No need to wait for the future of FX Management

We are surrounded by evidence of the changing world of banking and treasury.  The level of online banking and all its supporting integrations with accounting and ERP systems delivers a remote working environment we never thought possible five years ago.   The same is true in the world of FX management.  The world has changed significantly and for the better.  Yet one in five UK businesses still use spreadsheets to manage FX hedging – what are they waiting for?

A better question might be, why are they waiting?  In current times of increased currency volatility and the need to manage a range of different financial instruments has added considerably to the load of the corporate treasurer.  The ability to embed treasury into the financial supply chain through using FX management tools has to be seen as a game changer.

Being able to create live scenarios across a range of different options, that can be shared remotely, in real time with a range of stakeholders – is game changing.  You not only make better decisions but can manage by exception, focusing on the urgent and important without the distraction of having to continually process and update fields unnecessarily.

Off the shelf

Whereas once FX management tools were the domain of enterprise software developers – requiring highly bespoke and customized environments – that is no longer the case.  It is amazing what you can now, quite literally buy off the shelf: cash positioning, automated payment controls, fraud detection, cash forecasting, FX exposure calculators and more.  All cloud based.  All highly secure and all designed to integrate into existing technology stacks.

These aren’t simple solutions.  Many of the tools include highly sophisticated Artificial Intelligence and machine-based learning. In the case of FX management this may not enable you to predict future exchange rates but it will aid in the decision making around what to hedge and at what ratios.  While the calculations are extremely sophisticated the emphasis is on ‘ease of use’ and ensuring all stakeholders, including board members can read and understand the resulting reports.

Greater transparency

One of the side effects of FX management tools being more widely deployed has been an increase in transparency around what banks and brokers are charging for the outcomes they deliver.  Thankfully many banks are embracing this and looking to create their own eco-systems of integrated business banking tools.

The upside of this is it puts the corporate treasurer and their banker, broker or advisor, quite literally on the same page.  One of the big downsides in managing spreadsheets has been version control and the ability to dynamically update the information in a uniform way.  Getting on a call with everyone having certainty of the accuracy and timeliness of the data they are viewing is game changing.

In parallel, these tools are being designed for entry-level user.  It means FX management has moved from requiring a high degree of specialist knowledge and the ability to manage highly complex algorithms – to something a relative novice can pick up and use in hours.  This removes many single points of dependency from a business risk perspective and enables senior treasurers to spend their time where they can make the greatest impact.

Due to the high level of system integration and automation it dramatically removes the error rate, compared with manual, unprompted, data entry.  Having real-time accurate data makes the treasury management function in any organization far more valuable – and this is value they can add today for a relatively low-level outlay.

Customers taking the lead

While some businesses may be slow to shift off spreadsheets – those embracing new technologies are driving the pace of change across the FX management spectrum.  Whereas in the past corporates were looking to banks for direction- the adoption is largely being driven by customers picking up the tools and running with them.  

It is a phenomenon we are seeing around the world.  Corporate treasurers are being put under increasing pressure and the business is demanding they come up with not just the answers but a comprehensive understanding of the associated risk profiles.

They can’t afford to wait for banks to catch up nor can they afford to stay on spreadsheets and remain competitive.  They are driving the fintech industry to continually improve what is in the market to the point we have effectively caught up with the future.  It is, however, a moving target fueled by increased global demand and more complex, international supply chains than we have ever seen before.

The message, however, is clear for all of us.  Don’t wait. Corporates need to embrace what is now possible.  Banks, brokers and advisors need to embrace what their customers require and meet these new technology demands head-on.  And Fintechs need to understand that we need to stay ahead of the market, continuing to create a better future for everyone involved.