management of data to automate the reconciliation of invoices and collections. This eliminates the largely post-facto manual reconciliation process, resulting in significant efficiency gains with reduced errors and a shorter cash-conversion cycle. The corresponding faster release of credit limits enables clients to book more sales and reduce outstanding inventory.
BNP Paribas has also co-created a unique data analytics dashboard to improve operational treasury management tasks by providing treasurers complete visibility to their account structures including mandates and usage. This unified view allows treasurers to readily view and access actionable data on payments and collections and helps improve the cash conversion cycle. Important treasury KPIs can be monitored and data can be easily downloaded for internal reporting.
In the digital era, more information is being generated than ever before, creating opportunities for timelier and more informed decision-making. However, corporates face multiple challenges that include an evolving regulatory landscape, availability of quality data, and in many cases, the lack of a coherent data analytics strategy, all of which are impediments to data-driven value creation.
Corporate treasuries can turn to banks as reliable partners to get on the front foot and harness the power of data to build the treasuries of tomorrow.
Read more insights from BNP Paribas here