Author: Nidhi Sarin, Linkedin Profile

Author: Mehmet Arslan, Linkedin Profile

Treasury Management Systems

One question which is yet to be answered by the previous article, is what tool does treasury use, which allows them to effectively execute their roles? The treasury department will implement a Treasury Management System (TMS) which comes in several differing levels of sophistications and features depending on the size and needs of the company. Examples of TMS’s include Calypso, TM5 and Wallstreet. The diagram that follows, illustrates the main elements of a TMS.


The next section will describe the elements of the TMS’s functionality that are required to run a treasury department. In this diagram the TMS is reduced to the minimum, essentially the operational aspects. Some TMS vendors would provide some level of the blotter, Reference Data and Deal entry functionality integrated into one package.


The Blotter

The blotter is a fundamental device that treasury uses in order to get a real time feel for the actual cash flow in a large corporation. For example, say AgriGrow has bank accounts 100 countries. 20 of these accounts want to trade in dollar for various reasons. Due to this fact there are going to be 20 dollar balances for future scheduled payments. What the blotter will allow treasury to do is add up all of those balances along with the company’s regularly scheduled payments and consolidates them into one palatable graph of group dollar balances over time. Treasury will use the blotter constantly to make the best-informed decisions possible for the company on where to move dollar funds within the group.


Deal Entry System

The deal entry system takes a feed of market quotes, typically Reuters and Bloomberg, and with this information aggregates rates from a number of suppliers. In the case of AgriGrow, the human in the diagram is monitoring the price of rice, and based off of the information will book a contract (In this case a rice forward contract). Once someone in the treasury department strikes a deal it will be booked into the TMS for AgriGrow’s own records and relays messages to Bloomberg and to the counterparty’s books.



Reference Data

Typically, there will be a lot of reference data to make a contract work. Once a deal has been struck the static data, which is comprised of the details of the counterparty, will be fed into the TMS which becomes the master record of all contracts made by Treasury. Due to the fact that we’re talking quite high values, within the treasury department there will be one group of people who will maintain the reference data and a separate group of people who strike deals. The people who maintain the static data can’t strike deals and visa versa. The reason for this is to prevent collusions and fraud.


General ledger

Typically, you don’t put contract details in the General Ledger, but you will have the value of all the company’s contracts. If future contracts are involved, they will change in value over time, therefore the company’s balance sheet will have to reflect a profit or loss on them. The TMS will evaluate the value of these contracts on a daily basis, feeding the information back to the General Ledger.


Business Intelligence

The business intelligence system within the TMS, aggregates a broad range of data, which is used for various purposes. One such purpose is counter party risk. E.g. if AgriGrow were to strike a deal with JP Morgan, how exposed would the company become, given all the current and future deals with JP Morgan?