What do treasurers want out of their IT systems?

When we asked six treasurers about their preferred software systems and how they add value, some common themes emerged, writes Lesley Meall

How you start your working day can set the tone for the next eight hours. So it is with treasury IT infrastructure. “I can’t emphasise enough how important it is for our access to market data to be completely automated,” says Royston Da Costa, assistant group treasurer with Wolseley Group Services, a global distributor of heating and plumbing products.

“It may not be the most important thing, but it adds a lot of value,” he explains. Each day, a file from Reuters is automatically pushed into a BELLIN treasury management system (TMS) at Wolseley. “There is no manual intervention. It’s arms-length from an audit perspective and it works,” says Da Costa.

It also goes into the enterprise resource planning (ERP) system. “Market data is the first thing that happens for us each day before the bank statements are imported,” he adds, noting the potential to further automate the latter.

“The importing of bank statements is an area we want to try to improve,” says Da Costa. “We looked at SWIFT, but decided not to implement it at the time. We use our cash-pool bank to collate all the SWIFT MT 940s from around our group, so we get that visibility nevertheless, but we don’t currently make our payments using SWIFT.

"We still have to manually key them into our banking portal,” says Da Costa, who is looking at the controls in Wolseley’s TMS before assessing payment options, including SWIFT, host to host and a hybrid.

Pain points

Bank statement import has long been a pain point for many treasurers, though technology-enabled solutions have long been available.

A decade ago, when Sunil Boorman, assistant treasurer at learning company Pearson, began his treasury career, the corporate he worked for used a multi-bank system that remains one of his favourites because, as he recalls:

“When you got into the office each morning, you knew that your statements and your reconciliation were basically done, and you just needed to analyse the data.”

Each day, the 40 or so banks the corporate used globally would send their MT 940 statements to a single bank, JPMorgan. It would reprocess the information to create a single file and format, then transfer this into the corporate’s TMS (a high-end offering from Wall Street Systems).

 Market data is the first thing that happens for us each day before the bank statements are imported 

Likewise, the corporate would send an MT 100-type message for all outgoing payments to JPMorgan, for reprocessing into the different formats required by various other banks.

There’s a massive automation and straight-through processing (STP) point there, says Boorman: “The connectivity and visibility of that set-up was invaluable.”

Now, in his role at Pearson, he is working on an implementation with similar functionality, based on a SWIFT service bureau. “They can transform the data into whatever format you need. They will even take the pain out of doing a lot of the documentation you need for SWIFT.

“Once the data is fed from the SWIFT service bureau into the TMS, reporting tends to be much quicker and easier, since the information is already consolidated. There is no need to manually download data from multiple banking portals and create Excel reports, so it avoids potential Excel errors,” says Boorman.

FX favourites

Ask Rando Bruns which system has been most useful during his career and the head of group treasury for the global pharmaceutical giant Merck chooses an electronic trading platform for FX, 360T.

“It allows us to automate a high proportion of FX trading processes, including replication in the TMS and accounting system, while at the same time improving transparency and pricing,” says Bruns, who is not the only treasurer to appreciate electronic trading.

“Online dealing was a big game changer for us,” says Da Costa. It meant that Wolseley Group’s treasury could automate its dealing process, providing more than two banking partners with an opportunity to bid on their trades at the same time.

“I think it’s important to speak to your banks and build and maintain relationships with people,” he says. “You’ll always need some human intervention.” Though technology and its capacity to engineer unnecessary human interaction out of treasury processes can be a large part of its appeal.

Process re-engineering

Christof Nelischer, global group treasurer with advisory, broking and solutions company Willis Towers Watson, says: “I view technology as an enabler that helps us to get the most out of people, by working effectively rather than long hours, and avoiding menial tasks you don’t need a human brain for that a system is perfectly capable of.”

Nelischer is a fan of the system-based process re-engineering that can enable this automated approach to creating an efficient treasury technology infrastructure.

One example he shares, where system-based process re-engineering demonstrated its worth, was the introduction of European Market Infrastructure Regulation (EMIR) regulatory reporting on derivatives in 2014. The global group treasury dealt with this by working with a number of its software providers to ‘engineer’ an automated solution.

 I think it’s important to speak to your banks and build and maintain relationships with people 

Nelischer worked with Misys to come up with a report out of that system and into a confirmed repository, and with a TMS provider and a dealing platform to feed correctly into Misys, so that data moves to and fro automatically.

The result, he says, is a 100% matching rate: “Correctly configured, with no faults in the process, there is no exceptional situation that needs manual intervention, and it all works automatically. There’s no error. We haven’t had a mismatch on confirmations since 2014.”

This said, these processes are not totally automated. There is still a role for a human being: a treasury colleague does static data management and monitors automatic transactions on a screen in Mumbai, where Willis Towers Watson has offshored some work. “I consider this an example of technology adding real value,” says Nelischer.

“This is work that has to be done, but in itself, it doesn’t add any real value. Now, it’s almost entirely automated and one person spends just half an hour a week monitoring it.”

Regulatory drivers

Nelischer isn’t the only treasurer driven to greater automation by EMIR. It was also behind the Wolseley move to replace spreadsheets with a TMS.

“Regulation does not discriminate between big and small,” says Da Costa. You have to report all eligible (internal and external) derivative trades under EMIR and Wolseley also had to demonstrate hedge effectiveness under IAS 39, Financial Instruments: Recognition and Measurement.

“Our auditors wanted to see systems in place to document and produce the level of compliance required,” he says.

Wolseley worked with its TMS provider BELLIN to get this. This contrasts with the experience of Robert Scriven, group treasurer and planning manager with the Edinburgh-based oil and gas company Cairn Energy, who also looked to software for help with EMIR compliance.

 Lack of built-in integration of TMS, dealing software and data tools such as Bloomberg are big failings 

“The TMSs I knew about were not set up for EMIR. They did not seem to look at the industry direction and build ahead, ready for change. They seem to react to what big customers want and the rest of us get the cast-offs from that,” he says.

Nonetheless, a TMS can deliver unexpected benefits. Wolseley’s first TMS implementation in 2006 was driven by IAS 39 compliance. “In 2010, we put in a cash-pooling structure with BMG and we needed to have a solution in place that demonstrated that we were using the cash more efficiently,” says Da Costa.

Wolseley considers itself a follower, not a technology pioneer, but its driving mantra is now automation and STP.

Integration matters

Degrees of integration vary across the components in the technology infrastructures these treasury professionals are developing, but they are all working to integrate progressively more systems – and for good reason.

“Treasury systems need to be interconnected within the treasury system landscape, as well as with the ERP systems, in order to have highly automated treasury processes,” says Bruns, who dreams of a perfect world where one group-wide ERP integrates with the treasury systems.

Just integrating an ERP and treasury and risk management system isn’t end-to-end STP, but it can still deliver big benefits.

Raj Nandkumar, treasurer at the Private Export Funding Corporation (PEFCO), a provider of US dollar loans to foreign importers, says: “The integration has improved our operational efficiency in terms of time and control. What used to take two or three days at month end for hedge accounting now takes half an hour in Reval, with general ledger entries posted to Oracle at the touch of a button.”

At Cairn Energy, Scriven may have struggled to tackle EMIR with a TMS, but he still chooses a low-cost TMS as the technology that delivered the “biggest gains” of his career, with its “single central source of data and no rekeying”. He also notes how important integration is to treasury automation efforts.

“It is essential that you make the effort to link up to other systems,” says Scriven, who would like the suppliers of various treasury-related software and services to make this easier to achieve.

“Lack of built-in integration of TMS, dealing software and data tools such as Bloomberg are big failings,” says Scriven. “They all need to be joined up more, using a single standard communications protocol – and out of the box, not rebuilt for every client, in a custom, time-consuming and costly way.”

It can be easier to integrate cloud systems (with the application planning interfaces (APIs) they provide for connectivity) than it is to integrate traditional systems, but even cloud implementations need some IT expertise.

More software support

“Before we opted for a cloud implementation in September 2015, I thought we wouldn’t need help from IT, but we do,” says Da Costa.

“Because of our reliance on automation, we need secure file transfers (SFTs) in place for a number of processes, and our general approach at Wolseley is that we like to control those processes. We want to be able to pull and push the data to external vendors,” he explains, so IT support is still required, though, as Da Costa adds: “It is minimal.”

Better integration between systems and services could transform treasury, whether it’s achieved through standardised communications protocols, more APIs and other connectors, or convergence between products such as 360T and Misys. “They link with the same external counterparties and load to and from TMS, and there are natural synergies with ERP, such as Oracle,” says Nelischer.

Then, as treasury processing becomes more virtual, treasurers could add more value by focusing on their business advisory role. “Treasury processing eats up so much time and energy, and doesn’t add any value. It needs to happen, but how is immaterial,” says Nelischer. “Systems become more effective when they talk to each other, and the measure for effectiveness is your STP hit rate, so the more integrated systems the better.”

Perhaps that should set the tone for the next eight hours and the next eight years.

The wish list

We asked treasurers what they most wanted their IT infrastructure to help them achieve and what they would like to see in an ideal world…

  1. “STP across all treasury technology to avoid the need for rekeying and manual uploads and downloads.”
  2. “Full integration, so we can deal from the TMS, and STP to confirm, EMIR report and settle.”
  3. “Subsidiary budgets and forecasts to be automatically loaded into the TMS from the ERP in order to get greater visibility over group FX exposures and cash-flow forecasts.”
  4. “Central visibility and control of all bank accounts.”
  5. “A reduction of bank accounts – each bank account not only has hard financial cost, but soft costs around the company, such as reconciliation and maintenance of the data across multiple business processes.”
  6. “Central control of all cash.”
  7. “Better coverage in one dealing system of product classes, deposits, FX, repo and MMFs.”

We also asked which problems treasurers would most like to see resolved…

  1. “Banks with common interfaces and template requirements, especially across their own branches globally.”
  2. “TMS providers being more willing to create and provide standard interfaces for corporates to reduce implementation effort – often interfaces are required to be built from scratch.”
  3. “Risk management analytics – TMSs providing a more efficient process of running simulations to test hedge effectiveness.”

About the author

Lesley Meall is a freelance business and technology journalist.

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This article was taken from the May 2017 issue of The Treasurer magazine. For more great insights, log in to view the full issue or sign up for eAffiliate membership

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