If addressing treasury globalisation and the associated compliance issues is the dark cloud that hangs over today's treasury organisations, the silver lining is the opportunity to utilise an emerging breed of web-based treasury management systems that apply connectivity to streamlining and improving treasury processes.

Centralisation and regulation have become the most important priorities of cash managers and treasurers at the worlds leading multinational corporations, according to a recent survey conducted by EuroFinance, a U.K.-based company that provides research, conferences and cash management training to finance professionals worldwide.

This shift in priorities is driving the development of todays treasury management systems, which utilise the power of the Internet to offer unrivalled connectivity and system openness. These elements, along with clever design and strong functionality, make it easier and more cost-efficient for a corporate treasury to meet regulatory compliance standards while central treasury remains in control of even the most self-sufficient global subsidiaries.

It has taken only a few years for industry trends to move from simply making client/server architecture available via the Internet to building applications for the Internet from the ground up to take advantage of a uniquely open system architecture that allows for communicating with remote offices and transferring information at the system level.

Todays best-of-breed web-based treasury management systems embody the best practice procedures of corporations that have moved ahead of the curve in using the power of the web to rise to the challenge of centralising risk management processes to control data and enforce organization-wide compliance.

The Internet provides a secure means of collecting data and reporting results back to the business units.

Open architecture design The tools provided by todays systems have opened the door to enterprise-wide communication in its broadest sense. The open architecture design of the web-based treasury system allows a corporate treasury to connect to the rest of the enterprise. Integration between accounts payable, accounts receivable, and corporate planning and budgeting departments increase efficiency and data quality across the whole organisation and allow a treasurer to produce more accurate forecasts. The Internet provides a secure means of collecting data and reporting results back to the business units. Exposures can be added via remote entry from anywhere in the world and, since the application architecture is fully integrated and open, exposure data will be instantly accessible from the main application. Data is captured only one time, eliminating redundancy and mistakes that may arise from re-keying.

With the benefits of enterprise-wide connectivity come questions regarding data security and accuracy, bringing the topic again to centralised control verses business unit autonomy when it comes to day-to-day treasury management activities.

A quality web-based system with full integration will provide the means for customising security according to business practices and managing processes from the administrative level down with role-based access, secondary transaction approval, and data capture from disparate geographic business. A truly secure global application should be built on a single-database architecture with a clearly defined roles-based platform. This system can touch an entire corporate treasury organization and beyond by ensuring that the appropriate team members, regardless of geographic location, carry out exposure management functions quickly, seamlessly and securely.

"A truly secure global application should be built on a single-database architecture with a clearly defined roles-based platform"

STP
Web-based technology tends to manifest itself most productively in true system-wide straight through processing. Straight through processing should begin with deal capture and pricing assistance in the front office; continue to track instruments throughout their lives with simplified event management processes such as rate-resetting, cash-flow processing, short- term instrument rolling and amortisation tracking; and finally process portfolio valuations, confirmations, settlements and accounting entries.

To add compliance to the straight through processing path, some systems offer fully integrated staple tools that simplify and even automate processes that allow a treasury to perform the following functions:

Link exposures to hedges
Identify hedge types at inception and track histories
Calculate fair value mark-to-market exposures and hedges
Designate and de-designate hedge relationships
Calculate entries to OCI or earnings based upon effectiveness
Document hedges
Track balances in OCI and release them to earnings upon recognition
Forecast amounts to come from OCI over the next 12 months

Trend towards hosted solutions
It has become apparent that the sophisticated technology and advanced functionality built into todays web-based treasury systems requires sophisticated IT support that could break the bank for smaller treasury organizations. This factor is driving the trend in systems toward hosted solutions rather than in-house or intranet applications. Providers usually offer the option of outsourcing carefully selected parts of the IT infrastructure to an Application Service Provider (ASP). There are several advantages to outsourcing application hosting. The service can usually be rented on a periodic basis and implementation times are short for a faster return on investment. There is no software or hardware to buy or maintain, which could allow a quantum jump from a spreadsheet-based treasury to an automated one.

Over time, the client and ASP host can work together as partners to help the application evolve to meet both current and future cash management requirements. The ASP model can provide support for all or part of the cash management model by integrating with key internal and external partners as required. A provider should have a demonstrated record of accomplishment and implementation successes, offer Sarbanes-Oxley-compliant hosting, and house a knowledgeable staff that will help to meet current and future hosting needs.

As todays market drives treasury management systems toward the web in order to meet rising standards for compliance and data accuracy and security, treasury organizations are presented with a rare opportunity to take inventory of standing rules and processes and put into place new ones that center instead around automation. The end result will be a more up-to-date, compliant treasury with streamlined processes in place.