TREASURY

BY PAUL BRAMWELL

Holistic Review of Risk:

Top Priority for Corporate Treasurers

ne of the key attractions in treasury is the ever-changing environment in which a treasurer operates. Not a year goes by without the
passage of a new regulation or an economic crisis in some part of the
world that could severely impact a companys liquidity and profitability.
Globalization further complicates the treasurers role, as considerations
for foreign exchange and counterparty risk need to be made.
The results of a recent SunGard survey of senior treasury professionals reveals that gaining a holistic view of risk across the enterprise
is a top priority in this rapidly changing environment. Although heavily weighted toward risk, the surveyed executives said their other priorities include streamlining bank communications and consolidating
payment flows.

Bank Communications and

Payment Flow Consolidation

To pull together information in a timely and usable fashion, a treasury

department must rely on efficient bank communications. Typically,
this connectivity has been provided by the banks themselves, but in
the event a corporation has a sizeable number of bank relationships
and accounts, maintaining the many links to the banks is no small
task.
Banks have offered consolidation services to report on other
banks data, but of course that comes at a cost.
The growth in other non-bank networks has been significant in recent years. The primary provider in the bank communication world is
the Society for Worldwide Interbank Financial Telecommunication
(SWIFT).
Gaining a Holistic View of Risk
SWIFT is open to corporate membership through its SCORE proToday, a growing number of companies of all sizes are becoming
gram and provides corporations access to
global, resulting in many risk implicaNot a year goes by without the passage services from multiple banks via a single
tions, especially when it comes to FX,
interest rate, commodity and operaof a new regulation or an economic point of connectivity. It provides portability and as close to real-time cash reporttional risk. For example, when a comcrisis in some part of the world that ing
as possible, along with the capability
pany buys or sells anything from outcould severely impact a companys
of transmitting payments across an inside its home country, and the transaccredibly robust and resilient network.
tion is denominated in a currency othliquidity and profitability.
Enhancing the capabilities of treasury
er than its base currency, the company
solutions and taking the workflow and volume capacities to higher
books an expected payment based on the exchange rate that day.
levels is typically the domain of payment factories, which operate by
Any changes in the exchange rate between invoice and actual
importing payment data in multiple formats and normalizing that data
payment present risk. The further out in time the payable or receivable
is expected, the greater the risk given the time effect on changes in the into a format that can be transmitted to the payment banks. These may
be localized or standard SWIFT message types transmittable to banks
markets. Those who regularly monitor the currency markets notice
directly or through SWIFT interfaces.
that exchange rates change roughly two to three times a second.
They add the ability to handle very large volumes of data, to norSimilarly, the treasurer must cope with the risk associated with
malize and report on exceptions easily and to feed that information to
borrowing cash and investing surplus cash, as well as the price of
commodities in the global marketplace.
multiple systems for cash positioning and reporting. The major beneIncreasingly important among global companies is a treasury solufits accruing from a payment factory include routing payments
tion, specifically designed to identify, manage, test and report on the
through the lowest-cost means of payment, removal of the need for lorisks associated with doing business in a global environment. A treascal bank payment platforms and fraud reduction.
ury solution at its most basic level is a consolidation tool to retrieve
The priorities of corporate treasurers, as noted in the SunGard surand aggregate data from the multiple banks for which it holds acvey, reflect prevailing wisdom and trends regarding treasury departcounts. This information is pulled through direct connectivity to banks
ments today. Fortunately, technology providers are rising to the occasion
or manually downloaded as a file that is then compiled into a cash
when it comes to managing financial risk, bank communications and
position. Layer onto that the known financial events of the day and a
payment flows.
treasurer can obtain a good idea of what will need to be borrowed or
invested globally not just today, but in the months and years ahead.
Paul Bramwell (paul.bramwell@sungard.com) is senior vice
president of treasury solutions for SunGards AvantGard. He is
based in Hartford, Conn. www.sungard.com/avantgard

Reprinted with permission, Financial Executive, March 2012 . 2012 Financial Executives International.
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