Treasury Management Systems Guide 2016/2017

2016 / 2017

Treasury Management Systems Guide

The leading web resource for financial technology

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©2016 Bloomberg L.P. All rights reserved. S724932382 0916

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Brexit and Tech: How risk-enabled is your TMS? Neil Ainger // p. 6 Are you still using spreadsheets?

Madhvi Mavadiya // p. 9 Navigating regulatory change Rebecca Brace // p.12 Interview with Deutsche Bank: Managing Cash under Regulation Madhvi Mavadiya // p. 17

EDITOR’S WELCOME Having worked on both bobsguide and GTNews during my time at Contentive, I’m proud to welcome you to the first ever joint Treasury Management Systems Guide.

This bumper edition is full of features and commentary from industry experts, as well as our traditional functionality matrix that delves deep into what different treasury management systems are capable of.

With the recent decision to Brexit and the upcoming US election, it could mean that treasurers might have to sleep with one eye open in order to tackle potential fraud, manage cash visibility and meet regulatory requirements in these uncertain times.

We also look into what’s happening with regulation in Europe, innovation in Asia and tax in the United Kingdom which tie into some of the topics discussed by the bank and the TMS provider we interviewed.

2016 also saw our inaugural Treasury Innovation Forum and we’ve published the show report here with some statistics about TMS adoption that we found from our most recent survey.

Finally, we take a look at what treasury experts predict for the future and what upcoming trends to expect.

GTNews Editor Graham Buck graham@gtnews.com Managing Editor Sarah Gill sarah@bobsguide.com Sales Director Stephen McMaugh stephen@bobguide.com

The State of Corporate Treasury Madhvi Mavadiya // p. 24 Treasury Innovation in Asia Richard Hartung // p. 28 GTNews’ Treasury Innovation Forum report: Business Post-Brexit Graham Buck // p. 37 Interview with Bloomberg: The Importance of Functionality Madhvi Mavadiya // p. 40 Cyber Crime: On the Lookout for Fraud Keith Sonia // p. 43 BEPS TP rules: No longer a free lunch Nicole Miskelly // p. 49 Treasury Tech: The Innovation Game Sarah Gill // p. 52 The Future of Treasury Technology Madhvi Mavadiya // p. 55

Madhvi Mavadiya Editor

bobsguide Editor Madhvi Mavadiya madhvi@bobsguide.com

America 2016: What Treasurers Can Expect from Clinton or Trump Keith Sonia // p. 20

Business Development Manager Stefano Perciballi stefano@bobsguide.com Client Relationship Manager Carolina Quintana carolina@gtnews.com Design Alex Panichi Michael Rosa www.acceleratedigital.com

Copyright © 2016 bobsguide.

Copying and redistributing prohibited without permission of the publisher. This information is provided with the understanding that the publisher is not engaged in rendering legal, accounting or other professional services. If legal or other expert assistance is required, the services of a competent professional person should be sought.

Contentive One Hammersmith Broadway Hammersmith W6 9DL United Kingdom Tel: +44 (0) 208 080 9164 Fax: +44 (0) 207 084 7783 sales@bobsguide.com news@bobsguide.com

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Cash Visibility – Liquidity Management – Payment Workflow – Connectivity Management – Automated Daily Operations Treasury Management Systems Guide 2016/2017

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Brexit & Tech: How risk-enabled is your TMS? Treasury and risk management (TRM) solutions supposedly add integrated risk functionality to the traditional cash management abilities of a treasury management system (TMS), but can either help you cope with post-Brexit FX volatility and other such market shocks, or is technology only ever as good as the people controlling it? Is it best to integrate risk functionality or bolt it on?

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he people of Britain voted to exit the European Union (EU) on 23 June 2016 by a narrow margin.

Brexit will have major consequences for the economy, corporate treasuries and associated centralisation technology – not to mention the free movement of data, people, money and Britain’s wider relationship with the EU and the world.

The British Pound (GBP) plummeted once the result was announced on 24 June and stock prices initially fell, prompting Mark Rutte, the Dutch prime minister, to say that England had “collapsed politically, monetarily, constitutionally and economically”.

Rutte was referring to the resignation of the then Prime Minister David Cameron; and the threat of Scotland and Northern Ireland, which voted to remain in the EU, leaving the not so ‘United Kingdom’; plus the foreign exchange (FX) volatility, initial market turmoil, and downgrading of the country by the credit ratings agencies.

Since Rutte’s comments the stock market has recovered and the falling pound may help exporters, but the Bank of England cut interest rates from 0.5% down to 0.25% 6

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in August and relaunched its quantitative easing (QE) programme ahead of a feared economic downturn. The IHS Markit Purchasing Managers Index (PMI) survey of 650 UK companies in July 2016 showed a large fall in business confidence to 47. A reading below 50 indicates economic contraction.

It is clear that Brexit has increased risks – to short-term growth; FX stability; predictable business environments; continued UK access to the EU single market and the ‘passporting’ rules that enable firms to operate cross-border as if they were in their own EU country.

Trade and international business cooperation will obviously continue. But the question is in what form and how will it impact treasuries and their supporting treasury management systems which rely on centralised operations?

Payment factories (PFs) and many other such aggregation techniques need centralised structures, automated technology and cross-border cooperation. This cannot necessarily be taken for granted anymore in a world where national borders are strengthening – at least until a UK/EU bilateral agreement is thrashed out. The presumption must

be that Britain will eventually invoke article 50, which is the legal framework for exiting the EU once the new PM Theresa May settles in, following through on the advisory result of the national referendum.

COPING WITH RISK In an environment where risk is multiplying, corporate treasurers need to be able to model different scenarios, anticipate what hedging positions or funding arrangements they may want to put in place, and use technology and risk data to support these decisions and execute them.

“In an increasingly dynamic, unpredictable and volatile economy, treasury operations are ever more focused on risk awareness,” says Bruce Manson, head of treasury and risk management solutions at Bloomberg TRM. “Recent developments like Brexit and the changing regulatory environment have accentuated the need further. It is our expectation that this trend will continue.”

According to Bob Stark, VP of strategy at Kyriba, the Brexit fallout has driven treasurers to reevaluate their level of financial risk preparedness as the currency volatility was greater than most expected. “Any time there is significant financial loss to a firm’s bottom line, it leads to higher risk awareness in not only treasury but also the boardroom,” he says.

What corporate treasurers must decide is the best solution to help them cope with a world of increasing risk, whether it emanates from inter-related political and economic risks, enhanced stock market volatility, or more national tax transparency demands. Whatever the source, supporting technology should help treasuries plan strategies and execute trades in order to mitigate risk.

Humans will ultimately always have to make the big decisions about what to hedge, when, and where to base treasuries or look for growth. But if fast, relevant data and modelling software are available, alongside trade execution capabilities, it can help.

THE ROLE OF TECHNOLOGY Treasurers can use a treasury risk management system, with integrated risk metrics and analytics, or use a traditional treasury management system which ‘bolts-on’ this risk functionality to the customary cash management functionality. Both usually provide connectivity to financial market data and trading platforms to allow treasurers to easily execute their policies.

The third option for a corporate treasurer is to use a data service and trading toolkit provider, such as Bloomberg, which launched its own TRM solution in 2014 to try to integrate everything into one platform. Reval did a similar thing in 2011 when it entered the treasury technology field using the TRM name to denote it was attempting to integrate risk management functionality with the traditional cash management functionality of a TMS. Reval was previously a traditional risk vendor that offered credit valuation reports, stress tests and other risk metrics. Its Software-as-a-Service (SaaS) platform now offers risk, cash, liquidity and compliance all-in-one.

The TRM name is not trademark registered, however, and some view it as merely a marketing term, especially as older TMS’ have all rushed to add risk capabilities to their own platforms anyway, as much as they can retrospectively.

Whatever you call it – TRM or TMS – and regardless if the risk data and/or execution platform is bolted on externally, the key thing is how you align people, process and technology. All three ‘legs’ in this tripod are important

and should be addressed as such. There is no magic tech ‘silver bullet’ that will improve a corporate’s risk awareness, mitigation and hedging. Instead treasury technology should merely be the support mechanism for a well thought out strategic approach to risk from boardrooms and treasuries which are increasingly charged with implementing a comprehensive policy.

Who is programming in the key risk indicators (KRIs), and why, is as important as the technology reporting on them.

Humans matter. Equally, a treasury technology system should be able to offer KRIs, as well as the more traditional performance-related KPIs. “There are always going to be unexpected events and shocks to markets. This year it is Brexit, negative interest rates, the China slowdown and strengthening dollar,” says Peter Seward, VP of product strategy at Reval. “Corporates need a variety of risk analytics and metrics to quantify the impact of unexpected events to cash flows with regards to the timing, duration and lasting impact of the shocks. Collectively, scenario analysis, valuations and simulation techniques provide the essential technology toolkit to understand future uncertainty.”

CONCLUDING REMARKS According to Enrico Camerinelli, senior research analyst at the Aite consultancy, you shouldn’t get too hung up on the name, but rather concentrate on the capabilities of a treasury technology system, whatever the vendor decides to call it.

“Treasurers merely need a risk ‘intelligence’ component that relates to the metadata associated with potential risk events and quantifies individual risk probabilities. An ordinary TMS can provide risk management modules in its portfolio, although it can be disconnected so it’s worth checking the integration. The value of an ‘intelligent’ in-built TRM is its ability to build interdependent risk modules that allow treasury users to build correlations among risk elements.

For example, counterparty risk with cash and liquidity risk; market volatility and FX risk; and so on.”

Risk management functionality within most TMS platforms still appears to be relatively trivial, warns James Bateman, advisory director at the Covarius consultancy, citing a proliferation of takeovers and lack of R&D focus on the hard task of developing specific corporate risk management functionality. “It is often behind the times and in some cases only serves up basic risk reports,” he says. “Those vendors that do offer stronger risk management capabilities have expanded on these functionalities – perhaps offering CashFlow-at-Risk (CFaR) calculations – but many appear to be looking more towards leveraging the power of business intelligence (BI) tools and analytics platforms.”

“We feel most treasury technology vendors still do not have a genuine grasp of risk management,” continues Bateman.

“This causes them to integrate specialist risk vendor platforms into their package via application processing interface (API) services or use advanced BI data discovery and analytics platforms to mine deeper insights and relationships between treasury and corporate behaviours.”

Whether you decide to go with a vendor that tries to integrate risk functionality via a TRM approach or one that bolts it on to a traditional TMS depends on your treasury needs, legacy IT, cost, support and other individual considerations. It is up to corporate treasurers to decide what is best for them but whatever route is chosen aligning the people, process and technology is the key requirement.

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Are you still using spreadsheets?

With more and more corporations moving over to the TMS, are spreadsheets still being used?

The answer is yes. Many treasurers believe that spreadsheets continue to be a valuable resource due to the fact that TMS systems are not capable of doing everything.

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50% of treasurers managing less than $10 billion use spreadsheets as their primary management system.

McKinsey & Co, 2015

Why do treasurers use spreadsheets?

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Treasurers feel overwhelmed and too pressured to implement a TMS.

2.

It is too expensive to move over to TMS, but cloud solutions have helped alleviate this problem.

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Some treasurers do not need an overly complicated system.

Kyriba, 2015

Regulatory problems Over-reliance on spreadsheets could cause major problems for insurers and others in the financial services sector that are struggling to get to grips with the Solvency II regime.

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73% of CFOs are concerned about their reliance on spreadsheets.

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80% of CFOs have reported a fault with their planning processes when using spreadsheets over the past year.

Accountagility, 2016

APAC Region •

66% of treasury management officials said that they don’t use treasury tools to forecast cash flow.

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69% of officials in both emerging and developed economies across the Asia Pacific region reported relying on spreadsheets to manage finances.

Bank of America Merrill Lynch and SunGard, 2015

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B R A C E R E B E C C A B Y

Navigating regulatory change C

orporate treasurers in Europe could be forgiven for thinking that the post-crisis avalanche of regulatory change must, by now, have run its course. From Basel III to SEPA, the last few years have been characterised by a significant number of new regulations. However, there is plenty more yet to come – and treasurers should have a thorough understanding of the upcoming changes in order to stay ahead of them Specific regulations which could affect treasurers in the coming years include the following: MONEY MARKET FUND REGULATION Money market funds are commonly used by treasurers as a means of investing excess cash. However, this area has been subject to considerably scrutiny since the financial crisis. In the US, the Securities and Exchange Commission is in the process of introducing new rules which will require all prime institutional funds to operate on a variable net asset value (VNAV) basis, as well as complying with various disclosure requirements.

Similar rules may follow in Europe. “Europe envisages a similar regime to the US, with the objective of reducing systemic risk – however, also impacting the return landscape for MMFs,” commented Ruth Wandhöfer, global head of regulatory and market strategy at Citi.

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PSD2 The revised Payment Services Directive was adopted by the European Parliament in October 2015 and published on 23rd December. Member states will need to comply by 13th January 2018.

Wandhöfer noted that while PSD2 mainly focuses on consumers and smaller companies, “some innovation in the space of payment initiation and account information could also provide incremental benefits to larger corporates over time”. She added that there is still a fair amount of uncertainty around regulatory technical standards and processes.

TAX LAW Tax is also attracting regulatory focus. Tax transparency rules proposed by the European Commission in April would require multinationals with annual revenues of over €750 million to disclose country-by-country information about where their profits are generated and where they pay tax.

“This Directive proposal reinforces the importance of tax transparency – a theme that corporates (and banks alike) have become accustomed to as part of developments such as the US Foreign Account Tax Compliance Act (FATCA), the OECD Common Reporting Standard (CRS) and the OECD’s Base Erosion and Profit Shifting (BEPS) initiatives,” said Wandhöfer.

She noted that the proposal is linked to other initiatives which introduce the sharing of information between tax authorities, such as the revised Administration Cooperation Directive, which implements the OECD’s BEPS Action Plan.

“In addition, the global OECD BEPS reform package as well as the OECD Common Reporting Standards are seeing more and more local legislative action around the globe,” Wandhöfer added. “This means that corporates will need to focus their attention across many different geographies as required by their footprint.”

MIFID II MiFID II is due to come into effect on 3rd January 2018.

As well as replacing the original MiFID regulation, the revised regime will also bring the new Markets in Financial Instruments Regulation (MiFIR).

“MiFID II will affect corporate treasury functions significantly,” said Chris Leonard-Appleton, Director, Regulation at Thomson Reuters. “We worked closely with regulators in getting clarification to ensure that corporate firms could continue using an MTF [multilateral trading facility] if they are hedging on the platforms, but there will still be a lot of work to do around data and reporting.”

Leonard-Appleton added that MiFID II will have a number of impacts on corporate hedging strategies, from providing additional data to venues for transaction reporting to bifurcating liquidity pools globally.

IFRS 9 Where hedge accounting is concerned, IAS 39 is being replaced with IFRS 9. IFRS 9 has a mandatory effective date of 1st January 2018, although it can be adopted sooner.

“IFRS 9 is widely considered a welcome change and a step in the right direction compared to its predecessor (IAS 39),” commented Bruce Manson, head of treasury and risk management solutions at Bloomberg. “From a corporate treasurer’s perspective, this change will give them the flexibility to align hedge accounting with their risk management policies and practices thus providing opportunities for certain economic hedges to now become eligible for hedge accounting.”

BREXIT While not a regulation in itself, the UK’s decision to exit the European Union could have significant implications from a regulatory point of view.

“There’s a lot to be worked out around which route we will go down, given the integration of regulation across Europe through the EU,” said Mark Crowhurst, a director at PwC. “How the regulatory environment develops between the UK and the EU will be complex and is likely to involve divergence around specific areas, leaving firms to deal with considerable regulatory uncertainty for a number of years” For some companies, Crowhurst says this could lead to questions about where treasury is located. “As a corporate treasurer, I may be asking if I am better off having my treasury in Paris rather than in London, as financial services activities potentially relocate around Europe” he explained.

“Paris might give me better access to euro capital markets – if you look at the lack of liquidity in sterling bond markets

compared to the euro bond market. The counter argument is that it is very hard to replicate the economies of scale of the London model in terms of maturity of regulation, resources, infrastructure and access to financial services advice.”

IMPACT FOR TREASURERS For treasurers, the upcoming regulatory changes present a number of challenges – both in terms of complying with individual rules and operating effectively in the changing landscape. With so many changes in the pipeline, how should treasurers go about addressing them?

“Given the increased breadth of ongoing regulatory reform, which impacts corporates, it is a priority for corporates to focus their attention on these changes to ensure that first of all no compliance requirement is being missed and secondly to address the specific requirements in an effective way,” said Wandhöfer. “This may require more steps than just ensuring the production of specific compliance reports or shifting strategy in the space of investment, but also may lead to a reevaluation of legal entity set-up, the taxation model etc.”

Leonard-Appleton pointed out that regulatory change adds cost to corporate treasurers in the short term. “Treasurers have suddenly had to add regulatory compliance to their repertoires,” he says. “The pace of change may have slackened from a policy perspective, but now everyone is having to deal with a bewildering array of technical rules that are both vast and complicated in scope. Treasurers have to think about all of this while also doing their day job of managing commercial and treasury risk, which is a big ask.”

Treasurers should also be aware of regulatory changes that will affect their banks as well as their own businesses, and should monitor any possible implications.

DRIVING INNOVATION Despite the challenges brought by regulatory change, the new landscape may have some benefits where innovation is concerned. “Regulatory change forces innovation by altering the status quo,” said Manson. “New ways to address regulatory challenges will drive innovative solutions.”

Wandhöfer added that more solutions are coming to the market which simplify and automate regulatory reporting, help identify risks and inconsistencies and increase analytic output and transparency. “The emergence of RegTech as a focused fintech approach to solving regulatory challenges for firms is an area that should be kept in mind by corporates,” she added.

The changing regulatory landscape could also theoretically open up the market by enabling other fintech companies to enter this space. Crowhurst notes a rise in various FX brokers offering better pricing to SMEs and mid-tier corporates. However, these fintechs are also themselves subject to the changing regulatory environment.

CONCLUDING REMARKS Regulatory change is a fact of life for corporate treasurers.

With so many changes in the pipeline, treasurers should make sure that the understand the impact on their own businesses – as well as on their banks – and make sure that all requirements are met. Treasurers should also be aware of opportunities and new innovation that may arise as a result of the changing regulatory climate.

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B Y M A D H V I M A V A D I Y A

Interview with Deutsche Bank: Managing Cash under Regulation L

isa Rossi, Global Head of Liquidity and Investment Products for Global Transaction Banking, Deutsche Bank, spoke to us about how treasurers have had to adapt post-financial crisis and how other events in the future could result in uncertainty.

What is your role at Deutsche Bank?

I’m responsible for Liquidity and Investment Products within the Global Transactions Bank. This includes cash concentration structures, which help create efficiencies via multiple accounts across the globe. We also manage notional pooling, cross currency structures and investment products

that can help optimise fund positions. At the end of the day, it is all about working out how effectively a treasurer can optimise their balance position, regionally and globally.

Post financial crisis, how has the way chief financial officers (CFOs) and corporate treasurers (CTs) manage cash changed?

There has been a change in how banks look at liquidity products. With the regulatory changes that were introduced as a result of the financial crisis, regulators want to see banks increase the size of their stable funding. This requires banks to create different products to support stress-compliant funding options for clients, and requires CFOs and Treasury Management Systems Guide 2016/2017

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Treasurers to look at deposits differently as they manage their own cash positions. Historically, treasurers could leave money on their current account at any bank and they would be able to earn a return. Since the financial crisis, overnight money has been of less value to banks, and that affects the interest earnings on deposits that treasurers receive.

As banks, we are looking to have longer-term deposits that create more liquidity value and then pass that addedvalue onto the corporate treasurer. What this means is that increased visibility is essential, as is having an understanding of when treasurers have money and when they will need their money for operational requirements – which all boils down to better forecasting. This will help them to understand how long and where to invest their money, and to optimise it more efficiently than they did in the past. In addition to all the regulatory changes, the negative interest rates in the Eurozone and other regions are also an issue – another challenge that treasurers have to navigate.

Why is retaining excess cash a bad idea?

Of course, having excess cash is not, in itself, bad for corporates. It’s not bad for banks either, provided it has sufficient duration and longevity. Let me explain: with overnight cash, generally a bank would have to place it in a central bank. If placing it there represents no value or a negative value to that bank, that is of course neither good for the bank nor its customer. If, on the other hand, you have balances placed on term deposits of over 30 or 60 days, these may actually help banks meet their liquidity coverage ratio and improve the results of a stress test, which would then provide a positive contribution to the bank’s balance sheet.

Obviously, this means that the bank can offer a far better rate of return to its customer on these types of deposit. So the crucial questions to ask are: what kind of cash is this, and what kind of investment should I place it in?

How would treasury be affected by a potential interest rate cut?

We have seen interest rates dip into negative territory in the Eurozone, Switzerland and Japan. That has had a substantial effect, as treasurers are going to have to re-evaluate how they manage their end-of-day positions and look for other, safe, alternatives that sit within their investment parameters or criteria.

One of the key things that we are noticing when talking to treasurers is that some of them are reviewing their investment guidelines. Traditionally, treasurers had very conservative or short terms for investing. Now, treasurers are telling CFOs on the boards of their companies that it may be a good time to review certain areas of their guidelines

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such as extending the time they can invest to go beyond the 30 or 60-day time period for a deposit in order to achieve a positive, or even less negative, number.

That is not to say that they are going to change investment parameters to riskier investments, but they are certainly looking at durations that are longer, and also different options and different investment products.

Should companies worry about regulations that affect banks?

Absolutely, yes! At conferences that I have attended recently, many of the discussions that we are having are exactly like the one that I am having with you. I am sitting down with treasurers and explaining to them what the regulations are and how they have affected banks – and how that directly and indirectly affects products and the way we do business with our corporate treasurers. Having this dialogue is really important because I believe, as a corporate treasurer, you’re going to get frustrated if you expect the same thing you’ve had historically, but you’re not getting that anymore.

How can CTs optimise their company’s liquidity position?

Our number one priority at the moment is helping them to improve cash forecasting in order to better understand how long they will be in a particular excess cash position.

Treasurers have to deal with different types of cash, from the day-to-day operating cash that you need on-hand, to the work cash that is needed once in a while. Knowing precisely how long a particular sum is available allows a treasurer to optimise its use. This all ties into managing your working capital effectively. It is also critical to let your bank help manage flows and cash concentration structures in an automated process to realise better efficiencies. We are also seeing corporate treasurers swapping currencies; for example, swapping into dollars in order to maximise earnings instead of maintaining the money in a negative-yielding currency.

Going forwards, we will see increased sophistication in hedging and the ways that different currency positions are managed in order to achieve yield. As well as this, treasurers will look at investment parameters to see how positions could be termed-out a bit longer so that better interest rates can be achieved.

Any concluding remarks?

It is really important for treasurers to understand the consequences of financial regulation, and you can’t be complacent anymore. In the old world, you could leave your money on current account and you could still earn a return. Those days are gone and I don’t expect to see them back soon.

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S O N I A K E I T H B Y

America 2016: What Treasurers Can Expect from Clinton or Trump F

rom afar, the campaign being waged by Democrat Hillary Clinton and Republican Donald Trump to become America’s 45th President may seem particularly volatile. Considering the candidates: a former First Lady and Secretary of State with over two decades in national politics (and all the baggage that comes with that) and a property mogul turned reality star who has grown his brand in recent years by lending his name to conspiracy theories like the origins of President Barack Obama, it’s no wonder that treasurers and financial professionals around the world are attempting to move beyond the absurdist rhetoric that typically accompanies a presidential race in order to determine what they can expect from the hypothetical administrations of either Clinton or Trump.

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HILLARY CLINTON With Clinton, it may be easier to predict what to expect, considering her husband’s tenure in The White House, and with many assuming that her administration would represent the proverbial “third term” for Barack Obama.

However, with the success of Vermont Senator, and self-described democratic socialist, Bernie Sanders in the Democratic primaries, Clinton allies helped draft a party platform that has included more left-leaning language, perhaps forcing a President Hillary Clinton to adopt policy positions that many experts would have previously said were too ideological for Clinton to enact. This has already started, with Clinton dropping her support of the oft-discussed and much maligned Trans-Pacific Partnership (TPP).

Like Obama, Clinton has zeroed in on Wall Street and is

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by Kyriba, gives CFOs, treasurers and finance leaders the analysis and insight to deploy cash in an efficient and strategic manner. This enables them to drive smarter, more informed business decisions, and add value throughout the organization.

To learn more about how The Treasury Cloud can make your organization’s cash a powerful growth enabler, contact treasury@kyriba.com or visit www.kyriba.com.

Treasury Management Systems Guide 2016/2017

21

also arguing that there are still too many risks emanating from top firms, particularly when it comes to money backed by taxpayer funds. According to her statement last year, despite it being eight years after the financial crisis of 2008, risks that could cause another crisis are still present in our financial system. “Banks have paid billions of dollars in fines, but few executives have been held personally accountable.

“Too big to fail” is still too big a problem. Regulators don’t have all the tools and support they need to protect our economy. To prevent irresponsible behaviour on Wall Street from ever again devastating Main Street, we need more accountability, tougher rules and stronger enforcement,” Bloomberg reported.

In trying to work out how Clinton economic policy might be drafted, one may attempt to predict who the former cabinet secretary might appoint to run the Treasury Department. With anti-Wall Street rhetoric at a fever pitch, the run of banking heavyweights like Tim Geithner, Hank Paulson, and Larry Summers ending up in the job seems to be at an end, at least temporarily. POLITICO has speculated that Clinton would instead turn toward Silicon Valley, with insiders claiming that former Treasury Department staffer turned Facebook COO Sheryl Sandberg is at the top of the wish list. Campaign CFO Gary Gensler, Federal Reserve Board of Governors member Lael Brainard, current Secretary of Health and Human Services Sylvia Burwell and Gene Sperling, director of the National Economic Council under both Obama and Bill Clinton, are seen as other possibilities.

Additionally, a long sought after shake up at the Federal Reserve is perhaps in the offing, as Clinton endorsed a plan put forth by liberals looking to end the influence of private banks to contribute to Fed policy, including the raising or cutting of interest rates. The Huffington Post highlighted earlier this year that private banks do not have a significant influence over the Fed’s regional outposts through board of director positions. “Directors selected by bankers help choose the president of each Fed outpost. These presidents, in turn, serve on the key committee that sets interest rates. Clinton called for getting bankers out of that process.”

It would appear that the analysis that financial policy under Hillary Clinton would attempt to complete work begun

by Barack Obama is largely well founded, but despite that, the influence of Wall Street on domestic fiscal policy will be difficult to eliminate, particularly with Chuck Schumer, Democratic Senator of New York, the odds on favourite to take the reigns as Senate Majority Leader in January. His ties to Wall Street are the stuff of legend, and he will likely provide the banks a degree of cover.

DONALD TRUMP The fiscal policy of a Trump administration is as difficult to predict as the man is himself. Trump secured the nomination on the back of largely rejecting traditional Republican policy on everything from Wall Street to trade, often finding himself closer philosophically to Sanders than to Jeb Bush or Scott Walker.

The bulk of Trump’s statements regarding economic policy is rooted in his protectionist philosophy: the idea that the U.S.

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Treasury Management Systems Guide 2016/2017

is coming out on the losing end of trade deals like NAFTA and with nations like China. While Sanders also contributed to the protectionist tone of campaign 2016, it has become a Trump hallmark. In the June 2016 edition of GTNews’ Global Treasury Briefing, Mindy Herzfeld, contributing editor at Tax Analysts and formerly a senior manager at Deloitte Tax said the following, “Free trade, lower taxes, and no tariffs have been core to Republican ideology for decades.

Trump is rejecting all that, and much of the Republican base seems to be buying into his views.”

However, as the Global Treasury Briefing also notes, Trump’s threats to institute high tariffs, such as the 45% he’s proposed across the board on deals with China, would lead to “multinational corporations almost certainly see supply chains disrupted, prices skyrocket, and sales plummet.” This, then, would make most acquiesce, unwilling to risk a massive economic downturn, but then Trump is unlike any candidate America has produced in at least half a century.

This also manifests itself in who Trump would reportedly like to run his Treasury Department: according to Fortune, his nominee would be former Clinton financial bundler, Goldman executive and George Soros ally Steve Mnuchin.

Whether or not Mnuchin would be interested in the job is almost irrelevant; Mnuchin would be a choice that would alienate Republicans in and out of Congress, and represent a shift from Trump’s anti-Wall Street campaign rhetoric.

Mnuchin was one of over half a dozen economic advisers Trump has brought aboard his campaign in an official capacity. His influence is already, apparently, outsized, as Trump has recently announced that he would institute a moratorium on new federal regulations of Wall Street.

However, it’s also more than likely that Trump, not a policy wonk by any stretch, would be bulldozed into supporting Republican efforts lead by House Speaker Paul Ryan. Ryan likely sees Mike Pence, the Indiana Governor that Trump tapped as his Vice Presidential selection, as a key partner in a potential Trump administration.

CONCLUDING REMARKS The other cornerstone of Trump economic policy is his across the board tax cuts. While everyone would see a reduction, the top income bracket stands to gain the most from the plan, which has drawn unfavourable reviews from Moody’s in their analysis of the economic policy of both candidates.

“Everyone receives a tax cut under his proposals, but the bulk of the cuts would go to those at the very top of the income distribution, and the job losses resulting from his other policies would likely hit lower- and middle-income households the hardest,” the ratings agency reported. The report went on to state that Trump’s policies would see slower annual growth and a weaker jobs market compared to Clinton’s, with markets like the S&P 500 performing better under a Clinton administration.

Perhaps the Moody’s report provides the most thorough glimpse into the future, but Election 2016 has many on edge across the financial services industry, and treasurers in a variety of settings are likely hedging their bets, and rightfully so.

What Can One Integrated Treasury & Risk Management System Do For You? Jaguar Land Rover

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Duncan Karran Assistant Treasurer

Cigna

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Scott Lambert Treasury Senior Director

Hasbro

“We use Fides, FXall, Thomson Reuters’ market data and SAP, all without leaving the [Reval] system.”

BANK CONNECTIVITY

RISK MANAGEMENT

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Treasury Management Systems Guide 2016/2017

23

B Y

M A D H V I

M A V A D I Y A

The State of Corporate Treasury Insights from GTNews’ Global Treasury Trends Survey 2016

157 professionals from 44 countries were surveyed about trends in the treasury space and their predictions for the future.

Here are some of the findings.

Treasury at a time of uncertainty • • • •

30% of respondents said that foreign exchange fluctuations and exchange rate volatility were significant challenges to their organisation.

46% said that Basel III was the most challenging regulatory issue for treasury at the moment.

54% said that liquidity is an area of importance when it comes to treasury risk.

Managing workload was the biggest professional challenge facing 26% of the respondents.

Treasury technology • • • • •

40% currently use a TMS. 40% do not use a TMS. 20% are thinking about implementing a TMS. 73% use a TMS that allows treasurers to manage cash flow and deal with foreign exchange.

53% use a TMS that includes functionalities for derivatives and help with front and middle office.

Treasurers with increased opportunity • • •

82% believed that the role of the treasurer has changed significantly since the financial crisis.

Revenue growth is a significant opportunity according to 36% of those who were asked.

However, 16% believed that increased availability of real-time data would create opportunity for the treasury department.

Treasury Management Systems Guide 2016/2017

25

“The elite Treasury Management System.

A complete solution for all global treasury needs.�

www.salmonsoftware.ie 26

Treasury Management Systems Guide 2016/2017

Salmon Treasurer provides extended Treasury Management functionality enabling you to centralise or decentralise Treasury operations.

By automating your Treasury Management processes, Salmon Treasurer effectively eliminates the need for spreadsheets, as well as human intervention, allowing proactive management of Treasury activities, enabling a focus to add value in other areas.

The system supports all the Treasury Operational processes that one would expect.

Its key is the depth of instrument coverage, the flexibility of the integration capabilities to upstream, downstream & external systems, alongside 100% accuracy of the reporting requirements. Also key is our speed and success rate of deployment.

The Salmon Treasurer Portal the new browser based portal, also accessible via mobile technology. It is a multi-functional, multi lingual portal solution and can be used in a variety of ways such as: • Inter Company Portal – Workflow linked live to the Salmon Treasurer database to operate full Inter Company divisional segregated processing & reporting. Deployed via intranet or internet.

• Company Reporting Portal – Cockpit reporting portal for Subsidiaries and High Level Management and reporting requirements.

• White labelled Cash Management Portal – To service Corporate, Banks, Brokers or Public Sector Groups with Treasury Outsourcing Services etc.

Salmon Software deliver Elite level Treasury Management Solutions at a very reasonable price.

Treasury Management Systems Guide 2016/2017

27

B Y

R I C H A R D

H A R T U N G

Treasury Innovation in Asia D

espite increasing automation throughout most of the corporate organisations in Asia, treasury in many companies has stuck with longestablished and often manual practices. Innovation and new technologies are delivering better treasury management systems or alternatives, however, corporate treasuries may soon find new options that could lead to significant enhancements.

ASIA AND THE SPREADSHEET TRADITION While a TMS can be very beneficial for treasury functions ranging from liquidity management and payments to reporting and compliance, the Asia Pacific Treasury Barometer 2015 by SunGard (now FIS) and Bank of America Merrill Lynch showed that only about 40% of companies in Asia use either a specialist TMS or a treasury module from an enterprise resource platform (ERP).

Another 23% have built in-house applications.

The PwC Treasury Systems Report this year similarly found that around 47% of treasury functions in Asia have a TMS. Worryingly for vendors, “more than half of survey respondents in Asia expressed dissatisfaction with their existing TMS,” the report read.

Many organisations that do use a TMS, have older systems, as the 2016 AFP Treasury Management System Survey found that only 44% of companies that do use a TMS have the most up-to-date version while another 44% are using systems that are one to two iterations behind the current version.

Rather than taking full advantage of a TMS, treasury staff in Asia often still use spreadsheets for a significant portion of their work. The FIS survey showed that 67% of respondents

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Treasury Management Systems Guide 2016/2017

across corporations of all sizes used spreadsheets in 2015, down only slightly from 69% in 2013.

“Spreadsheets remain the backbone of Asia Pacific treasury reporting, with its predominance unlikely to decline meaningfully in the short term,” commented Bank of America Merrill Lynch Global eCommerce executive Cindy Murray. “However, the growth of TMS and cloud-based technology systems continues to rise and demonstrates that treasuries across the region are beginning to embrace change at an acceptable level.”

When companies do use a TMS, how they use it varies significantly depending on where they are located.

Developed markets such as Singapore and Hong Kong are typically very open to the cloud and have core needs for capabilities that enable them to manage cash, liquidity planning and foreign exchange better, Reval Solutions Consultant Asia Pacific, Nicolas Adjemian told GTNews.

Firms in Australia and New Zealand, on the other hand, have higher exposures to commodities and need systems that can provide robust risk management across all asset classes. Big conglomerates in Japan and Korea typically have decentralised treasury operations and TMS is mainly focused on solutions for the domestic market such as cash visualisation.

Developing countries in Southeast Asia are again different, Reval’s Adjemian said, being heavily reliant at best on the treasury module of their ERP providers but in most cases relying instead on bank portals and Excel spreadsheets.

Initiatives around treasury centres in Malaysia and Thailand are, however, driving interest in cloud-based TMS in those two countries.

A NEED FOR CHANGE With Asian firms lagging behind their counterparts in other regions and with only 62% of treasurers in Asia seeing the treasury function as a value-adding centre compared to 79% globally, according to PwC, there may be an impetus for change. What’s needed, PwC opined, is a “fit-for-purpose TMS solution [that] will allow treasurers in Asia to meet ever increasing demands and add value to their businesses.”

Key drivers of that change, Andrew Bateman, Head of Treasury Software Solutions at FIS told GTNews, are regulation and globalisation. Whereas relatively inexpensive headcount could manually operate basic functions of treasury cost-effectively in the past, “the increasing complexity of regulation requires corporations to invest in modern TMS technology for both computation and compliance.” With many Asian corporates now having regional or global operations, there also tends to be a greater need for core risk management functionality, specifically for foreign exchange.

Some solutions may come from financial institutions.

Capgemini said that banks and non-bank financial institutions are transforming their payments processing infrastructure by investing in order to create centralised payment hubs that will enable them to improve corporate payments services. The next stage of transformation in payments has also begun, Capgemini noted, with innovation from non-banks that are creating open-source, distributed, and immediate payment settlement infrastructure. “Nonbanks such as Ripple and Earthport have created nextgeneration payments networks, which can be used by the financial institutions to offer new competitive payments products.”

Discussions with small- to mid-sized companies in Asia over the past year about the potential adoption of treasury technology systems showed that change is underway at these companies too, according to Broadridge Financial Solutions executive director Andreas Guenther, though many are shifting away from relying on banks and looking at resources to build treasury capabilities in-house.

“Asia-headquartered entities are expanding globally. They see the immediate benefits of treasury management solutions in terms of flexibility and in-house data to be more efficient across geographies and banks.” He expects that Asian corporates will fully embrace quality treasury management solutions within the next five years. Many corporates in Asia also have a head start on their western peers for renminbi transactions and are creating innovative cash management structures across the region, Bateman noted.

BCG and BNP Paribas also found a preference for nonbank specific solutions in their Corporate Treasury Insights Survey 2016, where treasurers said they prefer a TMS and other external platforms over single-bank platforms because they offer an integrated multi-bank solution. The survey also found, however, that small companies in Asia tend to embrace traditional banking portals, with relationship managers playing a prominent role in day-to-day operations.

EuroFinance opined that many companies in Asia that have stuck with Excel may well leap straight into cloud-based solutions. The reason is that “it makes little sense to buy inhouse treasury systems with the associated problems of cost and maintenance when cheaper, more flexible solutions are available plug-and-play in the cloud,” EuroFinance said.

INNOVATION Along with building in-house TMS themselves or procuring TMS from large vendors, companies have the option of solutions from the growing number of fintechs in Asia that are developing solutions to meet specific needs of corporate treasurers.

Some of that innovation may well happen through fintechs that operate within banks. Capgemini Principal James Methe said in a recent D+H webinar that “it’s surprising how many banks have acquired fintechs for their open APIs. They’re outsourcing their creativity, adapting rather than changing. We’re seeing a trend [away] from everything having to be invented inside the bank.”

Other solutions will be created outside banks. Satyen Kothari, CEO of Mumbai-based fintech Cube, told AFP that he sees banks falling back on their core treasury management business and leaving anything beyond that to fintech startups. “The Reserve Bank of India (RBI) is doing incredible work to force banks to work together and open up protocols that private companies can use to build layers on top of core cash management. But you can very rarely move up the stack, and the banks are being forced to stay down in that stack, while the innovators are coming out on top and creating use cases.”

One example of a fintech that is developing a solution is Fluent, a start-up with an enterprise blockchain network solution that it says will enable corporates to make realtime payments with zero fees, utilise simple global treasury management, optimise working capital and streamline the procure-to-pay process.

Regulators in an increasing number of countries in Asia are also supporting fintechs. The Monetary Authority of Singapore (MAS), for example, recently published 100 Problem Statements for fintech and is ready to support fintechs in developing solutions. Solutions to these problems include: • Establish a digital supply chain finance hub that incorporates leading technologies in cargo documentation, SWIFT’s MT798 trade messaging utility, BPO and blockchain.

• Establish a digital marketplace where trade financiers would list products and services available to SMEs, and where SMEs would be able to post trade finance opportunities.

• Design a gateway interface that uses APIs to reduce complexity and the cost of multiple clearing interfaces for banks.

While it remains to be seen how many fintechs will develop solutions to address these and other problems highlighted by central banks, this will be pushed from MAS and similar initiatives in markets in other areas in Asia, which means that solutions are likely to be created faster.

WHAT’S NEXT? While corporates in Asia may have been slow in adopting the TMS, rapid advances in technology and the push for treasury to provide more value-add services with less resources could well speed up the pace of change. The competition between vendors, banks and fintechs to deliver solutions will give corporates more and better choices that may well provide the impetus for giving up spreadsheets.

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ADVERTORIAL

Can an analytics driven organization be the way forward for success?

by Thomson Reuters

The last decade has seen global organizations strive to cut costs and maximize profitability but with an emphasis on sustainable growth. Despite the fact that world trade has grown 10-fold in 30 years, the fragility of the markets is tested constantly with risks that surface with increasing frequency, and vigor. Recent years have seen increasingly rapid globalization, with the rebalancing of global markets, innovation coming from emerging markets and the world becoming more interconnected. New regulatory reforms are also being introduced increasingly based on dialogue with the regulated and in co-ordination across regulators to minimize unintended consequences of regulations.

Technology has permeated through every aspect of our lives to make us more efficient and we are literally and figuratively

Bringing Order to Information Overload: Big Data and Insight The speed of business development in the age of advanced information technology is a revolution which has captured the world above and beyond any imagination and on a scale far greater than that of the Industrial Revolution more than a century and a half ago Today, quintillion bytes of data are created on a daily basis, and the rapid onset of “Big Data” has allowed for the adoption of analytics to create valuable insights and to facilitate fast, intelligent decisionmaking. In fact, it will become the single most significant source of market growth and business opportunity if such enormous amounts of information are leveraged in the right way.

The phenomenon is particularly pertinent in Asia, where three of the world’s top four economies, based on purchasing power parity, are located. The fact that a rising class of Asian consumers continues to grow amid rapid wealth creation is a story of tremendous business potential.

breaking new frontiers with how far, and how fast we can go. With data streaming from all points of our daily lives – phones, electronics, city infrastructures, etc, it’s no wonder there is a data revolution afoot. But it’s not the quantity of data that’s revolutionary but rather it’s about harnessing the value from data which is poised to be the driver and determinant for future business success and effective risk management.

Looking at this from the lens of corporate treasurers, who are under increased scrutiny and pressure to demonstrate to their boards and executives how they manage financial resources and financial risks, the question now is how can they harness big data and analytics to keep agile, competitive and profitable?

In developed economies across Europe, the ability to collect real-time data from satellite imaging systems and combine it with weather and historical agriculture data to make early predictions on crop yields is indispensable to any company engaged in the commodities markets.

Not to mention the operational efficiency gains to reduce errors.

It is estimated the amount of data globally will double every two-years.

It is a massive challenge, however, to go about harnessing ‘Big Data’; hence the need for platforms of immense processing power to augment what humans are doing on an integrated, open platform which ensures a better, more pristine controlled environment. Thomson Reuters, for instance, distributes over 10 billion bytes of real-time data daily. At its peak, this can run to eight million bytes every second. With its legacy dating back to 1851, the company is recognized as a core industry platform for the financial community with over 11 million community interactions daily.

Successful organizations not only need to understand the value of their data but are able to monetise it. For example, consumers leave their digital footprint with everything they do. By analysing this data they can

POWERING YOUR TREASURY MANAGEMENT SYSTEM We provide an open platform that integrates our critical content and trade pricing solutions with your preferred TMS provider, giving you the freedom to choose and the ability to act with confidence. financial.thomsonreuters.com/corporate-treasury

30

Treasury Management Systems Guide 2016/2017

ADVERTORIAL

filter through the noise of the data to gain useful insights which can be used to further engage, target and enhance product offerings. Thomson Reuters Intelligent Tagging capability, for example, provides a unique identifier and the means to gain insight from any form of unstructured data. When combined with predictive analytics, news and sentiment analysis a great deal can be derived, and correlated. The progress being made in the field of “blockchain”, quantum computing and augmented intelligence, for example, heralds a time where corporations can prepare themselves with reliable and trusted information delivered rapidly and with embedded insight. Many progressive companies are leveraging new advances like holographic applications incorporating virtual reality to help them better visualise and bring to life trends and outliers in data sets internal and external to their organizations.

struggling to change their KYC processes fast enough. If corporates could upload whatever client information their banks needed, and enable their banks to have secure access whenever they needed it, many of their KYC challenges could be greatly reduced. That’s the driving force behind the creation of KYC managed services such as Thomson Reuters Org ID, which provides a secure portal to distribute KYC information as well as update and monitor KYC records.

The result is a huge reduction in time and cost – up to 80%- allowing the company secretary and finance chiefs to get on with what really matters: running their business efficiently. Best of all, the service is free for corporates.

The Way Forward: Greater Transparency, Better Tools, Bigger Rewards

With advances in new technology, it is possible to visualize now more accurately connections between parties and conflicts of interest based on publicly available data. This may include financial statements or news articles. Data visualization solutions have been used extensively in the past to generate new business ideas and opportunities. They are now also being used to identify risks and conflicts.

Big data and analytics can support treasury management activities.

There are many areas where the treasury function can use data analytics to its advantage especially in terms of managing working capital and risk:

1. RISK DATA With businesses across multiple countries, and exposures spread across multiple asset classes and counterparties, financial institutions and corporations are recognizing that they need to have timely, accurate and market based pricing mechanisms to price existing assets as well as new products.

Having near-time pricing mechanisms ensures assets are marked to market accurately and enterprise risk management is efficient.

Thomson Reuters Pricing Service (TRPS), as an example, is an independent global pricing service covering over 2.6 million fixed income securities, derivatives and bank loans, and distributing over 2.5 million price updates per second.

The benefits of being able to slice and dice risk data across the firm are relatively untapped due to the complexity of institutions, and their databases. In addition, aggregating data for risk reporting opens up opportunities to proactively use this data to drive better business decisions for superior risk management, capital allocation or even identification of fresh business opportunities.

2. KNOW YOUR CUSTOMER (KYC) AND ENHANCED DUE DILIGENCE A key foundation for prudent risk management is to know who you are doing business with, whether that is your customer, supplier or another third party. A growing number of institutions are using KYC solutions for onboarding as well as ongoing monitoring of their partners. This helps them to identify vulnerabilities, stay vigilant and take corrective action proactively. For decades, Thomson Reuters World-Check has been providing screening for sanctions, Politically Exposed Persons (PEPs), bribery and corruption, negative media reports, and human trafficking, helping corporations to develop greater insights about counterparties to assess whether they are who they say they are. Many progressive organisations are also using enhanced due diligence solutions to fulfill more bespoke due diligence requirements on higher risk or higher value suppliers from around the world.

Pushing for digital KYC solutions has proven to help ease the burden of frequent and often inconsistent KYC requests from banks, who are

3. DATA VISUALISATION

4. FOREX RISK TOOLS How can treasurers look to understand the exact nature of their risk exposure and influencing external factors? The short answer is that corporate treasurers must start by analyzing markets and building their own views on where they think prices are going before leveraging a hedging structure to reduce potential loss if volatile markets move against you. Choosing the right hedge can have a significant impact on a firm’s bottom line, so it’s best practice to thoroughly analyze market pricing and economic fundamentals to uncover the most cost-effective hedge structure.

Additionally, the need to achieve, evaluate, and demonstrate best execution is more important than ever now due to the structural changes introduced and heightened scrutiny in FX markets.

Organizations are increasingly being asked to justify how they transact their FX business and to prove best execution. Firms that perform best execution analysis on their FX transactions can evaluate performance based on actual trade data and identify improvement strategies accordingly. To assist in evaluating execution quality, Execution Quality Analysis reports (EQA) may often be sought.

By leveraging insights from EQA reports, corporates can efficiently maximize their execution performance and demonstrate best practice.

Thomson Reuters EQA reports, for instance, include a summary and detailed analysis of currency pairs traded, trade size and time of execution, counterparty activity, spreads, and response times received to assist corporate treasurers in analyzing their trading activity over a specified time period.

Concluding Thoughts Choosing an external partner with the gravitas and global coverage to offer relevant, verified and up-to-date data and analytics is the cornerstone of a rigorous approach to updating your treasury model or architecture to capitalize on what value big data and insight can bring to the success of your organization.

With an unrivaled global vantage point and presence, Thomson Reuters equips globalizing corporations with the platforms, cross-industry insight, and expert partnership to identify the right opportunities, consider them from every angle, and execute with confidence.

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TMS Vendor Functionality Matrix Instrument Coverage Foreign Exchange (FX)

Company Info

System Name

Short Term Loans

Repos

Spot

Forwards

Swaps

Equity

Fixed Coupon Bonds

Floating Rate Notes

T-Bills

Zero Coupons

Serial Bonds

Commercial Papers

Private Equity

Money Market Funds

Cross-currency Swaps

Equity and Bond Options

Financial Futures

FX Options

Interest Rate Options

Interest Rate Swaps

Derivatives

Call Deposits

Investments

Fixed Deposits

Money Market

3i Infotech

Kastle Treasury

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

3V Finance

TITAN

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

Axletree Solutions, Inc.

Treasurytree

l

l

l

n

l

l

l

n

l

l

n

n

n

l

n

l

l

n

n

l

l

l

BELLIN

tm5

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

s

l

n

s

l

l

l

Bloomberg

Bloomberg Treasury and Risk Management

l

n

l

n

l

l

l

n

l

l

l

l

n

n

n

n

l

n

l

l

l

l

Calypso Technology

Calypso

l

l

l

l

l

l

l

l

l

l

l

l

l

l

s

l

l

l

l

l

l

l

CAPIX

CAPIX Treasury Manager (CTM)

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

CGI

TWIN

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

Chatham Financial

ChathamDirect

n

n

n

n

l

l

l

l

l

l

l

l

l

l

l

l

l

n

n

l

l

l

Chella Software Private Ltd

HORIZEN - Central Treasury Management

l

l

l

l

l

l

l

l

l

l

l

l

l

s

l

s

l

l

n

l

l

l

CS Lucas Associates

CS Lucas

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

s

l

l

s

l

EdgeVerve Systems (A fully owned subsidiary of Infosys Ltd.)

Finacle Treasury

l

l

l

l

l

l

l

l

l

l

l

l

s

l

l

l

l

l

l

l

l

l

Eurobase International Group

siena

l

l

l

l

l

l

l

n

l

l

l

l

n

l

n

s

l

l

l

l

l

l

Exalog

Allmybanks

l

l

l

n

l

n

n

n

n

n

l

n

n

l

n

n

n

n

n

n

n

n

Expertus Technologies

Expertus Corporate Payment Platform

l

l

l

n

l

l

l

n

l

l

n

n

n

l

n

l

l

n

n

l

l

l

Fides Treasury Services Ltd

Account Reporting, Electronic File Transfer(Payments)

n

n

n

n

n

n

n

n

n

n

n

n

n

n

n

n

n

n

n

n

n

n

Financial Sciences

ATOM Treasury & Risk

l

l

l

l

l

l

l

l

l

l

l

l

l

l

s

l

l

l

l

l

l

l

FIS

FIS

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

GTreasury

GTreasury

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

Hanse Orga AG

FS²

l

l

l

n

l

l

l

s

s

s

s

s

s

s

n

l

l

n

n

l

l

l

Hedgebook Limited

HedgebookPro

l

l

l

n

l

l

l

n

l

l

l

n

n

l

n

l

n

n

n

l

l

l

ICS Financial Systems

ICS BANKS

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

Intellect Design Arena Ltd

Intellect OneTreasury

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

ION, formerly known as Wall Street Systems

Multiple TMS

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

Kyriba

Kyriba

l

l

l

l

l

l

l

s

l

l

l

l

l

l

l

l

l

s

l

l

l

l

Lumina Americas

Lumina Suite

l

l

l

l

l

l

l

l

l

l

l

l

l

l

n

l

l

l

l

l

l

l

32

Treasury Management Systems Guide 2016/2017

E-Dealing

Key:

Trade Finance

s Some

Commercial Paper

LC’s

Bank Guarantees

Bills of Exchange

Overdraft Facilities

Can the system link to one of the main e-dealing systems e.g.

360T,Currenex,FXall etc

Request for deals from subsidaries

Pre and Post-Deal Compliance

Central Treasury Dealing

Confirmations

Payment Netting

Settlements and Payments

In-House Banking

Multi Currency/Accounting

SWIFT interface and banks for Payments and Confirmations

Interface with Enterprise GL

Interface with Market Data Vendors e.g. Bloomberg, Reuters etc

FX Exposure Management

Mark-to-Market Valuations

Hedge Effectiveness Testing

Sensitivity Analysis

Counterparty Exposure Testing

Deal Limit Monitoring and Enforcement

Cash Visibility

Liquidity Management

Financial Controls

Separation of Duties

Risk Management

Bond Issuance

Functional Coverage

n No

Term Loans

Financing

l Yes

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

s

l

l

l

l

l

l

l

n

l

s

l

l

s

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

n

n

n

n

l

l

l

l

l

l

l

l

l

l

s

s

l

l

l

l

l

n

n

n

l

l

l

n

n

l

l

s

l

n

l

s

l

l

l

l

l

n

n

n

n

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

n

l

l

l

n

l

l

l

l

l

l

n

l

n

n

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

s

l

n

l

l

l

l

l

l

l

l

n

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

n

l

l

s

s

l

l

l

s

s

n

l

l

n

s

l

l

l

l

l

l

s

s

n

l

l

l

l

s

s

s

n

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

s

s

l

l

l

l

l

l

l

l

l

l

l

l

l

s

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

s

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

s

l

s

l

l

l

s

n

l

s

l

l

l

l

n

l

n

l

s

s

l

l

l

n

l

n

n

l

l

n

l

n

n

n

l

n

l

l

l

s

l

l

l

s

n

n

n

n

n

l

l

l

l

l

l

l

n

n

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

n

n

l

n

l

l

l

l

n

n

n

n

n

n

n

n

l

n

l

l

l

l

l

l

l

n

l

l

l

n

n

n

n

n

n

l

l

l

l

l

l

l

l

l

n

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

s

s

s

l

s

l

l

l

n

l

l

n

s

l

l

l

s

s

l

s

s

l

n

s

s

l

l

l

s

l

l

n

l

n

n

n

n

n

l

n

n

n

l

n

n

n

n

l

n

n

n

l

l

l

l

l

l

n

n

n

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

n

l

l

l

l

l

l

l

s

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

s

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

s

s

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

s

l

l

l

l

l

s

l

Treasury Management Systems Guide 2016/2017

33

TMS Vendor Functionality Matrix Instrument Coverage Foreign Exchange (FX)

Money Market Funds

Cross-currency Swaps

Equity and Bond Options

Financial Futures

FX Options

Interest Rate Options

Interest Rate Swaps

n

l

n

n

l

l

n

n

n

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

Misys

FusionCapital

l

l

l

l

l

l

l

l

l

l

l

l

l

l

n

s

l

l

l

l

l

l

MORS Software

MORS Treasury Manager

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

MUREX SA

MX.3

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

OpenLink

Findur

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

OpusCapita

OpusCapita

n

n

n

n

n

n

n

n

n

n

n

n

n

n

n

n

n

n

n

n

n

n

Pro Negotium Limited

SaaS Treasury Management System for SME Market

n

n

n

n

s

n

n

n

n

n

n

n

n

n

n

n

n

n

n

n

n

n

Reval

Reval Cloud Platform

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

Salmon Software Limited

Salmon Treasurer

l

l

l

l

l

l

l

s

l

l

l

l

l

l

s

l

l

s

l

l

l

l

Stahr GmbH

STS Stahr Treasury Software

l

l

l

n

l

l

l

n

n

n

n

n

n

n

n

n

n

n

n

n

n

n

TAS Group Spa

Aquarius

n

n

n

l

n

l

l

l

l

l

l

l

l

n

n

l

l

l

l

l

l

l

TIPCO Treasury & Technology GmbH

TIP

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

TreasuryXpress

C2Treasury

l

l

l

l

l

l

n

l

l

l

l

l

l

l

l

l

n

n

n

n

n

n

TreasuryXpress

C2Treasury_Lite

l

l

l

l

l

l

n

l

l

l

l

l

l

l

l

l

n

n

n

n

n

n

UniSystems SA

Global TBO

l

l

l

l

l

l

l

n

l

l

l

l

l

l

n

l

l

s

l

l

l

l

Visual Risk

Visual Risk

l

l

l

l

l

l

l

s

l

l

l

l

l

l

n

l

l

s

l

l

l

l

Whistlebrook Ltd

Whistlebrook TMS

l

l

l

n

n

n

n

l

l

l

l

l

s

l

n

l

n

n

n

n

s

l

zeb

zeb.control.risk ALM

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

34

Treasury Management Systems Guide 2016/2017

Private Equity

Serial Bonds

n

l

Commercial Papers

Zero Coupons

n

l

Floating Rate Notes

n

l

Swaps

n

l

Forwards

n

l

Spot

n

l

Repos

n

FusionCorporate KTP

Short Term Loans

TTBanca

Misys

Call Deposits

System Name

Mirรณ Ltda.

Fixed Deposits

Company Info

T-Bills

Derivatives

Fixed Coupon Bonds

Investments

Equity

Money Market

Bond Issuance

Central Treasury Dealing Confirmations Payment Netting Settlements and Payments

Interface with Market Data Vendors e.g. Bloomberg, Reuters etc FX Exposure Management Mark-to-Market Valuations Hedge Effectiveness Testing Sensitivity Analysis Counterparty Exposure Testing Deal Limit Monitoring and Enforcement Cash Visibility Liquidity Management Financial Controls Separation of Duties

n l n n n n n n l n n n l l l n n n n n n l l l l l l l l l l

l l l l s s l l l l l l l l l l l l l l l l l l s l l l l l l

l l l n n n n l l s l l l l l l l l l l l l l s l l l l l l l

l l l l l l l l l l l l l s l l l l l l l l l l l l l l l l l

l l l l l l l l l l l l l l l n l l l l l l l l l l l l l l l

l l l l l l l l l l l l l l l l l l l l l l l l l l l l l l l

n n n n n n n s l n n n n l l l l l l l s s n s n n n l l l l

n n n n n n n n l s n n n s n n l n n s n n n n n n n l s n s

l l l l l l l l l l l l l l l l l l l l l l l l l l l l l l l

l l l l l l l l l l l l l l l l l l l l l l l l l l l l l l l

l n n l l n l n l s l l l l s l l l n l s l s n l s n l l l l

l l n n n n n s l l l l l l l l l s l s s n n n n s l l l l l

l l l l l l l l l l l l l n n l l s s s l l s s s l s l l l l

l l l l l l l l l l l l l l l l l l l l l l l n l l l l l l l

l

l

l

l

l

l

l

n

l

l

l

l

l

n

n

l

l

l

n

n

n

l

l

n

l

l

l

l

l

l

l

l

l

l

n

l

n

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

n

n

n

n

n

n

s

n

n

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

s

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

l

n

n

n

n

n

n

n

s

n

l

l

l

s

l

n

l

s

s

s

n

n

s

n

n

l

l

l

s

l

l

l

l

l

l

l

l

l

n

l

l

l

l

l

l

l

l

l

l

n

n

l

l

l

l

l

l

l

l

l

l

l

Interface with Enterprise GL

SWIFT interface and banks for Payments and Confirmations

Multi Currency/Accounting

In-House Banking

Pre and Post-Deal Compliance

Request for deals from subsidaries

E-Dealing

Trade Finance

Can the system link to one of the main e-dealing systems e.g.

360T,Currenex,FXall etc

Overdraft Facilities

Bills of Exchange

Financing

Bank Guarantees

LC’s

Commercial Paper

Term Loans

Key:

Functional Coverage l Yes n No s Some

Risk Management

Treasury Management Systems Guide 2016/2017

35

T EN

NT

RE MA NAG E ME

AN AG EM

EN

RI

PO

T

SU

T

ORECASTING CASH F

EX

N

M

EM NAG SK MA

BA NK

E XE

CU

N/ TIO

SE

E M LE T T

COMP LIANCE

bloomberg.com/TRM

36

Treasury Management Systems Guide 2016/2017

©2016 Bloomberg L.P. All rights reserved. S724932382 0916

UR Y

S

To learn more about Bloomberg’s solution for absolute treasury management, contact bbg_trm@bloomberg.net or +1 212 318 2000.

EA

And because TRM delivers the full treasury workflow, it also includes Risk Management, E-trading and Accounting – not to mention the full power of the Bloomberg Professional® service.

G

- SWIFT-based bank data automation - Workflow-based payment control - Forecast analysis for enhanced liquidity planning

TR

CASH MANAGEMENT FEATURES

T IN

That’s why Bloomberg Treasury & Risk Management (TRM) includes automated cash management — and means the end of laborious number crunching. Gain instant visibility of every cash position from every banking relationship — and forecast treasury exposures with ease.

N OU ACC

Bloomberg understands that a talented corporate Treasurer adds real strategic value — when they’re not buried in spreadsheets.

H ED GE

AUTOMATED CASH MANAGEMENT? ABSOLUTELY.

AC CO UN

T IN

G

B Y

G R A H A M

B U C K

GTNews’ Treasury Innovation Forum report: Business Post-Brexit

G

TNews’ first Treasury Innovation Forum (TIF) was held in London on June 29, just six days after UK voters decided whether they wished for the country to remain a member of the European Union (EU).

An audience poll reconfirmed that both British and European financial professionals continue to be overwhelmingly in the ‘Remain’ camp by a margin of five to one. Nonetheless, the public decided otherwise on the day, with a majority 51.9% supporting ‘Brexit’.

The keynote speech at TIF, entitled ‘Brexit-What now?’ was presented by John Stepek, editor of MoneyWeek magazine.

He began by reassuring his audience that Brexit was not a re-run of the 2008 global financial crisis, when many banks had basically gone bust.

Despite alarming forecasts ahead of the June 23 referendum, markets were pricing in a win for the ‘Leave’ camp until the shock killing of Labour member of parliament (MP) Jo Cox, which many believed would trigger greater support for ‘Remain’. Global markets and the pound fell sharply as it became clear that votes supported leaving the EU, but the predicted freefall did not occur and volatility had eased with days.

“If things threaten to turn pear-shaped, the Bank of England and other central banks can always turn the printing presses back on,” suggested Stepek. “Indeed it’s likely [BoE governor] Mark Carney is secretly pleased that sterling has come down.” A more likely contender for triggering a rerun of the 2008 crisis would be a ‘domino effect’ in the Eurozone if other EU members followed the UK’s lead and headed for the exit.

PRAGMATISM TO RULE The UK’s current political vacuum, with prime minister David Cameron soon to step down and its main opposition party effectively disabled, might initially present a grim picture but Stepek was more optimistic. Contenders to replace Cameron are all “free trade-friendly”, while former London mayor Boris Johnson (who has since withdrawn his leadership bid) and justice secretary Michael Gove are rather less anti-immigration that many who voted for Brexit. “They don’t want to fundamentally change the EU, they just want less interference from Brussels,” he suggested.

It was also evident that, despite talk of companies pulling out of the UK or reducing their presence there post-Brexit, few businesses wanted to undergo the upheaval of relocating.

Markus Kerber, head of Germany’s Bundesverband der Deutschen Industrie (BDI) – the equivalent of the UK Confederation of British Industry (CBI) – had said before the vote that responding to Brexit by putting up trader barriers would be “foolish”.

“There will be pressure on governments to do the sensible thing,” said Stepek. While European Commission (EC)

president Jean-Claude Juncker and European Parliament (EP) president Martin Schulz seek to maintain their goal of a federal Europe “pragmatism is most likely to prevail”.

There remains the possibility that the UK could follow Denmark and Ireland, which have both restaged referendums, by re-approaching voters were the EU to produce a “fudge” that appeared to offer further concessions.

More likely, forecast Stepek, is that the UK reaches “a Norway-type solution” – a deal which excludes it from further EU integration while maintaining free trade and the free movement of people. “Those that voted ‘Leave’ on the promise to restrict immigration were sold a pup,” he added.

SLOWER GROWTH A UK interest cut by the BoE this month or in August and the pound edging down further to as low as US$1.20 were among the predictions in an economic update report from Sarah Hewin, Europe chief economist for Standard Chartered Bank.

For investors, she also anticipates that post-Brexit concerns over UK assets is likely to see the yield curve steepen in the months ahead and “the love affair with gilts” to end, so refinancing is likely to become cheaper over the near term although this be not be maintained longer term.

Hewin reported that the UK property market has already seen activity slowing in the second quarter of this year, investment and hiring decisions shelved and lower merger and acquisition (M&A) activity so Q3 economic growth will, at best, be flat. The medium term outlook is for the UK’s gross domestic product (GDP) to grow by only 0.5% in 2017, rather than 1.5%. Although longer term the pace is likely to recover, recouping the lost momentum will be difficult.

Across Europe, the UK’s exit has renewed fears that other countries such as Denmark and Hungary could also hold similar referendums and also that the single European’s continued existence could be jeopardised. In Italy, where the euro-sceptic 5-Star party has already won mayoral elections in Rome and Turin, prime minister Matteo Renzi could join David Cameron in stepping down this autumn if the country’s constitutional reform referendum goes against him.

France holds its next presidential election over April and May 2017 and while National Front (FN) leader Marine Le Pen is unlikely to be the candidate who displaces current incumbent François Hollande, she is expected to make it to the second round. “This period of uncertainty is not good for business or decision makers and is added to by the uncertainty over the US election,” said Hewin, who noted that although Democrat candidate Hillary Clinton currently leads, the public discontent exposed by Brexit is shared by the US and explains continuing strong support for Republican challenger Donald Trump.

Treasury Management Systems Guide 2016/2017

37

ADVERTORIAL

Reduce risk, get your subsidiaries in line, and stop stressing You too can rock your TMS implementation BELLIN has successfully launched over 15,000 companies on our tm5 Treasury Management system, leading the industry in project success rates.

This has given us a certain perspective on some of the less thought about aspects of TMS implementation, especially when it comes to cash management. Listed here are three factors we don’t think people pay enough attention to when implementing their TMS, and how these factors can improve your cash positioning, forecasting and risk management.

Don’t automate, do streamline.

This holds true for many things, but it holds especially true for cash positioning.

Cash positioning is an area where we provide a lot of consultation because there are several choices on the source of cash forecast information: direct subsidiary forecasts, indirect forecast from P&L, cash flow modeling, and bank current day reporting. Most TMSs can automate cash positioning, but it’s not as easy as clicking a button and having the TMS generate reports. There is a lot of thought and decisions that has to go into it, and that’s what makes the quality of your implementation team so crucial.

The first step that people really want to do is identify the sources of data.

The questions to ask here are: where does the data come from; when does the day-to-day come in; and, perhaps most importantly, how do I make sure that I don’t have duplication of data?

For example, treasury may receive a daily outgoing payments report from AP, but how can that be used in

38

Treasury Management Systems Guide 2016/2017 Copyright © 2016 MyGuides. All Rights Reserved

conjunction with a current day report from the bank that contains overlapping information? You have to figure out a way to reconcile the two sets of information so that your cash positioning doesn’t contain any duplication.

In some cases, that’s really easy to do because the different sources are easily identified, but in some cases it’s really hard. Maybe you’ve only got one five million-dollar payment that day so it’s easy to say “I see this one here on my current day report is the one that I just ran through the payment factory”. But maybe you’re making a payment to a bunch of different customers, then how do you reconcile all those payments with what’s coming in on the current day report?

So what we do is build a process for a customer based on how much work they want to do and at what level of detail they want it to be. There’s always going to be a tradeoff there - if they wanted to be really detailed then they might have to do a few more steps in the workflow to make sure that everything lines up. So you’re not automated, but you are streamlined, and let’s face it, that is really what you want. Somebody needs to look at this, there needs to be a human at some level to verify that what the system is doing is correct, that the amount is correct and that there’s no errors.

Somebody’s got to have a look at what’s being suggested by the system, and at BELLIN our philosophy is that you should check before the system does something on your behalf.

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Get your subsidiaries involved in cash forecasting early, so you can use their data.

People always ask how to ensure the reliability of the cash forecast reports submitted by their subsidiaries. We think this entire train of thought is faulty. If you have cash forecasts that are being “submitted” by the legal entities, then those legal entities have no reason to ensure you get the best numbers. What you really want is for the subsidiaries to start doing real, actual forecasting for themselves.

There are so many benefits to a real forecasting system (i.e. comparing against your actual values without all the copy/paste effort) that they will want to do it. Then, you want access to those numbers.

Accurate forecasting requires really good historical data - and unfortunately trying to organize that across a group can become a nightmare for certain organizations. Nearly every tool on the market can spit out this theoretical sequence that models a future cash flow. However, if you’re relying on incomplete or faulty data to base this model on, you’re wasting your time.

One of our clients recently told us how hard it is to get his subsidiaries to do forecasting. His problem was that they were asking “how do I even know where to start? On what forecasting?”

For him one of the biggest and best things he could do would have been to get them their historical numbers.

Now that he has BELLIN tm5, he has global cash visibility through the BELLIN SWIFT Service and he’s getting every entity’s account statements on a daily basis. He can go to them and say “Okay, you don’t know where to start with your forecasting? Well here’s what happened last quarter, you can use these figures as the basis for next quarter’s forecast.”

In our system you give those entities access to do their own forecasts (You can do this free. We don’t charge you for users). They’ll do forecasting because they were just given a great tool to do forecasting with. It’s good

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for their companies. They’re using the system to do their own forecasts, and in so doing you’re getting these forecasts at a very detailed level.

Now it’s a tool for them - it’s not a reporting requirement from head office - so they are going to do the best job possible, because it helps them.

Then it’s up to the head office for the central treasury to decide “do we incorporate this as part of our forecast”. The answer is often “Yes.”

When it comes to risk management, start with real data, and use specific analysis to establish where you have weaknesses.

A lot of customers ask for risk management and there are a lot of questions that can be asked here, many have been listed in the AFP RFP. However, the questions are always focused on specific risk factor calculations such as VaR or credit ratings. There is very little about the underlying risk management approach supported by the treasury management system. The treasury management system should facilitate the entire risk management process instead of specific risk factor calculations.

For example, let’s say you do a VaR calculation and find you have four million dollars at risk -what does that tell you? What should you do now with that four million dollars? This kind of data is hard to work with because it’s based on so many assumptions, all of which can be a risk factor that needs management. Assumptious data is bad because it does not lead to specific

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preventative actions. Should you hedge some interest rate risk or should you decrease some exposure? At this point, treasury is still as lost about risk management as when we first started.

What customers can focus on are things based on real data, like liquidity risk – risk that your company doesn’t have enough money in the bank to make a payment on a particular day. People don’t think of it as risk management but that’s probably the most important risk management that you’re going to do in the day. Now, when you have this treasury system that can bring much more data to the central treasury, suddenly you get a lot more data to make a lot more important decisions about your risks.

For one client we restructured their financial reporting structure to allow real-time reporting of their expected cash needs against their credit facility availability. This is further divided by the time it took for draw-down from different subfacilities to become available as cash.

At any instant, the treasurer and the CFO could obtain a financial status report to gauge the liquidity status of the company, then determine if cash needs to be repatriated, or if additional funding needs to be obtained well before the bills are due.

In this way, liquidity risk is clearly exposed and managed. The managers have a complete picture and can really understand what may be at risk.

Implementing the TMS only gets you going. Once you are moving, you face a whole new set of challenges.

Don’t settle for a TMS that only gets you started.

Leverage the experience of BELLIN to provide you with a truly transformative treasury experience.

Get started at: www.bellin.com +44 20 7340 8650

B Y

M A D H V I

M A V A D I Y A

Interview with Bloomberg: The Importance of Functionality

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n an interview with Mark Lewis, Head of Product Management, Corporate Treasury at Bloomberg LP, we discussed the benefits of using spreadsheets, the role of treasury management system in different types of companies and whether or not customisation is necessary.

What is your role at Bloomberg?

I head up the strategic direction of the corporate treasury product that we provide and define the roadmap.

Does the size of a company define what type of TMS they implement?

There are different systems out there, but there isn’t one that can serve all corporations from a TMS perspective. Those at what I call “the top end of the market” operate more like a bank and could have a big treasury operation with up to 400 treasury staff for example. They tend to have multiple TMS systems and they have more of a “best of breed” approach because they are so specialised in each of their technical spaces within the corporate treasury; larger organisations need different systems for different functionalities as it is more technical. Also, bigger companies are more likely to be in the process of conducting a perpetual project which results in constant implementations and upgrades, all at the same time.

The next layer down has been addressed by the packaged corporate TMS systems market that you and I know very well. In the early 1980s, very simple packages were available but this has changed and those vendors have been trying to improve and make the systems more complicated in order to address the bigger ticket sales and in turn, make more revenue. However, 30 years ago implementation would only take five days, but it now could take from around 6 months to 2 years to even do an upgrade. We’re seeing this big shift in the way in which TMS systems have built themselves up over the last two or three decades and this has resulted in any change in the system becoming a very expensive habit. The next layer down, which I call the “middle market corporate treasury” cannot get on the stepladder because it would be hard for them to obtain a TMS, despite auditors asking for the adoption of one. Although, a three-man treasury team currently working on Excel and with multiple bank portals also have to deal with cash visibility and cash forecasting initiatives, but cannot do so because it’s just too expensive.

We have addressed this problem with a simplified solution which offers no customisation. Is Excel obsolete? No, but some outputs do need to be combined for ease of reporting for senior management and internal monitoring for anomalies. TMS has moved in a different direction but I’m seeing older trends return to this lower market space because of the search for simplicity.

What capabilities should a corporate TMS have?

Connectivity should be the first step; treasurers need to be able to connect with banks and the ERP or accounting system. After that has been achieved, cash visibility should be the next priority and then cash forecasting. Deriving forecasts from actual numbers rather than a random number from the subsidiaries is what clients are looking to do now so that it can be reviewed and analysed at a later date. However, if your categorisation of forecasts does not tie in with the way cash is delivered to you from the banking systems, it becomes very difficult to get that comparison with the actuals against it, except at a very high level.

Are there some benefits to using spreadsheets?

I don’t think you can cover everything with a TMS solution.

TMSs have been trying to do it for the past 30 years and they still haven’t been able to replace Excel and I don’t think they ever will. You’ve got to be able to have these two programs working in parallel; the TMS will work with the core data ad report on what they need, audit, control and monitor to have all the right steps in place to provide security. But, Excel will have to be used in order to consolidate some of this information with other information that is available in house, but may need a link to the TMS. I don’t see Excel disappearing from a TMS ever, it’s complementary.

What do you predict a TMS system being able to do in the next 5 years?

For me, it’s about the user experience and the TMS systems as they are today, are still not user friendly. They are menu driven and display business applications in the way that the developers have designed, rather than for the end user.

These are the questions that need to be addressed: • How does a corporate treasurer want to use a treasury management system?

• What information is absolutely critical for them?

• What functionalities should be front and centre?

If you build a TMS that is focused more on identifying things that need work or actions that need to be made, solutions to these problems need to be put in front of the treasurer. The system needs to react and prioritise what is important to you.

User experience is also beneficial because to learn a TMS today at a high end corporate can take up to three years, which is a high risk for a corporate treasurer. If you think about it in those terms, you employ people and once they’ve learnt the system, they hand in their resignation. You should buy a TMS that you know how to use instinctively or with very little training, that’s where the industry should be in 5 years’ time.

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S O N I A K E I T H B Y

Cyber Crime: On the Lookout for Fraud B

anks and other financial institutions, big and small, are finding it increasingly difficult to recognise and combat cyber-crime, with criminal elements growing increasingly sophisticated in their methods. Kaspersky Lab and B2B International conducted a survey of major financial institutions, with 38% reporting that they are finding it increasingly difficult to determine whether a transaction is genuine or fraudulent.

With a marketplace that is increasingly becoming reliant on

electronic payments and transactions, and with technology advancing at a rapid rate, firms are being forced to put their best foot forward in combating crime. While many firms employ their own security measures, many are also using third party security firms in an attempt to protect their customers. However, with cyber criminals exercising more and more finesse, security is less than perfect, with many security programs producing false positives in searching for fraud, tying up genuine customers, and potentially harming Treasury Management Systems Guide 2016/2017

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the bottom line. Indeed, the cost of fraud in the UK is sky high, with the Annual Fraud Indicator 2016 estimating that fraud costs the country as much as £193 billion annually across all segments of the economy.

Ross Hogan from Kaspersky Lab highlighted that cyberattacks could be contagious. “The interdependence of the digital relationships between all financial services market players also means that if any one organisation in the value chain experiences a digital service issue – whether due to fraud, breach or cyber-attack – the damage can quickly spread to the other organisations in that digital financial service value chain. As the already high volume of customer demand for online transactions continues to increase, all companies (its customer facing digital platforms, infrastructure, data and employees) should be secure, convenient and prepared,” Hogan said.

Despite the cost of fraud and the growing existential threat of cyber criminals, corporate treasurers reported to Kyriba and the Association of Corporate Treasurers (ACT) that they are still overwhelmingly reliant on traditional cash monitoring measures. Despite the above mentioned reports that firms are doing what they can to shore up their security gaps, PwC reported in their own cyber-crime survey that just 37% of organisations across the economy have a security incident plan, leaving massive segments of the economy completely exposed, and 14% of organisations reported they don’t have any plan to implement a security plan to prevent a cyber-attack.

While 61% of CEOs reported that they were concerned about cyber security, less than half of board members have any clue about their organisation’s cyber readiness. The PwC report is indeed troubling, and illuminates all the reasons why cyber criminals undoubtedly feel emboldened in an increasingly electronic world. So what, then, do organisations and treasurers have to look forward to in the coming months and years when it comes to fraud? For one, a criminal element that is using technology to their advantage, but also thinking outside the box in how best to utilise the marketplace in order to find opportunity for criminal enterprise.

For example, when one thinks of the colossal human tragedy that is the migrant crisis from the war-torn Middle East, we often do in terms of cultural and political ramifications – criminal elements, many of which have ties to organised crime and terrorist links, use the plight of migrants and refugees to launder money through some of the world’s foremost financial institutions. While these institutions did not sign up to solve a key component of an enormous global political conundrum, they are a key ally in the fight against human trafficking, money laundering, and fraud through electronic means.

The journalists that worked on The Criminal Migrant Shipping Network Project, a six-month investigation into companies profiting from selling journeys to migrants and refugees, were granted access to Accuity Fircosoft’s compliance data and from this, found that Europe’s financial systems were supportive of this exploitation.

“Their presentation, entitled ‘How Europe’s Migrant Crisis Finances Terror’, will expose the dark shipping network and the logistics behind the exploitation of migrants, as well as exploring the financial circuits supporting human traffickers and their links to Europe’s financial systems.

It will emphasise the need for financial institutions and

corporations to be aware of the risks of doing business with entities which could be connected to these extremely profitable criminal organisations,” GTNews reported earlier this year. As the threat of financial crimes through electronic processes evolves, the way organisations combat it needs to, as well. However, some statistics show that just understanding the key threats is an issue for a startling percentage of firms.

In the 2015 Accenture Global Risk Management Study, a vast majority of firms admitted they were beefing up their risk management spending; perhaps the most inviting statistic for financial criminals is the fact that a third of respondents admitted they were hiring risk management firms in order to better understand cyber-crime. In other words, criminals looking to exploit gaps in protection are finding very fertile ground from which to work. That said, risk management is a steady enterprise, with a need for understanding complex, ever-changing threats at a critical mass.

What this threat also might entail is far greater interbank cooperation, as best to prevent overwhelming losses, particularly in fragile parts of the world. Banks in Bangladesh, Vietnam, and the Philippines have all recently been targeted, generally by a criminal organisation known to law enforcement agencies and financial institutions as Lazarus. With multiple banks targeted, Symantec, the cyber security firm, revealed the existence of a cooperative measure dubbed ‘Operation Blockbuster,’ which seeks to limit the scope of damage that enterprises like Lazarus can carry out.

Attacks by Lazarus and cyber gangs like them also prompted organisations like SWIFT, to re-calibrate their thinking in terms of security, once again promoting cooperation between banks across the globe. SWIFT subsequently installed a new two-step authentication system and greater system of standards to detect fraudulent acts.

Perhaps this, then is the future of cyber-security: great partnerships between banks and other firms, in conjunction with security firms like Symantec and Kaspersky, as best to protect their interests and the interests of their clientele. The days of firms going it alone on security seem to be coming to an end – this might make it all the more difficult for cyber criminals to steal money, information, and in a very real sense, lives.

With 57% of respondents of global corporations in a survey carried out by Strategic Treasurer and Bottomline Technologies admitting they have no framework in place to combat payment fraud, it would appear that it is risk management firms making the best of the situation by getting themselves hired by corporations seemingly one step behind savvy criminals.

Corporations and banking institutions sharing critical security measures, particularly in an ever increasing interdependent world, might be the ticket toward getting out in front of the latest and most elaborate threats. But it may take a calamitous event, or a terrible public relations hit (how many firms dread being exposed as the one utilised by those wishing to carry out terrorist attacks in their grab for funds?) before we see a truly interconnected security standard in place. Until banks and other corporations get serious, cyber-crime and fraud represent a cottage industry for criminal actors, and a threat to institutions heavily relied upon to preserve the overall health of the global economy.

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Treasury Management Systems Guide 2016/2017 www.fisci.com

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Treasury and Risk ATOM Treasury and Risk Bank Relationship Management With its visual interface and powerful ATOM offers a complete eBAM solufunctionality, Financial Sciences’ ATOM tion, including: treasury and risk management system • Bank account management • Tracking store/branch accounts (TMS/eTMS) automates essential treasury processes helping clients achieve • Bank services and performance unparalleled real-time visibility of cash • Bank fee analysis • FBAR tracking and reporting and risk in one complete web-based • Bank contacts and meetings solution.

• Signers and signer workflow Clients use ATOM to reduce financial complexity, ensure compliance and implement best practices throughout Why ATOM? their treasury operations. Two of the • Uniquely visual top 10 and five of the top 60 Forbes • Powerful functionality Global 2000 trust ATOM and Financial Sciences for treasury • Self-service reporting management.

• Great service ATOM Cockpits ATOM takes a uniquely visual approach to treasury management.

ATOM “Cockpits” provide the best of navigation, KPIs, data analytics and workflow all on one screen. ATOM users can quickly view, analyze or report on any element of treasury in seconds.

Cash and Liquidity Management ATOM automates enterprise cash management activity in any currency, including: • Multicurrency positioning and forecasting — real-time worksheets for dynamic tracking of global positions and cash flows • Payments — support for all payment types with seamless integration with banks and SWIFT • Bank reconciliation — powerful, rules-based matching for automated reconciliation and data enrichment • Cash concentrations — cash pooling, target balancing and liquidity management

Debt, Credit and Investments ATOM supports the entire deal lifecycle for all debt, credit and investment types, including: • Fixed and floating rate instruments • CP, CDs and money funds • Credit facilities, guarantees and LOCs • Gov, Corp, Agency and ABS securities • Brazilian, Chinese, emerging markets calculations • Intercompany transactions Risk Management and Hedging ATOM provides integrated risk management and hedging functionality for all financial risk types, including: • Forex spots, forwards, swaps, options and NDFs • Interest rate swaps and options • Commodity swaps, options and futures • Credit derivatives • Hedge creation and testing for automated compliance • Analytics for fair value, CVA, sensitivity and scenario calculations Financial Reporting ATOM includes a fully automated accounting subledger for all transaction types: cash, debt, investments and derivatives. ATOM provides: • GAAP & IAS reporting compliance • Complete subledger functionality • Integrated auditing

• Automated integration with ERPs such as SAP, PeopleSoft, JDE and Oracle • Automation for FAS 815 and IFRS 9 hedge accounting compliance Compliance ATOM enables compliance with regulatory frameworks including DoddFrank, Basel III, FBAR, SOX, IFRS/GAAP, EMIR and SEPA Deployment and Scalability ATOM offers flexible deployment: • License only needed modules • Browser-based with no local installation for rapid onboarding • Scalable platform for one to 100+ users • ASP/SaaS, hosted or installed delivery models Self-Service Reporting ATOM delivers flexible reporting solutions for both operations and senior management, including: • ATOM Cockpits, with live graphics, KPIs, dashboards, and visual workflow • Integrated, self-service business intelligence reporting • Intuitive drag and drop tools for creating charts, graphs, maps and standard reports • Integrated OLAP data cube for end-user data analytics • Real-time integration with Excel • An extensive standard reports library

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Treasury Management Systems Guide 2016/2017

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BEPS TP rules: No longer a free lunch A

s the Base Erosion and Profit Shifting project comes into effect over the next few years, we examine how its transfer pricing rules will affect treasurers.

The OECD’s Base Erosion and Profit Shifting (BEPS) project will not only have a significant impact on the tax departments of multinational companies, it will also affect treasurers, who will be required to review current processes and create an action plan to tackle any changes.

BEPS aims to address cases of base erosion and profit shifting, where the business activity of multinationals is undertaken in one country but the profits are allocated to

a country with a lower tax rate. The project incorporates 15 Action points which were finalised in October 2015.

“The actions are however guidance only and we are currently waiting to see how they are implemented by each country, with some countries taking a more proactive and aggressive approach than others,” says Thembani Mtetwa, tax and accounting solutions consultant at Thomson Reuters. “This also means we are likely to see significant variation in interpretations and implementations globally, adding additional complexity to an already complex environment.”

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WHY IT MATTERS FOR TREASURY The BEPS regulations were designed to reduce the potential negative tax practices of companies by increasing the exchange of information between multinationals and tax authorities, which is covered in more detail under Action 13 of the BEPS regulations. “This requirement for more information has led the compliance and reporting burden to be spread from the tax team to the entire organisation, including corporate treasurers,” said Mtetwa.

Of the 15 Actions points there a number that will specifically impact corporate treasurers. “For treasurers, BEPS essentially boils down to Action numbers 4, 8, 10 and 13,” says François Masquelier, head of corporate finance and treasury at RTL Group, vice-chairman of the European Association of Corporate Treasurers and Chairman of Association of Corporate Treasurers of Luxembourg. “It imposes a sort of tax health check, which is always salutary, even in the treasury function.”

However, despite the impact that the BEPS project is expected to have on the day-to-day work of corporate treasurers, many still do not understand what they will have to do with BEPS regulation and in particular the requirement for businesses, under Action 13, to review their transfer pricing (TP) documentation.

“Unfortunately, in my opinion, corporate treasurers aren’t really aware of the TP issue. A lot of our members in Europe aren’t yet prepared. They have heard of BEPS without having started to implement measures or to review current processes,” says Masquelier.

TP is used by related companies to determine the amounts by which intercompany transactions are recognised for accounting and tax purposes. BEPS and TP will involve much more documentation and a review of prices charged between subsidiaries. Under BEPS, TP must be “fair” and each transaction with affiliates must be justified.

“Treasurers must analyse and asses the credit risk of each subsidiary in order to define what spread/margin should be applied specifically for funding, including the risk on the subsidiary, its specific sector and the country risk,” says Masquelier. “There aren’t any more free lunches under BEPS TP rules.”

STRUCTURAL CHALLENGES One of the biggest concerns for treasurers is whether the structures that they set in place in the past are still fit for purpose in the new post-BEPS environment. “Structures commonly constructed by treasury departments including intercompany loans and in-house banking facilities have to be reviewed in lieu of the new requirements, and where they are not fit for purpose they would have to be reorganised to adhere to the new rules,” says Mtetwa. “And this potential reorganisation of resources and policies can be a great administrative burden for treasurers. If not completed in a proper manner, policy changes could leave the entire organisation at risk not only from a tax perspective but also from a public relations perspective.”

According to Masquelier, treasurers need to make sure they have systems in place to assess the credit risk of each affiliate case by case, on a yearly basis, to determine the type of margin to be applied to the intercompany loan. “Because banks will not offer this type of services for free (or even paid), treasurers will need to get support from a third party

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supplier...in order to assess the credit risk and the margin range for the risk based on the tenor of the loan.”

In addition, organisations may find it difficult to go through the reporting process repeatedly without errors and audit each step taken. “Technology which automates some of the necessary steps which would need to be taken can also help with such challenges,” adds Mtetwa.

NEXT STEPS Corporate treasurers that are not aware of the transfer pricing issues under BEPS, should start reviewing current processes.

“In order to be prepared, corporates need to first review current processes and try to make a gap analysis. If documentation is in place and effective, it is a good start.

The credit risk assessment tool will be then the second step. The recording of evidences will be the final one,” says Masquelier. “In some cases it can be a huge project.

However, it is key, given size of amounts involved and potential impact(s) on the bottom line,” he adds.

Treasurers that have already started responding to the BEPS regulations have been working more closely with their tax, finance and boardroom executive colleagues to ensure that the processes that they put in place are coherent with the strategic goals of the company and more importantly that they are compliant from a tax reporting perspective, says Mtetwa.

In addition to TP rules, treasurers should also be aware of Action point 4 and 6 of BEPS, which are expected to be implemented in the UK in 2017. Action point 4 outlines a best practice approach for multinationals to avoid base erosion through the use of interest expenses and other financial payments, whilst Action point 6 provides recommendations regarding the design of local rules to prevent treaty abuse. “Placing certain intra group finance structures in certain jurisdictions could be perceived as an abuse of treaty rules, says Mtetwa.

In order to be ready for BEPS treasurers should firstly thoroughly review all existing structures; secondly, they should strive to work as closely as possible with all potential stakeholders within their organisation to ensure that the policies which will be put in place will follow the new BEPS regulations; and thirdly treasurers should maintain that that all the processes that are put in place are supported by robust TP documentation and that the outcome of this documentation process will closely align with their financial policies, he adds.

TP will impose a huge amount of work on every treasurer in terms of documentation and recurring, evaluation, resulting in additional costs and requiring additional resources, says Masquelier. However, despite the burdens and complexities of BEPS, the rules could be seen as an opportunity to revise the transfer pricing strategy from top to bottom, he adds.

“It may be the spur to improving consistency of approach, to being closer to substance in some cases, and undoubtedly to improving transparency.”

While the thought of improving transparency might not be enough to make treasurers sleep any easier, there is no doubt that the BEPS transfer pricing rules will be a huge challenge for treasurers and is why those that have not started preparing for the new rules should start now.

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www.misys.com/fusioncapital Treasury Management Systems Guide 2016/2017

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INNOVATION GAMES So how are established players reacting to these changing demands?

Citi director of global commercial cards, Morgan Salmon, told us that banking giants are developing more dynamic solutions to traditional product sets in reaction to new approaches to treasury processes and the emergence of new fintech startups.

For example, a growing focus on bringing payment efficiencies to treasury, plus the increased demand for realtime speed, is creating an opportunity for technology to create better solutions for customers.

He also highlights technology’s ability to create more nuanced segmentation of payees. For example, a large oil company doesn’t need the same level of scrutiny and controls when buying a multi-million-pound new rig as it does when it’s buying stationery.

“Most of the systems used historically had just one level of control,” says Salmon. “Now we are starting to see an unpicking of the process in making payments and - in the unpicking - there is an increased need for tech to provide efficiency with the same level of control.”

Coming to work at the bank after the payments startup he was working at was acquired by Citi, he remains plugged into the startup ecosystem, previously mentoring at London fintech accelerator Startupbootcamp Fintech and startup hub Level39. He is also involved in Citi’s innovation labs and D10x programme through which the bank aims to build, fund and eventually implement new products.

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G I L L

I

ntensifying regulation post-2008 financial crisis, growing expectations from customers and the accelerating pace of business globally means treasury departments have never been under greater pressure than they are today.

Cloud, robotics, automation and blockchain are just some of the technologies that promise to answer the increasingly complex demands. However, that very complexity means that the evolution of the way money moves through treasury departments is ultimately a gradual, incremental process not without significant challenges and inherent risks.

Here, we take a look at where treasury fits into the broader sweep of financial services evolution, explore some of the biggest opportunities for tech to transform processes for treasurers and identify the hurdles of innovating in the space.

S A R A H

Treasury tech: the innovation game

INNOVATION IN THE TIME OF REGULATORY CHANGE One highly-touted area we can see innovation in the wider financial tech aimed at making treasury management easier, more efficient and more transparent is around regulation.

New legislation including Basel III and Dodd Frank were brought in to pull the financial services industry into line after the global financial crisis, but this equated to mounting pressure on treasury departments to make sure they are compliant.

Enter a strain of financial tech startups currently picking up a lot of attention: “reg tech”. This refers to technology that is designed to help banks and other financial institutions (FIs) comply with the increasingly complex regulation of their sector and which has been dubbed “the new fintech” by Deloitte, as well as being named by the UK government as a key focus of investment last year.

Like any catchy umbrella term, ‘reg tech’ actually incorporates a myriad of different services. In a report from Deloitte, one of those areas is described as including legislation and regulation gap analysis tools: as in helping FIs to identify the areas of their business that are not compliant.

Related to that are the health check tools: keeping track across the multiple systems inside an FI on a regular basis, while others include regulatory reporting tools, activity monitoring tools and risk data warehouses. As these examples highlight, a lot of the need that reg-tech answers is related to automation and crunching/storing/capturing and processing data that these FIs need to be able to produce.

Many treasury tasks are by their nature complex, but could a combination of machine learning and robotic automation help make some of the more repetitive aspects more efficient?

In a report published at the beginning of the year, Deloitte identified robotics as one of the core tech trends that could impact treasury.

“We have already seen the development of algorithmic trading in other markets and therefore we believe that in the near future the same technology could be used to do dealing on behalf of a company. With the exposures being inputted into the system and the treasury policies being stored in the system, the proposed deals could be automatically sent to the dealing platform for execution.

“Whilst improvements have been made in automating interfaces with banks and market data sources, in the future we would expect to see the straight through processing of exposure capture, confirmations and accounting to name a few.”

Treasury FTE

100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% HQ FO

Now HQ BO

HQ ACCT

Future Region

BPO

Robots

Source: Deloitte BLOCKCHAIN Meanwhile, these days no conversation about the future of financial services is complete with blockchain.

Blockchain must be one of the most talked about yet least well-understood concepts to enter finance in recent times.

That was illustrated at a Q&A during The Europas startup conference in London earlier this year, where the participants on a panel dedicated to blockchain panel flipped the format and asked the audience to ask questions at the beginning of the session - then tailored their talk to answer the range of understanding. That range was huge – with some attendees asking very niche technical questions while others simply wanted to know ‘what is blockchain?’.

That’s true in the wider global financial industry, which now appears to be separating into two camps: those that are trying to understand what blockchain could mean for their business and those that are not.

More than a third of financial services organisations globally do not know what blockchain is while two thirds of those familiar with the technology believe it’s the biggest technological innovation since the internet for finance, according to research earlier this year by Pegasystems and Cognizant, undertaken by Marketforce.

“For many, the jury is still out on whether or not blockchain will be a force for good or not,” says Pegasystems director and industry principal of financial services Graham Lloyd. However, we do know there’s no longer room to be complacent about such a potentially significant source of disruption.

“Banks and insurers must prepare themselves for the day when they might have to manage blockchain-stored customer data – whether it be their personal information, details of their assets, or even real-time data from virtual currencies.”

He warns that financial institutions need to be prepared to handle blockchain data belonging to their customers in the future or risk getting left behind. That view was iterated at GTNews’ Treasury Innovation Forum earlier this year.

“Blockchain has huge potential in a wide range of industries,” said Dr Catherine Mulligan, associate director at London’s Imperial College Centre for Cryptocurrency Research and Engineering.

“We advise companies that they should assess it – without necessarily recommending that they use it.”

CHALLENGES OF INNOVATION So what are the main challenges for startups looking to make inroads into this space? We spoke to head business development at treasury startup Huub Wevers for some insight. He said the firm and others in its space are targeting CFOs and treasurers, but change can be slow.

He says these are very busy people, engaged in a multitude of tasks, many of which are operational, high-frequency and ongoing from day to day. WalletSizing’s product requires the ability and willingness to take one or two steps back from this daily routine in order to initiate a strategic review on existing routines in bank relationships.

“This is potentially disruptive and sometimes seen as a huge project,” says Wevers. “It usually isn’t, but that only becomes apparent once one it’s actually underway. So the challenge is actually mostly to take the first actual step. Once it’s going, the on-going maintenance, reporting, transparency and control achieved ensure significant and sustainable year-onyear benefits.”

Another challenge is simply the high risk of experimentation when it comes to finance. Earlier this year the UK’s Financial Conduct Authority opened its regulatory sandbox to provide a “safe place” for fintech companies to test services and business models before being offered to the consumer without having to worry about regulation.

The thinking behind the sandbox is that fintech startups should have the opportunity to test new ideas, even if what they’re trying to build does not fit within existing rules, which FCA director of strategy and competition Christopher Woolard said earlier this year often pre-date smartphones, let alone emerging technologies like biometric authentication.

The very nature of disruption and innovation means this is likely to be the case with what startups are trying to build and not just in finance. While Airbnb or Uber’s approach of ‘asking forgiveness, not permission’ seems to have worked in the rental and transport spaces, fintech startups typically can’t afford to take such big risks with the law.

THE FUTURE’S STREAMLINED Ultimately, the potential for emerging tech and new approaches has the potential to transform treasury processes.

The reality is that change is slow.

The disruption of financial services by technology isn’t happening in one sweep, it’s happening through a succession of smaller shifts, moving at different speeds from industry to industry, segment to segment and geography to geography, across the many different areas that ‘financial services’ includes. In treasury there are increasing signs of change, albeit it at a slower pace than more mature verticals.

That said, the scope for new approaches to streamline, plus bring more efficiency, transparency and speed to treasury makes this one of the most exciting sectors to watch in financial technology right now.

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ADVERTORIAL

Transformation of treasury – The story of bank liquidity Treasury is at the heart of change in the capital markets following the global financial crisis. Funding, liquidity management and balance sheet optimization have each been significantly impacted by the crisis and the wave of regulation that followed it.

Murex has developed an integrated, flexible solution to help banks face their two largest challenges - cost and regulation.

The new frontiers for bank liquidity are optimization, transfer pricing and the evolution of payment systems.

COSTS To keep up with the fast pace of change in the capital markets, treasuries will need to adapt in order to remain profitable.

The cost associated with running a bank balance sheet has increased strikingly over the years. In addition, new competition from Fintechs is emerging, focusing on client-facing activities.

In this context, the ability to run a balance sheet efficiently, mastering increasing complexities and further reducing associated costs, will remain a key objective for banks.

REGULATION Regulations coming into force over the coming years include the NSFR, the leverage ratio, MREL and TLAC. Beyond liquidity, banks are also dealing with structural reform, new regulation surrounding interest rates (IRRBB guidelines) and accounting standards, such as IFRS 9.

Further regulatory changes are envisioned, including shadow banking regulation and the introduction of an intraday liquidity buffer.

OPTIMIZATION No two banks have the same balance sheet and for this reason, regulation will have a different impact on each bank. Depending on funding sources and capital available, balance sheet binding constraints differ.

Although most banks have already gone through strategic balance sheet optimization exercises and some ad-hoc optimizations, there is much more to gain from embedding balance sheet optimization in the daily processes of the bank.

Optimization requires a global view on costs and constraints. As such, it is typically monitored and achieved by central treasury desks. However, information can also be passed to business units for better day-to-day decision making.

TRANSFER PRICING Transfer pricing provides vital information to sales and business lines, enabling them to make decisions that will result in the optimal use of balance sheet resources.

Largely neglected in the past, liquidity pricing now requires new components to better account for banks’ costs and full transparency to business line decision makers.

Key developments in the area of transfer pricing include: • Basis risk, resulting from different liquidity between funding instruments and currencies, has emerged as a 54

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key cost that needs to be passed to business lines.

Curve analytics and real-time curve calibration will become increasingly important in wholesale markets to ensure that real-time pricing is accurate.

• In banking, costs are now driven by regulation over internal economic views. LCR/NSFR FTP components will help to contain the costs associated with regulation.

• The emerging FVA-MVA transfer pricing components will adapt to regulation and drive a first round of -limited- convergence between banking and trading book practices.

The evolution of transfer pricing methodologies will require even more integration between FTP, risk and front office systems.

•

PAYMENT SYSTEM EVOLUTION With the introduction of T2S in Europe, intraday liquidity regulation and the possible applications of blockchain technology, settlement systems are in the throes of a quiet revolution.

Beyond the infrastructure and regulatory changes, the settlement process is now identified as part of wider liquidity risk. As such, the settlement process must now be a concern shared by back-office, front-office and risk.

TRANSFORMING BANK TREASURY IN THE FUTURE REQUIRES THE RIGHT TECHNOLOGY TODAY Concentrating the number of IT systems, centralizing data management and harnessing the power of a front-toback-to-risk software enables optimization and allows for cost reduction.

Having carefully analyzed the market challenges and conducted in-depth analysis of client needs, Murex has developed a treasury solution that allows users to manage liquidity metrics intraday, steer the balance sheet with a global visibility of liquidity and market risks and allocate liquidity costs on a timely and accurate basis.

Murex’s treasury solution allows for the rationalization of operational processes around a single data source, naturally aligning risk and finance.

Combining the essential components of a traditional treasury solution with the complex, real-time metrics and strong product coverage, Murex’s integrated solution provides the technology needed to reduce costs and navigate the challenging regulatory landscape.

Now and in the future, IT systems will need to be flexible and capable of evolving at a rapid pace. Treasuries will need the support of vendors who are committed to innovation and investment in order to address the everexpanding quantity of regulations. Time and time again, Murex is the long-term technology partner of choice for the top players in the capital markets.

To learn more, please visit www.murex.com or follow us on LinkedIn and Twitter @Murex_Group.

Author and Editor: Marc Bernert, Treasury Business Solution Supervisor

B Y M A D H V I M A V A D I Y A

The Future of Treasury Here are some insights into what a few treasury management systems providers are predicting for the future.

DO YOU BELIEVE THAT TREASURY IS TRULY BEING INNOVATIVE IN 2016?

Philip Pettinato, Chief Technology Officer, Reval: Innovation, while really a relative term, generally means coming up with a better way of doing something you do now. In that respect, I think many companies are turning to treasury technology to help them better manage treasury and risk. Companies that are creating a global technology platform are, in essence, laying the foundation for further innovation. We are seeing new implementations of in-house banking structures, enabled in the cloud, which will help them optimise their resources internally and externally in ways they couldn’t before. This cloud-based foundation is enabling treasury organisations to respond nimbly to regulatory pressures, market events and growth, spending

time on analysis that is actionable rather than on gathering data that is out of date by the time they complete the task.

Anis Rahal, CEO, TreasuryXpress: From my perspective, 2016 was the most innovative year I have ever witnessed in treasury. This year, I have observed what I’m going to call the API revolution. With so much innovation by talented and innovative startups, it has now become easy to connect treasury to the systems and services it needs to make a treasurer’s job easier and more resource-effective. Take market data for instance. Prior to 2016, treasury had to rely on very expensive direct market data platform or they had to deal with resource-heavy data services and integrations from their TMS provider. Today, there is a spirit of accelerated and relentless innovation in the fintech startup space which opens up the opportunity for TMS providers.

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Peter Schädelbauer, Head of Product Management, Hanse Orga: I believe that treasury is in evolution, but not in revolution. Things have to be done step by step. There will be many new possibilities through technology and software solutions, with big data, but it will take some time to adopt all of this accordingly.

WILL THERE EVER BE A FUTURE IN WHICH TREASURERS DO NOT USE SPREADSHEETS FOR CASH MANAGEMENT? PP: Spreadsheets are a valuable tool to analyse data – they are not a processing platform, especially not the kind of platform global treasury organisations need. Many treasuries are using spreadsheets for operational tasks, but spreadsheets were not designed for this. They don’t provide the right controls and are not the source of data, which people turn them into; they are just for retrieval and analysis of already integrated data.

AR: I believe the purpose of the spreadsheet has changed and will continue to evolve. It will no longer be used for calculations, but it will still continue to be used visually and for information sharing. I was a treasurer for many years and I love spreadsheets. Treasurers love spreadsheets. They understand spreadsheets, but that doesn’t mean they need to or should do their actual work there.

PS: In my opinion, in the near future we can expect to have a real time cash position worksheet that is fully interactive with all the necessary information available. Spreadsheets will not be necessary then.

HAS THE CLOUD REVOLUTION ENDED, OR HAS THE EXCITEMENT MOVED ON TO OTHER TECHNOLOGY? PP: The hype has ended, but not the revolution. Cloud has definitely gone through its hype cycle, where there are now many different applications of cloud technology that are proven to add tremendous value. So, it is not so much whether people are moving onto the cloud, but what new technology will evolve out of the cloud itself that will enable value, efficiency, and more capabilities as businesses use it over time. For example, mobile couldn’t happen without cloud. Treasury right now is in the process of replacing legacy systems with cloud-based technology. There is a paradigm shift in treasury technology every 15 years, so I would say this is the beginning phase of that shift to the cloud for treasury.

AR: The cloud revolution has not ended but it has changed dramatically. With the advent and innovation made in the private cloud space such as Amazon Web Services and Azure, companies that have been steadfastly server-based in their infrastructures are now moving their environments and operations to the Cloud.

PS: Cloud was never a revolution for me, it was just

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another way of doing things. Cloud will become more and more important but I still believe that companies will not complete all critical processes in cloud solutions. Blockchain is in the spotlight now, as well as big data.

IS BLOCKCHAIN STILL A MYSTERY TO TREASURY? PP: I can see the value in applications such commodity trading or even currency exposure netting – where people are sharing a chain of transactions, like moving physical commodities – but the jury is still out on whether it is the right technology to support these types of applications.

Although innovation with blockchain is advancing, I believe it is some ways off in treasury.

AR: Yes, it is a mystery but it is inevitably coming. When it will arrive is yet to be seen as there is uncertainty is around the regulations. There is also still too much ambiguity on how corporate treasurers will be able to monetise it.

PS: Blockchain is not a mystery, but at the moment treasurers are not given direct access to it. As the treasury department is strongly related to banks, it may take three to five years for blockchain to become a part of daily business.

WHAT ARE YOUR PREDICTIONS FOR THE FUTURE? PP: Software is becoming simpler and easier to use. It is increasingly taking care of the detailed work while users spend their time gaining insight and taking action. This is especially the case in treasury as companies become players on the global stage, participating in M&A, responding to developments that continuously effect the markets.

Treasuries are turning to the technology that will progress as they progress, helping them better manage transactions, measure risk and respond to volatile and dynamic markets and new regulations. In both our consumer and our business lives, the proliferation of data from the Internet of Things will continue to drive technology innovation. We will need new ways to make sense of that data to add value to our lives. Technologies that add true value are always the winners.

AR: Treasury and TMS connectivity will continue to become more frictionless. What I mean by that is that TMS’ will or should become lighter. By lighter I don’t mean less capable, I mean that they will be more flexible, accommodating, and affordable which actually makes them even more capable. By leveraging new, cutting-edge APIs to de-clutter their resource-intensive integrations effectively, treasury teams will be able to perform at higher, more scalable levels.

PS: Because of big data and other new solutions becoming standard processes, other systems will be automated so that the treasurer has time for more important tasks and we will see a new way of working.

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CONTACT US: Questions@chathamfinancial.com Treasury Management Systems Guide 2016/2017 59 ChathamDirectTRM.com

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