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Why modernizing to a digital treasury with the right partner is critical
The Road to Treasury Technology Transformation
Treasurer’s Guide 2024:
2
contents
Centralize data
9
Leverage APIs and real-time payments
8
Streamline bank connectivity
7
Simplify global payments processing
6
Mitigate risk
5
Improve liquidity management and cash forecasting
4
Prepare for the future
3
Develop an ESG strategy
11
Move treasury to the cloud
12
Treasurer’s Guide 2024: The Road Ahead
Select the right partner
13
Comply with regulations
10
PREPARE FOR THE FUTURE
Did you know?
Dominic Faso AVP, Assistant Treasurer, Pacific Life Insurance Company
Leveraging the latest digital, treasury technology is imperative to navigating the ongoing economic uncertainty and market volatility. FIS' treasury management system has positioned us to strategically manage treasury today and into the future.
But as the modeling environment gets more complex, models become more costly to build and run.
With more calculations to make and more detailed reports with shorter timeframes, actuarial models must be both sophisticated and efficient.
Digital approach – Modernize treasury
Economic uncertainty and market volatility as well as the accelerated pace of innovation have put treasurers under tremendous pressure to manage cash and risk. Treasurers must rethink everything they do.
Insurance companies are more aware than ever of the wealth of information at their disposal. Their ability to extract value from data using advanced analytics has become critical to competitive advantage.
For actuaries, the pressure is on to gain greater insights from big data and rapidly transform modeling results into business intelligence.
By transforming treasury with the latest cloud-based treasury technology, treasurers can succeed today and prepare for the future.
Rick Yuan Head of actuarial modeling and transformation, AIA Group
We needed to run a projection tens of thousands of times to come out with a range of possibilities. One solution was to purchase more hardware, but the obvious winner was move to the public cloud. The beauty is you can tap that capacity when you need it and switch it off when you’ve finished the calculation.
IMPROVE LIQUIDITY MANAGEMENT AND CASH FORECASTING
97%
You can leverage an API solution to integrate your treasury management solution with your ERP to further optimize cash forecasting. This type of functionality can extract data from the ERP for forecasting purposes by generating a cash flow forecast using advanced artificial intelligence (AI) and other statistical models.
of companies view cash and liquidity management as a top priority for CFOs.
With so much costly, inflexible IT to manage, your on-site infrastructure could be holding you back.
of companies view cash and liquidity management as a top priority for treasurers.
100%
2023 Global Treasury Survey, PwC
With a hyper-focus on costs, treasurers need accurate and timely cash forecasting if they want to manage their cash effectively. But that’s impossible if they have fragmented data, disparate workflows, little transparency into root-cause analysis and manual reporting. While effective bank communication is essential to gaining visibility over current flows and balances, treasurers also need an accurate and complete forecast of future cash flow to manage liquidity and risk and structure funding and investment strategies. Today, many companies still rely on spreadsheets and ERP systems to create cash flow forecasts, which presents a number of challenges. In many cases, forecast information originating from different business units and regions is prone to wide variations and assumptions in the way it is constructed. Data may also be presented at different times, and in different formats, making it difficult to collate information in a consistent way.
The latest digital treasury management solutions are the ideal hub in which to combine cash flow information across the organization, bringing together bank data, treasury flows and information from across the enterprise and presenting data in a consistent and reliable way. Not only do treasurers have visibility over actual and projected flows and exposures, but they can analyze and model potential scenarios to understand vulnerabilities from a liquidity and risk perspective and improve decision-making. You can leverage an API solution to integrate your treasury management solution with your ERP to further optimize cash forecasting. This type of functionality can extract data from the ERP for forecasting purposes by generating a cash flow forecast using advanced AI and other statistical models.
Digital approach – Centralize treasury
MITIGATE RISK
David Elliott Architecture manager for financial services, Amazon Web Services
For insurers, the question isn’t "if" (they will migrate existing applications to the cloud) – it’s how fast they can move and what are they going to move first?
But beyond lockdown conditions, there are more reasons than ever to run your organization’s most powerful systems in the cloud.
In 2020, unprecedented global circumstances have shown us all the benefits of hosted IT for business continuity and remote working.
Treasurers should be evaluating and transforming their risk strategy. Leveraging treasury management solutions with specialized risk management functionality helps treasurers gain a holistic view of risk across key areas including FX, operational, market and country risk. More visibility into exposures can also help optimize hedging and reduce the cost of hedging. Additionally, treasurers should partner with their IT departments and the right treasury vendor to combat cyber risk.
Digital approach - Evaluate and transform risk strategy
Source: The Global Innovation Report, FIS, 2023
of respondents state that risk management is a key mandate for their organizations.
42%
of organizations are concerned about financial risk.
63%
The scope of the treasurer’s responsibility has expanded significantly to include a much greater focus on all areas of risk management, including cyber risk management. The recent market conditions are also increasingly leaving organizations open to FX exposures, interest rate risk, market risk, country risk, etc. However, partially dedicated staff and disjointed technology are typically used to manage key areas of risk, with highly manual exposure collection and hedging processes. Additionally, best-of-breed treasury and risk technology is often underused across most risk management functions. As a result, treasurers continue to be challenged in managing these new responsibilities.
Geert Wouters Head of Structured Finance and Treasury, DEME
DEME is confident that FIS solutions are future-proof and support business growth. They answer new needs arising from the ever-changing payment landscape, such as real-time payments, now and in the future.
Deliver speed and scale
Save time
Eliminate risk
Managed cloud services give you the power and scalability of a sophisticated actuarial modeling and risk management platform, but reduce the challenges, costs and risks of provisioning infrastructure and managing the underlying IT.
Hand every aspect of complex modeling technology to an expert provider and you'll reep the benefits:
Centralizing and standardizing payments and bank reporting with a payment hub gives corporations and insurance companies strong controls and workflow around domestic and cross-border payment processes. They can reduce complexity, increase control, improve cash visibility, reduce costs and mitigate fraud risk.
Digital approach – Centralize and standardize
Large payment volumes, high costs, lack of cash visibility and controls, fraud risk and the urgency to find ways to leverage new innovative technologies and alternative payments channels are among the top payment challenges for treasurers in corporations, insurance companies and government agencies. Treasurers see global payments centralization and standardization as well as streamlined bank connectivity as a key opportunity for improvement.
SIMPLIFY GLOBAL PAYMENTS PROCESSING
30%
43%
Barna Gergely Head of Global Treasury Operation, Hitachi ABB Power Grids
We were able to implement FIS treasury management and managed SWIFT services within six months. We have successfully re-hedged FX and commodity exposures, gained daily visibility over up to 80% of the group’s bank accounts, automated reconciliation of high-value treasury and intragroup netting flows, and streamlined bank connectivity.
Are you ready to join the highest flyers?
According to FIS’ research, 43 percent of the fastest-growing insurance companies have migrated one or more mission-critical applications to the public cloud, compared to just 30 percent of the rest of the industry.
Treasurers should be evaluating their banking relationships and where they can streamline. Additionally, leveraging a secure SaaS-based connectivity solution and comprehensive bank communications channel that securely connects you with your global banking partners through direct or indirect connectivity, including SWIFT, is key.
Digital approach – Reduce complexity
Organizations face complex banking processes, including multiple banking relationships, high costs and operational inefficiencies. Both banks and corporations want to streamline their bank connectivity processes.
STREAMLINE BANK CONNECTIVITY
Chief risk officer Major insurance company
The accommodation of large data sets, highly demanding algorithms and the hardware for instant computational resources make the cloud ideal for large-scale data analysis.
Treasurers should be evaluating API use cases within their organization. Insurance companies, for example, can build out use cases for paying out claims in real time. Ensuring the organization is using the latest digital treasury and payments technology is also key. For a corporate treasury to implement 24/7 instant payments, there is a need to invest in modern cash management technology that operates in real time, supporting real-time position updates, API connectivity for bank data and real-time cash positioning and forecasting.
Digital approach – Modernize treasury and payments technology
With the wider availability of open-API technology, options for bank communication continue to expand globally, bringing real-time payment options closer to reality. Using APIs, treasurers can determine what data they receive and from which banks, how regularly and what should happen to that data. This reverses the dynamics of bank connectivity. Previously, banks have determined what information they will deliver and how; today, treasurers can control this. The use of APIs is therefore not simply a new communication method, but a transformation in the sourcing, integration and use of banking data.
LEVERAGE APIS AND REAL-TIME PAYMENTS
Rijuta Jain, VP of Product Development at FIS
Key Advantages of APIs
Utilizing business intelligence
Data Challenges
By centralizing data into a data lake or data repository, treasurers can leverage data from all sorts of data points to better analyze and strategize. Data lakes can be integrated with treasury management systems as well to bring data into and out of the treasury management system for improved cash forecasting and decision-making.
Digital approach – Centralizing data into a data lake
Treasurers depend on fragmented payment, billing, ledger and ERP systems for reconciling/validating the efficiency and accuracy of cash flowing into and out of multiple bank accounts and cost centers. Organizations approach it via a piecemeal combination of basic matching tools and spreadsheet-supported manual processes, which increases operational risk and makes analyzing data and making real-time decisions a challenge.
Global visibility
Data access and control
Complex transactional data
To overcome these challenges, it’s essential for treasury departments to maintain up-to-date versions of treasury management systems and ancillary risk systems used for regulatory reporting to take advantage of new functionality. Technology can help treasurers track, monitor and analyze data they need to comply with the latest regulatory requirements. Technology can also help drive automation and improve operational efficiencies within their teams, freeing them up for other strategic tasks.
Digital approach – leverage technology
Regulatory change creates complexity, particularly as it often takes time for the implications of certain regulations to become clear. But it’s an intrinsic element of treasury and risk management, so treasurers are accustomed to monitoring changing regulatory conditions, and refining their treasury and risk management policies and procedures accordingly. However, additional reporting and manual exceptions to previously automated processes, to comply with regulations, can reduce efficiency, raise costs and increase the scope of treasury responsibility, often without the benefit of additional headcount. Banks, in particular, are dealing with IFRS 9, which requires an entity to recognize a financial asset or a financial liability in its statement of financial position and IRRBB (interest rate risk in the banking book)/CSRBB (credit spread risk arising from non-trading book activities).
Comply With Regulations
0
of financial institutions in particular deem it as a concerning risk.
39%
of total organizations deem legal and regulatory risks as a concerning risk.
38%
Evaluating an ESG strategy is a good first step for treasurers. They should gain an understanding on how leveraging digital technology can help identify, measure and manage their risk exposure to climate change and in particular around financial transactions such as funding or investment portfolios.
Digital approach – Create a framework and measurement
Environmental, social and governance (ESG) is moving into the forefront for many organizations. It is impacting the cost of funding and hence spilling over into areas such as liquidity management and exposure management. The focus on ESG is expanding for treasurers and not something any treasury organization should be ignoring.
DEVELOP AN ESG STRATEGY
of all firms have been or expect to be impacted by environmental or transition risk.
%
92
Organizations should be leveraging the latest cloud-based treasury technology. Cloud solutions can offer all the functionality that your treasury team needs, at a lower total cost of ownership and without the need for costly infrastructure or a disruptive upgrade process. But different solutions have different capabilities – and even if you already have a cloud solution, it may not fit your current or future requirements. For one thing, the cloud is no longer seen as just a deployment model – cloud-based systems can provide value in a variety of other ways, from robust cybersecurity that is built into the solution to the option of outsourcing non-value-added tasks via managed services.
Digital approach – Move to the cloud
Having access to the right treasury technology is essential. Without it, you may lack the ability to manage your liquidity and financial risks effectively. In addition, an outdated system can leave your data and assets exposed to growing cybersecurity risks.
MOVE TREASURY TO THE CLOUD
3. Eliminates infrastructure requirements
2. Keeps you on the latest version of the software
1. Lowers your total cost of ownership
Three key benefits of cloud-based treasury systems:
Modernize your treasury technology today
It’s easier than ever to find treasury technology solutions. The hard part is selecting the right treasury technology partner to help you modernize. Before you make any decisions, protect your investment and ask your potential partners the right questions. Here are a few questions to explore:
SELECT THE RIGHT PARTNER
Learn more
• Are they transparent with their pricing and financial statements? • Are they financially stable, and how comprehensive is their cyber risk strategy? • Are they leaders in their space and what is their experience?
Three Key Benefits of Cloud-based Treasury Systems:
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About FIS
FIS is a leading provider of technology solutions for financial institutions and businesses of all sizes and across any industry globally. We enable the movement of commerce by unlocking the financial technology that powers the world’s economy. Our employees are dedicated to advancing the way the world pays, banks and invests through our trusted innovation, absolute performance and flexible architecture. We help our clients use technology in innovative ways to solve business-critical challenges and deliver superior experiences for their customers. Headquartered in Jacksonville, Florida, FIS ranks #241 on the 2021 Fortune 500 and is a member of Standard & Poor’s 500® Index.
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