Artificial Intelligence: Transforming Treasury Operations

A recent study by KPMG has found that nearly 64% of companies are actively pursuing the implementation of AI in their treasury operations. Treasury services in general are becoming a nerve centre of innovation across organizations.

Why are treasury operations gaining heightened focus?

Ever since the COVID pandemic, companies at large have been sceptical about the economy amidst sluggish growth, geopolitical tensions, and trade wars. Disruptions and volatilities are becoming a mainstay, forcing financial planners to be prudent about spending and ensuring that key initiatives and operations have sufficient funds to perform. The role of treasuries has become ever more critical in this regard as they have risen to the forefront in strategically balancing assets and liabilities to ensure sustainable growth in uncertain times.

However, traditional treasury management approaches are inadequate to handle the complexities and scale of financial operations at companies with a global presence. Monitoring risks, optimizing resource utilization budgets, and emergency financing are critical areas in treasury operations that cannot afford to miss out on strategic competitive strength. The key to achieving competence is to break innovation barriers with technology such as AI.

The key benefits of AI in treasury operations

It is important for leaders to understand the true potential of AI to transform core areas of treasury management and make its impact felt in strategic avenues such as cash flow management, risk mitigation, streamlining compliance, and improving operational effectiveness.

Let us have a closer look

Strategic cash flow management

Thanks to advancements in digital finance operations, there is plenty of data available for organizations that point to historical revenue performance of the company, market trends, and customer sentiments. The challenge is to transform this data into insights that can catapult businesses into a position where they have risk-free cash flow. AI helps to realize this forecasting ability across financial operations when it is integrated deep into treasury management systems.

By analysing patterns of revenue and expenditure flows, economic and customer behaviour indicators, and partner relations, AI can help enterprises stay financially prudent by forecasting the availability of cash and offer clear visibility into how much liquidity the business has at its disposal to pursue new ventures. AI can help replicate scenarios with contextual data to forecast cash flow dynamics accurately and help financial planners stay nimble and agile even in the most challenging scenarios. They can even go into granular forecasting capacity, wherein regional, or country-specific operational measures can be planned based on cash flow predictions from local business prospects.

Risk mitigation

Treasury operations often face daunting risks due to poor financial decisions. They also face risks from not being able to deduce market competitiveness before making investments, resulting in mounting losses.

With AI capabilities, treasury management risks can be easily identified in the earliest possible stage, and remedial measures can be deployed to neutralize any evolving threats. Decision makers can use AI systems to forecast different operational models based on their financial capacity and then pursue one that has the lowest risks or highest reward. Balancing risk with rewards is a strategy that must only be pursued under strict expert data-driven guidance. AI can be the strategic driver of this guidance. From monitoring market trends to currency fluctuations and credit risks, AI systems can help navigate both active and passive risks.

Compliance adherence

To combat fraud and corruption, governance frameworks are being developed and deployed by governments worldwide to closely monitor and scrutinize corporate financial operations. Staying compliant with norms laid out for financial reporting, tax policies, trade frameworks, etc., is critical for long-term sustainable business activities. Violations will attract major consequences and result in reduced autonomy in key decisions. Additionally, compliance with transactional security guidelines is essential to prevent cyber risks within treasury operations as well.

Replacing traditional compliance monitoring mechanisms with AI-powered solutions can significantly transform adherence capacity. AI systems can study, infer, and apply updated regulatory oversight on key treasury operations. They can help businesses stay updated on reporting standards, automatically upgrade key financial documents to reflect new norms, and ensure full compliance in capturing all essential metrics as mandated for regulatory clearance of business. From a transactional perspective, AI-driven audits can help discover vulnerabilities in treasury systems that could be exposed by threat agents and can thus deter fraudulent transactions at their roots.

Improve operational efficiency

From cash flow management to security and transactional oversight, AI eliminates the need for financial teams to spend hours or days shuttling between spreadsheets, reports, and other key financial assets to maintain prudence. Key financial processes that power treasury systems can be automated with AI, and reporting can be streamlined with prompt-based report creation using generative AI tools.

Accuracy of data can be reassured with AI-driven audits that can compare millions of transactional records and spot discrepancies faster and more accurately than manual inspection. AI systems can empower financial, accounting, and treasury staff to save hours of complex manual financial reporting and data operations.

Towards a vibrant autonomous future in treasury operations

AI has the potential to unlock unprecedented value from enterprise treasury operations. With financial planners being empowered with clinical accuracy in forecasting cash flows and equipped with intelligence to mitigate risks, treasuries can propel the finance function into a strategic and competitive strength for any business. But building AI capabilities for complex domains such as treasury and financial operations is no easy task. There is a need for strategic domain expertise, exposure to core AI development and deployment roadmaps, and knowledge on how to align future business goals with financial operations planning and capabilities. This is where a technology partner like Verinite can make a huge difference. Get in touch with us to know more.

FAQ

What are the key benefits of AI in treasury operations?

AI offers streamlined cash flow management, lowers risk, strengthens compliance, and improves operational fluidity for treasury systems.

What is the adoption rate of AI in treasury operations?

Studies show that over 64% of companies are actively leveraging AI for treasury operations

How will AI transform risk management?

AI can lower risks by helping financial planners identify risky patterns faster and provide insight into alternative investment strategies