Optimizing Treasury operations with decision automation

Top performers in any field – athletes, entertainers, celebrity chefs and executives – all strive for perfection — that elusive quality that sets them apart. Perfection brings personal satisfaction, financial rewards, and maybe even a chance for fame and glory.

But in business, perfection is rarely the goal.  “Perfect is the enemy of good enough” we’re told when trying to eke out the last bit of efficiency in a core system and facing diminishing returns.  But this doesn’t mean it’s not worth the effort.  It means that we need to be looking elsewhere to gain an edge.

The typical money center bank or corporation relies on dozens of core systems to support varied operations from trade settlements, to FX, payables, receivables and risk management.  And these systems work nearly perfectly. Billions of dollars in transactions flow through banking core systems every day without interruption – most of the time with no problems.  But occasionally there are hiccups, and transactions need to be investigated.

Data quality impacts profitability and risk. Decision Automation can help.

These problematic transactions have less to do with core systems performance and are more generally a consequence of the inherent complexity of the timing and velocity through the pipes.  But the result is still a costly and time consuming situation.

Common factors impacting complexity include:

  • Multiple sources of fund flows
  • Cross business requirements
  • Timing of data
  • Complex value dates
  • Managing local and global commitments

These complexities are structural and increase the potential for both found and unfound errors that can be traced back to data quality and management.  Missing, late or inaccurate data affects Treasury operations across the board from cross book reconciliations to currency translations, and everything in between.

Financial institutions address data quality issues by deploying an army of analysts to dig through spreadsheets and adjust transactions, ensuring these impacts are kept in check.  But there’s a cost.  Aside from the headcount expense, Treasury may need to maintain a larger cushion for reserves, forfeiting higher returns. Other costs are incurred through increased levels of borrowing, higher transaction costs and potential regulatory action.

The bottom line is that data quality impacts profitability and creates plenty of headaches for treasury executives.  This is where decision automation can help.

Fixing the underlying problem of data quality begins at the source. Treasury relies on data sourced from numerous enterprise data-stores where business rules are applied to enrich data and support value-added processes used in operations.  Problems arise when business policies, translated into business logic, are not accurately coded into business rules used by core systems.

Effective decision automation solutions include easy to use tools to manage business logic underpinning business rules across multiple systems as a single rule set.  This ensures data meets all quality requirements before entering transactions.

Business rules are often spread across the tech stack and distributed across enterprise systems.  This common situation inevitably leads to limited transparency and requires IT to complete all modifications, additions or explanations.

With decision automation, logic that drives data quality can be updated easily by treasury business analysts using a toolset no more complicated than Excel.  Any change in treasury policy can be implemented in minutes, not months, in a tightly controlled and audited way.  Reliance on IT for updates can be reduced significantly.

Global banks usually adopt decision automation by starting within a specific area, like Treasury, Card Services or Mortgages, and then roll out decision models to include other systems once its value has been proven.

Decision automation provides improved accuracy, optimized use of funds, with lower financial and operating costs:

  • Treasury can free up reserves and earn a greater return without impacting risk
  • Borrowing levels can be reduced through more accurate information
  • Higher transaction costs can be eliminated
  • Regulatory risk is reduced and auditability improves dramatically
  • Reconciliation staffing costs can be reduced significantly

We may never achieve perfection but decision automation can propel your organization a lot further down the road. And as the benefits demonstrate, even incremental improvements can have an outsized impact.

ERIC WILKES
Eric Wilkes, VP sales, North America, has over 25 years of experience within global Banking and Capital Markets as an executive at major global firms and industry service providers. He provides an industry perspective to Sapiens Decision’s current and prospective clients and partners.