For most of the past decade, banks have been understandably preoccupied with catching up and slimming down—catching up in creating sleek customer front ends to compete with peers, fintechs, and other rivals and streamlining to improve the customer experience and relieve pressures from margin erosion.What does cognitive learning mean that survival mindset guided where and how banks channeled their digital investments. But it also obscured a significant opportunity—the ability to use digital tools and capabilities to unlock value within the treasury function.What does cognitive learning mean

They also have increasing responsibility for steering and execution activities and a heavier slate of profit-and-loss-related risks to manage.What does cognitive learning mean unfortunately, however, treasury IT, systems, data, processes, analytics, and digital tooling have often not received the level of investment needed to allow treasurers to excel in their broadened mandates.What does cognitive learning mean

A BCG survey of 44 banks revealed that most treasury functions have a relatively low level of digital maturity. Our analyses found that only 11% of bank treasuries make widespread use of advanced digital technologies and use cases, while about 70% have yet to embrace digitization in any meaningful way.What does cognitive learning mean while treasuries may have installed a digital officer, few officers have the authority, budget, and staff to enact a comprehensive digital strategy.What does cognitive learning mean

Similar insights can also help treasurers understand when they need to increase their liquidity reserves beyond historical peaks to reduce risk.What does cognitive learning mean in addition, treasuries can use improved forecasting capabilities to anticipate downstream funding demands from new business—a capability that would overcome a long-standing pain point between treasuries and business units and help optimize the overall funding strategy.What does cognitive learning mean

• decision support. Treasuries can use a variety of proven decision-support systems to determine the most effective hedges, purchase the best liquid assets, and pledge the most useful collateral.What does cognitive learning mean liquidity buffer “switch tools” can help treasury cios optimize the treasury portfolio for risk, return, and resource consumption within regulatory and accounting guidelines—an important capability since those portfolios can represent roughly 20% of a bank’s total assets.What does cognitive learning mean tools that use optical character recognition and rules-based expert systems can allow treasuries to scan documentation and quickly determine the optimal (cheapest to deliver) collateral to post.What does cognitive learning mean these and related decision-support tools, the most advanced of which use ML engines, provide granular and real-time insights that treasurers can use to eke out additional basis points on their repo books and collateral positions.What does cognitive learning mean

• cycle times and consistency. Greater automation and process integration would allow treasuries to improve coordination across stakeholders.What does cognitive learning mean RPA can help automate repetitive manual processes, thus speeding response times, lowering error rates, and freeing treasury personnel to focus on strategic, high-value activities.What does cognitive learning mean as a “bridge” technology, RPA can also help treasuries overcome legacy IT constraints until the bank is ready to fully automate its core processes.What does cognitive learning mean smart workflow tools can help coordinate and simplify process and approval steps, especially in tasks involving multiple stakeholders.

With automated processes supporting many routine tasks, treasury personnel will be able to focus on important programs that require specialized expertise, advising senior leaders across the bank on business and financial risk and becoming a creative sparring partner in helping them to protect and advance the bank’s interests.What does cognitive learning mean that expertise can also be directed to anticipating and planning for disruptive changes. Right now, for instance, most central banks do not have the digital infrastructure in place to move to a prorated intraday interest schedule.What does cognitive learning mean but we believe it is only a matter of time before those infrastructures evolve and a new market for intraday liquidity products will be created.What does cognitive learning mean that shift will turn traditional market dynamics upside down, requiring treasuries to extend the same rigor to intraday liquidity management that they apply to short-term liquidity management—and be able to complete transactions within minutes, not hours or days.What does cognitive learning mean

Meeting these demands will require treasurers to embrace new and agile ways of working, changes that include collaborating in small, cross-disciplinary teams on a flexible and iterative project basis, versus the more static, waterfall-based approaches and functionally specific teams that many treasurers employ today.What does cognitive learning mean but treasuries might also need to seek external collaboration with fintechs and others to help them access niche capabilities and accelerate development.What does cognitive learning mean

2. Transform and evolve the operating model. The second action bank treasuries can take to transition to treasury 4.0 is to ensure that, along with acquiring ML capabilities, they plan how to use the insights they generate.What does cognitive learning mean adopting sophisticated new technologies requires anticipating the methodology, people, and process changes needed to apply them and the ripple effects those changes will have.What does cognitive learning mean to increase the odds of success, treasury teams should consider doing the following:

• manage the increased risk that comes with new models. A key insight on the path to using AI is to recognize that there can be tremendous value in using the technology to create challenger models that bring deeper risk management insights and uncover previously hidden correlations with high predictive power.What does cognitive learning mean this can help banks identify important payments and lending patterns, and then manage cash flow accordingly. Yet, new technologies will naturally raise important questions.What does cognitive learning mean among the questions treasurers might consider are, “do I trust this machine?” “have we thought through relevant compliance and risk oversight issues?” “how do we apply the results within the context of our current methodology?”

what does cognitive learning mean

In short: understanding and managing model risk will need to be a top priority for AI to be successful in any context. Because AI, and other advanced technologies represent a departure from traditional static, rules-based systems, training, and ongoing communication are crucial.What does cognitive learning mean treasury teams must engage early on with key stakeholders such as IT, the second line of defense, internal and external audit, as well as with regulators to explain how models using these technologies work and provide enough time for these parties to develop trust and confidence in the resulting outputs.What does cognitive learning mean

• develop new skills and talent profiles. Digitization will make some roles and tasks redundant and other skills crucially important. In addition to data scientists, developers, and engineers, treasurers will need “business translators” to help communicate treasury’s digitization program as well as people who have a broader understanding of how the bank works overall.What does cognitive learning mean as automation frees capacity, treasuries will have the opportunity to redeploy valuable subject matter experts and thus accelerate how quickly strategic priorities are identified and deployed.What does cognitive learning mean employing such individuals productively will take careful advance planning.

• align with other transformation efforts. Treasuries will need to determine which digital initiatives should be managed within the treasury function and which can be supported or executed centrally to align treasury’s digital priorities with the bank’s broader digital transformation efforts.What does cognitive learning mean moving to a new treasury operating model is a serious undertaking, but embracing the changes required will help treasury squeeze the most value from its digital investments and generate the most value for the bank in return.What does cognitive learning mean

As fintechs, bigtech, and an expanding financial services ecosystem threaten to disrupt traditional banking business models, incumbent banks need to become more efficient and strategically adroit.What does cognitive learning mean the same is true for bank treasuries. Digital tools and capabilities give treasurers a powerful arsenal with which to execute their role. Treasuries that go digital will generate significant competitive and financial advantage for years to come, allowing their banks to become far more resilient and successful in the face of change.What does cognitive learning mean