Selling the Value of Transformational Treasury and Risk Technology
What Makes Today's Treasury Technology a Required Vehicle for
Financial Transformation
Treasury's evolution over the past five years to a more strategic business function has shaped the requirements of its enabling technology. So much so, that installed, client- server technology is giving way to next generation, cloud-based Software-as-a-Service (SaaS) technology for Treasury and Risk Management (TRM).
Next generation treasury technology is transformational in that it goes far beyond simple automation to help change the conversation for treasurers, their finance teams, and business units, such as those involved in pricing and contract negotiations, executive management, and the board. However, if treasurers cannot articulate the value of transformative treasury technology to their CFOs, it is unlikely they will be effective agents of change within their organizations. The inability to effectively lead change may leave companies subject to the advances of their competitors, who may be bounding toward the future, empowered with the right tools to support their charge.
Taking a Cue from other Technology Transformations
It is often challenging for sponsoring executives to actually quantify and articulate to the CFO the value of transformative technology, in spite of the fact that these solutions have a significant impact on treasury's performance, and therefore on corporate performance. To understand the broad impact such technology can have on the enterprise, it might be helpful for treasurers to look back on the evolution of some well-known business applications that are commonly used in companies today, such as Customer Relationship Management (CRM), which began as simple sales force automation. Salesforce.com, for example, continues to expand the applications offered on its single SaaS platform for CRM as more of the enterprise leverages the intelligence created by various functional groups. In another example, SaaS-based technology company Workday has transformed the way HR and ERP solves problems for large, global enterprises.
While these solutions manage multiple business processes across a major part of the enterprise, each meets the needs of a function that has developed from a tactical operation to a more strategic, forward-looking function. In addition, each technology progression moved beyond the limitations of on-premise, client/server technology to nimble, multi-tenant SaaS platforms that offered comprehensive functionality and liberation from the constraints of IT. These examples might help treasurers frame for their CFO's how companies today are leveraging technology to deliver on corporate strategies that are continually pushing their businesses forward.
Still, the question remains for each company considering new or replacement technology for treasury: What is the immediate need that is causing the most pain for the organization, and does that justify the investment?
2. Why Technology Investment is Strategic, Not Tactical
A company's immediate pain begins the treasurer's journey to exploring various technologies and ultimately investing in the right solution for his or her organization. To this end, having a broader vision of a world-class organization will enable companies to set themselves up for future change. For example, M&A events may leave an organization with disparate, redundant, or incompatible systems and processes. Growth in any organization, whether through mergers and acquisitions or through organic means, commonly highlights inefficiencies in manual processes, redundant processes, additional risk factors and outdated systems that cannot handle the challenges of conducting business in various markets around the world.
While this example of a compelling need comes from the complexities of a merged culture, conditions leading to consolidating systems and optimizing processes may have been a long time in the making. In either case, the organization is beginning to realize that future growth is simply unsustainable without the support of modern technology that can take the company where it wants to go. But truly transformational technology should not only help the company get where it wants to go, it should take it to places it never dreamed of. Only a technology vendor that can work as a strategic partner in this effort can help a treasurer determine whether the project is worth the investment.
3. Nothing is Free, Not Even Status Quo
To help treasurers begin gathering the information to build and, perhaps more importantly, sell the business case for transformative technology, consider the areas below that can help him or her demonstrate return on investment (ROI):
€ Global Financial Market Risk
€ Global Cash and Liquidity Risk
€ Regulatory Compliance Risk
€ Operational Risk
Exploring each of these areas with your vendor can help treasurers collect the information necessary to build out the business case by assessing the costs involved in keeping the status-quo or acquiring the vendor's technology. Let's briefly examine some ways to think about putting a value on current operations versus a new technology within each of these key areas.
Global Financial Market Risk - While automating these processes can be quantified on its own, linking a value to these exposures can demonstrate the limits to what you cannot do - how much in addition would you like to hedge, if only you could?
Global Cash and Liquidity Risk - What is the dollar value of idle cash? If you had global visibility into cash positions, you could avoid overdraft fees, or if your forecasting was better, you could invest these amounts. A global company that is considering an in-house banking model may currently have one subsidiary depositing in one bank, and another taking out a loan from a different bank. Placing a value on interest and bank fees saved can be easily quantified.
Regulatory Compliance Risk - The technology you are seeking to justify is truly transformational if it can help you with change and operate with limited resources. What does it take to keep up with new and changing regulations from global financial reform or accounting standards? You can calculate the extra headcount you might need on a project or the consulting hours you may require. If you will be coming from a manual process environment, how much will you save from the detailed audits of your entire process? The checks from audits on companies with good and reputable systems in place will be significantly less, not to mention the significant impact on shareholder value a restatement would cause.
Operational Risk - Companies can put hard dollars against the efficiencies gained by automating processes, many of which have been mentioned above. Savings can also be quantified in payment efficiencies. Optimizing payments can bring down the number of payments and transaction costs. A payment factory approach can reduce the number of banks used across various countries. Using a few preferred partners would reduce transaction costs because of higher volumes.
Other operational savings can come in optimizing data and the outsourced hosting benefits of operating in the cloud with a SaaS offering. Hardware requirements, set-up and maintenance of interfaces, the physical cost of upgrades, data and data recovery centers can all be calculated. In an organization of manual processes, a treasurer could calculate annual costs against the number of people working on gathering data, reconfirming data, making manual bookings, and manual accounting entries. Is the organization spending time gathering data and ensuring data integrity, rather than analyzing reports and basing decisions on those insights? Manual, repetitive processes cost a lot of time and effort.
4. Information Gathering Helps Define Value for all Stakeholders
While the treasurer will be the one to present the business case to the CFO, he or she will ha
Financial Transformation
Treasury's evolution over the past five years to a more strategic business function has shaped the requirements of its enabling technology. So much so, that installed, client- server technology is giving way to next generation, cloud-based Software-as-a-Service (SaaS) technology for Treasury and Risk Management (TRM).
Next generation treasury technology is transformational in that it goes far beyond simple automation to help change the conversation for treasurers, their finance teams, and business units, such as those involved in pricing and contract negotiations, executive management, and the board. However, if treasurers cannot articulate the value of transformative treasury technology to their CFOs, it is unlikely they will be effective agents of change within their organizations. The inability to effectively lead change may leave companies subject to the advances of their competitors, who may be bounding toward the future, empowered with the right tools to support their charge.
Taking a Cue from other Technology Transformations
It is often challenging for sponsoring executives to actually quantify and articulate to the CFO the value of transformative technology, in spite of the fact that these solutions have a significant impact on treasury's performance, and therefore on corporate performance. To understand the broad impact such technology can have on the enterprise, it might be helpful for treasurers to look back on the evolution of some well-known business applications that are commonly used in companies today, such as Customer Relationship Management (CRM), which began as simple sales force automation. Salesforce.com, for example, continues to expand the applications offered on its single SaaS platform for CRM as more of the enterprise leverages the intelligence created by various functional groups. In another example, SaaS-based technology company Workday has transformed the way HR and ERP solves problems for large, global enterprises.
While these solutions manage multiple business processes across a major part of the enterprise, each meets the needs of a function that has developed from a tactical operation to a more strategic, forward-looking function. In addition, each technology progression moved beyond the limitations of on-premise, client/server technology to nimble, multi-tenant SaaS platforms that offered comprehensive functionality and liberation from the constraints of IT. These examples might help treasurers frame for their CFO's how companies today are leveraging technology to deliver on corporate strategies that are continually pushing their businesses forward.
Still, the question remains for each company considering new or replacement technology for treasury: What is the immediate need that is causing the most pain for the organization, and does that justify the investment?
2. Why Technology Investment is Strategic, Not Tactical
A company's immediate pain begins the treasurer's journey to exploring various technologies and ultimately investing in the right solution for his or her organization. To this end, having a broader vision of a world-class organization will enable companies to set themselves up for future change. For example, M&A events may leave an organization with disparate, redundant, or incompatible systems and processes. Growth in any organization, whether through mergers and acquisitions or through organic means, commonly highlights inefficiencies in manual processes, redundant processes, additional risk factors and outdated systems that cannot handle the challenges of conducting business in various markets around the world.
While this example of a compelling need comes from the complexities of a merged culture, conditions leading to consolidating systems and optimizing processes may have been a long time in the making. In either case, the organization is beginning to realize that future growth is simply unsustainable without the support of modern technology that can take the company where it wants to go. But truly transformational technology should not only help the company get where it wants to go, it should take it to places it never dreamed of. Only a technology vendor that can work as a strategic partner in this effort can help a treasurer determine whether the project is worth the investment.
3. Nothing is Free, Not Even Status Quo
To help treasurers begin gathering the information to build and, perhaps more importantly, sell the business case for transformative technology, consider the areas below that can help him or her demonstrate return on investment (ROI):
€ Global Financial Market Risk
€ Global Cash and Liquidity Risk
€ Regulatory Compliance Risk
€ Operational Risk
Exploring each of these areas with your vendor can help treasurers collect the information necessary to build out the business case by assessing the costs involved in keeping the status-quo or acquiring the vendor's technology. Let's briefly examine some ways to think about putting a value on current operations versus a new technology within each of these key areas.
Global Financial Market Risk - While automating these processes can be quantified on its own, linking a value to these exposures can demonstrate the limits to what you cannot do - how much in addition would you like to hedge, if only you could?
Global Cash and Liquidity Risk - What is the dollar value of idle cash? If you had global visibility into cash positions, you could avoid overdraft fees, or if your forecasting was better, you could invest these amounts. A global company that is considering an in-house banking model may currently have one subsidiary depositing in one bank, and another taking out a loan from a different bank. Placing a value on interest and bank fees saved can be easily quantified.
Regulatory Compliance Risk - The technology you are seeking to justify is truly transformational if it can help you with change and operate with limited resources. What does it take to keep up with new and changing regulations from global financial reform or accounting standards? You can calculate the extra headcount you might need on a project or the consulting hours you may require. If you will be coming from a manual process environment, how much will you save from the detailed audits of your entire process? The checks from audits on companies with good and reputable systems in place will be significantly less, not to mention the significant impact on shareholder value a restatement would cause.
Operational Risk - Companies can put hard dollars against the efficiencies gained by automating processes, many of which have been mentioned above. Savings can also be quantified in payment efficiencies. Optimizing payments can bring down the number of payments and transaction costs. A payment factory approach can reduce the number of banks used across various countries. Using a few preferred partners would reduce transaction costs because of higher volumes.
Other operational savings can come in optimizing data and the outsourced hosting benefits of operating in the cloud with a SaaS offering. Hardware requirements, set-up and maintenance of interfaces, the physical cost of upgrades, data and data recovery centers can all be calculated. In an organization of manual processes, a treasurer could calculate annual costs against the number of people working on gathering data, reconfirming data, making manual bookings, and manual accounting entries. Is the organization spending time gathering data and ensuring data integrity, rather than analyzing reports and basing decisions on those insights? Manual, repetitive processes cost a lot of time and effort.
4. Information Gathering Helps Define Value for all Stakeholders
While the treasurer will be the one to present the business case to the CFO, he or she will ha