You’ve given your team the task of finding out what the options are for a new Treasury Risk Management (TRM) system. Perhaps you’ve worked out a general budget, a checklist of functional areas that need to be addressed, and a basic timeline. They are off and running, but do you really know what your team faces?
It starts with committing to change
Treasurers, whether you know it or not, your team is beset with dangers. They are already a lean team doing more than their fair share of work, managing cash and risk and other important missions. What is less well known are the manual workarounds, the reliance on spreadsheets, the less-than-optimal relationship with the business units, and the fact that the most important information resides in only one or two heads.
Therefore, as they evaluate technology that can help them, you need to anticipate what your team will need. Not just to tick off functional boxes, but to do their jobs better while freeing up time and intellectual energy for real collaboration and innovation. If you don’t have that level of insight into what they need, then what you will hear from solution providers may miss the mark. The result could be trading an old set of problems for a new set.
Manual ways of working and the associated risks
First on the list of needs is to eliminate the manual workarounds they face during their daily tasks. Time consuming and risky, these workarounds present a real vulnerability to the effectiveness of your treasury operation. They involve members of your team re-keying data from one system or place to another. Whatever the error rate for re-keyed data is, it is more than you can afford.
Not only are errors a problem, but the manual nature of the workarounds themselves is both distracting and discouraging for your team. Ask them how much time they spend addressing what amounts to functional gaps in their workflow. Even if it only amounts to several hours a week (it is likely more than that) it is still time they could be spending on more important initiatives. You need to identify and remove these manual processes. The best place to look for those opportunities is usually at the same old culprit: spreadsheets.
Spreadsheets are a cheap and ubiquitous solution, but they add an enormous amount of risk to your risk management programs. They will never have the security, validation and auditing of a true risk management system. But one thing you can count on is that they will grow and multiply and become too large and complex for your team to handle without errors. An even worse scenario can take place if those spreadsheet “systems” are created by your in-house Excel guru. We have seen it time and time again that, just when those spreadsheets get too large and complex, your gurus leave the department or company. That is just one way that your team can experience real resource risk (more on that topic in a moment). The last problem with spreadsheets is that they also creep into the communication process between your team and the business units.
Disconnect in multiple location collaboration
This speaks to a larger problem that many treasury teams face. Geographical limitations, time zone differences and reliance on spreadsheets to communicate information are some of the things that contribute to a lack of collaboration with the business units. There can be additional factors like cultural differences or the age old issue of personalities not meshing well. In any event, your team still needs to work effectively with the on-the-ground folks who are closest to the risks you are trying to mitigate. Many treasury teams forego collaboration and simply become a central collection point for exposure data and trade requests. This leads to the last large risk we will address here; resource risk.
It is common for treasury teams to have a “franchise player”--usually a Sr. Treasury Analyst or Risk/FX Manager--that has been there for a long time, endured team turnover and understands your processes up and down. These people can provide an enormous benefit to the success of your operations and initiatives. But they can also be walking vulnerabilities because most if not all of the critical information you and your team rely on resides in their brain.
They know how your business units operate, especially how they interact well (or poorly) with your treasury team. They understand the nuances of your processes and the optimal order of operations. They are familiar with the various personalities in your organization and how they work together. But if they leave the company, all of that institutional experience goes with them. In light of this risk and the other risks described above, what should your plan be to handle all of this?
The way forward for your team and your FX program
One thing is for certain: your plan should include the implementation of a robust, end-to-end treasury risk system. A system that can enable business units to enter their own exposures while allowing for review and collaboration will ensure that your treasury team has a good start on the risk management process and improve the forecasting capabilities of your business units. Quality exposure analytics will quickly enable your team to move forward with hedging those exposures, while seamless integration with industry standard trade portals will ensure efficiency and reduce errors in the trade execution process.
Lastly, an end-to-end solution that can provide trade booking, valuations and all of the complex accounting needs of corporate treasury will reduce the instance of workarounds and spreadsheets and make your team a key part of the company’s risk mitigation process. This means that all of the data, nuances and output resides in a permanent and effective home, instead of in your employees' heads.
All of this will require an experienced technology provider who can understand your business, implement you quickly without much disruption to the day to day running of your team, respond quickly to complex questions and issues and grow along side of your operation.
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