Hyper-automation concept applied to treasury.

The modern treasurer must optimize his/her management, even more so in the light of the current economic and geopolitical context. This requires two steps: (1) rationalization of teams, which are often too small, and (2) "extreme" automation (i.e. hyper-automation), to limit human intervention, which is prone to error, wasted time and lack of added value (through the repetition of worthless tasks). Achieving the first objective also means working towards the second. Thinking that "digitizing" cash management (i.e. treasury-) boils down to installing a TMS and bank connectivity, interfacing with a foreign exchange platform, plus a few loosely interfaced "add-ons", falls short of the ideal objective. The treasurer gets used to manual or semi-automated tasks and forgets that he/she could go one step further down the road to automation.

What do we mean by “hyper-automation”?

In my opinion, hyper-automation in the context of corporate treasury refers to the extensive use of automation technologies to streamline and optimize various financial and treasury processes. It involves combining robotic process automation (RPA), artificial intelligence (AI), machine learning (ML), API’s and/or ETL-style solutions, and other advanced technologies to achieve a high level of automation in treasury operations. Technology offers itself to us, and sometimes we seem to reject or fear it. Change remains the treasurer's worst enemy. He forgets that the treasury must take care of its productivity and measure it. The treasurer is also easily satisfied with what he has achieved and forgets to go one step further. This hyper-automation requires systems integration, either using a single instance of a complete and perfect tool (even if it doesn't actually exist), or through the dynamic integration of all the tools in use. In short, we're talking about a clean slate and the implementation of a single integrated tool for all financial functions (not just treasury), or the addition of an umbrella tool dynamically integrating all the others. It's up to the CFO to define the strategy and the course of action, in which the weight of treasury, the most IT-equipped, is enormous (both in terms of the importance of the tasks and the weight of the tools). The aim is to extract data, scattered here and there, in a variety of formats, and make use of it, or make better use of it, for example to detect behavior or dangers and risks, or to predict a future state, or better still to define the optimum strategy as a decision-making tool. Hyper-automation requires "enhanced" and optimized management of financial and non-financial data. Simple to say, very complicated to implement, even more so if the company doesn't use a top-class, integrated, multi-function ERP system.

Ways hyper-automation can be applied in corporate treasury.

If we focus on treasury, the most computerized department in all of finance, without question, we can see that there are several segments where automation can be taken a notch higher or a notch further. Let ‘s take a look at a few obvious examples.

Cash Flow Forecasting: Hyper-automation can improve cash flow forecasting by automatically collecting and analyzing data from various sources, such as bank accounts, ERP systems, and market data. Advanced algorithms can predict future cash flows with greater accuracy, or even detect suspicious behaviors or even risks of default.

Payments and Transactions: Automating payment processing and transaction execution can reduce manual errors and improve efficiency. This includes automating routine payments, approvals, and reconciliation. Ideally, there should never be semi-manual processes or import-export human interventions.

Risk Management: Hyper-automation can enhance risk management by continuously monitoring market conditions, analyzing financial data, and identifying potential risks. It can trigger alerts and suggest risk mitigation strategies in real-time.

Compliance and Reporting: Automating regulatory compliance and reporting requirements can ensure timely and accurate submissions. This includes automating the generation of financial reports and compliance documentation, often semi-manually (in best case scenario) or manually produced.

Treasury Operations: Routine treasury tasks such as reconciling bank statements, managing liquidity, identification of underlying FX exposures (including in-house FX management) and investing excess cash can be automated to free up treasury professionals for more strategic activities, but also for accelerating decision-making processes. Time is money in treasury!

Fraud Detection: Advanced algorithms can be employed to detect unusual or fraudulent transactions in real-time, helping to protect the organization's financial assets. External and internal frauds can be fought by automated internal controls (which are never strong enough).

Communication and Collaboration: Hyper-automation can also facilitate communication and collaboration among different stakeholders within the organization, enabling faster decision-making and problem-solving. Hyper-automation is a sort of oil to fluidify mechanics or inking systems to protect the whole “finance” engine. In essence, hyper-automation in corporate treasury aims to leverage technology to streamline processes, reduce manual intervention, enhance accuracy, and enable treasury professionals to focus on strategic financial management and risk mitigation. It can lead to significant improvements in efficiency and effectiveness within the treasury function.

So how do you "hyper-automate" without revolutionizing everything?

Technological solutions exist which, at different levels and for different processes, can make operations more fluid and secure. Think of solutions (SaaS native with latest technologies) such as FENNECH, which can be grafted onto existing tools to extract the very essence, or which, via "smart contracts", will individualize all financial operations, thereby making them "traceable". In FX, for example, KANTOX enables end-to-end automation of the foreign exchange hedging chain. Unfortunately, it seems to us that there is no such thing as a one-stop solution. So, in the absence of a perfect solution (which would be cumbersome to implement, as it would create a complete revolution), the use of add-on tools is the best way to hyper-automate (partially tailor-made) treasury management to make it more proactive. The modern treasurer must be "dynamic" and agile, we are told. But how can they be with traditional tools based around a single TMS? In the absence of a single aquarium of data, we must extract it here and there and convert it into a "customizable" tool. As much as we must resort to classic SaaS tools for the primary and basic functions (which are not very flexible), we have to resort to tailor-made solutions for the "gravy train". It is therefore possible to automate processes from start to finish, to avoid any human intervention, and to finally make use of the data extracted here and there to consolidate them in a kind of modern, dynamic "Extract Transform Load" tool (i.e. ETL, since it must be called that - even if the term often seems overused to us). This will be the treasurer's greatest challenge in the years to come. May he open his chakras and rethink his organization, without completely revolutionizing it. To do this, you need to take a step back and accept the areas for improvement and weaknesses in your organization. There's no longer any room for proud treasurers who are incapable of questioning themselves at the very least.

François Masquelier, CEO of Simply Treasury – Luxembourg 2024