TREASURY UPDATE

As if there wasn’t enough interest in electronic bank account management (eBAM) already! SunGard’s AvantGard business has been working on their own de novo development of an eBAM offering and it seems to us that it will be ready for the market in the early part of 2011.

There are a few interesting and a few parochial points about their offering that we’ll note. Please also note that they shared a few of the simple ‘form screenshots’ that we can reproduce here. They wouldn’t share any workflow images at this time, but, maybe we can coax those out of them at a later date closer to the launch.

• eBAM System
  • Supports all 15 XML eBAM messages
  • Able to send and receive these messages by leveraging their communication hub (– called Echos)  (when the banks are ready)
  • Output can be in XML or in a Custom PDF (for the banks that aren’t ready, or who won’t be ready for some time)
  • Is planned to work with all other TWS/TMS systems –this is in line with recent announcements at client summits regarding SunGard’s AvantGard development strategy whereby web based services such as eBAM will be made available in the “cloud” and can be accessed from any of their solutions (treasury and payments)
  • Financial messaging is managed between the treasury and payments solutions via the Echos platform which is a communication hub – the hub includes access to the SunGard SWIFT Service Bureau
• “Center of The Chessboard” Strategy
  • This application has been built from the ground up on their Infinity platform. While this is not the first SunGard application to be built from the ground up on this new platform, it is the first AvantGard application that enjoys this claim. (This is making good on their promises and overall strategy to occupy the “center of the chessboard” from a process ownership and technology basis).
  • Workflow management is part of base, out of the box offering. Configuration of workflows will be possible and this further advances their business process strategy and software/service delivery engine.
  

  Sungard eBAM Account Details (images used by permission)

• Acquisitions to Innovation?
  • Sungard Avantgard has long been known for acquiring firms and bringing them into their fold and them supporting them for…well…forever. We haven’t heard anyone accuse them of being innovators. However, with the release of Treasury XE (their cash TWS) and the pending release of eBAM, they seem to want to leverage some of their new technology tools and make some new toys for treasurers. But, let’s see a few more products delivered before we get ahead of ourselves.

While another eBAM offering is certainly noteworthy and interesting news, that is, in our opinion, the minor story here. We think that five years or so, the fact that SunGard began delivering on their new “center of the chessboard” strategy will prove to be the bigger and more important story.

Sungard eBAM Account List

-c

See related blog entries: Weiland Acquired, Wallstreet Systems Acquires Speranza

July 26, 2010 brought with it the announcement that Weiland Financial Group has been acquired in friendly transaction by OpenSolutions.  See press releases for more information. This brings the well-respected Weiland brand into a much larger organization at an opportune time.  OpenSolutions has acquired one of the premier names in treasury technology. Our analysis is that the acquisition/transaction makes tremendous sense in a number of ways for various parties interested in the transaction:

Weiland Financial Group

• Provides additional funding and resources of a larger organization as they grow the Account Analysis and Bank Account Management (eBAM) parts of their business. This is good timing – right when more investment is needed to further drive good growth as interest in (particularly) eBAM is accelerating.
• Strengthens the long-term plan for the firm as it appears to have well-positioned both Steve/Pat and their employees for long term growth and expansion before any questions about ‘what are they going to do with the company’ could create distraction.

OpenSolution

• Moves them into an increasingly stronger position in the corporate treasury space by acquiring a highly-respected firm who covers the Bank Billing (Account Analysis) and electronic Bank Account Management (eBAM).
• Captures a number of  intellectual leaders in the treasury technology space just as the business is heating up.

It is quite interesting that now the two main eBAM providers have been acquired within a three month period.  See TWS: Acquisition: Wallstreet Acquires Speranza for the last eBAM acquisition. This was not an overpopulated field and firms are rushing to develop offerings that can leverage the SWIFT messages that support eBAM.

-caj

Wallstreet Systems announced today that they have acquired City Financials. The stated reason for this acquisition is that it fills in the Treasury Workstation (TWS) or Treasury Management Systems (TMS) gap they have between Wallstreet Treasury (WST) and Wallstreet Suite (WSS).  See some of the news postings:

Finextra

Forbes

Bob’s Guide

Readers  who have seen our classification of the TWS landscape note that WST falls into our “Cash TWS” vertical and that WSS sits in the rightmost vertical called “Enterprise TWS”. The middle vertical in our model is called “Cash and Risk TWS”. Sitting in this space most comfortably are Sungard’s Avantgard (AG) Integrity and IT2’s offering.  CityFinancials falls into this category as well. Their stated 50-75 clients are predominately located in Europe with some initial success in penetrating the North American market lately.

It will be quite interesting to hear and report:

• How their new plans fit with their previous ‘center of the chessboard’ strategy they were pursuing with WST.
• About their ability and plans to market the three TWS offerings and the trading-related platforms. How will they ensure the focus isn’t on the largest systems (WSS and trading-related)?
• It would be particularly good to hear the development strategies for WST and CityFinancials (to say nothing of the integration plans).

caj

Embarking on the upgrade from Vista to Windows 7 today. Having enjoyed Vista’s capabilities and even performance (with the service packs) I am looking forward to experiencing Windows 7. It seems that even those who didn’t enjoy Vista like Windows 7 quite well.

I am no software tester, but thought it would be useful to document the upgrade on my live laptop.

-C

Misconceptions About Hedging – One would think that after many years’ worth of ‘experience’ with hedging that we would have the subject down pat; that we would no longer have any misconceptions about it. We landed on the moon in ’69, yet we still have various misunderstandings when it comes to hedging. Confusion about Global Warming I can understand, it’s new (ok, we’ve been talking about it for a long time, but to recent converts – it appears new, or even suspect). But hedging? Some very smart people have been writing about it and/or doing it for a very long time. There are at least two truisms in life that I believe: “…nothing can be said to be certain except death and taxes” (B. Franklin), and effective risk management, which may involve hedging, enhances a firm’s value. Nevertheless, the subject remains misunderstood. Or, as with any subject, there are different opinions on it. Over the next several BLOG posts I will raise a particular misconception about hedging and provide an alternative viewpoint. If you have an agreeable or a counter viewpoint, then feel free to respond either on the post or email me directly at DStowe@StrategicTreasurer.com .

This series of blog entries covers six commons misconceptions about hedging. Each BLOG post raises a particular misconception about hedging and provides an alternative viewpoint. If you have an agreeable or a counter viewpoint, then feel free to respond either on the post or email me directly at DStowe@StrategicTreasurer.com .

Hedging Misconception #1: Hedging Eliminates Cashflow Volatility

Hedging Misconception #2: Risk is Absolute

Hedging Misconception #3: Risk Management Equals Hedging

Hedging Misconception #4: It’s Important for My Hedges to Make Money

Hedging Misconception #5: Derivatives = Speculation

Hedging Misconception #6: Hedging Requires Crunching

Chris Skinner posted a blog entry (http://thefinanser.co.uk/fsclub/2009/12/realtime-spells-the-end-of-the-treasurer.html) meant to provoke dialog and response. At least, I hope he wasn't being serious with his main thesis. The main point is that real-time information will essentially do away with the Treasurer role. This is, on its face, a rather foolish assertion. 

Much of automation (STP, real-time, many other buzz-words) help carry out the financial brain stem activity. This is a great area for automation (wisely chosen, properly implemented and continually optimized) to handle.

So, if you have a few minutes to kill- read his blog entry and the responses.

Our quickly typed response (with a few modifications from the response):

I appreciate your being provocative with the phrasing of what is a treasurer to do after 'real-time' happens. However, you miss the strategic and tactical aspects of this position which is where the real value resides. And, when you talk about how Treasury groups can do the job with a 1/10th of the staff they have now, that seems to indicate the need for some remedial mathematics. How many treasury groups have large staffs? Most are dangerously thin.

People in charge of treasury operations care about gathering data, keying it in, reviewing trades, calling for trades, reconciling activity – etc. Work that needs to be done – but work than can largely be automated. These people have the hardest time letting go. However, many realize the mission of treasury and know that they most protect the organization's assets and continually improve efficiency – even if it hurts their immediate position or number of direct reports.

Why Treasurer's won't go away (if you were serious):
1. Debt and Capital Markets Management. Providing the proper structure for the organization and preparing it for the next 2, 3 or even 5 years.  Treasurers look ahead.
2. Visibility to Liquidity and threats to that liquidity. Treasurers and their team need to look farther ahead than this morning. Visibility requires treasury optics – tools to help you see what you need in the manner needed. Intelligence must be applied to the models and to the outlook to ensure this works well.
3. Resiliency. If the world was perfect, you could hire consultants to make all of the projections, secure proper funding, and even create all of the accounting entries going out 10 years. However, this won't let you manage relationships well – which is a crucial component for organizations that are resilient. And, the world isn't perfect.  Models we use for risk management aren't perfect. So Treasurers have to prepare for events that can happen – and for those they can't predict. This requires preparations that allow for rapid decisions based on good information. It also requires Treasurers and their teams to be situationally aware.
4. Brain stem versus cerebral cortex. Treasurer and their groups need to act as the financial cerebral cortex managing all higher level functions. The automation and real-time activity is like the brain stem – controlling heart beat, breathing – the basic 'operating system'.

5. Business Partner/Internal Consulting. Acting as an agent of change. Providing an intellectual and financial discipline to business decisions. Without this…huge problems.

6. Financial Risk Management. Real-time doesn't eliminate most financial risks. A clear need for treasurers and their staff remain.

I could go on and on and on – but, since the point has been adequately made, we'll stop.

However, your point about real time and the use of technology WILL be able to eliminate the vast majority (all?) of treasury brain stem activity – over the next five years. Treasurer's that focus on those activities alone – need to get real or they will be obviated by either real-time or by a solar powered calculator. No so for Strategic Treasurers.

See our blog entries at http://st.typepad.com/ and feel free to sign up for our Treasury Update newsletter at our website www.strategictreasurer.com

Craig A. Jeffery
Managing Partner
Strategic Treasurer

Just back from the AFP and debriefing with our team about the conference events and tech tidbits we picked up. Seeing the City of Los Angeles win both the Strategy category and the Overall Pinnacle Award (the first government entity to do so) was impressive.

Here are five select technology tidbits worth mentioning. We may expand on these later, but this list will do for now:

• 1. IDENTRUST now offers a Bank Account Management solution.
• 2. SWIFT hit 512 Corporate users in their SCORE offering at the end of the 3rd quarter.
• 3. CITY FINANCIALS (TWS vendor) exhibited at the AFP and has a US based sales person now. While their total customer base is still under 100, it is interesting to see another workstation vendor enter the US market.
• 4. CALYPSO is now offering a TWS that they just acquired. Four Silicon Valley customers use this offering. This is another new entrant.
• 5. SUNGARD has their TWS SaaS offering fully marketed now and has renamed it (now that my book that was just published is out) from AvantGard Treasury On Demand to AvantGard Treasury XE. The XE stands for express edition.

There were many other tidbits as well as major strategy shifts gleaned from discussions. But, this is all I'll blog on from my BlackBerry.

-caj

In her video interview with GTNews (link below) on 16 September, Marilyn Spearing from Deutsche Bank asked the question, “What will it take to move the acceptance of SWIFT corporate access from the current 500-or-so corporates to the 20,000 corporates seen as the addressable market?”  Additionally she asked, “What is the value add that is going to make this attractive as SWIFT moves from the Multi-National to the Mid-Cap space?”

See the interview here http://www.gtnews.com/feature/378.cfm

Here are some of our views. Add your thoughts to the comments.

1. Untangle the mess of permissions and paperwork.

-Provide clear guidance, by bank, about the process, paperwork and time required to get a corporate live for SWIFT.

-Allow the banks to post the documents required for activation of SWIFT services on the SWIFT website.

1. Continue to educate corporate treasurers.

- Provide clearer guidance toward qualified consultants who can enable the treasury staff to navigate the technical requirements and middleware required to make SWIFT interact with ERP and Treasury systems.

-Add granularity to the onboarding steps and timeline.  Despite the advances in the SWIFT website and message, clarification is still needed for the corporate treasurer to be able to understand what steps to take next if they think their company is a good fit for SWIFT.

1. Create a demo or video.

- Show how a corporate might use SWIFT Alliance Lite.  What does the interface look like?  How does it interact with other software? Until now the only picture we can see is the USB memory stick.  The concept is exciting, but the marketing
doesn’t sell.

1. Convince banks to prefer SWIFT connectivity over other channels.

- Independently, banks continue to say SWIFT is a collaborative vice a competitive space.  Aside from announcements, we just haven’t seen this practically applied.

1. Develop an onboard team concept.

-When a corporate customer comes to SWIFT, or the bank, asking for SWIFT connectivity, the bank representative, SWIFT representative, and client would all discuss the needs and expectations of the client together.

-This process should be repeatable with the same SWIFT representative across each bank that the client wants to
connect to. If SWIFT were leading this, it would be much easier for the client to find the right contact at the bank.

We understand SWIFT Corporate Access is not for every company, but, in our opinion, it should move more rapidly into the larger market. These concepts could certainly help the process. What ideas do you have to increase the use of this great pipe?

-rdt