The Treasury Boot Camp is a treasury training program that covers treasury best practices, liquidity management, treasury risk management, treasury technology, internal controls and much more!   Over two days, Treasury Boot Camp attendees with study real-world examples of treasury and cash management best practices in an active learning environments.  Learn more about the Treasury Boot Camp by visiting: www.TreasuryBootCamp.com

Treasury technology is continuously changing... This is why treasury professionals should stay informed about treasury technology changes and how they may affect their job functions. The Treasury Technology Forum (www.TreasuryTechForum.com) is a one-day forum specifically focused on learning, discussing, brainstorming and documenting treasury technology best practices.

Listed below are some questions that will be discussed during the Treasury Technology Forum:

1. How do you create a treasury management system cost benefit analysis?
2. How would you create a treasury technology RFP scorecard?
3. How do you assess the effectiveness of your current treasury technology?
4. How might treasury management systems change in the next 10 years?
5. How are blockchains and distributed ledgers related? How might this affect treasury management?
6. What are the treasury processes that could be automated by artificial intelligence?

If you're interested in the answers to these questions, you may want to consider attending the Treasury Technology Forum. The Treasury Technology Forums are held in Chicago and registration is limited. Register today by visiting:

www.TreasuryTechForum.com

Financial executives should take note that the Federal Reserve recently began stress testing prolonged negative 3-Month US Treasury rates and how they would effect financial institutions.  Should CFOs & Treasurers be conducting similar scenario analysis as a proactive liquidity risk management practice?  

One of the key lessons financial executives learned during the 2008 financial crisis is that dramatic changes in the money markets can materially influence corporate liquidity positions.  The money market environment would be vastly different if the Federal Reserve were to implement prolonged negative 3-Month US Treasury rates.   As reported by Bloomberg, the reason why the Federal Reserve avoided negative rates during the 2008 financial crisis was because they wanted to avoid a "dangerous dislocations in the money markets." 

Bloomberg goes on to mention that the Federal Reserve stated that "This [negative rate stress test] does not represent a forecast..."  CNBC is reporting that the Federal Reserve is now using negative rates as part of their Dodd-Frank compliance to evaluate how financial institutions would react to "severely adverse" conditions.

Even though the Federal Reserve does not consider negative rate scenario analysis as a forecast, there are recent examples of central banks (ECB, BOJ, Danish National Bank, Swedish National Bank, Swiss National Bank) implementing actual negative rate policies.  (re:Bankers vs. Mattresses)  Therefore, the precedent has been set and the negative rate experiment has already begun. 

The start of the new year is an ideal time for Treasurers to reflect upon overall treasury strategies and goals.  Since TreaSolution's purpose is to help organizations in developing world-class treasury functions, we've compiled a list of sixteen treasury optimization projects that every Treasurer should consider for 2016. 

The list of treasury optimization projects range from basic treasury policy and procedures documentation to advance treasury and risk management analysis.  TreaSolution hopes that this list will assist Treasurers in creating a world-class treasury department by implementing treasury best practices and simultaneously documenting treasury optimization results.

1. Document and Benchmark Treasury Policies
2. Document and Benchmark Treasury Procedures
3. Document and Benchmark Treasury Internal Controls
4. Create and Monitor Strategic Treasury Management KPIs
5. Document and Benchmark Treasury Personnel Workload Allocation
6. Update Treasury Position Descriptions with the Human Resources Department
7. Create and Regularly Test a Comprehensive Treasury Disaster Recovery Plan
8. Benchmark Current Treasury Technology Against Options Available in Marketplace
9. Review Treasury Technology Access Permissions (Treasury Workstations, Bank Websites, Etc.)
10. Benchmark Bank Analysis Statements Against Contracted Fee Schedules
11. Review Current Bank Account Architecture and Corresponding Account Purposes
12. Document and Review Bank Relationship Management and Implementation Services
13. Confirm the Accuracy of All Bank Signers on Both Bank and Organization Records
14. Document and Review Current Foreign Exchange (FX) Risk Management Functions
15. Document and Review Current Insurance Risk Management Functions
16. Create a Detailed Cash Forecast and Regularly Discuss Results with Organization Leadership

What are your thoughts about this list of treasury optimization projects? Should any projects be added to this list?  What treasury optimization projects will your treasury department pursue this year?  Please feel free to add your comments below.

Conducting a treasury review / audit consists of documenting and benchmarking treasury processes, procedures and policies in order to create a strategic, multi-year improvement plan.   TreaSolution's treasury review consulting services has allowed us to gain extensive experience working with treasury departments in order to assist them in implementing treasury best practices.   Listed below are five reasons why a CFO / Treasurer would want to make a treasury review project a top priority.

There is a substantial learning curve for treasury department senior management (CFO, Treasurer, Assistant Treasurer, etc...) when they are new to the treasury department.  This is especially true if the treasury department senior management is also new to the company.  A treasury review / audit inherently shortens the learning curve for senior management because the treasury review will document all critical treasury processes, benchmark them against best practices and highlight both what is working well and opportunities for improvement.  What more could new treasury department leadership ask for when starting a new job?

Combining two treasury departments is a challenging process.   Combine two treasury departments while consistently implementing best practices is even more difficult!   Often there are time constraints when combining treasury operations due to mergers / acquisitions.  This often creates an environment of "just make it work" instead of "make it work well."   A treasury review after a merger / acquisition allows corporate treasurers to take a step back and critically analyze the combined treasury operations so that best practices can be implemented over time.

"It's always been done that way!" or "If it's not broken don't fix it!"  Under most situations having stable treasury personnel is a good thing!  Having stable treasury personnel is a reason for a treasury review because there are motivations for not disrupting known processes, technologies, procedures, policies, vendors, etc...   A treasury review / audit project is a catalyst to critically analyze all critical facets of the treasury department.   A treasury review project will analyze the business logic of each critical process, policy, et al. to ensure the implementation of best practices.

Has your organization outgrown your current treasury function?   Are your treasury personnel struggling with the volume & complexity of your organization's treasury management requirements.  If so, a treasury review will assist corporate treasurers in developing a successful treasury strategy that will foster secure and efficient treasury operations.   Business requirements dictate the scope of treasury operations.  Therefore, a treasury review / audit project will review all critical business requirements in order to develop a secure and effective treasury strategy.

All technology, including treasury technology, advances at an astonishing rate!   A key reason for considering a treasury review project is to help ensure that your organization is leveraging treasury technology effectively.  A treasury review will analyze the utilization of both current treasury technology (within the treasury department) and treasury technology which is available in the marketplace.   A treasury review will provide senior treasury management with a clear understanding as to how treasury technology can make a meaningful impact upon treasury operations, security and efficiency.

Ultimately, a treasury review project enables corporate treasurers to  have a thorough understanding of their treasury department operational successes, risks and opportunities.   A treasury review / audit project is a tool that successful treasurers utilize when developing a world-class treasury function. 

What road will you take to create the best possible treasury department for your organization?

Do you agree or disagree with this data?  Please feel free to use the comments to post your thoughts or questions.

Relevant TreaSolution Services:
Treasury Benchmarking Reports
Treasury Best Practices Review

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What is the tipping point?  When do large companies actually create a treasury department?  TreaSolution's research on this topic indicates that corporations typically create stand-alone treasury departments at approximately the $250 million / year revenue range ( + / - $100 Million).  There are some exceptions for smaller, truly multinational organizations.  For organizations < $250 Million / year in revenue, the treasury management function is typically conducted by someone in the Controller's department. 

Generally, there is one main reason why an organization needs to create a stand-alone treasury department = cash management complexity.   At a certain point during an organization's revenue growth, it's cash management functionality outgrows the Controller's group.  The catalyst for this increase in cash management complexity may be due to organic growth, merger(s) and/or acquisition(s).  It is at this point that it become more secure & efficient for organizations to develop a new, stand-alone treasury department.

List below are five topics that should be taken into considering when developing a new treasury department:

What is the new treasury department going to be responsible for?   Specifically, what will be the treasury department's scope of operations?  An organization may want to document their business requirements when answering these various questions.   One approach is to start at a very high level business requirements then work your way down to more specific business requirements.  Listed below is one example of a high level to detailed level business requirement logic:

Multinational Operations (US & UK) --> Cash Forecasting --> FX Risk Management --> USD / GBP Hedging

This is a simple example that should be replicated for every function that will be incorporated in the new treasury department.   Once the new treasury department's scope of operations are determined, then an organization can review the department personnel, hierarchy, technology, policies, procedures and internal controls.

Hiring qualified treasury personnel (or providing sufficient treasury management professional development) is one of the most important factors that will determine your organization's overall treasury management success.   Treasury department personnel should be familiar with current treasury best practices and internal controls.   When creating a new treasury department it is important to have someone on the treasury team who is an experienced treasury practitioner who can implement secure processes that are simultaneously efficient.  Continuous treasury department training can help ensure that your treasury department is educated on the most current treasury best practices.

Most new treasury departments will utilized a combination of bank website and spreadsheets to manage treasury operations.   The main reason for this is primarily because most organizations develop a treasury department while cash management complexity is still reasonable.   As organization grows in revenue, cash management complexity will also grow.  

In some instances, organizations postpone the development of a treasury department (respective to the organization's annual revenue and cash management complexity.)   If a relatively large organization is creating a new treasury department then bank websites and spreadsheet may not be secure and efficient enough to facility treasury operations.  In these situations, organizations may want to consider the selection and implementation of a treasury workstation (treasury management system).

Let's discuss the general definitions of treasury policies and procedures.  Treasury policies are the rules by which the treasury department will operate.   Treasury procedures are the step-by-step instructions as to how each treasury process will be conducted.  The treasury procedures will operate within the rules dictated by the treasury policies.

The development of treasury policies should be a team effort.   The CFO (via Board of Director directives) can lead in the development and approval the overall policies for the treasury department.   Specific treasury policy feedback should be requested from various subject matter experts such as Legal, Internal Audit, Accounting, IT, Treasury Consultants, etc...

The development of treasury procedures is a more specific task.   In order to create a secure and efficient treasury process one must have a detailed understanding of internal control, business requirements, treasury best practices and treasury department capacity.  Generally, treasury department procedures will be draft by the corporate treasurer and submitted to both the CFO and Internal Audit for review / approval.  Once approved, treasury procedures should be reviewed annually to ensure that they are 1.) meeting business requirements, and 2.) utilizing current treasury best practices.

Treasury internal controls are of paramount importance.   Therefore, throughout the treasury department development process an organization should always consider treasury department internal controls.  Are internal controls incorporated into the new treasury policies?  Treasury procedures?  Are there sufficient separation of duties amongst treasury personnel?  Are there sufficient separation of responsibilities amongst departments?   These questions (and more!) should be address when creating a new treasury department. 

Ultimately, the overwhelmingly vast majority of large organization will create a treasury department at some point during their revenue growth story.  The best treasury department development strategy is to be proactive and not reactive.   Treasury department formations are more complex and challenging if an organization has sufficient cash management complexity yet delays the  development of a treasury department.   

Do you agree or disagree with this article?  Please feel free to use the comments to post your thoughts or questions.

Relevant TreaSolution Services:
Treasury Best Practices Review
Treasury Benchmarking Reports 
Treasury Department Development
Treasury Workstation Selection (RFP)
Treasury Workstation Implementation

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TreaSolution has documented a dramatic increases in the strategic value of many treasury departments.  The shift from a process-oriented treasury department to a key strategic organizational resource primarily started during the financial crisis.   During the 2008 - 2009 time-frame most corporate treasurers were on the CEO's speed-dial due to the lack of liquidity, counterparty risk, etc.   Since the financial crisis many treasury departments have experienced a strategic renaissance within their organizations.   Many strategic treasurers demonstrated their ability to navigate rough waters during financial crisis.   As a result of this success, many CEO's have rewarded strategic treasurers by 1.) including the corporate treasurer in more organizational strategy discussions, and 2.) increasing the scope of the treasury department's responsibilities.   This is why over 41% of survey respondents indicted that their treasury department is of "High Strategic Value" to their organizations.

Do you act as your organization's strategic treasurer?  What are some are some ideas that can help organizations that need a more strategic treasurer? Do you agree or disagree with this data?  Please feel free to use the comments to post your thoughts or questions.

Relevant TreaSolution Services:
Treasury Benchmarking Reports
Treasury Best Practice Review
Treasury Intelligence Reports (FI's)

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It is not surprising that 100% of survey respondents indicated that their treasury department is responsible for treasury operations and bank relationship management.   What is notable is the relatively high percentage of treasury departments responsible for Financial Risk Management (86.6%) and Insurance Risk Management (59.79%).   If fact, more respondents indicated that their treasury department is responsible for Financial Risk Management than Debt and Investment Management!  The responsibilities of treasury departments have grown since the financial crisis.   Hence the growth of more tangential strategic treasury functions such as Insurance and Financial Risk Management.   

Do you agree or disagree with this data?  Please feel free to use the comments to post your thoughts or questions.

Relevant TreaSolution Services:
Treasury Benchmarking Reports
Treasury Best Practice Review
Treasury Intelligence Reports (FI's)

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Renegotiating credit facilities is an important responsibilities for corporate treasurers and CFO's.   TreaSolution wanted to document what the churn rate was for credit facilities on an annualized basis.   As illustrated from the above chart, in 2013 almost 42% of treasury survey respondents indicated that they were going to renegotiate their credit facility.   This is a rather large percentage which, if consistent in subsequent years, indicates that credit facilities will be renegotiated on average every 2.38 years (i.e. 100% / 41.98%).  TreaSolution feels that the low interest rate environment and greater availability to credit may had led to an increase in credit facility renegotiations.

Do you agree or disagree with this data?  Please feel free to use the comments to post your thoughts or questions.

Relevant TreaSolution Services:
Treasury Benchmarking Reports
Treasury Best Practice Review
Treasury Intelligence Reports (FI's)

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