The importance of a treasury management system is greater in today’s economic climate than ever before, but just what are they, and why are they so important now?
The corporate treasury is a very different animal to what it was in times gone by. The well publicised problems with the global credit markets have hit everybody. It is harder than ever to get a loan or mortgage, and that is just for the man or the woman on the street. For businesses, corporations and large organisations the problem has been even worse.
Credit is the lifeblood of enterprise, the squeeze on the availability of it has meant that organisations need to keep a tighter rein on the finances than ever before. Corporate treasury management systems can help to manage risk, provide real-time cash flow forecasts and also provide global visibility of cash reserves. If there is one thing that recent events have surely taught us it is the importance of this to responsible governance and accountability.
There are plenty of figures available to show how businesses are struggling, and sometimes failing at the moment. What has not been examined as closely is how many of these businesses would have been able to survive had they better understood the importance of maintaining control of counterparty exposures. It is incredible how, in this day and age, this can be overlooked, but somehow it is.
For an example of how poor management of counterparty exposure can really lead to very bad things happening you need look no further than erstwhile telecommunications giant Nortel. Nortel filed for bankruptcy in 2009, the company had been in operation for 113 years. The company of course had its origins as the manufacturing wing of Bell Canada, who had found success offering telephone and telegram services to the Canadian market. Due to the failures on a corporate level in tracking counterparty risk, the pension fund was left with a huge deficit when the company filled for bankruptcy leaving former employees with a fraction of what they should have been entitled to.
Numbers can seem cold and impersonal, but there is often a human story behind them. Carelessness and a cavalier attitude in the boardroom one day can lead to hardship for thousands the next. In the new corporate landscape no one can afford to make mistakes, and in the wake of incidents such as Bernie Madoff being handed a 150 year jail sentence transparency in all dealings really is, to coin a phrase, of the essence.
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