An industry survey conducted by the European Association of Corporate Treasurers (EACT) has revealed that treasurers are now recognising the value of
the vast quantities of data at their disposal. When it is appropriately used – crunched, consolidated and analysed – it enables better, smarter decisions and faster reactions to crises. In fact, two-thirds of treasurers identified real-time data as their
top their priority for 2021.
These findings could not be more timely. Research has shown that concerns relating to the quality of financial and business data for strategic planning and decision-making have
increased. Data-driven decision making can unlock valuable insights into not only a business’s internal information but also the external environment.
These decisions were historically driven by humans who couldn’t analyse data at the same speed, depth and scale as today’s technology. By removing error-prone and manual processes, as well as unsuitable software tools such as spreadsheets, decisions can
be made with more accuracy and certainty.
Enhancing risk management strategy
Financial risk management remains in the top three priorities for treasurers, which is unsurprising given the events of the past 18 months. More specifically, managing foreign exchange (FX) risk, due to the volatility of currencies, remains a concern.
Data analytics can help to optimise and model appropriate hedging strategies, provide detailed insights into payment processes that can transform cash flow management, and limit unnecessary exposure to different currencies.
Have you ever wondered if your payments are made on time or too early? Or what percentage of payments are delayed, and by how much? What effect this has on your cash flow and exposure to different currencies? Are you securing the best rate and hedging at
the right time?
Knowing the answers to such questions can improve forecasting, detect patterns and anomalies, and enhance risk management.
Real-time FX rates are becoming the norm
The expression ‘garbage in, garbage out’ is one we are all familiar with, and this concept is a pillar of effective data analytics. Real-time rates with no hidden fees or spreads are crucial to achieving fully transparent pricing. This enables a corporate
to see the cost of their FX operations and take control of them.
Today, this can be achieved in different ways. Corporates may stream live rates from their banks, plug into real-time data feeds through an application programming interface (API) or utilise a modern treasury management system (TMS) where such features,
along with trade execution and hedging capabilities, are the norm.
Maximising data use
Data analytics should be at the heart of all treasury functions. These enhanced insights can potentially be transformational, especially for the owners of small and medium-sized enterprises (SMEs)
SMEs don’t have the resources of larger organisations and can find tasks such as maintaining a positive cash flow a challenge. If they had a more in-depth understanding of their business, they would be able to make better-informed decisions.
As businesses emerge from the pandemic, they will find themselves facing very different and unique situations and challenges. By using tailored data and analytics from their trading history, payments and cash flow, treasurers can make smarter decisions,
review their specific corporate behaviour and personalise their hedging and risk management strategies.
Treasury teams have always been a forward-thinking function, but the past few years have tested the limits of their operational capabilities and forced them to change their working practices. If they want to continue to be responsive to the fast-changing
business environment, now is the time to utilise data analytics.