When  to  Invest  in  a  TMS  

GTP  Webinar  Series  Ari  Morris,  Partner  Ian  Argue,  Partner  

April  24th,  2014  

Agenda���

•  Administration���•  What is a TMS?���•  Evolution of the Market���•  Drivers of Adoption���•  Benefits of a TMS���•  Taking Action���

Administration���

•  Please mute your phone lines during presentation���

•  Questions and comments���– Email questions during presentation to

kthompson@globaltreasurypartners.com���

What is a TMS?���

Back    Office  

Middle  Office  

Front  Office  

Cash  and  Liquidity  Management  

•  Cash Mgmt���•  Cash Fcst���•  Payments���

•  Trade Capture���•  Pricing���•  Position Mgmt���

•  Position Mgmt���•  Limit Mgmt���•  Valuation���

•  Settlement���•  Accounting���

TMS allow users to automate processes in a controlled environment and facilitate value-added functions���

Banks���

General Ledger���

Trading Systems���

Confirmation Services���

Payments���

Trade Data���

Market Data Provider���

Confirmations���

Rates���

Accounting ���Entries���

External Systems��� TMS��� Functional Scope���

Bank ���Stmts���

Evolution of the Market - Functionality���

���������

5���

1990’s��� 2000’s��� 2010 +���

n  Early adoption of web based connections���

n  SWIFT opens to corporate via MACUG���

n  Wider adoption of SWIFT via SCORE���

n  Service bureaus���Ban

k C

onne

ctiv

ity���

TMS market has evolved considerably in the last 20 years in terms of functionality and technology���

n  Host to host connections tailor made for each bank���

n  Modem based communications���

Fun

ctio

nalit

y���

n  Basic cash management and forecasting���

n  Basic deal capture���n  Little Straight Through

Processing (STP) ���n  Basic accounting ���

n  Cash pooling���n  Forecasting scenarios���n  Integration to some back

office providers ���n  Introduction of specialist

accounting systems (FAS133)���

n  Advanced payment factory and in-house banking ���

n  STP to trading portals���n  Direct integration to

GL’s���

Tech

nolo

gy���

n  Client server���n  Internally deployed

database and application software���

n  Thin-client “portals” into thick apps���

n  First web based systems���

n  Move to multi-tenant “software as a service” (SaaS) solutions���

Vendor Landscape���

ICMS���

IT2���

Triplepoint���

Resource IQ���

Gateway Treasury���

Selkirk / Treasura���

Trema���

Quantum���

Integra-T���

GTM���

XRT���

Alterna���

FXPress���

EcoFinance���

Kyriba���

Inssinc���

CitiFinancials��� Bellin���

Vendor Landscape���Solution(s)���

Suite, Citifinancials, IT2, Treasura, Triplepoint, Richmond ���

Avantgard (Quantum, Integrity, XE, ICMS, Res IQ, XRT, GTM)���

Reval TRM ���

Kyriba���

G-Treasury���

Differentiators���n  High end corporate/trading functionality���

n  Own SWIFT Service Bureau���n  Broad client base���

n  Hedge accounting background���n  SaaS deployment���

n  SaaS expertise���n  Broad client base���

n  Cash functionality���n  Deployment in-house or via SaaS���

Bellin��� n  Bank connectivity���n  Global support���

n  Enterprise wide integration���n  IT and organizational support���

SAP���Oracle���

Drivers of Adoption���Companies adopt TMS for a variety of reasons we see a few common drivers���

Corporate Change���

Sudden changes to the organization can create a sudden need to examine and invest in treasury technology���

Complexity���Changing business requirements from new business exposures can stretch current resources and require a look at technology.���

Operational Risk���

Risks identified by auditors or through internal process reviews can highlight material deficiencies in existing processes���

Obsolescence���External changes can render existing platforms obsolete and require examination into new tools.���

Strategy���The desire to increase the capabilities of a treasury department and overall contribution to the organization requires the right tools.���

Often a combination of the above are required for a company to take action���

Lev

el o

f Urg

ency

Ass

ocia

ted

wit

h D

rive

r���

n  Acquisitions���n  Mergers���n  Divestitures���

n  New markets and regions���n  New policies, procedures���n  Increase in volumes���

n  Audit findings���n  Board issues���n  Lack of visibility���

n  Unsupported platform(s)���n  New regulations ���n  New services���

n  Automation of processes���n  Resource optimization���n  Innovation���

Description��� Examples���

How to Determine Your Need���1. Objective Setting and Measurement���

n  Define short term objectives���n  Define long term vision���n  Measure yourself against objectives���

3. Gap Requirements to Future State���

n  Identify gaps from current state to future state to better understand benefits & create business case���

2. Define As-Is + Future State Processes���

n  Document current processes (flowchart, data flows etc).���

n  Identify desired state + process/service changes���

4. Build a Business Case���

n  Define qualitative and quantitative benefits���n  Create estimated cost structure (license,

implementation, IT, connectivity etc.)���

5. Go/No-Go Decision Point���

n  Do potential benefits justify investment in a TMS?���

Objectives���

•  Should flow directly from analysis of drivers of adoption���

•  Should be measurable – will need this later for the business case���

•  Objective definition is more than a “check the box” task���– What specific problem(s) is/are being solved?���– What is the relevance to the organization as a

whole?���•  Create a plan to communicate objectives

internally���Careful objective setting will yield enthusiastic

executive support and form the scope of the project���

Current and Future State���

•  The most important question to ask when assessing the current state – WHY?���– Why is each step in a task or workflow

performed?���– Why is each report created?���

•  Future state design should be created with no reference to what the future technology may look like���– Common to mentally solve a problem within the

limits of what is known���

Very important to assess whether the desired future state meets the objectives for the project���

Identify Gaps���

•  Gaps define the differences between current state and desired future state���

•  Not all gaps are filled with a TMS���– Banking structure may require a change���– Skills may need to be acquired���– Internal business processes may need to be

developed���•  The remaining gaps form the basis of the

requirements desired from a TMS���

Gap analysis may reveal that TMS should be delayed until other areas are addressed���

Build the Business Case���

•  Business case should tell a cohesive story���“By acquiring a TMS that fills the identified gaps, our current state will transition to a future state that will support Treasury meeting the project objectives providing “x” measurable results supporting the organization’s goals”���

•  The business case also requires analysis of specific costs and benefits���

Benefits - Quantitative���In addition to “soft” benefits, there are often hard dollar savings realized���

Quantitative benefits are most often obtained by adopting “advanced” functionality���

Benefit��� How Benefit is Realized���

n  Improved cash forecasting performance���

n  Improved cash visibility���

n  Cash optimization���n  Improved FX hedging���

n  Internal invoice netting (multi-lateral netting)���

n  Reduced FX spread paid on offsetting currency pair payments���

n  Hedging program (FX, Comm., Interest Rates) optimization���

n  Reduced trading volume���n  Improved performance���

n  Hedge accounting for derivative activity���

n  P&L volatility reduction���

n  Payment Factory/In-house Banking���

n  Payment fee optimization���n  Reduced bank accounts���

Benefits - Qualitative���Adoption of technology can deliver number of “soft” benefits to a client���

Successful business cases are most often based on a mix of qualitative and quantitative benefits.���

Qualitative Benefits���

n  Standardization of processes���n  Centralization of data into a single database���n  Improved access to information���n  Improved controllership���

n  Segregation of duties���n  Auditability���n  Restricted access���

n  Reduction of systems/access points���n  Streamlined processes���n  Improved risk management oversight (credit, operational)���n  Automation of manual processes (settlement, accounting etc.)���

Success Characteristics���Companies that realize the most benefits from TMS have a few common characteristics���

Not all characteristics are required to realize benefits, any one can create a compelling business case.���

Geographic Breadth��� ü  Companies with multiple locations/global ops���X  Companies in a single location���

Banking Complexity��� ü  Multiple bank relationships in multiple countries; ���ü  Advanced services (pooling, netting etc.)���X  Single domestic bank relationship���

Trading Volume��� ü  High trading volume in multiple asset classes���X  Low trading volume, no derivatives���

Risk Management��� ü  Multiple asset classes���ü  Hedge accounting���X  No active RM program/no activity���

Organization Support��� ü  Active support from IT, accounting, operations etc.���X  Siloed “Treasury only” approach���

Case Studies���Profile��� Approach��� Result���Driver���

Northeastern manufacturer with domestic and European operations, cash pooling, foreign exchange exposure and hedge accounting.���

Current state included combination of 2 systems and extensive use of spreadsheets, resulting in lack of efficiency, poor visibility and reporting.���

Go������

1. Obsolescence������

US-based global energy company with 100+ bank relationships and 1,000+ bank accounts across 40+ countries and 50+ entities considering cash pooling structures.���

Current state revealed no central control or visibility into bank relationships and very little knowledge about purpose of bank accounts.���

No Go – Work on bank structure first������

2. Operational Risk���

���

Global US-based technology company with operations in several European countries, FX exposure and an extensive investment portfolio, considering netting to streamline inter-company payables and receivables���

Analysis revealed company was preparing for growth through acquisitions and Treasury was ill-prepared given the manual nature of its operations.���

Go������

3. Complexity������

Taking Action���

•  Begin building the business case���•  Obtain organizational buy-in���– IT, Finance, Business Operations���

•  Examine existing processes���– Look at making key banking/policy changes

prior to, or in conjunction with, implementation���

•  Budget���

Now that you have identified a need or want to realize the benefits what to do next?���

Resources Required���

•  Functional team structure:���– Treasury (Cash, Risk, Back Office)���– Accounting���

•  IT resources���•  Software budget ���•  Services budget (banking, SWIFT etc.)���•  Implementation budget���