BIC Behrendt International Consulting

Treasury Management Services

Even in the most decentralized multinational organization with hundreds of subsidiaries, one area always needs to be as centralized as possible – the treasury function. Decentralized cash management, for example, is suboptimal, since it may create cash surpluses in some, and cash needs in other parts of the business. A decentralized market risk management is completely useless, since a market risk exposure in one part of the business may be offset by the activities of another part of the business. And by not using centralized loan agreements based, if necessary, on a rating process executed for the whole group, the company loses money by paying to much to its debtors.

Requirements of a Treasury Management System
The main challenge for setting up integrated treasury management systems are data quality and data consistency, and the speed required to interact with the international capital markets. Hedging operations, for example, require the collection and processing of all relevant data from all business entities within the group on a daily basis, with the subsequent calculation of the relevant risk exposure, an immediate decision about the intended hedging position, and the execution of capital market transactions to cover the relevant positions – all within a couple of hours. Setting up an integrated treasury management system is therefore heavily dependent on the analysis and optimization of the relevant treasury processes, the integration of the relevant data flows and, if necessary, the integration of the respective treasury and accounting applications.
Additional requirements for a treasury management system are posed by the ever increasing reporting obligations of companies interacting with capital markets. Stakeholders require frequent, fast and detailed reports about the company situation not only in terms of accounting but in cash- and risk-related terms. Accounting standards require most detailed information about the status and development of so-called financial instruments. Banks providing syndicated loans ask for continuous monitoring and reporting of the financial covenants, and, last not least, the management needs detailed information about relevant treasury ratios.

Treasury Management System Solution Components
Depending on the requirements of the customer, Treasury Management System projects can cover the following areas:

• Cash management and cash pooling
• Currency and interest rate risk management
• Creditor and credit risk management
• Leasing contract management
• Liquidity planning and liquidity management
• Management of capital market transactions
• Financial controlling and reporting
• Integration with financial accounting systems

Depending on the needs of our clients, BIC offers to support both the conceptual design, and the selection and implementation of related Treasury Management Applications. In its most extensive form, a Treasury Management System project can cover the following stages:

Due to the complexity of the solutions required, however, in most cases it makes sense to define an overall Treasury Management System strategy first, before implementing it step by step in separate stages.

 

Project Setup Phase
Definition of the relevant areas to be dealt with Definition of project targets for both the overall project and the function-specific subprojects Definition of timing, milestones, project resources, and project organization	Examples: Project will deal with cash pooling, currency and interest rate risk management, and the related management of capital-market based transactions Full integration of an electronic trading platform and an electronic deal confirmation, automation of transaction-related processes required
High-level Design
As-is analysis of processes and data flows High-level definition of all relevant processes High-level definition of data flows Definition of the work allocation between different IT systems and human beings	Examples: Workflow and tool analysis for existing cash management processes Analysis of current workflows for defining currency and interest rate risk exposure on a daily basis Definition of a possible workflow for measuring the group-wide risk exposure, defining the required hedging operations, and automated execution of the required hedging transactions on a daily basis before 11.00 a.m.
Software Selection
Definition of the functional requirements for one or more treasury applications Definition of technical and commercial requirements Pre-selection of possible application, or combination of applications Information collection from the respective suppliers and their consulting teams or companies “Beauty contest” with case studies to be solved by the individual suppliers Suggested ranking, client decision Supplier negotiation and contracting	Examples: Preparation of a detailed checklist for functional, technical, and commercial requirements Preparation of case studies for beauty contest Market research, benchmarking, and meetings with reference customers Pre-selection of three possible alternatives: Sophisticated all-in-one-treasury solution from banking sector All-in-one solution with full accounting integration Combination of two individual packages with individual strengths for cash pooling / risk management, and for liquidity management
Low-level Design and Prototyping
Low-level design for all relevant treasury processes Low-level (technical) design for the customization settings of the selected software Detailed data flow and data integration planning Prototyping for selected areas	Examples: Low-level process design for the group-wide, daily measurement of currency risk exposure, and the related data flows and data aggregation Detailed, screen-by-screen definition of the necessary customization settings for the required software Development of a prototype for testing the daily measurement of currency risks for a selected group company in one selected currency
Implementation and Testing
Setup of the necessary hardware environment Installation and customization of all required software applications Component testing (alpha testing) Integration with relevant systems for master and transaction data integration Integration testing Client testing (beta testing)	Examples: Setup of a 4-stage-environment (development, testing, staging, and production environment) Installation of the complete treasury application Module-by-module-customization Development of test cases, follow-up of testing procedure, documentation and evaluation of testing results
Rollout and Migration
Preparation of a rollout and data migration plan User documentation Central and decentral trainings Support of the group wide rollout activities according to the rollout plan	Examples: Definition of a rollout plan in four stages according to countries Definition of the migration procedure during the 1-month-duration of the rollout Establishment of a group hotline and support center during the rollout process

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