When to Invest in a TMS. GTP Webinar Series Ari Morris, Partner Ian Argue, Partner April 24 th, 2014

Transcription

1 When to Invest in a TMS GTP Webinar Series Ari Morris, Partner Ian Argue, Partner April 24 th, 2014

2 Agenda Administration What is a TMS? Evolution of the Market Drivers of Adoption Benefits of a TMS Taking Action

3 Administration Please mute your phone lines during presentation Questions and comments questions during presentation to

4 What is a TMS? External Systems TMS Functional Scope General Ledger Market Data Provider Confirmation Services Trading Systems Rates Trade Data Confirmations Accounting Entries Back Office Middle Office Front Office Settlement Accounting Position Mgmt Limit Mgmt Valuation Trade Capture Pricing Position Mgmt Banks Bank Stmts Payments Cash and Liquidity Management Cash Mgmt Cash Fcst Payments TMS allow users to automate processes in a controlled environment and facilitate value-added functions

5 Evolution of the Market - Functionality 1990 s 2000 s Bank Connectivity Functionality Technology Host to host connections tailor made for each bank Modem based communications Basic cash management and forecasting Basic deal capture Little Straight Through Processing (STP) Basic accounting Client server Internally deployed database and application software Early adoption of web based connections SWIFT opens to corporate via MACUG Cash pooling Forecasting scenarios Integration to some back office providers Introduction of specialist accounting systems (FAS133) Thin-client portals into thick apps First web based systems Wider adoption of SWIFT via SCORE Service bureaus Advanced payment factory and in-house banking STP to trading portals Direct integration to GL s Move to multi-tenant software as a service (SaaS) solutions TMS market has evolved considerably in the last 20 years in terms of functionality and technology 5

6 Vendor Landscape IT2 ICMS Resource IQ Gateway Treasury Selkirk / Treasura Quantum Alterna FXPress CitiFinancials XRT Integra-T GTM Trema EcoFinance Kyriba Triplepoint Inssinc Bellin

7 Vendor Landscape Solution(s) Suite, Citifinancials, IT2, Treasura, Triplepoint, Richmond Differentiators High end corporate/trading functionality Avantgard (Quantum, Integrity, XE, ICMS, Res IQ, XRT, GTM) Own SWIFT Service Bureau Broad client base Reval TRM Hedge accounting background SaaS deployment Kyriba G-Treasury SaaS expertise Broad client base Cash functionality Deployment in-house or via SaaS Bellin Bank connectivity Global support SAP Oracle Enterprise wide integration IT and organizational support

8 Drivers of Adoption Companies adopt TMS for a variety of reasons we see a few common drivers Description Examples Corporate Change Operational Risk Obsolescence Complexity Strategy Level of Urgency Associated with Driver Sudden changes to the organization can create a sudden need to examine and invest in treasury technology Risks identified by auditors or through internal process reviews can highlight material deficiencies in existing processes External changes can render existing platforms obsolete and require examination into new tools. Changing business requirements from new business exposures can stretch current resources and require a look at technology. The desire to increase the capabilities of a treasury department and overall contribution to the organization requires the right tools. Acquisitions Mergers Divestitures Audit findings Board issues Lack of visibility Unsupported platform(s) New regulations New services New markets and regions New policies, procedures Increase in volumes Automation of processes Resource optimization Innovation Often a combination of the above are required for a company to take action

9 How to Determine Your Need 1. Objective Setting and Measurement 2. Define As-Is + Future State Processes 3. Gap Requirements to Future State 4. Build a Business Case 5. Go/No-Go Decision Point Define short term objectives Define long term vision Measure yourself against objectives Document current processes (flowchart, data flows etc). Identify desired state + process/service changes Identify gaps from current state to future state to better understand benefits & create business case Define qualitative and quantitative benefits Create estimated cost structure (license, implementation, IT, connectivity etc.) Do potential benefits justify investment in a TMS?

10 Objectives Should flow directly from analysis of drivers of adoption Should be measurable will need this later for the business case Objective definition is more than a check the box task What specific problem(s) is/are being solved? What is the relevance to the organization as a whole? Create a plan to communicate objectives internally Careful objective setting will yield enthusiastic executive support and form the scope of the project

11 Current and Future State The most important question to ask when assessing the current state WHY? Why is each step in a task or workflow performed? Why is each report created? Future state design should be created with no reference to what the future technology may look like Common to mentally solve a problem within the limits of what is known Very important to assess whether the desired future state meets the objectives for the project

12 Identify Gaps Gaps define the differences between current state and desired future state Not all gaps are filled with a TMS Banking structure may require a change Skills may need to be acquired Internal business processes may need to be developed The remaining gaps form the basis of the requirements desired from a TMS Gap analysis may reveal that TMS should be delayed until other areas are addressed

13 Build the Business Case Business case should tell a cohesive story By acquiring a TMS that fills the identified gaps, our current state will transition to a future state that will support Treasury meeting the project objectives providing x measurable results supporting the organization s goals The business case also requires analysis of specific costs and benefits

14 Benefits - Quantitative In addition to soft benefits, there are often hard dollar savings realized Benefit How Benefit is Realized Improved cash forecasting performance Cash optimization Improved FX hedging Improved cash visibility Internal invoice netting (multilateral netting) Reduced FX spread paid on offsetting currency pair payments Hedging program (FX, Comm., Interest Rates) optimization Reduced trading volume Improved performance Hedge accounting for derivative activity P&L volatility reduction Payment Factory/In-house Banking Payment fee optimization Reduced bank accounts Quantitative benefits are most often obtained by adopting advanced functionality

15 Benefits - Qualitative Adoption of technology can deliver number of soft benefits to a client Qualitative Benefits Standardization of processes Centralization of data into a single database Improved access to information Improved controllership Segregation of duties Auditability Restricted access Reduction of systems/access points Streamlined processes Improved risk management oversight (credit, operational) Automation of manual processes (settlement, accounting etc.) Successful business cases are most often based on a mix of qualitative and quantitative benefits.

16 Success Characteristics Companies that realize the most benefits from TMS have a few common characteristics Geographic Breadth ü Companies with multiple locations/global ops X Companies in a single location Banking Complexity ü Multiple bank relationships in multiple countries; ü X Advanced services (pooling, netting etc.) Single domestic bank relationship Trading Volume ü High trading volume in multiple asset classes X Low trading volume, no derivatives Risk Management ü Multiple asset classes Organization Support ü ü X X Hedge accounting No active RM program/no activity Active support from IT, accounting, operations etc. Siloed Treasury only approach Not all characteristics are required to realize benefits, any one can create a compelling business case.

17 Case Studies Driver Profile Approach Result 1. Obsolescence Northeastern manufacturer with domestic and European operations, cash pooling, foreign exchange exposure and hedge accounting. Current state included combination of 2 systems and extensive use of spreadsheets, resulting in lack of efficiency, poor visibility and reporting. Go 2. Operational Risk US-based global energy company with 100+ bank relationships and 1,000+ bank accounts across 40+ countries and 50+ entities considering cash pooling structures. Current state revealed no central control or visibility into bank relationships and very little knowledge about purpose of bank accounts. No Go Work on bank structure first 3. Complexity Global US-based technology company with operations in several European countries, FX exposure and an extensive investment portfolio, considering netting to streamline intercompany payables and receivables Analysis revealed company was preparing for growth through acquisitions and Treasury was ill-prepared given the manual nature of its operations. Go

18 Taking Action Now that you have identified a need or want to realize the benefits what to do next? Begin building the business case Obtain organizational buy-in IT, Finance, Business Operations Examine existing processes Look at making key banking/policy changes prior to, or in conjunction with, implementation Budget

19 Resources Required Functional team structure: Treasury (Cash, Risk, Back Office) Accounting IT resources Software budget Services budget (banking, SWIFT etc.) Implementation budget