Treasury organisations and finance shared service centres in Central & Eastern Europe are changing - robots are taking over many of the manual tasks once performed by humans. At the same time, Big Data and predictive analytics are becoming more commonplace. But is treasury at risk of being sidelined in the rush to digitise corporate business models?
Robert Vida Finance Manager, EMEA Treasury Operations, Corning
Digital start-ups are thriving in Central & Eastern Europe (CEE). To date, the region has produced at least 10 so-called ‘unicorns’ – privately held start-up companies with a value of over $1bn[1]. One of the main reasons cited for this success is the abundance of local talent[2]. This is precisely why CEE is a favoured spot for finance shared service centres (SSCs), too.
Among the major multinationals that leverage the region for their finance SSCs is Corning Incorporated, a world-leading innovator in materials science. Located in Budapest, Corning Hungary Kft runs the European financial-processing operations of the parent company, as well as providing accounting services and managing liquidity, credit and collections processes.
Having local talent is important for Robert Vida, Finance Manager, EMEA Treasury Operations, Corning. “In Budapest, Hungary, we are able to employ well-educated staff who speak multiple business languages. The same goes for other countries in the CEE region, such as the Czech Republic or Poland, and given the high freedom of movement in the region, we can pull in talent from neighbouring locations if we wish – that’s a great benefit when seeking top treasury talent.”
Vida believes the CEE has an additional edge over other outsourcing hotspots thanks to its time zone: “We’re at the heart of the globe – that leads to great communication opportunities with Asia, the rest of Europe and the Americas.” And, importantly, he adds that: “compared with other geographies, CEE remains cost-effective from a human resources perspective”.
Another multinational with operations in Hungary is Howmet Aerospace Inc. The company provides jet engine components, fastening systems and titanium structural parts to the aerospace industry and forged aluminium wheels to the commercial transport industry. The company was recently created when Arconic Inc. split into two entities: Arconic Corp. and Howmet.
Zoltán Szigethy, EMEA Treasury Manager, Howmet, believes Hungary is an excellent location for the finance team, among the countries where the company is present in Europe. “Our offices stand next to our manufacturing plant, and the infrastructure is excellent. This last point is very important from a production point of view because logistics play a huge role in our business – more than 90% of our revenues from the Hungary business come from exports. So, we have to be able to move the goods efficiently,” he says.
Let’s get digital
Zoltán Szigethy EMEA Treasury Manager, Howmet
The digital infrastructure in the country, and indeed the entire CEE region, is also improving. Szigethy continues: “With the Covid-19 crisis, we have all rapidly adapted to working from home. Communication tools like Skype have made it easy to stay in touch with team members, we have remote access to our systems, and the digital infrastructure in general has held up well in this challenging environment.”
With this increasingly robust digital infrastructure, business models in the region are shifting – and so are the demands on treasury and finance SSCs. Radek Havlin, TTS Sales Head for CE5, Citi, explains: “With the advent of the Internet of Things, Big Data, artificial intelligence [AI], and accessible cloud services, business models are shifting. E-commerce is on the rise and technology platforms are enabling a direct-to-consumer approach.”
Of course, this trend towards digital business has been accelerated by the Covid-19 crisis. “People are not going to shops, they are buying goods and services online. Governments are encouraging digital payments as a way to reduce cash and limit the spread of the coronavirus. With the temporary suspension of normal life, many B2B companies are also looking to B2C sales to act as new revenue streams,” adds Havlin.
Vida agrees on the move towards B2C sales, and says there is also a growing reseller market online. For treasury, the interesting trend emerging from this business model change, he believes, “is the shift towards a larger volume of lower-value payments. This will have a significant impact from a cash management perspective, and treasurers will need the right technology to help them adjust to the new normal”.
Here come the robots
Havlin echoes this, saying: “These new business models drive transaction volume up, while reducing transaction value. So, treasurers need to find smarter ways to work, especially when it comes to cash application. Robotics and machine learning are two tools that can be of particular use here, enabling treasurers to automate reconciliations and for computers to ‘learn’ from payer behaviours to help reduce the number of manual exceptions, for example.”
Cash application is far from the only treasury activity that can benefit from robotic process automation (RPA), however. Szigethy identifies “monitoring of payments and financial reporting” as two potential use cases, for example. And Vida sees RPA as possibly being a useful tool for “extracting data around investments, enabling more time to be spent on the decision-making, rather than the data gathering itself”.
Other commonly cited finance and treasury activities that can benefit from RPA include payment execution, deal confirmation, and accounting. Szigethy continues: “RPA is a real time-saver and enables treasury staff to be redeployed to more value-added tasks. So, not only does RPA do the job more quickly, and more accurately, it also makes your team happier as they do not have to waste time on repetitive, mundane tasks. This is not to say that robots will replace humans, of course. But they can help to reduce the manual workload.”
Meanwhile, Vida believes that technologies such as Big Data and AI also have huge potential for treasury. “The utilisation of Big Data has become second nature at this point through many functions. We spend a lot of time analysing customer trends to help predict cash flows, especially where our subsidiaries are concerned. Recently, we implemented a solution which leverages business intelligence tools and supports our ability to provide a much clearer cash forecast to our Headquarters. After the delivery of another project, we now have visibility over all activities across the bank account portfolio, which enables us to draw conclusions and initiate actions to streamline and make our operations more efficient, for example the identification of candidates for our cash pool extension efforts or others that can, as a result, support us in different ways to reduce costs and complexity.”
While investments in the types of business intelligence tools Vida mentions can seem costly upfront, he says that “when applied in the right manner, they deliver insights which far outweigh the value of the investment in the system over the longer term”. He also believes such tools will be critical for the future of treasury, as the role becomes increasingly strategic.
Another technology that is garnering attention among finance and SSC leaders in the region is application programming interfaces (APIs). These enable systems to interact seamlessly, and so are “important for corporate-to-bank communication,” says Szigethy. APIs are also assisting the e-economy by enabling greater integration of emerging payment channels into websites, including real-time payment options.
This is an important point for CEE treasurers to pay attention to, since the treasury function must be ready to support the growth of the business – “namely by having the correct infrastructure in place to mirror the company’s strategic goals,” comments Havlin. He explains that an “agile infrastructure should be able to swiftly respond to (or even better – to predict) the needs of internal and external stakeholders – this involves deploying efficient account, payment and liquidity management structures, supported by advanced connectivity channels, such as API”.
Avoiding the traps
Despite the obvious benefits, there are inevitable pitfalls that come with moving towards a more digital treasury set-up. Cybercrime is arguably one of the biggest challenges, with companies in the CEE region being no less prone to cyber-attacks than their counterparts in other regions. Havlin comments: “Technology enables higher rates of automation but also increases the potential for cyber-attack. This requires treasury and finance SSCs to implement much stronger control mechanisms to minimise and quickly identify and rectify frauds.”
Treasurers are not alone in the fight against cybercrime, of course. “Banks like Citi are innovating in this area to help keep clients safe – ranging from biometrics for secure system log-ins to payment outlier detection tools. We also help to educate clients around the latest cyberthreats and best practice cybersecurity.”
For Szigethy, it is the training that is most important. “Our IT team does a great job, as do our banks and system vendors. It’s the people element of technology that introduces the most risk. You absolutely need to train your key people on how to mitigate cybercrime and ensure they work within those guidelines.”
People can also pose a risk to digital projects in the planning stage, believes Vida. “One of the most common pitfalls when it comes to digitising processes is that people are too ambitious. In my experience, it is better to focus on smaller projects and to garner success with those, before building up to the bigger tasks.”
Szigethy offers some additional advice: “It is also useful to review manual processes before digitising them and see how they can be improved. There is no point in simply turning an inefficient manual process into an inefficient digital process – this poses a significant risk to the return on investment.”
While we may observe some positive shifts already, one of the key technology-related challenges facing treasurers, however, is the fact that “they do not always have a seat at the decision-making table when discussions around the company’s business model and future digital plans are taking place,” says Havlin. To remedy this, Vida urges his peers to equip themselves properly. “Understand the technical side of new digital tools and learn how to talk to the management team about these innovations in terms that mean something to the business. This is the best way to ensure that treasury is not sidelined.”
Staying relevant also means “challenging banking partners to come up with innovative treasury solutions – perhaps in conjunction with a fintech,” believes Havlin. “Treasurers should continue to come forward with the issues they are still facing and encourage banks to up their game in response: dialogue is essential to finding the best digital solution,” he concludes.
