Signals | Transforming corporate treasuries

Data accessibility and visibility

Currency risk

Big changes on the horizon

Treasury management plays a central role in the financial health of businesses of all sizes. A company can be profitable and have a strong sales pipeline, but still be

Signals

To learn more about changing ideas of value and money and their implications for businesses, individuals and society at large, please look out for the Q3 2023 issue of Mastercard’s thought leadership publication Signals, which will explore the topic of reimagined money.

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Corporate cash management tends to be inefficient because it relies on siloed data, manual processes, and the use of multiple data sources and software tools. Multinationals face additional challenges related to the distribution of treasury teams across functions and geographies. Today, however, there is significant potential for advancing technologies — particularly in APIs, data management, artificial intelligence (AI), and quantum computing — to address these issues and transform essential treasury activities for the better.

Current state

Invoice Manager

Enterprise Resource Planner

Bank Account 3

Bank Account 2

Bank Account 1

corporate treasurer

spreadsheets

Future state

Current state

Future state

Treasury Management Dashboard

Corporate Treasurer

Aggregation Layer/ Data Infrastructure

Manual consolidation

Forecasting

Future state

Current state

act on forecast

optimize forecasts

Timeframe

for large and medium enterprise

25-50 hours

50-100 hours

20-40 hours

25-50 hours

Action

Tools

spreadsheets

banking portal

consolidate data

create forecasts

ERPs

spreadsheets

ERPs

banking portal

re-consolidation data

Action

Current state

act on forecast

Tools

aggregrated data layer

consolidate data

optimize forecasts

treasury dashboard

Description Most companies use inefficient techniques to create forecasts. Models are created manually and optimized on a time-locked basis — monthly, quarterly, or even annually. Technology Spreadsheets are utilized to manually create forecast models Efficiency Significant time is spent manually creating and updating models. Accuracy Manual processes and time-boxed updates based on historic trends lead to inaccurate, out-of-date forecasts which isn't a good predictor for one-off events (such as COVID-19)

Description AI-based tools continuously and automatically update projections based on the latest data allowing real-time views into forecasts across various time frames and scenarios. Technology Artificial intelligence utilized to create real-time forecast models and plans for scenarios. Efficiency Minimal effort is required besides occasional minor tweaks to the AI's underlying logic, allowing treasurers to focus on strategic decision-making rather than manual tasks. Accuracy Forecasts are automatically updated, so they provide the most accurate projection at any point in time - allowing treasurers to be better prepared for one-off events.

Description Through real-time connectivity across all accounts, companies maintain an up-to-date ‘single source of truth’ for all cash-related data. A dashboard can be connected to the data aggregation layer allowing corporate treasurers to view their data in whatever format they want without the use of manual effort through spreadsheets. Technology Data lakes and data meshes that create a strong corporate data infrastructure. Efficiency Minimum effort is required as data is organized and collated automatically — and delivers insights through analytics and visualization tools. Accuracy Data is automatically collected and validated across all accounts — so accuracy improves due to minimal manual intervention.

Current state

Future state

Description Corporate cash management requires treasury teams to access and aggregate data from multiple sources including banks, enterprise resource planning systems (ERPs) and assorted third-party payment tools. This requires corporate treasurers to employ ‘swivel chair analytics’ — jumping between tools to get a picture of their cash position. Information may be outdated before it is reported. Technology Spreadsheets that are downloaded from banking platforms and updated manually. Efficiency Creating a consolidated picture of a company’s cash position is a manual, time-intensive process. Accuracy Most data aggregation is completed in spreadsheets which require manual uploading, validating, and reporting — increasing the likelihood of human error.

Description Currency risk is the exposure faced by a company that operate across different countries, particularly with unpredictable gains or losses due to changes in the value of one currency in relation to another. Today there are automated tools to help manage strategies around exchange rates, time, and a company’s financial goals. Limitations In computing power and a basis In historic trends limit accuracy and efficiency. Technology Rules-based classical computing limiting the efficiency of FX calculations. Efficiency It depends. Today, tools to assist with sweeping and pooling into domestic currencies range from manual operations to simple rules-based systems to AI-powered tools that analyze markets in real-time. Accuracy Not optimal because classical computing can’t calculate the complexity of multiple currency conversions over time.

Description Technological advances will enable more efficient currency risk management through an automated process that minimizes FX fees and risk. This Is done by increasing corporate control over FX rates with the assistance of various technologies. This decreases manual efforts while ensuring a company's specific treasury goals and policies are met . Technology Quantum computing that provides exponentially more powerful FX calculations. Efficiency Minimal effort will be required; the combination of AI and quantum computing will deliver maximum efficiency. Accuracy Greater automation and quantum capabilities will ensure greater accuracy.

Description Implementation of digital assets is currently largely limited to acceptance and investment. It is estimated that 52% of corporates across Asia, Europe, and the US currently invest in digital assets of some form, with 90% expected to have a digital asset allocation within the next 5 years. Technology Digital wallets that are utilized to accept and hold digital assets

Description As digital assets become more mainstream at an official level, with 100+ governments exploring Central Bank Digital Currencies, existing practices within a treasury department, such as (cash management, cash forecasting, investments, FX risk and more) ,will be re-optimized to ensure digital currencies are managed seamlessly alongside cash and other traditional assets. Technology AI, quantum computing, blockchain, data visualization tools and more to manage digital and fiat cash.

Digital assets

Current state

Future state

Current state

Future state

Current state

Future state

Invoice Manager

Enterprise Resource Planner

Bank Account 3

Bank Account 2

Bank Account 1

Current state

Future state

Current state

Future state

Aggregation Layer/ Data Infrastructure

Treasury Management Dashboard

Corporate Treasurer

Invoice Manager

Enterprise Resource Planner

Bank Account 3

Bank Account 2

Bank Account 1

Future state

Manual consolidation

Invoice Manager

Enterprise Resource Planner

Bank Account 3

Bank Account 2

Bank Account 1

corporate treasurer

spreadsheets

Invoice Manager

Enterprise Resource Planner

Bank Account 3

Bank Account 2

Bank Account 1

Current state

Future state

Current state

pooled currencies

Timeframe reduced from 200-400 hours to

operating currencies

normal computing

unoptimized exchange rate trades due to limited calculation power

Corporate treasury operations are poised to be transformed by AI, quantum computing, other emerging technologies. Significant work is required, however, for companies to adopt tech solutions and implement seamless automated processes. They can begin by building up their data infrastructure to allow ease of access and utility across multiple systems and sources. Data from their banks, ERPs, invoice management tools, accounts receivables tools, and other locations where they conduct financial management need to be de-siloed and aggregated so treasury teams can optimize the impact of these technologies. The strategic role of a treasurer is becoming increasingly more about business and divisional partnering. Therefore the implementation of these new technologies would need to enable a 'personal', collaborative touch that heavily influences overall company strategy.

Outlook

Data Signal

Having a strong understanding of a business's cash position and forecast as well as stress testing and scenario planning positions is critical to achieving financial goals, supporting efficient operations, and maintaining reputational integrity.

A U.S. Bank study found that poor cash flow management is behind 82% of business failures.

82%

Data Perspective

Data Signal

of treasury teams seek visibility into their cash positions at least daily

92%

Data Perspective

brought to its knees by poor cash management that leads to missed payment obligations to staff and vendors. Corporate treasurers manage the financial risk, support the financing, and help achieve the strategic goals of a business.

operating currencies

quantum computing

Current state

1-2

hours

1-2 hours

Action

Timeframe

for large and medium enterprise

Cash management and forecasting

Digital assets wallet

€

Digital assets acceptance

Combined fiat and digital

€

seperate functions

Digital assets investments

updated real-time

real-time

artificial intelligence

Data Signal

of treasury teams use spreadsheets for cash reporting

74%

of treasury teams want more frequent updates on their cash positions

63%

Data Signal

only 6% of treasury teams use AI/ML tools today

Data Signal

of corporates across Asia, Europe, and the US are expected to have a digital asset allocations within the next 5 years

90%

Sources for data perspectives 1. Strategic Treasurer, 2001 2.2021 Institutional Investor Digital Asset Study, Fidelity Digital Assets.

Transforming corporate treasuries

Technology is enabling better ways to manage cash, risk and digital currencies

more efficient currency conversions due to greater computational power

€

pooled currencies