When it comes to tech, nothing’s more critical to treasury than an effective TMS – but fast-changing environments call for fast-changing solutions. Nash Riggins explores when it’s time to consider pushing for an upgrade, as well as how to temporarily avoid an upgrade by making the most of existing systems.
The scope and strategic significance of treasury has grown exponentially over the course of the last two decades. As a result of increasingly complex business processes and structures, complicated compliance obligations and a flurry of new cross-border opportunities, corporates have been forced to totally rethink and redefine how they utilise and engage with treasury – and more often than not, the journey to create a digital, scalable and forward-thinking treasury begins with implementing the right technologies.
Despite the dramatic changes within the global fintech space in recent years, the treasury management system (TMS) continues to be the core tech solution that drives a corporate’s increasingly wide range of treasury functions. TMS solutions are responsible for streamlining and managing an organisation’s financial operations – packaging up functions like cash and asset management, reporting, payments, banking and accounting into a single, comprehensive dashboard. Vendors offer a number of fundamentally different types of TMS solutions, too.
Yet as the scope of treasury continues to evolve, business strategies shift and new regulations come into force, outgrowing a legacy TMS solution can present corporates with a crippling hurdle. Treasury managers have got to assess their organisation’s developing needs, customisation opportunities and create a business case for upgrading their TMS. Unfortunately for practitioners attempting to future-proof their treasury function, understanding when it’s actually the right time to upgrade – or more important still, when it’s better to simply try and improve existing infrastructure – can be pretty tricky work.
Like it or not, the choice treasurers face of whether to upgrade their TMS is often decided by the market itself.
The global TMS space has become a relatively fast-paced and competitive environment, which means that monumental advances in new tools like AI and machine learning have limited the shelf life of many treasury tech solutions. Vendors have started to replace or discontinue support for existing products at an increasingly rapid pace – and so, more often than not, the right time to upgrade is simply when compatibility is set to become an issue.
A TMS solution that’s not receiving updates with new patches not only poses a heightened security risk for an organisation’s IT infrastructure, but it hinders connectivity. The treasury sector has long been drifting towards consolidation and centralisation. Yet in order for a centralised treasury to work effectively, practitioners rely on a number of remote teams to be communicating and collaborating in real-time, using fully compatible interfaces capable of unifying and rationalising various treasury functions.
When a TMS vendor decides to radically change or upgrade its offerings, this can leave corporates in a lurch where interfaces stop working together and errors begin to crop up. Any vendor worth its salt should be giving clients advance notice of any discontinuations – offering plenty of time to plan ahead concerning upgrades. That being said, the ever-widening availability of cloud-based solutions has helped to mitigate this risk to a certain extent, as some vendors are now able to onboard clients over to new solutions with minimal fuss.
Another critical factor in knowing when to upgrade to a new TMS solution is compliance. Treasurers must constantly be scanning the horizon for incoming regulatory obligations within existing markets, as well as in new markets up for consideration in terms of expansion. Jurisdictional requirements around KYC and money-laundering requirements, data processing and financial reporting are becoming increasingly divergent across key developing markets. This is particularly challenging for multinationals with a centralised treasury function, as counterparties are often remotely located and teams are made responsible for a wider range of transactions with minimal local knowledge.
An up-to-date TMS enables those centralised treasury practitioners with the ability to automatically gather and disseminate counterparty data from a number of regions in order to create a real-time, auditable trail. This vastly simplifies regulatory reporting requirements – and it should be a key consideration for any organisation bracing for the impact of new regulations or moving into untested markets. If a TMS system is not being updated with the necessary reporting function to meet new and incoming compliance targets, then it’s time to upgrade.
While there are a number of red flags treasurers should be looking out for in order to know when it’s time to make the case for a TMS upgrade, making the financial case for such an upgrade is a little bit harder – particularly given the economic uncertainty clouding multiple markets in 2020.
According to Deloitte’s 2019 Global Treasury Survey, a majority of practitioners say that the costs of ownership, implementation and maintenance of TMS solutions are still the greatest barrier to adoption within their respective organisations. Despite the fact that there are a number of ways in which teams can build a clear business case that quantifies the benefits of investing in new systems, sometimes major internal resistance or external economic uncertainties simply outweigh those benefits in the short-term.
Fortunately, there are plenty of ways treasury teams can improve the functionality and performance of an existing TMS solution without significant investment.
Regardless of a system’s age, TMS solutions are designed to be incredibly configurable by nature. This enables practitioners to work in tandem with internal stakeholders to tailor their existing system to improve workflows and reporting capability.
The vast majority of software treasury tools are designed with a relational database in mind that utilises predefined views to prevent direct access across most users. While this protects systems and the raw data they require from additional human errors, it also creates unnecessary hurdles for lateral teams that require real-time access to a wide range of both traditional and non-traditional data sources from starkly contrasting markets.
One solution to improve access and enable improved bespoke reporting functionality is to establish an additional data lake that can be linked with a TMS – often using BI-focused data visualisation techniques that can support any changes in reporting requirements and adaptation that are otherwise unsupported by the TMS vendor responsible for that solution. It’s worth noting that executing any required changes may turn out to be a relatively labour-intensive process for IT, accounting and treasury teams.
An easier way in which to improve an existing system – particularly within the context of analytics and data forecasting – is to explore the range of supported customisation and configuration apps already available using otherwise dates cloud-based solutions. While a number of white label cloud systems have started to appear clunkier in terms of off-the-shelf functionality, the use of open APIs has empowered enterprising fintechs to work alongside TMS giants to create hugely useful bolt-on, third-party modules that are relatively low-cost and easy to integrate within an existing system.
Bearing in mind the ability of many cloud-based TMS solutions to evolve alongside an organisation in terms of reporting functionality, security and compliance, treasurers or CFOs considering an upgrade must take stock and conduct a thorough breakdown of what a new TMS could bring to the table for their respective organisations. More often than not, the choice to upgrade is the decision between investing in seamless and convenient functionality against a hefty cost of implementation – and unfortunately, there’s no cookie-cutter solution to that problem.
At the end of the day, it falls upon treasury teams in order to ask the right questions and keep an eye on the horizon to ensure their respective organisations are working with relatively future-proof and scalable TMS solutions that can evolve in line with changing business needs.