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Treasury 2025 – Prepare today (part 2)

Treasury 2025 – Prepare today (part 2)

Using the following subject areas, we will show you what is going to change.



Per Areskär

Partner, Financial Risk Management

KPMG i Sverige


Relaterat innehåll

We already discussed the topics of automating standard processes (e.g. FX-Exposure Management) and digital decision-making in detail in Part 1 of this article.

Our key takeaways highlighted the opportunities as well as the importance of taking timely action. Only those who set up leaner and more homogeneous processes today can benefit from standardisation and the opportunities offered by the digital data world tomorrow. However, this does not represent the full potential. Using the following subject areas, we will show you what is going to change:

Dekorbild -Treasury 2025 – Prepare today (part 2)

"Embedded Compliance" as standard

Compliance is becoming more and more important. Whereas the requirements facing internal compliance in the Treasury department have changed only marginally over the past few years, we are now seeing far-reaching changes and requirements regarding external compliance. During a discussion, you have led a managing director to state that it is impossible for him to know and comply with all the legal and regulatory requirements of all countries and international organisations, and that's why he's already got one foot in prison anyway – not to mention reputational or financial damage to the company. It is undisputed that the largest problem in the context of compliance is the human factor – be it deliberate fraud, an incorrectly assessed situation, a lack of knowledge or simply because a mistake was made.

Treasury 4.0 does not solve this problem entirely, but it does offer the automation of processes and the integration of systems along the entire process chains, which are prerequisites for implementing "Embedded Compliance".

"Embedded Compliance" means that both internal as well as external compliance requirements are mapped in the systems using automated check routines and controls, which makes it possible to conduct the checks in real-time/ensure that, for instance, notifications are fully and correctly sent to external third parties. The objective is to take the human factor out of the regular process equation.

Let us take a closer look at three examples:

  1. Monitoring exposure limits (internal compliance): If strategic instructions stipulate a specific hedge ratio, then compliance with this can be immediately checked and management is automatically notified as soon as a specific deviation occurs. Monthly reporting, which is still quite common today and is frequently done manually, is no longer necessary.
  2. Payment transactions (internal/external compliance): Whereas in the past it was not possible in the context of decentralised payment transactions to identify fraud and thus prevent it, highly automated centralised processes mean that fraud is now hardly possible. Artificial intelligence provides the solution. With its help – machine learning, to be specific – anomalies are recognised and, if the system does not categorise the payment as "normal", it is allocated for subsequent manual processing. This approach is based on the assumption that machines recognise when something deviates from the norm. Not only can this procedure recognise and prevent fraud, it can also combat corruption and money laundering — two external compliance topics where huge fines can be levied in the case of non-compliance.
  3. EMIR reporting (external compliance): If it is ensured by the system that all relevant transactions in the central database are not only available, but also approved in line with the corresponding regulatory requirements, the system can directly escalate and document any deviations from the target process (e.g. target times) without having to rely on staff to do so. The same is true for ensuring the corresponding reporting requirements. The system will recognise the threat of non-compliance in this area and will initiate appropriate steps. 

These three examples illustrate that "Embedded Compliance" is more than just a buzzword and that it provides more security – not only for the company, but also for each employee in the process chain.

However, there is no need to wait for a system landscape that will enable this in one fell swoop. Already today you can begin further automating controls in the existing systems and, where possible, automate the corresponding compliance reporting function.

Performance becomes an indicator of quality

All business segments are subject to detailed performance measurements. All of them? Not quite, there is a small Gallic village called Treasury, which is still largely excluded from performance measurement. The reasons for this are not relevant at this point.

However, change is slowly becoming apparent, for instance, there is increasing interest in bank fee management or in measuring the performance of currency management, including the corresponding cost-benefit calculations. On top of this, process changes are emerging, such as in payment transactions, which are leading to process chains extending far beyond Treasury and are subject to corresponding performance measurement. Examples include cash management or payment transaction processes, which are in part the responsibility of shared service centres. Performance indicators in real-time such as turnaround times, transactions per employee, hedging costs in relation to the achieved volatility reduction of currency gains/losses, accuracy of scenario calculations in the ex-post analysis are just a few examples.

The reasons these topics were not tackled in the past was not always due to a lack of will; rather, the limits of what was technically feasible were a deciding factor.
This has already changed and will continue to do so. Central (current) data available is no longer limited by any material restrictions, neither technical nor financial. Nevertheless, depending on the starting point, the road to achieving this can be longer or shorter and require considerable or little effort.

Irrespective of this, there is no reason why you cannot start today to 

  • draft a comprehensive KPI concept, create the corresponding acceptance of this in the company and integrate it into the reporting function, as well as 
  • define the requirements regarding necessary data and, where already possibly, also start implementing this now.

The two future subject areas of Treasury 4.0 outlined above are intended to make the future of Treasury more tangible and transparent using standard topics and show what actions can be initiated already today. However, theory is not practice. Therefore, we will address practical implementation in the next newsletter.

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