Connectivity Means Continuity

Calastone Connect Forum 2020

Calastone’s Connect Forum 2020 brought together a quartet of treasury professionals to discuss the role of technology in enabling more efficient cash management while managing risk.

With all embroiled in the turmoil of 2020, the need for real-time usable data to help treasuries better manage cash and liquidity requirements has become paramount. The Calastone Connect Forum 2020 panel of Jim Scurlock, Director, Global Cash Management for Microsoft, Luc Vlaminck, Group Treasurer and MD at Rémy Cointreau, Jonathan Spirgel, Managing Director at Hazeltree, and Ed Lopez, Chief Revenue Officer at Calastone, kicked off with a look at the concept of data-driven treasury, which has taken off this year.

For Lopez, pandemic lockdowns halted easy office interactions with systems and colleagues. The manual processes and quick chats that worked in the flesh, suddenly proved a challenge when many were forced to work remotely. This has been a catalyst for systemic change. “We saw a lot of accelerated initiatives this past year,” he noted.

Although a lot of these were about automating  “simple things that would normally be rekeyed into a TMS”, he reported a “massive uptick” in Calastone’s TMS connectivity services. The settlement service it launched in 2020, for example, is a response to locked-down clients struggling to see manage their fund trades and settlement positions. The system brings real-time visibility throughout the fund lifecycle.

Enhancing data flows

From a corporate perspective, Vlaminck said probably the most important outcome of any upgrade to real-time data is that the treasury team is afforded “a quick overview of what's going on, but also to quickly detect anomalies and react efficiently to correct”. But he acknowledged that it’s not straightforward.

Although the pandemic enabled Rémy Cointreau to test its processes, backup and recovery planning fully, “unfortunately the banking sector is at various levels of readiness in this field”. For multi-banking, he said it is not easy to standardise processes and that it is “frustrating that we cannot automate it as much as possible”.

Hazeltree’s Spirgel  is sympathetic. He recognises that treasury management systems must be able to normalise data collected from multiple banks, making it readily available to treasury early in the day. But when every bank has its own approach, true real-time is rarely possible.  “I love Excel,” he commented, “but it shouldn’t be the dominant treasury management software that people use in 2021”.

Connectivity in the post-execution space has been a Calastone focus for the past year. While Lopez agreed with Spirgel that handling trading data and normalising back office processes is an “extensive” task, he said “we’ve been able to take that headache away for some of our customers”. Indeed, Calastone has been rolling out auto-settlement for J. P. Morgan’s money portal, and is building a list of other banks to which it will connect.

Real-time cash visibility for Microsoft is “absolutely paramount”, said Scurlock. It is the responsibility every morning for its treasury analysts to identify cash holdings by country, by bank and by currency. It was this need that “really kicked off our digital transformation journey”.

Microsoft’s journey pre-dates COVID-19 by many years, having recognised a world in constant flux. “There’s constantly some currency or some part of you that’s in the news that we need to be able to identify exposures around,” explained Scurlock.

Microsoft has about 90 banks covering its truly global presence. Cash visibility is vital to enable sweeps and other cash management activities, and it is using cloud technology to enhance its view. In the US and key money market locations, activity in many instances is acquired every couple of hours, enabling it to do positioning off its main accounts.

Further improvements are being sought, said Scurlock, but his description of APIs offered by FIs around the globe as “very piecemeal” suggests there is a way to go. Microsoft is keen to move to XML for some of its payments processes, and readily collaborates with its banks in workshops to find a level of standardisation that could more easily “snap a bank into the process”.

Automation and integration

Automated and integrated data solutions are vital to Rémy Cointreau too. Vlaminck reported that the firm’s journey started some 15 years ago. “We need a very responsive treasury system that can adapt to the emerging acquisitions and divestments we do on a regular basis,” he explained.

Its plan to create a group treasury has seen it implement a “solid” TMS, create an in-house bank, integrate SAP accounting, and integrate credit management. All processes are now  centralised within treasury, enabling robotic process automation (RPA) “to sit at the heart of our system”. However, insists Vlaminck, “RPAs are essential these days, but they are there to assist, not replace people”.

Scurlock has created an automated centralised data link that pulls in cash balances on subsidiary-level investments. Where analysts took a couple of hours to determine cash positions and investment exposures, they now take five minutes. “We come in and our dashboards are already lit up. We’ve got views from specific regions and specific banks and investment classes that are refreshed for us on a schedule.”

By leveraging Microsoft Power apps, he said treasury no longer needs deep IT expertise. “We’re able to create a lot of workflow tools, a lot of system tools and applications that honestly in my opinion means you do not really need a typical treasury management system anymore.”

For Spirgel, “just being able to collect basic data from two or three banks and have that available first thing in the morning, is really important”. However, he would like to see the connectivity used to acquire data extended to streamlining all the other process that follow on throughout the day, such as making payments and reconciliations.

Even with enforced remote-working, he observed that “the work gets done, payments are being made, and the banking system is sound”. However, he continued, while automation has helped enormously here, “there’s a lot more work that needs to continue in this space”.

Lopez believes some TMS vendors are unnecessarily trying to do too much. Specialist suppliers, such as Calastone, using APIs and modern architectures, already provide niche expertise. “Keep the core TMS because that’s your books and records; let it do what it does really well. But where a process needs to be more nimble, look at other solutions that are out there,” he advises.

Lessons learned

The challenges experienced in the past year have revealed what can be accomplished, said Lopez; automation is not “a bridge too far”, especially with the flow of new services and technologies enabling treasurers to avoid major IT surgery.

Vlaminck encouraged developers to think more about how treasury tools can be securely implemented on mobile devices. He also called for more thought beyond the profession about how treasury can enhance financial risk management, and how treasury can become an “essential partner” when addressing financial strategy.

Maintaining tight risk controls are fundamental for Scurlock: Microsoft has these under constant review. Adoption of new tools and solutions is a given, but the firm also engages in frequent and diverse roundtable discussions, where sharing views and ideas is encouraged.

Moving into 2021, cyber security is a leading theme for Spirgel . “When organisations start looking at lessons learnt during the pandemic, it will be about information risk, approval processes, compliance and cyber –  and how can we continue doing the work we’re doing in different locations,” he said. “But more than that, it’s about making sure they have the safeguards around where their money is, where it needs to be, and how it comes in and out of the organisation.” Connectivity has become an essential component of continuity.