The author of the article says that automating the treasury function in finance cuts costs, reduces operational risks and makes organisations more resilient against cybersecurity attacks. The article examines what family offices can do in this area.

The following article by James Land, director, capital markets, FIS, concerns the need for family office treasury digitalisation in Asia-Pacific, and outlines how family offices can make the switch. (FIS is an IT services and consulting business.) The editorial team is pleased to share this content, and invites responses. Jump into the conversation! The usual editorial disclaimers apply. Email tom.burroughes@wealthbriefing.com

In an age of market volatility, high interest rates, rising operational costs, and persistent cybersecurity threats, family offices face formidable challenges. Today, more than ever, the need for highly automated and seamlessly connected treasury operations is critical.

Digitising and automating the treasury function reduces middle office costs, minimises operational risks, and bolsters cybersecurity. Indeed, operational excellence hinges on end-to-end automation. But why is this so crucial, and how can family offices achieve it?

An outdated approach to cash management
Family offices are an increasingly important part of money centre economies in Asia-Pacific, with Singapore alone now boasting more than 1,100 registered family offices.

However, many of these family offices rely on increasingly outdated systems, including manual processes to reconcile bank accounts and calculate daily cash positions. Due to the effort and costs involved, most only forecast their cash once a week – unless they have mark-to-market exposures requiring daily cash movements. 

Cyber risks, such as phishing attacks, also pose significant dangers to manual systems. Globally, more than a fifth (21 per cent) of family offices in a survey by Dentons said they had suffered a cyber attack in 2023. Manual entry and inefficiencies also increase the likelihood of errors, complicate dual authorisations, and make approval logs more cumbersome.

Transitioning from legacy systems to a digital treasury can be daunting, and is often seen as disruptive and costly. Despite all of this, modernising treasury operations can yield significant returns on investment and interest revenue over time.

What a digital treasury entails
A digital treasury function leverages advanced, scalable solutions for performing traditional tasks such as managing cash more efficiently, but also newer treasury responsibilities, such as cyber-fraud mitigation and systems' security optimisation. Drivers of a digital treasury function includes API integration, real-time connectivity, and cloud access.

Integrating purpose-built workflows with an ecosystem of banking, accounting and investment platforms, eliminates the need for manual data entry and reconciliation, allowing operational staff to shift their focus towards high-value tasks.

So, through automation, a family office can complete the entire treasury management workflow with optimal efficiency to increase revenues, lower costs and remove both operational and cybersecurity risks.

How to modernise and optimise treasury operations
Here are six areas which family offices should consider as they modernise their treasury operations:

1. Automate cash management
With automated tools, family offices can monitor many bank accounts, view transactions, and manage cash balances efficiently. Additionally, integrating invoicing systems with investment and accounting platforms facilitates data-driven decision-making and enhances visibility – resulting in improved cash management and increased interest revenue.

2. Streamline payment processing
Automation helps to transform payment workflows by replacing labour-intensive manual entry with seamless electronic processes. Family offices can efficiently set up recurring payments, batch-process invoices in a wide range of currencies, and use real-time payments platforms for improved visibility of incoming and outgoing payments. Implementing structured processes with embedded approval controls also reduces the risk of errors, fraud, and cyber attacks.

3. Execute hedging transactions in real tine
A unified treasury management solution allows for modelling investments in real time modelling and debt, integration with market data and risk platforms, and access to external investment information. Continuous monitoring of interest rates, exchange rates, equity markets, and credit risks not only cuts decision-making time but also ensures compliance with risk limits and investment strategies.

4. Accurate, timely reporting
Accurate and timely reporting is fundamental for family offices. Modern treasury systems simplify the reporting process by consolidating data from multiple sources, eliminating the need for manual entry and becoming the single source of truth.

5. Efficient accounting
Complex entity structures with diverse tax treatments make accounting tasks cumbersome and expensive for family offices. But a modern treasury solution will model all entities and generate journal entries to feed the accounting system directly, reducing time, expense, and errors.

6. Enhanced IT security
To combat cybersecurity threats, family offices need the latest solutions to improve data security, privacy, and system stability. As cyberattacks become more sophisticated, there’s a growing reliance on technology providers to continually enhance their infrastructure and controls while complying with global information technology standards.

Family offices are playing a critical role in the provision of capital in APAC and across the world. The wealth they bring to the economy can lead to numerous benefits including job opportunities, more venture capital for local companies, and philanthropy for social causes. 

But family offices must keep pace with the wider market in terms of digitalisation and system optimisation. With the steps outlined above, they can achieve operational excellence and achieve it quickly, paving the way for cost reductions, big efficiency gains, more business and revenue growth, and less operational and cybersecurity risk.

About the author
James Land recently joined FIS as a director based in Sydney. Land, who more than 25 year financial services experience, has held executive positions at iPlatforms, Avaloq, Thomson Reuters, Nomura and Westpac. He holds a bachelor of international business majoring in economics and has completed various executive education programmes at the International Faculty of Finance, the Australian Graduate School of Management and the Chicago Graduate School of Business.