Only those who set up leaner and more homogeneous processes today can benefit from the opportunities offered by the digital data world tomorrow.
In our article from 20 July of this year, we reported on the opportunities and challenges treasury can expect over the next 5-10 years.
We already discussed the topics of automating standard processes (e.g. FX-Exposure Management) and digital decision-making in detail in Part 1 of this article. Our key takeaways highlighted the opportunities as well as the importance of taking timely action. Only those who set up leaner and more homogeneous processes today can benefit from standardisation and the opportunities offered by the digital data world tomorrow. However, this does not represent the full potential. Using the following subject areas, we will show you what is going to change:
Compliance is becoming more and more important. Whereas the requirements facing internal compliance in the Treasury department have changed only marginally over the past few years, we are now seeing far-reaching changes and requirements regarding external compliance. During a discussion, you have led a managing director to state that it is impossible for him to know and comply with all the legal and regulatory requirements of all countries and international organisations, and that's why he's already got one foot in prison anyway – not to mention reputational or financial damage to the company. It is undisputed that the largest problem in the context of compliance is the human factor – be it deliberate fraud, an incorrectly assessed situation, a lack of knowledge or simply because a mistake was made.
Treasury 4.0 does not solve this problem entirely, but it does offer the automation of processes and the integration of systems along the entire process chains, which are prerequisites for implementing "Embedded Compliance".
"Embedded Compliance" means that both internal as well as external compliance requirements are mapped in the systems using automated check routines and controls, which makes it possible to conduct the checks in real-time/ensure that, for instance, notifications are fully and correctly sent to external third parties. The objective is to take the human factor out of the regular process equation. Let us take a closer look at three examples:
These three examples illustrate that "Embedded Compliance" is more than just a buzzword and that it provides more security – not only for the company, but also for each employee in the process chain.
However, there is no need to wait for a system landscape that will enable this in one fell swoop. Already today you can begin further automating controls in the existing systems and, where possible, automate the corresponding compliance reporting function.
All business segments are subject to detailed performance measurements. All of them? Not quite, there is a small Gallic village called Treasury, which is still largely excluded from performance measurement. The reasons for this are not relevant at this point.
However, change is slowly becoming apparent, for instance, there is increasing interest in bank fee management or in measuring the performance of currency management, including the corresponding cost-benefit calculations. On top of this, process changes are emerging, such as in payment transactions, which are leading to process chains extending far beyond Treasury and are subject to corresponding performance measurement. Examples include cash management or payment transaction processes, which are in part the responsibility of shared service centres. Performance indicators in real-time such as turnaround times, transactions per employee, hedging costs in relation to the achieved volatility reduction of currency gains/losses, accuracy of scenario calculations in the ex-post analysis are just a few examples.
The reasons these topics were not tackled in the past was not always due to a lack of will; rather, the limits of what was technically feasible were a deciding factor.
This has already changed and will continue to do so. Central (current) data available is no longer limited by any material restrictions, neither technical nor financial. Nevertheless, depending on the starting point, the road to achieving this can be longer or shorter and require considerable or little effort.
Irrespective of this, there is no reason why you cannot start today to
The two future subject areas of Treasury 4.0 outlined above are intended to make the future of Treasury more tangible and transparent using standard topics and show what actions can be initiated already today. However, theory is not practice. Therefore, we will address practical implementation in the next newsletter.
Source: KPMG Corporate Treasury News, Edition 71, September 2017
Author: Tatjana Schäfer, Manager, Finance Advisory, firstname.lastname@example.org
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