Blockchain is increasingly garnering headlines and attention for its use cases beyond cryptocurrencies. For instance, the ability to transfer data and various assets can help firms keep track of, and improve, operations.
It’s no secret that transactions done between businesses, or across borders, can be mired in manual tasks. One area where elimination of such processes can be of benefit is treasury management — specifically, reconciliation of transactions and liquidity management.
Havell Rodrigues, CEO of Adjoint, a firm that offers blockchain solutions for treasury through smart contracts, noted in an interview with PYMNTS that the overall economy is moving toward a state of 24/7, always-on-demand functionality. Yet, corporate finance especially is “operating, more or less, the same [way] it has for 20 years prior. Much of the operations are limited by the time zone/region and cutoff times for various markets,” he said.
Beyond time windows, all too often, finance functions are still tied to PDFs, Excel files and email. However, with technology in place, Rodrigues explained, treasury can be transformed to become the “24/7 investment arm, to support financial and broader goals for global companies.”
Within that ambition, he said, “the only way to create real-time cash management or trading is to allow all parties to see the same pool of validated data.”
Distributed ledger technology (DLT), in essence, is a distributed database that securely stores and organizes data. DLT enables real-time asset ownership, like cash, and can provide that access to shared data, such as files and account balances.
Real-Time Window To Treasury Management
Rodrigues said the firm’s own blockchain offering, Adjoint Smart Treasury, is implemented today as an overlay, pushing and pulling data to connected enterprise and treasury management systems, and creating a real-time window to treasury management. Furthermore, he noted that workflow might be streamlined across some use cases, and can be automated — such as with generating a SWIFT international transfer, calculating accrued interest, generating invoices for a loan payment, and submitting to the systems of record to ensure accuracy and reconciled data.
“Arm’s length transactions for intercompany loans, for example, can be proved by time stamping the [foreign exchange (FX)] rate from a trusted third party, and then via smart contracts auto-settling at maturity,” he said.
In reference to supply chain management, he maintained that current systems are “disjointed, and often [involve] substantial delays. Real-time access to tracking data through distributed ledger technology is critical for time-sensitive materials, such as pharmaceuticals or [foods]. Blockchains provide that vital, real-time data, and the important accompanying documentation that can be associated with the goods.”
Across treasury and supply chain efforts, Rodrigues noted, blockchain can help improve risk management through three major points: data redundancy, auditability and smart-contract permissions. Data redundancy, he said, “ensures that there is no single point of failure. If a node or user experiences down time, the network can still effectively run.” The audit trail provides transparency, and smart contracts, tied as they are to permissions, help reduce the risk that cash might “accidentally” be sent to the wrong party.
PYMNTS raised the question about regulatory concerns. Beyond the immutable nature of DLT, he said “privacy can be permissioned for regulators to only view the necessary components, thus, enabling private counterparties to maintain independence.”