Technical problems, like weeds, always come back…
When a corporate treasurer is asked what the main pain points are and technical issues they encounter in their day-to-day work that consume resources, time, and energy, they often answer, invariably, KYC procedures and signing authorities (among a few others). At a time when technology is sending us into space and cars are flying on electricity, isn’t there a gap? How do you explain to a young treasurer that nothing could be done? Yet, solutions are finally emerging, and we don’t talk about them enough.
Maintaining banking relationships requires the exchange of documents
You cannot maintain a banking relationship without being in order in terms of KYC and signing authorities. Without this, if you are missing an LEI or UBO, you will be blocked or even banned from dealing with your banker. In the digital age, what a nonsense it is to exchange paper documents by mail or at best by email, right? Why should certain activities or tasks remain manual and risky? This is the question to ask, as solutions emerge. Compliance for various reasons, such as banking relationships, auditing, risk of prohibition to deal, risk, etc… is vital for everyone. No one doubts it anymore. But why not automate what can be automated and which causes so much trouble, without bringing any added value to the business, unfortunately? The problem comes from the risk of error, from the repetition of requests and the sending of information, for example, in the context of KYC, the signing powers. In large groups, they change very (too) often, creating unnecessary stress for any company treasurer. What if the Messiah had finally arrived without you knowing it? Miracles also happen in treasury…
Digitization of signing authorities, the long-awaited solution.
Why would it be so expected? Simply, let’s think about the very low added value of this repetitive and laborious, yet risky activity. While every CFO expects his/her treasurer to increase productivity by digitizing and transforming his/her department, and additional human resources cannot be considered, we continue to favor the manual for a vital (even if boring to death) process. Paper-based processes are still costly, risky, inefficient, and potential sources of human error. Teleworking has only crystallized this need to change the way we work digitally if we are no longer in the office. As is often the case, the manual nature of the process implies the repetition of data entry without guaranteeing completeness. Why repeat computer entries when you could do it once, guaranteeing the segregation of duties and the four-eyes principle? The fact that the banks each apply different processes and procedures, depending on the network or country, adds to the complexity of the exercise. Keeping powers of signature up to date and being sure that they have been communicated to your banking partners (and others) in due time is never a given nor a certainty. This adds an avoidable layer of stress to the treasurers’ work. The archaic or too basic transmission methods add another layer of risk, which modern technology and the subject matter do not allow to be tolerated.
The more centralized the treasury activity and the more you operate as an In-House Bank or Payment Factory, the more complex this subject becomes. The number of entities included in the scope can make the task, if centralized, simply impossible, or inhuman. In addition, it generates enormous risks that are too often underestimated by management, internal audit, and the CFO. And yet…
Never sure to get the full picture
One never has the full picture nor the assurance that all records and accounts are in order. It is the risk and uncertainty that creates this stress for the treasurer, who is ultimately held responsible if the accounts are not in order from a signature point of view. However, when you think about it, it’s like a certain bus, train, or plane ride, you get the impression that it takes and has always taken the same amount of time, as if technological progress had stopped there. What a frustration, no? It’s the same with KYC and signing authorities, a desolation that some feel they must endure forever. This is a point that we often hear from the treasurers we meet in Europe. A kind of insolvable fatality…
Standardization and digitalization
The worst risk is for a corporate to have forgotten to notify a bank of its changes in signing authority. However, even if perfectly organized, it remains a risk when it is done manually. To have a solid, robust, exhaustive, and up-to-date database (re. PoS/Power of Signature), the process must be digitized and systematized. This means standardizing and then digitizing the signature powers and their secure transmission. Moreover, let’s not forget that this will greatly facilitate the external audit, at the end of the accounting year. The keystone is digitization, the only way to finally solve an age-old problem for treasurers. Ask a “Z gen” member of your team and they won’t understand that the problem hasn’t been solved yet, and they’ll think you’re backward. Let’s also remember that beyond the obvious gains for your company, there are also significant gains for your banking partner. It’s time to tackle a recurring problem and get ahead of your peers. A solution like DELEGA seems to me a “no-brainer”. If you are wondering how to be more efficient and effective, this point must be addressed. Start with what costs you the most, brings you the least and bores you deeply. Do not fear change, because here it is beneficial and virtuous. I believe that this process of digitalization is integrated with the adoption of (e)BAM (i.e., electronic Bank Account Management) and KYC solutions. Human nature is such that we don’t tackle the things that make us angry and upset first. Yet, that’s what we should do. I have sometimes thought of an ideal treasurer’s world in daydreams, and guess what, among other things, I had imagined, an automated and digitized KYC (including signature powers). The dream seems closer than ever to reality.
When credentials change, for whatever reason, speed is of the essence. The sooner the bank updates the credentials, the safer the position of the corporate client. Fraud has only increased in recent months, perhaps exacerbated by COVID. Even more reason to protect yourself further, isn’t it? Moreover, treasurers too often forget that banks could only be happy, prefer and value this type of approach, thanks to the savings they will be able to make and get from it. Banks (all of them without exception) have started to select their customer portfolios and one of the criteria is and will be digitalization. Any bank will prefer a fully digitalized customer to a partially or not digitalized one, because of the intolerable costs involved. There will come a day, not so far away, when banks will demand it or charge the right price for not digitizing. You must be aware of this and explain it to the C-level. The treasurer is also tired of depending on the bank. Furthermore, it takes time to banks to adapt required changes. This latency can lead to many problems, even if the treasurer claims and proves to have transmitted the information on signing powers in due time. The risks also come from the different processes and requirements from the banks (it differs from bank to bank) making its life even more complicate and increasing risks of lacks. The bank fragmentation complexifies the tasks of treasurers (i.e., 45% of companies in Europe have 3 to 10 banks and 25% have more than 10 banks). It seems undeniable that a virtuous, win-win solution is advisable, anyway. Tell me what CFO would be foolish enough not to validate a solution that has only advantages, on both sides (i.e., buy & sell sides)? the key element is the risk and the possibility to mitigate it strongly for a process that is high risk, by its very essence. I love it when cash flow shows real technological advances that revolutionize everyday life.
François Masquelier, CEO of Simply Treasury November 2021
Disclaimer: This article was prepared by François Masquelier in his personal capacity. The opinion expressed in this article are the author’s own and do not necessarily reflect the view of the European Association of Corporate Treasurers (i.e., EACT).