The role of treasurers has evolved substantially in the past decade or so, and consequently the software underpins treasury management has also needed to develop.
Corporate treasury management software is one of the fastest moving areas of fintech, and financial institutions and businesses are keen to upgrade outdated legacy software in order to take advantage of the new technology available and also make their systems more fit-for-purpose as this area of finance has advanced.
But how has the industry grown to encompass new roles for treasurers, and what software is now required to meet these responsibilities? Treasury software specialists give us the answers.
The industry view
Jason Torgler, Senior Vice President, Reval
Corporate treasury departments around the world are in different stages of technology adoption. There are a number of factors driving treasuries to new technology, including the complexities of their organizations, the locations of their operations, and the vision they have for their own roles in their businesses. These factors are not static, they are dynamic.
When treasury teams move onto new systems, it is often because they are getting squeezed by the competing forces of growing responsibilities, resource constraints, and constantly changing market and regulatory requirements. Whether they are outgrowing their existing systems or automating manual processes, their move to a more digital treasury requires some fundamental considerations when buying a system. Here are some key concepts we are happy to pass along from our years of experience working with thousands of treasury teams:
Secure executive endorsement with a clear ROI Sadly, many treasury technology projects never get off the ground. Successful evaluations that turn into successful projects are ones that have full executive support, including budget backing. Treasuries can avoid the heartache of stalled or cancelled evaluation projects if they are first able to quantify a positive ROI and have a senior finance leader (treasurer, VP finance, CAO, CFO) back the project.
Look beyond now to futureproof When organizations only focus on a core set of requirements and fail to consider their growth areas, they lose the opportunity to add substantial value and gain solid ROI. Examples of these growth areas often include international treasury activities, managing foreign exchange, long-term debt and interest rate risk, commodities risk, AP payments, intercompany invoice netting (MLM) and accounting. Even if these areas aren’t part of a treasury organization’s current enterprise, might they be in future?
Treasury teams would do well to engage colleagues who oversee these functions.
Avoid the canned demo Canned demos with dummy data are good to start with, but teams will have to dig deeper closer to selection. To get beyond the flavor of what any given technology platform is capable of, teams will eventually need to inject demonstrations with their own, real data, to pinpoint their most complex processes – exposure management, debt examples, intercompany loans, mark-to-market reports, cash forecasts, etc. Selecting a platform that is not able to meet your needs across the requirement spectrum could result in a loss of significant ROI.
Profile your partner Treasury teams need to do their best to better understand the companies behind the platforms they are assessing. What is each provider’s financial health, long-term vision, commitment to product innovation and enhancements? Is the provider growing or declining?
Understand implementation upfront Implementation is where the rubber meets the road. If vision, scope, resources and costs are not understood and agreed upon during the buying process, expectations will not be aligned. Teams need to fully understand the implementation plan before they sign.
Broaden the reference base Treasury teams need to reach out to peers as well as to reference clients provided by a vendor. Reaching out to treasuries of the same complexity, or from the same geography or industry will add dimension to their assessment. With this context, teams will be able to validate their own vision and ensure they haven’t overlooked any of their own challenges or requirements. Local corporate treasury associations are a good place to start for peer-to-peer learning and networking.
Ben Singh-Jarrold, Corporate Banking Strategist, Misys
Treasurers are increasingly seen as advisors on business direction. They must balance operational excellence with accurate insights that can inform strategic decision making. While small and large corporates have gone a long way towards more centralised treasury management, employing well established Treasury Management Systems (TMS), we are at a point where treasurers now need more from their vendors. We see the need for advanced risk and liquidity management, greater flexibility to address regulatory reporting, and an increasing acceptance of cloud technology, even by larger corporates.
Corporates are dissatisfied by core areas of current systems. Better technology is being asked for to support risk management, accounting, fraud and counterparty risk requirements and regulatory reporting. Vendor support, new areas for automation and the adoption of cloud are influencing purchasing behaviour.
The visibility of cash and liquidity optimisation are the baseline of today’s systems. The difference comes from the depth of centralised coverage and the agility offered around risk and exposure management. In particular, legacy platforms provide poor hedge accounting capabilities and inflexible reporting tools. A major issue continues to be difficulty configuring reports to meet changing requirements.
In addition, internal fraud management and KYC increase the operational burden on the treasury function. Automation and system consolidation is key to delivering real-time insights into counterparty risks and delivering internal compliance and audit control. Due to constant change in the payments and settlement landscape, continued automation and STP initiatives are also being focused on payments, settlements and FX transactions too.
Basel III, Dodd-Frank, tax compliance, EMIR and IFRS 9 all create a need for TMS agility. A TMS has to be robust and mature but also be able to adapt to future demands. An all-in-one platform that provides a componentised approach is key to providing the single source of data to feed these requirements, and the foundation to scale and expand TMS functionality. With this, corporate treasurers can create powerful new reports and deliver the predictive analytics, scenario-based projections and forward looking KPI’s that bring high value – not only to treasury operations but also to CFOs, finance managers, accountants and controllers.
Outside the functional focus on TMS improvement, corporate treasurers are looking to their vendors for greater support. This centres largely on risk agility, but Software-as-a-Service (SaaS) is now seen as an opportunity to get this support, while reducing operational cost and risk.
The perception of security in the cloud is increasingly on a par with in-house deployments. SaaS enables vendors to boost support levels, which is a key ask in every TMS satisfaction survey. 24x7 support is a must and should be part of any comprehensive SaaS offering.
Companies want more innovative, regularly updated processes that help align system workflows with treasury best practices. SaaS is an option to ramp up this agility, either across the business or just for certain STP requirements. It is a flexible way to integrate new scope and bring solutions to market faster.
In choosing a partner for any aspect of TMS transformation or enhancement the treasurer needs to balance the need for operational excellence, forward looking intelligence and day to day risk management.
Choosing partners that have the global reach, scalability, support model and continued investment in innovation will help navigate the complex regulatory environment and the emergence of exciting new technologies.
John Byrne, CEO, Salmon Software
When considering purchasing a new corporate treasury management system, buyers need to ask themselves seven core questions:
Does the TMS cover all the instruments I need now and in the future?
Buyers need to make sure that any TMS they consider covers all required instruments from money market, FX and derivatives to trade finance, commodities, debt and others.
Does the TMS integrate seamlessly with required third party systems?
A modern TMS must work seamlessly with an increasing variety of third party systems. These include trading platforms, single bank and multi-bank electronic banking providers, market rates providers such as Bloomberg, accounting systems from SAP to Oracle to SUN and Microsoft and many more.
Is the system robust enough?
Talk and visit other users to check out that what is promised at the sales pitch is what happens under actual conditions.
While you’re there, check the robustness of the system, any downtime, speed of implementation as well as responsiveness, back up and interest from the provider once the contract has been signed.
Is the system flexible enough to provide real time reports to your various stakeholders?
Different audiences within the organisation will require different information and reports from treasury operations. These can change over time. At the tender and installation stage you must ensure that the vendor’s reporting systems are flexible enough to cope with these changing demands.
This will be dependent on working with a provider who can offer flexible and intelligent database design. This is hugely important. Remember, the MOST important consideration is about getting data OUT of the system. After all that’s why you are buying it, so that it can tell you what you need to know, when you want to know it. That ultimately comes down to OUTPUT. You want and need a system that gives you the output you want in the way you want it.
Who will implement the system?
The presentation team may look and sound impressive but who will implement the TMS? You must make sure that the provider’s implementation team is experienced, knowledgeable and responsive and make sure you talk to them as well as the sales people.
A key point is that the system must have a 100% fit to your needs – not you having to change to fit the supplier’s system.
Do you require an on premise or cloud solution?
You should select a provider which has a track record in supplying both. There are positives to both. It really depends on the individual company and your IT strategy.
The good news is that a cloud solution means that even the smallest treasury operation today can afford to automate.
Have you secured the best value for money?
While you need a modular and a scalable solution, a modular approach enables you to select only the modules you need today. This means you avoid paying for functionality you don’t immediately need. Equally, the system you put in today should be “future proofed”, i.e. you can add modules in a seamless manner in the future when you may be trading other instruments or operating new or different processes.
Implementing only the modules you need also significantly impacts the implementation effort and therefore the overall cost. Lower cost always pleases the CFO.
Bob Stark, VP of Strategy, Kyriba
The reasons why organizations choose corporate treasury management systems have changed as the priorities for corporate treasurers have evolved over the past ten years. Increasingly, fraud prevention and the need for improved financial controls are driving global finance leaders to adopt more robust treasury technology. As competition in the global market increases, finance leaders are also looking for a way to better mobilize cash and expand their operations.
A key priority for CFOs and treasurers is how to leverage the organization’s financial structure to support improved business results. The additional visibility a global TMS provides into cash, financial positions and risk exposures gives treasury managers the opportunity to protect their organization’s assets, and enables strategic decisions about deploying cash, liquidity, and treasury structures such as netting, pooling, and hedging programs to support global business objectives.
Secure financial controls
A TMS also enables corporate treasurers to reduce the risk of payments fraud with stronger financial controls. Financial controls include everything from hierarchical separation of duties for each stage of the payment workflow, including the administration of duties, to monitoring payment activity and aligning documentation to payment approvals. Controlled workflows, when combined with centralized audit trails, improve visibility into all treasury and payment activity, increasing detection mechanisms for unauthorized activity. In many cases, a TMS will help minimize the number of systems used to process payments, further securing the payment workflow.
Alignment with your organization’s security policy
Your CIO/CTO/CISO will want to evaluate the security offered by a TMS to ensure treasury is aligned with the organization’s information security policy. User IDs and passwords are the weakest links and should be combined with controls that include password timeouts, multifactor authentication, IP filtering and SingleSignOn, a preferred login control of many CIOs. In addition to protecting against unauthorized data access, your TMS should protect against data loss with encrypted data at rest in active and backup environments. Many TMS providers will also offer a SOC2 Type II report to assess the security behind the TMS provider’s controls; this report must be evaluated as SOC reports are not pass/fail propositions.
Treasury needs to collaborate with their CIO’s security policies and determine the best solution that minimises long term operational costs, ease of implementation, and provides constant updates without internal effort or cost.
The right TMS provider is the organization that allows treasury to integrate with the organization to support strategic business objectives. While often delivered in the cloud, the right TMS will offer enhanced security to align treasury’s controls with the organization’s security policy so treasury can securely manage cash, payments, and financial risk.