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Acquiring and Implementing a New Treasury System What is a treasury system? It would likely appear rather obvious, but treasurers that are many questions about treasury systems, their scope and functionality, and how exactly they can fit in with all the others systems already in use. A treasury system typically covers the treasury front, mid and back office process, meaning so it processes transactions from and including the doing of this deal, up to settlement and generation of accounting entries. In addition, it gives most of the analyses, risk management and reporting in respect of the transactions and positions within the device. There are several essential areas of this emphasising that is worth. Firstly, in regards to point that is starting the treasury dealer must be simultaneously inputting the deal while on the phone. There is absolutely no ‘deal docket’ being completed; it is an on-line activity, without any interim steps or recording. In some situations, there can be a requirement for a ‘pre-deal’ phase. The key point is that the TMS should support the company process from the earliest point possible, minimising or eliminating the manual or paper-based elements. Typically, the lifecycle of a treasury transaction is finished when settlement takes spot and the transaction is posted within the accounting system.
The TMS should produce the settlement instructions for the treasury transactions, delivering those in electronic form to a payment system e.g. Swift or a bank payment system, or in hardcopy if that could be the business process. There was less uniformity with regards to what the TMS that is various will when it comes to accounting. Preferably, the TMS will create all the account postings, such as the revaluations, for many treasury deals, passing those seamlessly to the accounting system. Offered the ever-shortening month-end processes, this amount of automation is very important.
Deal processing is just one dimension of a TMS; another is risk management. Sometimes treasurers ask to see the danger management module of the TMS, implying that somehow ‘risk management’ is separable from the rest of treasury. In reality, ‘risk management’ is — or should be — all pervasive and embedded through the system, especially if seen as broadly-defined and including risks that are operational. As a result, a ‘Risk Module’ is something of a misnomer, confusingly implying that ‘risk’ are confined to a module that is specific. The key point is that the system should process the deal from the point of deal entry, relative to an embedded ‘best practice’ control framework, that delivers segregation, counterparty checks, limitation checks etc.
In summary, the TMS would typically interface with the accounting system to deliver the account postings, along with one or even more payment/banking system to give settlement instructions and/or upload account balances. In addition, it would connect with an industry information system to upload interest rates, exchange prices and other market prices as required. Other interfacing may be required, for example with an on-line FX dealing system, or with secondary market bond trading systems, depending on the specific environment. Managing the Project Treasury should take responsibility for the project to pick and implement the latest TMS. The IT function takes the responsibility in some organisations. This may be counterproductive, with technical IT issues becoming the main focus and the actual treasury requirements being less than fully understood and somewhat muddled. Clearly, all systems also IT, including those in treasury, should be consistent with the general business IT policy, nevertheless, treasury should figure out its requirements that are functional review these with the vendors, and lead the selection process. Used, a small team, with enough seniority to take the necessary decisions, comprising treasury, IT and led by a project manager, could be the ideal way to proceed. The role of this project supervisor includes ensuring ongoing coordination and problem solving with the project manager on owner side. An agreed project plan with clear milestones ought to be the reference that is constant for managing the project. With regards to timetable, each situation is different but realistically it takes a minimum of three months for a very straightforward application and a maximum of twelve, depending on interfacing and customisation, with six months being a good average. A very determinant that is important of required is the degree to which the important thing users engage the implementation work. The ‘business owner’ regarding the TMS, while the project manager, must ensure that this engagement is maintained over the life of the project.