Why choice of technology matters when selecting a treasury management system

Albert Pang, president, Apps Run The WorldAri Morris, founding partner, Global Treasury PartnersModerated by Tim Wheatcroft, Kyriba

Why choice of technology matters when selecting a TMS

© 2015 Kyriba Corp. All rights reserved. PROPRIETARY & CONFIDENTIAL. 2

Today’s presenters

Albert PangPresident, Apps Run The [email protected]

Ari Morris, MBA, CPA, CMAFounding Partner, Global Treasury [email protected]

The treasury technology landscape

TMS Market Dynamics

Installations are defined as a TMS implementation attached to a unique organization. Deals cover TMS replacements, add-ons, and net new customer wins.

Global TMS Implementations By Vertical

Cloud vs On-Premise Software

• Market consolidation heightens competition among Cloud TMS apps vendors.

• Vendors are bolstering their Cloud subscription revenues for the first time starting in 2015.

• TMS market growth will hinge on enterprise customers, not financial services companies.

• Heterogeneous environment made up of TMS, ERP systems continues to pervade large enterprises.

• In Europe, up to 90% of top corporations now prefer commercial off the shelf TMS apps. In USA, it’s 76%.

• Number of new TMS implementations continued to rise in 2014.

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Cloud TMS Sales Could Eclipse On-Premise Software Licenses By 2017

Top 10 TMS Market Trends

1. Volatility is the new normal2. Holistic approach to TMS prevails 3. TMS centralization gains ground4. Cloud drives business value 5. Analytics lead transformation6. Big data spur TMS collaboration 7. Machine learning eases compliance 8. Currency war scenarios loom 9. Users favor best of breed TMS apps 10. Treasury As A Service wears many hats

1. Volatility is the new normal

• Market volatility will continue as era of cheap money may soon end.

• 2015 M&A mania, big share buybacks, and increased capital repatriation portend significant treasury and risk management implications.

• Process excellence, accurate forecasting are needed to withstand future shocks.

2. Holistic approach to TMS

• In the midst of uncertainty, the best defense may well be a well-orchestrated attack.

• A holistic approach combines big-picture thinking, risk mitigation, and preventive measures.

• Time to retire legacy TMS systems before they outlive their purposes.

3. TMS centralization

• Centralization helps set standard, ensure scalability, speed decision-making.

• Planning and forecasting done on single system yields better results than that of multiple ones.

• Implementing a standard system one module after another is like scaling out a buffet line to meet different needs of many constituents.

4. Cloud optimizes business value

• Cost and agility are secondary to the intrinsic business value cloud applications can bring to help strengthen a company’s top and bottom lines.

• BBC realizes tangible value by running cloud apps to manage 550 bank accounts globally, while finding a functional fit to meet specific BAM requirements.

• Continuous cloud updates aim to sustain those benefits by aligning product plans with treasury objectives.

Dedicated HostingHybrid Cloud

Private CloudPublic Cloud

5. Analytics as the transformer

• BI, Database, OLAP may have become commodity, but analytics offer considerable value propositions.

• New use cases of predictive analytics, adaptive planning, pixel-perfect visualization are transforming finance and treasury functions.

• Intuitive TMS analytics will boost utilization among casual and power users, providing them with early warning, insight and context, as opposed to information overload.

6. Big data spur collaboration

• Collaboration is the lifeblood of any fast-growing business and treasury could serve as the main artery.

• Successful task completion requires enterprise-wide collaboration by harnessing domain expertise, market trends, and unstructured data.

• Treasury function will be shaped by how it leverages Big Data and team collaboration to generate the single version of the truth that determines, defines a company’s fiscal health.

7. Machine learning eases compliance

• Machine learning keeps tabs on noncompliance, spots anomaly, and recommends remedies.

• Widespread use of machine learning algorithms from platform vendors like Amazon, Google could improve internal controls, combat fraud, and reduce compliance risks.

• Obstacles remain with information and system silos across the enterprise, especially those that underinvest in TMS.

8. Currency war scenarios

• Devaluation of Yuan and its effects on China’s foreign reserves will have serious ramifications for US companies, and the treasury community at large.

• No one is immune from a looming currency war and companies need to develop contingency plans when such volatility persists.

• TMS system standardization and a robust risk management strategy are keys to reduce one’s FX exposure.

9. Best of breed TMS vs suite

• Applications are becoming more modular with single-purpose function more prevalent than ever, TMS apps are no different.

• Rising popularity of cloud applications, which cover tens of thousands of point solutions, makes it impractical to rely on a tent-like software suite.

• Best of breed TMS apps and software suites will co-exist as users embrace hybrid cloud deployment, API integration.

10. Treasury As A Service

• It’s the services economy, stupid.

• Treasury professionals build corporate mandate and business case in advance of key initiatives such as in-house bank, finance and risk management command center, and cloud shared services.

• Pitching these projects to elicit corporate support requires key stakeholders wearing multiple hats, polishing up new skills and perhaps redefining the role of a treasurer.

Key Takeaways

• Volatility means disruption

• Spend less, but expect more from Cloud TMS

• More data with context, insight to connect the dots proactively

• Don’t fault for failures, just for bad decisions

Choosing a TMS – Technology Considerations

TMS FunctionalityMiddle Office

Front Office

Cash and Liquidity Management

• Cash Mgmt• Cash Fcst• Payments

• Trade Capture• Pricing• Position Mgmt

• Position Mgmt• Limit Mgmt• Valuation

• Settlement• Accounting

TMS allow users to automate processes in a controlled environment and facilitate value-added functions

Banks

General Ledger

Trading Systems

Confirmation Services

Payments

Trade Data

Market Data Provider

Confirmations

Rates

Accounting Entries

Integration Required TMS Functional Scope

Bank Stmts

Drivers of AdoptionTreasuries adopt technology solutions for a variety of reasons

Corporate Change

Sudden changes to the organization can create a sudden need to examine and invest in treasury technology

ComplexityChanging business requirements from new business exposures can stretch current resources and require a look at technology.

Operational RiskRisks identified by auditors or through internal process reviews can highlight material deficiencies in existing processes

System Obsolescence

External changes can render existing platforms obsolete and require examination into new tools.

StrategyThe desire to increase the capabilities of a treasury department and overall contribution to the organization requires the right tools.

Often a combination of the above are required for a company to take action

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Acquisitions Mergers Divestitures

New markets and regions New policies, procedures Increase in volumes

Audit findings Board issues Lack of visibility

Unsupported platform(s) New regulations New services

Automation of processes Resource optimization Innovation

Description Examples

Success CharacteristicsCompanies that realize the most benefits from TMS have a few common characteristics:

Not all characteristics are required to realize benefits, any one can create a compelling business case.

Geographic Breadth Companies with multiple locations/global opsX Companies in a single location

Banking Complexity Multiple bank relationships in multiple countries; Advanced services (pooling, netting etc.)X Single domestic bank relationship

Trading Volume High trading volume in multiple asset classesX Low trading volume, no derivatives

Risk Management Multiple asset classes Hedge accountingX No active RM program/no activity

Organization Support Active support from IT, accounting, operations etc.X Siloed “Treasury only” approach

Specific Technology ConsiderationsEngage stakeholders early to determine IT strategy in the following areas

These decisions will have wide implications on degree of benefits achieved and strategic importance to the organization

Deployment Options* • Installed (On-premises)• Hosted• Cloud (SaaS)

Operational Oversight • Centralized• Decentralized

Statement Retrieval and Reconciliation

• SWIFT vs. Direct Host-to-Host• Centralized through Treasury or Accounting?

Payments • Treasury as central release point for all payments• Shared between Treasury and AP

Deployment OptionsInstalled (On-premises) Hosted Cloud (SaaS)

IT involvement • Security, servers, database, business continuity, integration, IT standards

• Servers, database, integration, IT standards

• IT Standards

Functionality • Upgrades required• Customizable

• Upgrades required• Customizable

• No upgrades• Configurable

Bank Connectivity • Separate managed service (internal or service provider)

• Separate managed service (internal or service provider)

• Part of SaaS offering

Cost Components • Software license• Servers & DB• Annual maintenance• Implementation and

upgrades• Internal IT

• Software rental• Server & DB rental• Annual maintenance• Implementation and

upgrades

• Software subscription• Implementation

Taking Action

• Begin building the business case• Obtain organizational buy-in– IT, Accounting, Finance, Business Operations

• Examine existing processes– Look at making key policy changes prior to, or in conjunction with,

implementation• Budget

Now you have identified a need or want to realize the benefits, what next?

Resources Required• Functional team structure:

– Treasury (Cash, Risk, Back Office)– Accounting

• IT resources• Software budget • Services budget (banking, SWIFT etc.)• Implementation budget

Conclusion• Choice of technology is not a secondary consideration and should be

evaluated in conjunction with functional and strategic requirements• Deployment options are highly related to individual characteristics of

an organization• Ensure you gain a full understanding of the differences between

installed (on-premises), hosted and cloud (SaaS)• There are wide differences in implications for IT from implementation

through the life of the system


Further reading

Top 10 Treasury Management Market TrendsDownload at: kyri.ba/TMS-trends

SaaS and Cloud: Beware the Wolf in Sheep’s ClothingDownload at: kyri.ba/SaaS-cloud


Thanks for attending

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