Back to the Future: a New Generation of TMS
by François Masquelier, Head of Corporate Finance and Treasury, RTL Group, and Honorary Chairman of the European Association of Corporate Treasurers
We have entered a new world with a new ‘normality’. Treasurers need more adapted IT solutions to respond to the new requirements of e-level management. This technological evolution toward TiM(R)S (Treasury intelligence Management Risk Systems) is also crucial to comply with new regulations. Treasurers need to contribute more to the decision-making process with their strong financial expertise and new generation IT solutions. Treasurers have undoubtedly become strategic partners of CEOs and CFOs.
A new order, a new world
In a world in which the financial crisis has become a sort of ‘norm’ and in a world of finance in utter chaos, in which the return to normality (or the ‘new normality’) bears no relation to the world before the sub-prime crisis, treasurers need to face up to a large number of more restrictive and onerous changes in regulations. In particular, they need to provide a number of reports to meet the requirement for transparency, which is a consequence of the financial crisis that has been affecting us for five years now. The treasurer’s environment, like the banker’s, is in a phase of profound change. Most treasurers have not yet really felt the blast of these winds of change because the new regulations are being finalised and will start to come into effect in the next few months. But nobody is in any doubt that the treasurer’s job will once again have to adapt to its changing environment. The tools and the organisation have to evolve to adapt and fit the new obligations and the new demands required by ‘C-level’ management. This adaptation will necessarily involve innovative and powerful new technology. We need to move from the traditional TMS (Treasury Management System) that all treasurers use to more powerful IT tools that cope with the new requirements, particularly regulatory requirements. These new tools need to evolve to a more advanced risk management level, towards BI (Business Intelligence) and become modular so that they can evolve continuously and meet the new needs of CFOs. The strategic priority goes to managing financial risks and to giving the most comprehensive possible real-time overview of the company’s financial position.
These priorities, belonging to a new financial order and a new world, require new solutions that are more appropriate and fit for purpose. This evolution, without being revolutionary, will see us move from the world of TMS towards that of T&RMS (Treasury and Risk Management Systems) or even onto TiM(R)S (Treasury intelligence Management Risk Systems). Technology can be a catalyst for change and makes it possible to completely overhaul our organisational structure in this evolving environment.
Whenever the economic situation becomes difficult, management demands that better tools be used to take more effective – and particularly, faster – financial decisions.
International groups need mobility and productivity to create value in this new financial world. The risk that will face many treasurers is that of having a ‘traditional’ TMS which is not really capable of coping with the challenges that await them in the next three years.
Gaining greater visibility
The watchword of C-level managers is this: more visibility to be able to make the right strategic decisions in good time (and as early as possible). Today people no longer expect treasurers to produce a snapshot of the financial position at point of time ‘T’ like an accountant, but instead expect more dynamic and intelligent reports to help them be proactive. This means Business Intelligence at all levels of finance. And it is here that the whole substance and essence of treasury comes into its own and, through being involved in things from the earliest stages, it can do the groundwork for taking financial decisions. We need decision-making tools rather than tools that generate statistical reports after the event, which CFOs would seldom use anyway. This is all the more essential since the new normal mode is a long-lasting economic crisis mode in which we have to mitigate the new and ever-present risks that surround us. The level of financial risks in normal mode is higher than it was in the past. We need to get used to this higher risk factor and broader risk diversity. Against a background of ongoing risk, we need to be able to react quicker and smarter than the competition. This is no easy task, admittedly.
Emergence of new, bigger players – a sort of mini-ERP
We may also note that this buoyant treasury technology market has evolved greatly over the last few years. We are seeing the rise of mini-ERPs (for instance Reval, SunGard, and WSS) which grew mainly through acquiring add-on solutions, solutions peripheral or additional to their main software applications (i.e., TMS) or again through taking over their direct competitors. These mini-monsters now offer a wide range of IT solutions, more or less well integrated. The market has contracted and become more specialised, and we find ever fewer small independent players in it. One of the reasons for this is the exponential increase in requirements for providing reports and the growing complexity of international accounting standards (i.e., IFRS).
Fortunately technology seems to be moving ahead faster than regulatory requirements and the new post-G20 regulations. Even though we may have to produce more reports, documents and financial analyses than in the past, modern technology enables us to do it with increased productivity, producing more reliable information. These are the benefits that IT science places at the service of treasurers. We therefore find ourselves in a new era and a new phase of IT software application development.
Furthermore, SaaS (Software-as-a-Service) solutions are emerging and speed up delivery of the developments made by treasury solutions providers.
In the current economic environment, businesses need to be equipped with software giving them the maximum visibility on:
1) cash and cash equivalents (to manage them optimally),
2) the full range of financial risks that are now closely correlated and interconnected,
3) risk hedging strategies and their accounting treatment
4) the administrative/decision making and compliance reports to be submitted to the various supervisory bodies.
These are the four key objectives that modern TRMS/TiMRS solutions need to supply to their customers.