Treasury in a digital era

While the fundamentals of treasury may be universal, corporations in every industry face a unique set of challenges and opportunities as they pursue their international growth strategy and embrace digital technologies across their business. In this panel discussion held at the DBS Reshaping Cash Management Event in Singapore, leading treasurers discuss their cash management challenges, how ‘digital’ is already changing the way they address these challenges, including innovative solutions such as DBS Treasury Prism, and what the digital treasury could look like in the future.


Panelists from left:Raof Latiff, Head of Digital, Institutional Banking Group at DBS, Damian Glendinning, Vice President, Treasurer at Lenovo, Goh Seng Ti, General Manager, Treasury & Accounting at Isuzu Motors Asia Limited, Michael Sack, Group Treasurer at GN Store Nord, and Moderator: David Blair, Managing Director, Acarate.


What would you identify as your major cash management concerns?

Goh Seng Ti, Isuzu: Although Isuzu is over 100 years old, we only set up a treasury function quite recently. One of the issues of being a new treasury is that we did not have a treasury management system (TMS), which created a variety of challenges. One priority has therefore been to select and implement a TMS, which is currently in progress. As this is a new and unfamiliar initiative, we have a pilot project in a few countries, which will then give confidence to other countries to adopt and roll it out more widely. A second priority is multilateral FX netting. This is a little more complicated for us than for some other corporations as there are restrictions in some of the countries in which we are implementing, which include Japan, Singapore, Indonesia and the Philippines. DBS Treasury Prism has been very helpful in identifying these restrictions, leading us to manage and implement a solution quickly.


Damian Glendinning, Lenovo: Innovation is central to our value proposition, but the challenge is how to demonstrate value with technology in treasury. This is one of the characteristics I like about DBS Treasury Prism, particularly as it is so easy to use. Our cash management challenges stem mainly from our acquisitions. Twelve years ago, Lenovo bought IBM’s PC division. Overnight, the business was transformed from a domestic Chinese company to an international corporation with a presence in 67 countries, and operations in a further 120 countries.


We had to put our treasury and cash management infrastructure in place very quickly. This illustrated to us the value of technology to enable simpler, more efficient processes, but only when treasury fully understands the underlying business and transactions. For us, the best approach was to go back to basics: understanding where our money was; where our accounts were; what regulations applied, and what we were paying in bank charges and interest. Integration was also a challenge, given the diversity of systems across the newly combined business. Again, we found that simplicity was key to success, which has continued as our acquisition strategy has evolved.


Michael Sack, GN Group: The challenges for us are simple to describe but difficult to manage. We operate in more than 20 countries, with more than 50 banks and 200 accounts. On joining GN, I quickly realised that we needed a zero balancing structure, and DBS Treasury Prism has helped us to do this. In particular, Treasury Prism enables our  accountants and controllers within the business to visualise a zero balancing structure and its benefits very easily, which helped to convince them of the value to our business. Moving away from manual checks to digital payments is also a priority, and again, Treasury Prism is helping us to convince the GN finance community of the value of doing so.

Raof Latiff, DBS: One of the fundamentals to designing and delivering effective new digital solutions is co-creation, of which DBS Treasury Prism is a prime example. We have sought input from 30 to 50 treasurers on their day to day processes and challenges which in turn informed what issues customers need to solve, what functionality they needed and how they wanted to use this functionality. The benefit of co-creation is that it results in truly customer-driven innovation which is essential. Furthermore, it is an iterative process as we refine solutions in line with customer feedback and aligning to evolving business challenges and priorities.


To what extent has your company’s digital strategy extended to, or impacted on treasury so far?

Goh Seng Ti, Isuzu: Although we did not use technology extensively in our business support functions when I joined, we are learning lessons from our business. For example, the use of algorithms rather than batch processing allows the company to be more nimble and responsive to customer needs, and this has applicability to treasury.


Damian Glendinning, Lenovo: Digitalisation is fundamental to our business strategy and indeed, a matter of survival in our industry. As a business, we are investing an enormous amount in artificial intelligence (AI) and this will have a growing impact both on, and in treasury. We are already using dashboards to harness and analyse big data, detect trends and build new models.


Michael Sack, GN Group: Like Isuzu and Lenovo, digitalisation and connectivity is essential to GN. We are also embracing these trends in treasury, such as reducing manual checks, but we still need to develop our digital strategy further, including implementing a TMS and techniques such as FX netting and settlement that are difficult to achieve without this technology.


Raof Latiff: Digital strategies will obviously differ significantly across industries. In B2C businesses, it is easier for treasurers to identify and connect with elements of digital strategy as this is often linked to the consumer experience, but it can be less obvious in the B2B space. Furthermore, digital companies that operate predominantly in the m-commerce and e-commerce space will have very different requirements to those that operate in more traditional industries. Geographic legacy also has an impact on digital strategies: for example, Asian corporations that are expanding internationally for the first time often have digital at the heart of their expansion strategies. Some companies will also be further along the digital pathway than others depending on their culture and management priorities.


In all companies and all industries, however, the quality of the user experience is key, which is an important consideration for banks when developing solutions for and with our customers. In particular, our co-creation approach focused on helping customers to meet and exceed key performance metrics, which will drive future digital solutions through demonstrable value creation.


Not all treasurers will seek to be early movers or fast followers. For the majority of treasurers, the proven ability for a solution to address their cash and treasury management challenges will be more important than seeking to shape these solutions. In all cases, however, treasurers are seeking to contribute value to their business and shape their treasury to support evolving business models.


Given the growing importance of digital strategies across your business, what would you say comprises a digital treasury strategy?

Damian Glendinning, Lenovo: A first question is ‘what is digital’? We are not really discussing the string of numbers, but rather about information and in particular, making it available quickly and accurately. The first thing we need in treasury, therefore, is to know exactly how much cash we have in which currency and account, whether on a daily basis or ultimately on a real-time basis. Second, with this visibility, we can then enhance the efficiency of our operations and use our cash more effectively. In accounts receivable, for example, the ability to receive remittance advices, automatically identify and reconcile incoming flows as a streamlined process would be a really valuable development for our business.


Michael Sack, GN Group: Digitalisation tends to imply automation and before you do this, you need to standardise, which is particularly complex for multinational businesses.


Goh Seng Ti, Isuzu: Absolutely: more haste less speed as the saying goes. But speed is of the essence here, which is one of the benefits of technologies like DBS Treasury Prism. Things that used to take weeks and months happens now with a touch of a button. And as treasurers, we need to keep up with, and harness these technologies to perform our jobs more effectively in this changing environment.


Could technology replace the role of treasurers?

Goh Seng Ti, Isuzu: I think this is a very real concern for many people who work in treasury; however, in reality, technology enables treasurers to ‘up their game’: to add more value to the C-suite, respond more quickly, and become more significant to decision making. By reducing or eliminating manual processing, treasurers can spend their time on analysis, finding problems and resolving them.


Damian Glendinning, Lenovo: Treasury’s value is more in the strategy areas, such as funding the business and managing risk, and technology facilitates rather than replacing these roles. Wherever there is judgement required, I think it will take some time before technology takes over.


Michael Sack, GN Group: If you look at Europe, many of the more administrative elements of treasury have already effectively been outsourced and offshored to shared service centres in cheaper locations in central and eastern Europe. Treasury functions are therefore now knowledge-based partners to the business, that can keep up with regulatory changes, handle KYC and provide specialist expertise and advice.


Raof Latiff: A related question is the extent to which digital technology, or providers of these technologies, could change or replace the role of banks too. People want their banking to be invisible, which implies a lack of friction in the flow of transactions and information. In reality, everything that we do in our daily lives has a banking element to it: what you buy; what you eat and drink; where you go and how you get there. Moving money is becoming easier and frictionless, but there are other banking activities: loans, account opening etc. that are less streamlined, so there remains significant potential in these areas. Similar to the role of treasurers, the likelihood is that the role of banks will evolve in line with new technologies and business models, with a greater emphasis on using data and technology for AI, facilitating the internet of things and creating more streamlined ways of integrating banking into emerging business and consumer models.


As banks roll out application programming interfaces (APIs) what value do – or will - these solutions offer in your treasury?

Damian Glendinning, Lenovo: Ideally, a user shouldn’t know or care whether a solution uses an API, they’re a way of connecting systems and information. We have a lot of data residing in different places and systems, so the challenge is bringing this information together. While there are solutions to do this today, APIs will offer value if they enable us to harness data and communicate with different counterparties in an easier and more convenient way.


Raol Latiff: An API connects different software together seamlessly. The concept is not new, but the speed and depth of integration is now far greater, with more flexibility in the type of data that can be exchanged and how it can be used. So far, many of the API-based solutions introduced by banks have been used to enhance and accelerate existing bank services, but the use cases extend far further than this. These include solutions that are highly specific to particular industries and corporations to deliver enhanced services to customers and suppliers, and to streamline transactions, workflows and business models.


What impact do you see blockchain having on your treasury?

Michael Sack, GN Group: I think there are two issues here. Firstly, cryptocurrencies. If a customer wants to pay me in bitcoin or another cryptocurrency, I want to be able to receive it, process it, but also convert it into cash on my bank account quickly. Secondly, however, there are lots of wider opportunities using blockchain which are likely to impact on treasury.


Goh Seng Ti, Isuzu: We’re already seeing a number of case studies of blockchain- or distributed ledger technology (DLT)-based solutions in our industry, with the potential for end-to-end business process automation and far greater speed and efficiency than we have today. The difficulty, however, is that there are typically a lot of stakeholders, including ports, customs, tax authorities etc. across jurisdictions, so it takes a lot of effort and collaboration to make these solutions a reality.


Damian Glendinning, Lenovo: One issue associated with the widespread use of blockchain or DLT-based solutions is the exponential increase in storage requirements, which will need to be factored in. We see these technologies as very promising but as a treasurer, I am more interested in the end result than the technology used to get there.


Raof Latiff: Damian is absolutely right, the goal is to create the efficiencies our customers need, so as a bank, we are evaluating the potential of DLT and blockchain very deeply: how it can be used; the use cases that exist, and the value it can add. There are already some very interesting solutions that have emerged in the banking space, such as in India, but typically these are bilateral and domestic and nature. As Seng Ti describes in respect to the automotive industry, a big challenge for blockchain in banking is the development of cross border solutions, but the number of players involved creates challenges: not just banks, but also the logistics companies, shipping companies, and others that comprise the trade value chain need to be engaged. As a result, consensus, collaboration and international standards in formats and protocol will be essential. These are easier to develop locally, such as in Singapore, than internationally, but organisations such as the ICC can play a role. At DBS, we are supportive of new standards that we will follow as they emerge, and focus on execution to meet customers’ evolving needs in transaction speed, efficiency and control.


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