What role does the accounting function play in maintaining accurate financial records and ensuring compliance with accounting standards and regulations?
Accounting plays a critical role. The accounting and finance teams are the foundation of the organization’s financial output. More likely than not, most individuals already use basic accounting principles, from balancing their checkbooks to managing their household cash flow. Accounting keeps current and historical information, giving users key information and an accurate picture of performance.
Further, accounting consolidates revenue and expense drivers and provides stakeholders with the fundamentals, which is the first step in analyzing any Key Performance and Risk Indicators. Equally important, we focus on Basel III and the development of endgame regulations, translating development into opportunities to enhance resource utilization while optimizing capital usage.
Strict adherence to accounting standards unifies the understanding of a company’s use of resources or the most basic and universal elements to a denominator. Disciplined compliance with basic standards enables a sound budgeting process, informed investment decisions, evaluation of costs and benefits, and application of tax strategies. Most importantly, observance of accounting standards ensures confidence, knowing that maintaining accurate financial records is the critical first step of accounting guiding principles for makers and checkers.
If your company can consent to this, can you share your experiences from one of the projects you were recently involved in?
Accounting processes have evolved significantly over recent decades. The core is to improve the process and create efficient and effective gathering by preparing and auditing of accounting data. For our organization, there are several projects to support these goals as we deploy continuous process improvement as an internal key performance indicator. This includes implementing RPA (Robotic Process Automation) for regulatory call reporting and reconciliation, developing paperless workflows for accounts payables, and outsourcing certain technologies to support accounting-related processes. All these efforts and activities position accounting to leverage technology, reduce repetitive activities, and eliminate errors, which will conform to increased accounting activities from regulatory changes and company growth.
What are some of the challenges and risks associated with foreign exchange rate fluctuations and interest rate movements in your treasury operations?
The heavily anticipated “Fed’s next move” based on inflation-related data continues to push the appreciation of the U.S. dollar against most major currencies. Since CTBC Bank does not engage in the trading of foreign currencies, the impact is minimal and should be similar to most community banks.
FX risk still resides with those customers dealing with foreign currencies, as a strong dollar may weaken overseas demand. Foreign Exchange Forward would be an effective hedging tool for those companies looking to minimize foreign exchange fluctuation and stabilize both balance sheets and income volatility. Among the various causes of FX volatility, the yield curve inversion has caused profit compression in the financial industry. Unlike a decade ago, depositors have a wide array of choices, from treasury bills to broker CDs to online-only financial institutions (Neo Banks), as well as the option to utilize non-financial institutions. With continued uncertainties, banks are careful to lend while focusing on retaining deposits.
Any advice, suggestions, or warnings you would give to professionals in your similar role working in other companies in treasury and accounting functions in terms of dos or don’ts?
We all know that deposits are the key to stable growth and, more specifically, low-cost deposits. In today’s high-interest rate environment, low-cost deposits would mean demand deposits (checking accounts), and only those banks with a high percentage of demand deposits can minimize margin compression.
Taking the necessary time to invest in process improvement to effectively leverage existing resources will pay off. Just like manufacturing, low-cost but highly effective cost-to-serve would “win” given the similarity of products and services. Careful planning of asset growth in anticipation of potential interest rate movement coupled with an appropriate hedging strategy would provide a prudent balance sheet—we call that balance sheet optimization. The proposed rule changes in reporting, ESG, Basel III endgame, and governance will force financial institutions to re-evaluate the overall credit, investment, and risk management approach.
In the rapidly evolving banking sector, could you highlight one specific technological trend that has captured your attention recently?
Numerous technologically advanced platforms support loan origination, servicing, and various automation. Bigger banks with elevated levels of resources can deploy the latest and greatest technology, while traditional community banks should prepare themselves with the option to play in new tech.
One of the most evolved technologies coupled with strategic positioning belongs to Neo banks – a direct bank that operates exclusively online. It is potentially a mid-term threat due to its technologically advanced capabilities to completely replace the functions of traditional branch networks. Neo banks target Generation Z. Then Generation Alpha may pose concerns even for mega banks as the latest generations fully adapt to ever-changing technology and are just now entering the AI era or digital transformation. These developments and cybersecurity are changing the customer experience and causing financial institutions to rethink their mid- to long-term strategies
