The Data-Driven Treasury: A Virtual Cycle of Value

By Suraj Kalati, Global Head of Liquidity & Investments Product Management, Global Liquidity & Cash Management, HSBC

What first comes to mind when you think of a day in the life of a treasurer? Cash management? Transaction processing? Hedging risk? In reality, the first thing you should think of is data, which underpins every treasury activity. Now more than ever, the quality, timeliness and consistency of data that treasury produces, receives, manages and analyses is critical to its ability to fulfil the liquidity and risk management demands of the business, and offer new ways to add value.

The fact that these demands on treasury – and the opportunities to address them – have emerged now is not coincidental. Companies across all industries are at varying stages of digital transformation. This creates new business demands as companies embrace digital business models and target new supplier and customer segments. Treasurers are already responding, such as by devising new payment and collection strategies and restructuring working capital, financing and risk models. These demands will continue to emerge and evolve, but what is clear is that they will rely on data.

The data dilemma

Data has been a double-edged sword for treasurers in the past. In theory, the data linked to incoming cash flows has made it possible to reconcile bank account statements automatically. However, truncation and omission has often restricted the success of these initiatives due to a large number of exceptions. Data on future cash flows from across the business enables treasurers to produce consolidated cash flow forecasts, but the differences in formats, timing and transmission methods have often resulted in inaccurate or out-of-date analysis.

Until recently, ‘big data’ has been a buzzword, bringing with it visions of building and accessing huge data warehouses. Many treasurers have found ‘big data’ a problematic concept. How should they process and manage enormous volumes of data? What is this data in the first place, and how can they harness it to be meaningful and useful? In reality, what matters is not the quantity of data, it is the relevance, reliability and timeliness of data that enables treasurers to make better decisions.

Today, however, the opportunities for treasurers – and their banks – to build a realistic and achievable data strategy are unprecedented, enabled through technology (figure 1). Many have already invested substantially in treasury technology and banking communications, and are seeking ways to optimise these investments and bring together disparate data and processes in a cost-effective way to deliver additional value to the business.

Real-time data for a dynamic approach to liquidity and risk

Taking place in tandem with the growing focus on quality and relevance of data is the acceleration of both transactions and the associated data. Clearing and settlement mechanisms increasingly operate in real time and Application Programming Interfaces (APIs) offer the potential for treasurers to obtain and exchange banking data, dynamically.

Real-time payment schemes are emerging globally, with 40 schemes now live and a further 13 planned (source: www.instapay.com) and SWIFT gpi (Global Payments Innovation) is expanding rapidly, so the speed with which transactions and data are exchanged and processed will only increase. This will have major implications for treasurers both operationally and in terms of how they take advantage of more dynamic data. Liquidity management will increasingly take place in real time. Treasurers will rely on banking and supply chain data across multiple systems to make intraday funding and investment decisions and determine how to optimise their account structure to minimise working capital buffers and reduce the risk of underfunding.

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