Porus Mistry Updates : Payment Automation worth Investing in the Opportunity

Recent research jointly conducted by Capgemini Consulting with the Massachusetts-based MIT Center for Digital Business suggested that the vast majority of business executives (over 94% of those surveyed) see digital transformation as an opportunity. This observation also applies to electronic payments. A similar percentage believes that electronic payments are either critical or very important to the efficiency and success of an account payable department. That is why corporations and financial institutions continue to make significant investments to upgrade or overhaul their payments software solutions.

The benefits of payments automation are wide-ranging and include the following, to name only a few:

Reducing overall payment costs: Electronic payments methods have reduced staff time and effort to execute payments while enabling end-to-end automation and reconciliation, leading to greater straight-through-processing (STP) and lower processing costs.

Removing paper from the accounts payable (A/P) department: Companies which implemented payment automation claim that formerly typical problems, such as late payments and operational risks now belong to the past. Staff members are less stressed and suppliers are paid on time, thanks to minimal paperwork.

Reducing the risk of payment fraud: The improvement of risk prevention – both internal and external – and detection is a very important benefit of payment automation.

Better cash management: Payment automation allows the enterprise to gain a rapid overview on A/Ps and receivables. The enterprise treasurer /management can be more aware of what the future holds and take better business decisions for transactions investments and others.

Access to benefits of new technologies: One last – but not the least – reason why enterprises implement payment automation is the access to benefits of new technologies and digital transformation. The setting up of the payment software is sometimes a first step on the journey to fully digitise back offices or to fully integrate the front and back offices. This is an opportunity to mobilise the organisation around a project that affects almost all departments and draw valuable lessons for the future.

Without a doubt, operations, technology and people can reap many advantages from payment automation. Despite the benefits outlined above, many companies are still reluctant to embrace it. Why? There are also several obstacles, which include some or all of the following:

Supplier resistance: Liquidity mismatch – triggered by limited synchronisation / timing of inflows and outflows – and concerns over sharing private financial information over an electronic channel are leading causes of resistance. Added to that, if an important supplier does not adopt e-payments the cost of parallel infrastructure maintenance can rise drastically.

Incomplete and inadequate e-payment solutions: Despite the many solutions available in the market, many companies struggle to find solutions suited to their goals and expectations. Some companies are forced to consider multiple solutions to cover their needs completely. As a result, the integration and maintenance costs rise. Payment services providers (PSPs) remain focused on specific areas in the enterprise, which can be problematic particularly for global companies. A good example which illustrate that PSPs are not always able to provide their solution globally, is an on-going project at International Co. They decide to implement several different PSP solutions in order to cover their diverse needs. Connecting to a new PSP for a large company is always a challenge, because all PSPs have their own interface, reporting and servicing methods. All of these should align with the standard processes of a company and should also be integrated with – primarily – their legacy systems. A handful of challenges in total.

Lack of integration between e-payments and other back office systems: Misalignment between corporate accounting and electronic payments systems is another obstacle for the adoption of payment automation. The existing accounting systems function in ways that do not allow or require costly integration efforts. Consequently, residual processing is performed manually. As a result many companies then decide, typically, to either postpone their investments or even not to implement a solution at all.

Inadequate IT resources: The combination of legacy back office systems and insufficient operational and technical skills is a major hurdle to the adoption of payment automation. To give an example: A manufacturing company wanted to manage a payment automation project relying on internal skills. Within a couple of months, the project fell behind schedule and drifted significantly from the desired goals. Fortunately, its team understood quickly that the skills were inadequate and looked for external help before it was too late.

No management buy-in: The lack of executive sponsorship leads to poorly managed projects without any clear vision on the outcomes and benefits for the organisation. In fact projects fail because critical decisions were not supported by top management.

What Payment Services Providers have done to Address the Issues

PSPs are aware of the challenges faced by their potential clients to implement payment automation systems and have undertaken some actions to better meet the needs of companies and organisations.

A holistic approach is necessary to address all the needs of the organisation: As discussed, PSP offerings do not support the needs of their clients in total. PSPs are working on solutions which will enable them to firstly cover the needs of almost all departments in the organisation (procurement, finance, payroll, etc; secondly to use flexible technologies such as service-oriented architecture (SOA) to extend the functionalities of their solutions to meet requirements of specific users in a company; and thirdly to focus on value-added services such as reporting, payment security and control and compliance. Such functionalities enable platform rationalisation, which supports the business case. While there might still be a long way to go, PSPs that have taken this path to differentiate.

Complete payment solutions suited for particular sectors: PSPs that focus on a particular sector with the aim of providing complete solutions can better cover their clients’ needs, build successful relationships and outperform their peers. Consider, for example, a firm that specialises in solutions for the health care sector. ‘The company is transforming the industry with a 360 degree approach to revenue cycle management, enabling providers to get paid more, faster. This is enabled through automation of the four components of the revenue cycle: patient access; insurance and third party claims; insurance and third party remittance and payment; and patient billing and payment.’ Today, the company has connections to more payers, providers and vendors than any other competitor in the marketplace.

Facilitating integration of e-payment solutions with existing A/P systems: Along with SOA-based integration, customisation of solutions for liquidity management and reconciliation have been key to driving value for clients. For example, in the case of reconciliation, the criteria that matter for payment reconciliations vary depending on the sector and companies. PSPs have enabled their solutions to offer the flexibility required.

PSPs have undertaken many initiatives to improve and customise the solutions to drive client adoption. As integrator of some PSPs solutions, the authors are convinced that additional aspects can be adopted to be more successful in helping organisations adopt e-payment automation projects.

The further aspects to help successful implementation of e-payment automation include:

Payment process standardisation across the whole company is a must to get the most out of a payment automation project, which concerns almost all departments in a company – not only the A/P department as some assume. A best practice is to review all payments-related processes across the organisation. Standardisation helps people rapidly understand processes and communicate and over the long term, training costs can be significantly reduced. Process owners should be appointed for the standardisation. It is recommended to choose experienced, highly skilled people with a very good knowledge of the company.

Obtain management buy-in: Every corporation should consider the amount of cultural change that will accompany transformational initiatives if payment automation is to be successful. Automation solutions need management’s backing at all levels because they bring about radical changes in A/P operations. Obtaining management buy-in is not always an easy task, particularly when the advantages that such a project can bring are not perceptible for the top management. A good approach is to create a business case where it can be clearly demonstrated that short and long term benefits are linked to the project. As an example, a telecommunication company was looking to implement payment automation software. Management was convinced it was the right thing to do, but wanted to postpone the project to later because they believed other projects had higher priority and a better return on investment (ROI). The business case revealed that the project had a much better return than initially expected and that it could be done in a shorter time. The project was launched with a member from management as project sponsor.

Find the right IT skills to implement payment automation: To improve the chance of success, companies should conduct an internal assessment of process, technological and human capabilities before launching a payment automation project. A lack of internal assessment leads to a lack of understanding of the many technological capabilities and enablers available to the enterprise for payment process efficiency. So the internal assessment should help management understand if the company is ready to accept all the changes required by the project and if the right IT skills and capabilities are available to carry out and deliver the project. The assessment should be done in an objective and factual way. The pitfall in this exercise is to minimise weaknesses or exaggerate forces. Find a solution to address each weakness if there is any. Hire people with the required skills or subcontract the project where necessary.

‘Lite Solutions’: With advancements in technology, leading solution providers are providing lite e-payment solutions that require a low implementation footprint, typically in a software as a service (SaaS) mode. Services are provided in a ‘pay as you go’ commercial model that improves chances of business case approval. An evaluation of such solutions is highly recommended.

In conclusion, Payment automation yields increased productivity, efficiency, and greater visibility. Providers have done much to improve their solutions and adapt them to the new market demands. But PSPs and companies should carefully consider how they want to approach payment automation implementation projects for a faster and successful implementation. It is one thing to know what to do, but another to do it in the right way. A good practice for success is to standardise payment process across the company, absolutely obtain management buy-in, find the right skills to implement the projects and take advantage of SaaS like solutions.

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Porus Mistry Updates : Need to build a Stronger Supply Chain

As liquidity dries up in the face of Quantitative Easing (QE) changes and companies seek to access their own cash faster, banks need to devise new solutions to meet the needs of corporate.

While there was still sufficient liquidity for a time after the 2008-09 global financial crash any excess liquidity is now expected to steadily drain away and smaller distributors are becoming concerned about whether they will continue to have enough financial support.

To address this need for liquidity, companies want to Elongate Days Payable outstanding (DPO) by shifting from payment requirements of 30 days to 45 days or longer, for example, without a major impact on their suppliers. Furthermore, corporates want to move deeper into the supply chain and enable funding for their Tier 2 suppliers – aka the supplier of suppliers, such a company that provides rubber for a shoe manufacturer.

One solution was pre-shipment financing for the Tier 2 suppliers. The challenge, however, was that those Tier 2 suppliers may not be sufficiently creditworthy. What banks were then doing is to go beyond just those Tier 2 suppliers’ financial strength to look also at supply chain linkages, the importance of the Tier 2 supplier to the larger company, their percentage of sales to the larger company and the unresolved rejection rate between the two firms. In an environment of sluggish growth, companies able to facilitate this pre-shipment financing for their Tier 2 suppliers both create a differentiator for their supply chain and also ensure their distributors are equipped to sell.

In an Asian context, two things are especially important for financing a Tier 2 distributor.

1. The distributor often needs to make payment before goods are actually sold. An automobile dealer who needs to pay the manufacturer within 15 days, for example, may not sell cars that fast and therefore needs financing. Providing that financing ensures that the Tier 2 company has the financial support it needs and also helps them sell more products.

2. More financing means the Tier 2 supplier has more goods available that it can promote and sell.

From a corporate perspective, the current situation requires a different way of thinking. Whereas companies financed their distributors with surplus cash – even though they were not getting good returns in the past – now that liquidity is expected to tighten they are looking at alternatives for stable funding for the supply chain.

While a corporate’s channel partners are good at their business and their products may be so strategic for the corporate that there will be significant difficulties if the Tier 2 company defaults, the Tier 2 company may not have a strong balance sheet. Pre-shipment financing offers an alternative and while it requires both banks and corporates to understand the entire supply chain better, from a long-term perspective the new model offers the advantages of stable financing to the corporate.

Additionally, although it still is often difficult for a corporate to determine whether a Tier 2 company requires financing, as the cash management and supply chain divisions were separate, many banks have also enhanced its technology to make access to that funding easier. With the enhanced systems that links the two divisions and suppliers together, suppliers can notify the corporate when they want financing and the corporate can pass that information to the bank for consideration of vendor pre-payment.

Making Cash More Visible

Along with financing a further key need for corporates is cash visibility and management so that they know where the cash is and how to move it. One key part of this visibility is reconciling payments.

When a company gets paid, it needs to determine what the payment was for and which invoice it matches. Most companies set a limit on the outstanding amount to a single distributor, so a delay in matching the payment to an invoice may reduce sales because the company won’t sell more to its distributor until a payment is confirmed. Since matching invoices typically takes at least three to four days, cash gets stuck in the supply chain.

To solve the problem, many banks have developed a two-pronged solution.

1st.. It offers a virtual account, whereby a company has one main account and then creates virtual sub-accounts for each invoice so that the distributor can reference the sub-account and enable the company to match the payment with the invoice more quickly.

2nd.. It has created an advanced reconciliation management system to match invoice details with payments and inform the company of the level of match it has identified.

The two solutions combined can help a corporate increase sales by freeing up part of the limit faster.

To explain it more in detail, wish to give an example :

The bank is working with a large manufacturer of farm equipment that sells equipment through nearly 500 distributors in small cities in rural areas. Upon analysing payment flows, the bank found that when distributors paid the company at a small local bank in a small town, the payment would travel through a series of smaller-town banks to the larger city where the company had its account. During this extended process, much of the invoice detail would be lost along the way. When payments arrived the manufacturer could, at best, know who was paying but often could not match the payment to a specific invoice. When a distributor wanted to order more, the manufacturer would then retort that the distributor had not paid.

To address the problem, linking the systems to both the manufacturer and the distributors, and then giving the distributors a unique account number for each purchase order. This enables the distributor to pay into a dynamic virtual account, which the manufacturer uses to know who paid and for which invoice.

Conclusion

While liquidity may be tightening, leveraging new solutions can enable corporates to keep their supply chain functioning smoothly and free up cash in their own system faster so that they can increase their sales.
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Regards.

Porus Mistry

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Porus Mistry Updates :- In-house Banking: Efficiency or an Outdated Concept?

Once upon a time the function of an in-house bank (IHB) appeared to solve a number of issues for central treasury. Perhaps the most important of these was to bridge the gap between low investment return in one location and high borrowing costs in another. It also mitigated currency exposures resulting from different business units taking opposite positions in the same currency. Clearly, it was preferable to create an environment where only net borrowings/investments could be managed through an IHB and where central treasury would net internally and trade to hedge the company’s overall net global position in each currency.

It was also believed that combining group-wide surplus cash available for investment and pooling borrowing requirements would somehow put a company in a much stronger negotiating position in terms of investment return and borrowing costs. Moreover, reducing the number of external bank accounts would mean lower transactional banking charges, less time would be spent on account reconciliation activities and staff could be deployed on other, more value-added activities. This would, in turn, have a positive effect on individual career progression as well as headcount unit costs. A centralised in-house banking team with all the specialist skills required to operate like a bank was regarded as preferable to depending on local subsidiary staff operating in isolation and often with little involvement or control from central treasury.

An IHB thus quickly became the solution to solving issues associated with global working capital management and, subject to tax regulations, it evolved into an operation with responsibility for certain key activities:

Deposit taking: Business units’ surplus funds would be transferred to the control of the IHB for on-lending to other business units. The depositing subsidiary would expect to receive a market, or better rate and the borrowing entity would be charged similarly at a market, or lower rate.
Current accounts: Each subsidiary maintains an interest bearing current account with the IHB, which is used to settle inter-company transactions.
Cash forecasting and planning: Generally, cash forecasting is typically viewed over three time periods.
Up to one week: carried out by the business units for their own use to enable them to manage day-to-day cash. Any small shortages or surpluses would normally be covered through centrally managed cash pools where these have been introduced.
Monthly forecasting: three to six months out and rolling forward used as a reporting and management tool by central treasury to manage surpluses or shortages and used as an operational planning tool by the IHB.
Annual forecast: may also be attached to the annual budget, but is likely to be of marginal use as a treasury tool other than to identify, for example, new capital expenditure or structural surpluses/deficits.
Liquidity and working capital management: The IHB manages all the cash balances in each currency generated in business units around the world, by aggregating the funds held in the IHB accounts and ensuring their proactive and efficient investment to maximise returns within prudent parameters relating to risk, instruments and maturity. This will include setting up cash pooling arrangements. Working capital management entails looking at the whole supply chain from a financial and cash perspective and identifying areas for improvement; such as sales invoices outstanding and methods to improve collection of receivables, creditor invoices outstanding and better ways to pay suppliers, input into the management and monitoring of credit periods and discounts for early/prompt settlement.
Group borrowing and investing: Instead of business units depositing surplus funds locally or borrowing through local facilities, central treasury carries out these functions. Business units with surplus funds will lend them to central treasury, which will aggregate them and either invest the aggregate in the market or pay down existing group debt.

Add to the mix the attraction of centralising treasury foreign exchange (FX) dealing in an IHB, net settlement of inter-company transactions and a payments factory, and the result is the creation of a treasury function responsible for more than just managing liquidity and risk. In addition, the IHB is expected to provide a browser-based balance and transaction reporting service (instead of business units taking a service from each bank used) and often elects to centralise management of all bank relationships and authorised signatories through an electronic bank account management (eBAM) style service.

Does an IHB Still Make Sense?

Treasury has become a focal point for all things banking. Accounts need to be opened and closed, transactions to be processed, borrowing and lending rates to be updated and circulated to remote business units, currency exchange rates to be made available, statements to be provided and queries to be handled. The list is seemingly endless.

All to what purpose?

Control and visibility were the arguments in favour but does that necessarily require a traditional in-house banking model? The very concept of an IHB suggests people, processes, segregation of duties, regulation and compliance. As organisations grow – often through acquisition as well as organically, and frequently into new markets – it is difficult to sustain best market practice in the face of growing cash management complexity. The effect of having additional currency risk to manage, for example, as well as more bank relationships and counterparties, can have a significant impact on the existing IHB. So much so that unless properly planned and executed immediately after absorbing the new business, integration of the additional responsibilities into the IHB is often deferred or delayed resulting in a two-tier style treasury operation.

The cumulative effect of continued growth simply adds to the problem, with the risk that treasury and the IHB are unable to keep up with change. This often results in duplication of effort and a shift away from the efficiencies that an IHB would otherwise ensure. Treasury management consists of a centralised model, the in-house bank, and potentially different models elsewhere in the other newly-acquired or opened business units each with their own unique characteristics in relation to working capital management, probably additional bank relationships and almost certainly different compliance and reporting practices.

What Should it Look Like?

As organisations expand into new regions treasurers continue to face increased complexity in managing cash and risk. It used to be that the treasury function was primarily based on transaction management, reporting and regulatory compliance. Nowadays, treasurers are responsible for much more than just operational efficiency. Many are expected to make a strategic contribution to the management and day-to-day running of the company. The essence of an IHB is the centralisation of certain key functions in order to achieve better investment return, lower borrowing costs and economies of scale. Control and visibility are still required, but does the concept necessarily mean that the functions of an IHB all need to be located in the same place?

Improvements in treasury technology, particularly in the introduction of delivery via software-as-a-service (SaaS), have changed the landscape of the typical treasury and cash management model to such an extent that a ‘virtual’ IHB is more feasible than perhaps it ever was. Treasury functionality can now be deployed securely over the internet, while connectivity to dealing counterparties and banks is technically easier and there are multiple ways in which it can be achieved. Internal IT involvement is significantly less, reducing internal treasury overhead costs and access to critical data, which is stored centrally, is both faster and available to any authorised user irrespective of their location.

Creating internal ‘centres of excellence’ becomes less of a headache when the choice of location is not driven by the availability of the required treasury skills and where potential candidates are not required to relocate. Major market centres in Europe, the US and Asia-Pacific are more likely to be able to provide staff with advanced cash or risk management expertise but this is of little benefit to corporate treasury functions in the new emerging markets. There is no reason, for example, why global risk for a multinational corporate based in China cannot be managed out of London. Enabling technology to essentially bridge the resource gap makes acquiring the right skill sets easier and centralising treasury management as effectively as if the team were all located in the same corporate headquarters.

SWIFT, as well as other third party treasury management systems, are able to consolidate daily account balances held in bank accounts in different banks, which themselves are located in different countries. Data can easily be reported into central treasury for cash management purposes and combined with forecasts submitted by in-country corporate financial controllers so that informed decisions can be made in terms internal borrowing requirements, for example. Exposure to counterparties and currency fluctuations can be monitored automatically as positions are updated as soon as each transaction is entered into the system providing group treasury with the information necessary to determine an effective hedging strategy.

Regards

Porus Mistry

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Porus Mistry Updates :- Critical Areas for Treasury

Since the financial crisis in 2008, the treasury role has changed and become more strategic. The importance of treasury to the organisation has increased, with much more emphasis on cash management and forecasting, working capital management and above all operational risk management.

While the importance of treasury to the organisation might have increased, the relative importance or ranking, of core treasury functions has not changed. Corporate treasurers think that the three areas of greatest importance to their organisation in 2012 are:

1. Cash management and forecasting.
2. Operational risk management (ORM).
3. Working capital management (WCM).

According to a recent survey which I was going thru, Ninety-one percent of respondents believe that cash management and forecasting is “important” or “very important” this year, compared with 73% who believed that this was the case a year ago. More than eight out of 10 (82%) view operational risk management as important, whereas 79% think that working capital management is a key discipline.

Other areas ranking in the top five services of treasury include banking relationships (counterparty risk analysis), which was chosen by 76%, and financial and capital allocation (68%).

Single euro payments area (SEPA) solutions and treasury outsourcing are viewed as the least important areas this year. Interestingly, even today treasurers do not believe that eurozone breakup contingency planning is of great importance to their organisation, with only 17% believing that it is “very important” and 16% thinking it “important”. It is, nonetheless, more than the 9% who thought it was an important or very important issue 12 months ago.

Breaking down the results by region, financial and capital allocation makes it into the top three areas of importance for corporates based in Asia-Pacific (chosen by 78% of respondents), while North American corporates are more interested in supply chain management (SCM) and new technology and systems than corporates in other regions.

The results suggest that treasury’s role in new technology and systems may be more important to organisations with annual revenue below US$1bn. And more respondents at smaller organisations also see treasury activity/service in banking relationships (counterparty risk) as more important.

Despite the fact that outside challenges are increasing, as well as the importance of services to the organisation, the portfolio of treasurer/treasury responsibilities has remained largely unchanged over the past 12 months. The similar percentages of respondents indicate treasury has ownership, both today and 12 months ago, for, in descending order:

• IT/systems in treasury.
• Capital markets/investment.
• Credit risk management/mitigation.
• WCM.

Next-level responsibilities also appear unchanged over the past 12 months.

This may indicate that, while the role of the treasurer expanded quickly in the aftermath of the financial crisis, treasurers are now working to cope with the new remit without a corresponding increase in staffing levels. A mantra voiced throughout treasury across all industrial sectors is “doing more with less”.

There may be some differences in responsibilities between western Europe and North America. For example, 63% of North Americans indicate that treasury has ownership for WCM versus 35% of western European respondents. Two-thirds in North America have responsibility (own or monitor) insurance versus about one third of western Europeans. Fifty-eight percent of western Europeans, in turn, own trade finance, compared with 30% of North American respondents.

Treasury Success Factors and Areas of Improvement

Success factors for the treasury function align with core organisational needs. The most importance success factors are:

• Risk management effectiveness.
• Liquidity targets.
• Improving working capital efficiency.

Western European respondents view risk management effectiveness as the most important success factor, whereas improving working capital efficiency is first for North America-based respondents, of whom 88% provide a top two rating versus 57% for western Europeans.

Reduced borrowing costs, the third most important service 12 months ago, dropped to fourth place. This area remains higher in the rank order for western European respondents (third) than for North American respondents (sixth), despite treasurers in both regions selecting it about equally.

Interestingly, ORM is rated as one of the three most important treasury activities/services to the organisation and risk management effectiveness is rated as the leading success factor for treasury. However, operational risk appears to fall lower among treasury responsibilities, with treasury playing more of a monitoring role (as it does with merger and acquisition (M&A)) than an ownership role: only 21% say that they “own” this process, while over half (56%) say they “monitor” this activity. From this result one could conclude that the treasury function would like more ownership of operational risk, to meet organisational expectations or to increase its business impact.

The highest-rated opportunity for treasury to enhance performance in the financial supply chain is by improving operations through automation (77% of respondents cited this option). For at least three quarters of all respondents, the five most important opportunities to increase automation are in areas of:

1. Cash management with 89% ranking this within the top two ratings of importance.
2. Cash forecasting (83%).
3. Account reconciliations (82%).
4. Payments processing (75%).
5. Liquidity management (75%).

Treasurers see that the negotiation of commercial and payment terms represents a second major opportunity to enhance performance (69%) by targeting the financial supply chain, particularly in North America.

Treasurers See Limited Regulatory Impact

Regulations/directives appear to have a fairly limited impact on organisations’ business, with the exception of International Financial Reporting Standards (IFRS), which significantly affects about three in five. Less than a third of respondents report a great impact to their organisation’s business from SEPA, Basel III and the Payment Services Directive (PSD). Even fewer organisations have seen a great impact from other major regulations/directives. There has not been a significant change in perception from 12 months ago.

As expected, SEPA and the PSD have a greater impact on western European companies, with 46% and 41% of respondents respectively ranking these regulations within the top two categories.

Potential Threats to Business

Negative economic growth/recession remains the greatest threat to treasury business, according to 73% of respondents who chose this option within the top two rating categories, along with stability of the banking system. Slow economic growth is ranked third as a potential. Interestingly the ratings are higher today than 12 months ago, possibly reflecting heightened risk/uncertainty.

Exchange rate volatility, the third most important threat in the last 12 months, is fourth today overall, although it remains in third place for western European respondents.

Overall, the euro crisis/contagion threat has increased in importance today versus 12 months ago. While emerging in Europe, the euro crisis/contagion appears to be as much of, or possibly more important, a threat to North Americans (70% of North America-based treasurers rank this within the top two rating categories versus 56% of their western European peers). Just 24% of North Americans indicate the euro crisis/contagion was an important threat 12 months ago.

I feel, although the treasurer’s role has undergone enormous change as a result of the 2008 financial crisis, this year has seen more stability in the role and its remit. Treasurers are reporting an increased importance to all their functions, but the relative importance (rank order) of core treasury functions has not changed, nor has the portfolio of treasurer/treasury responsibilities. The constrained resources in treasury may mean that treasurers are not looking for extra responsibility to take on.

That said, risk management is an area that treasurers are concerned about and would like more ownership of. ORM is rated as one of the three most important treasury activities/services to the organisation and risk management effectiveness is rated as the leading success factor for treasury. However, operational risk appears to fall lower among treasury responsibilities, with treasury playing more of a monitoring role to date.

Looking at potential challenges for treasury, negative economic growth/recession remains the greatest perceived threat to treasury business. Stability of the banking system and slow economic growth are also at the top of the worry list, whereas exchange rate volatility is less of a concern today as it was last year. The euro crisis/contagion fear has increased in importance and is spreading well beyond Europe, which may well be an indication of things to come.

Regards

Porus Mistry

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Porus Mistry Updates : France, EURO Zone, Liquidity Management

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Porus Mistry Updates : Debt Management – An Overview

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Porus Mistry Updates : When the Well Runs Dry !

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Porus Mistry Updates : Nomination Facility

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