Technology

Imagine the Possibilities: An All-in-One Treasury and Risk Management Solution

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A recent Aberdeen 2014 Excellence in Financial Management Survey confirms that the top two pressures facing organizations today are increased financial risk and an inability to accurately forecast cash flows. But without proper insight into current and future cash balances it becomes difficult for business leaders to make decisions that will help to grow the business. An all-in-one treasury and risk management (TRM) provides total visibility into cash, liquidity and risk in a single solution to run day-to-day operations, and sophisticated analytics so that treasury teams, procurement and business units can deliver against business objectives. Join Nick Castellina, Research Director, Aberdeen Group and Ryan Heaslip, Senior Solutions Consultant, Reval as they present the results of the 2014 Excellence in Financial Management Survey and discuss the benefits of an integrated treasury and risk management workflow.
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  • 1. Imagine the Possibilities: An All-in-One Treasury and Risk Management Solution Dennis Carey Solutions Consultant, Reval Nick Castellina Research Director, Aberdeen Group August 12, 2014
  • 2. About the Speakers 2 Dennis Carey Solutions Consultant Reval Nick Castellina Research Director, Business Planning and Execution Aberdeen Group
  • 3. The Integrated Approach to Treasury and Risk Achieving Greater Returns through Automation and Visibility 3
  • 4. Key Findings o Finance departments must become more collaborative o Volatile markets and increased regulation impact treasury and risk management o Top performers integrate treasury and risk management to improve reporting, automate processes, forecast more effectively, and minimize risk o By integrating treasury and risk solutions, organizations can realize significant increases in performance o Cloud solutions provide benefits 4
  • 5. Aberdeen’s Research Methodology Pace: End-User Investigation PRESSURES ACTIONS CAPABILITIES ENABLERS ! External and internal forces that impact an organization’s market position, competitiveness, or business operations. The strategic approaches that an organization takes in response to industry pressures. The business capabilities (organizational, process, knowledge management etc.) required to execute corporate strategy. The key technology solutions required to support the organization’s business practices. What is causing organizations to think differently? What strategies are they using to respond to pressures? Why are they achieving greater success? What technologies and services are enabling them to succeed? 5
  • 6. Aberdeen Maturity Class Framework Defining the Best-in-Class Selected Performance Criteria (KPI) Organizational Goals Employee Performance Bench Strength Total Respondents - Top 20% - Middle 50% - Bottom 30% Respondents are scored individually across KPI Best-in-Class Industry Average Laggard 6
  • 7. Creating a Cohesive Finance Department Among Top Finance Initiatives 43% 41% 36% 48% 0% 20% 40% 60% Conduct internal assessment of financial processes and technological capabilities Automation of core business operations and functions Promote collaboration with finance as well as with the rest of the organization Integrate and align data useful for multiple finance functions Percentage of Respondents, n = 100 Source: Aberdeen Group, June 2014 7
  • 8. Polling Question #1 o What is the top pressure driving your company to initiate or explore improvements in Treasury and Risk Management? a) Greater regulatory and compliance oversight b) Increased financial risk (foreign exchange, interest rate, sovereign risk, commodity risk, etc.) c) Low interest rate making it difficult to find areas to invest in d) Too many technologies or financial products making it difficult to identify a specific solution e) Insufficient information to effectively hedge / insure against financial risks f) Inability to keep up with market volatility g) Inability to accurately forecast cash flows h) Lack of visibility into and understanding of outstanding accounts receivables 8
  • 9. Pressures Impacting Treasury and Risk Management 21% 16% 36% 32% 41% 0% 20% 40% 60% Increased financial risk (foreign exchange, interest rate, sovereign risk, commodity risk, etc.) Inability to accurately forecast cash flows Greater regulatory and compliance oversight Insufficient information to effectively hedge / insure against financial risks Lack of visibility into and understanding of outstanding accounts receivables Percentage of Respondents, n = 100 Source: Aberdeen Group, June 2014 9
  • 10. Defining the Best-in-Class Definition of Maturity Class Mean Class Performance Best-in-Class: Top 20% of aggregate performance scorers 1.9 days to report a global cash position 3% variance in global cash forecasting 20% decrease in risk exposure over the past year Industry Average: Middle 50% of aggregate performance scorers 7.4 days to report a global cash position 8% variance in global cash forecasting 1% increase in risk exposure over the past year Laggard: Bottom 30% of aggregate performance scorers 8 days to report a global cash position 11% variance in global cash forecasting 2% increase in risk exposure over the past year 10
  • 11. Best-in-Class Strategies to Align Treasury and Risk 21% 21% 21% 10% 27% 53% 38% 16% 47% 68% Best-in-Class All Others 0% 20% 40% 60% 80% Automate financial transactions Improve cash flow forecasting Centralize treasury and payments processes Implement new treasury and risk management technology Formalize risk management and cash flow forecasting processes Percentage of Respondents, n = 100 Source: Aberdeen Group, June 2014 11
  • 12. Taking an Integrated Approach 72% 61% 56% 61% 68% 49% 28% 44% 39% 58% 80% 70% 60% 50% 40% 30% 20% 10% 0% Integrated business systems serve as a complete and auditable system of record Real-time updates to financial metrics Ability to manage cash and risk together Ability to identify and quantify risk exposure Real-time visibility and control into all cash account balances Percentage of Respondents, n = 100 Best-in-Class All Others Source: Aberdeen Group, June 2014 12
  • 13. Enhanced Cash Management 61% 67% 58% 56% 72% 60% 59% 33% 30% 51% 80% 70% 60% 50% 40% 30% 20% 10% 0% Ability to forecast cash positions for defined time periods Streamlined and centralized payment processing Ability to invest end-of-day surplus cash Ability to support multiple pooling structures and bank relationships globally Support for integration of new banks / accounts Percentage of Respondents, n = 100 Best-in-Class All Others Source: Aberdeen Group, June 2014 13
  • 14. The Importance of Reporting and Control 71% 50% 74% 41% 25% 51% 80% 70% 60% 50% 40% 30% 20% 10% 0% Continuous process compliance monitoring Automated financial reporting Automated transaction posting to general ledger / financial systems Percentage of Respondents, n = 100 Best-in-Class All Others Source: Aberdeen Group, June 2014 14
  • 15. Effective Risk Management 72% 67% 67% 33% 41% 46% 51% 52% 21% 39% 80% 70% 60% 50% 40% 30% 20% 10% 0% A risk- and compliance-aware culture is established to ensure accountability and alignment to organizational objectives Ability to evaluate credit Ability to monitor and detect fraud Ability to optimize and automate hedging strategies Ability to optimize cash and support intercompany funding and lending Percentage of Respondents, n = 100 Best-in-Class All Others Source: Aberdeen Group, June 2014 15
  • 16. Polling Question #2 o Does your organization track and benchmark any of the following risks on a regular basis? Please select all that apply. a) Credit risk b) Counterparty risk c) Foreign exchange risk d) Sovereign risk e) Commodity risk f) Interest rate risk g) Liquidity risk h) Reputational risk i) Do not regularly track 16
  • 17. Best-in-Class Monitor More Risk Factors Best-in-Class All Others 44% 26% 27% 21% 16% 32% 32% 25% 36% 21% 26% 32% 37% 47% 0% 10% 20% 30% 40% 50% Credit risk Interest rate risk Foreign-exchange risk Counterparty risk Reputational risk Liquidity risk Don't track Percentage of Respondents, n = 100 Source: Aberdeen Group, June 2014 17
  • 18. Key Tech Enablers of the Best-in-Class 50% 44% 39% 33% 30% 26% 60% 50% 40% 30% 20% 10% 0% Treasury Management System Governance, risk, and compliance (GRC) solutions Integrated Treasury and Risk Management platform Percentage of Respondents, n = 100 Best-in-Class All Others Source: Aberdeen Group, June 2014 18
  • 19. Benefits of Integrated Treasury and Risk Integrated Treasury and Risk Not Integrated Percentage of reports delivered in time needed by managers for decision-making 84% 73% Accurate financial reports in the last 12 months 90% 80% Variance in revenue forecast between forecast and actuals 9% 17% Average return on short term capital investments 2.6% 2.4% Average cost of short-term borrowed capital 2% 2.8% Variance in global cash forecasting 4% 8% Loss due to unmitigated risk over past two years 2% 4% Decrease in risk exposure over the past year 5% 0% 19
  • 20. Cloud Adoption for Financial Management Trends 38% 31% 24% 32% 21% 20% 40% 20% 0% Off-Premise - software is installed off-site or at a rented data center, and is deployed to users through your internal network infrastructure Software-as-a-Service (SaaS) / Cloud / On-Demand - software is hosted and accessed via a third-party web-based service Percentage of Respondents, n = 100 Best-in-Class Industry Average Laggard Source: Aberdeen Group, June 2014 20
  • 21. SaaS Brings Enhanced Capabilities 58% 67% 67% 58% 92% 83% 41% 43% 51% 39% 59% 61% 100% 80% 60% 40% 20% 0% Audit risk exposure is assessed and tracked Ability to identify and quantify risk exposure Establishment of benchmarks to track performance on an on-going basis Ability to optimize cash and support intercompany funding and lending Real-time visibility and control into all cash account balances Ability to forecast cash positions for defined time periods Percentage of Respondents, n = 100 SaaS TR No SaaS TR 21
  • 22. Cloud Adoption for Financial Management Trends SaaS Treasury and Risk Not SaaS Percentage of reports delivered in time needed by managers for decision-making 80% 75% Accurate financial reports in the last 12 months 87% 83% Percentage of stakeholders with access to financial data 85% 72% Decrease in time to decision over the past year 18% 8% Average cost of short-term borrowed capital 1.1% 2.5% Variance in global cash forecasting 3% 7% Loss due to unmitigated risk over past two years 1% 4% 22
  • 23. Key Findings o Finance departments must become more collaborative o Volatile markets and increased regulation impact treasury and risk management o Top performers integrate treasury and risk management to improve reporting, automate processes, forecast more effectively, and minimize risk o By integrating treasury and risk solutions, organizations can realize significant increases in performance o Cloud solutions provide benefits 23
  • 24. Recommendations o Take an integrated approach to finance and GRC o Provide visibility into cash management and forecast effectively with predictive data o Identify risk factors and monitor them on an ongoing basis o Automate transactions and reporting o Utilize key technology 24
  • 25. All-in-one SaaS Treasury and Risk Management Strategic opportunities and benefits of an integrated treasury and risk management workflow 25
  • 26. Integrated vs. Not Integrated Multiple Systems and Data Sources Interfaced to Address Tactical Treasury Requirements Market Data Disparate, Disconnected, Siloed Integrated, Connected, Seamless 26 Processes and Capabilities Systems and Processes All-in-one Fully Integrated Solution for TRM Built to Deliver on Strategic Treasury Requirements GL Ledger Bank Accounts Commodities Risk Management Light Web User Interface Custom Apps TWS Hedge Accounting
  • 27. Effective Financial Risk Management 27 WHO - •Trades • Approves • Monitors • Reports • Counterparty WHAT - • Exposures • Objectives • Strategy • Instruments • Benchmarks WHEN - • Reports • Decisions • Trading • Settlements • Communication HOW - • Objectives • Trading • Risk Analysis • Accounting • Valuation 27
  • 28. Increased Financial Risk Increased Strategic Decision Making Financial Risks 28 Cash FX Exposure IR Exposure Commodity Exposure Limits Controls Risk Management • Holistic view • Timely info • Key metrics • Policy thresholds Decisions Cash Policies • Bank partners • Pooling structures • Payment structures Risk Management Policy • Hedge strategy • Compliance • Performance metrics • Execute policies • Compliance • React to unexpected • Reputational risk
  • 29. Cash & Liquidity Risk 29 Cash Position TODAY FORECAST o Large disbursement (Liquidity risk) o Held in currency (Currency risk) o Held in bank (Counterparty risk) o Held in country (Country/Sovereign risk) Simulations
  • 30. Cash & Liquidity Risk – Building the Foundation o Centralized bank account management database o Total visibility into world-wide cash balances o Flexible, dynamic and configurable cash position worksheets o Global cash flow forecasting • Identify future shortfalls and surpluses o Basic cash forecasting performance testing o Understand debt and investment structures 30
  • 31. 31 The Power of SaaS TRM • Debt & Investments Management • Intercompany Loans • Limit Monitoring CASH MANAGEMENT • Bank statement retrieval • Bank account management • Cash positioning and reconciliation • Payments and Payment Factory • In-house banking and Pooling • Multi-lateral Netting • Forecast and Liquidity Planning • Accounting • Performance Evaluation and Reporting LIQUIDITY MANAGEMENT ACCOUNTING AND COMPLIANCE RISK MANAGEMENT • Integrated Market Data • Exposure Quantification / Management • Multi-Asset Class Derivative Valuation including IR, structured rates, FX, energy, agriculture, metal, equity, credit) • Credit adjusted valuations • Hedging Strategy • Back Office and Accounting • Strategy Evaluation and Performance Measurement • Compliance with ASC 815(FAS 133 and FAS 161), ASC 820(FAS 157), IAS 39, IFRS 7, IFRS 9, and IFRS 13 • EMIR and Dodd-Frank Reporting • Inventory & Activity Reporting • General Ledger • Audit Controls
  • 32. 32 Amplified with Innovation-as-a-Service SOFTWARE-AS-A-SERVICE (SaaS) • Immediate and global access to Reval’s single and integrated platform • Flexibility for growth and expansion • On-going upgrades and enhancements seamlessly deployed to entire user community DATA-AS-A-SERVICE (DaaS) • Validated data aggregated from multiple sources and systems • Evaluate, analyze and act on information within Reval’s single integrated platform CONNECTIVITY-AS-A-SERVICE (CaaS) • Seamless connectivity and integration with transaction partners (MMF portals, Trade Execution, ERP etc.) • Streamlined and simplified treasury activities including: • Bank statement reporting • Transactions and trading • Investment (MMF portals) • Internal connections (ERP)
  • 33. Questions? Dennis Carey Solutions Consultant, Reval Dennis.Carey@Reval.com Nick Castellina Research Director, Business Planning and Execution, Aberdeen Group Nick.Castellina@Aberdeen.com @nickcastellina 33
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