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WFH in The Treasury Management System Space -a ticking bomb?

At the advent of COVID-19 pandemic, many software technology workers had quickly improvised to manage the sharp disruption in our way of life. Some had their workstations as a comfortable desk set up on a porch or patio while some had theirs set up in an uninsulated garage working on a piece of strong plywood wedged between the family’s minivan and kids toys box.

Need I not say that WFH setups like these are not only hazardous but may also end up posing a high level of enterprise risk to an organization.

Like other tech workers, Treasury technology workers had also improvised through WFH to keep up with their tasks. Among the vast list are Treasury Management System Technical Analysts who not only understand the flow of funds in the treasury space but also, and more importantly, have an excellent understanding of manual/system journal building, automated dummy clone via simple CRON jobs or database schedulers, and have a coherent understanding of the encompassed technicalities behind GL transaction-impact.

You would agree that in the wrong hands, such grounded TMS knowledge and access to an FI’s cyberspace can pose a risk, hence the need for improved information security while promoting business continuity.

My Top 5 Recommendations To Properly Manage This Risk

  1. High-privilege tech workers/super users should ALWAYS work from the office. There are other different opinions around this especially considering the current COVID-19 reality. To strive amid the constraints of a pandemic, high-privilege tech workers/super users must be lodged in the office complex and work right from the office.
  2. Participators in a maker-checker array in a Financial Institution with a cyber presence must be closely monitored when working from home. Never underestimate the power of a well-thought syndicate nor leave maker-checker participators to act entirely based on ethics and discretion when working from home.
  3. Network monitoring must be top-notch to pick up irregular activities like the download of confidential info or other forms of malicious attacks by confirmed or unconfirmed endpoints.
  4. Activities of Treasury operations must be closely monitored when working from home.
  5. Lastly and most importantly, the Treasury Management System team must casually monitor each other’s activities on the TMS system especially that team member who for some reason is working from a different location. Though TMS team members are seldom made privileged users, a syndicate isn’t hard to form.
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Treasury Management Systems -System Behavior on Discount Accretion Explained

When securities are purchased at a discount, the discount is expected to be accreted over time. Methods are key determinants of the results as the wrong method could lead to an unexpected outcome and in some cases, lead to a substantial income leakage.

(On this analysis, we have focused on Finacle Treasury. However, this also applies to other Treasury Management Systems.)

Some keywords System Analysts should note when analyzing discount accretion for a security deal are;

Units traded:- Quantity
Consideration:- Settlement value
Discount:- Unit traded РConsideration
Tenor:- Days-to-maturity

Let’s take for example 500,000 worth of a TBILL purchased @ $89.

Here, the Unit traded is 500,000.

The Consideration is ($89/100) X 500,000 = $445,000

This means the 500,000 units of TBILL will be purchased for 445,000 and the discount (55,000) would be earned over the life of the security as Discount Accretion.

On Finacle Treasury, considering that securities would most often be processed at a holding level, discount accretion would also be handled at the holding level. In this case, the system would not process accretions per deal, rather, it would process it per group of deals ( known as portfolio professionally, and known as holding in FT ).

For security holdings, the units of related deals are summed up to make a value known as Holding’s NET QUANTITY, the Settlement Values are summed up to make a value known as Holding’s NET VALUE, the difference of these two values (NET QUANTITY – NET VALUE ) is known as the unearned discount.

So, for holding processing, instead of working with the keywords noted above for deal level processing above, we would work with the Holding level figures.

Therefore, NET QUANTITY – NET VALUE =UNNEARNED DISCOUNT

The Unearned discount has to be earned over time through the life of the security instrument.

There are multiple methods this can be split to be earned over time. The method to be used would be strictly on the regulatory policies applicable to the bank’s region.

The most widely used method is the Straight Line method where the unearned discount is shared evenly over the tenor of the security. Based on this, the Discount is earned.

To earn this, the system basically debits the Discount Account and credits the Discount Accretion Account.

Please note that the above analysis has focused on the Straight Line Method.