Do treasurers really need a treasury management system to do their job?
October 14, 2020
It has long been a bit of a truism in the treasury world, that to run a “proper treasury” the treasurer needs an appropriate treasury management system (TMS) to enable them to record and manage their exposures, transactions and positions. To rely on spreadsheets with their inherent control weaknesses was, and is, rightly viewed as sub optimal but over the past year I have seen an increasing number of treasurers look seriously at not having a TMS at all.
There are perhaps two reasons for this
Firstly, for some a TMS may be considered relatively expensive to implement and maintain while the cost savings and benefits may be difficult to articulate and justify. Also, I know many treasurers who have painful prior experience of TMS implementations or upgrades, with the promised benefits failing to be delivered.
Secondly, there are now potential TMS alternatives that may be cheaper, more flexible and fit in better with the wider technology landscape of the business. For some the enhanced functionality and significantly decreased complexity of treasury solutions within enterprise resource planning (ERP) applications may be the answer. For others, newer FinTech solutions, either third party or bank owned, may be more applicable given they focus on specific functional areas such as netting, cash forecasting, FX risk or payments. Certain treasurers I have come across are using such FinTech solutions allied to internal data warehouses as data sources while many use data visualisation tools for reporting.
So how might the treasurer proceed?
The first point to make is there are many alternatives and one size will never fit all, what is right for one may not be so for others dependent on the nature, scale and spread of the business exposures. Also, in my experience unless there is a compelling business case for significant change, many treasurers will be constrained by overall business IT policy and end up making the most of currently available technology, augmenting with new solutions as required.
However, in my view, notwithstanding the alure of new FinTech solutions, the core TMS does have an often-overlooked role in providing a well-controlled environment that can act as the source of truth for all treasury data in the global business.
In effect I believe the treasurer should consider the TMS as the base layer over which newer FinTech tools, whether within the TMS or standalone, can be implemented as required to provide greater efficiency and insight in key areas. A TMS alongside specific robotic process automation (“RPA”) tools to automate key manual processes such as reconciliation or data analytics (“DA”) tools for analysis of FX or cash exposures may be considered as examples of this.