TMS at Risk?

The majority of companies have treasury management systems, Reval says, but many still use older versions.

The vast majority of large corporations in North America and the U.K. employ treasury management systems (TMS), but many use older versions of those systems, according to recent surveys by Reval, which provides software-as-a-service treasury and risk management solutions. And Reval argues that companies that aren’t using the latest version of their treasury management system face compliance risk.

Reval surveyed 95 of the companies included in the London Stock Exchange’s FTSE 150 index, and found almost three-quarters—74%—use automated treasury management systems, while 26% do not. In North America, Reval’s survey of 200 large companies found an even higher portion—close to 80%—have automated treasury management systems.

As corporate treasuries deal with the fallout from the eurozone’s debt crisis, Reval argues that treasury technology is a key component in handling those risks. Especially for big companies like the ones Reval surveyed, “the amount of risk that is entering their equation is at the highest levels we’ve ever seen,” says Jason Torgler, vice president of strategy at Reval, citing liquidity risk, companies’ access to capital and credit, and financial risks related to interest rates, foreign exchange and commodities.

“All of these are coming to a head for these size companies,” Torgler says. “And it’s our feeling that unless you have something that’s consolidating that information, making it real-time and actionable, that the organization is exposed to those risks.”

Many of the companies that have treasury management systems are using outdated versions. In the U.K., 50% of companies with TMS are not using the latest version, according to Reval. In North America, “we actually see a higher degree of companies using out-of-date versions, it’s slightly more than 60%,” Torgler says.

Upgrading installed software can be a laborious process, Torgler says, adding that many corporate treasuries, caught up in their day-to-day work, may find it hard to focus on larger challenges like investments in technology.

But companies that still rely on older versions of treasury solutions may have difficulty complying with the latest regulatory requirements, he says. “These systems are constantly evolving to meet the reporting requirements, whether it be IFRS or FASB, whether it be anything coming down from Dodd-Frank. The ability to be able to mobilize product enhancements for that level of compliance is critical.”

Amid the turmoil in finance markets, Torgler says Reval sees North American treasuries moving toward centralization. “We’ve seen major movement over the last year or so to centralize the visibility and often the management of activity that’s occurring not only in Europe, but emerging markets and Asia-Pacific. They’ve set up structures and technologies to get much closer to that information,” he says.

 

For an earlier story about treasury technology's move toward SAAS, see The Cloud Invasion.

 

 

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