Troy Angara, senior vice president, Wells Fargo International Treasury Management
Managing corporate treasury can be an unrelenting struggle against the fast pace of global expansion and evolving compliance requirements. Outdated policies and procedures are cause for concern because they impede efficiency at times when your company is expanding, undergoing an internal reorganization, or experiencing a merger.
Fortunately, there are ways to get ahead of the curve. Strengthening treasury governance and enhancing automation can improve visibility and control of your global treasury operations so that you’re prepared for a changing landscape. A recent survey showed that 70 percent of CFOs have a mandate to enhance governance and control over their domestic and overseas operations.1 Optimizing data, streamlining work flows, and instituting the use of standards are all critical components of a plan to achieve global treasury excellence.
70% of CFOs have a mandate to enhance governance and control over their domestic and overseas operations.
Take on these five initiatives to get started.
- Use a cross-functional approach to create a risk management plan for treasury.Groups across your company may use different processes reducing visibility and control of global accounts. To better understand these groups’ diverse priorities — and to create risk management policies and procedures that will be adopted universally — convene a multi-disciplinary group of representatives from inside and outside your corporate headquarters. Be sure to include representation from treasury, legal, tax, and IT.When creating a universal set of risk management policies and procedures, corporate treasurers should develop a strategy that raises enterprise-level awareness about concerns that could originate from cultural, geographic, or political changes. Developing plans now for different levels of regulatory change will better prepare your company for unforeseen future events.
Demonstrating executive support for new policies and procedures is also important, as treasury will need to influence partners who may have a limited understanding of the company’s strategic financial goals.
- Review, rationalize, and document your global accounts periodically.If your company has a large number of banking relationships, is constantly reconciling disparate reports, or has difficulty moving funds, it might be time to reevaluate how your accounts are structured. Bank accounts are one of the first areas that multinational companies outgrow — particularly during periods of rapid expansion.Start by identifying every bank account across the organization and look for opportunities to consolidate. When rationalizing bank accounts, review the client service model associated with the activities required against the account. It’s important to have a continuity plan to service accounts should a situation arise.
Next, consider alternative approaches for reporting account information and alternative payment and collection services that will improve working capital flows not available when the accounts were first established.
Assessing your cash balances across subsidiaries, countries, and currencies will also provide insight into which accounts provide the greatest opportunities to improve liquidity and reduce foreign exchange exposures.
- Create and maintain a central repository of authorized account users.If an authorized account signer leaves the company, the company risks losing access to that account. First, ensure you have at least two signers on each account. Then, document your accounts and develop and maintain a single source for account formation documents, a “living” list of authorized signers, and other essential banking details.
Be sure to assign a team to manage this information and institute processes to keep the data secure and up to date.
- Establish and preserve policies for treasury and FX.Most global corporations start out with a standardized set of treasury guidelines that over time become inconsistent and outdated. Updating your foreign exchange and treasury policies on an annual basis, for example, will educate and guide your internal staff, and balance your need for central access to data with your subsidiaries’ need for operating efficiency.Updates are often fairly straightforward, and your treasury banking partner should be able to advise you on this process.
- Implement common standards with your banks.Even with an ERP system in place, bank reporting, transaction processing, and cash forecasting can require access to multiple systems, spreadsheets, or cumbersome manual processes.Today, standards like ISO XML 20022 that can enable direct access to bank systems without taxing your in-house IT resources. Also, secure platforms such as SWIFT make it possible for all your locations to use the same protocols and reporting formats across your global banks. Streamlining and automating your access can save time for each of your locations, and speed delivery of critical financial details for central decision-making.
While greater treasury governance doesn’t happen overnight, it is a project worth undertaking. A disciplined approach establishes a solid foundation for future growth and sets the stage for treasury excellence.
1. Deloitte, “2015 Global Corporate Treasury Survey”