
AI in Treasury: Artificial Intelligence or Augmented Intelligence?
Written by Patrick Kunz Artificial Intelligence (AI) has become a buzzword across industries, and treasury management is no exception. However, there’s an important distinction to be made when discussing AI in the context of treasury: Is it truly Artificial Intelligence, or is it more about Augmented Intelligence? AI Will Not Replace You – It Will Enhance You One of the most common fears surrounding AI is that it will replace jobs, making human professionals obsolete. In treasury, this concern is understandable. With AI’s rapid advancement, it might seem like machines could eventually take over tasks like cash forecasting, liquidity management, and financial risk assessment. The truth, however, is that AI in treasury is designed not to replace professionals but to augment their capabilities. It’s not about machines replacing humans but about empowering them with faster, more accurate decision-making tools. The Role of AI in Improving Processes Rather than automating treasury functions completely, AI enhances existing processes by increasing efficiency and accuracy. In areas like cash management and financial reporting, AI algorithms can quickly analyze vast amounts of data and offer real-time insights. This allows treasurers to make better, data-driven decisions and free up time to focus on strategy and value-added tasks. For example, AI can significantly improve cash forecasting by identifying trends and patterns that might go unnoticed by human analysis. It can process large datasets in seconds, allowing treasury teams to make faster decisions and act proactively rather than reactively. WEBINAR ALERT: Fighting Fraud in 2025: Are You Ready for the Next Generation of Threats? Over 70% of businesses have experienced fraud attempts, and the financial impact continues to rise. As fraud tactics become more sophisticated, relying on outdated prevention strategies simply isn’t enough. Join Tom A. (Senior Fraud Consultant UK at Trustpair) and our very own Royston Da Costa (Assistant Treasurer at Ferguson PLC) on February 20, 2025, at 11:00 AM for an essential webinar that will equip you with the latest insights and strategies to protect your organization from evolving AI-driven fraud threats. Moderated by Patrick Kunz, FRM QT What you’ll learn: This session is tailored for finance professionals, treasury leaders, and risk managers who want to stay ahead of fraud risks. Real-Life Examples of AI in Treasury Here are a few examples from major corporations that showcase the power of AI in augmenting treasury processes: Speed and Accuracy In treasury, where accuracy is paramount, AI can play a crucial role in reducing human error and streamlining operations. By automating repetitive tasks like transaction categorization, reconciliation, and monitoring of financial exposures, AI can not only reduce errors but also speed up these processes. With faster and more accurate data analysis, treasury professionals can optimize cash management, hedge risks more effectively, and identify opportunities for cost-saving or investment more efficiently. The Bottom Line: AI as a Collaborative Tool Ultimately, AI in treasury is a tool to enhance human expertise. It’s about creating smarter, more efficient teams rather than replacing jobs. Treasury professionals will continue to play a critical role in making strategic decisions, interpreting data, and navigating the complexities of financial markets. AI, however, will allow them to work smarter, not harder. The future of AI in treasury is less about replacing human jobs and more about enabling treasury teams to unlock their full potential. By leveraging AI to automate mundane tasks and improve decision-making, treasury professionals can deliver greater value to their organizations. Also Read Join our Treasury Community Treasury Mastermind is a community of professionals working in treasury management or those interested in learning more about various topics related to treasury management, including cash management, foreign exchange management, and payments. To register and connect with Treasury professionals, click [HERE] or fill out the form below to get more information. Notice: JavaScript is required for this content.

How to Automate ‘Cash Pooling’
This article is written by Embat Cash pooling is a highly beneficial tool for companies within their cash management practices. However, it often becomes a significant challenge for treasury departments due to its complex implementation, especially when done manually, which requires considerable human intervention. Fortunately, modern technology provides effective solutions to automate cash pooling, making its management much more efficient and streamlined. What is cash pooling and what is its purpose? Cash pooling is a technique used by companies to optimise their treasury management, particularly in groups with subsidiaries or branches, whether domestically or abroad. Essentially, it involves consolidating the balances of all the bank accounts belonging to the various entities of a company into a single master account. This provides a comprehensive view of cash flow, enabling more informed decisions regarding the use of available funds. This procedure allows companies to maximise treasury efficiency, reduce the costs associated with banking operations, and improve financial risk management. Additionally, by centralising funds into a single account, companies can decrease the need for external financing and better seize investment opportunities. In general, this technique is advantageous for companies that maintain multiple bank accounts across various institutions, and it becomes even more efficient when those branches are located in different countries. JOIN TREASURY MASTERMINDS Cash pooling: a practical example To better understand how cash pooling works, let’s look at a practical example. Imagine a corporate group made up of three different companies, each with distinct business dynamics. Company A, due to its operations, maintains negative balances. As a result, its account shows a debt of €200,000. In contrast, companies B and C have positive balances in their bank accounts of €300,000 and €500,000, respectively. Therefore, the corporate group has a total positive bank balance of €600,000. Thanks to cash pooling, the balances of the three companies are unified into a single bank account, resulting in a consolidated balance of €600,000. In effect, companies B and C have financed company A, allowing it to avoid resorting to external financing to achieve a positive balance. Thus, company A will incur much lower interest rates than it would have if it had turned to external financing (and, of course, lower than what it would pay on the overdraft of its bank account), thanks to the financing provided by companies B and C. Additionally, cash pooling allows companies B and C to obtain higher returns from company A than if they had simply deposited their funds into a bank account. Types of cash pooling Broadly speaking, there are three main types of cash pooling: Advantages and disadvantages of cash pooling The primary benefits of utilising this technique include: On the downside, some of the disadvantages of cash pooling are: How to automate cash pooling? If you are wondering whether it’s possible to automate such a critical treasury process as cash pooling, we have good news. Recent technological advances in enterprise resource planning (ERP) systems, combined with increasingly advanced digital capabilities from financial institutions, have made real-time communication between companies and banks possible, enabling the automation of certain processes. Generally, these systems allow the company’s various branches or subsidiaries’ bank accounts to be linked to a single centralised system, automatically consolidating the balances into one central account. As a result, bank reconciliation becomes much simpler. Additionally, treasury software enables the scheduled sweeping of accounts according to the frequency set by the user. Whether daily, weekly, or monthly, cash pooling can be adjusted to meet the specific needs of each company. Conclusions In summary, automating cash pooling can significantly improve a company’s treasury management, offering greater visibility and control over cash flow, reducing banking costs, and enhancing financial decision-making. Various tools and technological solutions are available to automate cash pooling, tailored to the needs and budgets of each business. Therefore, it is worth considering automating cash pooling as a viable and effective option for improving the financial management of the company, particularly regarding cash management. Also Read Join our Treasury Community Treasury Masterminds is a community of professionals working in treasury management or those interested in learning more about various topics related to treasury management, including cash management, foreign exchange management, and payments. To register and connect with Treasury professionals, click [HERE] or fill out the form below. Notice: JavaScript is required for this content.

4 Ways To Battle Selective Hedging For Strong Corporate Governance
This article is written by Kantox Are narcissistic managers steering your company’s financial ship into treacherous waters? In this article, we delve into the nuanced relationship between corporate governance, narcissistic managers, and the perilous practice of selective hedging. You will learn four key strategies that will help you improve your corporate governance and avoid engaging in selective hedging that may put the future of your company at risk. And if you want to learn more about selective hedging, check out this episode of CurrencyCast where our Senior Financial Writer explains the topic. The Dangers of Weak Corporate Governance Corporate governance is the system by which companies are directed and controlled. It is formed by a Board of directors that are in charge of the governance of the company to help build trust with the investors and the different stakeholders. Their main role is to appoint the directors and auditors, and to ensure that an appropriate governance structure is in place. Strong corporate governance gives investors and stakeholders a clear idea of a company’s direction and business integrity. Moreover, it promotes long-term financial viability, to keep the company afloat even in volatile times. But empirical studies consistently reveal a disturbing trend. Companies with weak corporate governance standards are more likely to indulge in speculative unsystematic hedging, commonly known as selective hedging. This hazardous approach, driven by the whims of managers rather than sound financial principles, poses a significant threat to the future stability of the company. Decoding Selective Hedging Selective hedging takes place when a company hedges its exposure opportunistically, aligning with managers’ views on currency markets. This practice rests on two pillars: attempting to beat the market based on managers’ intuition and adjusting the size and timing of positions, leading to excessive volatility in hedge ratios. This is particularly risky for the company, as we have seen in recent times that unprecedented events can have a great economic impact impossible to predict. The Link Between Governance and Selective Hedging Studies indicate a strong correlation between weak corporate governance structures and the inclination to engage in selective hedging. A key metric for governance quality is the percentage of independent directors within the Board of Directors, acting as a vital check on managerial discretion. Unmasking Reluctance To Hedge Companies with weak governance structures may be hesitant to hedge currency exposure for two primary reasons: optimism about favourable market movements or reluctance in the face of unfavourable interest rate differentials. Such firms afford managers greater discretion over hedging policies, making them less accountable. Narcissism In The Equation Enter the realm of narcissistic managers, individuals more prone to risk-taking and questionable behaviour. Researchers have employed natural language processing to identify narcissistic traits in managers, revealing a strong correlation between narcissism and selective hedging practices. Strengthening Corporate Governance in Forex Hedging To help you avoid the dangerous practice of unsystematic hedging, here are four actionable steps to enhance corporate governance in foreign exchange hedging: Conclusion As financial stewards, CFOs and Treasurers must recognise the critical link between corporate governance, narcissism, and selective hedging. By implementing these four steps, companies can fortify their governance structures, safeguarding against the pitfalls of selective hedging and steering towards a more resilient financial future. Also Read Join our Treasury Community Treasury Masterminds is a community of professionals working in Treasury Management or those interested in learning more about various topics related to Treasury Management, including Cash Management, Foreign Exchange Management, and Payments. To register and connect with Treasury professionals, click [HERE] or fill out the form below to get more information. Notice: JavaScript is required for this content.

Treasury Contrarian View: Do We Really Need Treasury Centers in Every Region?
For decades, multinational corporations have established regional treasury centers to manage cash, liquidity, and risk closer to their operations. But with advances in automation, AI, and real-time banking connectivity, is the traditional regional treasury center model still necessary, or is it time for companies to rethink their treasury structures? The Case for Regional Treasury Centers Managing FX exposures and liquidity on a regional level can reduce transaction costs and allow for tailored hedging strategies based on local market conditions. WEBINAR ALERT: Fighting Fraud in 2025: Are You Ready for the Next Generation of Threats? Over 70% of businesses have experienced fraud attempts, and the financial impact continues to rise. As fraud tactics become more sophisticated, relying on outdated prevention strategies simply isn’t enough. Join Tom A. (Senior Fraud Consultant UK at Trustpair) and our very own Royston Da Costa (Assistant Treasurer at Ferguson PLC) on February 20, 2025, at 11:00 AM for an essential webinar that will equip you with the latest insights and strategies to protect your organization from evolving AI-driven fraud threats. Moderated by Patrick Kunz, FRM QT What you’ll learn: This session is tailored for finance professionals, treasury leaders, and risk managers who want to stay ahead of fraud risks. The Case for Centralizing Treasury Functions The Hybrid Model: A Flexible Approach Rather than choosing between full decentralization or complete centralization, some companies are adopting hybrid models: Let’s Discuss We’ll be sharing insights from treasury leaders and industry experts—join the conversation and share your perspective! Ricardo Schuh, Treasury Masterminds board member, comments: The hybrid model is the most effective treasury structure, as it balances regional agility with central oversight. Based on my experience, fully centralized models risk losing critical local expertise, while fully decentralized approaches may lack standardization and control. A hybrid approach ensures that regional treasury teams can respond swiftly to local financial challenges, regulatory shifts, and banking relationships while still adhering to a global strategy set by headquarters. This setup enhances efficiency, supports compliance, and allows for tailored risk management and FX strategies without sacrificing strategic alignment. Additionally, maintaining strong regional teams is crucial for fostering close and effective relationships with banks—there is no substitute for an in-person meeting when it comes to securing trust and ensuring smooth financial operations. Moreover, technological advancements, such as AI and real-time banking connectivity, should complement rather than replace regional treasury hubs. While automation improves visibility and standardization, on-the-ground teams remain essential for navigating local complexities and ensuring quick decision-making in different time zones. A hybrid model optimizes costs by centralizing core functions like policy-setting and liquidity management while enabling regional execution for market-specific needs. This structure maintains strong internal controls while preserving the operational agility necessary for treasury teams to add value in a dynamic global environment. Finally, I would point out that having regional teams also helps in talent development and sourcing. ð Lorena Pérez Sandroni, Treasury Masterminds board member, comments: Each approach has its own benefits and challenges. The decision should depend on the current stage of the Treasury departments in different regions. It is crucial to ensure local Treasury operations are maintained, as local knowledge, requirements from central banks, banks, and language barriers are key factors. I am definitely in favor of achieving centralized control of liquidity management as soon as possible. This involves establishing proper minimum cash balances and working closely with Tax and Legal departments to create a structure that allows for the physical centralization of funds. From there, proper FX and risk management will be easier to centralize. Only basic local operations should remain decentralized, and wherever possible, opportunities should be sought to rely on centralized liquidity (e.g., in-house banking). I am also a strong advocate for implementing advanced technology, where standardization and control can significantly improve liquidity management and data accuracy for decision-making. Johann Isturiz Acevedo, Treasury Masterminds board member, comments: Current news and context about USA imposing tariffs to countries (mainly Mexico – Canada and China ) and geopolitical discussions (Panama Channel and immigration) are showing that having a regional treasury center in a specific place is something serious to consider. Hybrid model and well detailed processes are key today. Below some takeaways as a must. – A proper DoA – what can be done by local team and done by regional treasury centers.- Localization, is the regional center located in a country which can be impacted by sanctions or restrictions? Country risk assessment.- Cash management set up with local bank and corporate bank. Cash upstream policy is critical- FX risks, are the local team quick enough to share FX exposures to the risk management team in order to take decisions and mitigate FX risk ? Avoid volatilities. Also Read Join our Treasury Community Treasury Mastermind is a community of professionals working in treasury management or those interested in learning more about various topics related to treasury management, including cash management, foreign exchange management, and payments. To register and connect with Treasury professionals, click [HERE] or fill out the form below to get more information. Notice: JavaScript is required for this content.

Trade Digitalization: How to Start?
This article is a contribution from our content partner, PrimeTrade There’s a growing and visible push to get trade digitalized – and trade documents digitized. See more here. Read this short post to understand the “what” and the “who” of trade digitalization – and then crucially, “how” you might start the journey yourself. Below the body of this post (below the line) are some definitions and a framework that we use to make sense of the complicated world of international trade: The “why” of trade digitalization? International trade still uses paper documents that may as well have been invented by Queen Victoria herself. It all works, but there are a lot of costs, delays and frictions. Estimates for the annual cost to all of us for these inefficient processes go into the many US$billions, see for example McKinsey’s analysis of the impact of electronic bills of lading here. But digitalization is not a one-size fits all story. Two digitization approaches The big and immediate wins come from the use of new digitization techniques for documents. There are two types: The “what” of trade digitalization This table shows which type of digitization approach is appropriate and in which context (definitions are below the line later on): So what do we see here? That should not be controversial but we do recognise that not everyone would agree with us on the last point. See here for why manufacturing supply chains can be efficiently financed using non-DNI digitization. The “who” of trade digitalization This table shows who is interested in the digitization discussion and who has the power to initiate change: What do we see here? Putting the what and who together This is how we drive the digitalization agenda forward: So what next with trade digitalization? Trade digitalization: how to start? How you start depends on who you are, the wins available, and which part of the ecosystem you can influence: Background materials – trade digitalization: how to start? Trade digitalization – a framework There are two dimensions to international trade in goods: Moving the goods involves transport documents, customs paperwork and certificates. Moving the cash involves purchase orders, invoices, payments and trade finance. There are two kinds of international trade in goods, and they work differently: To put some numbers on it: There are also different people involved: And they work in different kinds of organisations: For the terms we are using: For more on that discussion, see here. Standardization – digital standards There is a significant value in standardising the data that the documents involved in international trade contain. This allows handshakes across borders and between systems can be improved. We must do this. But this is not the subject matter for this short post. See more about this here. DNIs, for example, are a specific class of documents that are supported by the Electronic Trade Documents Act 2023 in the UK and similar legislation (based on MLETR) that is being passed in jurisdictions around the world. This class of documents typically has special characteristics and requires specialist systems to support them. But DNIs are not the whole story and only need to be used in specific situations. When do I need a DNI? Only very few documents are capable of being created as a “DNI” – a digital negotiable instrument. In the context of digital trade, we are only talking about: Other documents, like certificates, packing lists, invoices, purchase orders, inspection reports etc. are not capable of being DNIs. And it is important to think about the features of a DNI: A DNI, typically, is: An example where a DNI is helpful is where control of a cargo is being transferred by multiple parties (eg: commodity traders and their lenders) who need to be able to pass on easily the digital document (eBL) in which that control is vested. Another example where a DNI might be to organise post-maturity financing of an invoice by settling the invoice on its due date (or earlier) with an electronic bill of exchange or electronic promissory note incorporating a delay in payment that can subsequently be sold and easily transferred to a financier by the receipient (the supplier) for cash. An example where a DNI might be unhelpful is where a corporate wants to control the identity of financiers that it has to pay money to, and so would prefer not to issue debt to financiers in the form of a DNI, since the claim (and all the rights) might be transferred. Also Read Join our Treasury Community Treasury Masterminds is a community of professionals working in treasury management or those interested in learning more about various topics related to treasury management, including cash management, foreign exchange management, and payments. To register and connect with Treasury professionals, click [HERE] or fill out the form below. Notice: JavaScript is required for this content.