Central & Eastern Europe’s Digital Treasury Revolution
By Eleanor Hill, Editor
Treasury organisations and finance shared service centres in Central & Eastern Europe are changing - robots are taking over many of the manual tasks once performed by humans. At the same time, Big Data and predictive analytics are becoming more commonplace. But is treasury at risk of being sidelined in the rush to digitise corporate business models?
Digital start-ups are thriving in Central & Eastern Europe (CEE). To date, the region has produced at least 10 so-called ‘unicorns’ – privately held start-up companies with a value of over $1bn. One of the main reasons cited for this success is the abundance of local talent. This is precisely why CEE is a favoured spot for finance shared service centres (SSCs), too.
Among the major multinationals that leverage the region for their finance SSCs is Corning Incorporated, a world-leading innovator in materials science. Located in Budapest, Corning Hungary Kft runs the European financial-processing operations of the parent company, as well as providing accounting services and managing liquidity, credit and collections processes.
Having local talent is important for Robert Vida, Finance Manager, EMEA Treasury Operations, Corning. “In Budapest, Hungary, we are able to employ well-educated staff who speak multiple business languages. The same goes for other countries in the CEE region, such as the Czech Republic or Poland, and given the high freedom of movement in the region, we can pull in talent from neighbouring locations if we wish – that’s a great benefit when seeking top treasury talent.”
Vida believes the CEE has an additional edge over other outsourcing hotspots thanks to its time zone: “We’re at the heart of the globe – that leads to great communication opportunities with Asia, the rest of Europe and the Americas.” And, importantly, he adds that: “compared with other geographies, CEE remains cost-effective from a human resources perspective”.
Another multinational with operations in Hungary is Howmet Aerospace Inc. The company provides jet engine components, fastening systems and titanium structural parts to the aerospace industry and forged aluminium wheels to the commercial transport industry. The company was recently created when Arconic Inc. split into two entities: Arconic Corp. and Howmet.
Zoltán Szigethy, EMEA Treasury Manager, Howmet, believes Hungary is an excellent location for the finance team, among the countries where the company is present in Europe. “Our offices stand next to our manufacturing plant, and the infrastructure is excellent. This last point is very important from a production point of view because logistics play a huge role in our business – more than 90% of our revenues from the Hungary business come from exports. So, we have to be able to move the goods efficiently,” he says.
Let’s get digital
The digital infrastructure in the country, and indeed the entire CEE region, is also improving. Szigethy continues: “With the Covid-19 crisis, we have all rapidly adapted to working from home. Communication tools like Skype have made it easy to stay in touch with team members, we have remote access to our systems, and the digital infrastructure in general has held up well in this challenging environment.”
With this increasingly robust digital infrastructure, business models in the region are shifting – and so are the demands on treasury and finance SSCs. Radek Havlin, TTS Sales Head for CE5, Citi, explains: “With the advent of the Internet of Things, Big Data, artificial intelligence [AI], and accessible cloud services, business models are shifting. E-commerce is on the rise and technology platforms are enabling a direct-to-consumer approach.”
Of course, this trend towards digital business has been accelerated by the Covid-19 crisis. “People are not going to shops, they are buying goods and services online. Governments are encouraging digital payments as a way to reduce cash and limit the spread of the coronavirus. With the temporary suspension of normal life, many B2B companies are also looking to B2C sales to act as new revenue streams,” adds Havlin.
Vida agrees on the move towards B2C sales, and says there is also a growing reseller market online. For treasury, the interesting trend emerging from this business model change, he believes, “is the shift towards a larger volume of lower-value payments. This will have a significant impact from a cash management perspective, and treasurers will need the right technology to help them adjust to the new normal”.
Here come the robots
Havlin echoes this, saying: “These new business models drive transaction volume up, while reducing transaction value. So, treasurers need to find smarter ways to work, especially when it comes to cash application. Robotics and machine learning are two tools that can be of particular use here, enabling treasurers to automate reconciliations and for computers to ‘learn’ from payer behaviours to help reduce the number of manual exceptions, for example.”
Cash application is far from the only treasury activity that can benefit from robotic process automation (RPA), however. Szigethy identifies “monitoring of payments and financial reporting” as two potential use cases, for example. And Vida sees RPA as possibly being a useful tool for “extracting data around investments, enabling more time to be spent on the decision-making, rather than the data gathering itself”.