How to make Corporates Treasury Management Efficient using Technology?
Corporate Treasury is the strategic focus area in today’s organization with a clear mandate from the CFO to strengthen the Corporate Treasury function. Owing to the volatility in the market, the Treasury function continues to be central to the successful management of all financial risks associated with the firms’ business. Over the years, the role of a corporate treasurer has fundamentally transformed from a back-office and intensive function to a significantly more stable and strategic one; a role which adds immense value to the organization. Efficient treasury management bentails an accurate measurement of all types of risks an organization faces viz., transaction risk, translation risk, liquidity risk, credit risk, currency risk, economic risk, interestrate risk, so on and so forth. With the current volatile FX market conditions, which are here to stay, the need for an automated and end-to-end solution to enable effective management of exposures and the associated risks has become inevitable. Before we diveinto the details of how a TMS really improves the efficiency in an organization,let us understand how organizations are managing treasury today.How are organizations managing today?
Quite surprisingly, a large share of global organizations still depend on low technology solutions such as spread sheets to manage critical treasury management functions viz.,fore casting, cash visibility and bank account management. A recent survey by Bloomberg highlighted the fact where in 74 percent of global organizations with revenues less than $250million 'DO NOT' leverage a TMS for treasury management. Excel sheets and archaic systems still rules treasury systems of multi-billion dollar corporates. Several companies with over$10 billion forex exposures are still managing Forex with Excel utilities!!
What are the challenges faced in technology adoption?
Irrespective of an organization’s size, key reasons for not adopting a TMS include:
1. Fear of Technology Adoption Technology disruptions across industries, especially in the financial segment have left many organizations wondering about their next step. Though technology adoption is the evident way forward, but fear of technology adoption is natural. One of the challenges faced by organizations today is the unnerving fear of new technology adoption which renders adoption of an innovative Fin-Tech solution even at large size corporate seem like a daunting task.
This is further supported by this finding in a survey report conducted by Fidelity Information Services (FIS) that has found that 44 per cent of treasury and finance professionals are concerned that their risk management performance is mediocre or poor. This particularly applies to those using spread sheets and enterprise resource planning (ERP) systems for risk management.
2. Adapting to Change Many organizations feel that implementing a TMS means making changes to their existing system of processes and operations. Implementing a new system for Treasury Management would also mean trainings for the users to understand& learn how this system works, which implies investing time & resources.
3. Measuring value of TMS The very nature of any management decision while buying, is to see what it saves by spending money.
This leads to wrong set of benchmarks which often gives not so positive impact while buying a TMS. Hence, treasurers should look beyond what they save and also focus on how TMS will enable the organization post implementation
How does a Corporate Treasury Management System combat these challenges and enhances the efficiency using the power of technology?
A well designed, integrated, comprehensive,and customizable TMS enables efficient treasury management in an organization with following core capabilities:
• Automated. A good Treasury Management System automates the complete treasury management process of an organization.
• Analytics. Reports & Analytics are an integral part of a TMS, enabling single moment of truth for CXOs and daily basis analytics for the Treasury Department.
• Compliance. A technologically powered TMS employs thorough compliance with company as well as local / international regulatory body guidelines
• Decision support system. TMS guides and enables management compile enough information to make an informed decisions on risk mitigation and investments
• Governance. Implement strong corporate governance especially for global organizations with decent ralized treasury processes.
• Integrated. A comprehensive system which integrates with existing legacy systems of the organization and acts as single point of contact for the treasury operations
• Documentation: Configure system which can generate documents automatically required during each business process flow for both internal organization and financial institutions
• Notifications & Alerts. Real - time notifications, alerts and exception messages can play a critical role in enhancing efficiency of treasury management.
• Real - Time. A TMS helps build a strong information flow protocol enabling real-time access to critical information such cash visibility, cashflow, exposure, transaction information and so on.
• Streamline. A TMS streamlines the processes in Treasury Department ,allowing time for strategic decision making than wasting time on manual processes. A Treasury Management System with above listed capabilities will there by help
• Mitigate all kinds of market risks.
• Save Time.
• Save Manual Errors.
• Streamline the Processes.
With more time in-hand, the treasury team can concentrate on the strategic role and enhance the operational, functional, transactional and productive efficiency.
The Positive Impact:
• The Balance sheet of the organization and the business profit margins are protected irrespective of the market volatility.
• As there is a robust market-neutral system in place, the Management can easily delegate hedging operations to the Treasury Team, who will work within the risk parameters and an approved risk management framework.
• The CFO and the Treasury team can take and execute hedge decisions in a better manner with the help of the new strategy and system.
• Data linkages, simulated analysis and MIS reports will give clear view of risk, hedges both covered and open positions and profit margins to the Management. Period-wise reporting of hedged and un hedged position with risk quantification will provide a decision support tool to the treasury team.
• Monthly or quarterly reporting can be generated automatically during the management committee and the Board meetings.
• The Treasury team can take guided and well informed decisions on risk mitigation and investment portfolio, choosing the most proper instruments. A positive Treasury performance will be seen at the end of the year, whichcan be measured and quantified..
Owing to the volatility in the market, the Treasury function continues to be central to the successful management of all financial risks associated with the firms’ business
How does a Corporate Treasury Management System combat these challenges and enhances the efficiency using the power of technology?
A well designed, integrated, comprehensive,and customizable TMS enables efficient treasury management in an organization with following core capabilities:
• Automated. A good Treasury Management System automates the complete treasury management process of an organization.
• Analytics. Reports & Analytics are an integral part of a TMS, enabling single moment of truth for CXOs and daily basis analytics for the Treasury Department.
• Compliance. A technologically powered TMS employs thorough compliance with company as well as local / international regulatory body guidelines
• Decision support system. TMS guides and enables management compile enough information to make an informed decisions on risk mitigation and investments
• Governance. Implement strong corporate governance especially for global organizations with decent ralized treasury processes.
• Integrated. A comprehensive system which integrates with existing legacy systems of the organization and acts as single point of contact for the treasury operations
• Documentation: Configure system which can generate documents automatically required during each business process flow for both internal organization and financial institutions
• Notifications & Alerts. Real - time notifications, alerts and exception messages can play a critical role in enhancing efficiency of treasury management.
• Real - Time. A TMS helps build a strong information flow protocol enabling real-time access to critical information such cash visibility, cashflow, exposure, transaction information and so on.
• Streamline. A TMS streamlines the processes in Treasury Department ,allowing time for strategic decision making than wasting time on manual processes. A Treasury Management System with above listed capabilities will there by help
• Mitigate all kinds of market risks.
• Save Time.
• Save Manual Errors.
• Streamline the Processes.
With more time in-hand, the treasury team can concentrate on the strategic role and enhance the operational, functional, transactional and productive efficiency.
The Positive Impact:
• The Balance sheet of the organization and the business profit margins are protected irrespective of the market volatility.
• As there is a robust market-neutral system in place, the Management can easily delegate hedging operations to the Treasury Team, who will work within the risk parameters and an approved risk management framework.
• The CFO and the Treasury team can take and execute hedge decisions in a better manner with the help of the new strategy and system.
• Data linkages, simulated analysis and MIS reports will give clear view of risk, hedges both covered and open positions and profit margins to the Management. Period-wise reporting of hedged and un hedged position with risk quantification will provide a decision support tool to the treasury team.
• Monthly or quarterly reporting can be generated automatically during the management committee and the Board meetings.
• The Treasury team can take guided and well informed decisions on risk mitigation and investment portfolio, choosing the most proper instruments. A positive Treasury performance will be seen at the end of the year, whichcan be measured and quantified..
