Treasurers make their mark on software decisions

From the treasurer’s vantage point, the decision to buy software links together IT teams, business and senior management to decide on company architecture

13 September 2018

Downside protection from interest rates and foreign exchange used to be the core focus of treasury departments, but they have increased their presence at the corporate bargaining table – they too, are profit centres. The demands of corporate treasury have now intensified with the digitisation of reporting tools, forecasting and risk analysis. The department has far outgrown its origins as a silent trading desk, since hedging currency and rates no longer constitute the sole risks to consider.

Previously, corporate treasury departments and trading desks were order takers – money-making desks would tell treasuries to hedge their MTM positions; C-suite officers used to ask for cash flow and liquidity reports. More complex treasury departments had greater responsibilities. Credit rating, tax accounting, banking relationships, and centralisation of risk feature in many treasury roles. Above all else, treasury departments’ main role was to minimise costs and control risk.

Sweeping changes to capital reporting, the trading environment and tax gave way to opportunities for treasury to enhance its role within the business. Suddenly new roles were assigned to treasury teams. In 2009, McKinsey reported that 50% of treasury teams noted an increase in roles, while C-suite respondents turned the spotlight on treasury functions. Actions most likely taken up after the crashes in 2008 include an increase focus on cost reduction; more frequent risk sensitivity analysis and forecasting; tightening cash management; and strengthening the role of finance at the corporate level.



Unsurprisingly, corporate treasury specialists have taken up the role of resident strategic finance advisor. Fast-forward ten years from the global crisis, treasury departments are positioned in leadership roles. The ability of the CFO to perform her role is inextricably linked to treasury functions – the CFO now relies on the department to make decisions.  The trend is clear. Treasury departments now spend on average, more time on strategic activities rather than business as usual. Teams spend 38% of their time on strategy versus 33% on operational tasks, with 92% of UK departments preparing board packs.

Cash is still king

Corporate treasury tools have also evolved. Digitisation, automation, and powerful software help departments with risk management and strategic thinking. Increasing centralisation across business is essential. Ensuring that there is enough cash for operations and to meet payment obligations while also having the ability to interrogate cash flows is still the primary function of treasury.

Around fifteen years ago, Bloomberg terminals connected businesses with their relationship banks. The premise around the software and technology was one-way. Treasury departments could download their cash flow position and make payments, but cash anlaysis was not possible. The software has changed much since. Bloomberg’s Treasury and Risk Management (“TRM”) system is widely used to interface with vendors, banks and customers in real time. An old faithful system, Bloomberg still remains near the top of the software food chain for sophisticated businesses looking to connect with banking counterparts.

Challengers have emerged to cater to treasury departments. While established software and hardware providers are still prevalent, fintechs have joined the competition. Treasury departments wanting to minimise costs can contemplate the shift away from hardware to internet-based delivery of financial risk management tools. Finastra offers a compelling suite of services for treasury departments open to cloud, SaaS, or open-link software. The fintech offers legacy software laden firms the opportunity to leapfrog ahead. One emerging market commercial bank with over $40 billion dollars in AUM noted that “we have been able to retire around six software systems that we were previously using for treasury management,” bringing the bank up to speed with current technology standards.

Corporate treasuries today can opt for traditional or cutting-edge technology. However, the functionality remains the same – optimising cash management.  

Taking calculated risks

Weighing up the financial risks and rewards has long been the speciality of treasury departments. Treasury departments need to be nimbler than ever. While previous generations mastered cash management, treasury teams must look forward to balancing not only cash, but cybersecurity, compliance and regulatory risks.

Cybersecurity and payment fraud are top concerns. Last year, 40% of companies indicated that their treasury department had been victims of fraud. Intimately linked to IT, 51% of companies instituted new IT security or upgraded existing technology. Cyber threats pose a significant risk to business operations and the bottom line, making it a clear priority for treasurers to work with IT departments to seek out appropriate software.

Treasury departments are often targeted by hackers and cyber criminals, since they take and make payments on a regular basis. Some of the most vulnerable to attack are departments with older IT systems which have not been updated, those with weak audit processes, and poor authentication and authorisation verification. Not only are older systems vulnerable, but stalwart professional systems too.

Cash management and strategic advice today form the pillar of corporate treasury functionality. Informing the decision on software purchases, corporate treasury departments, CFOs, and IT departments need to coordinate. Treasury, business and IT teams need to build a greater understanding to maximise functionality in investment management, FX, banking portals, confirmation platforms, and strategic reporting tools.

Purchasing strategic software for treasury functions

Treasurers have a suite of options to choose from. The vast majority of treasury departments use SAP Treasury and Calypso. The latest editions of SAP Treasury includes predictive technology, helping to forecast and manage risk, liquidity and available working capital.  SAP works well with large, complex companies, since it can help corporate treasury teams harness the power of Big Data. Calypso, another industry veteran also works well with complex firms. Calypso can be customised and fixed by local IT teams, enabling treasury teams to make bespoke enhancements. The platform centralises systems and payments, aggregating transactions company-wide, making it easier for treasurers to see the ‘big picture’. Sophisticated conglomerates managing many different products, compliance, regulations and payments typically turn to single-software solutions for treasury.

Deloitte’s study in Global Corporate Treasury Survey also highlighted some interesting trends in software use. The decision to choose external software providers including SAP, Calypso, FIS, Kyriba and others may depend on the size of the company.  For small and large companies, purchases tended to be from out-of-the-box providers. However, a significant number of mid-sized firms created in-house systems and solutions.

Outside of the well-known treasury software providers, in-house solutions elevate corporate treasury departments to the status of banks. In-house banking (“IHB”) models are ramped up treasury teams operating a commercial bank with accounts, payment systems, risk management, funding and FX expertise. In league with IT consultants, software developers like Kyriba and Elire can help very large multinationals manage their subsidiaries and group exposures. Another benefit of an IHB model is speed of process – having immediate access to cash for M&A purposes or payments. IHB clearly offers substantial benefit but also comes with significant investment – only the largest companies can implement a full IHB model.

Maintenance costs and software updates are also part of the decision to invest. An up-to-date treasury management system protects against cyber risks, provides liquidity, cash and risk management. Despite the importance of the corporate treasury, few businesses actually keep the latest versions of software. Respondents to an Association of Financial Professionals survey highlighted that 45% of firms operated treasury management systems which were not the latest version; some 13% of those were more than 3 versions behind. Considering the hazards of improper treasury risk management and cybersecurity threats, planning for maintenance and updates is vital.

The ladder to the C-suite includes time in corporate treasury

The fortunes, and misfortunes of firms count on the calculated opportunities that are taken. Corporate treasury, has emerged from back-office hedging and risk management to strategic business development.

Treasurers have slowly built-up their experience to take the strategic lead. CFOs have come to rely on treasury expertise, citing that they already take critical advice from the department for board room decisions. Equally in a survey of corporate treasurers, 90% of participants felt that they were already “participating in the decision-making”, with many of them noting that their voices would become ever more important.

Insight into the corporate treasury department, its inner-workings, software, and business achievements can help launch a career to the C-suite. Through strategic advice and exposure to senior management, treasury professionals with high sights can capture the CFO’s desk. As CFOs increasing rely on the shrewdness of treasurers, improving the visibility of the bottom line can open doors to even the highest echelons of business.

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