‍Background

In this episode of The Good money we interview Ben Watiwat, VP of Finance at Immutable, who talks about the best strategies as a CFO to create and execute a clear treasury management strategy. As well as his thoughts on the use cases of Generative AI and specifically ChatGPT as part of that toolkit.

Emerging commercial opportunities in Web3 technology

Immutable is an Australian scaleup, turning the $200 billion gaming industry on it’s head with their gaming platform allowing for digital asset ownership. 

Ben discusses how we've witnessed an explosion in the evolution, development and not to forget investment into a number of high profile Web3 related products in the past 5 years, spread across: 

• Digital assets. 
• Decentralized finance. 
• Smart contracts. 
• NFTs. 
• Tokens.
• Decentralized autonomous organizations AKA DAOs. 
  

The use cases of Web3 everything from laying a new financial and digital infrastructure to upgrade international payments, settlements and clearing process, to expanding access to financial services to a billion people who are currently unbanked, to things like digital identities, individual data sovereignty and data usage, to closer to home for Immutable tackling property rights and ownership, including that of digital goods.

Tackling cashflow management bottlenecks with stronger treasury management

As a background, Treasury management refers to the administration and monitoring of the financial resources and assets of a company.

It’s a crucial aspect of the finance department and encompasses a variety of duties and responsibilities aimed at maintaining liquidity, minimizing financial risk and increasing the value of the company. 

Ben highlighted how successfully managing a company's cash flows is critical to avoiding financial bottlenecks that could impact your overall performance. Treasury management is the process that enables this effective control of cash flows, especially in the area of ​​liquidity management.

This ensures that a company's working capital is optimized and used in the best possible way to achieve long-term financial goals such as revenue growth and cost reduction.

How does Immutable think about the impact of Counterparty Risk on Treasury Management?

Following the Silicon Valley Bank, Credit Suisse and Republic Bank collapses, the risk of keeping your cash in one bank has risen to the forefront of the minds of CFO's from both small and large companies from around the globe. Which has led to an overnight shift of utilising multiple banks in order to keep cashflow more secure.

Eliminate single point of failures:

What Silicon Valley Bank has taught us is that counterparty risk is the biggest risk in any Treasury organization.

What Silicon Valley Bank has taught us is that counterparty risk is the biggest risk to any Treasury organization and the need to diversify banking providers.

Unfortunately, managing cash across multiple banks is a real challenge. While larger enterprises spend years building treasury management systems to address this, startups and scaleups can struggle with the extra load. 

Now, instead of having one place in which to manage liquidity and burn rate, finance teams need to constantly log into and monitor multiple banks to stay on top of their cash. And then pull reports, parse them, and compile them to analyze the data. 

While multi-bank is definitely the way to go for scaling businesses, it matters how you do so. Without clear visibility or cash management processes in place, it becomes a real challenge to answer key questions around liquidity, burn rate, and cash flow performance. This makes it harder to optimize cash efficiently, forecast future cash flow, and understand your liabilities and risk. As you grow, this challenge only scales with you, with stakeholders demanding this information on a consistent basis.

Ben's Treasury Management playbook

Treasury management plays a crucial role in a company's financial health and success. By implementing effective strategies and processes, it helps improve financial stability, profitability and competitiveness.

The tasks of modern treasury management range from classic liquidity management to avoiding current and future financial risks.

Ben explains that he see’s treasury consisting of three levels:

• Cash: 6 months worth of expenses maintained across 2-3 operating bank accounts with tier- one banks.
• Short-term: Idle cash that is not required for at least 6 months; to be invested in secure, liquid options to extend runway and protect against inflation.‍
• Strategic: Well-capitalised startups (typically for when you’re a Series B+ funded) should seek bespoke investment options to further diversify risk and improve returns on longer term idle cash. Ben in particular recommends FIIG which is his preferred solution for Immutable.

"I'm seeing upwards of 3% savings rates, which for a startupthat has raised money and still has money in the bank, that can give you quite a material level of runway extension for very little work.

Leveraging new technologies such as Generative AI and ChatGPT in the finance team

Ben discusses the need to ensure you stay abreast of the quickly evolving technology space so that you can always utilize the best tools when looking to build out a modern finance stack. Ben goes on to make the point of explaining how imperative it is to continually advance the performance of your team with new tools such as ChatGPT to increase efficiency and accuracy.

"It's still early days in terms of AI and ChatGPT, but I think it's great for generating things lik documents or new processes, which give you a solid leg up in terms of how to get started.

There’s a number of ways ChatGPT will support CFO’s and finance teams, such as:

• Being able to seamlessly onboard customers by analyzing and summarizing hundreds of documents against dozens of different databases to highlight anomalies. 
• Creating AI-powered chatbots that offer unique MI insights for financial controllers and your wider business.
• Automate routine tasks, such as the generation, sending and tracking of invoices to improve efficiency and accuracy.

Conclusion

Treasury management is an indispensable aspect of corporate governance that ensures a company's financial stability, profitability and competitiveness. By effectively managing liquidity, financial risk and assets, treasury management helps startups and more established companies adapt to the changing market conditions and economic challenge, whilst still being able to achieve their long-term goals.

Proactive and efficient treasury management enables companies to mitigate risk, optimize financial performance and seize opportunities. It contributes to better planning, control and decision-making and strengthens relationships with all of your stakeholders and suppliers.

In an ever-changing business world with new technologies and regulatory requirements, it’s imperative that companies have sound treasury management structures, processes and systems in place that enable them to respond to changes quickly and effectively.

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