The central role of the corporate treasurer has never been more prominent. As corporations have become global, lines of communication have become fragmented. Establishing something as simple as how much cash is in the bank has become dangerously complex. In the past two years, the dearth of external liquidity has only compounded the pressure on treasurers to improve the performance of their department.
Treasurers have had to ensure growing corporate complexity does not translate into increased liquidity risk. To do this, they have become leading adopters of technologies that allow them to keep track of financial transactions in real time, 24 hours a day, seven days a week, anywhere in the world.
While this could not have been achieved without the collaboration of the IT department, the relationship has often been strained, with the treasury system seen as an IT headache, rather than a strategically vital part of the IT infrastructure.
The treasury department has had to become expert in the implementation and maintenance of its own technology, and this has had one unforeseen outcome. It has left treasury teams so close to the technology they implement that it risks limiting their strategic decision-making. After all, when faced with a strategic business issue, you don’t want to limit yourself purely to technology solutions. Becoming too close to the technology can have a detrimental impact on treasury innovation and strategic performance.
While treasury teams have all become more or less knowledgeable about the technology underpinning their treasury operations, we now see an interesting divergence between two distinct approaches to treasury management. On the one hand, you have those treasurers who sanction the purchase of technology and leave it in maintenance mode, resting on its functionality and being satisfied that it is right for them and that they can operate within its framework. These are the treasurers who are more likely to see their technology systems as a limiting factor in what they can achieve within their corporation.
Then there is a second type of treasurer, focused on the strategic challenges facing the group treasury, and prepared to see solutions that are beyond the limitations of current technology. These treasurers believe fast-moving technology is a good thing because it provides opportunities to change and innovate in line with the changing demands of their fast-moving business. Such treasurers tend to keep up with the latest technology innovations, but they focus solely on how they deliver business-orientated results. For these innovative treasurers, the technology enables them to make meaningful transformations within their business, to deliver results that will be noticed across the board.
In our experience, the more treasurers can be isolated from technology, the more they are able to reach solutions that make a tangible difference in the performance of liquidity, risk and investment management. Many treasurers are changing their focus from understanding technology to understanding how to work directly with the people selling the software solutions they need. This allows them to think primarily of business solutions, rather than technology.
The recent growth in technology by subscription and partnerships based on software-as-a-service (SaaS) or hosted solutions demonstrates that treasurers are able to work closely with technology providers and focus on achieving corporate objectives. Take one example: many corporates are adopting SWIFT because it gives them better direct bank connectivity. However, many of these do not want to house this internally, seeing it as merely another technology that they need to understand, install, maintain and upgrade.
For those corporates that desire the connectivity without the hassle, outsourcing it to a partner makes a lot of sense, and allows them, in turn, to focus on the more strategic aspects of their business.
So what of the IT department? I described it earlier as having two roles – implementing and maintaining treasury systems, and ensuring they continue to talk to other core IT systems within the corporation. As solutions are increasingly installed elsewhere, and available as a service, the IT department is freed to focus on integrating these hosted systems with their core IT systems, to ensure they talk to each other at the application programming interface level. The impact of this is to provide the IT department with greater capacity and scalability, allowing them to act as federators of best-practice solutions, rather than as a maintenance team for existing systems.
In our experience, this suits IT departments perfectly, as this general shift towards working with external partners is happening in many other areas of corporate IT. It is more aligned with their evolving skill sets.
Keep it Simple
As these trends continue, treasurers – particularly those focused on making the most of technology to achieve business solutions – are becoming strategically more valuable to their corporations. They are not only selecting and implementing systems that improve the performance of the treasury department itself, but of the entire corporation, by delivering measurable results such as greater levels of available internal cash, and faster credit and lending decisions.
The great irony is that treasurers are not interested in the most advanced, complex technology, but the simplest solutions to their thorniest problems. And rather than delivering the treasury management solution with the largest number of possible add-ons, vendors should really be working towards delivering a user-friendly treasurer’s desktop that allows decision-making without any need to understand the IT behind it. This is the type of solution that enables a treasurer to become a driver of innovation within their corporation.
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