With a recovery picking up steam, is now a good time to retool treasury’s infrastructure?
Despite having plenty of cash on hand corporations remain in a cautious mode. They await more stability in Europe and more signs of economic recovery before committing significant funds to new businesses and growth prospects. Market rumblings indicate that it may take a good part of 2012 to work through these two issues and bring about a change of attitude. In the meantime, what should Treasurers and their staffs be focused on while the world waits for global recovery?
While we do not know precisely when full economic recovery will arrive, companies are preparing now for the increased business the hope will result. Corporate treasury should be thinking about where within their framework of operations and infrastructure – ERPs, treasury work stations, etc. – they need to strengthen to support this growth. As one banking director noted, “In my opinion it is time for all institutions (and corporates) to rebuild their infrastructure. The cost to do so is cheaper now than [it will be] later. Those who do will reap the rewards as the economic conditions stabilize.”
With the treasurer’s role evolving and becoming a partner in the strategic planning of the company (see prior article “Treasury’s Role Continues to Grow” add link) effort needs to be made today to meet tomorrow’s challenges. Part of this has been an effort to map out the treasury infrastructure and resources required to support each phase of company growth.
Management of treasury infrastructure generally includes the information technology and communications used to run the operations and provide liquidity and risk management to the company. The process is supported by the underlying policy and procedures, and developed and delivered with the assistance of banking partners and IT staff. External vendors and outsourcing options provide additional, customized support and services.
Infrastructure management touches all of treasury operations and its components. It also integrates communications with other company functional areas such as a shared service centers or procurement and accounting groups. This integration is the glue that holds all functions together and allows treasury processes to be seamless and supportive of other company operations.
This checklist provides steps to take and suggestions for retooling treasury operations:
- Rationalize current operations – target potential improvements.
- Review technology platform in light of future treasury requirements.
- Implement best-in-class tools – dashboards/trading platforms/payment mechanisms.
- Incorporate real-time, speedier information delivery for faster reaction to market events.
- Integrate treasury systems and services on a global basis; improve visibility.
- Align new investments with overall company strategic growth initiatives.
- Streamline your bank network.
- Revisit policies and procedures to meet new regulatory and compliance requirements.
- Review staffing; in-house development vs. consultants vs. new hires.
Knowing how much and how to invest in information technology and re-engineering is a difficult decision. As with any project, infrastructure investments need justification and should be measured by the gains generated. This will help secure the needed resources and executive buy-in. However, there are often soft benefits that can be hard to measure. Improvements may reduce costs, improve productivity or provide greater visibility and better forecasting. The automation of manual processes and leveraging of current technology, if possible, is a good place to start with easy-to-measure risks and rewards.
Treasury is more and more becoming a strategic advisor, more closely integrated with the business and expected to provide support enterprise-wide. With a rosier economic outlook on the horizon, the demands on the treasury organization will grow and it is crucial that the right infrastructure is in place to meet the company’s needs in the fast-paced environment we operate in. Now is a good time.