Are you managing risk effectively in your payments infrastructure?

Business leaders and their CFOs are contending with global trade-related pressures, persistent inflation, and the looming possibility of recession. Some may experience reduced revenue and liquidity issues. Others who hold different currencies may face unexpected losses due to ebbs and flows in foreign exchange rates. This volatility makes it difficult for businesses to manage risk, especially when it comes to payments and cash flow.

Traditional risk frameworks alone are no longer sufficient. Instead, leaders must build agility into their risk-management models, including scenario planning, real-time monitoring, and rapid-response capabilities. But what steps can they take to achieve this?

Automating the treasury function

Automating and digitising the treasury function means rethinking a number of functions including cash management, cash forecasting, reconciliation, and compliance and risk management processes. Treasury automation has the potential to build a buffer against volatility by ensuring teams can access all their treasury data in intuitive dashboards from one portal or solution, eliminating the hours spent compiling information from various systems.

Treasury automation solutions can also leverage AI to identify forecasting trends and generate even more detailed projections. For example, CFOs can input various scenarios into the software to see how macroeconomic changes, such as major supplier price increases, would impact their cash flow. This ability to rapidly “see” the future helps finance avoid cash crunches, assess liquidity, and guide appropriate actions.

While the investment might seem counterintuitive during a rough economy, real-time cash movements, balances, and future projections mean treasury teams can understand cash flow, available funds, and potential risks, ensuring cash gets used efficiently.

Prioritise operational resilience

In an increasingly interconnected world, the risk of unforeseen disruptions, even those brought about by tech advancements, remains constant. Businesses must keep a keen eye on regulatory volatility and treat cyber-compliance as a core pillar of operational risk. Risk teams should integrate robust governance frameworks with real-time threat monitoring, comprehensive incident management protocols, and continuous compliance tracking. This level of control will ensure their payment systems and underlying infrastructure are robust against operational failures and secure against evolving cyber threats.

Moreover, aligning strategies with expected government policies can provide a strategic advantage. For instance, the UK government's 10-year Industrial Strategy, with its substantial R&D backing and focus on sectors like financial services, presents an opportunity for financial institutions to align their risk management programmes to futureproof their organisations.

Strengthen against fraud

The landscape of corporate accountability for economic crime is rapidly evolving in the UK. With fraud accounting for over 40% of all reported crimes, the government is introducing the “Failure to Prevent Fraud” offence as part of the Economic Crime and Corporate Transparency Bill. This significant legislation will hold organisations, including financial institutions, criminally liable if they fail to take adequate steps to prevent fraud.

The implications for financial institutions are profound. This new offence will require heavy investment in fraud prevention measures, demanding greater engagement in compliance efforts, deeper integration of fraud prevention strategies across departments, and more rigorous internal audits.

To prepare, financial institutions must enhance their fraud prevention frameworks to monitor and prevent fraudulent activities in real time, particularly in high-risk areas such as payment processing and CRM applications. Eliminating fragmented payment processes, centralising business payments, and speeding up invoice and payment processing are vital steps to take in reducing fraud risk.

If treasury teams don’t have a good handle on their company’s cash, they’re not able to understand the risks and opportunities for the business, putting the organisation in a vulnerable position. Consolidating treasury data in one place and automating cash management and forecasting functions will ensure businesses are better prepared to respond to constantly fluxing market challenges.