|We’ve seen a lot of development over recent years in terms of corporate treasury practices in the Middle East and we were delighted that two of our customers in Dubai were just recognised for their achievements in the ACT Middle East’s annual awards. As such we wanted to gain the very latest insights and decided to run a market study in collaboration with Aite Group and the ACT Middle East. The results have just been published confirming our observations; that the majority of corporations in the Middle East do now have a treasury function set up and that many are indeed moving away from manual processes and bespoke software towards increasingly sophisticated methods of treasury management.The study uncovered that the top three treasury challenges are; increasing productivity, demonstrating treasury as a value generator rather than a cost centre and improving risk analytics. The study also found however that a significant number are still spending too much time using spread sheets and manual processing. If you’d like to read the full report, please click here.|
We were delighted to recently announce that one of our key customers in Dubai, Easa Saleh Al Gurg Group (ESAG), was recognised by the ACT Middle East in its annual awards winning the category of “Small/Medium Team of the Year.” ESAG has been a SunGard customer since 2011 and during that time has established a dedicated centralised treasury operation that, using our AvantGard Quantum solution, has since achieved significant cost savings and provided a central database for all transactions across 23 diverse entities. With more than 250 bank accounts across 11 bank relationships, obtaining an accurate view of its daily cash flow across the entire company was a challenge, but ESAG set up an In-House Bank (IHB), enabling them to concentrate and manage cash flow, promote best practices and standardise processes through ensuring all entities are working from the same daily bank statements. The IHB can perform intercompany payments without additional charges and can facilitate better bank relationship management.
We would like to congratulate ESAG on winning the award and on the achievements it has gained in transforming its treasury over recent years. We are seeing more and more corporates in the Middle East move forward in adopting treasury technology and improving efficiencies, with a shift away from error-prone manual processing and unnecessary expense. Congratulations also to another SunGard customer, Dubai Aluminium (DUBAL), who won in the category of “Large Team of the Year” at the ACT Middle East awards.
CLICK HERE To Read the Full Case Study on ESAG’s Treasury Project
A Guide to SaaS and the Alternatives…
The treasury management solutions market has witnessed a number of important innovations over the past few years, one of which is the introduction of the software as a service (SaaS) deployment model. As often happens when new technology is developed, it is easy to assume that because SaaS is now so regularly discussed, it provides a ‘one size fits all’ solution for treasury, irrespective of the specific needs and considerations that exist. Undoubtedly, SaaS brings a range of opportunities and benefits: However it is important that when selecting a vendor, they are able to give you a selection of multiple deployment options and have the necessary experience and expertise. You want to be selecting a true partner, not just a vendor who can navigate you through the selection process, implementation and support you going forward. I will outline below what SaaS really means, whether it is the right option for your business, and what alternatives may exist.
What is SaaS?
As with any other industry jargon, the term ‘SaaS’ is often applied to a variety of different scenarios, often erroneously. In particular, it is important to distinguish between a SaaS solution and a system that is accessed via a web browser. SaaS solutions refer to a treasury workstation or treasury management system (TMS) that is hosted by the vendor or another third party, with users accessing the application via a web browser using their user ID and password. There is no software located on the company’s own platforms so no dedicated hardware or IT resources are required. Instead, the TMS is hosted in a common environment with a shared database (although access is only permitted to the company’s own data). Upgrades and corrections are provided automatically, as opposed to being scheduled between the vendor and customer.
Installed and hosted solutions
However, SaaS are not the only treasury solutions that can be accessed by a web browser as opposed to requiring specific software or drivers on the user’s PC (which may also be a mobile device in some cases). A TMS may be installed on the company’s own IT infrastructure, but still be easily accessible to users, e.g. via a browser. Alternatively, hosted, or ASP (application service provider) solutions are those hosted and managed by the vendor or a third party. Again these may be accessible through a web browser. Like a SaaS solution, hosted solutions are managed by the vendor, reducing the amount of IT resource that treasury requires. In contrast, however, the system is often hosted on a dedicated platform, with the customer controlling the timing of major events such as upgrades.
Is SaaS right for me?
SaaS solutions undoubtedly bring a variety of benefits for customers of certain profiles. There is no need to dedicate IT resources to implementing and maintaining a treasury solution; similarly, interfaces to external systems such as electronic banking systems are managed by the vendor. Many of companies are attracted to this model, and it is an ideal solution for delivering functionality across multiple systems. For example, an eBAM (electronic bank account management) or bank fee analysis solutions can be delivered via SaaS solutions, in addition to cash management, debt management, investment management etc.
While SaaS treasury solutions bring obvious advantages, you need to consider your functional requirements carefully before determining whether this is the right approach for your business. By using a shared treasury environment, there is less flexibility in workflows, instrument definition, reporting and key performance indicators (KPIs) than an installed or dedicated solution can provide, and no ability to add custom processes. Similarly, it may not be straightforward to integrate a SaaS treasury solution with in-house systems such as a payments factory.
If you have relatively straightforward treasury requirements, these issues may be insignificant. If you have more bespoke functional, reporting or integration requirements, the loss of flexibility resulting from a shared environment may mean that either a hosted solution, or solution installed on your own technology infrastructure is more appropriate. A hosted solution, for example, still avoids the need for dedicated IT resources, but treasurers benefit from greater flexibility and sophistication in functionality, reporting, processes and instrument definition. If you are looking to implement capabilities such as SWIFT 3SKey for personal digital signatures, this will typically be better supported through an installed or hosted solution.
Another criteria for deciding whether a SaaS solution is right for you is the way in which the solution will be maintained over time. With a SaaS solution, upgrades are performed across the whole customer base at once, so individual customers have no discretion over the timing of upgrades. Again, where your treasury requirements are relatively modest and user testing of new upgrades can be completed quickly, this probably presents few issues and may be considered an advantage. If your treasury is larger and/or more diverse or complex, it can be inconvenient to have the timing of upgrades imposed on the business. For example, it may not be feasible to perform extensive user testing during busy periods, e.g. staff holidays or major events such as mergers or acquisitions, and changes to functionality may be undesirable during these key business events.
The wider enterprise
There are also factors beyond treasury that may influence the decision over SaaS. Some companies’ IT security policies dictate that SaaS solutions are not permitted, requiring that treasurers hold sensitive systems and data in-house or in a dedicated hosted environment. The growth of the ‘big data’ concept will also increasingly be a factor. As the amount of data with which every organisation is bombarded continues to grow, the idea of ‘big data’ is to manage the volume, velocity, variety and veracity of data in a structured and meaningful way. This is likely to have a major impact on the way that many companies approach their business applications and databases including in treasury. As treasurers do not have their own database when accessing a SaaS treasury solution, it is far more difficult to accommodate a ‘big data’ approach.
Innovation for greater choice
Treasury management solutions have developed enormously over recent years in response to new technology opportunities and treasurers’ functional responsibilities. SaaS deployment is one manifestation of this evolution and offers considerable opportunities to many treasurers for whom a TMS has appeared an unrealistic option in the past. It is only one innovation amongst many that are taking place, however, so treasurers need to consider their IT, functional, reporting, integration and security needs carefully before deciding whether SaaS is right for them. Choosing the right deployment model can be an important factor in ensuring that your treasury achieves the balance of convenience and accessibility with functionality and information.
SaaS vs. hosted solutions
|SaaS treasury solution||Hosted treasury solution|
|Hosting and user access||
|Upgrades & maintenance||
|Reporting and enquiry||
The European Markets Infrastructure Regulation (EMIR) is designed to reduce systemic risk and bring more transparency to both OTC and listed derivatives markets. I was recently asked to comment on the impact it will have on the corporate treasurer in terms of workload and staffing. Due to the increased volume, detail, standard and time-sensitive nature of reporting required, I think the impact will be significant and corporate treasury departments will be stretched to comply. Without dedicating additional resources, the investment required to meet these regulations will undoubtedly compromise the business, which is why we’ve developed specific reporting functionality within our treasury solutions to help alleviate that pressure.
You can listen to this podcast to hear my complete commentary on the impacts of EMIR.
I’d be interested to hear from corporate treasurers who are concerned about how EMIR is going to impact their team’s productivity. In the meantime, you can hear my thoughts recorded in the podcast.
In Part I and Part II of our Managing Corporate-to-bank connectivity blog series, we discussed how there is no ‘one size fits all’ when it comes to bank connectivity and how monitoring is key to effective corporate-to-bank connectivity. In part III, I will discuss formats. The connection between corporates and their banking system(s) or SWIFT is often described as a communication ‘pipe’. This is really a misnomer. A ‘pipe’ suggests that data (in this case) will simply flow through it unimpeded, so long as there are no blockages or breaks in the pipe. However, in the case of corporate-to-bank communications, not only does the flow of data need to be unimpeded (e.g. by error or omission) but the format of data from the originator needs to be recognized by the recipient. In this respect, a better analogy may be that of a jigsaw puzzle. It doesn’t matter how efficiently data is sent from a corporate to a bank, or vice versa, if it doesn’t fit correctly into the other’s systems.
This is the challenge with file and message formats, e.g. for payments and account statements. In the early days of electronic banking, when a company may only use one banking system, and this was not typically integrated with the company’s treasury management system or payment systems (such as they were at that time) banks were free to define formats as they wished. Corporate customers typically had little knowledge of what formats were being used, and even less interest: it simply wasn’t relevant.
As companies increasingly became multi-banked, and sought to integrate bank connectivity with their internal systems, the lack of consistency across banks’ electronic banking systems became a more significant issue. Various efforts were made to try and standardize formats across the banks, but most of these initiatives were relatively unsuccessful as electronic banking was still considered as a competitive differentiator by many banks.
This is changing slowly, and there is now greater recognition of the value of standardized formats, leading to the development of XML-based ISO 20022. This is the format used for SEPA payment instruments, but adoption is becoming global. The reality, however, is that there are various ‘flavours’ or permutations of ISO 20022 between banks and countries, not least due to differences in underlying systems, payment instruments and market infrastructure. Consequently, while ISO 20022 is an important step forward in simplifying and standardizing financial messaging formats, it is not a magic formula.
Supporting multiple formats is a major overhead for corporate treasurers and finance managers, not simply as a ‘one time’ activity during implementation and integration of a new banking system or SWIFT, but on an ongoing basis. Banking systems evolve, new systems are introduced, and formats themselves also evolve over time. Introducing new currencies or countries can also necessitate new formats.
To enable this resourcing to be redirected to more value-added activities, treasurers and finance managers are increasingly turning to a managed connectivity and SWIFT messaging solution, which is integrated with a treasury management system or a payment solution like a payment factory. By connecting to all of a company’s banks via a single platform, the format of files is structured automatically according to the needs of each bank, and vice versa to enable files to be integrated seamlessly into companies’ own system environment. A managed bank connectivity solution enables new formats to be integrated seamlessly into the treasury and payments solution without the need for additional implementation effort.
In Part I of my blog series on Managing Corporate-to-Bank Connectivity, I discuss how there is no ‘one size fits all’ when it comes to bank connectivity. In this article, monitoring is key to effective corporate-to-bank connectivity. A common misconception when implementing banks’ electronic banking systems, SWIFT or a domestic channel such as EBICS (Electronic Banking Internet Communication Standard) is that once installed and integrated with internal systems, the task is complete. The reality may be quite different. Every message to or from a banking partner needs to contain exactly the right information, and in the correct format. Any errors or omissions will cause the message, and in the case of some file-based messages, the entire file to fail. The offending message or file then need to be identified, corrected and resubmitted, which is typically a race against time as cut-off times loom.
Delays in payments processing can have significant ramifications, particularly in the case of salaries, payments to key suppliers, treasury settlements and interest on borrowings. Consequently, constant monitoring of messages exchanged with banking partners is required to ensure that any errors or omissions are identified and addressed promptly.
Realistically, few treasury and accounts payable departments have the resources to provide this level of monitoring. This is a significant factor in the decision to leverage a managed connectivity and bank communication service. Not only do treasurers and finance managers avoid the need to set up bank connectivity and integration, but messaging with the banks is then monitored proactively to ensure errors or omissions are identified as soon as they occur.
As companies operating in the Eurozone finalize their SEPA migration plans and complete their implementations, leveraging a managed service is extremely valuable in order to ensure that payments processing is not interrupted through the introduction of new formats and settlement instructions. Furthermore, regular monitoring of traffic between a corporate and its banks and analysis of errors or omissions drives constant improvement in the quality of underlying settlement data used to make payments, the accuracy of formats, and the efficiency of payments processing.
How are you monitoring your bank communications? I’d like to hear from you.
In days gone by – which could mean any time from the 1990’s to around 5 years ago, the goals when implementing a treasury management system (TMS) or payment system were typically transaction management, control and reporting. Over recent years, however, there has been a transformation in the way that these systems sit within the treasury or payments technology infrastructure. Integration with external systems, such as electronic banking solutions, is no longer an add-on function relegated to an elusive phase two of a TMS implementation project. Instead, it is an essential enabler for efficient, secure processing of payments and retrieval of account information for cash positioning and automatic reconciliation.
There is no ‘one size fits all’ when it comes to bank connectivity. In most cases, companies use one or more electronic banking systems provided by their banks. Those that have a number of bank relationships are increasingly using SWIFT, formerly a bank-to-bank communication network to which corporate users are now eligible to join for multi-bank corporate-to-bank connectivity. In some cases too, particularly amongst corporates that have predominantly domestic business, companies use a domestic payments channel, such as EBICS in France and Germany.
The common feature of these communication methods is the effort required both to install and maintain the system, and to integrate it with internal treasury and payments systems. This may appear relatively straightforward if a company uses one banking system, or outsources SWIFT connectivity to a service bureau. The reality is that few medium or large corporations have a single cash management bank. This means that they need to maintain interfaces to multiple electronic banking systems, each of which has its own security mechanism and data format. Furthermore, one bank may have different formats in each region or country. While this issue differs slightly for companies that outsource SWIFT connectivity, a standalone service bureau is rarely expert in the internal treasury and payment systems used by a corporate, so effort and expertise are typically required to provide the required degree of integration.
Robust and reliable bank communication should be part of an efficient payments and cash management process. Rather than making connections to multiple banks or portals, and managing separate formats, bank connectivity (with the relevant banks, in the required format and through the chosen channel) can be delivered in conjunction with a treasury management system or a payment factory – ideally from one vendor who offers these solutions and has years of experience and expertise in addition to acting as a service bureau.
As corporations expand their geographic footprint into new territories, diversify their counterparty risk, and seek new ways of enhancing treasury’s efficiency and security, efficient bank communication and integration with internal systems become even more important and indeed challenging. By leveraging managed bank communication services, treasurers and finance managers can focus not on communication rather than connectivity, and on process efficiency and control rather than integration.
In my last two blogs, I discussed the recently-released Asia Pacific Treasury Barometer Survey conducted by SunGard and Bank of America Merrill Lynch. In this blog, I’d like to take a closer look at hosted and cloud-based Treasury technology in the region. The cloud model has gained momentum and emerged as one of the biggest advances in treasury technology by enabling companies to access software held securely offsite. Those turning to the cloud model see benefits of rapid implementation without impacting local IT structures, reduced fees based on usage and transactions, and reduced capital expenditure costs. While cloud-based Treasury is in its infancy in the region, companies moving to this model have the opportunity to leapfrog to sophisticated Treasury technology.
According to survey responses, a trend is emerging in the Asia Pacific region among companies with revenues in the $5-10 billion range, who are using a hosted solution more than twice as often as any other company size. This indicates that companies in their growth stages, in order to meet increasingly complex Treasury demands and growth, are increasingly looking to creative solutions to support that growth at a lower cost. By implementing more sophisticated Treasury functions at an earlier stage, these companies can take advantage of improved cash visibility and even potentially fund growth with freed-up cash.
Some companies express apprehension around using a cloud or hosted solution due to concerns around the security of their data. Hosting providers that offer a choice of secure hosting facilities or a secure private cloud can alleviate those apprehensions. Working directly with the technology provider or software vendor rather than a third party host can avoid the complications of introducing an additional layer of communication.
You can download the full report at: www.sungard.com/treasurybarometer. Have you investigated or implemented a hosted or cloud-based Treasury solution? I’d like to hear how your experience compares with our survey respondents.
In our last blog, we shared the recently-released Asia Pacific Treasury Barometer Survey conducted by SunGard and Bank of America Merrill Lynch. I’d like to take a closer look at the continued trend of Treasury centralization. While already popular in the United States and Europe, centralizing Treasury functions in the Asia-Pacific region can be a challenge due to incredibly diverse regulatory environments. Not surprisingly, many firms continue to manage functions accounts payable, accounts receivable, and banking relationships at the subsidiary or business unit level.
However, Treasurers in the region have indicated an increasing degree of centralization. As the survey data showed, regional Treasury structures often begin with moving basic tasks around cash visibility and forecasting from the business unit to the centralized location. Once in place, though, companies can begin to move additional functions to the centralized location and work on creating a more sophisticated treasury structure.
A truly centralized RTC might take on functions like risk management, compliance, and hedge accounting. And a more sophisticated treasury structure enables higher-level functions such as the in-house bank, which allows subsidiaries to borrow from within the company rather than having to use external funding, helping make cash available to fund growth or to better manage credit during times of economic turmoil.
An interesting trend emerged from the survey indicating that middle market companies are increasingly implementing centralized functions at an earlier stage in their development. By doing so, they can avoid building complex structures that would need to be painstakingly unwound if centralized at a later stage in their development. With the improved cash management and visibility provided by an RTC, they may also benefit from having more funds available for growth.
For a region dealing with cash visibility concerns, as discussed in my last blog, implementing a higher degree of centralization and sophistication can go a long way to addressing some fundamental frustrations. The barometer report discusses these results in detail, with results according to country and industry.
You can download the full report at: www.sungard.com/treasurybarometer.
Have you implemented a regional Treasury center? I’d like to hear how your experience compares with our survey respondents.
I would like to share with you a recently-released survey conducted by SunGard and Bank of America Merrill Lynch. With over 900 responses from treasurers across the globe, the Asia Pacific Treasury Barometer is the most comprehensive treasury management survey conducted in the region.
One thing that really stood out was that 25% of treasurers identified as improving cash visibility as their primary area of focus in the next year. This is not entirely surprising, since Asia Pacific can be a complex region for treasury management with its diverse tax and regulatory requirements and potential for trapped cash. Of note, 73% of respondents identified their level of cash visibility as sub-optimal.
Having a functional cash flow management structure in place is crucial for funding growth with surplus cash and to withstanding credit tightening. A surprising 67% of respondents did not use any cash flow management systems, and of those who did, over two thirds relied on spreadsheets rather than specialized Treasury technology. Because spreadsheets usually do not easily integrate with other systems to provide analysis, this can clearly contribute to poor cash visibility, in addition to raising potential for fraud and keying or function errors.
Another factor that can contribute to poor cash visibility is a higher number of cash management bank accounts. As companies grow in size and across regions, the number of bank accounts they use tends to increase as well. But our research showed that, once companies reach $5 billion in revenue, they begin to undergo a bank account rationalization process to reduce the number of bank accounts, and often to implement measures like automated or electronic bank account management. The barometer report discusses these results in detail.
An opportunity clearly exists for companies in the region to review internal processes in order to make cash actionable to take advantage of growth opportunities. You can download the full report at: www.sungard.com/treasurybarometer. We intend to repeat the survey in the future, so I’d be interested to hear your thoughts and feedback.