Risk Management in Treasury Tech Trials: A Detailed Analysis

This report analyzes the article 'Treasury Tech Trials,' focusing on the evolving role of treasury management and the associated risks in today's dynamic market. It highlights the shift from decentralized to centralized treasury functions and the critical need for integrating treasury activities with core business operations. The analysis delves into the importance of effective technology, strong controls, and streamlined cash flow monitoring to mitigate risks, referencing lessons learned from the 2008 financial crisis and successful strategies adopted by companies like Acer and Toyota. It emphasizes the evolution of treasury cash management, the shift in focus to cash flows over traditional performance indicators, and recommends improvements through streamlined bank connectivity, standardized payments, optimized cash visibility, and comprehensive risk evaluation. The report also underscores the need for regulatory compliance and user-friendly technology solutions.

Finance- Risk Management
Introduction
The article Treasury Tech Trials deals with the evolving role of treasury from decentralised
or localised to centralised function. The article deals with the risk of evolving market and the
urgency for an active treasury coordination/streamlining with other core business activities
for effective management and growth of business. The article presents issues in current
treasury management system linking it with financial crisis that led to closure of many
financial institutions and grant of bail-out package by government. The report also highlights
the importance of Treasury Management System and monitoring of cash flows to meet cash
obligations in near short, short and long term.
Analysis
The article discusses about risks that have come to lime light since the financial crisis. The
risks are mainly lack of effective or updated technology and lack of effective control to
manage the latest technology. Thus, both risk move hand in hand and a latest technology like
a centralised ERP for the entire organisation must be coupled with a strong control over the
software for an effective functioning of the treasury.
The risk the article identifies have been dealt by many organisations like Acer, China
National Offshore Oil Corporation, Nissan, Toyota etc.
The lessons that have been learnt from the crisis is mainly the importance of manging the
cash and risk for the company. Further, the crisis highlighted the active role of treasury in
managing the derivative and cash risk of the company. The crisis averted the need for
companies to have an active treasury management with a regular or hourly update on the
exposure and the cash flow of the company in the dynamic and competitive market. The
company which fell prey to 2008 crisis includes Lehman Brothers, AIG was rescued and
many other giant enterprises. (Guardian News & Media Limited, 2019)
The crisis led to Evolution of Treasury Cash Management system as a strong need was felt
for the same. The balances in the treasury general account sore very high in US post 2008
financial crisis.
(Federal Reserve BAnk of New york, 2012)Further, the crisis shifted the attention of management
to cash flows from traditional performance indicators like EBITDA, sales, PAT etc.
( AlixPartners, LLP. , 2017)
The methods through which corporates can improve their treasury technology function shall
include streamlining the bank connectivity with the treasury for an effective update on the
current cash position at any instant of time. The method of bank connectivity encompasses
Web based electronic banking system, SWIFT etc. The second step shall be making
payments standardised and centralised which will help a company to reduce fraud and check
on cash flows. The third shall be optimising cash visibility such that the projected cash flows
of all the business can be maintained at a single base through single enterprise wide ERP. The
fourth step shall be evaluation and management of risk through information of various
exposures and market trends etc. Further, treasury should navigate the regulatory landscape
and shall reduce the compliance cost. Further, the technology adopted shall be least complex

and easily understandable and customised to user needs. It should be a vendor implemented
methodology and support structure for standardisation of goal. (FIS, 2016)
Thus, the following solution may be adopted by corporates.
References
AlixPartners, LLP. , 2017. Lessons for Treasury Management from the Financial Crisis. [Online]
Available at: https://legacy.alixpartners.com/en/Publications/AllArticles/tabid/635/articleType/
ArticleView/articleId/331/Lessons-for-Treasury-Management-from-the-Financial-Crisis.aspx
[Accessed 23 March 2019].
Federal Reserve BAnk of New york, 2012. current issues. [Online]
Available at: https://www.newyorkfed.org/medialibrary/media/research/current_issues/ci18-3.pdf
[Accessed 23 March 2019].
FIS, 2016. Which regulatory charges are of concern?. [Online]
Available at: https://www.fisglobal.com/-/media/fisglobal/files/whitepaper/treasury-technology.pdf
[Accessed 23 March 2019].
Guardian News & Media Limited, 2019. Three weeks that changed the world. [Online]
Available at: https://www.theguardian.com/business/2008/dec/28/markets-credit-crunch-banking-
2008
[Accessed 23 March 2019].