One of the key attractions in treasury is the ever-changing environ-ment in which a treasurer operates. Not a year goes by without thepassage of a new regulation or an economic crisis in some part of theworld that could severely impact a companys liquidity and profitability.Globalization further complicates the treasurers role, as considerationsfor foreign exchange and counterparty risk need to be made.

The results of a recent SunGard survey of senior treasury profes-sionals reveals that gaining a holistic view of risk across the enterpriseis a top priority in this rapidly changing environment. Although heavi-ly weighted toward risk, the surveyed executives said their other prior-ities include streamlining bank communications and consolidatingpayment flows.

Gaining a Holistic View of RiskToday, a growing number of companies of all sizes are becomingglobal, resulting in many risk implica-tions, especially when it comes to FX,interest rate, commodity and opera-tional risk. For example, when a com-pany buys or sells anything from out-side its home country, and the transac-tion is denominated in a currency oth-er than its base currency, the companybooks an expected payment based on the exchange rate that day.

Any changes in the exchange rate between invoice and actualpayment present risk. The further out in time the payable or receivableis expected, the greater the risk given the time effect on changes in themarkets. Those who regularly monitor the currency markets noticethat exchange rates change roughly two to three times a second.

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

Increasingly important among global companies is a treasury solu-tion, specifically designed to identify, manage, test and report on therisks associated with doing business in a global environment. A treas-ury solution at its most basic level is a consolidation tool to retrieveand aggregate data from the multiple banks for which it holds ac-counts. This information is pulled through direct connectivity to banksor manually downloaded as a file that is then compiled into a cashposition. Layer onto that the known financial events of the day and atreasurer can obtain a good idea of what will need to be borrowed orinvested globally not just today, but in the months and years ahead.

Bank Communications and Payment Flow ConsolidationTo pull together information in a timely and usable fashion, a treasurydepartment must rely on efficient bank communications. Typically,this connectivity has been provided by the banks themselves, but inthe event a corporation has a sizeable number of bank relationshipsand accounts, maintaining the many links to the banks is no smalltask.

Banks have offered consolidation services to report on otherbanks data, but of course that comes at a cost.

The growth in other non-bank networks has been significant in re-cent years. The primary provider in the bank communication world isthe Society for Worldwide Interbank Financial Telecommunication(SWIFT).

SWIFT is open to corporate membership through its SCORE pro-gram and provides corporations access toservices from multiple banks via a singlepoint of connectivity. It provides portabil-ity and as close to real-time cash report-ing as possible, along with the capabilityof transmitting payments across an in-credibly robust and resilient network.

Enhancing the capabilities of treasurysolutions and taking the workflow and volume capacities to higherlevels is typically the domain of payment factories, which operate byimporting payment data in multiple formats and normalizing that datainto a format that can be transmitted to the payment banks. These maybe localized or standard SWIFT message types transmittable to banksdirectly or through SWIFT interfaces.

They add the ability to handle very large volumes of data, to nor-malize and report on exceptions easily and to feed that information tomultiple systems for cash positioning and reporting. The major bene-fits accruing from a payment factory include routing paymentsthrough the lowest-cost means of payment, removal of the need for lo-cal bank payment platforms and fraud reduction.

The priorities of corporate treasurers, as noted in the SunGard sur-vey, reflect prevailing wisdom and trends regarding treasury depart-ments today. Fortunately, technology providers are rising to the occasionwhen it comes to managing financial risk, bank communications andpayment flows.

TREASURY BY PAUL BRAMWELL

Not a year goes by without the passageof a new regulation or an economic crisis in some part of the world thatcould severely impact a companys

liquidity and profitability.

Holistic Review of Risk:Top Priority for Corporate Treasurers

Reprinted with permission, Financial Executive, March 2012 . 2012 Financial Executives International.By IPA Publishing Services www.reprintdept.com 800-259-0470 (12538-0612). For Web Posting Only. Bulk Printing Prohibited.

Paul Bramwell (paul.bramwell@sungard.com) is senior vicepresident of treasury solutions for SunGards AvantGard. He isbased in Hartford, Conn. www.sungard.com/avantgard