Beyond Technology in Treasury: Leveraging Community Intelligence

Running an efficient, data-driven global treasury is not just a technology play: it’s also about leveraging “community intelligence” and group-wide collaboration. Sounds too involved? It’s easier than you think, says Nikolai Diekert, Director, Product Management, Coupa.

It has always been the job of the corporate treasurer to manage cash, liquidity and risk in an unpredictable world. Despite the almost existential importance of the role, treasurers have often been presented with a rather simplistic toolset to help keep the lights on: the spreadsheet.

In itself it is a useful, flexible and familiar piece of technology. The problem with spreadsheets comes when treasuries have to bring financial data together to make sense of the rapid-fire dynamics of the commercial, economical and, increasingly, political drivers of global business.

When having all financial data in one place, available and readable in real time is so critical, it’s perhaps an anomaly that treasurers often struggle to gain access to the right data, running the gauntlet of functional silos, multiple yet disconnected systems, and perhaps even budgetary resistance to improvement. It certainly would be an anomaly, were it not such a common scenario.

What does make the underpowering of treasury unusual is that the tools to give it flight have been available for a long time, and are just getting better, says Diekert. “It’s a long-term issue. Taking a different approach 10 years ago was the right choice, and is still the right choice today, but that decision is even more important now,” he warns.

The problem is that information flows and visibility are still too slow for organisations to respond to events that often have an immediate impact. “To counter this, we need to make sure event information flows faster than the impact; spreadsheet-based decision-making simply cannot keep pace with reality.”

With the effects of the pandemic having demonstrated the need and the capacity for many businesses to work remotely, he believes there is no real reason to continue avoiding enhanced connectivity. This argument is further strengthened when it is understood that the nature of recent health and financial crises has ensured treasurers’ stock has risen across the organisation.

Making connections

In being able to tackle currency risk, for example, Diekert says where once treasury was perceived as residing in ivory tower, now many more business colleagues understand and appreciate how the role can help them make better decisions. “Operational siloes make no sense when strength is so obviously found in collaboration.”

While technology enabling this approach is readily available, it may be that some organisations are waiting for the right moment for a Big Bang deployment. This is a mistake, says Diekert. “You shouldn’t wait until you believe everything is perfect from a technological standpoint.”

Ideally, the effective connection of technology as a means of enhancing data sharing needs to be matched by the connection of people. Indeed, says Diekert, it is the successful interpretation of data, not its transfer, that is perhaps the most challenging and rewarding aspect of building and running an efficient, data-driven global treasury.

“There are correlations between local levels of knowledge that cannot be discovered unless brought into one place,” adds Diekert. Where a domestic entity makes decisions based on local knowledge, certain information is not necessarily required for it to make good decisions. Yet central treasury may need this information – to inform hedging of currency exposures, for example – for its own effective decision-making.

If automation of workflow within a connected treasury infrastructure adds enormous value in terms of operational efficiency, then using this as the basis to deploy artificial intelligence (AI) and machine learning (ML) takes data interpretation to the next level.

However, says Diekert, AI and ML does not replace the professional wherewithal of the treasurer. “ML is not yet capable of solving every problem; there’s a long training process ahead for the algorithms. But then treasury will be able to move to the next level of effectiveness.”

Today, he notes, cash management consumes a great deal of effort, with often little time to consider its underlying risks. Once cash management is ‘solved’ by having all the data easily to hand, with tools such as ML enabling automated forecasts for the short term, then longer-term risks can come under closer scrutiny.

Depth and breadth

What this means for treasury is an ever-widening reach into the organisation. With few, if any, business decisions not impacting on or potentially leading to some form of financial risk, treasury can learn about any underlying risks as a means of improving its own efficacy. What’s more, functions such as sales and procurement can benefit from this treasury knowledge.

A sales contract using a foreign currency obviously has a risk attached. With treasury advice, it is possible to avoid embedding risks in contracts, such as a price pegged to an exchange rate, , says Diekert. Indeed, ‘treasurer as adviser’ to business units such as sales and procurement aids the development of profitable international trade and supplier relationships.

Of course, absorbing information from outside the company has long been a treasury endeavour. With data often poorly structured, transforming it into knowledge for use by business can be “extremely challenging”, notes Diekert.

However, the power of “community intelligence”, where data is shared and can be leveraged by every stakeholder, is a key goal for Coupa, he says. An understanding of general economic indicators as a means of steering forecasting for different functions, for example, demonstrates how working together through data brings more effective and co-ordinated results.

The community that Diekert has in mind is not just partners, such as banks and vendors, but also the community of treasurers, with Coupa’s customers able to share not just methodologies “but also real, impactful knowledge”. Naturally, this is not about relinquishing competitive advantage but about tackling mutual issues, such as financial crime. “I think there is a strong interest among treasurers to be part of a community that can leverage common knowledge,” he remarks.

As a key partner for its clients, Coupa provides the enabling technology but also analyses common data to generate insight for the wider treasury community. An example of this could be the provision of focused benchmarking data on foreign exchange (FX) deal or bank-fee pricing – potentially very useful in building fairer commercial relationships.

With clear agreements on precisely what data is considered, and every element anonymised, Coupa is able to apply its own knowledge and expertise to take its offering beyond technology. As part of this approach, clients are free to take part in the Coupa user-group forum. Here, not only do these open exchanges of information and experience create deeper community understanding of treasury issues, but it also helps inform Coupa’s own product development, creating the most desirable and usable solutions for treasurers.

Time to act

Businesses need to be prepared for each new major challenge. In the past year or so, the world has seen how fast situations can deteriorate. Having the right data at the right time is essential, and for many treasurers the time has come to re-assess their readiness for these challenges.

With vendors such as Coupa engaging with the notion of community intelligence, Diekert believes that treasurers have an opportunity to work together to solve common challenges while leveraging the latest tools to share their knowledge and understanding with the rest of the business.

At a technical level, Coupa’s implementation programme starts with a data-sourcing process to offer the earliest possible visibility, and then follows the life cycle of the transaction to conclusion. By integrating treasury into the broader business environment in this way, treasury becomes a “finance hub”, enabling deeper insight into potential issues and opportunities.

In practice, Coupa offers businesses end-to-end visibility, from source-to-settlement, and an enhanced set of processes, using automation to drive efficiency while minimising risk. A well-connected treasury function can therefore operate as a hub, connecting stakeholders from different disciplines and locations. This serves to develop collaboration and help build stronger corporate teams, with each acquiring data at the point of origin, not only after decisions have been made. In this way, treasury is involved at the very start of the risk-carrying business processes.

Of course, it’s up to the individual when to begin the journey towards data and knowledge enhancement. But with proactive and well-established programmes of guidance and support to help clients progress firmly embedded in Coupa’s DNA, Diekert notes that two ideas become clear.

First, that treasury’s increasing importance makes the risk of being spreadsheet-based almost untenable, certainly from the perspective of missing out on the many new opportunities already available. And second, that even the latest technologies work best when being driven by communities. Indeed, when treasury has data visibility, and the means and will to share its knowledge, everyone benefits.