Sliding company profits in Africa’s largest economy has given way for innovative methods of slashing costs of capital and boosting labour productivity. For commercial banks, better process automation is the new catch.
Banks in the Nigerian financial system are increasingly ‘rightsizing’ staff strength, amid other strategies, to cut costs and shore up ailing profit. The need to find a new way to navigate through economic headwinds has become ever more pertinent.
Stemming from the above, bank treasury operations are doing everything in their power to optimise efficiency. To optimise efficiency, process automation- which helps maintain very high standard of processing that minimises errors and settlement delays, is indispensable.
Speaking at the maiden seminar of the Treasury Support Workgroup, organised by Financial Market Dealers Association (FMDA), held Thursday, industry experts unanimously fingered treasury process automation as the low hanging fruit that can increase profitability and efficiency in the banking sector.
“With integrated and automated treasury operations, the bank can price deals much more efficiently with multi-curve simulations and process transactions faster than before,” said Chika Sanni, Head of cash management operations, Citibank Nig. Ltd.
“We need to interact more with the IT experts to develop new technology that can drive down cost of capital as well as satisfy customers,” said Sanni.
Corporate treasury automation involves the deployment of ICT-enablement for specific treasury functions such as cash, liquidity, debt, transaction, deal, accounts, risks, as well as ICT security and control managements.
Significant income lines flow from the treasury, bank financial statements show. However, the treasury automation remains plagued with challenges that threaten to crimp process efficiency.
To curtail these challenges, Dipo Odeyemi, senior vice president, market operations and technology, FMDQ OTC securities exchange, shared some insights.
“Identify and document risk areas in your treasury operations and discuss same with stakeholders that will assist to reduce the risks,” said Odeyemi.
“Engage your technology and process improvement team (preferably staff with bias for application development) and discuss your current mode of operations with them with the aim to automate critical processes,” he added.
He also suggested the banking application user manual be studied with respect to all the functions used on the system to see what other functions are useful to make work faster.
In conclusion, he said getting assistance on the use of Microsoft Excel macros to automate routine tasks on Excel and identifying areas to capture the same data twice, to eliminate data duplication using a central data repository; will go a long way.
“We should appreciate improvements in treasury processes. And automation as a tool for efficiency should be embraced, because it helps to get a lot done in a short while and with minimal cost,” Odeyemi said.
The risk in financial stocks due to rising non-performing loans and foreign exchange uncertainty can be attributed for the bearish run for bank stocks in the last few days.
Odeyemi says reviewing the treasury operations process flow obtainable in most banks today to reflect more automation will trickle down to the profitability of bank stocks and heighten investor confidence.
“One thing I have deduced from the success of some banks is their automation drive. Superior automation process impacts the bottom line of banks, leading to more profit and boosting investor confidence in buying their stocks.”
In 2015, the World Economic Forum (WEF), in its Global Competitiveness Report (for 2014-2015), ranked the Nigerian financial market at 67th spot of 144 countries appraised globally. One of the best rankings Nigeria received.
However, despite this modest accomplishment, David Adepoju, FMDA President says there is still a lot more to be achieved.
“The main emphasis is on technological innovation to drive the market. This is an area that a lot needs to be done, if we remember the system failure that paralysed the market in April, 2015,” said Adepoju.
Hitherto to the adoption of ICT applications in the processing and automation of treasury-related transactions in the financial markets, processing of most these transactions were manually conducted, thereby delaying and elongating the transaction conclusion periods, creating inadequate and unreliable data reporting systems, which leads to fraud, poor data reconciliation issues, etc.
In order to avert or eliminate these downsides of the financial market, the Central Bank of Nigeria (CBN) introduced the Government Securities System (GSS) on the one hand and Bankos application systems, on the other, to enhance the efficiency and effectiveness of the Nigerian financial market.
The pitfalls of the GSS saw it give way to the Enterprise Resource Planning (ERP), Real Time Gross Settlement System (RTGS) and Temenos24 (T24).
The challenges of T24 also saw it phase out for a new RTGS with the Scripless Securities Settlement System (S4) as a component.
So far, the introduction of S4/RTGS has achieved the following: increase of security around settlement processing, reduction of associated risks, promotion of efficiency in terms of speed, cost and robustness, achievement of DvP, transparency of operations, data integrity, and ensuring efficient and effective liquidity management.
