When Smart Treasury Meets the Real Economy

In the real economy, where trading activities come face to face with real-world pressures, business strategies and models need to evolve sustainably. Michael Spiegel, Global Head of Transaction Banking, Standard Chartered discusses the evolving environment.      

At the heart of every treasury is the understanding that cash management, trade and working capital financing and related foreign exchange transactions are not abstract financial concepts. Instead, they are essential components of a business’ approach to the real economy, where goods and services are traded. It is why, against the backdrop of supply chain disruptions and geopolitical developments, focusing on delivering solutions that enable the production and movement of products, services, and human capital to support the real economy has never been more critical, says Spiegel.

“We believe that globalisation – powered by the exchange of goods and services, and the division of labour  – will continue to drive prosperity, albeit the dynamics and corridors are changing. In these times, corporates need strategies that enable them to be resilient and face headwinds, ranging from geopolitical shifts to the sustainability of their supply chains.”

In addition to the challenges posed by adjusting to the shocks and delays witnessed in the global supply chains, Spiegel acknowledges the need to identify future avenues for growth and capture opportunities in a way that is increasingly compliant with ESG criteria. These issues have become a competing priority among many corporate clients, with a need to strike a balance between efficiency and resilience. An approach able to tackle these issues head-on bears the hallmark of ‘smart treasury’.

Trends and megatrends

There are several operational trends which treasurers must consider in their approach. Spiegel cites the “perennial challenge of cost control”, noting that digitalisation is expected to improve efficiency, provide visibility, and improve business resilience against future challenges. However, while there continues to be no one-size-fits-all approach to having a centralised versus regional treasury centre, he observes a renewed focus on regional treasury centres (RTCs) and shared service centre (SSC) models.

Businesses are also focusing on adopting effective working capital strategies that enable them to be more resilient, notably from a supply chain perspective. There is a noted shift from just in time (JIT) to just in case (JIC) deliveries, requiring a different funding proposition, not only for buyers but for suppliers too. 

What’s more, sustainable finance is being increasingly adopted across a variety of financing products, with flexible solutions that support investment and development. Both investors and banks are looking for better ESG disclosure and pushing to direct capital toward sustainable development. Spiegel comments: “We believe these forces will lead to sustainable finance becoming the norm. This means treasury managers will need to understand the impact of ESG on companies and on their ability to effectively secure capital.”

Really smart

Of course, the advance of treasury technology is perhaps the megatrend often directly connected to the notion of smart treasury. Big data, AI and the emergence of real-time commerce, real-time information and real-time settlements have provided some of the biggest game-changers shaping the way businesses operate. Talk of smart treasury is often over-used in technology spheres. For Spiegel, it’s a concept that is more than the deployment of new tools. “Smart”, he states, “is about being predictive, data-adaptive, and following the cash cycle.”

Therefore Standard Chartered is building on its deep client relationships to co-create solutions that are tailored to clients’ business needs. An example is a solution that brings together digital escrow with omnichannel collections to enable seamless collections and disbursement, instead of standalone solutions that need to be integrated separately.

Another example of a co-creation pilot is a working capital analytical tool which gives clients better visibility of their cashflow and enables them to simulate the impact of their working capital through scenario analysis. This affords clearer decision making on how best to invest their unlocked working capital (through debt repayment or investing in sustainability, for instance).

Standard Chartered is also working with its clients to identify new opportunities to improve efficiencies. On reducing FX processing and transaction time, the bank’s transactional FX proposition digitalises the clients’ entire FX process on the back of their transaction banking activities. Improved visibility of client cash across multiple markets is aided by the bank’s liquidity management solutions, and the offering of multiple payment methods with automated reconciliation is facilitated by its ‘Straight2Bank Pay’ platform.

Of course, the chain of trade does not stop with a client; that client has its own clients, and the client experience across eco-systems is another area of focus. “This is about us helping clients digitalise their collections process while improving the end-customer experience,” Spiegel explains. “Straight2Bank Pay relieves clients of the need to keep up with new payment providers while making their customers ’sticky’ by offering alternative payment methods and a seamless checkout experience.”

To enable clients to achieve maximum balance sheet value, gain visibility into their cash flow, and forecast for strategic growth, a working capital optimisation advisory team is at hand to help tailor solutions. “By benchmarking their working capital against peers and the industry to improve DSO/DIO/DPO, our clients are now able to closely monitor their working capital and receive recommendations on the opportunities to allocate their unlocked cash for future growth.”

The connector to emerging markets

“Just as trade is part of our DNA, so too are emerging markets,” says Spiegel. It’s no idle claim. As a global bank with a presence in 59 countries, Standard Chartered is geared to helping businesses and individuals prosper across Asia, Africa and Middle East. Through its expansive footprint, the bank connects emerging and high-growth markets with more established economies, including in Europe and Americas. “We have been a network bank for over 160 years and our long and deep presence in many of those markets yielded excellent relationships with regulators, industry associations, and professional bodies,” he comments. “We are often called upon to consult and contribute to a client’s market entry and development strategy. Given the strength of our business in these markets, our advisory orientation sometimes features well in de-regulation pilot working groups, and we are often one of the first to activate new solutions leveraging evolving regulations.”

Additionally, Spiegel believes that the bank’s relationships with professional associations and industry bodies – including the Association for Financial Professionals, Bankers Association for Finance and Trade, and International Chamber of Commerce (AFP, BAFT, and ICC respectively) – places it perfectly to contribute and shape decisions impacting the treasury profession in local markets and on the global stage.

And as a founding bank of the Singapore Trade Data Exchange (SGTraDeX), it is also able to make available its expertise and global network for the development of this trusted international digital supply chain ecosystem – an example of how the bank’s presence in economic hubs such as Singapore enables it to contribute to the establishment of this critical platform for the development of global trade.

Tomorrow’s economy

The real economy is constantly evolving around new demands, geopolitical developments and events. This is why businesses, their clients, and their banks must move in lock-step and continuously adapt. While it is difficult to look into the future, for Spiegel there are some trends and topics that are likely to be prominent.

“Looking ahead, we see more demand for sustainable finance solutions and an increase in platform businesses, such as B2B, B2C and B2B2C. These platforms, some of them blockchain-based, will become increasingly international, and integrating our solutions with them plays a crucial role in how we help our clients capture cross-border opportunities,” he predicts. “We work closely with companies on managing new challenges in the continuously developing business environment. Our evolving sustainability proposition will offer clients additional support to achieve ESG compliance. This also extends to our extensive Islamic-compliant franchise – including sustainability solutions which are among the first to be Islamic-compliant.”

Standard Chartered will continue investing in its platforms and technology to elevate the client experience and enable real-time commerce. As companies navigate supply chain challenges, leverage efficiencies brought about by digitalisation, and seize opportunities in ESG, its suite of cash management, trade and working capital and integrated transactional foreign exchange solutions are at the forefront of offering clients the flexibility they need as they make their future growth decisions.

Finally, no future view of transactions is complete without a comment on digital assets. Spiegel takes a positive stance, declaring they are an important and permanent part of the future of financial services. Standard Chartered is committed to working with regulators to ensure responsible innovation and support for the evolution of an open and trusted global financial architecture for digital assets, notably but not limited to central bank digital currencies (CBDCs).

With a stated goal of enabling services and tools to connect institutions, digital assets service providers and clients, Spiegel is clear that providing access to emerging opportunities in all spheres of economic activities is very much on Standard Chartered’s agenda for smart treasury.