Globalisation and the rapid growth of Asian corporations is adding new tasks to the agendas of corporate treasurers based in the region. These finance professionals must learn how to manage the cash of decentralised subsidiaries, operate in new accounting environments, comply with additional regulations, handle multiple currencies and interest rate levels, and rethink their funding strategies – all at the same time.
These new challenges, in combination with the unstable global economic environment, carry different risks, and they have changed the role of corporate treasury significantly. Treasuries must now better understand, manage and mitigate the full reach of risk across the enterprise.
Figure 1: Risk Factors to Consider
As treasury staffs across the globe are finding out that their legacy solutions are not equipped to mitigate risk at a sufficient level, they are considering a new breed of technology that is enterprise-wide in scope, delivers global coverage and is comprehensive across both cash and risk functions. When searching for such a solution, treasurers need to revisit the kind of information they need to solicit from vendors in the request for proposal (RFP) process. Doing so can help them ascertain the right technology and the right technology partner to match their new world treasury and risk management (TRM) needs.
Getting Into the RFP Process
Selecting the right technology partner is a journey that can last several months. As treasury executives are not IT professionals and have treasury day jobs to do, identifying technology options and matching those options with treasury’s needs is a process that is as challenging as it is long. Therefore, RFP’s and their associated responses can prove invaluable for a structured capture and comparison process.
When starting the selection process, most treasurers will discover how hard it is to find out what they really want. Therefore, the first step in any RFP process is crafting a vision for the desired technology. The best practice recommendation to create a vision for TRM is as follows:
- Start by understanding the shortcomings you are looking to address.
- Understand the impact of these shortcomings.
- Visualise a solution that will address these challenges.
- Perform research on the technological options available.
- Put a graphic together that reflects your vision.
Many technology providers include case studies that are available for download from their websites. These are helpful to review as they mirror different environments. Additionally, introductory demonstrations of technology tools could be reviewed to gain a first overview. Reviewing case studies and joining demonstrations will help to reduce the number of potential partners as providers that do not support the newly required risk capabilities will be identified early and eliminated from the selection process.
Figure 2: TRM System Schematic
How to Set Up a RFP
After rendering your vision in a diagram, as above, the second step is to create a RFP document. The RFP should be a two-way sharing of information between buyer and vendor. In order to receive relevant responses from vendors, the issuer has to ask the right questions and give guidance on the level of detail desired. Here, treasurers can adapt proven structures to their specific needs:
Section I – Response guidelines
Be clear and up-front about response guidelines. Include critical date milestones and delivery instructions such as soft and/or hard copy requirements. Identify the key person within your organisation that will serve as project manager for the RFP and include that person’s full contact details.
Section II – Description of purpose
Why are you issuing the RFP? What are your goals? Be clear and pointed.
Section III – Description of the evaluation process
Outline your anticipated evaluation process from start to finish. Include a full milestone list with dates, inclusive of implementation delivery.
Sections IV – Description of company
Provide details of your overall company and business lines. Include a link to your annual report.
Section V – Description of treasury operations
This is your chance to describe the nature and characteristics of your treasury operations. Explain and detail the different functions and responsibilities performed. Include an organisational chart with roles and titles. Outline the different countries and regions treasury covers. Include a full listing of bank relationships or a visual depicting bank account structure, if available.
Section VI – Description of current utilisation of technology
Be clear about your existing environment. Describe what tools are used to manage what information. List out spreadsheets, databases, bank portals, general ledger systems, data terminals, trading portals and any other repository of information, relevant to your project. Feel free to elaborate on the challenges associated with managing treasury and risk with these tools.
Section VII – Restate vision
Here is your opportunity to detail your vision. Include your graphic. Be clear as to what your end state should look like.
Section VIII – Description of prioritisation
Your vision may have levels of priority. It is definitely worth detailing their delineation. Segment the priorities according to primary, secondary and ‘nice-to-have’ wishes. If there are challenges that are not relevant now but could be in the future, include a section called future needs.
Section IX – RFP questions
This section contains your questions for the respondents. There are many RFP resources and templates available. Although online sources and treasury peers are recommended sources, review the templates carefully as specific risk mitigation capabilities might not be covered to the scope needed. Questions are best broken out into the following elements:
- Functionality: Organise questions by treasury function. Common examples are cash management, payments, accounting, foreign exchange (FX), risk management, compliance, etc.
- Interfaces: Include questions on interface capabilities that are priority items for you. Common questions inquire about general ledger systems, bank connectivity hubs/SWIFT, enterprise resource planning (ERP) systems, etc.
- Partners: Have the respondents detail any third party partners they are recommending. Request information on the specifics of the recommendation, length of time and track record of working together.
- IT: Involve your IT department to include technical requirements. Ask each provider recommended technical deployment options. Be sure to clearly understand the differences between local installation, remote hosting via application service providers (ASP) and software-as-a-service (SaaS) models.
- Implementation: It may be too early to pinpoint exact implementation details. However, this is a good opportunity to better understand provider methodologies. Request details around staff skills, size and location. Also ask for sample project plans and statements of work. This will give preliminary indicators of attention to implementation detail.
- Customer service: Ask questions around support size, location, skill set, level of tenure, escalation and issue resolution, as well as hours of operation.
- Pricing: Be clear about the level of pricing detail you require. The more information you share, the more accurate the offers will be. Different providers have different pricing methodologies. Common variables on pricing include number of users, number and type of software modules, bank connectivity requirements and interface requirements. Understand that all pricing received will be estimates and subject to change. Pricing disclosure and negotiation are best served later in the evaluation process.
- References: Decide, how important references are at this stage of the evaluation. For common courtesy, don’t ask for references unless you plan on calling them. Many RFP issuers prefer to substitute reference requests for a listing of clients. Then, they plan to interact with reference clients as they close in on their decision.
Although the RFP process may seem like a lengthy journey, the time invested will be well spent as visualising and capturing relevant information will promote a meaningful exchange between the buyer and vendor. This is critical for procuring integrated technology and expert support that match the new world needs of managing cash and risk in a dynamic business environment.
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