Trading, Treasury

Analytics can turbo-charge time strapped corporate treasuries

December 17, 2018
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Analytics can turbo-charge time strapped corporate treasuries

By Toby Michelmore, Head of Buy Side Sales, APAC, EBS

Volatile markets, such as those experienced over the last 12 months, have heavily impacted various currencies and thrown the spotlight once again onto the corporate treasury function. Nowhere is this more apparent than in a growing corporate treasury hub and FX centre like Singapore.

The treasury function has evolved to be almost unrecognisable from the traditional decentralised role of payment processing and tax management. Corporate treasurers for multi-national corporates (MNCs) with centralised and hybrid regional functions must increasingly wear many hats and deal with multiple business critical processes.

Today, in an age of globalisation and technological disruption, corporate treasury is at the heart of cross-border businesses. It mobilises internal sources of liquidity, optimises cash management, provides data for risk management and helps navigate the continually evolving FX and Money Markets. Treasurers are, increasingly, strategic advisors to senior management.

Yet many corporate treasury functions are failing to leverage technology in a way that may help them be a more strategic function, adding measurable value to the overall business rather than being a cost centre.

Technology adoption, especially in risk and treasury management systems, has been beneficial to many regional treasury centres. Especially when it comes to providing efficiency and transparency for global cash and liquidity positions and payment processing.

Many MNCs have already adopted some form of electronic execution in relevant markets. As treasurers look ahead to 2019, there is more that can be done to leverage advances in technology to elevate the corporate treasury function.

Data and analytics

The explosion in data is not confined to corporate treasury functions. It’s all around us.

As in other industries, the challenge today is about having the right data, at the right time, having the tools to make sense of it and to make informed decisions.

Storing information in multiple systems that don’t talk to each other, or on excel spread sheets, is outdated. At best it leaves cash on the table, at worst it represents a risk to the business when it comes to meeting regulatory obligations in areas such as hedge accounting.

In FX and Money Markets the road to optimisation is relatively clear. It is about transparency, automation and analytics. Software as a Service (SaaS) trading platforms now cover multiple asset classes for treasuries. They streamline multiple STP feeds, reduce manual data input, can incorporate auto settlement and provide both pre-and post-trade analytics. 

Take one example – sourcing the best FX rates for your organisation at any given time.

The ability for treasurers to have timely, accurate and reliable visibility over FX exposure is critical. As companies continue to expand internationally, managing exposures of greater scale become more demanding, particularly in periods of market volatility.

Depending on the size of the treasury function multiple banking partners typically those who make up the revolving credit facility (RCF), also provide FX dealing as part of their holistic relationship. The challenge for treasury functions is how best to leverage those important relationships.

Comparing quotes across platforms, or taking the quote on offer, does not necessarily give you the real-time outcome that you need to ensure best execution. Nor does it always provide the data that you need to inform your FX or hedging strategy.

In this case technology can be your friend. An electronic platform can give you a cross-market view of trading data. It can help you understand how the market has moved during your previous trading period and assess your potential market impact. Through comparative analytics you can benchmark your activity against other participants who execute similar trades, thus obtaining peer-to peer-analysis. This comparative analytics service is particularly powerful when leveraged through an electronic platform with a large trading universe that can provide both current and historical data for the most accurate market impact report possible.

Technology can also reduce reliance on manual processes and increase visibility on exposures in other ways. For example, it can help provide access to restricted currencies, comply with regulatory and reporting requirements and give treasurers much needed visibility on cash and FX exposures.

More than that, it provides the intelligence to make effective decisions – such as informing hedging strategies in the future – and cultivating the most powerful long-term and sustainable relationships. Without that connectivity, analysis and visibility, the onus falls on the treasurer to do the best they can manually with the tools available.

Levelling the playing field

The challenge for treasurers has often been keeping up with the changing shape and requirements of their business. For many firms the processes for doing so have developed organically over time. Comprehensive technology solutions have been viewed as a big-ticket luxury item which only the large MNCs can afford. The reality is that treasuries of all sizes and complexity can now access technology that will make their function smarter, more agile and efficient. SaaS deployment is proven to be highly scalable for MNCs and is also cost effective for global vendors. It requires minimal IT resource by treasury which is especially helpful with smaller regional centres operating with minimal employees and often scarce resources.

More importantly it gives MNCs the architecture to support the business as priorities change.

As we look ahead to 2019, treasurers have time to reflect on the role they want their function to play in their organisation. They have an opportunity in their day-to-day operations to be more insight driven, empowered and strategic, in a globalised and disruptive world.

about author

Toby Michelmore is Head of Buy Side Sales, APAC at NEX Group Plc. He is currently based in Singapore and began his career with EBS Brokertec (Part of NEX) in 2015 in London. Prior to this Michelmore has held senior position at 360t and Tradition in EMEA covering FX, MM and Commodity markets. He was focused on sales, broking and relationship management to corporates, asset managers, sovereign wealth funds and other non-bank institutions.