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Digitalization in Treasury

Digitalization in Treasury

Bots and Their Possible Applications


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A recent study of “Der Treasurer” showed that treasurers increasingly view Treasury Management System vendors and FinTechs as their driving partners for digitalization. It is only with digitalization that companies can successfully reach Treasury 4.0, thus making the most of their potential. The way to Treasury 4.0 is paved with robotics (in short: bots), which is why we would like to take a closer look at bots. Bots are software-based solutions which independently perform repetitive tasks. Once programmed and integrated into the overall landscape, bots are completely automated and only require human help in exceptional cases. Besides saving resources, the great advantage of these digital little helpers is the possibility to integrate them in already existing system environments. It should be possible to integrate a bot into existing architecture without having to change it. The greatest potentials may be found in the following areas: Support for the introduction of a treasury management system (TMS); fraud detection; forecasting of currency and interest rate risks and their hedging strategies.

Support for the introduction of a treasury management system

The introduction of a treasury management system presents Treasury departments with numerous challenges. A common one is that a large amount of essential information is stored in different systems, files and formats. Oftentimes, these are located in stand-alone applications that cannot be combined and just as often, not all employees have access to all systems or files. Add to this toxic potion the “human factor” who has to prepare the data for the TMS, and errors are as good as pre-programmed. This is where bots are predestined ­­- a perfect fit, so to speak. Bots help automate mass data, thus efficiently transforming this data into a standardized format. To this end, bots are programmed so that they pick the relevant data from the various formats, extract this data and process it. As soon as the bots have been programmed and integrated into the overall landscape, they query the necessary data from the files and systems, and process these into the required format. This makes for high quality and good security when migrating legacy data to a new system or a newer version thereof.

Besides saving time and money, the advantage of using bots when introducing a Treasury Management System is that the Treasury team can then focus on non-automated processes, such as the conceptualization and configuration of new systems or the strategic dimensions of using a TMS. It should also be noted that bots do not make employees superfluous but allow them to concentrate on the really important things, thus generating added value. Another advantage is the reduced error rate as human intervention is limited to exceptional cases. 

Fraud Detection

Another potential use of bots is fraud detection. Companies make a large number of payments every day. Many of these are recurring and in the same amount. Such payment orders are often a good way of embezzling funds without drawing too much attention to the fact. In the fewest of cases, the company notices before it actually happens that instead of the normal EUR 1m all of a sudden EUR 10m should be wired or that a recurring payment is sent to a different recipient. Such cases are generally noticed only after the fact, i.e. after the damage is done. In such a case, bots are of good service because they are a security mechanism and can thus protect the company from such activities. In a first step, the bot stores the relevant information (such as recipient, payment date, amount, etc.) of all outgoing payments and then reconciles these with all submitted payment orders. If a payment is in a different amount or a payment with a regularly used remark is to be released to another recipient than usual, the bot reports this to the responsible employee. As such, fraud can already be detected before the payment is released and its execution can be prevented.

Using bots to detect fraud has two major advantages. On the one hand, it makes embezzlement more difficult, on the other hand it reduces the workload of Treasury employees. A bot checks each individual payment in the shortest of time, an activity that would require many hours of work if it had to be done by hand. A bot can also check each payment order and can identify suspicious orders around the clock, also in the middle of the night.

Forecasting currency and interest rate risks – a thing of the future?

In a world that has become very volatile as far as financial and commodity markets go, better forecasts are an important way of mitigating risks and maximizing profits. Preparing such forecasts requires statistical know-how and a wide array of data. In a first step, this information has to be obtained, then organized and structured and in a last step processed and analyzed. All of this requires much work and can keep employees busy for hours, which is why bots are a perfect support. Bots will research day and night, looking for the necessary data (from pre-defined sources) and then enter it into a system to be analyzed. Predefined algorithms then use this data and prepare a comprehensive analysis regarding the expected developments in financial and commodity markets. This allows Treasury employees to adjust their hedging strategies and in an ideal case, mitigate the company’s risk whilst maximizing profits.

The advantage of bots when preparing a forecast is the on-going collecting and processing of data. Bots research and analyze data 24/7. This not only gives Treasury a huge mass of data but this data is also always up-to-date, including its analysis. Once this very time-consuming work has been automated, Treasury employees may concentrate on the analysis, making relevant decisions that no bot could ever take, namely strategic decisions.

This use of bots is especially interesting in view of integrating artificial intelligence (AI). If AI is used to obtain information and bots should learn themselves from which sources they can obtain information, and the data-processing algorithm also develops by itself, the resulting forecasts would be even more exact at their micro and macro levels. For Treasury, this means even more efficient hedging of all types of foreign exchange risks.

These are the possible uses for bots that are part of Treasury 4.0. However, bots are only one aspect of the digital Treasury of tomorrow – they are by no means the end-all and be-all going forward. Bots can take over numerous time-consuming and repetitive tasks by digitalizing and automating these. This frees up valuable Treasury employee hours, who may then dedicate their time to more important tasks – such as focusing on strategic tasks or making decisions for special cases. Bots and employees drive the digitalization of Treasury 4.0 hand in hand. However, additional components may be needed, for instance a blockchain approach or artificial intelligence. Stay tuned!

Source: KPMG Corporate Treasury News, Edition 92, June 2019

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