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7 steps for taking control of your treasury technology renewal

  • carissa burns headshot

    Authors

    Carissa Burns

    Director
    Client Relationship Management

    Corporates | Kennett Square, PA

  • jason peterson headshot

    Authors

    Jason Peterson

    Managing Director
    Client Relationship Management

    Corporates | Kennett Square, PA

Summary

Treasury technology platforms serve as critical tools for many organizations. Whether an all-in-one TMS that handles cash and financial risk management, an integrated set of best-of-breed systems, or a combination thereof, today’s treasury systems continue to evolve in both their capabilities and their approach to pricing, service, and support.

If your organization relies on treasury technology, your renewal cycle offers an opportunity to reassess your team’s technology requirements, evaluate your experience with technology partners, and identify future needs. Starting this process 12 months or more before your renewal can provide put you in control and ensure the most positive outcomes for your organization.

Use the following as a blueprint for proactively managing your next renewal cycle:

Step 1: Determine renewal objectives and project scope

Although the most common renewal goal is to obtain the most robust technology at the best possible price, your organization should consider and prioritize goals in several areas, such as:

What is our realistic budget?

Viewed as a cost center, the treasury function can struggle to obtain the budget to upgrade or expand technology platforms. If your system is multiple releases behind in functionality, likely to face a mandated upgrade, or requiring multiple manual workarounds, you can likely make the business case for an investment. Knowing where you stand in advance can strengthen your position as you negotiate the renewal process.

Which functionality improvements are most critical and which are optional?

Identifying your most critical pain points and understanding what new functionality is available to address them can help you focus on the highest priority areas for investment.

Should we expand our vendor pool?

The renewal process presents an ideal opportunity to survey the market. It can serve as the impetus for your team to move to SaaS, achieve and-to-end processing, or add enhanced management reporting.

Signs it may be time to change technology platforms:

  • New functionality emerged that could improve your program and processes
  • Expanding needs that your current system can’t handle
  • Concerns with your current system, such as technology gaps, security vulnerabilities, pricing, an inability to support your organization’s growth, a lack of key capabilities, outreach from a competing vendor, or service/support issues raised by users

Step 2: Review your current contract terms

The next step in your proactive renewal process is understanding the terms in your current technology agreement. This should include the exit terms since vendor termination notice requirements impact the process timeline, which can stretch out 18 months or more. You should also understand the pricing components in detail, including any per-seat or per-module pricing, and identify any functionality that your team is currently contracted for but not using.

Step 3: Engage procurement and learn your internal buying process

You can minimize friction and delays in the renewal process by learning the nuances of your organization’s buying process and partnering with your procurement team early. You should know whether your organization will require an RFP, so you can incorporate that process in your renewal cycle. You should also consider how long an implementation process would take should you opt to change systems, building in six weeks or more for contract negotiation and review, as well as factoring in about 90 days of overlap between the two systems during the required notice period.

Step 4: Align treasury and accounting perspectives

While treasury often drives the technology procurement process, the accounting team provides an important viewpoint, since the selected technology must automate the process from exposure gathering through accounting and reporting. Ensuring that the selected technology can provide the required accounting capabilities and integrate with the appropriate hedge accounting, general ledger, and reporting systems is key to enabling an end-to-end treasury platform.

Step 5: Consider possibilities beyond your current state

When considering the scope and functionality of your technology stack, think beyond your current process. Rather than just automating your existing workflow, envision your ideal future state. Would you like to automate more processes, integrate additional data, or improve reporting? Has the widespread availability of APIs made a best-of-breed system an option for addressing your program’s complexity? Conduct some research and learn what’s possible. Talk to your peers and ask what they’re doing and which platforms they’re using. Attend webinars from technology providers and key influencers. Reach out to potential vendors and request demos that address everything possible within your ideal state. When meeting with vendors, request that they pull in their experts in key areas, such as hedging, hedge accounting, and treasury advisory.

Get “into the weeds” when comparing platforms

When speaking with potential technology partners and comparing platforms, you need to go beyond a standard RFP template and the basic questions that most any provider can answer “yes” to. To truly weigh the pros and cons of each option and understand how each platform will work with your program, prepare a set of your most complex and difficult issues, and pose those to each potential partner. For example, if you need a broad window for FX hedge effectiveness to avoid de-designation, don’t ask, “Can your system handle FX hedge accounting?” Ask, “Can you demonstrate how your system handles triple regression.” Similarly, the capability to handle intercompany loans, covenant compliance, and commodity hedging can vary significantly between systems.

Another best practice for differentiating vendors is reaching out to references beyond those provided to you by that vendor. This can provide a reality check compared with a vendor-provided references, who are likely to skew toward highly satisfied users. When speaking to references, always ask whether they chose the vendor through a competitive process or were mandated to use a specific pre-approved partner. Ask whether they were able to automate their full workflow or still require manual workarounds. Also, ask specific pricing questions, including how much the company had to invest to activate new or existing modules within their system.

Step 6: Negotiate your contract

Once you’ve selected a technology partner, plan to actively participate in negotiating the contract terms. Your initial objectives and priorities can serve as a guideline for separating critical features and functionality from those that can be omitted to achieve your targeted budget. Consider your in-house capabilities and whether to budget for advisory services to fill knowledge gaps or provide operational support. Also, think about pricing structures, such as a-la-carte vs. retainer pricing, how they can impact your goals. Creative planning, such as a phased approach, can stretch your budget growth across multiple years, allowing for increased functionality as your program grows in size and complexity.

Step 7: Plan for a successful implementation

If you took the time to explore what’s possible during your platform selection process, make sure to carry that mindset into your program implementation. This may mean re-evaluating your workflow to maximize the value of your automation or taking advantage of your technology partner’s expertise to incorporate best practices for processes, communication, and reporting. The best technology implementations create an optimal process and automate it, rather than creating a workflow around the available technology.

ChathamDirect technology platform

ChathamDirect is a groundbreaking financial risk management and hedge accounting platform that supports foreign exchange, interest rate, and commodity hedging programs. ChathamDirect provides a clear view of your entire hedging program, including cash flow forecasts, balance sheet exposures, and hedge requests — all securely available on a leading SaaS platform. ChathamDirect is backed by Chatham Financial, an employee-owned, independent market leader with a global team of capital markets experts, risk management advisors, CPAs, lawyers, quantitative analysts, and technology developers who serve more than 3,000 clients annually.


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About the authors

  • Carissa Burns

    Director
    Client Relationship Management

    Corporates | Kennett Square, PA

  • Jason Peterson

    Managing Director
    Client Relationship Management

    Corporates | Kennett Square, PA


Disclaimers

Chatham Hedging Advisors, LLC (CHA) is a subsidiary of Chatham Financial Corp. and provides hedge advisory, accounting and execution services related to swap transactions in the United States. CHA is registered with the Commodity Futures Trading Commission (CFTC) as a commodity trading advisor and is a member of the National Futures Association (NFA); however, neither the CFTC nor the NFA have passed upon the merits of participating in any advisory services offered by CHA. For further information, please visit chathamfinancial.com/legal-notices.

Transactions in over-the-counter derivatives (or “swaps”) have significant risks, including, but not limited to, substantial risk of loss. You should consult your own business, legal, tax and accounting advisers with respect to proposed swap transaction and you should refrain from entering into any swap transaction unless you have fully understood the terms and risks of the transaction, including the extent of your potential risk of loss. This material has been prepared by a sales or trading employee or agent of Chatham Hedging Advisors and could be deemed a solicitation for entering into a derivatives transaction. This material is not a research report prepared by Chatham Hedging Advisors. If you are not an experienced user of the derivatives markets, capable of making independent trading decisions, then you should not rely solely on this communication in making trading decisions. All rights reserved.

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