Alison Fletcher (Bloomberg): Why integration should be non-negotiable

 

Corporate treasuries are increasingly moving away from what was once the world’s most common treasury management and risk system: spreadsheets. Instead, treasury professionals are choosing technologies appropriate for their modern, complex global business needs. While specialist technology has unquestioned advantages, it also raises challenges to ensure those systems integrate within their workflow and with each other, ensuring that the return on technology investment is maximized. All too often, the ability of vendor systems to integrate without having to assign the corporate’s own scarce dedicated IT resources is not considered early enough in the process.

 

Integration has evolved

One important integration factor to consider is ensuring that the corporate’s understanding of integration is the same as the vendor’s understanding. While it is undeniable that integration is an electronic exchange of information, there can be potential for confusion whether all parties are referring to 2nd or 3rd generation capabilities. Basic integration is generally a file-based delivery in scheduled batches, with information flowing in a single direction only. Enterprise integration, however, involves a real-time, automated, two-way exchange using Web Services technology, for example.

 

Treasury automation should be asset-class agnostic

According to the 2019 FIS Global Treasury Technology Study, adoption of technology versus the continued use of manual spreadsheets varies greatly depending on the asset class that the corporate treasury is trading. As an example, manual processes, which include spreadsheets, for FX are still being used by 28% of survey respondents, while interest rates are at 43% and commodities at 55%. When treasury departments decide to integrate with third-party systems and automate their corporate treasury workflow, the choice of asset class should be irrelevant. The technology already exists for corporations to trade FX, interest rates and commodities electronically and for those trades to flow directly into TMS and risk management systems. The technology also exists for information to flow back and forth between these two systems seamlessly.

 

The utopian solution

When comparing vendors to streamline treasury workflow, it is not essential to find a vendor that can perform every single stage of the workflow in one solution. In fact, as treasury functions are so diverse, it may be more beneficial to consider a cash management specialist for a TMS and adopt a specialist vendor in financial markets and risk for functions such as electronic trading, confirmation and matching, valuations, hedge accounting and CVA. However, it is necessary that each vendor can fully integrate with each other in a proven, streamlined way to avoid any issues. Diverged systems increase the odds of operational risk and may ultimately impact the productivity of the entire treasury department.

Bloomberg's Multi Asset Risk System (MARS) is fully integrated into FIS Integrity.

A call to action for corporate treasuries

When reassessing existing or assessing potential new technology, a few emerging best practice questions should be at the top of every list to ensure the return in technology spend is both maximized and can achieve the desired efficiency gains. Examine the entire front-to-back workflow by answering the following questions:

  • Do the proposed vendors integrate with each other? How? What aspects are integrated?

  • Are both vendors SaaS or is there a mismatch of installed and SaaS? How often are upgrades performed? How will the interface work after the upgrade?

  • Can the system be tested before going live? Is it the same data that the company needs integrating? Is transformation mapping or consolidation required?

  • What does the vendor mean by integration? Is there any manual upload/download? Is it two-way? Is it a file-based or service based? Is it scalable?

  • Who would have to settle the cost for any integration (financial or time cost)? Who supports it if it stops working? How quickly will they respond? How time sensitive is the integration? What service levels are needed from the vendors?

  • If a new instrument type/asset class is added over time, where does the responsibility lie to ensure a seamless workflow?

  • Will market data need to be purchased to feed these systems?

 

Reaping the rewards

A fully integrated corporate treasury workflow provides numerous benefits to corporations. By freeing up human capital within the department, these professionals are able to engage in more strategic projects and undertake more responsibilities, rather than focusing only on manual tasks. More importantly, automated workflows significantly reduce operational risks such as spreadsheet errors. Seamless integration should no longer be regarded as a “nice to have”, but as a truly non-negotiable component of any technology adoption throughout the enterprise