"Data without insightful interpretation is worthless. It's like staring at the instruments of an airplane but not knowing how to use them to get where you want to go." Matt Singley - Chief Engagement Officer, Singley + Mackie.
The corporate treasury function continues to grow and evolve within an organization, and is increasingly becoming critical for the financial health, growth and successes of all organizations. Simply because, the decisions and everyday actions of a treasurer directly impact the cash flow within an organization, and it is well known that cash is the life blood of an organization. It is for good reason that the adage "Revenue is Vanity... Margin is Sanity... Cash is King" is widely popular.
Fundamentally, there are three key questions around which a treasurer's world revolves:
- How do I "optimally" run the business? i.e., Ensure adequate cash flows to keep the business going
- How do I "effectively" grow the business? i.e., Ensure financial return on investment in line with financial/business objectives
- How do I "realistically" protect the business? i.e., Ensure holistic and effective risk management
To answer and act on each of the questions above, the treasurer needs to have accurate data/information around payments status' and cash positions, have the required knowledge and skills to draw actionable insights about liquidity and risk, and also be empowered to make decisions around the strategic and operational parameters like investments, forex hedges, bank accounts, etc.
The data to analytics continuum usually involves: data > information > insights > intelligence > decisions > actions > analytics.
As an example, data on payments > provides information on current cash status > offers insights into liquidity positions > conveys intelligence on risk exposure > enables decisions on investments > prompts action around payments/investments > feeds into the engine for current/future analytics.
In the context of a corporate treasurer, there are broadly two areas which are relevant.
- To use historical treasury related data and information to pre-empt (risky) situations and take preventive action, or broadly called treasury predictive analytics. For example: There could be change in interest rates after every political election. A prompt to the treasury office to perform a critical and objective review of the organizations cash positions/investment portfolio prior to an upcoming election could be triggered by an analytics engine. Necessary action will follow suit.
- To use currently available treasury related data/information to draw "actionable treasury insights" and initiate the 'next best action,' as relevant. For example, a treasury governance report indicates that an organization has 100+ bank accounts in a specific geography out of which only 20 have been active in past 12 months. A critical review and analysis of the bank relationships and account status could be the trigger to close the inactive ones and optimize on bank fee structures.
In the era of data explosion, what will increasingly be relevant and important to global treasurers is to use the power of innovative next generation technologies to plan, define and set parameters which need to be periodically reviewed. From the data, it will be critical to draw actionable treasury insights to ensure the financial well-being of an organization.
That's my view. Why do you think treasury analytics is increasingly becoming important? Leave a comment in the section below to let us know…
A version of this post first appeared here.