Market turmoil: the treasurer's point of view.

• Author: Gallanis, Mike
• Position: Treasury

The massive changes roiling the banking industry during the last six months have been completely unprecedented. The industry landscape has been irrevocably altered, making the role of corporate treasurer a 24-hour-a-day job.

Understanding how vast changes in the marketplace have affected corporate treasurers is essential to maintaining an effective and strategic treasury function within an organization. The major changes fall into five key areas: changing priorities; investment practices; technology; risk management; and banking.

Changing Priorities

Overall, there is a great deal more communication occurring both within corporations, as well as between organizations and their vendors and suppliers.

In many companies, treasurers are now receiving daily phone calls from their chief financial officers. These conversations usually focus on questions regarding cash positions, forecasting, working capital, foreign exchange exposures and access to global liquidity.

This heightened focus on treasury by the CFO is a relatively new phenomenon. It truly underscores the importance placed on the security and preservation of capital, thus creating a tremendous need for real-time information on current financial markets and banking activities.

Predictably, priorities have changed.

The highest priorities are now:

* compliance with all covenants;

* access to liquidity;

* visibility of global cash and risks; and

* establishing the necessary technology framework to provide all of these capabilities.

Investment Practices

Because of concerns surrounding access and visibility to cash, treasurers have been turning to securities with shorter-term maturities. Basic services and tools for monitoring credit ratings and risks have become less dependable.

Thus, a new appreciation for government securities has developed within the world of short-term investing.

Additionally, treasurers want to "look under the hood" of money-market mutual funds to see the underlying instruments and understand what the funds are invested in.

This effort to understand underlying instruments is a direct result of the failure of several more esoteric financial instruments that were once thought to be safe, reliable vehicles for investment, such as auction-rate securities.

Technology

Technology systems have also risen in importance within the world of treasury management because of their ability to provide near real-time information and visibility to cash, transactions, foreign exchange...