lunes, 2 de septiembre de 2013

Centralization of Corporate Treasury Processes using ERP Systems

By Dominc Oberlaender - Consultant in Convista Spain
The ongoing globalization nowadays is inevitable on a CEO’s agenda, as part of a corporate strategy to achieve long term growth and to establish a global presence. Once the objective set for worldwide operations and a global supply chain, it is also necessary to involve other departments of the company in order to achieve the corporate objectives. The financing of these global activities, the exposed risk arising from it and the generated sales in foreign currency call the attention of corporate treasures. Global funding sources, the financial crisis and volatile markets created a severe environment for treasures in the past and will be continuing ahead.

The task of a corporate treasurer in this context is to manage and control all treasury activities along the financial supply chain in order to maintain the liquidity for global acting corporates. However, liquidity management is not the only challenge for a treasury department nowadays. Moreover, a corporate treasurer has to maintain short term funding activities, optimize cash management, trade financial products in MM, FX, commodities and securities as well as keeping ahead with regulatory topics such as IFRS, EMIR and Dodd-Frank Act or SEPA.

So how to complete all these activities in a rather demanding work environment?

The usage of an enterprise resource planning (ERP) system can help to automate processes across the organization. ERP systems cover the functional areas of manufacturing, human resources, sales, CRM, accounting but also treasury functions. Since treasury becomes more important for corporates that act globally, ERP providers are shifting their functionalities also towards financial risk and treasury topics. Thus, a well selected and implemented ERP system can create a competitive advantage regarding the centralization of operative and treasury processes. Especially in times of volatile financial markets, it is vital to have an integrated ERP solution, which is able to show e.g. the demand for a commodity resulting from the latest production ratios and its market price in real time. This can accelerate decision making of a treasurer or a front office trader. So an integrated ERP system, which is capable to centralize the corporate treasury processes, can add value to the company. A corporation can appreciate the availability of existing data from surrounding departments, which are all maintained within the same system. Such functions are not covered by a stand-alone Treasury Management System solution.

But why are these functions for my ERP important and what are my benefits through centralizing treasury processes using an ERP? – Let the following key points elaborate on this:

  • Increase centralization and control of global treasury activities
  • Higher degree of automation and standardization of processes
  • Create a homogeneous system landscape and reduce interfaces
  • Centralize treasury processes to monitor corporate wide risk and exposure management
  • Connection of financial instruments to the general ledger and Hedge Accounting integration
  • Straight-through-processing (STP) of financial transactions
  • The ERP system is the information basis to achieve compliance in regulatory reporting such as IFRS, EMIR, Dodd-Frank Act
  • Central ERP database can accelerate decision making of management
  • Various reporting functions based on corporate wide treasury information

The basis to achieve this information in terms of a corporate treasury is often based on the availability of information resulting from financial transactions. Therefore, it is crucial to achieve central trading guidelines and reduce local financing and risk management activities. As such it is possible to have all financial transactions available in one ERP system. However, for some multinationals it is unavoidable to have different systems often due to the volume of transactions or due to local and legal requirements. However, an adequate degree of centralization of treasury processes can be achieved by implementing one or more regional treasury centers. These treasury centers should act as the central organization for treasury services for the corporation and the subsidiaries of the group. Financing and risk management is carried out centrally in order to achieve transparency of treasury operations immediately.

Concluding it can be said, that due to a vast changing regulatory environment and a continuously increasing degree of global financing and operating activities, it is crucial to have an ERP system, which is capable to support processes along the financial supply chain.