Drivers of change

The evolution of technology continues to dramatically change the world. With robots advising on investment decisions and automated trading enabling the execution of transactions faster than humanly possible, we are going through an unprecedented upheaval in the way we live and work. The financial services industry has not been immune to this trend. Emerging technology like distributed ledger and artificial intelligence – and the exponential use of mobile and “smart” technologies – has created a truly digital world. These developments in technology are driving the next generation of financial services infrastructure and solutions.

AUTHOR

Anton AbrahamDirector, GTS Advisory Global Transaction Services anton.abraham@bofa.com

Single solution to best-of-breedKey drivers

� Pace of change – Technology is now moving so fast, that not adopting new technology could negatively impact a treasurer’s ability to manage risk; there is a growing gap between companies investing in technology and those that are not.

� Change capability – Cloud and software-as-a-service (SaaS) solutions are enabling treasuries to try new technologies, test proof-of-concepts and implement the technologies.

� Cost – As the use of cloud-based technology and SaaS become mainstream, the cost to procure and implement treasury is declining.

� Technology enablement – Fintech solutions are specializing in specific areas such as reconciliation and cash-flow forecasting, providing treasurers with more choices in selecting solutions for a specific purpose. Additionally, application program interfaces (APIs) are also providing more options to configure, implement and connect solutions.

Key takeaways:

• The biggest risk comes from not taking

action

• Have a clear idea of the problem you are

trying to solve

• Pick the right technology to solve the

problem

Treasury Megatrends Series

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The combination of these factors has influenced the role of the treasurer and the importance of technology. Technology has never been more critical to effective treasury management. As the global marketplace changes, business models and operations have to adapt to remain competitive. This is even more profound in Asia, where the growing middle class, multiple markets, languages and regulatory regimes create a unique set of challenges. The right technology can make navigating these challenges easier. It is vital that corporates have an understanding of the technological solutions available to them and how they can be deployed to assist them to operate, scale and succeed across borders and time zones.

Challenges treasurers face

Treasuries big and small face challenges across four main areas of treasury management:

1. Visibility – liquidity, risk, payments and collections

2. Processes – manual, non-standard, custom, errors

3. Scalability – for growth, M&A, flexibility

4. Risk & control – auditability, banks, credit, security

Treasurers need to understand these challenges and deploy solutions to effectively manage their risk across the organization. Some of the factors to keep in mind when looking at possible technology solutions to address these challenges include:

� Business dynamics – how the business is changing

� Cost of treasury technology

� IT and change management capabilities

� Technology solutions available

� Technology configuration

Technology solutions need not be complicated

Visibility is foundational; you cannot do anything unless you have visibility across treasury operations and have insights into what is happening. Cash forecasting continues to be one of a treasurer’s most important priorities. Better visibility and data enables treasurers to make better and more proactive decisions. Even something as simple as having access to electronic bank statements will improve a treasurer’s visibility over their cash position. Electronic balance reporting can be achieved through a range of connectivity options, including APIs and host-to-host solutions.

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Selecting the right technology

The most important questions you need to answer are what problem are you trying to solve, and what is the right technology solution for your problem? More often than not, treasurers understand the areas requiring improvement across their treasury, but they don’t have the right technology for optimum performance. Therefore, it’s critical to have a clear strategy so that everyone in the organization is aligned around what you are trying to achieve. Banks, technology partners and advisors are also important stakeholders in this process and should be engaged.

Never before has so much technology been available to treasury and finance professionals to tackle their challenges. There are so many solutions and options available that treasurers need to consider their needs carefully and find the right mix of solutions that gives them optimum results. Deploying an Enterprise Resource Planning (ERP) system or Treasury Management System (TMS) is no longer enough to implement a best-of-breed solution. Treasurers now need to leverage a mix of fintech, bank and third party applications to create a bespoke treasury solution. This presents a unique set of challenges as treasurers try to determine the best mix of technology for the organization and how best to integrate it. Solutions that integrate cash forecasting tools, TMS, SWIFT and fintech solutions are becoming increasingly common. The key for success is to ensure the focus is on people, process and technology across the organization. It’s critical that treasury is clear on what the technology must do. In order to define this, treasury will need to:

� Get granular

� Address treasury and organizational challenges

� Consider timing and output – does it need to manage liquidity or risk in real-time?

� Identify the “must-haves” vs. “nice-to-haves”

� Limit the need for customization

� Make certain the solution can scale

� Integrate infrastructure into bank and other fintech solutions

Data

Data and advanced analytics are becoming more and more important and have become a differentiator between a traditional and an advanced, proactive treasury. The challenge is how to harness the data and deliver better outcomes for the business. This goes beyond having better reports and obtaining data more efficiently – it is a more intelligent treasury that also includes leveraging data to drive better commercial outcomes across operations, financial risk management, funding and liquidity. Treasurers should look to leverage internal data such as working capital, payments and liquidity, as well as external data, including market data, rates, macroeconomic factors, credit ratings and more.

� Level of functionality needed?

� Number of users by function and location?

� Necessary reports required?

� Implications to the business continuity plan?

� Interaction with other financial systems both internal and external?

� How will the technology conform to policies, guidelines and regulations, such as audit requirements, accounting, compliance, legal, statutory reporting?

� Additional languages available?

� Data exchange with the ERP system and external partners such as banks?

� Tangible benefits expected from implementation? Operational efficiency? Risk reduction? Enhanced security?

� Hosted or Cloud based solution?

Questions to consider

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Bringing it all together – best-of-breed solution example

Kyriba

Cash ManagementCash Flow Forecasting

Risk ManagementCorporate FinanceTreasury Reporting

TIS

PaymentsStatements

ReconciliationBAM

AP-AR Data Treasury Data

Bloomberg

Market data

360T

Dealing platform

Oracle SAP Microsoft Dynamics

Payments

Market Data FX-MM Transactions

Finastra

Trade ConfirmationsTrade Quotes

Collections

Banks

BACSH2H

EBICSSWIFT

Payments

Statements

Excel

VAR

Moody’s

I/C loan pricing

UnaVista

EMIRAccountingConsolidation

G/LedgerCofA iRec

Payments

� Bespoke solutions

� Leverage specialty products and solutions

� Potential complexity when integrating multiple providers

� Data and analytics

� Ability to use the TMS as a sub GL

� Bank agnostic with ability to integrate select bank solutions

Tailored Hybrid Solutions

Connectivity – integrating technology across treasury

There are a number of connectivity options available to treasurers, each with their own advantages. These are becoming increasingly important and challenging in terms of integrating various solutions across treasury, finance and your financial services providers, and making sure these solutions can continue to transfer data across systems.

We foresee APIs becoming more and more important. An API provides a way for two computer applications to talk to each other over a network using a common language. APIs can also be used to send and receive data. For treasurers, APIs allow them to connect to the different platforms of their financial services providers – whether banks or fintechs – and receive data in a standardized format.

APIs could provide an alternative to SWIFT in the future if managing multiple API connections can be simplified and streamlined. On the other hand, for corporates using a large number of banks, this may be too challenging. Ultimately, a hybrid solution is often the best approach in order to leverage best-of-breed solutions.

For example, a treasurer creating a cash forecast may want to supplement that with data beyond what is available in a regular bank report. Instead of accessing the data from multiple sources (or not being able to access it at all), APIs effectively create a single data repository for treasury to access, which makes it a more efficient process.

Banking services + Emerging technologies

+ Omnichannel access + New ways to connect

= The future of treasury

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© 2019 Bank of America Corporation. All rights reserved. 2825846

Ways for treasurers to connect

APIs

� Application programming interfaces (APIs) connect systems simply and quickly, for access to data in real time

� An OPEN API framework allows clients, their trusted service providers, and banks to communicate in new ways and deliver business services and capabilities outside of traditional banking channels

SWIFT

� Set of services to support corporate-to-bank transactions, including statement data, payments, confirmations and trade

� Utilize a single, non-proprietary interface to banks leveraging industry standard message types e.g. ISO 20022 XML, EDI, NACHA, BAI

Host to Host

� A single-file, multi-account, multi-currency file transmission solution

� Designed to provide greater flexibility, integration and automation between client financial systems, such as ERP systems, TMS and other applications and BofAML global transaction services

GTS Advisory

Our Global Transaction Services (GTS) Advisory team consists of former corporate treasurers and practitioners, combining decades of treasury experience. With ten members located across the globe, we offer advisory services to our most valued clients to help them meet their strategic goals.

GTS Advisory insights can include subjects such as working capital optimization, M&A, operating models, risk management, capital strategy and innovation. Support is often hands-on and on-site, and our advisors frequently help clients build strategic treasury roadmaps, inform capital or hedging strategies, or prepare change management business cases. We deploy the team as necessary to help address short-term challenges, as well as to realize long-term treasury objectives.

Key takeaways

What are the important things treasurers need to remember when it comes to determining the optimal technology strategy for the treasury function?

The biggest risk comes from not taking action

The importance of technology is only going to grow, and it’s better to take action earlier.

Have a clear idea of the problem you are trying to solve

If your company was to face a financial shock, what part of the treasury would be most vulnerable, how quickly could you get accurate, up-to-date information on your exposures?

Pick the right technology to solve the problem

It’s important to match the capabilities of the technology to the needs of your company.

Building an intelligent treasury function takes planning, foresight and a keen understanding of existing and emerging technologies. As the pace of technological development accelerates, not being in tune with the latest developments can negatively impact a treasurer’s ability to effectively manage risk.