How CFOs Are Adopting Automation

00:05Welcome to nasa trade talks.

00:07I'm Jill military, no global market reporter at nasdaq.

00:10Joining us for this segment, we have Greg person,

00:11senior vice president of sales and account management, riba,

00:14as well as that Brown executive Vice President of Product two, ICD.

00:18They join us to discuss how CFOs are adopting automation

00:21and AI for treasury functions such as liquidity planning,

00:24risk management, and cash forecasting.

00:26Gentlemen, It's great to have the both of you with us.

00:28Welcome to trade talks and Greg will kick it off with you first,

00:30if you could just give us a high-level overview of where

00:33it sits within the risk management ecosystem.

00:36Yeah, absolutely. Thank you, Jill.

00:38Thanks so much for having us on here this afternoon.

00:40Sure. So yeah, I mean,

00:42we're a global leader in liquidity performance.

00:44And really what that means is we're helping CFOs, treasurers,

00:48IT professionals, connect into their overall liquidity landscapes.

00:53So that's Bank connections,

00:54ERP connections really all the sources and uses of cash and

00:58helps them optimize and protect their liquidity both now and in the future.

01:02So do that now for over 3,000 customers around the world,

01:05we're processing as well lots of bank transaction through

01:08our system that helps execute that liquidity strategy.

01:11So we're moving more than three-and-a-half billion bank transactions per year,

01:14about $15 trillion in annual payments through our platform.

01:19Right? It's that tell us about ICD,

01:21where you sit within the risk management ecosystem.

01:24Yeah, thanks Joe, glad to be here.

01:26ICD offers a short-term investment marketplace and execution and

01:32investment reporting technology focused

01:34on the corporate treasury team within the office of the CFO,

01:38we offer two primary products.

01:40First is our investment portal,

01:42which offers hundreds of short-term investments I

01:45and support for the full trade lifecycle of those asset classes.

01:48As well as a system called portfolio analytics,

01:51which is an AI enabled risk and exposure analytics platform that allows

01:56reporting to aggregate data about corporate treasury teams entire investment portfolio.

02:01And we'll certainly touch on AI, of course,

02:03an automation at the latter half of this conversation.

02:05But Greg looks kick this off.

02:06How our CFOs managing bank exposures in the wake of past and future failures.

02:12It's been a big thing, big topic of conversation in 2020,

02:153% we saw at some of the banks?

02:17No, absolutely, Jill, I think, I think,

02:19I think 2023, obviously you prefer in Silicon Valley and what happened last spring?

02:23I think that was absolutely wakeup call the CFOs and treasures.

02:28I think we've seen a lot of initial reactions to that,

02:31but certainly going forward as well and how

02:33companies are that doesn't get credit ratings of

02:35the organization are looking at the sort of basic chiropractor risk allocation,

02:40but getting more sophisticated,

02:41they said it was a wake-up call and part of that as well.

02:44This is just the timeliness of how they look at their exposures.

02:47Historically, you would find some organizations wait till

02:50quarter end and they do roll up and they had

02:53an audit committee board meeting or something you've got to go through.

02:55Where are those exposures?

02:56But I think the wake-up call from last year is a lot more prudent behaviors.

03:01Looking at my exposure, what are they today?

03:03Will they be next week a quarter from now,

03:05and making sure there's a nice balance across

03:09the risk mitigation on where's my exposure with the risks measured with the,

03:14the interest rates as well,

03:16ensuring that there's a return there and

03:18allocating that risk properly across their various counterparty banks.

03:23I'm sorry. Good.

03:25I was just gonna say I Greg is absolutely right.

03:27Like 2023 was a wake-up call for the organizations we work with and

03:31we actually have seen that that continues to push on into 2024.

03:36In January, we ran a client survey where 80% of respondents said that they are

03:41still concerned about bank failures even after

03:44the government stepped in and do a lot of things to try to shore up that marketplace.

03:47But when we talk to firms in the space,

03:50they really focused on three areas that

03:53they're really trying to push ahead on in that area.

03:56One is just visibility.

03:57And Greg touched on this, just understanding what your risk is across your portfolio.

04:02That doesn't just mean your bank deposits,

04:04but it also means things like your underlying exposures through your fund products or

04:08any kind of individual positions within

04:11your separately managed accounts are your direct investing activity.

04:14Also stepping up your analysis and Greg said

04:17that their frequency at which they're doing reporting is has changed.

04:21And I think a lot of firms were running on

04:23either a monthly or quarterly cadence when they

04:25were looking at things like counterparty exposure.

04:27And we've seen people step that up and say,

04:29not only do I want to do that at a much more frequent basis,

04:32but I want to make sure that I'm communicating

04:35within my organization whenever those exposures change.

04:38And then adding new metrics is a big push right now.

04:42Greg mentioned ratings as being a lagging indicator and ineffective one last year.

04:50And so a lot of firms are adding to

04:53that dataset by adding things like credit default swaps,

04:56spreads, and equity price changes in order to really get a better feel for the,

05:01for the health of their counterparties.

05:04Then the last one, just diversification, right? So we saw

05:07Huge shifts away from any single name exposures to products like money market funds

05:13which provide diversification to enable stability,

05:20as well as high levels of liquidity.

05:23And we'll talk about this later, I'm sure,

05:24but liquidity was a big issue.

05:27Maintaining liquidity while also I'm getting diversification.

05:30It's one of the reasons why money market funds shot up across the board for institutions,

05:35as well as providing a higher yield.

05:39I mean, with the higher for longer world that we sit

05:42in to sit in today with the interest rate environment

05:45and inverted yield curve really drove a lot of balances towards those types of products.

05:51Well, let's talk about this some more here.

05:53How our CFOs reducing vulnerability is due to rising interest rates,

05:56but appears to be we're going to be in

05:57a higher interest rate for longer environment and of course,

06:00your foreign exchange volatility as well.

06:02Now that's true. I mean,

06:04obviously we're not seeing any,

06:06any slowdown and we get data continues to suggest that the right side,

06:09if that happens, we'll be certainly probably towards the end of the summer.

06:12So again, similar to the same concept before by wake-up call.

06:16And there's a lot of CFOs that we work with. Group treasurers.

06:20They've gotten very used to

06:21the very low interest rate environment and that's

06:23how he changed dramatically in the last few years.

06:25So balancing that now is ensuring that the cost of idle cash,

06:30but the cost of funding has risen dramatically.

06:33So if you think about any CFO,

06:35he or she has a capital allocation strategy to execute against

06:38ensuring that share buyback program retiring deaths or M&A activity.

06:43These are all critical things that CFOs are tacit executing.

06:47So with the rising integrated environment,

06:50that cost of capital is certainly more challenging than it was years ago.

06:55We don't see really any signs that slowing down until maybe earliest, later this year.

06:59Similarly with the industry volatility as an impact,

07:03of course on an FX rates or injury parody driving your FX volatility as well.

07:07So that's an angel challenge.

07:09I think we're going to continue to see high volatility in currency markets.

07:15And all of us can drives,

07:16how do I have the right,

07:17the right liquidity in the right region with the right level of risks and costs.

07:21And that's a lot with the OCF.

07:22Both the challenge with the higher interest rates have certainly

07:26made that a bit more challenging than we saw in years past.

07:30Zack, that was part of the challenge with Silicon Valley Bank is an example.

07:34They weren't running good enough risk scenarios as it relates to interest rate.

07:38They just weren't modeling it out far enough or it has high interest rates have risen.

07:42Yeah. I mean, the changes in the environment were dramatic.

07:46Obviously. We've seen continued pressure

07:51on that and I guess risks around where that's headed.

07:55There was a lot of interest rate drops expected sooner rather than later.

08:00And now that, that world looks a lot different than it used to just a few months ago.

08:04I think risk is still at the top of all of CFOs.

08:08Concerns around their portfolios,

08:11around their cash exposures.

08:12And I think one of the big things that they need to focus on is

08:15reducing their manual processes so that they can maintain that visibility.

08:19So the firms that I talked to,

08:22they often will have manual,

08:25Excel-based processes by which they

08:28understand their exposures to things like interest rates, durations,

08:31counterparties, And those those processes keep

08:35them from being able to achieve what they need to when those events occur.

08:39And we're not going to know where that next risk from it comes from,

08:43whether it's FX or geopolitical event or some sort of FX or interest rate movement,

08:50a dramatic shift in the curve.

08:51All of those things are possible.

08:53And without automation, that the on-demand

08:58recording that you need to respond to those types

09:00of situations is really difficult to get to.

09:03And you have to think about that well ahead of when you need it, right?

09:06And so you've got to think about enabling

09:07those technologies while before the event occurs.

09:10Alright, well, I mean, part of the challenge is to,

09:12is that the technology is moving so quick

09:14and you can grab have been saying over and over again,

09:17monthly quarterly auditing of your processes in place just isn't gonna be enough.

09:21I can't imagine how CFOs wouldn't want to automate their processes,

09:25whether it's around liquidity planning and risk management,

09:28cash for caching, there's just so much data coming accompanies these days.

09:33Yeah, maybe I can kind of remark on that.

09:36I think data is a key word in that.

09:38There's a lot of buzz right now about ai aj NaI.

09:41It starts with data, right?

09:42So any AI or ML strategies starts with data strategy.

09:47I think that's a key thing that we're working with CFOs at the moment is understanding

09:51the data landscape and not just referring to historical trends,

09:55are looking at current bank exposures,

09:57but actually leveraging multivariable sophisticated models to say,

10:01where's my data come from or where my ARMA p

10:04activities whereby was like CapEx to the next,

10:07next to reporters out and really nearing that data

10:09across different market indicators as well, right?

10:11And doing a more sophisticated liquidity scenario planning to ensure that a CFO,

10:16that he or she has again,

10:17the right cash out with patient in the right market.

10:20With that right level of risk and cost

10:22Um, any, any ten K or ten q,

10:24you will either be the liquidity and capital resource section

10:27that's talking about overall liquidity within the organization.

10:29But a lot of the challenge sometimes is the disbursement that liquidity across the world.

10:34It'd be a good working with a lot of

10:35multinational corporates or corporates that are growing very,

10:38very quickly and they're expanding into new market and new region.

10:41There's various tax restrictions,

10:44jurisdiction requirements, and make sure how cache gets into an organism,

10:47into a country or it gets me patriot out of the country.

10:50That planning is critical, right?

10:52Making sure you have holistic data across your different markets.

10:55ERP data, in-country understanding your payables,

10:58you're syllable exposures, and then having

11:01a strategy to ensure that liquidity is in the right account at the right time.

11:05I would add that risk metric.

11:07At Joe and Greg, you're absolutely right The To your point,

11:11Jill, about the way the speed at which technology is changing.

11:14It means that you need to be ready for those technology changes as they occur.

11:19Often what we see is that organizations have a technology transformation they have to go

11:24through enabled even to get to a point where they can

11:26even utilize technology like artificial intelligence.

11:29So they have to actually first structure their information structure,

11:32their organization in a way that allows them to adopt it.

11:35So I guess one of the things from a strategic perspective CFOs

11:38need to be thinking about is how do I organize my my,

11:41my personnel and my datasets so that I can take advantage of the next,

11:45a new technology that's going to really revolutionize the space, right?

11:49Exactly. I think that's part of the challenge,

11:51whether you're talking about AI from a product and revenue perspective.

11:53If you're talking about from a risk management perspective,

11:56everybody wants these products to go-to-market yesterday.

11:58And there are integration challenges or cybersecurity challenges.

12:02Imagine you work with a lot of

12:04financial services institutions and we will heavily regulated.

12:06So it's not something where you can step your finger and add to your story.

12:10I mean, there are technical security,

12:13a number of challenges that exist.

12:16Yeah, I'm think a lot of firms like a Karima and ICD

12:20offer the ability to take advantage of

12:23those technologies without having to change a lot of your internal processes.

12:26So as we are able to implement them,

12:28we already have the security apparatus in place to

12:32make sure that your data is secure when you're processing through our platform.

12:36But then we can implement and help you take advantage of artificial intelligence and

12:40other technologies that'll make you both more efficient

12:43and give you better insights into your interior data.

12:46Yeah, Instagram, when you are working with clients to overcome

12:50these challenges for the integration process or even to launch new processes.

12:54What are some of the common challenges that you hear about

12:56and how are you helping them to execute on this?

12:59Yeah, a lot as far as understanding their data, right?

13:02So I think a lot of legacy approaches,

13:05and you're talking about AI and this point, right?

13:06How we're, how we're leveraging this,

13:07these datasets eat large datasets that drug more insights

13:11and analytics that they otherwise wouldn't know to look for a lot of it.

13:15Sometimes it is for the CFO to really understand the data first, right?

13:19Not to have traditional bottom-up approach and submission of say,

13:23currency data or forecast data across the organization.

13:26But as we're moving forward now with all these great technologies,

13:29all of this horsepower that AI is bringing,

13:31It's really allowing CFOs to have predictive models

13:35that they can be validated by the various different,

13:40different CFOs and controls across the organizations that to

13:43validate these future liquidity requirements and currency exposures.

13:47So part of that first is,

13:48do I understand my, my data of all in these regions, right?

13:51And that's a lot of work could we do with sort of scrubbing the data and making

13:54sure that there's a historical trend that we can build off and improve.

13:57Our CFOs. Competence is king.

14:00If you don't understand the data initially and you don't have that kind of comfort.

14:04It's hard to then trust recommendations that come out of these models going forward.

14:09Yeah. I would also argue to that implementing AI,

14:12where they're looking at the CFO function, cybersecurity function,

14:15it seems to be unlocking a lot of the silos because you need to able to

14:18have an instant bird's eye view of what's happening across the organization.

14:23Zachary, finding that it's helping to unlock

14:26silos as you need to have a more complete view of what's happening in real-time.

14:29Yeah, absolutely. I think one of the areas that

14:32we've seen a lot of advantage with AI and our,

14:34and our organization is in being able to aggregate data from those different silos and

14:39bring it to a normalized place where you can compare

14:41datasets across the different functions.

14:44Modeling something like a bank deposit is very

14:47different from modeling a fund and its underlying investments.

14:49And so being able to bring that data together.

14:52Unfortunately, not all of the organizations that you might

14:55interact with out there in the financial sector are moving at the same pace.

14:59And so often you'll get unstructured data

15:02being sent to you by your investment manager or by your custodian.

15:06While you might get an API from

15:08your treasury workstation or maybe your commercial banks that you work with.

15:11And so the varying levels that

15:13the organizations have to deal with within that technology stack,

15:16but also within the frequency of the data.

15:19The granularity of that data that's being provided is immense.

15:22It does create a huge challenge for

15:24organizations to try to bring that data together and see

15:27across all of those to understand what my total exposure is to SVB,

15:31your Credit Suisse, or the next challenging event that occurs in the future?

15:37Yeah, Greg, it's not only just internal operations.

15:39You have to think about your supply chain,

15:40you have to think about other vendors that you work with,

15:42counter-parties if you're in financial services.

15:44So it's not just something they think about

15:46interleave all these different layers, if you will.

15:49Yeah, that's correct. I think historically that

15:52was more of a foundation is understanding that kinda kinda probably risks first,

15:58your clients as example,

15:59you had to create a basic level was a bank agnostic,

16:03electronic bank system, right?

16:05So we plumbed into thousands of banks around the world.

16:08So you're absolutely right having that kind of real-time competence and comfort.

16:11So are our clients knew that day what their exposure wasn't Silicon Valley Bank,

16:15in addition to every other bank that they that they

16:17bank we got that afternoon. So you're right.

16:19First having the real-time access to words like counterparty risk.

16:24That's the foundation, right?

16:25So you can have a prudent counterparty risk management program as a foundation.

16:29But then moving into the warm capital size as you, as you said, right?

16:33Understanding why suppliers, that's where AI is very interesting.

16:36Is there certain suppliers that are more delinquent on their payment terms?

16:40Or if I have 45 day payment term that I'm seeing a certain behavior.

16:43But how can I model that into my broader strategy around liquidity?

16:46And then how do I maybe deploy certain resources like

16:48a supply chain finance program or other kind

16:51of word capital tools that can help my suppliers.

16:54How to liquidity needs and their payables back to me as a buyer.

16:58So there's a lot of things that you're saying.

17:00It's kind of getting into the details and that's what's so interesting on this data

17:03is that it's so vast that format is it being normalized.

17:06We're getting a lot of that on the bank formats,

17:08but also all the major ERPs out there in the world

17:11to make that date and more relatable to business users.

17:15CFOs and their teams are not necessarily data scientists,

17:18but they need absorb that data in a way that is understandable,

17:21that is a transplant from a business perspective and then drive decisions from that.

17:26And oftentimes these are decisions that come

17:29from the information that otherwise wouldn't be exploited.

17:34It's one thing that you run a report and looking at it,

17:36certain datasets and other things run analytics on top of that and expose anomalies,

17:40risks, trends that otherwise would be hidden.

17:43And I think that's what's so interesting that with

17:45these detailed models that resorting to pioneer to

17:48really help CFOs accelerate

17:51their liquidity performance more than they have the best, right?

17:54For sure. Oh, and by the way, you have to present this to the board as well.

17:56Anyway. It's digestible.

17:59Alright, gentlemen, appreciate the insight.

18:01Thanks for joining us on trade talks.

18:02I'm Joe Malin, Torino, global market.

18:04You put her at net stack?