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Wednesday, 9 July 2014

Treasury and Technology


In many organizations today, the Treasurer or the Treasury Head is considered to be in an important position. They usually report to the CFO and in some cases, directly to the person at the helm of affairs.

Why is this position so important? To understand that, one also needs to be aware of the global business scenario. In today's business environment, the entire world is a market place. One can obtain resources, and build revenues in any corner of the world. The world is getting smaller and is crying for goods and services. Organizations that can deliver their customers' requirements in an efficient and cost effective manner can reap the benefits.


At the same time, the world economy is buffeted from many sides, by very strong influences. A random act of terrorism, a civil unrest, a unpredictable political situation, a natural calamity, social unrest, war -  all can impact what is known as 'market sentiment', which can lead to uncertainties in the exposure an organization carries to a particular business or currency or economy.

Market sentiment is something to watch out for. The nature of the beast is such that, there is no saying which way the herd will move. Sometimes it is a wave, sometimes a knee jerk reaction. Currencies can get impacted, shares may rise or nosedive and commodity prices will fluctuate due to very illogical reasons.

It is the Corporate Treasurer who looks at his companies’ exposure and assets critically on a day to day basis, sometimes multiple times a day, to try and predict how global events shape the business environment. To some, his actions may look like a calculated gamble. For, it certainly is. Currencies fluctuate, assets get devalued and exposure becomes risky. Opportunities for investments appear and will contain risks. Will a gamble pay off? The Treasurer needs to decide how best to manage his assets in such a manner that risks associated with any change in sentiment minimally impacts the bottom line. In fact, at times, a shrewd Treasurer can even profit from the chaos.

Technology becomes the backbone to a Treasurer's activity. He definitely will need a dynamic dash board which shows the current and planned exposures. He will need screens displaying 'What if' scenarios which gives him a feel of how certain events can influence his balance sheet. Various mathematical and statistical models - messages data to produce predictive analysis. Technology becomes the enabler, a tool in decision making - either to invest or convert or even perhaps take a loan to meet his obligations.

Information is king or so goes the saying. One who can analyse the information based on past behaviour and has the experience to take decisions based on historic facts, current trends and his own analytical capabilities, then is an Emperor.

Yes, experience counts. The number crunching can be done by computers and software. Decisions on investments, conversions and raising funds needs human thinking.

The Treasurer also is guided and his activities are regulated by comprehensive Treasury policies and legislations which are monitored by market regulators. Organizations internally have checks and balances that ensure that no one person can take a call which falls outside the overall risk appetite as adopted by the Board. Here also technology plays an important role in setting benchmarks, risk limits, alerts and comprehensive MIS throughout the chain of command, besides enabling the Treasurer to facilitate straight through transactions, across multiple products covering Foreign Exchange, Money Market, Fixed Income, Equities, Mutual Funds, Deposits, Loans and Derivatives, all seamlessly interfacing with multiple systems including ERP and Banks, bringing about a much needed control with proper audit trail.

A good system will be a value for money system, with a short ROI, enabling controllers, managers and auditors everywhere access to information that is timely, accurate and relevant.  It will be technologically advanced, adaptable and scalable and will provide the users with real time information. Besides the system will have robust MIS capabilities, with abilities to cater to the disclosure requirements mandated by regulators, and a modern evolving data base which can be interfaced with Business Intelligence tools as they will serve a very useful purpose for forensic accounting (in case something goes wrong).

 It is a given that the system will address the IT security issues and boast of a very high quality of development standards and support. The development team will need good support from Subject Matter experts and Business Analysts and the end product should be thoroughly tested with all kinds of scenarios.



The best systems cannot replace the deeply analytical nature of the human mind. At best the system can be a facilitator, which over a period of time will evolve, support and eventually become an integral part of the Treasury Department as a Revenue Centre.





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