Exploring the Shift: From ‘Best of Breed’ to ‘Integrated’ Treasury Management Systems and vice versa

March 2024
3 min read

Is the grass always greener on the other side? Observing a tendency to change from “best of breed treasury management systems” to best “integrated treasury management systems” and vice versa.

In large organizations, the tendency is to select large scale ERP systems to support as much of the organization's business processes within this system. This is a goal that is driven typically by the IT department as this approach reduces the number of different technologies and minimizes the integration between systems. Such a streamlined and simplified system architecture looks to mitigate risk by reducing the potential points of failure and total cost of ownership.

Over the years the treasury department has at times chosen to rather deploy “best of breed” treasury management systems and integrate this separate system to the ERP system. The treasury business processes and therefore systems also come with some significant integration points in terms of trading platforms, market data and bank integration for tasks such as trade confirmations, payments, bank statements and payment monitoring messaging.

The IT department may view this integration complexity as an opportunity for simplification if the ERP systems are able to provide acceptable treasury and risk management functionalities. Especially if some of the integrations that the treasury requires does overlap with the needs of the rest of the business – i.e. payments, bank statements and market data.

Meanwhile, the treasury department will want to ensure that they have as much straight through processing and automation as possible with robust integration. Since their high value transactions are time sensitive, a breakdown in processing would result in negative transactional cost implications with their bank counterparts.

Deciphering Treasury System Selection: Below the Surface 

The decision-making process for selecting a system for treasury operations is complex and involves various factors. Some are very much driven by unique financial business risks, leading to a functional based decision process. However, there are often underlying organizational challenges that play a far more significant role in this process than you would expect. Some challenges stem from behavioral dimensions like the desire for autonomy and control from the treasury. While others are based on an age-old perception that the “grass is greener on the other side” – meaning the current system frustrations result in a preference to move away from current systems.

An added and lesser appreciated perspective is that most organizations tend to mainly focus on technical upgrades but not often functional upgrades on systems that are implemented.  Meaning that existing systems tend to resemble the version of the system based on when the original implementation took place. This will also lead to a comparison of the current (older version) system against the competing offerings latest and greatest.

Another key observation is that with implementing integrated TMS solutions like the SAP TRM solution in the context of the same ERP environment, the requirements can become more extensive as the possibilities for automating more with all source information increase. Consider for example the FX hedging processes where the source exposure information is readily available and potential to access and rebalance hedge positions becomes more dynamic.

Closing thoughts

There is no single right answer to this question for all cases. However, it is important to ensure that the process you follow in making this decision is sound, informed and fair. Involving an external specialist with experience in navigating such decisions and exposure to various offerings is invaluable.

To support these activities, Zanders has also built solutions to make the process as easy as it can possibly be, including a cloud-based system selection tool.

Moreover for longer term satisfaction, enabling the evolution of the current treasury system (be it best of breed or integrated) is essential. The system should evolve with time and not remain locked into its origin based on the original implementation. Here engaging with a specialist partner with the right expertise to support the treasury and IT organizations is key. This can improve the experience of the system and this increased satisfaction can ensure decision making is not driven or led by negativity.

In support of this area Zanders has a dedicated service called TTS which can come alongside your existing IT support organization and inject the necessary skill and insight to enable incremental improvements alongside improved resolution timeframes for day-to-day systems issues.

For more information about out Treasury Technology Service, reach out to Warren Epstein.

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