Strategic Treasury: Does it Play a Part in Your Enterprise?

By Kyriba September 6, 2018

As companies address the challenges of today’s rapidly changing market conditions and business needs, treasury is increasingly asked to support better execution of the broader business strategy. Below we identify six initiatives that corporate treasury functions should be prepared to assist, followed by questions to help financial professionals consider their current state and how their treasury can become a strategic function for the enterprise.

Transforming treasury operations

How do you measure whether your treasury operations effectively and cost-efficiently support the needs of the evolving business?

Successful treasuries are evolving their operations to align with today’s volatile and complex business environments. Forward-thinking treasury departments periodically review and redesign their processes, as appropriate, to effectively balance efficiency, innovation and performance excellence to support their current and anticipated future needs. Operational techniques are used, such as cash pooling, treasury and shared services centers, in-house banks, payment factories, re-invoicing and netting. All should be routinely evaluated for deployment to drive standardization, centralization and scalability of treasury capabilities — all positive indicators of an effective and cost-efficient treasury operation.

Related reading: AFP TiP Guide 2018: Selecting the Right Treasury Management System

Related reading: CFO Perspective: Out with the Grand Strategist. In with Informed Operatives

Related reading: How JVCKENWOOD’s CFO Benefits from a Treasury Management Solution

Automating treasury

Are you getting the most out of your existing treasury systems? Does your enterprise have a strategic plan for treasury technology?

As the role of treasury is becoming more visible and strategic, the treasury function is expected to do more, do it better and faster, while simultaneously reducing cost. In context, treasury systems should be reviewed and reassessed periodically to determine whether they are being leveraged to their fullest extent, appropriately supporting the enterprise’s evolving needs. If it is determined that business needs are outpacing existing systems, then more suitable solutions should be identified, evaluated and adopted to support the enterprise’s requirements. Forward-looking treasuries are creating automation road maps with enterprise goals, objectives and detailed execution plans that conform to the overarching goals of the enterprise technology road map.

Executing corporate transactions

To what extent is your treasury ready to support your enterprise through evaluation, planning and successful execution of a strategic transaction — whether it’s a merger, acquisition, divestiture, spin or IPO?

The treasury function should be able to effectively support any strategic transaction undertaken or anticipated by the enterprise — from due diligence and pre-close through close and post- close. Processes can be automated to increase the enterprise’s forecasting and predictive capabilities, enabling more reliable information available for upstream decision-makers to negotiate optimal positioning for potential transactions.

Leveraging treasury analytics

How does your treasury leverage analytical tools to accomplish the following?

  • Evaluate potential future outcomes and risks
  • Protect the enterprise’s assets
  • Support business decisions
  • Unlock cash from the business
  • Finance the enterprise
  • Invest excess cash

Analytical tools and other emerging technologies are being leveraged by leading treasury functions to help support decision-making processes by enhancing and enabling existing capabilities that can lead to improved data integrity and quality, as well as more reliable reports and insights within the accounting, finance, governance and regulatory spaces. For example, robotic process automation (RPA) is being used to automate routine procedures; artificial intelligence (AI) is helping to analyze large amounts of data; and blockchain is being applied to potentially improve overall operational efficiency via better asset management, supply chain management and delivery.

Evaluating specialty treasury activities

Has your treasury been tasked with supporting any of the following new activities?

  • Establishing a payment entity
  • Factoring receivables
  • Managing benefit plans and real estate
  • Enhancing payment security
  • Managing insurance

A high-performing treasury department should be able to create value for the enterprise at an increased and measurable level. In order to support execution of ad hoc tasks and new activities, a treasury department should establish and routinely reassess processes and procedures to ensure they evolve alongside changes in the business environment and technology. At the same time, leading treasury departments strive to maintain their capabilities with timely assessments of workforce competencies and follow up with strategic hiring and training. This helps ensure resources are on the leading edge of knowledge and development and can respond to the latest request necessary to support the enterprise. It goes without saying that all of the above areas are now within the remit of most treasury groups and are essential for being at the forefront of controls and security.

Managing accounting and controls

How does your treasury provide an adequate control environment to address emerging risks and meet the regulatory requirements of a dynamic regulatory landscape? In today’s environment, risk management has increased relevance for treasury. Enterprise risks such as global instability, fraud prevention and cyber breaches are relatively new risks, in addition to currency, interest rate, commodity, credit and securities prices. Treasury can be the promoter of more stringent controls around payments, for example, which are carried out to facilitate a more rigorous controlled environment. Data security leveraging the latest cryptographic and data protocols has become increasingly adept at detecting fraud and other emerging risks. To the extent treasury has responsibility, it can help provide or promote an adequate control environment to address enterprise risks and regulatory requirements.

Valerio Trinchi is a senior manager in Ernst & Young LLP’s Global Treasury Services practice within Financial Accounting Advisory Services.

This material has been prepared for general informational purposes only and is not intended to be relied upon as accounting, tax or other professional advice. Please refer to your advisors for specific advice.

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