By Francesca James

Corporate treasury departments played a key role in helping companies survive the recession. But despite their success in combating the financial crisis, less than 20% of companies have increased their spending on the function.

According to a far-reaching PricewaterhouseCoopers’ survey — The PwC Global Treasury Survey 2010: Can the crisis make treasury stronger? – which sought the views of nearly 600 corporate treasurers in businesses around the world, the key role played by company treasury teams in seeking to combat the devastating impact of the global financial crisis has placed them firmly on the boardroom agenda.
But there remains a major concern that lessons of the crisis have not been learned, with more than 80% of those surveyed reporting that treasury department budgets have not increased.

“The challenge for corporate treasurers now is to take advantage of the opportunity created by the financial crisis to boost their influence within their companies,” said PwC Treasury Solutions Leader Sebastian Di Paola.

The financial crisis provided the sternest possible test for treasury teams, as they wrestled with the impact on funding, commodity price volatility and financial counterparty risk. Nearly 80% believe that their key role in managing the impact of the crisis has earned them greater attention from their boards, and more than 60% see it as reinforcing their reputation for adding value to the business.

It is clear that those treasurers that had been able to apply agreed best practice – covering areas ranging from financial risk management to long-term financing – were better able to ride out the storm. This best practice includes:

Liquidity: Diversify sources of funding, spread the maturity of long-term debt, institute effective cash flow forecasting, including worst case scenario and strengthen cash and working capital management to make best use of the liquidity you do have

Bank relationships: Need to be mutually beneficial to ensure commitment. Demands balanced scorecard measurement of the value so both parties know where they stand

Counterparty risk: Not just about bank failure, but also the possibility that payments will be frozen or credit access will dry up. Demands real-time warnings of problems such as Credit Default Swap spreads — credit ratings are too late

Commodities and currency risks: Standardised hedging techniques do not work in irrational or illiquid markets. Need to work with the business to understand the dynamics that produce the exposures and combine this with a real in-depth knowledge of the markets to achieve the optimal hedging strategy

Says Sebastian Di Paola: “Treasuries have traditionally been small, under-resourced and under-valued departments — the crisis has shown that the consequences of this can be devastating.

“The lessons must be learned. While the pain of liquidity pressures and market instability is still fresh in the minds of CEOs and CFOs, there is no better time to press the case for sufficient resources to implement treasury best practice.”

powered by Typeform