Treasury & Risk - December 2010/January 2011

FYIREPORT

bursement process as a whole. It will be interesting to see how far treasury’s control of this area will progress. For example, will the treasury department determine how early payment discounts are utilized?

Virtualization

IT systems are becoming important assets for the new, centralized treasury function. Virtualization makes it possible to execute and manage global treasury processes in one central, integrated system. Treasury staff and operating companies in different regions can all work in one system, which improves the efficiency, effectiveness and accuracy of the cash and treasury function. There are two aspects to treasury virtualization: improved functionality and integration.

Traditionally, treasury departments have used dedicated stand-alone treasury management systems for such functions as deal management, cash management, hedge accounting and financial risk management. Nowadays, with corporate treasurers looking at the supply chain, and in fact the full balance sheet, there is a need for integrated risk management, counterparty credit risk, electronic bank account management and payment factory solutions. At the same time, new solutions require new processes, and extensive process reengineering will be required to obtain the benefit of these systems.

The second development is
systems integration, which can
be viewed both from a technical
and a functional point of view.
Treasury management systems
will be integrated more closely
with a multitude of ERP and
financial consolidation systems,
which hold a lot of financial
management information. The
end goal is visibility of the full
cash-conversion cycle in a single
system. Mastering liquidity will
eventually lead to the optimi-
zation of funding costs and
increased independence. This
leads us to the fourth trend.

independence

Bank independence will remain important in the coming year. Corporations and banks are tied to each other via the corporate cash and treasury function. Banks try to keep customers captive by developing proprietary electronic banking systems, trading portals and treasury management systems. However, the credit crisis and the default of Lehman Brothers made it very clear that corporations should not rely too much on a limited number of banks.

In addition to the continued
developments in bank-indepen-
dent electronic banking systems
and online dealing platforms,
the SWIFTNet service offering
for corporations is an important
driver of bank independence.
SWIFT connectivity is becom-
ing increasingly accessible to
corporations. In addition to
providing the ability to handle
payments, reporting and confir-
mations, SWIFTNet is spreading
into companies’ financial supply
chain by offering eBAM and
trade finance message support.
So SWIFTNet not only enables
companies to switch their trans-
action banks with ease and run
their disbursement processes
more efficiently, it also offers
greater opportunities for effi-
ciency, accuracy and control.

dividing Line

In the near future, operational treasury functions, primarily those related to the execution of the cash-conversion cycle, will either be outsourced to the company’s shared-service center or to a third party. What remain will be the strategic, value-added functions, like the holistic management of a combined risk portfolio and the optimization of the internal and external corporate finance function.

But before corporations can really outsource treasury’s operational functions and focus on strategic treasury, many need to start working on treasury transformation projects to prepare their organizations for the new reality. With all the new possibilities—eBAM, SWIFTNet and ISO XML 20022—2011 is the ideal time to begin such initiatives.