Financial services can be a risky business.  For corporate treasurers it is listed as yet another of their “key priorities”, particularly as they become more involved in the strategic decision making processes within their organisations.  Risk is linked to many factors over which business has anything from some to little or no control, for example at one end of the spectrum there are the policies and procedures for cash management established by the corporate treasury department, and at the other end of the scale, market or environmental influences such as unforeseen market crashes, we all remember those or perhaps a devastating tsunami or earthquake.  Life is anything but dull it would seem for our treasury colleagues.

Whilst we can monitor tectonic plate shifts and hope to be able to give advance warnings about impending natural disasters, there is something we can do to mitigate the risk in areas under our direct control in business.

Over the last 10 years I have seen a significant increase in the technological developments and increased expertise that has evolved in financial transaction automation.  There have been many reiterations of solutions that promise to mitigate risk, from STP (straight through processing) to real time transaction monitoring, but it all comes back to automation.

The term itself may not be new or indeed very exciting but the benefits of carefully planned and well executed automated treasury management functions tell a very inspiring story which links directly back to risk mitigation.  For me it’s particularly relevant because this is an area of the treasury function that we do have control over and yet, in many situations, the manual approach is still employed today.  We have affordable and proven software tools and services which can make a significant difference to both cash management efficiency and the reduction or indeed removal of risk from the process of managing and reporting on cash positions. 

Recently the ACT published an interesting article that drew from recent research conducted by SaaS TMS vendor, Kyriba.  The corporate treasurers that participated in the research provide some interesting highlights and statistics around the current risk issues facing corporate treasurers that I think are worth revisiting.

It was a key assertion that the use of technology, replacing manual spreadsheet reporting with either TMS (treasury management systems) or ERP (enterprise resource planning) treasury modules can save treasury teams almost three entire months a year! Yes, 3 months – that’s staggering don’t you think?

The example given in the article suggests gathering bank information and making general ledger entries manually takes up to 50% more time than it would for those using a TMS system.  Up to 50% -- that’s incredible.  What’s more frightening however is how much risk there is in all that manual checking, recording, transferring and re-checking data from multiple banks – probably it’s too scary to measure!

On another point, we are well aware that there are areas of our globe that continue to be subjected to geopolitical uncertainty and volatility which impacts FX.  In fact the research suggests FX tops the list of risk factors impacting treasury teams in 2015.  Coupled with lack of visibility into liquidity and forecasts, there are at least 3 major headaches for corporate treasurers.  Again, we see the dreaded “spreadsheet” referenced as a key risk factor and no wonder, 47% of those surveyed said they use spreadsheets as their primary treasury tool which causes them great concern.  I’m sure it does.

Back to technology, those with a treasury management platform reported significantly lower risk concerns.  This simply comes back to the point that removal of the manual activities is less problematical.

The third area reported which is perhaps even more alarming is that only 22% of companies who responded to the survey had visibility into 100% of their cash and only 19% reported daily visibility into each of their bank accounts.  Now if you have multiple bank accounts and most corporates do today, that is certainly cause for concern.

The research does not suggest this high risk processing is the fault of the corporate treasury departments. Indeed if lack of visibility into cash positions and forecasts is one of their greatest concerns for the next 12 months, then it seems fair to suggest that the boards of their companies really need to give urgent consideration to investing in technology to remove the inherent risk of poor quality data and information.

Making decisions at the top of an organisation for future investment, diversification or expansion, think M&A scenarios, would make the most stoic of executives tremble just a little surely. Yet, there are opportunities to make good use of proven technology that is available today which will go a long way and very quickly, towards ensuring that financial reporting can be timely, completed more efficiently and even more importantly, have a significant amount of risk removed so that the data provided is reliable for decision making purposes.

 It’s also proven that compliance and regulatory reporting becomes much less of a headache when processes are automated which has to be further incentive in our dynamic world of global trade.

I’ve not touched on the issue of centralised versus decentralised treasury functions, the latter again offers another element of risk and was mentioned in the article.

So whilst I find some of the statistics from the survey quite worrying when taken at face value, I can only imagine our corporate treasurers and CFO’s are very well aware of the risks within their environments.  I’d like to think that we in the industry can step up and help corporate treasurers and CFO’s make a case to gain the support of their executive management and boards for investing in technology, mitigating risk and perhaps everyone will sleep just a little more peacefully at night!