Holding the key to the treasury has always been a position of responsibility, but today’s treasurers are expected to be more than just trustworthy and loyal servants. In the modern global corporation, they are expected to deliver a meaningful competitive edge to the company’s underlying business.
To do that, they rely on complicated computer systems, enterprise resource planning (ERP) solutions and full-blown treasury management platforms that detail the movement of every single dollar in close to real time, all of which places new responsibilities on the top tier of treasurers. But not all companies are there yet, according to Scott Coffing, chief operating officer of corporations at SunGard, a treasury system vendor.
“There are still corporations out there that designate a representative to go out to a local bank branch, request a piece of paper, return to the office and type that information into a computer,” said Coffing. He called the corporate commercial ecosystem “the most inefficient market in the world” and said that while Microsoft’s Excel can manage part of your treasury, and banking partners can manage other parts, what businesses really need is a centralised solution that manages all aspects. To reduce risk, you first need to know exactly what your risks are.
There are many options available to treasurers. Products range from Calypso’s global corporate treasury solution to Oracle’s E-Business Suite and SunGard’s AvantGard -- all of which provide robust tools, often tailored to local markets with local language capabilities, to aid money management at corporations.
Even so, centralised solutions are not common in
Implementing an advanced treasury platform not only improves efficiency, say product providers, but satisfies the higher standard of risk management that treasurers are expected to meet.
Risk managers
“The role of a corporate treasurer is not that of a cashier; he is in fact the risk manager of the company,” said Peter Wong,
Liquidity risk management has become a priority for treasurers during the past two years. The 2008 credit crunch prompted a need for better access to -- and visibility of -- corporate cash positions, which electronic treasury management systems can achieve. The platforms can enhance control over finances, forecast and provide visibility into cash flow, and manage risk, all incalculable and intangible benefits to a business. According to Boston-based consultancy firm Celent, setting up a risk management structure to cover every part of an organisation is important and should be part of the corporate business strategy to generate a competitive advantage.
Still, businesses remain hesitant to invest. Many corporate boards maintain the view that treasury is a cost centre and the purchase of a dedicated technology platform is a capital investment without a tangible return. Treasurers are expected to demonstrate concrete benefits of a system in order to receive funding.
Rather than increase revenue, treasury systems improve profitability through efficiency gains. “It doesn’t matter if you keep cutting transactional costs,” said Jerry Lou,
Wong explained that sophisticated technology platforms squeeze more money out of existing revenue streams at corporates, improving the bottom line but not necessarily overall turnover. This is a critical selling point for corporate boards but once funding is approved, the question of which system to implement remains.
Selecting a system
Not all businesses are created equal. Cash management systems come in all shapes and sizes with a myriad of capabilities. Deciding what system is needed is far from a simple decision.
“Many businesses do not need full-blown systems,” said Michael Fullmer, senior vice-president of AvantGard. Treasurers are spoiled by the number of choices in today’s market and can mix and match solutions or applications to best suit the needs of their company. Still, they have to decide what’s right for their business.
Lillian Chin, Asia-Pacific chief financial officer at real estate and property management firm Savills, faced the decision of how much to implement when she decided to streamline the company’s regional treasury. When she assumed her position in July 2008, Savills had numerous local operating accounts and processes with no method for obtaining a single, regionwide view, complicating the process of efficient cash management. Chin decided to implement a Standard Chartered Bank solution that improved the company’s control and visibility over its cash without removing the company’s well-established decentralised approach to treasury. By opting to not reinvent the wheel, just improve on it, she was able to get board approval for the investment in a cash solution.
Efficiency and risk management are the critical selling points for treasurers who want to invest in technology solutions. In this world of six sigma manufacturing and just-in-time supply chains, better control over the financial supply chain is something corporate boards want to hear before they approve any new investment.
The unfortunate truth with technology, be it treasury platforms or the latest iPhone, is it will soon be out of date. According to Wong, the maximum life-cycle of any system should be capped at five years. When choosing a treasury management system it is important to ensure that it can be replaced or upgraded after this period.
Rapid obsolescence or not, technology has increased the importance of treasury at companies. Caroline Lacocque, Asia-Pacific head of corporates at the Society for Worldwide Interbank Financial Telecommunications (Swift), said that the role of treasurers has expanded during the past five years, driven largely by the need for transparency of the exposures in the corporate environment, a demand for reliable, real-time information and the interoperability between countries and systems. Advancements in information and communication technologies, increased mandates around regulatory compliance and the emergence of a truly global economy also factor into this evolving role.
Technology is playing an ever increasing part in the transparency and efficiency of businesses, something everyone from the chief executive to regulators and customers demand. Adopting a robust treasury management system is the key to a successful 21st century treasury.
This story first appeared in the Corporate Treasury Yearbook 2010, which was published as a supplement to the June 2010 issue of FinanceAsia magazine.
