Feel free to join our LinkedIn Groups for dialog and discussion. The Treasury & Risk Technology and Working Capital & Supply Chain Finance groups are most pertinent.
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A recent press release from IT2 (the treasury workstation vendor – TWS) provides some base information about IT2’s electronic bank account management (eBAM) offering. Press releases are, well, black text on a white background. We found a discussion to prove much more illuminating about what they have done and why it matters to Treasury groups. Here are the main points and what we think it means:
- Supports eBAM Standards Now. Of course they support the messages. However, their solution is ready and released as the v7.0 Feature Pack. This feature pack made it out the door at the end of Q2 this year. Some banks are ready. As of today, only test messages have been sent across the network. However, that will change soon. And, IT2 is ready.
- Process Mapping. IT2 has been known for their process maps. This tools shows the logical flow of data or transactions through the system in flow chart format. It doubles as a sort of self-documenting tool. The eBAM offering takes advantage of these maps as you can see from one of their provided screenshots.
- Account Audit -Integrated Processes. Rare but not unique in the world of TWS and other treasury automation, IT2 has ensured additional value in the area of bank account management (notice we didn’t say ebam – since there isn’t a SWIFT message for this). When accounts come into their system through balance reporting or other means a comparison against the account table is made. If the account is ‘new’ or not found in the existing database, IT2 takes that information and creates an alert (Request to Acknowledge). This allows for some automated discovery of accounts that are reported on by your banks but weren’t entered into your bank account inventory. This is a highly useful process/control support. If you don’t know all of your accounts…how can you know your total exposure…if you don’t know your total exposure how can….
- Transition Time -SWIFT or NOT. Years in the future we’ll tell our children (or grandchildren) about how we used to change signers and close bank accounts by sending paper documents. ‘Stop kidding grandpa’ they’ll say ‘who would do that’. Well, right now we are beginning the transition phase that will take years. Soon the first live eBAM transaction will occur. However, adoption will take some time. At present, there are a few handfuls of banks who have been testing the messages (i.e. Bank of America, BNP Paribas, BNY Mellon, Citi, Deutsche Bank, HSBC, JPMorgan, Standard Chartered…). And, not every company is a member of SWIFT yet. Accordingly, IT2 is able to send eBAM xml messages directly to banks in certain instances (for example, if the company is not yet a member of SWIFT but their bank can handle the files/process). Additionally, they will support the paper process for banks that are…well…waiting to see if this automation thing really catches on.
- Support Internal Requests. Since IT2 is client server software, they added their thin client version (IT2 NET) some years back for wire requests, forecasting entry, etc. This allows the system to achieve better reach given the challenges of client server technology. They added the internal process steps to IT2 NET for 1. requesting bank accounts, 2. approving (locally) the request, and 3. support of local reporting. This shows solid understanding of the base business process of bank account management – and not just the part of the process between the company and the bank.
IT2 ebam management dashboard
In summary, a well-thought out offering delivered at an opportune time. Again, we see tremendous and growing interest in eBAM.
-c
Treasury: Situational Awareness – Lehman and San Mateo County
February 24, 2010’s WallStreet Journal ran an article entitled Lehman’s Ghost Haunts California. This article is well worth a good and critical read. Emphasis on the critical. It covers, essentially, one side of the story about San Mateo County and their loss of $155mm (reported by them) from the collapse of Lehman Brothers. We’ll be more frank in this blog entry even if it makes people feel uncomfortable.
The article states that “San Mateo’s board of supervisors ordered an independent review of the way the county investment fund was run, but found no wrongdoing.” And, a little later “San Mateo’s treasurer had invested in highly rated securities and put no more than 10% of the fund in any single issuer.” Okay, no laws were broken. Nobody violated the written investment policy as written. However, this fails to tell all of the key points about what was going on at the time. I would like to see the reporter dig up some useful information to tell us – such as:
“If there are warning signs all over the place about ice on the road - and snow is falling, anyone who doesn’t slow down to adjust for conditions is responsible for flying off the road. Claiming they didn’t break the posted speed limit isn’t going to be a good argument – especially if they were accelerating into the corner when they hit the ice.”
The article highlights a push to try to secure bailout funds for municipalities that held Lehman paper and makes comparisons to the bank bailout. While we can all argue about appropriateness of the ‘voluntary’ capital infusions to banks, there are some important differences that are not noted:
Lessons Re-Learned:
If anyone thinks that reducing treasury staff levels or eliminating funding for treasury systems and tools is a good idea, they may need some shock therapy or recent (and old) history lessons. However, no system can completely prevent operator error.