Why Collaboration Beyond Treasury Matters
Treasury is no longer the solitary function it once was. Oleh Kurinnyi, a global treasury and operations specialist, draws upon his own corporate and banking experience to reveal the power of partnerships.
There are many clichés on the subject of co-operation and mutual support:
- Two heads are better than one.
- Four eyes see more than two.
- There’s no I in team.
- Teamwork makes the dream work.
Despite the roll of the eyes that such expressions often induce these days, it seems that the treasury function is a living embodiment of their meaning; its success really is based on collaboration with a range of partners.
Reaching far and wide
The treasury is the heart of many corporate and banking organisations, ensuring the continuous flow of cash. It sits at the crossroads of incoming cash flows (from revenue generated by the sale of goods and services, and income from financial and operating activities), outgoing cash flow from the purchase of goods and services, and payments to staff, taxes to the state, interest on bank loans, and operating expenses.
Of course, the treasury’s fundamental task is to draw up a cash flow forecast (broken down by timing, amounts, currencies, and bank accounts), monitor the fulfilment of this forecast, and adjust it in line with changes in internal and external factors.
To carry out this task, the treasury is in constant contact with various departments within the organisation. The list often includes the front office (sales forecasting), the finance department (banking operations and capital flows), the accounts department (taxes, payroll, overheads), as well as the AP department (invoice payments, rent). In multinational organisations, the group treasury co-ordinates the cash flows of various regional divisions and the group as a whole, adding a whole new level of interaction.
Often, in order to fulfil its tasks of forecasting and co-ordinating cash flows, the treasury department will regularly liaise directly with client companies and external partners, effectively identifying it as a front office.
This partnership arrangement is most typical of bank treasury departments, which, alongside cash management teams, are usually responsible for selling treasury and trade solutions. It’s an area with which I am very familiar [1].
A bank-side view
In the banking setting, the treasury department typically interacts with external partners in two situations:
- During the audit of the bank’s financial statements.
- During the implementation of projects to automate and optimise business processes related to business transformation.
An audit of financial statements is carried out to confirm that the bank’s activities are accurately reflected in the financial statements at the end of the reporting period (usually a year or six months) for presentation to external stakeholders.
External stakeholders include the bank’s shareholders, government regulators (central banks of individual countries and the European Union, and national securities commissions), as well as credit rating agencies (such as Moody’s, S&P and Fitch), whose ratings are subsequently used to demonstrate the bank’s creditworthiness to creditors and investors.
During an audit, the treasury, in response to a request from the auditor, submits statistical information and source documents relating to transactions carried out during the reporting period on the FX and money markets, as well as on the capital, securities and derivatives markets, and regarding payments and settlements made in connection with such transactions.
Source documents include contracts with counterparties, transaction confirmations from trading platforms (such as Bloomberg and Thomson Reuters), account statements from service banks, and settlement confirmations from payment systems (such as Swift). The treasury extracts statistics and a list of transactions and payments from the TMS.
Following a review of financial statements to ensure they are consistent with the documents submitted, the auditor draws preliminary conclusions and makes recommendations for adjustments to these statements. The audited company is given a short period, within the planned audit timeframe, to make the necessary adjustments.
Based on the results of the analysis, the auditor draws up a report summarising the conclusions reached and detailing the adjustments made. A collaborative treasury is an essential part of this process.
Strength in numbers
In the wider business community, there can be few better examples of how partnerships facilitate better results than during a transformation project. The need to automate and optimise treasury processes will often be linked to the business transformation of the organisation itself. This may be triggered by its transitioning from a local to a global player, the rapid and wide expansion of its branch network, a series of M&As, an IPO, or, in the banking world, the launch of new financial products.
I wrote about the pressures of transformations in my article Treasury Challenger. Essentially, the volume of work undertaken by treasury in a transformation project creates a need for partnerships with companies that provide, for example, data analysis, consultancy, and implementation services for new solutions.
At the initial stage of such a project, a joint team comprising specialists from the treasury and the consultancy firm may be formed; the project objectives are defined, and the timetable and cost of the service are approved.
The main phase in this instance involves analysing data on the treasury’s operations over the past few years, analysing existing business processes and management reporting, and developing the necessary set of changes, which will result in an optimal mechanism capable of meeting and maintaining a response to new business challenges.
As a result of the project, the treasury receives a description of business processes in two versions: As is and To be, alongside a list of recommended changes. These may include the implementation of a new TMS, the online visualisation of KPIs, the automation of calculations and the generation of reporting forms. Throughout the entire period of implementing new solutions, conducting tests and integrating them with the organisation’s business processes, the consultancy firm will be expected to support the treasury through its involvement.
Some of the most high-profile global consultancy firms include EY, Deloitte, PwC, KPMG, CFGI, McKinsey & Company, BCG, Accenture, Grant Thornton, IBM Consulting, BDO and Forvis Mazars. Those with authorisation from government financial regulators may be assigned responsibility for independent auditing financial statements.
Digital partners
Partnerships may take a number of forms. AI is currently playing a key role in treasury operations, transforming operational processes and helping treasury’s shift from being operational units towards a new more strategic business partnership role.
Because AI technologies enable the processing of vast amounts of transactions in a matter of minutes (replacing manual analysis in Excel, Google Sheets and databases that used to take several days), the treasurer now has a de facto AI partner. It can be tasked with collecting and analysing data, visualising the results, and suggesting or even formulating management decisions based on the findings of that analysis.
The main areas of AI application in treasury operations are currently in cash forecasting, bank reconciliation, fraud detection, and compliance. All of the most visible TMSs in the market deploy AI capabilities. The expansion of treasury AI into more experimental scenarios cannot be far away.
It’s worth considering that before the advent of AI, treasurers spent a considerable amount of time carrying out elementary data collation and analysis tasks. Now, at least where an AI solution has been successfully implemented, time has been freed up to address more strategic issues. This makes it possible to better partner with colleagues in other functions, and often offer them guidance on treasury impact areas both up and downstream. Indeed, arguably, the AI partner can assist the treasurer in their quest to be more proactive as a business development and growth partner.
In fact, across all of these settings, by choosing to collaborate with a range of assistants (human or digital), consultants, auditors, and other internal and external partners, organisations – and of course their treasuries – open up the possibility of consistently achieving better results.
