How does your treasury operating model compare?

Something everyone would like to know but not divulge in public, is how their treasury operating model compares with everyone else. Are STP rates better than average? Are costs below average? How do our error rates compare? What is the asset class strength? How proven is the SaaS?

A long time ago ISDA used to publish an operations benchmark report to bring some light into the OTC derivatives space. Eventually this came to and end, as the data was hard to collect, and picking the right metrics wasn’t easy.

In which case benchmarks are a largely private activity. We know that some peers and gather and provide benchmark data, some of which is useful when we carry out our own benchmarking reports. We also know from our long experience in carrying out treasury operating model reviews how each firm compares. It can be flaky data and we need to loop back.

Another aspect of benchmarking is the capabilities of the (BPO) service providers. Each of them provides either a software package or a SaaS based service which firms use to process some or all of their back office. We come from the leading front to back service providers, it’s in our DNA, we have forged strong relationships and challenge managed independently.

When we issue an RFP, we are looking for a great deal of information beyond just functions and features. We ask for information on their client base in each region, the underlying technology they use, digital footprint, their data strategy, their research and development plans, M&A, cashflow and their staff turnover rate, diversity rations and their ESG ratings. Anyone who has worked with us, knows we get under the hood!.

Armed with all this knowledge, we provide our clients with visuals and data which show how their current operating model compares with other leading solution providers. These charts begin to illustrate whether a wholesale movement of business to a new provider is going to be a major gain, or only a optimise move. We provide background on the providers based on what we know from our network and ecosystem

As we consider the future operating systems, we also provide estimates of capacity. We analyse the requirement of the target operating model in multiple dimensions. We look at pre config work flows by asset class, and within those the functions in the trade lifecycle. We look at the way each market is changing. We take into account the strategic goals and mission statement of the client. And we look at the benefits of transforming their operating model, to threats and error rates.

Taking that all into account we can construct a matrix of future capacity scenarios based on forecasts, the market and infrastructure investments. This gives our client a valuable insight into how to plan for future staff numbers, and the trade-off between system investments, and capacity growth.

One dimension of investment is regulatory mandatory change. We know that the US is aiming to move to T+1 settlement in 2024, and we can foresee that crypto assets are bound to attract stronger regulation. Both these things will drive short term capacity, and maybe a long-term benefit if crypto becomes a lower risk asset

As we develop the benchmark view and gather information on service providers, we always map this back to the priority scope of the client. There is no point in planning a revolution in their infrastructure if it isn’t needed.

We keep our advice practical and work closely with clients to shine a laser light on the right way forward for their investment business. We do not follow the pack.

Photo by Dietmar Becker on Unsplash