Corporate Treasury and SMAC: Possibilities, Opportunities and Paradigms

October 30, 2014
Nischala Murthy Kaushik - Wipro
SMAC

The corporate treasury function continues to grow and evolve within an organization, and the role of the treasury office is increasingly becoming critical for the financial health, growth and successes of an organization. "Why?" you may ask. The answer is fairly straightforward. The decisions and everyday actions of a treasurer directly impact the cash flow within an organization, and it is well known that cash is the life blood of an organization. It is for good reason that the adage "Revenue is Vanity... Margin is Sanity... Cash is King" is widely popular.

Fundamentally, there are three key questions around which a treasurer's world revolves:

What matters to the corporate treasurer

  • How do I "optimally" run the business?
  • How do I "effectively" grow the business?
  • How do I "realistically" protect the business?

What this translates to is:

  • Ensure adequate cash flows to keep the business going
  • Ensure financial return on investment in line with financial / business objectives
  • Ensure holistic and effective risk management

To answer and act on each of the questions above, the treasurer needs to have accurate data / information around payments status and cash positions, have the required knowledge and skills to draw actionable insights about liquidity and risk, and be empowered to make decisions around strategic and operational parameters like investments, forex hedges, bank accounts, etc.

Before we get into specifics of this post, I’d like to share the initial reactions / responses when I shared this topic in multiple communities. There were the treasury / finance teams who seemed interested because the topic sounded interesting and relevant for them.  There was the technology camp which was excited by the use of the acronym SMAC (Social, Mobility, Analytics and Cloud) - no prizes for guessing that treasury was incidental here! Then there were the product camps which were both curious and interested in what an IT service provider had to say about this area. Lastly there was the analyst community who gave a big thumbs-up as a topic that needs to be written about! But I digress.

The point is that the corporate treasury ecosystem is complex with treasurers, product vendors, technology specialists, service providers, consultants / advisors, and a lot of other interfacing teams which are impacted by the work done by the treasury office. Hence, the (big / next generation) treasury (technology) decisions are never easy and fast! With the acceptance and proliferation of next generation technologies, the amount of technology leverage and innovation that is possible within treasury is significant, and that can potentially transform treasury operations.

In this post, I will share a few scenarios / use-cases in how SMAC technologies can enable / equip and empower a corporate treasurer to answer the above questions.

Social media and corporate treasury – the interplay

"The power of social media is that it forces necessary change." Erik Qualman - author, Socialnomics

In the context of a corporate treasurer, social media is really about real-time access to relevant and critical information, connecting with "people / groups" with similar interests and collaboration to address specific issues / solve problems.

Some use cases that would be significantly useful to a corporate treasurer are below:

  • Use social media as the first conduit of news, information, insights and intelligence on parameters which affect treasury operations like foreign exchange rates and business / financial risk exposure. For example, let's say there is a U.S.-based company with global operations and has 40 percent of its revenues coming from India. In case there is a natural disaster like a cyclone in India, it could mean a huge impact to cash flows and forex exposure, which could potentially impact the top-line, bottom-line, supply chain and business operations.  Now if the group treasurer of the company learns about this on Twitter / social media in real-time, he / she could possibly influence / moderate finance / business decisions to have minimum impact on the global cash positions. If technology integrates the social media trends / sentiments with the core every day decisions of a corporate treasurer that would be truly remarkable.
  • Use the power of online social communities (public / private / by invitation only) to connect, share and converse on the larger issues of corporate treasurer, and apply the best practices from the real-world case studies across the globe. For example, compliance to the ever increasing regulations across the globe. According to McKinsey, many industries face an increasing level of regulations that often puts 30 to 50 percent of EBITDA at stake. No matter what industry, many of these regulations (in)directly affect the corporate treasurer. Discussing with treasury peers on how they have affected a regulatory change within their enterprise is always a highly valued / interesting conversation.

Mobility and corporate treasury – the interplay

"Wireless technology has changed the way we conduct business, offering mobile workers constant access to business critical applications and data." Sarah Hicks - technology consultant, Sarah Brecht Hicks Consulting

In the context of a corporate treasurer, this translates to leveraging the power of mobile technologies to help a treasurer in their day to day operations and decisions.

Some mobile-enabled use-cases that would be significantly useful to a corporate treasurer are below:

  • Mobile-enabled consolidated dashboards and reports of real-time data around payments status transactions, global cash positions, liquidity status and risk exposure which enable and equip a corporate treasurer to make data based decisions at real-time and on-the-go.
  • Initiate critical treasury related transactions using a mobile interface. For example - immediately initiate an ad-hoc payment of $50,000 to a third-party vendor to minimize interest payments and reduce financial loss.
  • Approvals of every day transactions around cash decisions / investments. For example, - approve a request to invest $2 million of idle cash in pre-defined financial instruments.

Cloud and corporate treasury – the interplay

"Line-of-business leaders everywhere are bypassing IT departments to get applications from the cloud (also known as software as a service, or SaaS) and paying for them like they would a magazine subscription." Daryl Plummer - vice president, Gartner

In the context of a corporate treasurer, cloud solutions are really about leveraging the power of cloud technologies to optimize on the cost associated with treasury technologies / solutions / functions.

Some use-cases that would be significantly useful to a corporate treasurer are below:

  • Treasury technology solutions for everyday decision-making / support provided on the cloud.  A number of forward-thinking vendors already provide SaaS-based treasury solutions around cash management, risk mangement, bank account management, etc. Adoption of these cloud-based treasury solutions within an organization will only increase over time.
  • An interesting innovation could be a comprehensive suite called “Treasury-in-a-Box” in which a packaged model of all treasury processes, data and information, services, reports and dashboards required by a corporate treasurer are provided via the cloud based model.

Analytics and corporate treasury – the interplay

"Data without insightful interpretation is worthless. It’s like staring at the instruments of an airplane but not knowing how to use them to get where you want to go." Matt Singley - chief engagement officer, Singley + Mackie

The data to analytics continuum usually involves data  information  insights  intelligence  decisions  actions  analytics. As an example, data on payments  provides information on current cash status  offers insights into liquidity positions  conveys intelligence on risk  enables decisions on investments  prompts action around payments / investments  feeds into the engine for current / future analytics.

In the context of a corporate treasurer, there are broadly two areas which are relevant.

  • To use historical treasury related data and information to pre-empt (risky) situations and take preventive action, or broadly called treasury predictive analytics. For e.g: There could be change in interest rates after every political election. A prompt to the treasury office to perform a critical and objective review of the organizations cash positions / investment portfolio prior to an upcoming election could be triggered by an analytics engine. Necessary action will follow suit.
  • To use currently available treasury related data / information to draw "actionable treasury insights" and initiate the 'next best action,' as relevant. For example, a treasury governance report indicates that an organization has 100+ bank accounts in a specific geography out of which only 20 have been active in past 12 months. A critical review and analysis of the bank relationships and account status could be the trigger to close the inactive ones and optimize on bank fee structures.

What do you think is the interplay between SMAC technologies and the world of the corporate treasurer? What are the possibilities, opportunities and paradigms? Leave a comment to connect, converse or collaborate on this...

Corporate Treasury

About the author

Nischala Murthy Kaushik is currently Head of Marketing and Thought Leadership for Global Treasury and Payments Solutions at Wipro, one of India’s leading IT services company. She creates and executes integrated marketing strategies, leads digital campaigns, and works on Thought Leadership initiatives to gain mind-share among customers, partners, analysts and industry communities. She is also actively involved in exploring new alliances and partnerships, and creating next generation innovative treasury solutions.

She loves writing, believes in the power of words and is an avid blogger. Her writings have been published in many reputed global publications. Her claim to fame is that she was among 20 Must Follow Women Influencers on Twitter (2014), 50 Indian Women to follow on Twitter (2012) and among the Top 10 Most Influential Bloggers in India (2012). You can connect on Twitter @nimu9.

References

1. Reputation, government and regulatory strategy, McKinsey