Treasurer SpotlightOpinion PiecesGazing into the TMS crystal ball: What treasurers need to prepare for

Gazing into the TMS crystal ball: What treasurers need to prepare for

Predicting the future of any endeavour is difficult. Many areas of research and development are being carried out by different players. Such is the disruption caused, that this is already impacting on how many businesses operate - or even survive. Treasury is no different. It too is having its future shaped by advances in other areas.

Predicting the future of any endeavour is difficult. Many areas of research and development are being carried out by different players. Such is the disruption caused, that this is already impacting on how many businesses operate – or even survive. Treasury is no different. It too is having its future shaped by advances in other areas.

On a practical level, from a treasury management system (TMS) provider’s point of view, these influences fall into three general areas:

a) the treasury community itself

b) technology

c) regulation

The treasury community

Treasurers use many different systems on a daily basis in the execution of their function, including:

a) trading platforms

b) electronic banking systems for cash management

c) electronic banking systems for payments

d) any number of ERP systems

e) market rates providers

f) regulatory repositories

What they desire is seamless integration of all of these diverse systems. Reduction of manual processes. Elimination of spreadsheet dependencies through a single database.

The function of the treasury department is to provide real-time accurate information to a variety of interested parties within the organisation through detailed reporting in the form of tabular reports and summary reporting though informative dashboards.

So they want a TMS which offers this capability without over the top complexity. They want systems which are easy to use, easy to learn, include intuitive navigation, have easy access to data while simultaneously maintaining control and security.

Technology

Technology is ubiquitous. Systems’ power and speed is increasing all the time. New techniques and new processes are emerging continuously and these in turn are bringing new opportunities on the one hand and new challenges in terms of security and control on the other.

Relatively recent developments include:

a) global access to data and information via mobile devices such as  smartphones and tablets

b) anonymous and competitive trading through multi-bank trading platforms

c) access to global cash and payments

d) notional and physical pooling linked to Intercompany Position Keeping

e) Dodd Frank and EMIR regulatory reporting

f) data protection obligations, the latest being GDPR

g) risk assessment including realtime analytics across positions, counterparties, currencies, jurisdictions etc.

h) much of the above is possible through automated inbound and outbound transmission of data from and to 3rd party systems as described above.

Future developments will be interesting to watch. I say “future” but I use the term cautiously. The reason is that “future” technology is already here waiting to be embraced by corporate treasurers. I refer to:

a) cryptocurrencies such as Bitcoin, Bitcoin Cash, Ripple, Zcash, and others.

b) Blockchain

c) smart contracts such Ethereum

These are already in use but not yet embraced by the treasury community on a grand scale. High volatility is keeping them out of the treasury market and the emergence of the major players has yet to evolve to gain a foothold in the treasury world. This technology is beginning to mirror the emergence of the internet which after a cautious beginning, has embraced every walk of life gaining widespread general use among the public for virtually everything.

Allied to the above are biometric authorisation of payments using fingerprint and facial recognition techniques.

The biggest driver of these requirements is of course fraud and the desire to reduce that risk and increase the security associated with making payments.

Big data is also gaining traction. Its applicability in the treasury arena is in trending of KPIs. For example, debt and interest portfolio graphs, cash management profiling over various time periods, exposure profiling etc. These demands require TMS providers to enhance their data storage and retrieval capabilities; to process much larger of volumes of data and offer meaningful information dashboards to senior management.

Regulation

The ability of the regulators is constantly challenged and new regulation and reporting requirements are a constant feature of the treasury landscape. The regulatory impact of Brexit remains as cloudy as ever.

In recent years the focus was on EMIR and the corporate treasurer’s obligations under that directive. Next on the horizon are:

a) General Data Protection Regulations (GDPR)

b) IFRS 16 relating to leases

So, plenty of R&D for TMS developers and much food for thought for treasurers.

 

Further reading: The evolution of treasury management systems

 


This article originally appeared in GTNews’ sister-publication bobsguide.com.

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