The role of the treasurer is becoming increasingly complex and the tasks that treasury professionals perform on a daily basis are now far more sophisticated than ten, or even five, years ago. In turn, this evolving remit calls for technological innovation which will support treasurers to complete their day-to-day tasks, while simultaneously adding value to the wider business.

One such innovation is cloud computing. According to an informative presentation given during this workshop by Marcus Hughes, Director Business Development at Bottomline Technologies, cloud computing is now more important than ever. There are several significant drivers for this, he believes, such as the fact that many banks are reducing their cross-border lending, or deleveraging, and reducing their international networks as a result of Basel III, or in some cases, political pressure.

An unintended consequence of this banking ‘de-globalisation’ is that corporates will need even more banking partners to achieve global coverage, noted Hughes. This could exacerbate a longstanding problem for many corporates: too many smart cards and tokens for connecting with multiple banks, using different standards and different file formats. This situation could quickly become quite a headache to control and a major security risk, he said.

Little surprise then that more and more corporates are looking to use bank-agnostic SWIFT connectivity services – largely through the use of a SWIFT bureau. And as Hughes pointed out, SWIFT service bureaux were created originally to provide secure connectivity to SWIFT but now the best bureaux offer much than just connectivity: cloud-based applications for payment factories, SEPA DD mandate management, reconciliation, data transformation, compliance, cash forecasting, sweeping and pooling.

Regulatory pressure

In addition to de-globalisation, banks are also becoming more selective about which companies they lend to and at what price – again as a result of Basel III. The types of deposit that banks will take is also coming under greater scrutiny since the new Liquidity Coverage and Net Stable Funding Ratios mean that retail deposits are more attractive than corporate deposits, unless they are operational balances as part of cash management services, or unless the deposits are committed to the banks for longer periods. This is precisely why, Hughes explained, efficient cash forecasting, sweeping and pooling arrangements are going to be even more valuable to avoid unnecessary overdrafts and optimise interest.

To meet these requirements, and the added burden of regulations such as the European Market Infrastructure Regulation (EMIR), it is important for corporate treasurers to find a multi-channel platform which is adaptable, scalable, secure, resilient, proven and flexible. And increasingly, noted Hughes, these platforms are in the cloud, offering connectivity to multiple banks and multiple networks and a stack of software applications.

In short, with the arrival of cloud computing, corporates need to think not just about connectivity, but about ‘connectivity plus’ – in other words, accessing value add software applications, hosted in the cloud.

Cloud computing in practice

During the session, Hughes also provided a detailed case study on Scor, the French re-insurance group, a customer of Bottomline’s teams in France and Switzerland. The company was looking to migrate from ETEBAC to SEPA and was also tasked with a number of strategic decisions around multi-bank connectivity and security. It was looking for a smart solution to solve its multiple operational and strategic challenges in one – it approached Bottomline.

Today, Scor achieves secure and resilient connectivity with multiple banks and counterparties internationally by outsourcing to Bottomline’s SWIFT service bureau in Geneva, using GTExchange multi-network interface. Scor also uses SWIFT’s 3SKey to approve and authenticate outgoing messages. This is a single token to securely authenticate and approve transactions with multiple banks, using multiple channels, such as SWIFT and banks’ own e-banking platforms. 3SKey uses PKI and ensures a clear audit trail of who has approved a transaction. This, Hughes explained, is additional security on top of a SWIFT BIC which indicates which legal entity initiated a transaction.

In addition, Scor has automated data transformation of legacy formats into and from ISO 20022, to comply with SEPA and other message types using XML, which improves STP. For this, Scor uses BT’s GTFrame data transformation solution. Conducting all the data transformation on one platform means that Scor does not need to update its formats in different platforms; instead they simply update once for all their systems. Elsewhere, the company also uses Bottomline’s enterprise reconciliation solution GTMatch, which reconciles payments, bank statements, FX and MM transactions, as well as statements of securities holding.

The benefits of these solutions are wide and varied, but centre around cost reduction, risk mitigation and flexibility:

Source: Rethinking connectivity, BNP Paribars. BNP Paribas Cash Management University, Marcus Hughes, Director of Business Development, Bottomline Technologies

Technology for excellence

Another company that has reaped significant benefits from an overhaul of its treasury technology is Valeo, one of the world’s leading automotive suppliers. The so-called TOTEM (Tools for Treasury Excellence in cash Management) project was led by Thierry Hamon, the company’s Treasury Controller. With more than 100 treasury staff and 600 signatories spread across 26 countries and four continents, 60 ERP systems, numerous payroll systems, and more than ten bank groups, the group’s connectivity challenges were manifold – and something had to change.

The graphic opposite illustrates the sheer scope of the project, and highlights how the challenges were overcome – primarily through the integration a software-as-a-service platform and the implementation of SWIFT connectivity.

As Hamon outlined, the all-in-one Saas platform offers the company a number of benefits, including: automatic forecasts after payments; integrated reporting statements and automatic controls over bank details. The core treasury team manages user access and profiles for the platform, meaning that they can be updated as and when necessary, with no delay.

In addition to the platform, the implementation of a centralised database with secure web access means that updates, disaster recovery planning and backups are no longer the treasury function’s responsibility. Also, multiple treasury staff can access the database simultaneously. And due to the cloud nature of the solution, payments validation is now both mobile and flexible.

Moreover, having a standard technology tool worldwide has led to better communication amongst treasurers and more reliable treasury reporting at Valeo. Benchmarking of best practices has also become far simpler with the new set-up, according to Hamon.

Lessons learnt

But, of course, garnering the benefits of the TOTEM project meant overcoming a number of hurdles along the way – and these provide interesting learning points for the wider treasury community. Take, for example, the fact that XML is not actually standardised. As Marie Laurence-Faure, Head of Marketing Product Channels at BNP Paribas explained during the connectivity workshop, despite XML being a standard in its own right, there are often small differences in fields and options at a national level and SEPA XML is a good example here. Certain banks may also use XML differently.

Source: Valeo

To mitigate any such confusion or complications caused by potential XML inconsistencies, Hamon had consultants lead a workshop with all of his banking partners to get them on the same page. Other key lessons Hamon learned from the TOTEM project included the need to have: a single named point of contact at each bank, as well as one SWIFT SCORE contract by bank; a strong co-ordination plan to ensure all stakeholders are involved and on-board; and a rigorous testing programme with local experts to ensure all local specificities are covered and that the set-up works in all environments.

With a limited budget and timescale to implement TOTEM, Hamon also explained that success was ultimately dependent upon his team remaining focused solely on the defined scope of the project.

Security is paramount

Additional advice given by Hamon during the session centred largely around improving security in treasury systems. He suggested four key action points:

1. Control your data.

   This not only means protection through means of firewalls but the activation of automatic controls in the ERP.

2. Secure your workflow.

   Segregation of duties will be vital here, as will internal controls.

3. Connectivity.

   Use the robustness of the SWIFT network to improve reliability. Where possible, remove any unnecessary actors from the connectivity loop.

4. Define service level agreements.

   This is particularly important for the TMS. Pinpoint where backups will be hosted. Outline expected levels of response time when problems arise. Ensure you have a 24/7 hotline number for all regions – and that the necessary languages are spoken by hotline staff.

Going forward, Hamon’s team will be investigating 3SKey as a means to further improve its security processes.

The future of connectivity

According to BNP Paribas’ Faure, mobile technology will continue to gain traction in the corporate treasury field. And this will stretch beyond simple payments verification to wider cash management tasks, as well as treasury-related information. To illustrate this point, Faure explained that the new Cash Management Atlas app from BNP Paribas provides comprehensive cash management information on 48 countries globally. This includes information on permitted pooling techniques, payment and cash management instruments in use, clearing systems, the tax and regulatory environment, and local market practices.

Other connectivity innovations that will positively impact the treasury landscape in the near future include the ongoing development of additional bank-agnostic messaging systems, such as SAP’s financial services network (FSN). While the panel felt that the SAP’s FSN would not present a threat to SWIFT as such, the development of FSN was widely viewed as beneficial for corporates and banks alike.

Additional key connectivity trends identified by the panel included the outsourcing of activities to banks or vendors. Where companies recognise that they do not have the necessary expertise in-house, there is a growing move towards leveraging strategic business partnerships to provide specialist knowledge or services, said Faure. This might range from reconciliation services to data transformation. Citing an example here, Hughes noted that to overcome the issue of ‘local flavours’ of SEPA corporates can use solution providers, especially SWIFT service bureaux, to act as hubs connecting them with their banks and providing data transformation services to ensure STP.

Elsewhere, for Hughes, the emerging use of predictive analytics in improving the accuracy of cloud-based cash forecasting is another development to watch. He also drew attention to the adoption of payment sanction filtering by corporates. While banks retain ultimate regulatory responsibility for AML, he explained, corporates are starting to see the benefit of screening their payment instructions before submission to banks, thereby reducing the number of false positives that banks have to handle and minimising any reputational risk issues for their own entity.

Faure, on the other hand, highlighted reconciliations as a significant area of connectivity focus in the immediate future. The ultimate goal of straight through reconciliation, she said, will require deep, process-level, integration between corporate clients and their banks – but the continued move towards treasury centralisation should help to foster this. Virtual account solutions will also help to smooth the path towards automated reconciliation, helping to eliminate errors and reduce the need for manual intervention.

Finally, Hamon brought the session to a close with some simple yet powerful advice for his fellow treasurers: strive for continuous improvement. No matter how good your connectivity set-up is, he said, there will always be room for improvement – and that is what makes it so very interesting.