Bank Connectivity: The Glasses for Effective Cash & FX Risk Management


If you can’t see it, you can’t manage it. In today’s digital world it is almost hard to imagine that visibility into bank account balances and activity could be anything but simple. Unfortunately, establishing visibility into bank account balances and activity across domestic banks and/or global banks is still excruciating. As impossible as it may seem, treasury professionals must still negotiate and coordinate directly with their banks to transmit required electronic bank account data. And, they pay a healthy fee for it. Why? Because they need the data. Timely and accurate information relative to cash balances and movements are critical to effective cash flow forecasting. Without a complete and accurate forecast, effective cash deployment and the ability to manage foreign currency risk is impacted.

Data visibility and the relative accuracy of cash forecast inputs (data) determine the quality of a cash flow forecast. Direct bank connectivity ensures the quality of a critical input of a cash flow forecast, it also ensures the timeliness of the data as well. Decisions relative to cash deployment need to be made every day. Do we need to borrow, if so how much, from what source? Do I need to invest or rebalance the short term investments portfolio? Do I need to buy or sell any currencies? Inaccurate cash flow forecasts impact the quality of these decisions and many more relative to cash deployment. Untimely and inaccurate information impact the quality of decisions relative to cash management. It impacts the bottom line. Bank connectivity can eliminate two inherent barriers to an effective cash flow forecast: untimely bank account information and inaccurate bank account information.

Companies with global currency exposures feel the pain the most. Lack of visibility into bank account information diminishes a company’s ability to measure and manage foreign currency risk exposures.  Decisions need to made what currencies and/or derivatives need to bought and sold, and when, to effectively manage currency risk exposures. Ineffective currency exposure management impacts a company’s balance sheet from currency exposures relative to transaction and translation risk. Furthermore, companies receiving information from multiple banks or indirectly from colleagues spend time manually gathering information each day just to create a view of cash that allows them to make decisions relative to cash deployment. This time, which can take hours can certainly be better spent on value add activities. By automating bank connectivity team members no longer need to devote time to these mundane tasks.

Bank connectivity eliminates meaning inherent barriers to effective cash flow forecasting, effective FX exposure management, and removes mundane tasks allowing more treasury time for value add activities. If you your company does not have 20/20 vision relative to your bank accounts it may just be time for a trip to the eye doctor, the right TMS provider for your company.

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