Risk, Data and Cash Management: re-tooling for a resilient future ______

Blog / 24 Feb 2021

Ed Lopez, Chief Revenue Officer

Like many other corporate functions, treasury management has been turned on its head by the pandemic. Assumptions about how cash and liquidity should be managed have been tested as never before, and steady, slow evolution has given way to a cycle of ultra-rapid change, writes Calastone’s Ed Lopez.

Liquidity and cash management are critical to any organisation of size, whatever the circumstances. At times of crisis that importance only grows. Understanding the global liquidity position in real time, knowing and forecasting the flow of cash, and building the capability to make and assure transactions with maximum speed and minimum friction – these are the hallmarks of a business that can ride out the stress of challenging times.

Needless to say, the Covid-19 pandemic that is still gripping the world has provided a stress test like no other. Treasury management systems have had to adapt to circumstances that were largely unforeseen, and in many cases they have adapted well. But what lessons have been learnt for the future? What are the next steps that will de-risk the management of cash, liquidity and the data that underlie them? To get to grips with these fundamental questions, I was pleased to join several industry experts in an online forum hosted by Treasury Management International.

The discussion showed that I am not alone in thinking that most treasury officers have the issue of real-time useable cash and liquidity data right at the front of their minds. Even in the recent past, this was not the case: many treasury management operations entered 2020 still reliant on manual data handling, with corporate cash and liquidity profiles typically being collated by analysts drawing on multiple data sources in multiple formats, often just working the telephones to assemble the daily report. By the time it was done it was quite often out-of-date. And companies need to do better than that.

“It’s not just that we need real-time data to create the quick overview of the position,” said Luc Vlaminck, group treasurer of drinks giant Rémy Cointreau. “We also need it to detect anomalies fast. But the big question remains, how do you draw together that data on a single platform and in a standardised format?”

Companies certainly agree that real-time data remains a work in progress. In an online survey conducted during the forum, almost 60 per cent of companies said they still needed to improve access to real-time cash and liquidity data.

“Collecting and organising data is a real challenge,” said Jonathan Spirgel, managing director of Hazeltree, the provider of treasury solutions for asset managers. “If you have to go into individual bank portals one by one to assemble your daily cash picture, and every bank has its own data format, then by the time you are done the picture is no longer ‘real-time’. The goal should be everything visible in a single dashboard by 8am, not some time later the same day. And that is still difficult.”

Without real-time data, complex organisations will struggle. First and foremost, cash visibility is paramount. This has been apparent ever since the financial crisis, when we saw the need to know the cash position by bank, and by country, and by currency, because when you have revenue in 190 countries there is always going to be an issue somewhere. And to get that visibility you are going to need to engage with your key banks to encourage data standardisation that can be leveraged in a cloud-based solution.

Indeed, the need to standardise data formats was a theme that surfaced again and again in this discussion. Participants agreed that standardisation was the path to efficiency through treasury management automation; it is the foundation of better integration of treasury functions internally and with partners and financial providers externally.

“This kind of integration is not easy even if you only have two or three banking partners,” said Spirgel. “It’s not just about getting data in from several different systems. It is also about making payments as efficient as possible, about making reconciliations as efficient as possible, about optimising inputs and outputs without anyone having to log on to an external system or pick up the phone.”

And the next steps for any treasury officer looking to learn from the stresses of the pandemic year? The consensus remains that organisations must prioritise standardisation and automation, looking hard at anything that is still done manually and digitalise wherever they can, whether that means system transformation or bolt-on technologies. “There is never going to be a better time to start that digital transformation than right now,” said Scurlock.

And as Rémy Cointreau’s Vlaminck added: “Whatever you do, don’t stand still.”

Ed Lopez, Chief Revenue Officer

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