Digitally Enabling Risk Management Objectives: Accelerating to Smart Treasury

FX Risk Management Solutions Quarterly | Issue 127 | July 2020 | Trending 2 Use of algorithmic techniques to predict and determine next action is increasing, and with this, we expect new value to be unleashed, offering treasuries the ability to digitalize at a pace and at a confidence level previously unachievable, but now necessary, to increase post-crisis resilience. The advent of new technologies and the evolution of financial services had already prompted treasury to rethink its future, but there is now a renewed focus by treasury to accelerate the delivery of its digital strategy to better support corporate objectives. 2 A client webinar poll hosted by Citi in April indicates that over the half clients that joined are accelerating their digital strategy as priority. “We have accelerated automation projects that we had planned for the next year and indeed some that were planned to deliver in next five years back into this year. [We want] better data for better decision-making and instant data and decision-making support where we can [get them].” Kiera Agnew, Assistant Treasurer Europe, Kellogg Company Overview of this article Fully automating the fundamentals, coupled with prescriptive analytics to augment human decisions, is a well documented requirement to realize the Future Smart Treasury. 3 The mobilization of digitization initiatives is now prolific across treasury as a post-crisis response to building future operational resilience. At Citi, we are running a number of initiatives in which we are collaborating with our clients and their technology partners with the shared objective to empower treasury decision-making by digitalizing processes using algorithmic techniques. There is opportunity now to reimagine treasury through this symbiotic relationship between people and data-fuelled predictive and prescriptive algorithms, with some even moving to consider that final step in the journey to smart treasury: deploying AI-enabled machines to execute next actions on their behalf. Establishing trust in machine–led execution of next action for risk mitigation is expected to come about through collaborative experimentation across corporates, banks and technology partners. Figure 1: Poll results from Citi/Client webinar in Q4 2019 showing the shift in appetite away from static reporting to prescriptive analytics in the next 3 years Source: Citi Treasury Leadership Client Forum, November 2019 70 % 60 % 50 % 40 % 30 % 20 % 10 % 0 % Prescriptive analytics appetite A Descriptive analytics (static reporting and visualisation) B Diagnostic analytics (Interactive dashboards) C Predictive analytics (machine powered forecasting) D Prescriptive analytics (decision support/recommendations/deal determination) E Artificial intelligence (decision automation/deal execution) Level of decision support automation expected by Treasury to achieve in the next 3 years Treasury participation in business model review Accelerating delivery of digital strategy for Treasury (automation, prescriptive analytics) Move to real time Treasury to support real time payment flows Review of business continuity plan for effectiveness where workforce is WFH for... Other Level of decision support automation currently in place A 61 % 30 % 21 % 52 % 19 % 0 % 15 % 13 % 0 % 2 % C B D E Figure 2: Poll results from Citi/Client webinar in April 2020, showing the post COVID-19 acceleration in treasury focus on digitalization through automation and prescriptive analytics 13 % 52 % 17 % 14 % 4 %