Establishing a Need for a Treasury Management System

Building the business case for new treasury technology is a tall order, even if doing so can greatly improve cash and liquidity management, FX risk management, working capital management and more. In times of economic uncertainty and budget tightening, it’s even more challenging. But treasurers can have greater success if they know how to position a treasury solution as a necessity.

Lee-Ann Perkins, assistant treasurer for Specialized Bicycle Components, noted that throughout her career, she has been successful pitching a TMS implementation to a CFO at times when various external factors were in her favor. If the economy was good or the company was performing consistently well, then getting buy-in for treasury technology can be a much easier sell.

Fred Schacknies, treasurer for TechnipFMC, noted that treasurers generally “don’t do a great job” of talking TMS implementations to the CFO. Schacknies speaks from extensive experience, having pitched TMS implementations to four CFOs at four different companies. In his estimation, convincing the CFO generally boils down to showing them what finance and treasury currently cannot do without such a treasury system. “Either it’s helping a critical transformation or it’s not,” he said.

For example, treasury at TechnipFMC manages “a material foreign exchange portfolio,” which is challenging to do with legacy technology, Schacknies explained. While treasury also is well staffed in comparison to the size of the company, it could run more efficiently if certain tasks we automated. So, gaining buy-in from the CFO on a treasury system implementation wasn’t difficult because Schacknies was able to show that it supported key strategic and organizational imperatives.

According to Chris Mitchell, treasury director, technology and operations for Koch Industries, it can also help to provide the CFO with more of a long-term vision rather than just immediate process improvements. When the treasury leadership team presented the case for a TMS implementation to the CFO, they first discussed the benefits of automation. It didn’t move the needle. But when they presented their overall vision and strategy of a treasury department across the world working closer together, the CFO was able to see how a TMS could help. “We needed one single application that could be accessed across the entire globe by a core group of treasury individuals to support our businesses,” he said.

Treasury can also capitalize on timing. Petar Tomicic, treasury manager for Beam Suntory, explained that the 2014 acquisition of Beam Inc. by Suntory created a “perfect storm” for a TMS implementation. The treasury department knew that the legacy system it was using was outdated. After the acquisition, it became immediately clear that the system didn’t have the capacity to handle the growth that the company was expected to experience. So, for Beam Suntory’s treasury, building a business case with the CFO wasn’t difficult because it was absolutely necessary due to the changes the company was experiencing.

Finding Allies Outside of Treasury

It also helps to have allies outside of treasury to support your case. A TMS implementation affects more than just treasury, and it can help immensely if other departments recognize this fact.

Stephen Kincaid, vice president and assistant treasurer for Walker & Dunlop, explained that in 2016, his controller was the one who first suggested investing in a TMS. This occurred right before AFP’s annual conference, which provided the perfect opportunity to meet with various TMS providers.

After speaking with several TMS providers at the conference and ultimately selecting Kyriba, Kincaid and his controller needed approval from the CFO. Fortunately, the CFO agreed because they were able to carefully illustrate why Walker & Dunlop needed to adopt a treasury system. “We had over 1,000 bank accounts with multiple banks, and didn’t have an easy, efficient way to track our cash positioning in real-time,” he said. “Ultimately, my controller was easily able to convince the CFO of the many benefits that a TMS could provide to our organization.”

When Lee-Ann Perkins join Specialized in 2021, she faced a unique challenge. Treasury had already adopted Kyriba, but the project had stalled prior to completing the implementation across the company’s locations around the world. “So, my job was to restart a Kyriba implementation for the rest of the company—in 80 countries,” she said.

Finishing the implementation was critical for Perkins to achieve her overall goals of automating and maturing the treasury department. While Specialized is a large, global company, the treasury team is small. Maintaining continuity—which includes cash visibility and protecting the company’s financial assets—is much easier to do with a treasury solution. But completing the project would require more than just getting the treasury team on board, as well as producing hard numbers.

“The sell to the CFO was to get resources from the financial side and the human capital side to ensure we could keep the implementation going,” she said. “It wasn’t what I would call an easy sell. It required conversations, quantitative metrics and qualitative metrics, to ensure that there was buy-in from the end-users. Because at the end of the day, those people running the system need to also know that they can use it in their particular jobs as well.”

Making the Case for a TMS

There are a multitude of factors that can contribute to treasury either getting the approval for treasury software implementation or getting shot down. With a possible recession looming and many companies tightening their purse strings, 2023 may be an exceptionally challenging year for treasury departments to get buy-in for a TMS. Treasury must establish the need for a system—not only for itself but across other departments.

Often tasked with doing more with less, treasury has consistently risen to the challenge. But there comes a point where investments need to be made for treasury and the overall business to continue to perform at a high level. If treasury can make that case, then getting buy-in might not be a tall order after all.

The Threat of Impersonation

Payments fraud in 2021 was as bad, if not worse, than the year before, according to the 2022 AFP Payments Fraud and Control Survey. But even though business email compromise (BEC) scams dropped substantially last year, many organizations are still falling prey to them and incurring significant losses.

At the heart of BEC scams and more recent developments like deepfake fraud is impersonation. Cybercriminals use social engineering tactics to develop profiles on company employees or routine vendors, which they then impersonate to dupe unsuspecting people into making critical mistakes.

To identify an impersonator, it’s helpful to know the telltale signs. More than likely, the payment request will be urgent and will attempt to exploit unique circumstances, such as a specific time when employees are out of the office. Additionally, if your organization is making a lot of payments to contractors for a project, fraudsters might attempt to exploit that.

For example, Philabundance, a Philadelphia food bank lost about $1 million due to a successful BEC scam. The food bank was in the process of building a $12 million community kitchen. The accounts payment (AP) team received an invoice from what they thought was a construction company supplier and made a payment.

The Government of Carrabus County, N.C., also found itself victimized by a vendor BEC scam. The county intended to send money to a contractor it had been working with for the construction of a new high school. Through a series of emails that began in late 2018, the fraudsters made requests to update bank information. The county didn’t do its due diligence and ultimately sent more than $2.5 million to the fraudulent account. While over $776,000 was ultimately recovered, about $1.7 million remains unaccounted for.

Common Fraud Myths

When it comes to payments fraud, many treasury and finance departments still get lulled into thinking they are more protected than they are. Organizations may assume that their procedures are infallible or that any lost funds will be reimbursed, but they quickly get a wake-up call when a successful attack happens. The following myths are common.

“We have an approval process in place.” Even the companies with the strictest policies in place can still have a breakdown in processes. Employee ID/password combinations can be stolen. Regional treasury/shared service centers may require fewer numbers of approvals due to limited in-country staff. And companies with multiple ERP systems might have different approval processes—a scenario that is ripe for fraud.

“My bank will cover me.” There is no obligation for a bank to cover any client for payments fraud, unless the bank itself has been breached, like in a bank employee scheme. The bank may still reimburse corporate clients on a case-by-case basis, but don’t bet on it.

“We have cyber insurance.” Many companies assume that if they purchase cyber insurance, that they are covered in the event of a loss. However, if an organization can’t prove that it took all the right steps to protect itself, it’s very likely that the insurance policy won’t cover the loss. Many plans don’t cover BEC scams, for example, because they involve an employee making an error. There have been several legal cases where insurance firms have refused payment and the courts sided with the insurers. Furthermore, even if cyber insurance does agree to pay out, you might still have to pay a high deductible. For some plans, that cost can be tens of thousands of dollars.

What Can You Do?

Fortunately, there are many ways to protect your payments and your data. The following tips can help.

Embrace the cloud. Organizations should embrace cloud technology to secure payments and systems. IT teams know that payments data and connectivity are more secure when hosted externally. However, not all cloud solutions are alike. Solutions like Kyriba Enterprise Security ensure that treasury, payments, and risk data meet internal security policies and international security requirements while providing 24/7, global support.

Align all departments. Your internal IT department, as well as any key areas that touch payment processing areas such as treasury, accounts payable, shared services, etc. all should be aligned with your security policies. With more and more companies allowing remote work, companies must ensure that all employees are using effective protections such as strong passwords, policy controls, multifactor authentication, IP filtering, single sign-on and data encryption.

Automate payment processes and standardize controls. Automation allows organizations to standardize the payment journey from the initial request to the receipt of the payment. Risk lies in the exceptions to a standardized process, i.e., payments made outside of this typical format that provide fraudsters with opportunities. Again, these are usually one-time, urgent payment requests that can come in for things like mergers and acquisitions, legal settlements, emergency payroll, etc.

Enable real-time screening, alerts, and notifications. The rise of same-day and real-time payment systems has increased the need for real-time responses to fraud attempts. Modern fraud detection software uses artificial intelligence (AI) and machine learning to screen payments against historical payment data, pinpointing any anomalies.

Implement fraud prevention workflows. Modern payments fraud modules support fully automated, end-to-end workflows for the resolution of outstanding suspicious payments. Users can determine how each detected payment should be managed, enforcing the separation of duties between the initiator, approver, and reviewer of a detected payment.

Know your vendors. Vendors can be a major liability for your company. In some cases, vendors are granted access to their customer’s network credentials. If that vendor’s security protocols are lacking, they can become an unknowing backdoor into that customer’s systems. This is what happened in the infamous Target breach in 2013. Therefore, it is imperative to have a detailed information security questionnaire that can provide confidence in the governance and risk programs that a vendor has in place. Additionally, with vendor BEC scams proliferating, organizations need to make sure that requests for payment instruction changes are verified directly with the vendor before any transactions are completed.

Safeguarding Your Payments

To mitigate the risk and safeguard your payments, organizations must have a unified solution that connects ERPs, internal and external systems that allows for a secure, end-to-end payment journey. Furthermore, when exceptions occur, protocols can’t be abandoned no matter how urgent the request. Any departments that touch payments need to understand that one slip up can be catastrophic, not only leading to loss of funds, loss of job and reputational risk for the whole organization.

Kyriba is here to help you protect your organization against payments fraud. Learn more here.