System Options for Medium-sized Bank Treasury Operations

A conventional treasury solution transformation exercise involves elaborate scoping, a detailed fitment study, system analysis and the participation of stakeholders. It costs significant time and money from key personnel at both the institution and solution partner. Both parties need to agree on the correct processes, obtain approval of stakeholders over proposed realignments and changes to process flow, as well as securing the buy-in of all concerned parties. Because end-to-end treasury transformation is such a complex cycle, it bears considerable risk of sub-optimal performance, over-runs and even failure. A typical solution deployment exercise starts with engaging the solution partner in a detailed requirement-gathering exercise, which will usually have standard answers, establish the methodology and process to be followed, and in most cases ‘re-invent the wheel’ of the established process.

Implementation success is highly dependent on the continued availability of personnel from both sides. Scoping, training, testing and sign-off require the support of teams representing the treasury front, mid- and back office, IT department, and other upstream and downstream systems. Usually, in a conventional treasury transformation exercise, the end result is status quo with the solution partner not able to gain access to key stakeholders throughout the project and ultimately losing out in terms of cost.

What do Banks Expect From Their Partners?

Since so much is at stake in a treasury transformation project, banks expect their partners to have done their homework. The partner must come prepared with a game plan for alleviating the chief pain points of treasury users. The bank will be looking for a solution that is quick and easy to implement and puts as little pressure as possible on the bank’s financial and human resources. The system should be equally simple and built in such a way that users find what they need intuitively and effortlessly. Last, but not least, the cost aspect is important as all partners will want to derive competitive advantage from it.

Challenges for the Solution Provider

The solution provider should aim to build an innovative, standardised, packaged solution designed to fulfil most treasury requirements across geographies. Virtually plug-and-play, the solution should be designed to easily accommodate minor alterations.

While it does not replace end-to-end treasury transformation solutions capable of handling complex customer-specific requirements, a packaged solution has the advantage of being more cost effective, faster to implement and is therefore ideally suited to smaller and medium-sized organisations with budgetary and time constraints.

Building a standardised treasury solution that satisfies the needs of most small and medium-sized banks is a task fraught with many challenges. These can include acceptable technology, functional uniformity and the fitment of the treasury solution to cater to global requirements. Obviously, this cannot be done without input from market experts. The first goal should be to arrive at a wish list of features required across the treasury value chain. Next, the technology partner must study conventional market practices to determine static data requirements and establish standard parameters and guidelines. The acceptability of hardware and third party software dependencies has to be studied and ascertained.

In the treasury solution, the data set-up of currency, interest frequency and rate conventions, international regulatory requirements, etc, should be consistent with the standard. The solution partner must ensure the treasury solution interfaces seamlessly with other systems such as those used in trade finance, money markets, market rate feeds and accounting systems. Although the solution is a step towards largely building a pre-set solution, the underlying technology should be extensible to accommodate dynamic changes and facilitate the quick and easy delivery of service packs and future upgrades.

The solution partner needs to take a holistic perspective and ensure that the solution deployment:

  • Is cost effective through the value chain.
  • Has the right functionality fitment for global requirements.
  • Reports and data are compliant with regulations.
  • Rollout times are faster and there is lesser involvement of key stakeholders.

What Key Benefits Should a Solution Partner Offer the Bank?

Besides the advantages of lower costs and quick implementation mentioned earlier, the solution partner brings many immediate benefits to the bank. First of all, the bank learns from the partner’s expertise, gathered over years of market research and implementation experience. It has the assurance of obtaining a time-tested solution, implemented in accordance with standard contractual terms, with virtually no risk of time or cost overruns. Additionally, the bank is secure in the knowledge that its solution will be periodically upgraded through service packs, which will further improve its functionality and minimise its downsides.

Benefits are also derived from the treasury solution itself, which will be robust and built from a thought-process involving industry experts, research and studies on building a treasury solution that meets global requirements. As new knowledge is acquired from current projects – whether relating to people, process, technology or functionality – this is leveraged to enhance future projects and continually improve the offered solution. With input from partners across the project, the solution partner is able to deliver many utility and usability features, standardised reports, proven output, adequate checks and controls resulting in a scaleable comprehensive user-friendly system for all the stakeholders.

Typically in a treasury solution, analytical outputs such as mark-to-market calculations, different realisation methods, standard methodology of conversion to valuation or reporting currency are basic expectations. Quite often in a conventional treasury implementation there could be numerous debates contesting the correctness and validity of the numbers and methodology. In a standardised solution, the numbers and methodology are agreed by the industry experts involved in the solution development based on their extensive knowledge and experience.

In addition, other standard implied expectations such as reduced total cost of ownership (TCO), system availability, return on investment (ROI), automation, system performance, traceability, auditability aspects, error detection and system monitoring would be taken into account in the solution design.

When the solution is able to consolidate several banks on a single version, it realises synergies that result in lower scoping, training, implementation and support costs resulting in overall cost effectiveness. Consolidation also enables service packs and upgrades to be synchronised to market needs and renders customisations reusable in future implementations. Successful implementation sows the seeds for a mutually rewarding client-partner relationship.

Conclusion

Lower cost and quicker time to deliver are the standout benefits of a standardised treasury solution. These attributes make it ideally suited to small and mid-sized treasury operations.

With a treasury solution that meets expectations globally, the rollout time is optimal as routine repetitive activities are eliminated – a standardised treasury solution strikes the right balance between desirable features, increased value and quick delivery.

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