Advisory Treasury Technology Current Landscape and Trends · 2020. 11. 5. · Trans. (daily) 36...

Advisory

Treasury TechnologyCurrent Landscape and Trends

Strictly Privateand ConfidentialDraft

November 12, 2014

1 What treasury technology options are available in the market? 1

2 What are the latest trends in treasury technology? 5

3 How do I sell a treasury technology project internally? 20

4 How do I select the appropriate solution for my Company? 24

PageSection Overview

Table of Contents

PwCNovember 12, 2014

Confidential Information for the sole benefit and use of PwC’s Client.

What treasury technology optionsare available in the market?

1

Section 1

Treasury Technology • Current Landscape and Trends



Draft

Treasury systems landscape (2005/2006)

2Treasury Technology • Current Landscape and Trends

Section 1 – What treasury technology options are available in the market?

ERP*

Standalones*

Cash and Risk Management Systems*

- WSS (FX Trading, FXBO)

- Trema

- Quantum

- GTM

- Integrity

- ICMS

Local / nichePlayers

- XRT (Universe)

- Sage

- FXPress

- FiREapps

- …

* Sample list of systems, for illustration purposes



Draft

Treasury systems landscape (2014)



ERP*

Specialist (veterans & new entries)*

Cash and Risk Management Systems*

- WSS (FX Trading, FXBO)

- WSS Suite

- City Financials

- IT2

- Treasura

AvantGard:

- Quantum

- GTM

- Integrity

- Globe$ / XE

- Trax

- Getpaid

- …

Local / nichePlayers

- XRT / Sage

- FiREapps

- …

* Sample list of systems, for illustration purposes

- Risk/HedgeAccounting

- Cash/Liquidity(Ecofinance)

- FXPress

- Endur

- Findur



Draft

TMS Vendor Landscape - Considerations

• Consolidation and integration

(through acquisitions or alliances) to

expand footprint in:

− Functionality (end-2-end)

− Geography

− Clients (top-down)

• New market entrants

− To cover increasingly complex

requirements

− Offering relatively simple, easy to

implement solutions



Proper due diligence required when

selecting a new TMS, not just in terms of

functionality and cost, but also

• Vendor strategy & viability

• Age/maturity of underlying

technology

• Development strategy and R&D

investments

• Implementation & integration

efforts (complexity)

• Cultural fit



What are the latest trends intreasury technology?

5

Section 2


•Vendor consolidation•Increased system functionality•Greater modularity•Highly integrated systems & solutions•Increased system connectivity

•Simple system architecture•Use of cloud and web-based technology•Enhanced system security & controls•Emphasis on mobile capability



Draft

Trend 1 – Integration / Connectivity (1/5)


Section 2 – What are the latest trends in treasury technology?

In the past/present The Dream



Draft




External environment

Internal environment

Policies and Procedures

Pr

oc

es

se

s

Mandate & Vision Goals & Objectives

Financial Risk

• Foreign exchange• Interest rate• Commodity• Credit• Counterparty

Cash & Liquidity

• Bank relationshipmanagement

• Daily cash positioning• Payments• Cash forecasting• Excess cash investing

Corporate Finance

• Capital structure• Financing strategy• Leasing• Debt management• Dividend policy• Contingent liabilities

Tools, Technology, and Data

Delegation, Limits, and Controls

Organization & People

Treasury Infrastructure

Banking Partners Rating Agencies Tax JurisdictionsRegulators VendorsFinancial Markets

Culture Training CommunicationPerformance

MeasuresRewards

TradingCounterparties

Ac

co

un

tin

gA

/PA

/R

Le

ga

lP

ay

ro

llT

ax

IT

KPIs and Reporting Knowledge

Bank Account Structure

Fin

an

ce

Treasury has become increasingly complex, operating in a broader ecosystemwith multiple internal and external stakeholders



Draft




A single TMS in isolation will likely not provide all of the components required fora comprehensive treasury solution

Banking Partners

• Global banks

• Regional banks

• Local banks

•SWIFT?•Service Bureau?•Multi-bank reporting

ERP Core FunctionsTMS or ERP

treasury modules

TradeconfirmationsFX trading

Exposureconsolidation

Market Data (Reuters,Bloomberg, etc…)

Consolidationsystem

Function-specific Software

BankCommunication

Module

GL IC AP AR

Investmentportals

Additional considerations:

• Market data requirements

• Optimal approach to obtainingvisibility to global cash balances

• Linkages to banks / SWIFT forpayments and confirmations, inaddition to cash visibility

• Cash forecasting requirements anddata sources

• Robust, real-time and dynamicreporting with build in dashboards

• Process optimization andstandardization

• Connection to function specificsoftware

• Advanced, automated control andgovernance functionality

MgmtDashboards

WorkingCapital

Management



Draft




The traditional patchwork of systems and custom interfaces has demonstrated itslimitations in terms of maintenance and scalability

LT-InvestmentManagement

Bank #n

Bank #1

Bank Systems(Balance Rptgand IntraDay)

Upload of BankStatements

CashManagement

ReconciliationSystem

TreasuryAccounting

(several X day)27

Bk. Balances &Trans. (daily)

36

Reporting

Liquidity

Short TermInvestments

LOB Acctg. (daily)30

Adj.(daily)

39

Ledger Data(daily)

LedgerTrans(daily)

14

Funding

Trades22

EFT Provider

LOB DisbursementSystem

Trade SettlementFeeds & Acks

(X daily)38, 19

EDI FIles and Acks.(x daily) 35, 10, 11

LOB Acctg. (x daily)18

(several X day)26

Bank 1

Bank 2

DB Update (daily)42

Bank ExposureManagement

Bank RatingAgencies

Ratings

25

Upload of LOBFiles

Funding &Projections

9

Forecasts (daily)15

Earn

.

Pasti

(mo)

6

Fe

eds

(daily

)31,32,33,

34

Short Term

balances (daily)

16

Repos. Feed (daily)41

EDI FIles

(daily)

LOB #2

LOB #1

LOB Wire andACH Files

Wires & ACH(daily)

1,2,3,4,5

Sub Bank ExposureFiles Exposure

data24, 40

ForecastFile

Balances (daily) 23Acctg. (daily) 8

Balances (x daily) 20Projections (daily) 12

Trades (x daily) 21

Forecasts(yearly)

17

Bank RelationshipManager

Bank #1

Bank Systems(Statements)

Monthly

Traditional approach:

• In-House built

• Multiple systems

• Multiple interfaces

• High use of spreadsheets(EUA’s)

• Manual reconciliations

• Multiple data sets



Draft




Solutions that simplify the integration of data from internal and external systemshave a significant competitive advantage as they are best positioned to eliminateinefficiencies of data gathering and processing

Currently area of focusfor the largest clients

Though perhaps moreneeded by smaller co’swith limited resources

Improvement benefitsfrom larger co’stechnology investmentswill trickle down toMME’s

Functionality – How to provide all modules with a turn-key approach via one interface

Sale-ability – How to take the technology developed for the F1 clients and deliver to mass market



Draft

Trend 2 – Optimized bank connectivity through SWIFT(1/2)



What does SWIFT do?

What is SWIFT?

• Society for Worldwide Interbank Financial Telecommunication

• Founded in Brussels in 1973

• Cooperative society, supported by the banks

• SWIFT has 10.000+ customers spread over 212 countries

• SWIFT processes over 20 million messages / day ... 99.999% availability

• Transport of financial messages in a highly secure way

• Provides and defines communication standards (file formats)

SWIFT for corporates is gaining acceptance as the industry standard forbank connectivity



Draft

Trend 2 – Optimized bank connectivity through SWIFT(2/2)



Corporate

e-banking Y (EBS)

host to host X

e-banking Z (EBS)

WAN

Internet

Leasedline

Accountspayable

Accountsreceivable

Treasury

Other

Multiple bank channels

Corporate

Accountspayable

Accountsreceivable

Treasury

Other

Standardisedgateway

Single, standardised gateway

A key component of an integrated treasury technology solution is integrated bankconnectivity, including SWIFT, with one standardized interface for payments andstatements

Cost reduction, global visibility on cash, increased control/security/ compliance, increasedbank independence, extended offerings (FX matching, eBAM,…)

Benefits



Draft

Trend 3 – In House Bank and Payment Factories (1/5)



• Bank communication hub that centralizes,standardizes and automates payment processesacross the enterprise.

• Typical transaction types include:

– Bulk commercial payments, treasury payments,local and cross-border payments, inter-companytransfers

• Provides value added services such as:

– Netting, intelligent routing, payment advice andtrace numbers and enhanced audit trail

• Combination of organizational unit and supportingapplications that manages and administersintercompany liabilities and provides bank styleservices to affiliated entities.

− Looks and acts like an external bank accountto businesses – accounts are interest bearing,provide bank statements and balance reporting

• Primary functions include:

– Intercompany settlements, cash pool management,payments on behalf, hedging settlement (e.g. FX)

• Reduces number of bank accounts

• Reduces external banking transaction costs

• Supports currency exposure management

• Supports management of intercompany facilities

• Reduces transaction volumes through interconetting and aggregate FX funding opportunities

• Overall reduction of FTEs involved in the paymentsprocess

In-House Bank - Definition

In-House Bank - Benefits

Payment Factory - Definition

Payment Factory - Benefits

• Eliminates need to maintain disbursement bankaccounts for business units which improvescontrollership, reduces cost and streamlinestransaction processing

• Standardizes process and technology

• Enables processing on a larger scale to fullyleverage investments

• Enables better cash forecasting and execution

• Provides information for decision support



Draft




Typical Situation

• Inter-company payments & loans settled with cash

• Subsidiary FX deals executed against banks (settles with cash anduses credit)

• Result:

– High volume of external deals and cash movement

– Manual processes to execute, settle and journalize

IHB Solution

• Subsidiaries hold virtual accounts with IHB

• Inter-entity flows settled via IHB book entry

• Subsidiary FX, debt & investment all executed against IHB(cashless settlement)

• Result:

– Less cash movement and fewer external deals

– Automation of routine tasks

Sub

Sub

Sub

IHB

Sub

Sub

Sub

Banks

Banks

In-House Banking



Draft




Payment Factory

Multiple Processes

Multiple PaymentFormats

Multiple Interfaces

X Multiple locations

Multiple Accounts

Multiple Bank Statements

Multiple Signatories

Business Unit A A/C A Vendor A

Bank A

EFT A

Payments

Business Unit B

Payments

A/C B Vendor B

EFT A2

Payments

Business Unit C

PaymentsA/C C

Vendor CEFT B

ManualPayment

Business Unit DA/C D

Bank B

Bank C

Example payment(s) process withoutpayment factory



Draft




Payment Factory Example payment(s) process withpayment factory

One EFT System

One Set of Formats

Direct Connection to your banks

Business Units A/C A Vendor A

Bank A

Business Units

Internal

A/C B Vendor B

SWIFTinterface

Business UnitsA/C C

Vendor C

Business Units

Bank B

PaymentFactory

Bank C

interface

A/C D

Multiple Accounts

Multiple Bank Statements

Multiple Signatories



Draft




Payment Factory + In House Bank

Payment Factory

Reporting

Business Units

Business Units

Business Units

Business Units

Payments

Payments

Cash Settlements Centre

In-HouseBank

Corporate Treasury

Reporting

Operating Parameters

SWIFTNetinterface

Bank B

Bank A

Treasury A/C

Country A

Treasury A/C

Country B

Vendor A

Vendor B

Vendor C

Vendor A

Vendor B

Vendor C



Draft

Trend 4 – Big Data & Artificial Intelligence



Increased integration also leads to better access of data; question remains whatare we doing with this overload of information?

Bottom Up1000+ Entities xls

8 FTEsManually collated CFFs

Top Down1 FTE

One modelHistoric Data set

DIV A

1

A

B

C

D

E

2

I

II

III

IV

V

VI

3

a

b

c

d

e

f

Bus a

DIV B

1

A

B

C

D

E

2

I

II

III

IV

V

VI

3

a

b

c

d

e

f

Bus a

DIV C

1

A

B

C

D

E

2

I

II

III

IV

V

VI

3

a

b

c

d

e

f

Bus a

Big Data

FX ExposuresCFF

Bank Reconciliations



Draft

Trend 5 – Mobile Technology



Multiple Mobile Banking Platforms Single global view of liquidity& payment execution

• Single application for Payments and Reporting• Automated Intelligent routing of payments to appropriate a/c, partner & channel (Bank, SWIFT,

e-Payments, …)• Outsource vendor onboarding, payments to 3rd party specialist

Mobile technology is currently generating a lot of interest, especially in the areasof payments and real-time visibility of global liquidity



How do I sell a treasury technologyproject internally?

20

Section 3




Draft

The business case, at minimum, must address severalkey questions and focus on anticipated businessoutcomes. This is not just about technology.


Section 3 – How do I sell a treasury technology project internally?

• What caused the need/situation to happen? The triggers or drivers for thetransformation (e.g. FX loss, liquidity issue, excess cash, merger or divestiture.)

• What is trying to be achieved? The problem statement and hypothesis containing the"end game" when the problem/issue/change is fully resolved or completed and in place(e.g. a reduction in the earnings impact of FX volatility from Q1 2015 by 10%)

• What will it look like when it is completed? The transformation objectives, includinga detailed description of the new/changed way of working

• How will an organization know when it is there and how will it be measured?New measurable goals, performance measures, benefits measures, and stretch targets

• Who is responsible from initial conception to post implementation delivery tomake it happen? Names, roles, responsibilities, and accountabilities for all individualsand groups involved to permanently resolve the problem/issue and to implement thechange



Draft

Addressing these questions requires linking businessissues to potential solutions enabled by technology.



Business Issues

• Cash forecasting activities only provide visibility of 60% of globalcash balances and only 50% of business units provide timelyand accurate forecasts

• Earnings volatility due to FX rate movements are becomingmore significant as company continues to expand internationally

• Cash in Asia is decentralized in several jurisdictions from recentacquisitions leading to a less than optimal use of company cash

Opportunities for Improvement

• Improve visibility on global cash balances

• Create visibility on economic foreign exchange exposures

• Better control cash on a regional basis

Change Action Required

• Through a combination of enabling technology and instituting a“cash culture” gain visibility on current and future global cashbalances

• Implement an economic hedging strategy through linkages intoERP and consolidation systems

• Implement “In-house bank” as regional treasury hub in keygeographies

Enablers Policy Struct. Process Tech. People

1.Informationtechnology

X X X

2. Cash culture X X

3. Economic hedging X X X X

4. In-house banking X X X X X

Barriers and Risks

• Acceptance of the information management practicesrequired in forecasting and hedging

Benefits

• Impacted KPIs (Quantitative)

• Improved return on excess cash over benchmarks

• Reduction in P/L volatility

• % Centralized cash



Draft

Further, the business case should clearly identifyexpected benefits linked to overall corporate andTreasury objectives.



• Decreased earnings and cash flow volatilities• Stronger platform for operational stability and future growth

Minimize Financial and Operational Risk

Improved Returns

• Straight through processing for treasury transactions fromdeal / payment to accounting, front to back office

• Segregation of duties rules and limits, electronicauthorization and audit trail

• Reduced number of spreadsheets

• Reduce the number of Treasury systems paymentsystems/bank interfaces to be developed and maintained

• Effectively mobilize cash and debt to tax efficient locations• Reduce the number of banks, bank accounts and

banking charges• Eliminate the spread of simultaneous borrowing and

investing

Simplification

• Increase real time visibility and control over global cash andfinancial exposures

• Provide better support and more value added services to thebusinesses

• Create a better control and security environment• Daily cash flow forecasting• Greater transparency and awareness of currency flows and

risk implications• Fine-tune hedging programs through sensitivity analysis• Better management and follow-up of bank relationships• In-house banking for liquidity and intercompany lending• Enhanced reporting and measurement of performance

Lower Costs

Quantitative

Improved Transparency and Performance

Qualitative

• Improve the investment returns on surplus cash by effectivecash flow forecasting

• More robust short term investment management• Lower cost of capital through better working capital

management



How do I select the appropriatesolution for my Company?

24

Section 4




Draft

It is not just about selecting a replacement system...


Section 4 – How do I select the appropriate solution for my Company?

...but using the opportunity for process change

VisibilityOf Cash Flows and Bank balances foreffective liquidity managementOf underlying exposures (e.g. FX,credit, interest rate) to implementappropriate hedging strategies

Automation levelSTP (straight through processing)Integration with ERP, Banks &market data providers

Security and ControlSegregation of dutiesInternal and external audit compliance

ManagementReportingSingle source of information

Regulatory driversCompliance with regulatoryrequirements



Draft

System selection approach – insights



Lack of understanding ofREQUIREMENTS

IneffectiveSELECTION

Poor systemDESIGN

• Generic design not based onspecific requirements andobjectives

• Design toosegmented/fragmented drivenby system modules/functionality; more effective tofocus on comprehensive list offront-to-back scenarios fordifferent instrument types

• Standard RFP... standardresponses

• Lack of differentiationbetween system vendors –challenge to identify whichvendor dominantly demonstrateshe is better than competitors toachieve your objectives

• Too much focus on product, notenough on vendorimplementation team; bothare critical to achieve successfulimplementation

• Requirements do not tie back tooverall treasury objectives

• Requirements are based on as-issystemcapabilities/inefficiencies

• Requirements are too solution-oriented, leading vendors tofocus on client-request solution(including customizations)rather than optimal solution

A standard ‘quick fix’ selection…

Definition offunctional

requirements

RFPcreation

Responseevaluation

Short list ofvendors

Vendordemos

Final scoringand

recommendation

The traditional system selection approach is build on the following steps:

Can lead to a long, expensive and failed implementation…



Draft



Mountain Climbing

How do you recognize a good mountain guide?



Draft



Use of expertise!

Scenario A:

• Hire a mountain guide and:

- Tell him how to climb the mountainand what tools to use

- Tell him you know a better way to getup

- Tell him what team he needs to puttogether

- Tell him it can be done much faster

- Tell him it can be done much cheaper

Scenario B:

• Get yourself a very experienced& skilled guide and let himtake you to the top



Draft

System selection approach – benefits



1. Requirementgathering and objective

setting

2. Vendor cooperation& SMART RFP

3. Vendor detailedcapabilities evaluation

4. Pre Award

Assessment RFPresponses (supply scope,

risks and value add) +shortlist of vendors for

IV’s / demos

Preferred vendorselection

for Pre-Award phase

Client specificdocumentation:

demand scope, objectives(SMART), as-is (scenarios)

+ improvements

• No standard system RFPrequirements

• Leverage vendor expertise• Focus on risk management• “Dominant” scoring, based

on key differentiators

• Detailed capabilitiesevaluation throughinterviews of key vendorimplementation resources

• Vendor differentiation• Minimizes subjectivity and

decision making

• Focus on client objectives andexpected business benefits,rather than only systemspecific requirements

• Define as-is + improvementsSMART (via scenarios)

DIFFERENTIATORS

Detailedplanning &

scopingdocument +

Risk Plan

• Reduce implementationrisks (avoid surprises)BEFORE contract sign

• Focus on measuringperformance andaccountability

OUTPUT

Our recommended approach is to focus on achieving company specific objectives,leveraging the expertise from the vendor during the selection process, minimizing risksand achieve maximum utilization of the opportunities in the procurement and executionof the project

Execution framework



Draft

Key considerations when undertaking a systems initiative

• Define Treasury goals and objectives and strategic and functionalrequirements prior to selecting system solution

• Factor in the future needs of the company (i.e., strategic plans for organicgrowth and expansion, M&A, changing risk profile)

• Ensure appropriate buy-in from all key stakeholders (i.e., accounting, IT)

• Establish effective project management standards to ensure an efficient andtimely selection and implementation process

• Beware of vendor promises of future improvements (i.e., need to understandsystem embedded functionality vs. manual workarounds)

• Contact references including those of companies that did not select aparticular vendor

• Be flexible in changing your current processes to accommodate systemfunctionality

• Don’t rush the process – a formal RFP assessment is the best approach





Draft

PwC Contacts

Hans Candries, PrincipalSan Jose(408) [email protected]

Ali Rusta-Sallehy, ManagerSan Francisco(415) [email protected]



Thank you!

This publication has been prepared for general guidance on matters of interest only, and doesnot constitute professional advice. You should not act upon the information contained in thispublication without obtaining specific professional advice. No representation or warranty(express or implied) is given as to the accuracy or completeness of the information containedin this publication, and, to the extent permitted by law, [insert legal name of the PwC firm], itsmembers, employees and agents do not accept or assume any liability, responsibility or dutyof care for any consequences of you or anyone else acting, or refraining to act, in reliance onthe information contained in this publication or for any decision based on it.

© 2014 PricewaterhouseCoopers LLP. All rights reserved. In this document, “PwC” refers toPricewaterhouseCoopers LLP which is a member firm of PricewaterhouseCoopersInternational Limited, each member firm of which is a separate legal entity.

Advisory Treasury Technology Current Landscape and Trends · 2020. 11. 5. · Trans. (daily) 36...

Documents

Transcript of Advisory Treasury Technology Current Landscape and Trends · 2020. 11. 5. · Trans. (daily) 36...