Q&A: CloudMargin on the Treasury Tools of Tomorrow

Q (gtnews): We’ve had many discussions with treasury and finance professionals who say that they still use Excel for a lot of their duties. However, despite being the common tool for financial professionals for many years, it has a lot of limitations and many practitioners are looking for something more efficient. Are you seeing this trend? Are treasury and finance professionals beginning to realise the limitations in spreadsheets and look for superior solutions?

A (Andy Davies):
Yes, absolutely. Excel spreadsheets are really flexible and easy to use. But if you’re handling millions of dollars on a spreadsheet, that’s not very efficient. Maybe a few years ago that would have been acceptable. But now we’re seeing more and more are financial professionals using more dedicated systems as they become available.

 

The biggest problem with spreadsheets really is a lack of control. It’s very hard to tell who’s done what. So it’s quite easy to accidentally change a number and not realise it. Also, it’s very easy to not be complete or have a broken calculation. Excel will still tell you an answer, but it will be the wrong answer. Spreadsheets are massively flexible, but they’re not robust. They don’t have the controls that dedicated systems have.

You see that time and time again in the press; JP Morgan lost a billion dollars because they were running their credit default swap [CDS] valuations on a spreadsheet. Just using a spreadsheet is becoming more and more unacceptable these days for business critical functions.

What services do most of your corporate clients want from dedicated systems? What areas are they most concerned with?

What we’re seeing from our clients is, they want to have complete control over what’s going on. Treasurers know that the world is changing, and they want to be able to accommodate that change. A lot of that has been driven by regulation, Dodd-Frank, Basel III, etc.

A lot of people are still scared that financial technology comes with a million-dollar price tag and a two-year implementation cycle. That’s why people have been using spreadsheets so much; it’s the default option. They feel that they can’t afford a dedicated platform.

Dedicated system providers can not only give clients the control, the discipline and the efficiency in the process, but also give them best practices throughout. They can show a client how they should be running their business; guiding the client through their daily activity. It’s far more than just doing calculations; a dedicated platform delivers far more to the client than just automating and crunching the numbers.

Regarding Basel III – the first two Basel frameworks affected the banks, but didn’t have much of an impact on corporate treasury. But now, with all of the requirements that are going to be placed on banks as different countries implement their own versions of Basel III, corporate treasury departments are certain to feel the effects. Will dedicated systems become even more of a necessity for corporate treasury departments?

The last thing that anybody wants is to have to start engaging in massive projects and bringing in consultants and project teams to cope with everything, but that’s what will likely happen. Unfortunately, the treasurer will have to become the master of everything.

As regulations start to bite and firms are asked to do more work with the same resources, that’s when the efficiencies of dedicated platforms become vital. It’s hard to scale your business when you’ve just got spreadsheets; especially when those spreadsheets are written by someone who is no longer at the company. That’s when having an external system is incredibly valuable.  

 

Your service is 100% web-based. What are the pros and cons of going with a web based solution versus one where a company has to install certain software, etc.?

The biggest difference between something that’s run in-house and something that’s in the cloud is obviously the cost. There’s just no comparison between what you can do from a cloud-hosted solution and something that’s handled internally.

But also, if you’re a treasury function, you likely have certain technological skills but you’re not an IT department. You’re not an expert at managing services and deploying software. So when something goes wrong with an in-house solution, you have to worry about making sure your systems are working and your data is backed up. You have to make updates, you have to run tests.

A cloud-based solution is so much easier and much quicker. You can let the system provider be the experts.

What about protecting data? Are cloud solutions more of a risk?

Because it’s what a cloud solution provider does, they can focus more on security and the resiliency. It’s not corporate treasury’s main job to make sure everything is incredibly tight, whereas for an external provider, it’s their business to make sure everything is secure. The infrastructure that they run on; corporate clients just couldn’t afford to do it themselves. They run on state-of-the-art technology and fortress-like data centres. For clients who install something themselves, it just won’t be handled with that level of security and scalability.      

The first thing that traditional vendors would say is that an in-house solution is secure, whereas if the solution is housed on the web, you don’t know who can see your data. But if you look at some of the biggest data breaches, like what happened with [US retail chain] Target, the companies that were hit used in-house platforms. So the real thing to remember about security isn’t whether it’s in-house or cloud-based, it’s more about all of the people operating the systems.

If you have absolutely state-of-the-art technology, you need the appropriate security around it. Making sure that security is adequate that shouldn’t be the number one duty of a corporate treasurer. But it’s a cloud-based solution provider’s job to makes sure those systems are secure.

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