IT budgets in Treasury – costs are not the only issue to consider

IT budgets in Treasury

How high are IT costs in Treasury - both in absolute terms and in comparison with other companies - and how can they be reduced? Nowadays only a few Treasurers can give a comprehensive answer to these simple and at once complex issues. The more Treasury is involved in the entire system landscape of a company and interfaces exist between departments and companies, the more difficult it is to directly allocate and control individual cost pools.

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It is relatively easy to determine the license and maintenance costs of applications solely used in Treasury. However, can directly controllable cost types even be identified in a mix comprising overhead allocations and cost transfers for PCs, printers, networks, processing centers and ERP systems? And how does one deal with opportunity costs which arise as a result of inefficient system use in Treasury, if for example interfaces between Treasury and Accounting do not function in an optimal way or reporting involves a high degree of manual effort?

In the majority of cases, costs are also the determining factor for Treasury in deciding for or against specific projects. A transparent overview of existing costs is thus always the basis for savings forecasts, even if the path to this objective is often fraught with difficulty.

What, however, can Treasury ultimately do to scale back IT costs? Treasury is merely at the end of the IT chain and is unable to influence decisions concerning the strategic framework of IT operations such as the selection of an outsourcing partner or hardware equipment. The answer, instead, lies in the framework which Treasury defines for the alignment of IT and the associated operating costs:

  • in organizational terms, towards a central management of risks and payment processes in a central Treasury management system. This inevitably results in cost savings for separate tools in local units.
  • in process terms, towards automated processes using aligned systems without cost-intensive activities in the user department and in IT operations. In this case, Treasury is responsible for identifying existing vulnerabilities or translating industry-specific innovations into concrete recommendations for action.
  • in aligning the IT landscape, Treasury must, as custodian of the authority to issue guidelines, draw up the road map regarding the degree of heterogeneity permissible in the system architecture and the conditions under which a central Treasury management system or multiple partial solutions operate in a hybrid architecture. A reduction in the number of systems and tools, interfaces and information to be integrated (reports, payment transaction formats etc.) will reflect directly in operating costs.

However, savings and corresponding cost effects are only one side of the coin. What, if any, are the benefits? In the light of increasing expenses in the form of financial and personnel resources allocated to the implementation of changes or enhancements of Treasury system landscapes, Treasury must increasingly determine whether the introduction of a new Treasury management system or the establishment of an in-house bank with corresponding technological infrastructure (e.g. SWIFT-based bank communication) has sufficient income and profit potential.

The difficulty the Treasurer has in answering this question stems from the fact that the use of technology does not automatically lead to cost savings in its environment; the indirect effects of IT also need to be examined:

  • How does IT support the various Treasury processes and how are technical requirements presented? Is there a large number of manual tasks and workarounds or do interfaces function without difficulty and are individual activities more or less implemented automatically (e.g. in reporting or in the processing of financial transactions via electronic confirmation exchange)? Process speed is also a factor to consider here.
  • Do relevant systems and components operate at the levels of availability and performance preferred by Treasury? In this case, IT security issues are a primary consideration for the operator. If the operation of a global payment factory is not ensured round the clock, foreign subsidiaries will be unable to receive support in the event of problems. The value of IT solutions in Treasury should be appreciated at all times, not merely when systems fail.
  • To what extent does IT fulfill its role as Enabler of technical innovations? In a global Treasury organization, in particular, the manner in which collaboration takes place with local units depends, to a large extent, on the technological platform. Global currency management can only be implemented efficiently when systems allow risks in international group companies to be identified and exposures consolidated. An innovation issue such as the central management of bank accounts (EBAM) also requires adequate tool and workflow support.

Having regard to these factors, priorities and decisions concerning IT investments in and for Treasury can inevitably then be taken based on a point of view that goes beyond the implementation of mandatory regulatory requirements or a simple analysis of costs and potential income. As part of the ongoing struggle over restrictive and tight IT budgets, Treasury promotes its own interests by identifying potential innovations and gathers valid arguments in support of its plans.

Author: Michael Baum, Senior Manager,

© 2016 KPMG AG Wirtschaftsprüfungsgesellschaft, ein Mitglied des KPMG-Netzwerks unabhängiger Mitgliedsfirmen, die KPMG International Cooperative (“KPMG International”), einer juristischen Person schweizerischen Rechts, angeschlossen sind. Alle Rechte vorbehalten.

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