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Corporate Treasury - a constant challenge


The demands on corporate treasury departments are undergoing constant change, driven by regulators and the organizations themselves. Requirements for increased transparency, better control and enhanced performance means treasury leaders need to, continuously update their technical knowledge, reduce costs, minimize volatility, deliver value and ensure clear lines of communication. Treasurers need dedicated information systems to support those challenges.



Shareholders are increasingly putting the spotlight on the treasury function and how it monitors and manages financial resources and risks. Cash management and bank relationships are, more than ever, key to securing a company’s financing.

It is high time for organisations to focus on process optimisation through system integration and deeper organisational changes, including the centralisation of the set-up of payment factories. It is becoming increasingly important for organizations to adopt an integrated, holistic approach to their treasury activities, rather than pursue temporary solutions for individual issues. Shareholders demands for increased transparency and better control are driving a global trend toward the centralization of treasury activities.

Today, treasurers also need to cope with the growing complexity of financial instruments, volatile financial markets and the introduction of new regulations and accounting practices. Hot industry topics include the European Market Infrastructure Regulation (EMIR) for over-the-counter derivatives, Basel III, REMIT, MiFIR/MiFID, IFRS 9 and IFRS 13 for derivatives accounting and valuation, tax matters for cash pooling and payment factory implementation, and the Single European Payment Area (SEPA). These regulations are placing increased pressure on treasurers’ time, presenting difficulties in monitoring and reporting exposures and the impact on financial statements.

In such a challenging environment, organizations need to define the role and responsibilities of their treasury functions. A fully operational treasury function at a minimum should ensure that the following are kept up to date and are continuously evaluated on a regular basis:
• Treasury organization and governance
• Treasury performance assessment
• Financial risk management (interest, foreign exchange, credit risks and commodity risks)
• Cash and liquidity management, including cash forecasting
• Corporate funding and capital management
• Treasury technology, including treasury management system (TMS)
• Valuation and accounting for financial instruments

Organizations should have an appropriate organisational structure and infrastructure in place (such as policies, controls, processes and models), and develop methods and processes for quantifying, assessing and monitoring financial risks.

In today’s environment, the optimization of a company’s financial resources (cash management and funding) are of paramount importance. This will help in ensuring that cash is managed effectively from both a financial and tax perspective. In order to optimally utilize the financial resources, the organization should continuously stress test its cash forecasting model.

Organizations need to prioritise actions within their treasury departments and define an action plan for implementation. The many facets of corporate treasury require a pragmatic interpretation of relevant regulations, which need to be considered in the broader context of the company’s risks and its level of complexity.

December 17, 2013
By IMTIAZ
(Imtiaz is a partner with EY and does financial accounting advisory practice.)

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