The corporate treasury industry is finding that market disruptions have led them towards a new set of preoccupations, with much of the emphasis on minimizing risk and maximizing control and visibility.
Current economic uncertainties have resulted in a range of concerns becoming more apparent within corporate treasury departments, which are now insisting upon more control over the mobilization of their money. They may also be keener to minimize their exposure to risks that may occur in the future. Gone are the days when spreadsheets were an adequate way to manage a treasury department.
They can’t, after all, provide flexibility in terms of reporting requirements and organizational structure. They are also lacking in risk management attributes. So how can modern-day treasury departments respond to these new concerns? Most are opting to invest in treasury technology, and the Cloud is the latest favorite way to ensure treasurers are aware of their global cash position at all time. Treasury technology also helps to facilitate mobilization of that cash and improve the reliability of financial forecasting. Perhaps more importantly, it provides insurances against future risk through improving data reliability.
The effective introduction of treasury technology in the form of a treasury management system (TMS) can enable a team to concentrate on fulfilling a strategic function, which again offers treasury departments the chance to minimize risks through affective management. It will also establish a strong infrastructure and will help the department to move towards something resembling automation.
With the rise of treasury technology, corporate treasurers are becoming more demanding about the functions of the technology they invest in. Indeed, some analysts believe that most requests from treasurers - providing they are willing to pay for them - are being met by their TMS providers. A recent article in Treasury & Risk, by Richard Gamble, asserted that improved visibility of collateral is a leading requirement among treasurers looking to improve treasury management. They are also looking for stronger reporting functions, which should be tied to key performance indicators (KPI). Mr Gamble explained "Embedded policy provisions and activity metrics in treasury systems’ reports could make it apparent if policies have been violated - or even impossible to violate those policies as a result of embedded rules on such things as investment concentrate."
Data storage and retrieval is important to treasurers and they are increasingly insisting upon the best possible services from their TMS providers. Nothing is set in stone, however and treasures are glad of this as most want to be able to customize their management systems to their very individual requirements. An example of a firm that opted for cloud-based software as a service for its treasury management solutions is Styron. The $3.5 billion plastics, rubber and latex manufacturer was established in June 2010 as a result of the spin-off agreement from Dow Chemical. Dow continued to look after the treasury operations for the first year of running Styron as a separate entity, which allowed the treasury team to concentrate on the approach they were going to take. “We had to build our treasury staff and treasury operating systems form scratch,” explained assistant treasurer, Michael Rowan. The staff were eventually spread over centers in Switzerland, Hong Kong, the US and Brazil and together agreed that appointing a Cloud-based TMS was the best solution. Styron’s treasury department has found the decision to have been the right one and is now looking to hedge its currency exposure through FX trading. The firm currently makes the majority of its cash in the eurozone, but also has major sales in Asia. Rowan told Treasury & Risk, “We definitely want to move towards being more proactive,” and having establish Cloud-based treasury management, it is in a strong position to do just that.
