The cloud and its hidden treasury
In recent years, cloud computing has become an important part of information technology. It is currently a buzzword among IT decision-makers, and the implementation of treasury management systems (TMSs) is no exception. In order to appreciate fully how the cloud can benefit an organization, it is necessary to understand what the cloud really is and what its different components are.
Cloud computing is often described as a ‘stack’, in recognition of the broad range of services built on top of one another under the moniker ‘cloud’. Organizations are able to choose where, when, and how they use cloud computing according to three fundamental service modes:
- Software as a Service (SaaS): software that is delivered over the Internet.
- Platform as a Service (PaaS): a computing platform for the creation of software that is delivered over the Internet.
- Infrastructure as a Service (IaaS): a way of delivering cloud computing infrastructure – servers, storage, network and operating systems – as an on-demand service.
Figure 1: Division of responsibilities per category
The cloud enables companies to access modules as they need them and to pay for them on a subscription or a pay-as-you-grow basis. A cloud-based TMS therefore allows companies to scale up or down quickly, as and when necessary, in response to rapidly changing system capability needs. By using the cloud, management is also able to access the company’s data from wherever using a mobile device, thus increasing transparency and enhancing its decision-making process.
A typical treasury solution will have links to external parties that provide feeds from the equity, derivative and FX markets. Reports and analyses to be generated by the cloud computing system will also rely on a continuous flow of information and data. In order to prevent interrupting the normally continuous flow and causing the data and analysis to become inaccurate, it is necessary to research the feasibility of integrating the applications hosted on the cloud with other operators and applications.
‘Multi-tenancy’ and ‘resource sharing’ are defining characteristics of the cloud which pose a potential security risk for cloud users. ‘Multi-tenancy’ is defined as a single instance of a hosted application that is accessed by multiple users. Systems are also susceptible to the security risks inherent in the Internet, because information to and from the cloud must go through the Internet. Compared to a private cloud, a public cloud has a greater number of users with access to data and is therefore perceived as being more exposed to risk. When using the cloud, companies must be fully aware of these risks and must themselves take responsibility for the level of confidentiality of data stored in the cloud and for the implementation of security settings.
Implementing cloud computing can be very complex. To implement cloud computing successfully, a company can either make the transition on its own using a precise project plan purchased directly from a vendor, or it can seek help from a professional consulting partner who will support the company throughout the implementation process.
Although challenges still exist as regards security, a number of steps can be taken to mitigate the risks as companies increasingly adopt cloud-based solutions in their treasury departments. These steps include adopting a so-called ‘progressive approach’ where, instead of making a complete transition to the cloud at one time, a company begins with areas that are less risky, such as cash management/forecasting, before progressively expanding to other more sensitive modules. Another approach might be to select a number of core modules that meet the company’s basic requirements and then get more add-ons as required. By adopting one of these approaches, risks can be mitigated and a company is able to assess not only the suitability of a cloud-based system but also its readiness for the move to the cloud.
It may well be concluded that hosting treasury services on a public cloud is not a suitable option. In that case a company should opt for a private or hybrid cloud. A hybrid cloud is a mix between a public and private cloud which allows a company to implement a treasury management solution quickly, and to benefit from reduced upfront costs, easy implementation of the required services, decreased IT resource requirements and automatic service upgrades. The private cloud solution is more expensive but does offer a company higher levels of availability, resilience and scalability as well as added security, control and auditing abilities. For these reasons, vital treasury management functions require private cloud solutions.