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Digitization Of Corporate Treasury Processes: Focus On Banking Relationships
Jakub Chrzanowski, Head Of Client Services Account Management, Ing Bank Slaski, Ing Poland
The business world around us is changing at enormous speed and the change is only accelerating. There are many useful metrics that show this growing velocity. Suffice to look at the biggest 10 companies listed on the NYSE – in the days of yore a slowly changing list. Today – almost all are newcomers, barely known or even non-existing companies 20 years ago.
For treasury executives and CFOs. these changes have meant a paradigm shift in the scope of their support function to the core of the business. From invoices settlements through receivables management, liquidity and risk tracking to the redefinition of the UX metrics in the client payments flows – treasury teams have evolved into the true business enablers, co-creating the long-term strategy and addressing some of the most epic challenges of today’s corporates.
This is where wholesale (or commercial if you will) bankers try to play a role by helping their corporate partners devise a durable, safe and efficient approach to corporate finances.
For the banks who have been most successful in the implementation of the digital transformation the direction is simple: digitize and automate all areas where traditional and manual processing is a value destroyer going forward.
However, whereas this approach is relatively straightforward in retail banking (assuming you have your own house in order as a bank), it needs a very special craftsmanship and a set of unique implementation tools in the wholesale banking area.
Even though the global pandemic situation perpetuated by the virus SARS-CoV-2 made super clear that digitization is not a tech geeks thing, bereft of the core human characteristics, but rather an every-day necessity – we can’t stress enough the importance of the word implementation in the corporate domain. In other words: without good implementation digitization dream will probably not come true.
This is where wholesale (or commercial if you will) bankers try to play a role by helping their corporate partners devise a durable, safe and efficient approach to corporate finances
First of all, you really need to get to know your client’s needs. That’s true to all business, but for a wholesale banker some important characteristics stand out. Not only do you want to place your client in a given market or sector (this too!), but you’d better be conscious of all the differences in each and every client. The value of your digital proposition is defined by how it addresses all the complex and interdependent challenges of a corporate. Here a very useful metric kicks in that helps understand this complexity: the digital maturity of a client. You will want to apply of completely different set of narratives and finally services when your client’s ERP infrastructure is fragmented and not integrated, corporate treasury and accounting processing decentralized and not necessarily programmed into a digital flow. As opposed to when a client has lived the digital agenda for many years and is concerned with slight adjustments (triggered by efficiency or regulatory changes) or cyber security challenges.
Let us now see the various challenges corporate treasurers and CFOs. have on their plates at the start of the third decade of the 21st century and how the digital value proposition of wholesale banking can help address these.
- The COVID-19 pandemic triggered so many changes and made many anxious about the future. One easily observable, yet truly challenging consequence is that many teams, experts, executives – all of us who can, really – work remotely. All were caught by surprise, but for those not prepared this circumstance alone posed a huge operational problem and a wide array of risks. We saw quite a number of corporate clients jumping on the digital train just in time before it could have been too late. From transactions and reporting, through other core banking services, all the way down to formal contract signing – all this low hanging fruit for years suddenly became a core necessity, rather than an option and the banks who excelled in this area could extend a helpful hand to their clients.
- Process efficiency – by far nothing new, yet in times of economic slowdown when wise resource allocation is pivotal this challenge climbs up the priority ladder. On the other hand, we have all seen an exponentially growing number of ways how to come about it: different methodologies to measure and implement process efficiencies, platforms and tools that facilitate it, technological breakthroughs that have a potential to wipe out entire burdens of legacy. No wonder that treasurers get lost in the sea of options. A trusted and experienced transaction banker, who looks at her products as solutions to client’s problems rather than something she simply wants to sell, can be of immense value. She will zoom into the specific area (say payments, reporting, liquidity management, etc.) and help diagnose the “as-is” situation, then together with the client she will build a “to-be” scenario (there might be a couple, depending on different variables) and she will make sure there is a team at her bank who will support her client in the implementation of the change project.
- Cash position and liquidity management – again, per se this challenge is not new. However, given the changing regulatory environment (e.g. tax and invoicing), a high degree of interdependence with FX risk management and operational efficiency this area requires a special attention from treasury teams. Banks can either stick to their core service of being, essentially, mere data providers. Alternatively they can move on to facilitating a highly automated cash pooling and cash concentration solutions. When coupled with high quality visual and reporting insights this offering becomes an indispensable part of the cash flow forecasting (CFF) ecosystem within a corporate treasury function.
This is a short introduction to a much broader field in which corporates and their wholesale banking partners cooperate and where digitization and automation have the potential to redefine some key elements of the game. When implemented wisely and consistently – the game is bound to become more elegant, efficient and surely safer.