Risks and Threats Arising from the Adoption of Digital Technology in Treasury

The importance of Treasury management, within a commercial bank has increased significantly over the last couple of years. After the 2008 financial crisis the role and responsibility of a Treasury department has changed in terms of scope and strategic importance, evolving from a transactional cash manager to the guardian of the balance sheet. In order to meet this broader strategic mandate, Treasurers must therefore consider ways to become more effective and streamlined, while reducing time-consuming operational activities. Digitalisation can address many of the traditional Treasury challenges and provide a number of commercial and competitive benefits as well. However, to successfully adopt digital technologies and related digital innovations, Treasury requires a well-defined digital transformation plan. The Smart Digital Treasury Model (SDTM) was developed to provide a comprehensive roadmap to assist a Treasury’s digital transition towards a next generation ‘smart’ Treasury department. This paper explores a key building block of the SDTM, which addresses the risks and threats that can arise from the adoption of new digital technology. The reason for focusing on this aspect is that many of the digital risks have no direct reference points with conventional banking activity or security measures. The result of this research is an approach that articulates Treasury specific digital risks and threats, as well as describes a risk management process that can be deployed as part of the digital transformation. The digital landscape is evolving the whole time; therefore, digital risk management activity in Treasury can’t be seen as a once-off exercise, but needs to evolve in line with market developments.