TMS Solutions: The future is Now

By Andy Davies | 26 August 2015

Treasury departments have always been a staple part of any organisation linking to every part of a businesses’ internal structure; albeit a department that used to carry out its activities unobtrusively in the background. They serve as financial risk managers who oversee business activities and help shield their company from the plethora of financial regulation.

One can, however, comment that this business function was thrown in the limelight with the shattering financial crash in 2008.  The crisis caused treasury departments to be hauled to the front end of businesses, coming under scrutiny and evaluation like never before. It is no secret that treasurers now need to face up to the harsh reality of onerous changes and restrictive and time-consuming regulations, seeing the way in which they operate impacted greatly. Most prominently, treasurers now need to provide in-depth reports to meet the requirement for transparency set upon them by a number of regulatory constraints, EMIR reporting for derivatives to name but one.  

Treasury departments now have a greatly increased workload that has often outpaced available resources leading them to consider a variety of different bolt-ons to the TMS to help keep up with the throes of regulations. Typically these bolt-ons came with a huge cost, not only for the extra features themselves, but also having to upgrade the core TMS to the latest version, testing and re-testing every change and updating internal connectivity. Due to the sky-high costs of updating their core TMS, many stick with the seemingly low-cost option of a spreadsheet, opening the door to an increase of human error and having a non existent audit trail.

For a considerable amount of time, the above two options have been the only solutions available to treasury departments wanting to expand upon their core TMS – spend big or use Excel. Surely no other technology exists to allow treasurers to increase their workflow and productivity whilst lowering cost and most importantly keeping in line with regulations?

New priorities require new solutions to tackle an issue head on and with new technology evolving at an unprecedented speed it is vital that treasury departments can adapt to the changing world around them; a world which can benefit them greatly.

Innovative technology solutions, most efficiently delivered as SaaS, are starting to change the world, screaming in the faces of those using the ‘But that’s the way its always been done!’ excuse for treasury departments not migrating to a more modern method of mitigating risk, as well as keeping regulatory compliant.

Treasury departments need to adopt SaaS systems that work seamlessly with their core TMS, whilst allowing them to operate efficiently and cost effectively. Previous excuses to keep everything within the TMS or on spreadsheets because “we’ll never be able to integrate multiple systems” are no longer relevant, technology has moved faster than the naysayers can cope with, in many cases you can add a best of breed SaaS solution on top of your TMS for a fraction of the time, effort and cost of a new TMS module.

The changes to collateral and margin management set out by EMIR and the associated trade reporting are typical of the extra pressures on TMS’s. Many firms have historically been able to avoid collateralising their derivatives relying on their superior credit ratings so never had the need for collateral technology when selecting their TMS’s, but that world no longer exists for more and more treasurers so new solutions need to be found. SaaS technology increases the ease in which a treasury department can remain compliant with regulation without increasing resources or writing a huge cheque for IT.  An example is having existing connectivity to trade repositories allowing firms to keep in line with EMIR guidelines for very little money, something on-premise technology simply can’t do.

SaaS solutions, such as CloudMargin, come in at highly competitive prices. Legacy vendors over complicate many issues and Buy-Side companies need to remember that legacy vendors need to over-sell an issue to support their own agenda; they need to make the world seem as scary and over complicated as possible, therefore justifying their million pound solutions.  SaaS solutions, however, can be bought for a fraction of this price and still deliver high performance functionalities and benefits that over shadow those of a legacy vendor.

One reason that SaaS solutions can be bought at this affordable price is because they do not require any additional hardware, there is no software that needs to be installed and there is no need for costly IT teams to oversee maintenance and integration of the system into your environment. Due to these factors, it also takes considerably less time to integrate a SaaS and get it functioning along side your central TMS.

Most of the TMS offerings on the market have their roots in the 90’s technology boom and have changed little in the past 20 years except for a few cosmetic tweaks. Think about how the mobile phone market has changed in that time and how you get millions of times more capability for a lower cost, but financial technology hadn’t changed at all until the rise of SaaS.  

One argument frequently raised against SaaS solutions is the concern of security due to the handling of delicate and sensitive information. The truth is that a SaaS company’s reputation is based on their security so it becomes integral to the product. On-premise software could leak like a sieve, with vendors knowing the reputational damage of data security issues will lay solely on the company using it, and not on the vendor themselves. Therefore, one could suggest that SaaS security is a higher priority for the vendor than that of an in-house system. 

Whereas internal IT teams struggle to keep a view of things on a large number of different platforms with limited knowledge of them, a SaaS provider's has a team of specialists whose sole responsibility is to focus on client security.

To conclude, the Buy-Side’s treasury departments have been hit with a wave of challenges. However, the innovation and modernisation of new technology has solely been created to face these challenges head on. In times of significant upheaval, treasury departments need to select technology that enables them to deliver increased productivity and control, all whilst lowering cost and work load.

By Andy Davies, CEO and Founder of CloudMargin

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