Operational Challenges in Finance

Operational Challenges in Finance

August 18, 2020


The world is changing

In finance, the ground under your feet is always changing and the dangers of standing still can often be catastrophic. We are in the midst of one of the biggest shifts in financial architecture of this century which is driven predominantly by the application of exponential technologies, such as AI, automation, blockchain technology, and the internet of things (IoT).

This changing landscape was overtly apparent when we looked into the challenges of setting up Pactum’s new receivables financing platform which endeavours to embrace and incorporate new age operational finance technology to maximise results, minimise the risk of errors or fraud and provide complete transparency for both our customers and clients.

To automate or be out of date

Exponential technology has sparked the next wave of enterprising business inside and outside of finance creating many opportunities and challenges for all involved parties. With our new receivables finance programs, it quickly became obvious that automation was not only convenient but necessary with the high volumes of data, cross-system integrations requirements, and tight timelines.

The challenge of building processes and bringing large volumes of data together from multiple third-party systems to be efficiently filtered, processed, criteria checked and to meet the risk management framework is intimidating and can only be achieved through high-level processes that deliver synergy and automation between all parties and systems. We realised quickly that working with business partners and understanding their needs, constraints and strengths is key to providing a service that can unlock the potential of a client’s supply chain while at the same time not infringing on their day to day operational procedures. We endeavour to understand the data flow and the extraction process required for concise and complete data which will allow us to create unique identifiers so that the team can pull all the data platforms together, assimilate it and process it quickly and efficiently.

Completing the equivalent work manually, a team, depending on size and competence level, may take weeks or even months but it is important to remember that although automation may help with regards to dealing with large data volumes the take away should always be to understand the clients workflow and to break that down into its relevant component parts when it comes to creating an efficient operational framework. As the adage goes “You can’t manage what you can’t measure”.

The importance of not being idle

The groundwork to creating any high-level system or process is intensive and it is easy to think that once it is set up and the work is done. It’s money in the bank, right? Wrong. A chain is only as strong as its weakest link and it is important to remember that even though the day to day running may be smooth sailing it is the days where things are not going according to plan that define us and our ability to adapt and overcome and to understand if, to quote our introductory paragraph, the ground is moving under our feet.

The best way to do this, we have found, is to focus on key metrics. When we are dealing with large volumes of data it can be extremely tempting to incorporate operational procedures that pull in huge amounts of statistics and recognisable patterns and to be sucked into what we call data mining. 

“You are better to do one thing well than ten things badly.”

Recognising where the real weaknesses are in a process and pulling out leading indicators that give us a head start to any potential issues that may arise in handling receivables can make the difference between sinking and swimming in a sea full of numbers. Our operational processes at Pactum are driven by keeping it lean and simple which is built on the premise that we understand not only our own but also our clients’ processes and workflows and we focus on the metrics which help us identify when things may need more attention and try to regularly review them as well as gain better perspective and broaden our horizon. It is not uncommon to replace, change or incorporate new operational procedures as every day is a school day and having the ability to believe that you can be better than yesterday is fundamental to building a lasting and agile operational framework.

Keep it simple

A good indication of intelligence, in our humble opinion, is someone that can explain something inherently complex in a simple manner so that almost anyone, regardless of their academic background or experience can understand and follow the conversation. Building intelligent solutions, i.e. operational frameworks which are able to handle large and complex data and to break them down into digestible and manageable pieces is crucial, so that each potential danger is covered and each responsible person in the hierarchy and their support team understand the tasks they have to complete and have the information and tools necessary to do it well.

When it comes to running an efficient operations department the aim of the game should always be to keep the final output simple and understandable regardless of the complexity of the processes that go into the workflow to provide these outputs. In this context, technology allows us to make a significant difference at Pactum. It enables us to reduce complexity, gain time, add our expertise and, through automation, create an offering that not only produces an excellent financial product, but one which is transparent, free from error and efficient to manage for our clients.

Pactum’s primary goal is to offer its clients high-quality financial solutions covering all dimensions.

Text written by: Derek Palmer, Senior Operations Manager, Pactum AG