Treasury Today Country Profiles in association with Citi

Are you ready for the future?

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Corporate treasurers constantly have one eye on the future, and with many treasury functions under increasingly stringent cost constraints, treasurers are seeking ever more innovative ways of doing their jobs more efficiently and technologies to free them up to do the tasks that add the most value. From mobile treasury tools to the rise of the CTO, we look at what the future holds for the function.

From entering, approving and settling trades, to opening a new bank account, technology permeates almost every aspect of treasury work. And as treasurers look to 2015, many will ponder how advancements in the tools available to them will alter the function in the future. Here we speak to a number of treasury technology experts to find out what developments we can expect in the year ahead, and beyond.

We begin with mobile technology. It seems that no corporate treasury conference would be complete without a mobile treasury panel, although treasurers may sometimes wonder when exactly the promises of technologists will materialise into usable and useful solutions.

In the wake of a number of developments that could transform the mobile payments space, 2014 could be considered the year of mobile. In April, the UK’s Payments Council launched Paym, the first mobile payment solution with the ability to link between nearly every current account in the UK using only mobile numbers. Later in September, Apple unveiled plans for its Apple Pay digital wallet. However, while most high-profile mobile news has been on the consumer side, what about the mobile technology that treasurers can get their hands on?

“Pretty much every treasury RFP we receive includes an element where prospects want to know what our mobile capabilities are,” says Paul Bramwell, Senior Vice President – Treasury Solutions at SunGard. “Mobile is still at the novelty stage, where treasurers think it is interesting to have a strategy for it, but in reality its usefulness is still limited at present.”

The fact is, many key treasury tasks do not lend themselves well to mobile as a platform. Think about it: would you really want your treasury manager doing FX deals in the pub? Or buying commercial paper on the train to work? Probably not. It is for this reason that mobile penetration is unlikely ever to be as pervasive in corporate treasury as it is in the consumer space. “We don’t see there being such rapid migration to mobile as there has been in retail,” says Alastair Brown, Head of eChannels in the Global Transaction Services business at RBS. “There, the whole value chain is translated into a digital solution. In treasury departments it will supplement, rather than replace, what’s already there.”

That said, mobile can be a useful channel for monitoring and approvals, and it is here that technology could develop rapidly over the next few years. “The segregation of duties and the approval queue are key aspects of treasury. The ability to log in to your treasury application using a mobile device whenever you have some approvals waiting for you is a big draw,” adds Bramwell. “For payments which are high-value, low-volume, and critically important to the business, mobile approvals give far greater flexibility to the treasury department whose treasurer is often away from their desk.”

In future, the mobile medium could also greatly enhance visibility into cash and investments. “Dashboard components built into mobile treasury applications allow CFOs and treasurers to see what their current position is,” says Bramwell. “Valuable information such as how much cash they have, the mark-to-market position of their derivatives, and the number of deals that have gone through in a day, give them a snapshot of exactly where they are at a given time.”

The notion of flexibility that mobile solutions can offer treasurers is compelling. This flexibility is also inherent in another developing channel: the cloud.

In the cloud

Corporates are increasingly looking to the cloud for solutions to their treasury technology needs. “One of the big emerging trends is cloud deployment, which is becoming more accepted now as a deployment medium and methodology,” says SunGard’s Bramwell. “Treasurers were perhaps initially sceptical of the web as a medium in terms of security and usability, but they are becoming far more convinced now. There are several players who offer treasurers software-as-a-service (SaaS)/cloud solutions, and the market has adopted web-based services as a very viable option.”

Reval is one such player offering SaaS treasury solutions. “SaaS is a delivery model that allows us to create an environment in which a multi-tenant community shares the same version of application software to run their treasury risk management solutions,” explains Phil Pettinato, Chief Technology Officer at Reval. “The economies of scale and the accessibility of cloud and SaaS technology enable corporates to operate their global organisation on a platform that works across all their different locations.”

Pettinato says this kind of flexible solution is especially beneficial to growing companies and those that are acquisitive. “These are configurable, extensible and extendable solutions corporates can expand upon to accommodate their growth and meet regulatory changes in the marketplace,” he adds.

For corporates that are uncomfortable sharing data in a public cloud outside their own firewall, there is an alternative. “There is a significant minority of companies who want to control their data in a secure private cloud environment,” says SunGard’s Bramwell. “That means having the infrastructure dedicated to you as an individual company, with no shared elements, which then offers considerably more scope for customisation.”

Private cloud services are more costly than those in the public cloud, but they do give corporates the ability to bring the process back in-house at a future point should they so wish.

The increase in the use of cloud-based services within the treasury is linked to another technology trend worth watching – the rise to prominence of the Chief Technology Office (CTO) in the corporate world.

The rise of the CTO

Formerly the preserve of technology companies, now corporates in a variety of sectors, not to mention banks, are appointing their own CTOs and CIOs (chief information officers; they differ in that CTOs are typically responsible for technology innovation and development, while CIOs focus more on the organisation of technology) to keep pace with technology advancements.

In the UK for example, drinks group Diageo, hardly known for its technology credentials, has a dedicated CTO, and in May, Deutsche Bank appointed a CIO for its Corporate Banking and Securities and Global Transaction Banking business.

“Mobile is still at the novelty stage, where treasurers think it is interesting to have a strategy for it, but in reality its usefulness is still limited at present.”

Paul Bramwell, Senior Vice President – Treasury Solutions, SunGard

This trend could be interpreted as a positive and proactive step in embracing technology outside the tech sector. However, the creation of a standalone role focused on technology can create challenges in treasury and finance if the CTO is not in close contact with other functions impacted by technology. For instance, if the implementation of a new TMS is led by the CTO with too little input from the treasurer or CFO, the project is likely to end in failure.

“The problem with the CTO role is that there is a separation of roles,” says Ian Pearson, a futurologist at futures consultancy Futurizon. “As more advanced technology is integrated into payments and cash management systems, if you’ve got a CTO that is distanced from the finance or treasury department, these need to be brought closer together. There should be some overlapping function that forces them to have regular meetings at the very least to make sure that adequate security is in place, that they are using the right technology, and that this technology is compliant with the company’s existing finance systems. Today this is too separated in many companies.”

This improved communication and visibility between functions is one evolution that could well take place in increasing numbers of MNCs in the years to come, but within the treasury function itself, visibility, particularly over cash and liquidity management, looks set to remain a challenge.

Moving on from the financial crisis

Following the turbulence of 2007/08, the way corporates manage their cash and liquidity has evolved, partly because many treasurers realised their control processes were overly lax, but also because they are more wary of relying on a single financial institution to handle all their transactions. The increasingly stringent regulation on banks has also had an impact. This has led to treasurers monitoring their positions more frequently and in more depth. It has also resulted in the expansion of the number of banking relationships a company has. As these two trends look set to continue, the role of technology should become ever more important to the treasurer.

“In the past, corporates would typically have a single bank providing all their liquidity needs, and the treasurer would view the company’s positions periodically. Now the active monitoring and management of their cash positions is more of a pressing business need, and for MNCs this is often across accounts at multiple financial institutions,” says Mike Jackson, Head of US Cash Management at Fundtech. “Even if a bank isn’t meeting all of a company’s liquidity needs, they still need to have a technology solution in place that allows their client to aggregate all the relevant information and closely manage their position.”

Just as the financial crisis forced treasurers to review their cash and liquidity management policies, it also made many corporates take a step back to look more closely at their risk management and mitigation. One key way to address this is by analysing the data arising out of treasury operations. But in order to analyse crucial data such as historical banks transactions, for example, treasurers are often hamstrung by the technology they have in-house: the typical reporting tool in a treasury management system (TMS) often limits analysis to a 12-month period at best, especially if the business has an annual, repetitive nature to its cash flows.

It is here that in the future banks could come to the aid of their clients with the wealth of data they collect on their behalf. “Treasurers in general probably don’t realise the potential benefits available from the data that comes from what we have transacted on their behalf,” says RBS’s Brown. “We have spent a lot of time thinking about the technology mechanics around handling big data, such as stitching data together, making sure the data set is consistent, and eliminating redundancy or duplication. The question is, what do corporates want to get out of this massive asset? Now we are working in close collaboration with our clients looking at the areas they are trying to get information on – this is going be a big differentiator over the next 12 to 18 months.”

He adds that as the pressures of regulation and resource constraints continue to impact treasurers, they are likely to seek outside help – notably, though not exclusively, from banks – to make use of their data. “Corporate treasurers are telling us that they are expected to do more and more – they have to take a bigger risk agenda and take a bigger role in the strategic decision-making of their firms, and they are under cost constraints. It is a role in change,” he says. “Based on the data from transactions we process, we as a bank are in the useful position of being able to provide an across-the-board view of the client’s business. The question we need to address is what will tomorrow’s corporate treasurers want from their data?”

So far we have looked at developments that, while they are ones to watch for the future, are nevertheless already starting to have an impact on treasury operations. Now we look at a more ground-breaking advancement.

Brave new world

Looking further ahead, nascent technologies such as wearable devices and augmented reality could have a profound impact on corporate treasuries. As with many new technologies, wearable technology will likely make an impact on the consumer space before becoming widespread for use in treasury and finance.

Visor technology, such as the Google Glass, launched in May 2014, could be of use in retail by providing instant price comparisons and facilitating contactless payments. Futurizon’s Pearson says this comparability capability could also be of great use to some corporates. “Augmented reality and visor technology could potentially generate huge savings for companies that they can’t achieve at the moment,” he says. “For example, local stock managers could glance at an item in a warehouse and be given information on how much it cost, how much energy it uses, the alternatives available, and the savings that could be made. It is a very strong potential tool for optimising costs, and can go to a management level.”

Augmented reality could also impact negotiations. Imagine sitting down to negotiate with a supplier or banking partner armed with all the information you could ever possibly want. “This technology could offer every advantage possible in negotiation,” adds Pearson. “You can negotiate from a position of extreme strength knowing just about everything there is possible to know about a competitor – you will effectively be able to bring in an entire team to provide you with real-time figures.”

However, this could consequently create an ultra-competitive environment that diminishes trust in the negotiating room, similar to a chess player who might feel that playing an opponent backed by a supercomputer is neither fun nor fair. “There could be a backlash against using the technology in this way, as people might not want to feel under pressure all the time. Rules could be drawn up to ensure this kind of technology cannot be taken into the negotiating room,” he concludes.

Future-proofing treasury

As they look at the technology challenges and opportunities that lie ahead, treasurers must be careful to future-proof their businesses. If they pick the wrong technology, they could be confronted with the costly problem of obsolescence a few years down the line.

“Technology moves on and it moves on fast,” says SunGard’s Bramwell. “Corporates need a technology partner that can adapt very quickly and easily to make sure they don’t end up obsolete, using technology that is unsupported, not by their vendor but by the underlying supplier of the operating systems.”

He cites Microsoft’s recent decision to end support for Visual Basic 6 and Windows XP as an example of technology that will soon be unsupported. This termination of support can create a serious audit issue for treasurers. Similarly, corporate users of the Microsoft.NET framework were faced with the choice of HTML5 or Microsoft’s proprietary Silverlight plug-in. “Silverlight was picked by many vendors, but it is becoming far less prevalent now and at some point it will reach end of life,” he says.

“Corporates need a clear strategy for the future,” concludes Bramwell. “You need to be ahead of the game, otherwise you could end up with obsolete technology.”

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