Traditionally, banks display nominal exchange rates that last for the whole day and make several efforts to ensure profitability regardless of the currency’s striking variation. In recent years, real-time foreign exchange (FX) came to light with immediate rate calculation, providing banks and investors with concrete indicators to make decisions.
Yet, the best news is that these live FX could be more powerful than ever thanks to the existence of RPA technology.
The importance of real-time FX management
To provide precise and instant FX values, well-managed live FX systems may clear the desks for many finance departments. Although a lot of work needs to be done, the end result is so fruitful that banks always try to get their money’s worth out of real-time FX management.
- Monitor real-time FX rates: Track and keep a 24/7 record of real-time exchange rates in over 100 currencies with dates and times specified for each conversion. In a survey by Euromoney, 66.8% of respondents agreed they would choose automated real-time FX rates to implement as a solution. Cross-border payments could never be more manageable!
- Compare FX fluctuations: Automatically run every 1-2 hours to check and compare current vs. prior exchange rates. Also, the system can provide an hourly/daily alert regarding the daily fluctuation of specific pairs of currency. This helps to save a tremendous amount of human time from looking up and compare the rate jump.
- Upgrade supply network: In the past, local suppliers must pay banks to convert incoming invoices to local currency, hence adding these additional costs to their services. Real-time FX services allow transactions to be done in the local currency instead of foreign ones. A report by Deutsche Bank shows that companies can save 3-5% on invoice payments across multiple currencies, resulting in a better relationship with their clients.
The problematic issues on FX management
- Live FX rates fluctuate uncontrollably: Real-time FX rates are immediate and instant, but don’t forget that they’re constantly changing. Inflations occur in many levels and many times throughout the world; interest rates vary from one country to another; export and import levels continuously alter. This non-stoping scenario of the market sometimes drives bankers off their heads ー and might even drive the live FX management round the twist!
- Exposure management is getting complicated: A company always undertakes a particular risk when making transactions in foreign currencies. If the cash flow is not protected from sudden fluctuations by proper exposure management, the profit margins might end up negative. This requires an automation platform to integrate data from various sources to calculate the exact currency exposures and apply customized rules to solve the problem as quickly as possible.
A closer look into RPA technology – The answer to all problems
There is no doubt that RPA technology serves as the key to success in real-time FX management. The question is, how exactly does RPA technology work?
Firstly, it’s essential to understand the basics of RPA technology. RPA uses “robots” to imitate human activities by applying predefined steps to help employees eliminate repetitive tasks.
Manually, a banker must update the real-time FX rate repetitively many times a day to provide the most exact value. According to a report by RPA Master, it takes an employee an average of 6 minutes per task and 40 minutes per week. Meanwhile, RPA bots only need 40 seconds to complete the job, resulting in a less-than-5-minutes workload per week. If we look at the annual record, the bot only spends 4 hours 10 minutes a year, performing 88% faster than a human with 35 hours to update exchange rates.
Many RPA services, such as the akaBot platform, measure exchange rates in real-time and send live reports to the financial department. Specifically, the Control Room in akaBot Center will send an alert notification to inform the currency rate fluctuations. To respond, treasurers can register tailored hedges to let RPA bot adopt these rules and apply them automatically to minimize FX exposures and financial risk in real-time.
Sources:
The road to real-time treasury
Automated Monitoring and Alerting of Foreign Exchange Rates using RPA
RPA for Currency Exchange Rate Update