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COVID-19 Crisis Fuels Treasury Digital Transformation

By Dory Malouf
Director, Value Engineering North America

What we have learned in the past few months since the pandemic began is that some CFOs – and their companies – were unprepared to weather the resulting economic shock brought on by COVID-19. And, in most cases, it left treasury and finance professionals scrambling to support or manage needed analysis on liquidity, financial risk and operational impact. The pandemic accelerated the treasury digital transformation mandate, and for good reason.

For the treasury and finance leaders that have reliable systems and data at their fingertips, gaining insight into the company’s cash and liquidity was simple and elevated their role as a trusted advisor to the CFO. However, others are currently facing an inflection point, realizing that they were not prepared to provide reliable and timely data or analysis. And this isn’t over yet.

With medical experts predicting the potential for the COVID-19 crisis to come back in the fall, now is the time to act on the treasury digital transformation of finance and treasury by adopting cloud-based solutions that enable real-time active liquidity management inclusive of business intelligence, artificial intelligence and machine learning. Doing so can help finance and treasury teams better manage liquidity, financial risk and operational risk.

COVID and Digital Transformation: Liquidity

The extended global shutdown of economic activity has had a dramatic impact on liquidity across multiple sectors, not just travel and hospitality. Many organizations are facing lower incoming cash flows resulting in the need to hold payables or extend borrowing. And the changes in liquidity behavior have a trickle-down effect that could result in many companies becoming insolvent.

However, this is one area where a digital transformation during COVID-19 can help. As we are witnessing today, the disruption and increased volatility in the financial markets have demonstrated the need for real-time, digitally-enabled access to liquidity.

With this, finance and treasury functions have access to real-time insights:

  • Real-time visibility into global cash positions enable intra-day liquidity management, ensuring that informed and timely decisions are made on capital market activity.
  • Real-time monitoring of cash forecasts with data visualization and transformation empowers treasury and finance to make informed short- and long-term financial decisions.
  • Real-time analysis of the company’s full liquidity profile outlining positions on cash, capital markets and investments ensures the CFO can confidently report on solvency and counterparty risk.

COVID-19 and Digital Transformation: Financial Risk

With the continued disruption and increased volatility in foreign exchange rates and commodity prices, how are you monitoring global market developments and the impact it has on your exposure? Are you able to confidently report on and identify how your current exposure affects the risks to your income? Or how the rate fluctuations affect the value of your cash balances?

While market fluctuations in foreign exchange rates and commodity prices are variables that cannot be controlled, having real-time, business intelligence-enabled digital transformation makes it easier to manage and identify exposures, giving treasury the ability to mitigate risk by minimizing losses and maximizing gains.

Navigating this current volatile environment without the proper tools in place will lead to the treasurer’s inability to provide the CFO with a reliable or timely picture of their company’s risk profile. Conducting analyses in real-time with data integrity will be the biggest challenge, hampering the company’s ability to closely monitor market developments and resulting in significant cash fluctuations impacted by the rate volatility.

Today’s best-of-breed solutions are cloud-based and enable end-to-end global visibility with business intelligence tools, which is imperative for COVID-19 and digital transformation. These systems utilize intelligence to scrub data and alert and remove any anomalies to ultimately provide strategic insight into risk strategies that mitigate losses and maximize gains.

COVID Digital Transformation: Operational Risk

As the economy started to slow on the heels of the COVID-19 pandemic, what did your business continuity plan look like? How reliable were your internal controls and fraud defense mechanisms? How good and transparent was your relationship with your business partners or suppliers? Some teams would respond with an “all is good” report on these fronts.

However, if you ask the same questions to organizations that have not deployed digital transformation tools for their finance and treasury operations, the response would be vastly different. The operational challenges that many companies that were not equipped with finance and treasury digital transformation tools faced are not limited to lack of access to an office space.

The absence of digitally enabled finance and treasury tools resulted in various disruptions, including:

  • The inability to comply with internal controls (e.g. 4eye principle, physical signature)
  • IT personnel managing the protection of corporate infrastructure firewall/fraud defense mechanisms under the onslaught of phishing schemes that jumped more than 667%
  • No tools other than email or messaging platforms to collaborate on needed analysis
  • Lack of access to corporate systems and networks due to limited VPN licenses

This extended global economic shut down has accelerated the digital transformation mandate. With the potential for a resurgence of COVID-19, the time to act on digital finance and treasury transformation is now to ensure you are better prepared to confidently report on and manage liquidity, financial risk and operational risk.

Learn how you can lead your organization’s digital transformation and unlock enterprise value through active liquidity. Register for our upcoming webinar,” In the Midst of Crisis: Why CFOs are Demanding Active Liquidity.”

And for more information on best practices and tips for treasury and finance as we navigate the current global pandemic, visit the Kyriba COVID-19 Treasury and Finance Resource Center.