October 2016
Treasury functions need to evolve in order to strengthen short-term performance and long-term strength of the organization. Treasurers are responsible for helping develop and support an organization’s strategy that is aligned to resolve business and operational challenges. These challenges may include:
• Managing financial risks in a highly volatile market with risk factors such as currency, interest rate, commodity, credit and securities’ prices
• Keeping pace complying with the recent influx of regulatory changes
• Dealing with an increased demand to deliver real-time financial data with new technology in order to capitalize on market opportunities in a timely manner
• Strengthening liquidity management to provide financial stability during an economic downturn
• Reducing commercial fraud by leveraging a robust treasury technology infrastructure as well as a process to enhance controls related to social engineering methods
The organization’s design needs to help treasurers manage this increasing change and complexity to deliver sustained performance. In short, treasury will need to do more, better, faster and at less cost. The footprint of the treasury function is becoming wider and deeper within the business. The impact on the CFO, controller and treasurer’s role and the finance function will be significant.
EY’s Global Treasury Services team can help you go beyond the traditional high-level blueprint and into much more detail to link the treasury function with the rest of finance, to assist in integrating both to support business growth.
As organizations find themselves working in an increasingly fast-moving, complex environment, corporate treasurers face new opportunities and challenges.
Corporate treasurers are expected to be more strategic and deliver more with less.
Success depends on a balance of maintaining efficiency while being innovative and delivering business performance, where effective processes and controls allow the business to run faster and work better.
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How can your treasury and finance functions evolve together?
2 | How can your treasury and finance functions evolve together? October 2016
Current treasury trends and perspectives
Organizations are operating in dynamic environments and facing significant change, and the treasury function is similarly affected. Some of the key challenges are:
Regulatory changeOrganizations are facing a number of key regulatory and tax issues such as the new financial instruments standard impacting areas such as hedging and the Organisation for Economic Co-operation and Development’s (OECD) base erosion and profit sharing (BEPS) and the proposed US Section 385 requirements. There are also a number of key banking regulatory issues that are, in turn, impacting organizations such as Basel III, MiFID II/IV and the Payment Service Directive II. And while not strictly a regulatory change, the UK’s decision to leave the European Union, is likely to have an impact on regulations for organizations with a UK base or relationship.
Financial riskOrganizations may face earnings, balance sheet, price volatility and enterprise risk issues resulting from global economic instability, volatile foreign exchange rates, declining commodity pricing and an uncertain interest rate outlook.
Treasury technologyThe growing demand for real-time financial data and comprehensive financial information is creating a need for better, consolidated treasury systems and processes. Treasury systems should support the requirement to improve visibility into cash flows, to improve controls, prevent fraud, reduce errors, provide a global view of bank accounts and cash, and to improve the efficiency of daily processes such as the monitoring of funding requirements and risk management positions.
Liquidity managementImproved banking structures and supply chain finance techniques can help accelerate the efficiency of working capital and utilization of excess cash. Leading practices include cash pooling, multi-lateral netting, working capital management, factoring, and reverse factoring and dynamic auction.
Treasury payments fraudTreasury teams need to be aware of escalating and increasingly sophisticated fraud schemes including scams targeting CEOs and CFOs, hacking and email infiltration, vendor account schemes, malfeasance and malware.
Requirement for treasury to be more forward-looking
Need for improvement in tools and skills to communicate value
Need to adapt as technology becomes a major disruptor
Be more connected
Treasury themes
Data
Automation
Cyber
Regulation
Speed
Trust
Performance
Blockchain for back office
activities
3
As treasurers consider what the right structure is for their team to meet these challenges, they should consider:
The right balanceThe team should not lose focus on cash effectiveness and cost management, while the organization looks to grow. The balance between supporting the business to contain and reduce costs, and investing in growth should be maintained.
Navigating through uncertaintyTreasurers need to evolve the treasury function to keep pace with the changing financial needs of the organization. Treasurers (and CFOs) often lack the data, tools and experience to evaluate and act on opportunities in a timely manner, before the opportunity is lost.
Preparing for corporate transactionsCFOs are turning to restructuring, divestiture and M&A to keep pace with accelerated growth expectations. They are willing to quickly embrace innovation with at-the-ready products, technologies, talent and markets.
Helping you find the target operating model for your treasury team
VisionTreasurers need to develop a vision for their treasury function, which will allow them to face, and embrace challenges and support the wider organization.
ComponentsThe treasury operating model consists of seven key components, with an initial focus on organization and process. The balance will depend on the vision for how treasury will support the organization.
A focus on the vision and components will help the treasury function to operate efficiently, linking operational requirements to responsibilities, and by doing so, adding value.
EY can assist you to:
• Identify treasury management system requirements to reduce manual processing and reduce errors, allowing the team to focus on value-added work
• Identify and define the touch points with other departments
• Enhance performance evaluation and risk management capabilities and establish an internal control structure
• Reduce costs and measure performance
Helping you manage complexity
Policy
Data
Performance measurement
Technology
Organization
Process
People
Why EY EY has a deep understanding of the operations of the treasury function and our multidisciplinary teams can help you address the internal and external challenges you are likely to face as you work to transform your treasury function.
Strategic direction and decision support• Support the alignment of finance strategy with overall business objectives
• Help develop treasury strategy and vision
• Support the design and implementation of the operating model
• Help develop a governance framework and assist with change management
• Help design analytics, reporting and insights framework
How can your treasury and finance functions evolve together? October 2016 |
EY contacts:
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This material has been prepared for general informational purposes only and is not intended to be relied upon as accounting, tax, or other professional advice. Please refer to your advisors for specific advice.
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People and organization• Help with organizational design
• Recommend changes in structure, roles and identification of responsibilities
• Help with training and knowledge transfer
Process and policy• Support process reviews, documentation and standardization
• Help develop processes and procedures
• Support the identification of risks and required controls
• Help improve legal compliance and reporting
Technology and data• Help review treasury management systems and identify gaps
• Review IT operations to provide value to the finance function and wider organization
By addressing each of these elements in order, we can support you in designing a treasury function fit for the current and future state of your organization, so you are better able to meet the objectives of internal and external stakeholders.
The scope of some of our services may be limited for an audit client and its affiliates in order to comply with applicable independence requirements. Please ask your local EY contact for further information.
AmericasPaul DeCrane [email protected] +1 312 879 3207
Europe, Middle East, India and AfricaFrancois Holzman Financial Services Organization [email protected] +33 1 46 93 64 03
Craig Kennedy UK and Ireland [email protected] +44 20 795 19026
Steffen Kuhn Germany, Switzerland and Austria [email protected] +49 711 9881 14063
Jerome Brun UK and [email protected]+44 20 7951 5152
Asia-PacificDamien Jones [email protected] +61 2924 85236
Kieren Cummings [email protected] +61 2924 84215
JapanYoji Kawato [email protected] +81 90 8054 8695
Mikio Hara [email protected]+81 70 2175 1780
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