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Technology and the Enterprise Treasury

Enterprise treasuries are found in multinational companies in which there are high-level demands for the real time visibility of cash and risk. This information needs to be available for both periodic and ad hoc reporting on a virtually instantaneous basis, so that the treasurer can feel a high level of confidence in responding to requirements for information across a broad range of operations, financial exposures and risks. In essence, the enterprise treasurer needs to have powerful tools at his or her disposal to provide immediate answers to critical questions such as, 'What is our total exposure to XYZ bank?', 'What is the corporation's present global position in the euro?' and 'What would be the impact on our profit and loss (P/L) if sterling drops another 10% against the dollar?'.

In rough terms, enterprise treasuries are found in multinational companies with annual turnovers in excess of US$200m, or equivalent. They are additionally found in smaller organisations whose business operations incur relatively high levels of financial risk, for example through a high proportion of foreign sales generating substantial currency risk, or through a high level of leverage requiring very efficient cash management to optimise debt service. Until recently, the industry tendency was for such organisations to adopt a centralised model, so that the necessary information could be controlled as required. There is now some evidence of a reversal of this trend, in cases where management are returning higher levels of financial responsibility to operating subsidiaries; an example is operations that devolve the responsibility for adjusting exposure levels to facilitate accurate hedging to the individual business units. In such cases, treasury typically retains its responsibility for the collection and analysis of the critical information, and for controlling enterprise-wide cash management, hedging and the related management reporting. Robust technology with complete, powerful functionality is the essential means of achieving high quality results in the collection, consolidation, analysis and reporting of the necessary information.

The effective operation of an enterprise treasury imposes some requirements on technology that may not be immediately apparent to a corporate treasurer. The production of an accurate and timely response to all kinds of reporting demand requires that all the necessary, up-to-date information is immediately available to the reporting engine. If treasury is served by a number of systems based on incompatible technologies, perhaps hosted in different environments, it will not be possible to perform this with the necessary speed and reliability - if it is possible at all.

As a high level generalisation, three contrasting approaches to technology are found in corporate treasuries, namely the enterprise resource planning (ERP) approach, the niche system approach and the enterprise treasury management system (TMS) approach.

Some organisations use an ERP system as a single source of global information. Such solutions take a generalised, homogeneous approach and may not offer the specialised treasury and risk analysis functionality that many treasurers regard to be essential for a fully effective performance.

At the opposite extreme, treasuries may be served by a series of niche systems provided by a range of vendors. These islands of technology can present the enterprise treasurer with coordination and efficiency problems - and may not be able to provide the complete and rapid views of cash and risk that are now demanded.

The enterprise treasury typically uses a powerful and flexible TMS that can coordinate, control and report all the necessary information at the required high levels of speed and accuracy.

Best Practice for Enterprise Treasury

The best practice solution for an enterprise treasury is based on a TMS using a single central database that is updated in real time with all necessary current information. This requires a high level of integration with all relevant third party systems - and this in turn requires that they are technologically compatible and can integrate reliably. The hosting environment is critical to the realisation of the necessary levels of intercommunication and integration that the enterprise treasury requires. The solution adopted in a particular case is driven by corporate IT policy. Some organisations will have strong internal IT departments who support a standardised IT platform in which integration between systems is part of the standard service. Other organisations may adopt an IT outsourcing policy, in which an expert third party is contracted to host a standardised IT environment. This may be done so that the enterprise divests itself of what is judged to be a non-core activity, and it may also be regarded as a way of reducing IT operational risk. In context, if treasury is supported by systems on different platforms that cannot be integrated, it will not be possible to service the full demands of the enterprise treasury.

Effective integration between the central TMS and all critical systems is therefore established as critical to the proper operation of the enterprise treasury.  

The actual integration, in fact, required by a given enterprise treasury will depend in detail on the organisation's business flows and treasury policy. The essential information flows that are typically integrated are:

  • Bank systems - inbound: bank statements for reconciliation, visibility of cash, forecasting and modelling; outbound: payments. These integrations may be achieved in a number of ways; there is an increasing use of SWIFT, as SWIFT becomes more 'corporate friendly' so that companies can take advantage of its standardisation and robustness.
  • ERP, accounting and consolidation systems - inbound: accounts payable and receivable summaries for forecasting; outbound: accounting journals for posting to the corporate general ledger and other reporting.
  • Cash forecasting systems - inbound: subsidiaries' cash forecasts, typically via the web for a maximum degree of flexibility. Web forecasting uses browser-based functionality in which remote subsidiaries use customised templates to submit and update their cash forecasts to central treasury, on a 24x7 basis.
  • On-line dealing systems - inbound: deal execution details; outbound: deal execution requests. This integration is a critical component of implementing treasury STP. In the US, there are very similar integrations with money market funds portals, for investments and withdrawals of cash.
  • Confirmation matching systems: outbound: deal confirmations; inbound: counterparty confirmation match/non-match information. This is another critical integration for achieving enterprise treasury STP.
  • Microsoft Office - so that spreadsheets, Word documents (for example defining treasury policy) and so forth may be seamlessly integrated with treasury processing.
  • Market data systems - inbound: foreign exchange and interest rates, securities' prices, and volatilities.

There are a number of technical alternatives for achieving efficient and secure integration; evaluation of these is, of course, a matter for technical specialists. Finance professionals should be aware of the benefits of implementing secure integrations, most notably the reduction of operational risk. Examples of suitably robust integrations are provided by SWIFTReady certification and the use of middleware, such SAP NetWeaver.


The enterprise TMS needs to be supported by the robust integrations described above, so that it is supplied with the necessary information to fulfill its critical mission. The system must be based on a single, central database that is updated in real time, so that reporting is always based on up-to-date information. And if the technical environment supports a high level of secure 'hands-free' STP, the treasurers can focus on their professional duties with confidence, rather than having to be constantly diverted into unproductive data processing tasks.

The present financial market turbulence has generated positive interest among enterprise treasuries in upgrading their supporting technology. The primary reason is that the cash visibility, risk management and control benefits that may be achieved via the necessary technology investment can be objectively demonstrated to yield real and tangible benefits. The organisation can locate and manage its cash with a high level of efficiency, optimising both liquidity and interest income/expense management. Counterparty exposures may be measured and managed, so that risk is contained according to policy. The treasurer can analyse a full set of current information, so that emerging management tools, such as the derivation of cash flow at risk quantification, can be achieved. Perhaps most importantly, the CFO's most demanding questions can be answered quickly and accurately.


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