Treasury 4.0: From standardisation to digitalisation | KPMG | SE

Treasury 4.0: From standardisation to digitalisation – Treasury organisation of the future

Treasury 4.0: From standardisation to digitalisation

Increasingly dynamic product development, the internet of things and disruptive technologies are changing established business models. A significant component of this is digitalisation – a game changer.

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This also applies to treasury and it has long since ceased to be a secret. But what consequences does this have and, above all, what do treasurers need to do to position treasury as a consulting entity of equal standing that will lead the change processes brought about by Industry 4.0 for managing liquidity and financial risks?

As was discussed in Issue 63 of our newsletter, today's treasurer already needs to deal with how tomorrow's treasury will look like. And has to consider which activities and technologies are necessary to support the company's performance and flexibility with appropriate products. Taking the example of treasury organisation and the demands placed on treasury employees, this article will cast light on these issues.

The consequences of Industry 4.0 – Digitalisation of treasury

Consider a current example of change processes initiated by digitalisation and the impacts on treasury: In many companies, sales departments and customers are both trying to settle invoices using electronic money and associated platforms (e.g. PayPal, Apple Pay). Apart from the many operational risks that are currently being discussed at length, what does this mean for the treasury area of responsibility? Is treasury involved in these strategic decisions and what are the implications for liquidity and financial risks?

Before these cash equivalents are transferred as deposits to the traditional treasury processes, just what are the current liquidity effects or counterparty and settlement risks? Electronic money providers and platforms are often not covered by deposit insurance, and traditional treasury instruments, e.g. for insuring against credit risk, can only be deployed to a limited extent. Therefore, treasury must make sure that the content of its products is aligned with new technologies and processes. For example, in the case described above this means that the end product, 'Monitoring counterparty risks', must also take into account electronic money holdings and their specific risks (e.g. in the respective risk report). This is easily said, but putting it into action creates much more complex issues. In an ever faster changing world, treasury must set itself up so that processes, data models and reports are structured in the most modular way possible and can be flexibly adapted and expanded.

Therefore, treasury must frequently put its processes and products to the test and update them on a regular basis. This requires standardised, clearly-defined processes, for which the necessary data and interfaces and the finished end products and responsibilities are clearly and transparently established. Standardisation is the prerequisite for digitalisation. And standardised, digitalised processes are the basis for docking relevant apps and modular process extensions, thus allowing change processes to be addressed at short notice (for example, expanding credit risk analysis to cover e-money aspects).

Legal and tax frameworks will set limits for the standardisation of treasury products. As, of course, will highly individual processes that require problem analysis and solutions, and which cannot run in standardised, automated processes. Consequently, treasury teams' activities will be focused on solving demanding and complex issues, because the standardised processes will largely be automated, following the principle of 'management by exception'.

This is where the issue of employee qualification comes into play: the future treasurer will take on more of a financial adviser's role, providing their clients with the best-fitting product. This especially involves high-quality advisory services: which products are necessary (why can't a standard product be used?) and how should the service be designed specifically? Therefore, the treasury specialist must be well familiar with the treasury products, the specifics in the individual markets and regions and the general legal and tax conditions.

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