Abstract
The traditional banking landscape has been disrupted in recent years by various forces including financial regulations, digitalisation, innovation, and competition from financial technology (FinTech) companies. New financial directives such as open banking and technologies of the Fourth Industrial Revolution (4IR) including robotic process automation artificial intelligence, big data analytics and others are transforming the banking industry. These changes are creating an increasingly connected banking ecosystem that leverages advanced technological capabilities to enhance customer experience, deliver efficiencies and drive strategic and commercial actions.
An observation on the digitalisation journey of many banks are that digital adoption is not always uniformly implemented throughout the organisation, meaning it is not fully ingrained into the bank-wide digital DNA. Digitalisation initiatives often focus on external customer interfacing channels with the objective to enhance client experience, reduce operating costs and increase transaction execution speed. Core internal management functions such as Treasury departments do not always receive the same level of digitalisation attention or investments.
A Treasury department forms the nerve centre in most commercial banks. The reason is that Treasury manages vital financial resources and balance sheet risks of a bank - which is a difficult task, even in stable times.
The 2008 financial crisis, but also the more recent Covid-19 pandemic, had a significant impact on the role and responsibility of Treasury in terms of its scope and strategic importance. There are an ever-increasing number of demands from regulators, senior management and shareholders, that the Treasury department must deliver on.
This research project studies the growing importance of Treasury management activities within a commercial bank and evaluates how developments of the 4IR can support this core department going forward. Leveraging next-generation technologies associated with 4IR can play an important part in transitioning to a smart Treasury function. The advantage of a smart management function is that it is better equipped, not just to handle future crises through intelligent and rapid decision-making, but also able to enhance the day-to-day operations in business-as-usual times.
An implication explored in this study is that in order to establish smart Treasury management functions, it is crucial to study inter-alia the capabilities of digital technologies, understand the need for digital awareness and recognise the importance of having a well-defined digitalisation plan in place for Treasury.
Design science research methodology is deployed to design and develop an artefact (i.e. digitalisation plan) that provides a Treasury-specific solution that can help guide a department in its digital adoption
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endeavours. The artefact delivering the digitalisation roadmap solution is entitled a Smart Digital Treasury Model (SDTM). The SDTM comprises of the following buildings blocks: i) assessing the digital maturity of Treasury; ii) how to select the right digital technology; iii) implementing the digital tools in the right way; iv) managing the new risks and threats; and v) establishing digital awareness. The SDTM as well as its distinct building blocks and underlying steps are studied in detail and presented as original research output.
The robustness and applicability of the SDTM artefact is then demonstrated and evaluated by eliciting the feedback of a group of Treasury subject matter experts, through a semi-structured interview process.
The contribution of the PhD study is a theoretically and academically grounded digitalisation solution – in the form of the SDTM artefact - that can guide a Treasury department to transform its activities effectively and thereby transition to a smart management function. The PhD research findings can furthermore serve as reference for future academic studies on digitalisation activities in Treasury. The research output of the PhD study is communicated through five peer reviewed academic articles that expanded the industry and academic knowledge base on how to approach digital adoption in a Treasury.
Keywords: Digitalisation, Smart Treasury department, banking innovation, Fourth Industrial Revolution, Smart Digital Treasury Model, FinTech.