Making data matter: insights to transform treasuries
As companies strive to enhance their risk and liquidity management, and make more accurate forward-looking projections, a robust and well-thought-out data strategy is essential.
The treasury function is best placed to spearhead such an initiative, to bring the benefits of better visibility and improved decision-making to the business. “There's a growing realisation that grasping data analytics helps treasurers shape the future of their organisation, as well as enhance treasury processes and goals,” said Jonathan Denny, Director - Treasury Solutions Group, Global Payments Solutions, HSBC.
As a result, treasury-related insights and the required skill set to interpret and integrate them are quickly becoming an integral part of an efficient, fit-for-purpose treasurer, according to Ian Pettigrew, Director - Treasury Solutions Group, Global Payments Solutions, HSBC.
Five reasons to get more serious about data
Data-related challenges are nothing new. However, the pursuit of digital transformation across all aspects of a company has made it more pressing to find solutions.
“When you consider the real-time environment that is accelerating through the evolution of more innovative banking infrastructure and technologies, what is really powerful for treasurers is to be able to analyse this data so it generates valuable insights and is delivered in real-time,” said Denny.
More specifically, five key forces are pushing treasury teams to push this higher on the agenda within their organisations.
Firstly, the need for strong risk identification and management in an increasingly complex and volatile business environment is ever more important. “Having a good grip on data across the organisation can help treasurers identify risks quicker,” explained Pettigrew. “Advanced analytics tools offer insights on how to best manage and mitigate them.”
Secondly, the transformation agenda in terms of increasing digitisation and automation across the treasury function is driven largely by the availability of the right information.
Thirdly, an increasing focus on compliance, both internally and externally, prompts greater transparency and reporting. “Automation and analytics or visualisation tools can help organisations effectively manage obligations in this space,” added Pettigrew.
Fourthly, the technology itself has become far more democratised. For instance, treasurers need to find the tool which best meets their needs – from full enterprise-scale Treasury Management Systems (TMS) or Enterprise Resource Planning (ERP) implementations, to cloud-based, off-the-shelf, SaaS data analytics suites.
The final driver is widespread digital and data literacy. “To put data analytics to effective use, it’s becoming increasingly easier to bring talent into treasury functions with this skill set. It’s close to becoming a must-have,” said Pettigrew.
Creating value from being data-first
Yet the right processes, tools and people are only a starting point.
There is already a vast array of sources of financial and treasury information – internally from bank statements, cash flows and forecasts, to accounts payable and receivables, and also externally, such as FX and interest rates.
Instead, the key to extracting value, said Denny, is using data analytics to create actionable insights that enable effective treasury decision-making and enhance performance across tasks.
Three examples of achieving this include:
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In liquidity management – by combining the various data components required for an accurate cash flow forecast, which is typically top of mind among treasurers.
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To enhance performance across payables and receivables – in payables, this could be a drive to reduce costs and improve payment operations; whereas, for receivables, this could be to understand and predict customer payment performance so that late payments can be mitigated more quickly.
- In measuring financial performance and optimising working capital – by analysing inbound and outbound payment records.
“Other areas where data and analytics are useful for treasurers include monitoring and preventing fraud, and measuring and improving KPIs,” added Denny.
Putting data-driven transformation into practice
Delivering on all these goals in the way treasurers want, however, is easier said than done.
Among several common challenges that Pettigrew can see, for example, is the fact that many companies suffer from data being in silos and different systems across the organisation, as well as from inconsistencies in the quality of the information itself, how it gets cleaned and the governance to protect it. At the same time, the volume can quickly become overwhelming.
In addition to potential shortcomings, some organisations might be using outdated or inefficient technology, or may lack the required talent to work with new models and analytical tooling.
“To design the right strategy requires clear objectives related to business value, such as increasing efficiency, reducing costs or growing revenue,” added Denny.'
Further, companies need to ensure there is a connection between the information sources and corporate goals to build a collective understanding of the opportunities.
A way to kickstart this, said Denny, is to identify the treasury workflows and the types of data they utilise – which will also help inform use cases and bring people and processes closer together. “This all forms part of your foundational strategy document, which can be shared with stakeholders.”
Ultimately, there are big opportunities for organisations of all types if they can derive value from the data they have access to.
Financial institutions are part of the process. They can support treasurers in this journey, said Pettigrew, pointing to tools such as enhanced cash flow forecasting, payments and liquidity analytics, which he believes can really help meet strategic treasury objectives.
This becomes possible once treasury teams have implemented a best-practice approach to their data. Put simply, this involves collecting it from the sources where it is held, cleaning and validating it by removing duplicates and filling in gaps, analysing it to find trends, variations and outliers, and then visualising it to display it in a meaningful manner, explained Denny. “Insights can then be used to make faster, better decisions that improve cash management and meet the business value objectives.”
Conclusion
As the digital transformation agenda evolves within treasury, treasurers have a real opportunity to further demonstrate their strategic value to their organisation’s ambitions. Data is not necessarily the new frontier but interpreting and transforming it to assist treasury and business activities holds real value for the future of the whole organisation.
Key to success is bringing stakeholders together around a common objective to achieve real business value before working through how to get there. With perseverance and a common understanding, actionable insights can be unlocked. Small wins matter to demonstrate success.
