New regulations are the biggest technology challenge facing corporates today. Treasury Strategies has tips on how to make implementations less painful.
You are going to have to spend some money to keep up with treasury technology. However, your initial outlay and yearly—yes, yearly—upkeep is well worth the expense. Therefore, according to consultancy Treasury Strategies, don’t neglect your infrastructure.
In a survey of over 27,000 participants, Treasury Strategies found that while the term “treasury workstation” does harken back to a time of a single computer in a corner, 79 percent of respondents view the treasury workstation as very much current, noting that it doesn’t matter what you call it as long as it meets your needs . This means cash, risk, operations, analytics and strategy should be enabled by your workstation, whether it’s an ERP, TMS, bank technology or something else altogether.
Not surprisingly, 69 percent of respondents also agreed that technology improves both the corporate treasurer’s ability to do his or her job and the overall effect of treasury activities. For this reason, you need to be budgeting for ongoing technology improvements, instead of just upgrading your entire system every 5-10 years.
This is especially true in an environment of increasing regulation, where some corporate treasurers claim that regulation consumes “130 percent” of their technology budget. The Treasury Strategies team outlined these five treasury technology needs that make this percentage easy to get to, just from Dodd-Frank:
- Optimizing hedge analysis: This includes the cost of collateral and administrative expenses of clearing swaps under Dodd-frank. Given Basel III and counterparty risk considerations, hedging decisions become even less clear and require more modeling.
- Deal management: System storage, valuations, clearing and meeting reporting requirements should be enabled by your technology solutions. Swaps have to be valued, and electing end-user exemption may mean you need technology solutions for reporting data to claim it.
- Reporting capabilities: Registered US swap dealers are required to report, but corporate end users may be required to report as well.
- Portfolio reconciliation: In the US you might not have to do this, but in Europe the requirement will be at least once per year.
- Confirmation and matching: Entities that clear their swaps will need to confirm electronically, and those who don’t clear will be pressured to confirm electronically. Your system needs to accommodate these requirements.
However, they also discussed some ways to make implementation and upkeep more bearable:
- Have a comprehensive design phase: Start design well in advance of any implementation, looking at how the new system will be used from levels of policy, procedures and controls. This may sound obvious, but many corporates who try to save time in planning and jump to implementation end up doing themselves a serious disservice.
The Treasury Strategies team recommended going as far as a design workshop with all of the stakeholders to demonstrate and solidify the system’s functions and have a more comprehensive design. Having this strong design with everyone in agreement on the end result and how to get there will also prevent stalling configuration that can result from having to make big decisions in the middle of implementation. - Plan tests: Giving short shrift to formal testing is an easy way to speed up implementation, but you are in this for the long haul. Testing is essential to determining where configuration needs to be tweaked, where the bugs are and where users need help. Using a detailed script to guide these tests, which includes expected results, is useful for both troubleshooting and getting users accustomed to the new system.
- Document your testing and results: Testing is not so useful down the line if you don’t record the results. Results provide more details on problems to vendors, and they are effective defect and project management tools for making improvements. Additionally, any audit that may be done of your installation will go much more smoothly if you have documented exactly what you did.
If this sounds like a lot of work, that’s because it is, but tech implementations that are essentially overhauling your entire system and will affect every treasury employee is an excellent example of slow and steady winning the race.