Executive summary

When Canadian visionary Marshall McLuhan coined the phrase, “Themedium is the message,” in the 1960s, he didn't know aboutSoftware-as-a-Service (SaaS) technology–at least as it isunderstood today. He didn't have to. Rather, he understood that amedium itself can have a transformative effect on 'humanassociation and action.' The light bulb, for example, transformedhuman activity because it no longer restricted activity to daylighthours. The automobile spawned suburbia, highways and the extensionof time and space between work and home life. In the world oftreasury and risk management, SaaS is a medium that has thetransformative power to break down barriers and change the waygroups across and beyond the enterprise share information andcreate intelligence. Taking a closer look at medium, we can explorehow the shared nature of SaaS technology, while not new, isenabling an evolution that will take the management of treasury indirections not yet thought of.

From Shared Data to Shared Services

The conventional view of SaaS as a convenience is wellunderstood, as it is in the example of online banking. It is evenappreciated for its enablement of sharing public data for thebenefit of all users, as with online newspapers. What is lessunderstood, however, is where SaaS is headed, and what is drivingthe direction of change.

The SaaS world is hosted. Partially shared, partially privateand fully secure. Decentralized and subscribed to – no longer is itnecessary to buy servers, make backups, check security, and endurepainful roll outs and upgrade cycles. Your access is anywhere,anytime on a single version, which is regularly upgraded and incompliance with the latest regulatory changes. Your treasuryorganization is no longer bound to IT strictures, other than a tickin a RFP box, leaving you free to fully exploit the opportunitiesinherent in the SaaS medium.

Consider, then, how the consumption of information by usersacross the treasury spectrum – from positioning cash, processingpayments, monitoring credit lines and making inter-company loans togenerating valuations, performing advanced risk management andposting accounting entries – is driving an evolution from shareddata to shared services. This evolution toward shared servicesmeans more work is automated and provided by your SaaS partner,saving you time and money.

Shared Treasury Data

Over the past decade, SaaS technology made it easy for aprovider to leverage common, public data, for the benefit of allusers. In the treasury world, some of this data includes:

• Market Data – You need market data, though itmay vary from your neighbor. SaaS providers sourcing and publishingyour market data enable independence (a plus with auditors), widecoverage and validation of data accuracy. FX and interest rates areused throughout treasury, from translating cash amounts tofunctional currency, valuing FX transactions, creating journalentries, and performing stress tests. The 30 minutes you spend perday sourcing, checking and publishing market data could result inthree weeks' annual savings and a lot fewer headaches with thiscentralized task.
• Market Conventions – You all need to defineand maintain everyday data, such as currencies, holiday calendars,day count conventions, country codes, bank statement formats, andpayment message formats. While this task is the same for everyone,it takes time and effort to install and keep up with marketstandards. The recent Royal Wedding holiday is an example. Vendorssupplying this data will have reduced your effort and guaranteedthat market standards would be followed. With thousands of eyes onthis data daily, you would rest assured that a vendor of a true,multi-tenant SaaS would know of mistakes or errors veryquickly.

As SaaS platforms continue to add more functionality, theleveraged value of centrally provided market data increases.

Shared Treasury Services

Providers are increasingly aggregating data on your behalf,adding value to it and offering it as a service. As the car createdthe need for a highway, the highway gave rise to the rest stop andgas station. New mediums create new opportunities. Therefore, aprogressive SaaS vendor will ask “Why stop at providing commondata?”

As your treasury team works through its day, each memberperforms a variety of activities that could be provided asservices, further exploiting the SaaS medium and making lifeeasier. For example:

• Bank Statements – Early in the morning yourcash management team needs to connect to banks to get statements ina timely manner. Your neighbors do too. SaaS now enables thisservice via the provider itself or via a service bureau.
• Correlations and Volatilities – Furtherprocessing public market data can add value by calculatingcorrelations between asset classes and curves, historicalvolatilities and using this data as inputs into advanced riskmanagement tools like Cash Flow-at-Risk, Earnings-at-Risk orValue-at-Risk measures.
• Payments – By mid-morning, and in theafternoon, your payments team needs to make (treasury and/or AP/AR)payments from your treasury and risk management solution to one ormany banks. Each bank may use a different payment format, e.g. MT101, EDIFACT, ISO20022 or some custom format. Let the SaaS vendorprovide these formats out of the box to you and then be responsiblefor maintaining and adding to them. Also let the host provideconnection to a common service bureau or bank connection to sendpayment messages, track confirmations and acknowledgements.
• Sanction List and Payment Validation – It is arequirement to verify that payees are not on sanction lists, and itis also useful to check SWIFT BIC's, Fedwire/ABA codes prior tomaking payments. This data is available via public databases, butproviding this data centrally and checking against it benefits allusers. This value-added service will save time and also strengthenSOX controls.
• Trading – Throughout the day your front officemay use one of the many FX or money market online trading platformsto trade. You also need the trade data in your treasury system. Youcan now exploit the interconnected, shared aspect of the SaaSmedium to trade directly from within your treasury and riskmanagement solution and automatically book your trades, saving youfrom double keying data.
• Hedge Accounting – When designating hedges andat each month end, your accounting team needs to run regression ofindex values or derivative fair values and calculate statisticalmeasures. A SaaS provider may leverage published market data tothis, further adding value.

While the SaaS treasury and risk management world is clearlyevolving from shared data toward shared services, there are alsoother developments taking place.

The Future Enabled

The most subtle impacts of any new medium are the results of howusers consume it. When television overtook radio, the eye became asimportant as the ear. Now the internet is engaging users in avariety of levels, and in a variety of ways – we now 'read'newspapers by reading text, watching embedded video, linking torelated stories and clicking through galleries of still photos.Similarly, how might the SaaS medium be exploited to further engagetreasury groups to share information and create intelligence?Perhaps they can access how-to videos within help functions andvideo chat with customer support desks or use mobile smart tools(tablets and smart phones) to perform specific treasury tasksremotely.

While the future sometimes appears to have arrived, new and moreunimagined innovations are always on the horizon. Treasury and riskmanagement users and providers alike will continue to find new waysto exploit SaaS to make work smarter and easier. As McLuhan wouldsurely agree, the SaaS medium really is the message.

About the author

Peter Seward is responsible for the strategic direction of theReval ® SaaS/Web-based platform and Reval Center™ valuation andhedge accounting service. He has also written the Reval modules forIAS 39, IFRS 7 and FAS 161. In addition, Mr. Seward leads Reval'sRisk Management Taskforce, advising internally and externally oncritical risk management issues. His 15 years of experience infinancial services software spans Asia Pacific, Europe and NorthAmerica. Prior to Reval, he was a sales engineer at PrincipiaPartners, an implementation consultant and custom developmentproject manager for Integrity Treasury Systems in both Sydney andChicago, and a manager of treasury systems at Rabobank Australia inSydney. He holds a Bachelor of Science in Mathematics and Economicsfrom the University of Western Australia.

The author can be reached at: [email protected]

About Reval

Reval is a global provider of an all-in-oneSoftware-as-a-Service solution for enterprise treasury and riskmanagement. Its award-winning SaaS platform delivers deep and broadvisibility into cash, liquidity and risk for finance, treasury andaccounting groups, worldwide. With Reval's integrated,straight-through processing workflow of front-to-back officefunctions, companies can optimize operational efficiency, security,control and compliance across the enterprise.

Reval's unique combination of deep domain expertise andcomprehensive functionality provides companies with the means tocompete confidently in a complex and dynamic market environment.Founded in 1999, Reval is headquartered in New York with regionalcenters across North America, EMEA and Asia Pacific.

For more information, visit www.reval.com or email [email protected].