Experts Weigh in on the Digital Transformation of Treasury: Part Two

  • By Brooke Ballenger
  • Published: 8/12/2021

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The coronavirus pandemic accelerated the momentum toward a digital-first strategy as companies look to stay competitive and relevant in the current environment. But what exactly does that mean? Seeking answers, AFP recently hosted a webinar, “Digitalization or Transformation: What's the Difference?,” where financial professionals from around the world discussed how they are handling the transformation and what it has meant for their organization.

In part two of a series of articles based on the discussion, we bring you the perspective and experience of Nitin Jain, head of Treasury and Capital Markets at Agrocorp International Pte Ltd.

Describe where your company started in its digital transformation.

Jain: We are in a space of physical commodity trading, meaning we buy our agricultural and soft commodities from farmers in Canada, the U.S. and Australia. It is a classic and traditional commodity trading business, and probably one of the oldest businesses, going back centuries.

Our company implemented a blockchain DLT platform that includes farmers, our end buyers, bankers, insurers, shipping company and ourselves into one single distributor that shares all information across the processes. This platform leads to higher transparency, digitalization of a lot of our processes, and the ability to share information digitally between the various participants and our financing partners. We began this implementation about three years ago, and we are still in the process of moving most of our supply chain digitally across the globe.

With this digitalization, we have been able to eliminate most of the paper-based processes. When we have a reliable blockchain wherein all the participants are part of the same group, information is trusted, and we have been able to do about $3.5-$4 billion of physical movement of commodities through pilots with various financial institutions.

Has this initial journey been a success, and what key lessons have you learned?

Jain: One of the big problems we faced was that people are reluctant to change. Unlike some of the processes that are more internal to an organization, our process change involved external counterparties who were not even on the same side of the business. The thought process was, “If somebody wins, somebody has to lose.”

However, we began to engage in discussions with the various people who are involved. We spoke to counterparties on the benefits that would come through automation, digitization and blockchain, as well as what was in it for them.

Some of the benefits we saw after implementation were: saving on operating costs by reducing trade processing time by up to 90%, reduced cost of financing by 15-25%, reduced working capital cycle, enhanced digitization and optimization of workflow, and much more.

What advice would you give other corporate treasury departments?

Jain: While the treasury space is wide, organizations should look at the pain areas or various approaches in different industries. Some processes could be different in organizations that focus more on the product side. In our case, the problem was clearly defined by top management. Our focus was bringing efficiency and digitalization in the industry of commodity trading, whereas the processes for other companies could be around payments, automation, bank connectivity or integration.

My advice to companies is to align your vison across the organization. Then, start small and build a test case that you can scale up.

When did you start using block chain? Are you experiencing any issues versus the advantages?

Jain: We started our journey back in 2018. One initial issue we faced with blockchain was getting banks to accept digital contracts and shipping documents. We had to solve those problems with each bank separately.

Now, we are seeing regulators such as Monetary Authority of Singapore move to digital contracts, as well as International Chamber of Commerce coming up with acceptance of digital Bill of Lading. We are seeing stakeholders stepping up, and a global acceptance of digital supply chain contracts and documents flowing through smoothly. The initial issues had more to do with the legacy and the way these processes were set up, but regulators are now making those changes.

For part one of this article series, click here. Missed the webinar? Watch the full recording here.

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