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Time to Embrace Treasury Technology in Latin America The region’s treasury departments have grown and matured in the last decade - now it is time to fully automate day-to-day functions.

Time to Embrace Treasury Technology in Latin America

by Margarita Carrillo, Treasury Practioner, Global Business Solutions, Bank of America Merrill Lynch

The region’s treasury departments have grown and matured in the last decade - now it is time to fully automate day-to-day functions. Over the past ten years, the treasury function in Latin America has come of age. What were once small treasury departments have, in many cases, grown into international operations. Too often, however, this growth in scale and professionalism has not been matched by investment in the technology that can automate day-to-day tasks and free up the treasurer to take on a more strategic role.

So why does Latin America lag behind other regions in its willingness to embrace sophisticated treasury management systems?

The old ways aren’t always the best

Latin American treasurers are no different from those in many other regions, where often complex treasury activities can be found using standard office software because that’s the way it’s always been done. Another barrier to innovation has been a regional infrastructure that, some feared, was not yet robust or secure enough to support advanced technology.

Today, however, connection speeds and reliability are growing across Latin America and a wealth of analysis has shown that the region is at no greater cybercrime risk than any other. Security consultancies consistently identify internal data security as a far greater risk to corporate stability than the use of electronic platforms.

Enhanced status for treasury

This leaves us with what is arguably the most significant obstacle of all: a cultural resistance to change and an apprehension of the consequences.

Now there is a growing understanding that, far from undermining treasury, technology helps to enhance the role and status of the treasury department - and, by implication, treasury managers and staff - within the company. The real challenge, once the decision is made, can be to obtain the capital expenditure budget to invest in information technology. Treasurers must compete with other departments, such as the marketing or sales teams, that may also have important projects which need funding, and frequently have immediate advantages that are easier to demonstrate to the board than those of efficient cash management.

Companies that have already invested a great deal in an enterprise resource planning (ERP) system, for example, may be wary of acquiring yet another new set of technologies to address the specific needs of the treasury function.

Build a strong business case for treasury investment

To change this mindset, it is essential that treasurers prepare a strong business case to present to the company board. A key part of that case is to overcome the idea that it is more cost-effective for Latin American companies to continue to handle daily treasury operations manually.

Any comparative analysis of staying with existing manual processes versus implementing new technology must include not only the easily quantifiable cost savings, but also ancillary costs that may not be immediately visible. Greater savings can come from avoiding ‘accidental’ costs such as those arising from potential mistakes on payroll, duplication of activities or making decisions based on bad information.

For example, a treasury operation using manual processes to handle large volumes may have a relatively small number of errors due to clearly defined structures and widely understood processes. As a result, there might be an assumption that there is limited risk to the organisation. But in order to get an accurate view of manual processing costs, boards and CFOs must also factor in the large size of the cash flows involved - even one error could cost the company millions.

In another example, one subsidiary might need an intercompany loan while another has an excess of cash, but the treasury function is simply unaware of that information. Without the visibility and control offered by modern technology, the treasury team can lack the up-to-date information they need to use the cash they have in the company efficiently.

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