The Role of Technology in Achieving Operational and Strategic Objectives

Solutions provider Wall Street Systems recently conducted a study in association with the European Association of Corporate Treasurers (EACT)  amongst European corporate treasurers to explore some of their challenges and priorities, and attitudes towards technology. Over 300 treasury professionals participated, including representatives from treasury associations across the region. This article looks at some of the research findings and discusses some of the implications.

While liquidity and risk-related issues are priorities for treasurers (figure 1), technology dominates the agenda, including implementation of new systems, upgrades and integration. This also includes bank connectivity, such as SWIFT and implementing FX and MMF portals.  This is not to say that technology is more important than liquidity, risk or financing issues, but reflects treasurers’ recognition that technology has a major role to play in achieving objectives in these areas. Furthermore, almost every treasury priority has a technology implication. Efficient treasury processes are reliant on effective, automated technology, and payments factory or SEPA migration projects are largely technology-driven.

However, while the research illustrates that treasurers have a considerable appreciation of the role of automated treasury solutions to address risk and liquidity priorities, there is still significant potential to leverage these solutions further to achieve treasury objectives. For example, 55% of respondents indicated that they lacked complete and consistent information and processes across their global treasury business, and a similar proportion had not integrated their ERP and treasury management systems. However, only 25% of respondents believed that they lacked visibility over their liquidity and risk position. Bearing in mind the limitations in more than half of treasuries’ technology environment, as suggested by the survey, it is difficult to see how the remaining 75% of treasurers are achieving the degree of visibility that they believe they have. Furthermore, with key liquidity and risk management decisions at stake, it is very surprising that such a high proportion of companies have not achieved basic process, information and systems integration.

Treasurers therefore would appear to have low expectations about what cash and treasury management technology can provide. For example, despite the figures above, 59% of respondents said they were happy with their IT provision, of which the majority were larger companies (over $10bn turnover) who typically have more experience and resources in treasury technology. Amongst the remaining 41%, which generally includes companies of a turnover of less than $10bn, treasurers may believe that they lack the scale, sophistication or budget to take advantage of leading-edge treasury solutions; in others, there may be a lack of awareness of what solutions are available. As Paul Wheeler, Managing Director, Corporate Treasury, Wall Street Systems explains,

“Companies outside the FT250 are currently poorly served in both functional and geographic coverage of their treasury requirements. Often, technology solutions are too expensive to license, implement and support, and while early web-based solutions tried to address this, they lacked the breadth and sophistication of a full-service system. As SaaS solutions have come of age, technology should now be an enabler rather than a barrier for these companies.” [[[PAGE]]]

Paul continues by emphasising that companies’ internal IT departments are not necessarily in a position to come up with the answers,

“As treasurers’ responsibilities have expanded, the resources available have not, resulting in more pressure on systems to support increased productivity. Internal IT departments often have a different set of priorities from treasurers, such as focusing on customer-facing systems and expanding the use of ERP systems. Treasurers, however, are seeking flexible, progressive technology that supports automation, control and integration objectives. To achieve this, they need to reduce their reliance on installed IT solutions that require considerable maintenance and infrastructure costs. SaaS solutions are increasingly proving a catalyst for treasurers’ transformational journey, enabling them to meet their operational, strategic and cost-efficiency objectives.”

The research shows that there would seem to be an appetite for these solutions; however, there is still significant scope for improvement. Fifty-six per cent of respondents have, or would consider implementing SaaS or ASP solutions in treasury, demonstrating that market awareness of alternatives to traditional installed solutions is growing. Larger companies already make heavy use of web-based technology in treasury (e.g., for electronic banking, web-based dealing and business unit treasury system access) so it is perhaps surprising that only 65% of respondents working for companies with a turnover of $1 - $10bn have implemented, or would consider implementing SaaS or ASP solutions for their core treasury activities. Respondents working for smaller companies favoured SaaS technology less, which is likely  to be due to a lack of awareness, as these solutions offer them a rapid, cost-effective means of leveraging cash and treasury management tools without the need for an up-front investment or significant resources to set up the solution. As SaaS solutions become better publicised, we expect to see awareness and support increase amongst treasurers of mid cap companies.

Looking ahead, regulatory changes such as Basel III, ongoing cost pressure, market volatility and continued economic fragility in some parts of the world are adding to treasurers’ worries. Treasurers need a reliable, integrated and transparent technology infrastructure both to deal with uncertaintly and also to leverage opportunity in the future. Paul Wheeler concludes,

“Treasurers need to ask themselves how well-positioned their department is to deal with future demands and priorities both within the business and beyond. Rather than waiting until it is ‘broken’ or no longer fit for purpose, treasurers should be considering the technology solution they have today and the extent to which this is aligned with future requirements.”