How to ask your senior management team for a TMS

A treasury team must present its firm with a compelling business case for a suite of new technology. Royston Da Costa provides insights on how to pitch it

Since the global economic crisis, corporate treasurers’ credibility has undergone a dramatic renaissance. Indeed, recent figures show that the scale of treasurers’ responsibilities to their CFOs and boards has flourished.

For example, according to The Association of Corporate Treasurers’ (ACT’s) The Business of Treasury 2018 report, in 2017 just 36% of treasurers around the world considered themselves to be playing a key role in defining corporate strategy.

By the following year, though, that figure had risen to 45%: a 25% positive shift.

The report also revealed that:

  • On a global scale, 58% of treasurers routinely prepare reports or presentations for their boards; however…
  • In the UK, that figure jumps to a massive 92%.

In the US, meanwhile, 80% of respondents to a 2017 survey from the Association for Finance Professionals (AFP) said that treasury was playing a more strategic role within their organisations than it had in the preceding three years.

That resurgent platform of credibility is particularly significant against a backdrop of two, parallel developments:

  1. the threat of cybercrime has become a huge concern to treasury departments, with most corporates having neither the resources, nor the investment to protect themselves from sophisticated attacks; and
  2. compliance controls in the treasury function are under tighter scrutiny from auditors – particularly in light of accounting, regulatory and legislative developments such as European Market Infrastructure Regulation (EMIR), IAS 39, IFRS 16 and PSD2.

All of this provides treasurers with a prime opportunity to leverage their status as trusted, strategic aides, and call upon their firms to implement best-in-class treasury management systems (TMSs) – tools that will tackle not merely day-to-day operations, but cyber risks and compliance issues, too.

Pre-implementation changes

When treasury heads ask their firms to introduce TMSs, they typically hit the following barriers:

  1. A pervasive view that, if the current method isn’t broken, then why attempt to fix it? In other words, “We can manage with what we already have” – regardless of how inefficient it is;
  2. An impression that there will be an additional cost with very little return. Corporates tend to run treasury departments as cost centres, so they perceive investment in new technology as an increase in costs; and
  3. A sense that any efficiency gains are not visible: treasury teams are quite small – 45% of firms in the ACT report and 61% of those in the AFP survey have fewer than five staff.

Those are not the only challenges that treasurers face when making a case for the technology they need. There is a more local one, too, which is the impact on team members.

Many treasury teams are comprised of staff who are trained to handle data in a relatively manual fashion. As such, a treasury head looking to implement a TMS should evaluate:

  • Whether a team member’s process could be automated, and their role ‘upgraded’, so they can take on a more analytical role. How would that employee react? Would they be willing to be trained or upskilled?
  • Whether, if their role becomes redundant, that affects the structure and team morale.

Efficiency gains

One of the key challenges facing treasurers is the perception that manual processes are somehow ‘simpler’ than using a TMS.

We all see the impact of technology opening up efficiency gains in every walk of corporate life and the impact on business processes. For example, McDonald’s now offers customers the ability to order their meals using touchscreens.

Interestingly, this has enabled outlets to redeploy some of their staff to delivering meals to tables – which many customers have wanted for years.

Some of the world’s largest companies have failed to invest promptly in new technology and we see these business failures in the press all the time.

 Many treasury teams are comprised of staff who are trained to handle data in a relatively manual fashion 

I believe that any company without a basic TMS to handle its cash management and regulatory reporting tasks is hindering itself.

For instance, the future-proofing benefits that technology – and specifically TMSs – offer are significant.

As technology has evolved, many corporate back-end systems have had to accept urgent upgrades to interface with new applications entering the marketplace.

A carefully selected solution should offer corporates the assurance of future-proofing against regulatory change and potential new applications the business wishes to interact with.

For corporates that are on SWIFT, there are additional benefits around international payment tracking, transparency and speed. Most TMS solutions offer an integrated SWIFT service, which offers full transparency and delivery within 90 minutes.

The business case should therefore focus on unlocking the potential of the treasury function and the way that the technology will enable change and improve efficiency.

Building the business case

Any treasury business case that seeks internal investment in new technology from the firm must quantify the benefits that could be realised.

Based on my own experience, when Ferguson plc looked to introduce a TMS, the business case was fully costed and contained a wealth of detail to satisfy the group treasurer and CFO that the investment was prudent and worthwhile.

Today, a standard cloud-based TMS is relatively simple and cost-effective to implement and cannot be compared to the experiences of the past, ie a situation heavily reliant on IT support and regular upgrades.

In addition to the business case benefits of better efficiency, ability to process all our transaction types and improved reporting, we included extra requirements in our search for the right TMS. The following are examples of some of them:

Consistency with internal IT standards and protocols

  • No ActiveX controls or Java applets required.
  • Runs with the aid of only limited internal IT support.
  • Easy to roll out to other users via a simple web-browser connection.
  • Integrated SWIFT solution: straight-through processing for payments and collating MT940s, for cash visibility.
  • Provides a strong support system that will evolve in line with the business and market conditions.
  • Potential for broader application across the group to tackle areas of further cost reduction – for example:

i) replacing legacy systems;
ii) providing greater visibility at group level; and
iii) facilitating greater communication and working relationships with other business units, such as the integrated trade repository solution and internal FX trading platform.

Compliance with regulation and controls

GENERAL SECURITY

Functionality supported crucial points, such as segregation of duties, two-factor authentication, four-eyes transaction approval and white-label IP addresses.

EMIR

Automated upload of all eligible deals to the Trade Repository-RegisTR, and full outsourcing of future obligations under this regulation.

IAS/IFRS

  • Ability to comply with the requirements of IAS 39 or IFRS 9. (Incidentally, it was a recommendation of our auditors to implement our first TMS solution because of the challenges of financial reporting standard IAS 39. It was therefore crucial that the TMS can both measure, report and account for the hedge effectiveness of our hedging instruments.)
  • Capability to support future requirements such as IFRS 16, which came into effect at the start of this year.

PSD2

Ability to obtain visibility and access to e-wallets (non-banking financial institutions) – for example, Amazon, PayPal, Apple Pay – on their TMS dashboard using its application programming interface.

Patterns and behaviours

Further to those points, can any company continue to ignore how poorly the cybersecurity safeguards around their hosted servers compare to those of the larger SaaS providers – some of whom have Gold-standard security certification?

In relation to the concerns that treasury leaders have over their teams’ skill sets prior to implementation, there are plenty of measures that can be put in place to ensure everyone is prepared.

Firstly, though, it’s important to note that treasury staff who have followed the same manual procedures for several years present a conspicuous cyber risk.

Cybercriminals study patterns and behaviours that corporates apply when making payments.

In recent years, the results of that scrutiny have manifested through the phenomenon of CEO fraud. So it is important for corporates to acknowledge that risk and address it by providing their new systems with the appropriate coverage – such as two-factor authentication and/or biometric identification.

On the capabilities point, corporates should work with their TMS suppliers to provide advance training for their treasury teams and upgrade their skills, especially in cases where there is an identified aversion to change or a fear of job loss.

Workshop and documentation pre-implementation

In addition, as part of our TMS implementation, there were several steps that Ferguson took to secure buy-in from group-wide users, such as:

  1. A customised system manual was made available to all users via the provider’s online portal;
  2. ‘Show-and-tells’ were held to highlight the TMS’s primary benefits to various departments and entities within the group; and
  3. Detailed scoping workshops help the wider group with more extensive use of the TMS.

Harnessing engagement

Treasury staff are generally quick to recognise how a TMS will not only make their teams’ lives easier, but create opportunities to do more interesting or challenging work – thereby adding value to the business.

It is the treasurer’s responsibility to manage the team’s expectations and fears.

However, for a successful implementation, the supplier can also help to alleviate any concerns by supporting the treasurer and setting out the benefits to the team of using the system.

This can be done by setting out the opportunities for personal development that the TMS will provide. At the very least, the TMS supplier can support the team with their capability and knowledge of new treasury technology.

If staff recognise that peers and competitors are advancing their knowledge of new technologies such as artificial intelligence, robotic process automation and machine learning – they will be more likely to be open to embracing it fully.

All these pre-implementation activities should be considered before embarking on any technology implementation. A TMS implementation is strategic, complex and, for most treasury teams, the largest technology project that they will work on.

It should therefore be approached carefully, addressing the internal as well as the external challenges.

The benefits of a TMS for businesses, however, are persuasive and, with proper management, outweigh any risks of implementation.

About the author

Royston Da Costa is assistant group treasurer at Ferguson

This article was taken from the Cash Management Edition 2019 issue of The Treasurer magazine. For more great insights, log in to view the full issue or sign up for eAffiliate membership

Scroll to top