Treasury visibility requires: hindsight insight foresight: the recent financial crisis has elevated the role of treasurers in organizations, particularly those relying more on new technology tools with the ability to provide better information to help mitigate risk and avoid future crises.

• Author: Jeffery, Craig
• Position: Treasury

Since the beginning of the financial crisis, treasury staffs have faced a range of emerging problems related to risk. While a sense of greater stability now seems to be permeating boardrooms, there is still significant attention paid to a range of risks. This attention has typically resulted in an improved view of treasurers who, on several crucial fronts, are using better technological tools to enhance their organization's capabilities around visibility.

Assessing the Crisis and Issues

Many treasurers feel that while the various risks and challenges that became painfully clear during the financial crisis of 2008 have subsided to some degree, by no means have they disappeared. Additional areas of weakness and risk have emerged or been amplified.

One early issue was instrument exposure. Auction-rate securities were the most emphasized. Their enhanced yields, with seemingly stellar safety features, seemed to merit use. They were AAA-rated and over-collateralized, backed by insurance and supported by the dealers.

These backstops quickly fell through when exposed to stress. Counterparty risk became a constant subject of conversation and fear for many treasurers. Enormous, centuries-old financial institutions were shaken, and a number of them fell like dominoes in rapid succession.

Sovereign risk as well as broader country risk seems to continue to spread. Concerns about the level of fiscal strength and discipline of many countries--including Greece, Ireland, Spain and Portugal--continue to vacillate at historically high levels. Other country-level risks have come into focus in the Middle East, with many countries facing political unrest and internal fighting.

Situations in the Middle East threaten energy supplies, and the related commodity prices have experienced increased volatility. In Japan, the earthquake, resultant tsunami and nuclear reactor disasters have created a significant hardship for Japan. Beyond the direct challenges facing the Japanese, however, these situations are testing various supply chains.

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Visibility and Sights: Where to Look

Given that risks are approaching from diverse fronts with alarming speed, what do treasurers need? With any risk or threat, they must understand their own exposures, as well as improve the means of viewing emerging risks and threats. Like driving a car efficiently, treasurers need to be concerned with hindsight, insight and foresight.

HINDSIGHT: THE REARVIEW MIRROR

Hindsight...