Every corporate treasurer depends on technology to fulfill their responsibilities and daily tasks. At a time when treasurers are constantly asked to do more with less, it is technology that can ease the pressure and allow them to perform their job more efficiently.
Technology Requirements Today
The technology requirements of corporate treasurers today focus on tight controls, automation, speed and efficiency of operations. “In a modern treasury environment, corporate treasurers are looking for technology that will give them reliable and secure straight-through processing,” says Ken Lillie, managing director of Lillie Associates – Treasury Consulting. “Reliability to ensure the efficiency of interfaces between the systems employed within and on the periphery of the department, and security to meet the stringent requirements of processing funds movements and key financial data.”
He adds that straight-through processing (STP) ensures that the transaction is not touched after inception (i.e. the various approval, verification and release processes are undertaken within strict, pre-defined access rights) through to completion, dramatically reducing the opportunities for error or fraud, and that information flows automatically and in a timely fashion across systems. “The reporting capability of the systems employed has always been a primary concern for treasurers and never more than today with the increasing demand for complete transparency in financial operations for management and regulatory reporting,” he claims.
His view is supported by Laurie McCulley, principal, and Elizabeth St-Onge, managing director at Treasury Strategies. “World and economic events are leading to an increased focus on financial accountability, reporting, transparency and risk management, thus thrusting treasury management into the limelight,” they say. “Today, treasury is undergoing a fundamental shift into a highly visible and strategic partner within the organisation. As a result, traditional products will increasingly become embedded within more comprehensive and technological solutions.”
While we know that technology is the key enabler in supporting treasurers to meet the expectations of their expanding role, the variety of systems and vendors that are available today can be a daunting prospect for treasurers to deal with. What steps should they take?
Making the Right Choice
According to McCulley and St-Onge at Treasury Strategies, when it comes to choosing technology, it is vital that treasurers develop an effective technology strategy and infrastructure. They argue that all of the potential that technology offers cannot be harnessed if a solid and integrated foundation is not built. Read more about the systems available today, such as treasury workstation systems (TWS) or treasury management systems (TMS), online trading platforms and multilateral netting systems, in their article, Factoring and Trade Finance Services Continue to Increase in Latin America.
While the technology required by corporates will differ greatly according to their size, organisation structure, location and business, one common denominator for all treasurers is making sure they get a return on investment (ROI) from the technology they choose to buy. This fundamental issue is discussed by Bruce Lynn, managing director at the Financial Executives Consulting Group (FECG), in his article, Investing in Technology: Are Corporate Treasuries Generating Positive Returns?.
In order to make the right decision, he suggests that treasurers take a phased approach to acquiring and implementing treasury technology where the phases are driven by function and organisational structure. “For example, rather than follow the ‘big bang’ theory of acquiring and implementing all system features at once, everywhere treasury should acquire and implement only selected features at selected locations,” he says. “This ‘buy then try’ approach can also reduce upfront costs if it is determined during the early days of the project that the initial system selection process was flawed.”
He also advises treasurers to devote the right amount of treasury resources to the effort. “System vendors are only responsible for insuring that their system works according to the specifications they were given,” he points out. “If (or when) it is determined that the original specifications were wrong or missing only treasury and the project team can ‘fix it’. Inevitably, the fix it period always conflicts with treasury’s other responsibilities. Never the less, treasury must be prepared to fully staff this project over its duration if it is to earn the positive returns promised to management.” Read more about how to ensure a ROI in his article.
Are Treasury Technology Requirements Changing?
As highlighted earlier, the role of treasury is evolving and, as a result, technology must also evolve to meet changing needs. According to Lillie from Lillie Associated – Treasury Consulting, treasurers and CFOs are now looking beyond core treasury for technology solutions and embracing the wider treasury/financial view. “As technology and connectivity improve, so the desire increases for views of up-to-date group-wide cash positions and links into the payables and receivables functions with the treasury management system positioned at the centre,” he says. “Intranet and Internet availability across a group enables treasury to measure and control activity globally and there is a continued move to centralise treasury activity employing this technology for those vital information flows.”
He adds that more companies are now seeking treasury systems that are not installed in-house. In other words, they are looking for systems provided on the basis of an application service provider (ASP) or that are hosted by the supplier or a third-party hosting centre. “This demand will continue to grow as will the demand for full connectivity between systems allowing increased automation of treasury processes and improved security and control,” he says. “Companies will be looking across the financial enterprise and will therefore be studying those suppliers who can help to deliver a wider view while providing total transparency down to the necessary level of detail.”
Joergen Jensen, director of treasury products at Wall Street Systems, also supports the view that hosted solutions or ASP are now taking off because concerns that sensitive data could be compromised if it were stored outside the company on another organisation’s servers as well as worries over whether hosting companies could guarantee system access are finally being dispelled. In fact, he believes that the major drivers in treasury technology in recent years have more to do with changing attitudes than actual technological advances.
In his article, What’s Driving Change in Treasury Technology?, he argues that many of the technologies currently being taken up have been around for some time, but until recently the business case for their use by treasury had not been made. He outlines various factors behind this such as the fact that solutions which are easy to roll out worldwide are now demanded as essential, rather than being viewed as ‘nice to have’ as well as SWIFT opening its door to corporates for communication with their banks via SWIFTNet, meeting their need for easier access.
He also highlights new technology developments in the areas of service-oriented architecture (SOA), electronic bank account management, and unified digital personal signatures, and suggests that that technological progress in the treasury area in the near future will be driven by the emergence of standards around communication between corporates and external parties, especially banks. (Read more about these latest developments in his article.)
Technology for treasurers will continue to evolve, as treasurers identify further opportunities to make their daily tasks more efficient and the software developers and vendors respond. “The boundaries are always being pushed forward with increasing functionality demand and a continuously advancing technology environment,” affirms Lillie at Lillie Associates – Treasury Consulting. He underlines the fact that banks, TMS suppliers, ERP suppliers and other specialist treasury software houses have to move forward to survive. “Some suppliers are developing their own suites of fully integrated solutions within and beyond treasury while others are working with partner organisations to provide solutions fitting the buyer’s specific organisational need,” he says.
And this is just the way that technology in this space should develop – according to the needs and requirements of the treasurer.
There has been an uptick of treasurers inquiring about interest rate risk management in recent months as interest rates in the US and UK have started to show a rise in momentum, said Chatham Financial at the annual Bellin treasury conference.
The global economy has seen about eight years of growth, but we are starting to see the end of this which is triggering some volatility in global markets, Stefan Bielmeier, DZ Bank, argued in his keynote speech at the Bellin annual 1TC conference. Other speakers discussed blockchain, cyber crime and netting.
A series of governments are now very worried about the idea of bitcoin and these currencies because customers would be able to make sustainable ongoing transactions and payments without having to ever introduce the use of a typical financial model or banking system. To combat this potential threat, several countries including major central banks like the Bank of England and the Bank of Israel will be launching their own version of a cryptocurrency. This could bring big advantages to customers.
Once there is KYC blockchain, the technology will be at the forefront of helping to identify those who present a greater risk of criminality, argues David Poltorak, chief technology officer at Fortytwo Data.