The financial crisis has strengthened the ties between Swedish treasury departments and their businesses as well as top management, according to a new survey by TradeTech Consulting. Findings suggest that new legal requirements have brought treasury to the forefront of organisations, which will hopefully leave banks and corporations better prepared for the next financial crisis.
TradeTech Consulting conducted in-depth interviews with eight Swedish treasuries ranging in size from fewer than 10 to more than 50 employees.
Most survey participants felt that they had better control of financial data globally, better contact with management and the rest of the organisation, and a better view of the overall financial picture. Many also felt that the crisis gave them a reason to take initiatives that they otherwise wouldn’t have taken. There was now more focus on questions normally handled by the treasury such as risk management, credit, working capital, and cash flow management.
“The perception of the treasury has changed quite significantly during the crisis and has come closer to the underlying business and to top management. Treasury now gets more attention and has taken a more advisory role,” said Joakim Wiener, chief executive officer (CEO) of TradeTech, in an interview with gtnews. “In general, it is moving back to basics.” He said that this represented a trend over the past decade, which was accelerated by the financial crisis. “Treasury evolved from being a profit centre to a cost centre, and is now a hybrid of the two. The function of treasury has returned to being an advisory role for local companies within a group, for example, rather than experimenting with exotic products and innovations.”
Risk remains a key focus. “What is coming through quite clearly is that there is a pressure on them to gain more control over geographical exposures and risks, or counterparty risk. That has already improved – all the companies surveyed have better control over their exposures today than a year ago,” said Wiener.
Despite this positive picture, most felt that their technical infrastructure could be improved. Producing clear and relevant reports directly from the treasury system was difficult for all but one of the survey respondents. While the treasury system handled all calculations adequately, most moved the data into Excel spreadsheets in order to produce management reports. The only treasury in the survey that didn’t was also the only one with a customised data warehouse.
Wiener said that, despite varying levels of system complexity, all treasuries participating in the survey had considerable unused functionality. “They are trying to increase the standard system functionality and decrease the amount of data manipulated outside the system. When data is exported, to a data warehouse for example, it should be purely for analysis and reporting purposes,” he added.
Other trends highlighted included the fact that methods for reducing counterparty risk, such as credit support annexes (CSAs) and continuous linked settlement (CLS), are becoming increasingly common among corporates, having previously been used almost exclusively by banks.
The survey also found that:
- The treasury became a corporate function focused on serving the financial needs of its organisation rather than acting independently out in the wings.
- Top management now has a better understanding of the treasury function.
- There is an increasing demand from the business for treasury services.
- The treasury has gained better control of the financial activities of business units globally.
- Internal transfer pricing is an important question for treasuries.
- Most treasuries have an adequate IT infrastructure, but there is room for improvement.
- The use of Excel for risk calculations is not prevalent among those Swedish treasuries that have a treasury system, although most use it to produce reports. Those who do not have a treasury system, or who do not fully exploit it, feel that they use Excel too much.
- Most treasuries had considered the use of business intelligence to aggregate data and produce information, but only one had actually built a data warehouse.
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