The Future-ready Treasurer
In collaboration with the Association of Corproate Treasurers Singapore, DBS hosted an executive roundtable with an intimate group of Corporate Treasurers in Singapore in May 2019. The participants of the roundtable include Goh Seng Ti, General Manager, Finance & Administration, Isuzu Motors Asia Ltd, Jonas Falk, Managing Director, SKF Treasury Centre Asia & Pacific Pte Ltd, Melissa Low, Treasurer, Ikano Pte Ltd (IKEA Southeast Asia), Mark Troutman, Group Head of Sales, DBS Global Transaction Services, moderated by Mark Evans, Head of Experience Strategy, DBS Transformation Group.
Today, we’re discussing treasury’s role in digital innovation and how this impacts the role of treasury for the future. For a start, let’s hear what does digitisation mean for organisations?
Mark Troutman, DBS: At DBS, we work with our corporate clients in a variety of ways to harness innovation, depending on where the points of friction exist across their ecosystems, and the business models they are seeking to adopt.
For example, recently, we started working with a real estate client that has entered the student accommodation market in Europe. We are looking not only at financing and cash management, but also at assisting them with the design of the whole student and parent engagement strategy, from selecting a university and accommodation through to furnishing a student’s accommodation and building a peer community. In this situation, a mobile payments wallet can offer reassurance and control for both students and their parents and it forms the hub of the whole experience.
Another example is a large European head-quartered retailer that sells online and customers can collect their purchases from stores in Singapore. The company approached DBS seeking an entirely cashless retail store. This was around the time that the SGQR came out, so we were able to simplify and streamline the sales process end-to-end for both the company and its customers, from goods selection through to cashless payment.
In the supply chain space, we have worked with a large company in China to launch a blockchain-based platform to help digitise the logistics of getting cars to dealers, paying the car transporters and financing them if required, again removing friction, increasing transparency and enhancing the experience at each point of interaction.
Treasury’s role in digital innovation - What’s the most interesting way in which treasury is contributing to, or driving innovation in your business?
Melissa Low, IKEA: In addition to cash management and funding, we are trying to take a more active role in the business, for e.g., looking at unified payment solutions in Malaysia to avoid having multiple channels at point-of-sale terminals and centralisation of cash reconciliation via applications developed in-house.
Jonas Falk, SKF: Treasury is not necessarily the driver of innovation in our company, as we are a service provider to the business. Nonetheless we aim to make our processes and decision-making as efficient as possible. We are therefore always looking at ways to automate our business, reduce manual processing, and make the process of compliance more efficient.
However, it can take time to convince people to change from their familiar ways of working. Like Melissa, we’re also working with our business to facilitate sales and reduce friction in the supply chain financing process to continue to add value to the organisation and stay relevant.
Goh Seng Ti, Isuzu: Finance in our organisation has changed considerably in recent years, which has included splitting the finance and accounting functions, with treasury being a part of the new finance organisation. This reflects a change of thinking in our business, and it can take some time for corporate culture to evolve, we can also see the impact of new ideas. For example, until recently, we contacted our banks by telephone, but now we use online dealing platforms.
Likewise, there are other obvious ways in which we can use newer technologies and best practices to improve the way we work. A key area for us is to build a treasury mindset amongst our senior leadership so that treasury issues become part of our strategic decision-making. Technology can help in presenting insightful and impactful dashboards and reporting.
Technological innovation also brings with it an element of risk. It may not be the right technology, the investment level may be too high, the design or functionality of a solution might not meet the objectives, or it may not have been well-implemented. How do you mitigate these risks in your decision-making around innovation?
Jonas Falk, SKF: In our core business, however, we aim to be pioneering, so we monitor digitally the location and movement of every train 24/7 and use sensors to monitor exactly when every part will need to be replaced. This then impacts on our maintenance schedule and our parts ordering. The digitisation of our business also has an impact on our treasury, through better cash and liquidity forecasting.
Melissa Low, IKEA: We are also quite prudent as a business, and although the in-store experience remains central to our value proposition, we recently rolled out e-commerce in Singapore, Malaysia and Thailand to enhance our online presence and give convenience to customers who know what they want. It does not compete with the in-store sales, but rather, it is an extension of the existing business. Having an online platform also changes the role of our sales associates as they now have further career development opportunities into the e-commerce channel.
As for Treasury, we are sometimes, being perceived as the support function, hence with the same pool of funds, investments in business/operations takes precedence to increase sales and profitability. Therefore, a strong case would have to be put up to convince the business that investment in technology to eliminate manual reconciliation does add value and increase back-end productivity for the team.
Goh Seng Ti, Isuzu: As a commercial vehicle producer and engine manufacturer, we are experienced in adopting new technologies, and have pioneered solutions such as dashboard monitoring of the health of commercial vehicles, which requires not just technology within the vehicle but satellite communications, onsite logistics etc.
However, it can be more difficult to convince senior management of the value of innovation in corporate functions such as treasury. We are currently upgrading our ERP, for example, and trying to influence the company mindset to embrace technology more widely. For example, we are doing pilot tests to demonstrate cost reductions and improved efficiency, but it takes time to change mindsets.
Mark Troutman, DBS: You’re right, innovation in most companies tends to be centered on customer-facing activities, as opposed to corporate functions, which means one has to be more creative. So, you don’t buy or build, you license, rent, integrate, and stay connected to keep in touch with best practices and share ideas. Staying close to the business is also essential, and treasury can often play a valuable role in shaping frontline solutions, such as integrating payment services into a customer portal, or integrating real-time payments. And staying close to such developments can positively impact the accuracy of the business’ cash flow forecasting, another plus for treasury.
Harnessing data in treasury - A key area of value add that new technology offers is data. What are you seeing in terms of new data, data flows and how these are used?
Jonas Falk, SKF: Data is becoming increasingly important: both how we get it and what we do with it.
Apart from achieving more efficient operations, we are building a great deal of data. One challenge is that we have 10 core banks, plus a large number of local cash management banks globally in Asia Pacific and Latin America. Although we try to keep our banking relationships to a minimum, we still have to deal with a large number of different communication channels and formats and varying quality of data. Centralising and standardising data exchange is therefore essential.
As a second step, we also need the analytical tools that and allow us to develop intelligence and insights, such as total supplier spend across regions, for example, where we may be able to achieve economies of scale.
Melissa Low, IKEA: We have a specific function within the organisation that focuses on data collection and analysis. This frees up considerable time across the rest of the department, and allows us to make more informed, data-driven decisions and become a more valuable business partner. For example, using the data on hand, we could see which bank has the highest card acquiring business and use that as a bargaining chip to negotiate for better MDR or simply to collaborate with the top performing bank for any form of marketing activity.
Goh Seng Ti, Isuzu: We are a manufacturing business and we do not do last-mile distribution. We need data to determine what and where the demand for trucks is, what parts this involves, and where these parts are produced. We then use these multiple variables to set pricing and manage foreign exchange exposures as well as dealing with the supply chain elements.
There are still improvements we could make, however. In Japan, for example, we are using robotics and artificial intelligence, but this has not yet been adopted across the business which could in turn improve our forecasting and decision-making.
Mark Troutman, DBS: Corporations in all industries are recognising the value of data, but a number of challenges remain, not least sourcing data in a consistent, meaningful and automated way.
For example, take a company with a procurement hub in Singapore which needs rubber for one of its business units. Their rubber production comes from Indonesia, and has been industry practice, the traders use WhatsApp. To make a price to the company, the trader has to exchange messages with each of the large buyers and factories to determine the relevant price to quote. For the company, this type of price discovery process shows how hard it is to get relevant data.
Digitalisation can play a significant role here. We are seeing the introduction of a new digital marketplace for rubber trading, developed by Halcyon Agri, bringing all the supply chain parties onto a single platform. Participants all have access to the same data, in real time. It also makes it easier to support the supply of sustainably-produced rubber as it can be priced and traded separately more easily. Digitalisation, therefore, solves a problem but also creates a business opportunity and supports sustainability objectives.
Identifying leading technologies - What technologies do you think will have the greatest impact, and which can most likely be achieved?
Melissa Low, IKEA: E-commerce is and will continue to have a radical effect on the way that companies work. It is not just a different sales channel to ‘bricks and mortar’ model but the whole customer journey and experience is different too.
Jonas Falk, SKF: The internet of things is likely to have a transformational impact, with hybrid connectivity and sensors, creating highly responsive supply chains and creating a far closer relationship between physical and digital.
Goh Seng Ti, Isuzu: One of the discussions I have had today with other treasurers is that the highest impact innovations are also the most likely; those that are of lower impact are likely to remain on the wish list.
For example, looking at real-time treasury, some of the elements of this already exist. However, some of the newer innovations, such as using blockchain to bring together every element of the financial supply chain into a single ledger, are unlikely in the near term, with these technologies instead applied to parts of the business where the commercial impact is more obvious.
What is key is continuous learning. What we learnt about technology 10 or even 5 years ago has been superseded, and we need to keep on learning, unlearning and relearning to understand what is possible and what is achievable.
Jonas Falk, SKF: Related to this, you cannot be afraid of new technology. No one knows exactly where digitalisation will take us, but you will need to be part of the journey and potentially disrupt your own business to avoid being disrupted by someone else.
Mark Troutman, DBS: Digitalisation will also be instrumental in connecting ecosystems more closely. Take healthcare, for example. Pharma, device manufacturers, healthcare providers, hospitals and care homes are all part of a single, interconnected ecosystem to deliver care to people. The closer these participants work together, and the closer the connections between the physical and the digital, the better the quality and timeliness of care, and the better the experience of every participant in the value chain.
It’s not too far into the future when we can envision a person living in a care home with a hearing aid. That hearing aid will automatically alert the patient’s doctor if it fails, and automatically arrange for a new one to be sent, via drone, straight to the patient. The care home bills the patient or his/ her family in real-time, and on receipt of the payment, triggers another payment to the doctor or device manufacturer. The experience is entirely customer-centric, but all the participants are digitally connected, enabled by a bank’s digital platform.
Mitigating risks associated with technology and innovation - We have talked about opportunities with new technologies, but what are the risks and blind spots?
Melissa Low, IKEA: One of our major concerns is data privacy and cybersecurity. Risks around both of these are both high impact and high probability so they need to be priorities.
Jonas Falk, SKF: Absolutely, IT security poses the biggest challenge for the future, particularly as we embrace new forms of connectivity. For example, today we use SWIFT to connect to our bank. With different forms of connectivity opening up, both with our banks and more widely across our ecosystem, the potential for security weaknesses increases, and every participant needs to maintain the highest level of security.
As we become increasingly digitalised, the risk of loss of business continuity and reputational damage becomes substantially higher, either through a cyberbreach or system shutdown, so we need to work collaboratively to secure our networks and ecosystems.
Mark Evans, DBS: One thing that is interesting to me is that the most innovative processes and solutions do not necessarily rely on the newest technology. It can seem like a high-risk strategy to place big bets on new technology that may or may not work.
In many cases, this risk can be managed by using proven, familiar technologies that may solve a problem at least as well, or even better. Sometimes problems are best solved by thinking creatively about what you already have.
Goh Seng Ti, Isuzu: In our business, we take care not to take on too much, too fast. This limits the risk of overextending ourselves to the point where we forget what we set out to do, or do not fully understand what we have implemented, so it becomes a ‘black box’.
While many of us could do our jobs without much of today’s technology, having done so in the past, we need to avoid over-reliance on technology. Particularly, the younger generation who have never been without it may not necessarily understand the underlying mechanics of what they are doing. For example, you might receive a report from the ERP or treasury system and think something looks wrong, even though it has been approved, reconciled etc.
You need to stay close to the fundamentals and make sure you understand them. That being said, these fears should not stop us from adopting technology, but simply make sure we are doing so sensibly, and with an eye on the relevant risks.
Mark Troutman, DBS: As digitalisation continues, the role of the treasurer changes, becoming less operational and more of a strategic-enabler, one which harnesses the use of enterprise data to drive better risk management outcomes for the business. This reinforces treasury as a key business advisor and partner, and continues the trajectory of being a critical role.
While we have talked over the years about the future of treasury and the future role of treasurers, the past 24 months has seen a real shift in the pace of technology change and its practical ability to deliver transformational outcomes. This is an exciting time to embrace technology to solve problems, eliminate friction, and deliver new opportunities to create value in each business.
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