Holistic review of risk: top priority for corporate treasurers.

• Author: Bramwell, Paul
• Position: TREASURY - Survey

One of the key attractions in treasury is the ever-changing environment in which a treasurer operates. Not a year goes by without the passage of a new regulation or an economic crisis in some part of the world that could severely impact a company's liquidity and profitability. Globalization further complicates the treasurer's role, as considerations for foreign exchange and counterparty risk need to be made.

The results of a recent SunGard survey of senior treasury professionals reveals that gaining a holistic view of risk across the enterprise is a top priority in this rapidly changing environment. Although heavily weighted toward risk, Not a year goes the surveyed executives said of a new regulate, their other priorities include, streamlining bank communications and consolidating payment flows.

Gaining a Holistic View of Risk

Today, a growing number of companies of all sizes are becoming global, resulting in many risk implications, especially when it comes to FX, interest rate, commodity and operational risk. For example, when a company buys or sells anything from outside its home country, and the transaction is denominated in a currency other than its base currency, the company books an expected payment based on the exchange rate that day.

Any changes in the exchange rate between invoice and actual payment present risk. The further out in time the payable or receivable is expected, the greater the risk given the time effect on changes in the markets. Those who regularly monitor the currency markets notice that exchange rates change roughly two to three times a second.

Similarly, the treasurer must cope with the risk associated with borrowing cash and investing surplus cash, as well as the price of commodities in the global marketplace.

Increasingly important among global companies is a treasury solution, specifically designed to identify manage, test and report on the risks associated with doing business in a global environment. A treasury solution at its most basic level is a consolidation tool to retrieve and aggregate data from the multiple banks for which it holds accounts. This information is pulled through direct connectivity to banks or manually downloaded as a file that is then compiled into a cash position. aver onto that the known financial events of the day and a treasurer can obtain a good idea of what will need to be borrowed or invested globally--not just today, but in the months and years ahead.

Bank Communications and...