automation: an expected journey
FX workflow
Colin Lambert reports on how pandemic disruption has impacted corporates’ FX risk management strategies, illustrating this with a profile on Yusen Logistics’ use of automation to meet its new business needs
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f one positive emerged from the volatility shock to foreign exchange (FX) markets in March 2020, it was that the market structure worked. Liquidity held up and corporate treasuries were able to hedge. Spreads might have occasionally been wider than normal, but pricing was available throughout.
This meant that treasuries did not, after the initial shock of the first wave of the pandemic, need to be overly concerned about whether they could hedge exposures. A dispersed workforce and local limitations on the movement of people, however, created a very different problem. Manual processes were exposed, and the list of risks to be managed steadily grew as companies fought to ensure resources were adequate and in the right place at the right time. Logistics disruption and FX exposure were just two of these risks. Coping with business change during the early days of the pandemic could have derailed ongoing automation programmes, but it also underlined why momentum and sticking to the plan are so important. Streamlining, automating and optimising internal processes were more than a ‘nice to have’ benefit as remote working rapidly became the norm.
Few corporate treasuries would argue against greater workflow efficiency, but achieving it is less than straightforward and demands a collective organisational determination that also involves other finance functions and the IT department. In addition, while there are common processes, each firm has its own nuances
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in how it operates. This makes buying an off-the-shelf solution (such as an enterprise resource planning or treasury management software system) challenging. While it might work on 90% of the necessary workflow, adapting an already-built technology solution can be onerous and expensive if 100% efficiency is to be accomplished.
Workflow automation is, therefore, a thousand different journeys for a thousand different firms, especially in the corporate space. Yet there are plenty of junctions where those paths cross over, and here is where the opportunities lie. Rather than attempting to optimise an FX trade in a product – with a spread of perhaps one tenth of a pip – it is far better to optimise the processes that inform the decision to hedge in the first place.
Driving efficiency Perhaps the biggest obstacle to implementing technological change is knowing when to start. No two companies are at the same stage of evolution, especially when considering the proliferation of ‘new economy’ corporations seeking to offer online services on a global basis. These firms are at a very different evolutionary stage to those that have existed for decades, or recently engaged in a merger or acquisition.
However, most treasuries share one common goal: a drive for efficiency. “Treasuries are highly motivated to achieve efficiencies,” says Yannick Marchal, Managing Director, Global Head of Autobahn Maestro at Deutsche Bank. “For some this means beating the market
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