Liquidity Dominates Risk Concerns for Corporates

Publication: gtnews.com

In 2010, the gtnews Treasury Risk survey tracked the challenges that corporates are facing in mitigating risk and popular risk management methods. The results show that concerns over liquidity remain high on the corporate agenda. 

One of the major effects that the credit crisis has had on corporate treasury is the wide amount of risks that the function has to manage. In 2010, gtnews carried out research into this trend - looking at areas such as liquidity risk, the effect of risk on treasury within organisational structure, counterparty risk, foreign exchange (FX) risk, interest rate risk and financial crime - as well as asking corporates which risk they perceived as the top risk to be mitigated and managed in the next year. 

Six hundred and one corporates took part in the research, providing a comprehensive set of results. Respondents came from a crosssection of company sizes - most respondents came from companies with revenue of between US$10-500m (29.5%), closely followed by those with revenues of US$1-10bn (29%). The next most represented group was companies with annual revenues of more than US$10bn. A large majority of respondents to the Treasury Risk survey came from one of three regions - western Europe (37.3%), North America (28.8%) and Asia-Pacific (18.1%) 

Liquidity Risk on the Wane? 

For the first few years of this century, cheap liquidity was easy to come by if you were at a company with good credit ratings - whether this was through bonds, commercial paper, notes or uncommitted bank facilities. The credit crisis had the effect of abruptly cutting off many of these options, with costs also spiralling. So a couple of years after the credit crisis hit, we were keen to understand just how easy it was now for corporates to access liquidity. The results show a rather mixed picture. 

Forty-two percent of organisations reported that it was easier to access liquidity currently compared to 12 months previously. Another 28% noticed no change in access to liquidity, while the remaining 30% consider it more difficult to access liquidity than 12 months ago. 

Table 1: How Easy is it to Access Liquidity Compared to 12 Months Ago? 

Source: gtnews Treasury Risk Survey 2010

This split between those organisations finding it easier to access liquidity and those who aren't is played out across different regions. A majority of organisations in the Asia-Pacific region report easier access to liquidity currently compared to 12 months ago (58%) while 50% of organisations in Latin America found it more difficult. In North America, 38% of organisations report that access to liquidity is easier currently than a year ago while, at the same time, 26% found it harder. These results were closely mirrored by western European respondents, where 37% found liquidity easier to access, but 32% found it more difficult. 

The mix in results may lead one to suspect that the size of an organisation is critical when it comes to ease of accessing liquidity. However, the Treasury Risk survey suggests that this is not the case. Forty-two percent of larger organisations - companies with annual revenues between US$1bn and US$10bn - indicate it is easier to access liquidity today compared to a year ago, while 31% found it more difficult. A slight trend can be argued when looking at the results from the largest respondents - with annual revenues of US$10bn or more - where 52% found it easier to access liquidity than 12 months previously, while 23% found it more difficult. The same percentage of smaller companies - those with annual revenues below US$10m - report that access to liquidity is easier than it was 12 months ago as those between US1-10bn did (42%), while 32% found it more difficult. 

Overall there is a slight trend towards liquidity being easier to access for some corporates, but these results also show that corporates still face a struggle to access liquidity and the conditions that existed before the credit crisis remain a distant memory for most. It is likely that corporates are experiencing a variety of different conditions from banks that they are striking up new relationships with in the effort to manage counterparty risk. 

Treasury structure 

The 2010 Treasury Risk survey sought to find out the level to which firms had changed their treasury structure, if at all, as a result of the liquidity risks posed by the credit crisis. During the credit crisis itself, it was reported on gtnews that companies that had once had a decentralised approach to cash management, funding and hedging were centralising these activities to improve control over cash flow, reduce the cost of funding and manage credit, interest rate and FX risk more effectively. Had this continued into 2010? The Treasury Risk survey asked corporates if they'd changed their treasury structure in the previous 12 months in order to manage liquidity risk. 

Fifty-two percent of respondents had not changed their treasury structure over the past 12 months. This leaves nearly half of all respondents making some change to their treasury set-up. One-third said that they had changed their treasury structure as a result of liquidity risk - 28% becoming more centralised and 5% becoming fully centralised. Another 11% of respondents made changes to their treasury operations unrelated to the liquidity risk they faced. 

Table 2: In the Past 12 Months, Has Your Treasury Structure Changed as a Result of Liquidity Risk? 

Source: gtnews Treasury Risk Survey 2010

Looking to the future, the Treasury Risk survey indicates that a large majority of organisations feel they have made the necessary changes to ensure their treasury department is able to successfully manage liquidity risk. Eighty-two percent of organisations indicate they will not make any change over the next 12 months. Only 16% report they plan to further centralise their treasury operations, while the remaining 2% indicate they would decentralise their treasury operations. 

Efforts to improve cash flow forecasting being made 

Accurate cash flow forecasting and information on liquidity reserves are critical for corporates if they are to 'expect the unexpected'. Inaccurate or untimely data can lead to a string of surprises that can heighten liquidity risk and leave treasury in a dangerous position. And judging by the response to the Treasury Risk survey 2010, organisations are responding to this challenge. 

Seventy-seven percent of organisations indicate that they have improved their cash flow forecasting system within the past year. Within this number, 35% took steps to improve both accuracy of their data and their forecast window (by forecasting further ahead). Thirty-three percent solely focussed on improving the accuracy, while 9% took steps to forecast further ahead. 

Table 3: What Steps Have You Taken to Improve Cash Flow Forecasting in the Past Year? 

Source: gtnews Treasury Risk Survey 2010

The majority of organisations within each region changed their cash flow forecasting system within the last 12 months. Fifty percent of Latin American organisations improved both accuracy and forecasting, while a further 36% put in place efforts towards improving one or the other. Most effort was made by organisations in the Middle East and Africa - 45% of respondents here improved both accuracy and forecasting, while another 48% devoted efforts towards one or the other separately. In Asia-Pacific, 44% improved both accuracy and forecasting and 36% improved one or the other. Thirty-six percent of North American companies improved both, while this number dropped to 32% for companies in western European countries. One explanation for these figures could be that firms in western Europe and North America had more sophisticated cash flow forecasting systems in place before the onset of the credit crisis and, as such, felt slightly less need to change their way of operating once liquidity risks were raised. 

Post-credit crisis, the Treasury Risk survey 2010 shows that a majority of organisations believe they have a suitable cash flow forecasting system in place to mitigate liquidity risk concerns. Sixty-three percent do not plan to change their cash flow forecasting process in the next 12 months. More than one in five (22%) plan to improve only accuracy or forecasting, while 15% still target improvements in both concurrently. 

Counterparty Risk of Banking Partners High on Corporate Agenda 

One of the most noticeable effects of the credit crisis for corporates was for those with direct or indirect exposure to financial institutions that collapsed, were bought cheaply by rivals or required state support to remain in business. Organisations faced the prospect of losing credit lines or having to renegotiate lines they were dependent on for much higher fees. 

Corporates were well used to carrying out counterparty risk analysis on other organisations they dealt with - for example, suppliers - but the shock of the credit crisis meant that this now also became a top priority for their banking partners. And the Treasury Risk survey highlights the fact that this trend has continued after the credit crisis as corporates pay close attention to the credit ratings of their banks. An overwhelming majority of organisations regularly review their banking partners’ credit standing. Half of all organisations review credit standings at least quarterly, with 27% carrying out a review on a monthly basis. Six percent review every six months while 15% percent annually review their banking partners credit standings. A further 20% review on a 'random' basis. Only 9% conduct no review at all. 

Table 4: How Often do You Review the Credit Standing of Your Banking Partners? 

Source: gtnews Treasury Risk Survey 2010

Larger organisations (with annual revenues greater than US$1bn) are more likely to review bank credit standings on either on a monthly or quarterly basis than smaller companies. On average, 53% of these larger companies review standings either monthly or quarterly, compared to 43% of those organisations with revenues of less than US$1bn. And the process still has a way to go, according to the Treasury Risk survey, with one-third of respondents saying that they plan on increasing the frequency with which they review their banking partners' credit standing to some degree. 

Late settlement from bank partners infrequent 

Over the past 12 months, organisations very rarely (if at all) experienced a late settlement from a banking partner. Just three percent indicated their organisations regularly experienced late settlements from their bank partner. Sixty-two percent report having never experienced a late settlement, while 11% experienced a late settlement once. Twenty-four percent experienced a late settlement only occasionally. 

Primary Objective for Hedging Strategies 

Corporate priorities for hedging strategies can cast light upon the current markets that they are operating in and, just as importantly, business confidence. The Treasury Risk survey discovered that the primary objective of an organisation's hedging strategy when managing FX risk was to protect the organisation from adverse markets, with 62% of respondents selecting this option. The next most frequently cited objective was hedging at the most favourable level to gain a competitive advantage (11%). This suggests that corporates are overwhelmingly still thinking to protect what they have, rather than chasing growth. 

Table 5: What is the Primary Objective of Your FX Hedging Strategy? 

Source: gtnews Treasury Risk Survey 2010

This thought is further backed up by the fact that 73% of survey respondents indicate that they have not changed their approach to FX risk management in the previous 12 months. In addition, 21% say that they have made moves to protect themselves from adverse moves in the currency market, while just 6% have become more optimistic and thus made moves to gain competitive advantage through their FX hedging strategy. 

Organisations with annual revenues greater than US$1bn were more likely than smaller companies to have maintained the same FX risk management strategy (average of 76% percent versus an average of 69%, respectively). Also, smaller organisations tended to change their strategy to become more conservative (24% average) versus large organisations (19% average). 

Hedging tools 

Turning to hedging tools used to mitigate risk, the Treasury Risk survey looked at which methods are most popular when it comes to hedging interest rate risk. Over two-thirds of respondents - 72% - use swaps for this purpose. The next most popular method was forward rate agreements, used by 38% of organisations. 

Focus on short-term investments 

Before the credit crisis, corporates looked for potential yield in short-term investment instruments as the key factor in deciding where to place their cash. However, as many of the money markets collapsed and credit lines were threatened, organisations were far more focussed on the liquidity and security of cash. This is still the case, judging by the results of the Treasury Risk survey. When making short-term investments, security is the most important consideration for a majority of organisations (60%). Liquidity followed as the second most important (31%) while yield was only chosen by 9%. 

Critical Risks to Manage in the Next Year 

Organisations view liquidity, FX and counterparty risk as the most important risks for treasury to manage above other risk types during the next 12 months. A quarter of organisations view liquidity risk as the most critical, followed by FX risk (23%) and counterparty risk (17%). Less frequently cited risks include: 

• Interest rate risk (14%). 
• Operational risk (10%). 
• Investment risk (7%). 
• Financial crime (2%). 

Organisations in the Asia-Pacific, central and eastern Europe, Latin America, the Middle East and Africa and North America regions all indicated liquidity risk as their top risk to manage over the next 12 months. Those in western Europe ranked FX risk as the top priority (26%) followed by liquidity risk (24%), which could well reflect the difficulties currently faced by the euro. 

Both small and large organisations were most likely to identify liquidity risk as the most critical risk to manage over the coming 12 months. Beyond that, a greater percentage of small organisations consider interest rate risk and investment risk as a top priority over the next year while large organisations are more likely to be concerned with managing counterparty risk (19%). 

What is certain is that risk management will continue to be a major burden for corporate treasurers through 2011. Liquidity will remain a precious commodity, while FX markets may still remain volatile. You can read thought leadership pieces on the wide variety of risks that treasurers face here. Later this year, gtnews will carry out the 2011 Treasury Risk survey, the comparison data of which will track the trends that have been seen in these results and highlight how corporate risk management is evolving.

2010 in Review: Mounting Challenges for Treasurers

Publication: gtnews.com

This year has seen treasurers face challenges on several fronts. This review of 2010 examines industry trends and reveals the top 10 most read topics on gtnews this year. 

Looking back at 2010, it is fair to say that, thankfully, it has been less tumultuous than the couple of preceding years. This was the year that many economies around the world emerged from recession and, while not exactly sprinting into growth, the widely predicted doubledip recession has failed to materialise. So far, so good? 

Perhaps not - looking beneath the surface, there are clearly still many structural cracks in the global economy that could derail future stability. In Europe, the sovereign debt crisis threatens to catch up with many more countries in 2011, while the euro itself is under the most intense pressure of its short history. How long will German taxpayers be content to lead the bailout of other nations? 

In the US, the Dodd-Frank Act became law, creating huge changes for both banks and corporates in their accounting and reporting processes, while ‘QE2’ showed a marked difference in approach to deficit management compared with most European countries. Even China, seen by many in the west as the saviour of the global economy, has been struggling with a number of economic issues of its own. Under fire from the US and Asian neighbours for manipulating the value of the renminbi (RMB), the spectre of inflation also looms large in China. 

With considerations such as these, the role of the treasurer is not getting any easier. The rise in profile of the treasury department over the course of the credit crisis has been well documented, but in many cases this has not been matched by a similar rise in resources. So in a situation of having to do more with less, what have been the topics that gtnews subscribers have been reading the most this year?

Cash Management Concerns to the Fore 

Perhaps unsurprisingly, cash management issues dominate the ‘most read’ list for 2010. But within this broad umbrella description, a number of issues emerge, including cashflow forecasting, cash management systems and the centralisation of cash management processes. 

Forecasting 

Looking at cashflow forecasting, the gtnews Treasury Insider’s blog on the topic had the rather provocative title “Cash Forecasting: Is It Really Worth It?” In the post, the gtnews Treasury Insider explains that, while they don’t need convincing of the importance of cashflow forecasting, there are a couple of major challenges they face in their organisation: 

1. I need to encourage the subsidiaries to get into the habit of forecasting regularly, by which I mean once per week, with updates when necessary. 
2. I need to improve the accuracy of these forecasts. I am keenly aware that the nature of our business dictates the frequency required for forecasting. 

The Treasury Insider sees the issue for their company as being an internal personnel issue rather than a system issue. And the blog post gained a large response from the gtnews readers. Selected reader comments include: 

• “I can only support the absolute MUST of cashflow forecasting and also the need to have a at least three months outlook especially when you have to plan out your short-term financing needs, like we are having to do in my company.” 
• “We went from a loose two-week forecast model in 2008 to a very rigidly enforced 13 week model in early 2009 in response to the economic crisis. The outcome played a large part in ensuring that our company avoided any breach of financial limits or covenants - its simply that important.” 
• “Regarding your issue no 1, the best way to solve this is from the top down. Your CFO [chief financial officer] needs to be behind you. Anything less than that will get short-term attention.” 
• “Better cash forecasting will not occur until the link between profitability and liquidity is measured more precisely, and those involved are rewarded for meeting their goals.” 
• “... treasury needs to take the lead not only by owning the cashflow forecast process, but by clearly articulating the benefits across the organisation.” 
• “Technology also helps complete the information loop by quickly communicating back forecasting effectiveness at a level of detail that is actually useful to the remote user.” 

Clearly the optimum forecasting rate - daily, weekly or monthly - varies from company to company, and there were different views on this from the readers who commented. Common themes surrounded the importance of getting senior management onboard with the forecasting process, and also educating business units as to the importance of accurate and timely cashflow reports. To get a successful cashflow forecasting project off the ground, treasurers need to be adept at communicating the benefits to all invested parties. 

A centralised approach to cash management 

In their article that looks at centralising the cash management function, Diejana van der Wal and Heijmert Rijken from Rabobank acknowledge the role that cashflow forecasting can play as part of a centralisation programme. Integrated with cash pooling, it can be an important tool for improving cash management as it lets the treasurer have visibility of their company’s cash, no matter which country or currency the account is held in. 

In terms of pooling, one example of this helping to centralise liquidity management that is given is this article is the end-of-day sweep. This process makes it possible to transfer balances from local accounts to one central account or to centrally maintained accounts in the name of the local subsidiaries. It is also possible to automatically move the balances back to local subsidiaries, while profiting from the advantages of a central interest pool. 

Van der Wal and Rijken explain that this allows the treasurer to have better control over their cash, while they can also view it as a corporate asset within the organisation. 

System choices 

The most read piece of content on gtnews in 2010 was an article from Joergen Jensen at Nasarius, who provided a guide to cash management systems in Europe. In the article, Jensen examines a variety of areas related to cash management systems, such as the type of vendors (banks, enterprise resource planning (ERP) providers and specialist vendors), what you should look for in a system to suit your organisation, and how to approach the selection process. Jensen also takes a look at some of the specific offerings from the different types of vendors that are available, and offers some advice as to which types of systems may better suit which types of organisations. 

This year, gtnews also published a buyers guide to treasury management systems (TMS), providing a comprehensive report on the various issues that treasurers face when selecting and operating a TMS, featuring interviews and case studies from a variety of treasury professionals and a TMS matrix comparing the functionality of a large range of systems. You can download the TMS buyer's guide free of charge. 

SWIFT Success? 

Articles related to SWIFT take up two of the top four places in the most read chart on gtnews this year, demonstrating the demand for information that exists when it comes to the role that SWIFT can play in making corporate bank communication more efficient and secure. The content with most relevance to corporates in this list is Debunking the SWIFT Myth, written by Joy Macknight and published in July this year. In this feature, Macknight asked the question why, despite the benefits that SWIFTNet offered corporates by providing a single, standardised and secure channel, had not a greater number signed up to use the service? It certainly seems that preconceptions about the accessibility of the SWIFT network had played a role in the slow take-up, with many corporates questioning whether they have the volume of payment information necessary to justify the cost of gaining SWIFT connectivity. 

To combat this perception, SWIFT has launched a variety of different connection methods for corporates - from plugging in a USB stick to gain off-the-shelf connectivity through Alliance Lite, through to outsourcing connectivity to a SWIFT service bureau (SSB). The additional services that SWIFT is now looking to offer as part of an overall package is also helping to gain traction, through innovations such as: 

• Exceptions and investigations. 
• Trade finance. 
• Secure e-mail. 
• SWIFT Secure Signature Key (3SKey). 
• Electronic bank account management (eBAM). 
• Electronic invoicing (e-invoicing). 

As Marilyn Spearing, global head of trade finance and cash management corporates, Deutsche Bank, and chair of SWIFT’s Corporate Access Group, says in the feature: “Everybody is talking about electronic bank account management and e-invoicing - in other words really expanding what can be done through the same channel.” While SWIFT connectivity is still not going to be high on the agenda for some corporates, these value-added offerings look likely to give a welcome boost to SWIFT’s corporate numbers. 

To compare and contrast a selection of the SSBs available for corporates, download the buyer’s guide to SWIFT service bureaus that gtnews published this year. 

Evolution of corporate payments 

But there was a lot more going on in the world of corporate payments during 2010 than just debate over SWIFT. An article from Nigel McCook of Edgar Dunn & Company discusses the possibilities for future trends in payment systems. Analysing survey results, the article focusses on understanding the importance, both today and in the future, of individual payment products, as well as the key industry events that are expected to shape the payments markets over the coming five years. Some of the key findings discussed include: 

• Credit cards were the payment product given the highest rating in terms of current importance, followed by domestic debit cards. 
• Respondents from Asia gave comparatively higher ratings of importance to cash, mobile SMS, remote payments and remittance. 
• The top four payment products, in terms of their expected growth in importance over the next five years, are: 

1. Contactless cards. 
2. Mobile SMS/remote payments. 
3. Prepaid cards. 
4. Mobile NFC. 

These were among the payment topics under discussion at this year’s Sibos conference in Amsterdam. Following the past couple of years of battering this conference has taken - both from the Lehman Brothers’ collapse in 2008 and typhoon Koppu in 2009 - this year saw delegates and exhibitors alike emerge from their emergency shelters and hit the conference ready to do business and network. You can find full gtnews coverage of the conference here, including both the Corporate Blog and Banking Blog and a wealth of video interviews with perspectives from a number of industry experts. 

Risk Management Issues Rise 

One of the more blatant legacies of the credit crisis has been the rise of risk management and mitigation that treasurers are responsible for. A glaring example of this is the fact that corporates now actively need to carry out counterparty risk analysis of their banking partners - something completely at odds with the ‘one global bank’ policy that many corporates were actively pursuing when credit was both plentiful and affordable. 

A key area of risk management this year has been foreign exchange (FX) - from currency volatility in Europe and South America to concerns over ‘currency wars’ in Asia, corporate treasurers have had to be increasingly mindful of their FX exposures. As such, it is no surprise to find the article from SunGard’s Ryan Heaslip in the top 10 content list. Entitled Cost-effective Foreign Exchange Risk Management, the article looks at steps corporates can take to ensure they have an efficient FX risk management strategy in place. Some questions Heaslip suggests treasurers start by asking include: 

• Are you currently able to gather a complete dataset of exposures?
• Is exposure information provided in a timely, detailed and accurate manner? 
• Is there an operational focus on reducing exposure? 
• Are risk factors used to rank exposures? 
• Is there a strategy that prioritises the types of risk to hedge (e.g. balance sheet, short-term forecast, long-term forecast)? 
• What type of derivative strategies will be used to hedge, after operational considerations? 

The topic of FX risk management was also high on the agenda at the inaugural Global Corporate Treasurers Forum Europe that gtnews hosted at the Grosvenor House Hotel in London in June. The event is an annual independent forum bringing together European corporate treasurers to meet face-to-face, listen to leading speakers and network with industry peers in a high level and exclusive environment. 

Discussion at one session of the forum turned specifically to the transaction risk element of FX risk - where the risk of value changes depending on where the transaction is. Some transaction exposure is not shown in the profit and loss (P&L) because it has not yet been recognised, or the contract is anticipated rather than committed to. A couple of the questions raised at the forum referred to a) whether transaction exposure should be hedged; and b) if it was hedged, whose responsibility within the organisational structure was this? 

One group treasurer explained that their company had decided not to hedge its transaction exposure as they would have had to involve all of its investors, which would have added complexity. It has an impact on reporting - the company would have had to have shown like-forlike figures, and they wanted to protect this information. The factors involved in weighing up whether or not to hedge this risk requires a full evaluation by corporates. 

If you are a treasurer or group treasurer, and would like to find out more about the Global Corporate Treasurers Forum Europe and register your interest in attending the 2011 forum at the Ritz Hotel in Paris, click here. 

Growth in Supply Chain Finance 

Another area of interest to corporates that received a ‘boost’ from the credit crisis is supply chain finance (SCF). The contraction of available credit in the market led to an increased need for bank financing. With a dearth of liquidity solutions available, SCF solutions gained a much greater global popularity. Picking up this trend, Alexander Mutter from Deutsche Bank examined what the future may hold for SCF offerings in his article that rounds out our top 10 for 2010. 

Mutter sees the growth of SCF leading to more diversified and bespoke solutions emerging, driven by banks. He uses the example of a supplier portfolio where there are large, mid-sized and smaller enterprises involved. “Today, a similar supply chain finance solution will be offered to all of them. In the future, the offering to the individual supplier will be customised according to their balance sheet objective, based on the need analysis of this portfolio and risk policies, as well as financial needs,” suggests Mutter. By taking this approach, the SCF offering will be more flexible and tailored to suit the individual customer profile. 

Responding to the growth in popularity of SCF as a topic among corporate treasurers, this year gtnews has worked with Enrico Camerinelli, a senior analyst at Aite Group and SCF expert, to publish a monthly blog on key SCF issues. Topics covered in 2010 include the return on investment in SCF, the importance of sustainable supply chains and the need for an industry standard taxonomy in SCF. You can find every blog post on the topic here. 

Looking Ahead 

2010 proved that, while the role of the treasurer has grown in stature, the demands this places on the treasurer are fierce and come in many forms. The economic world can still be paranoid and reactionary in the aftermath of the credit crisis and, as many corporates stockpile cash, perhaps some treasurers could be accused of fuelling the fire in this regard. It seems that this year has answered a number of questions - regarding global recession and the credit crisis - but thrown up several more challenges. 

Despite this, there are excellent examples of corporate treasury departments and individual treasurers demonstrating best practice across the myriad different disciplines mentioned above. We were lucky enough to witness this first-hand at gtnews in 2010 through the quality and quantity of entries we received for our first annual Global Corporate Treasury Awards, which was this year held in Amsterdam alongside the Sibos Corporate Forum. As you can see from the winning projects, teams and treasurers, innovation is alive and well in treasury departments around the world. 

Coming up on 4 January in our first upload of 2011, we’ll be publishing a series of articles offering perspectives and predictions for the year ahead and mulling over the challenges that are likely to come the way of the treasurer. Until then, best wishes for the holidays from everyone here at gtnews.

Risk, Regulation and the Rise of Asia: Corporate and Bank Perspectives

Publication: gtnews.com

This year's EuroFinance Cash and Treasury Management conference was held in Geneva, Switzerland. The three key topics under discussion were risk, new regulation and growth in Asia. This commentary looks at the challenges and opportunities in the year ahead. 

This year the EuroFinance International Cash and Treasury Management conference was held in Geneva between 6-8 October. The economic situation is Switzerland is comparatively healthy when viewed alongside some other European countries, but what of the global economic outlook for the next year? This was the theme of the opening session of the conference, with Daniel Franklin, executive editor at The Economist, interviewed by Anne Boden, head of Europe, Middle East and Africa (EMEA), Global Transaction Services, RBS, on ‘The World in 2011’. 

Boden described how she had found paranoia about emerging markets on recent visits to the US. Franklin pointed to the fact that this is a permanent shift, which was accelerated by the credit crisis. He encouraged delegates to look beyond the BRIC countries of Brazil, Russia, India and China, and also be more discerning with opinions towards emerging market countries. I think this comes from a certain desire in the west to rush to acronyms and paint largely diverse emerging economies as the same. 

Turning to risks for the year ahead, and Franklin’s main concern is protectionism. He used to the US as an example for his fear - unemployment is stubbornly high and some in congress are calling for harsh trade measures in order to protect jobs in the US. The main focus of this ire is China, with the perception that it is manipulating the price of the renminbi in order to have a trade advantage. Franklin stated that China doesn’t respond well to threats, but at the same time would not want a trade war with the US. 

Looking at Europe, and Franklin dismissed the chances of the euro breaking up as no more than a 10% likelihood - believing the political will to hold the euro together will overcome any current disgruntlement in various of the member states. However, the mechanisms within the eurozone for coping with economic crisis need to be much more robust, with the various sovereign debt woes and the value of the euro standing testament to the fact that safeguards were not strong enough in the past. 

Many of the economic themes that Franklin discussed have been subject to direct political influence during and in the wake of the credit crisis. Franklin named political risk as the biggest risk faced over the next 12 months, stating that he believes this gives a 30% chance of the much-touted ‘double-dip’ recession. For example, some tax cuts introduced by former-US president George W Bush are coming up to their expiry date. Looking at the political polarisation in the US, and the possibility of next month’s midterm elections delivering a split Congress, these cuts may be unable to be reinstated, which in turn could strike a blow against consumer spending levels. 

Turning to business, Franklin named three key trends: 

1. Competition from the emerging markets is increasing - even in the corporate world. 
2. The global nature of business is only intensifying, be it in the talent pool, or where business operations are based. 
3. There’s a focus on having both of the key factors that create enduring success for business - scale and agility combined. Many companies are good at achieving one or other of these, but the two together offer a much greater challenge. 

Asian perspectives 

Picking up on a theme common in this first session, a panel discussion on the second day added some extra detail to the Asian analysis. Damian Glendinning from Lenovo, based in Singapore, made the point that many of the delegates in the conference hall might find themselves working for a Chinese or Indian company in the near future. This is one example of the rapid corporate growth taking place in Asia. And it’s not only in the talent pool where this growth and competition is being found. 

Glendinning pointed out that a large number of western corporate are viewing Asia, and China in particular, as a ‘honeypot’ and there is a scramble to become involved and create a presence in these markets. Faced with this competition in their home market, an increasing number of Asian corporates, led by those from China, are rising to the challenge and taking the fight to the west by competing aggressively in these traditional western home markets. Glendinning used this example to illustrate the point that delegates need to understand the fact that perspectives in Beijing on the global economy and corporate world can differ from the perspectives held by those in London or Paris, for example, and that entities in the western world would benefit from trying to gain an insight into these alternative perspectives. 

David Blair from Huawei, based in China, described some of the challenges of being a western group treasurer of a Chinese corporation. “They call us the ‘grey hairs’," he joked, referring to the young and ambitious domestic workforce that are driving innovation in Chinese corporations and their thoughts on working for somewhat older western treasurers. Blair explained how Huawei has to have a very tight set of financial controls in place in the company, with most cash being centralised and not ‘in the field’, something he described as being very necessary when the workforce is young and eager. And, as Franklin mentioned in the opening session, this competitive nature is something that those in the west are just going to have to get used to. 

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Regulatory Thoughts 

Paul Simpson, Citi - The regulatory framework is unpredictable at the very least - Dodd-Frank, anti-money laundering (AML), emerging payments. A lack of liquidity is enhancing the focus on supply chain finance. Also, global cash flows are changing, which can be attributed to the growth of the BICs. 

Marilyn Spearing, Deutsche Bank - We’re wading through regulations, like it’s a new religion. And this is not just in the US with Dodd-Frank, but in Europe with things such as SEPA [single euro payments area] too. 

Tony Richter, HSBC - There’s a need for European governments vocally to support SEPA migration. The recent example of France switching the vast majority of its public finance payments to SEPA instruments is a lead that others around Europe should be looking to follow in order to boost the scheme. 

Anne Boden, RBS - The impact of regulations on the banks and the knock-on effect on their corporate clients is key. With Basel III, are we regulating the crisis we just had instead of focussing on current issues? Also, many regulations don’t look at the interlinked nature of banks. 

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Risk, Technology and the Role of Banks 

gtnews has published a number of articles about the growth of risks that treasurers are tasked with managing since the credit crisis, particularly areas such as counterparty risk and sovereign risk. It is here that treasury technology can be a key facilitator for treasurers, and this was a topic that I discussed with Vanessa Manning, corporate director, market manager, EMEA, international cash management at RBS. 

Corporates are seeking end-to-end visibility over their value chain, in a way that is synchronised and visible, rather than in the silos that bank offerings can tend to come in. Manning made the point that the technology available today allows this to be possible. And while budgets are tight, the opportunity to outsource these capabilities exist. "Software-as-a-service [SaaS] has never been cheaper, and it is globally available," said Manning. With the options available multiplying in number and versatility, corporates are looking to multibank channels, as opposed to proprietary banking technology. 

Turning to 2011, Manning described how there will be a continued focus on both standardisation and modularisation, with agility and mobility of systems being key to corporates during this time. Corporates want to track areas such as processing flows and connectivity, and are comparing and contrasting the performances of their different relationship banks thanks to the multi-bank portals that exist today. The user-friendliness of the new technologies will also play a large part in corporate adoption in the coming year, according to Manning. "This has to cover the complete online account," she explained, and pointed to the trial of the SWIFT 3SKey (PDI) in France as an example of the interest in developing user-friendly interfaces. 

User friendliness is a key reason that electronic bank account management (eBAM) is such a hot topic for both corporates and banks right now. Speaking to Paul Wheeler, managing director of Wall Street Systems, he explained how for corporates, eBAM will become a 'must have' utility over the next couple of years and it will be seen as part of the standard treasury kit. On the bank side, the advantage of eBAM is the efficiency it brings - compare having to change the signatory on 300 accounts of one of their corporate customers manually via paper authentification, to the ability to do this online. With pressure coming from both sides of the corporate banking relationship to get this technology evolving, progress will be swift. 

The next development for eBAM revolves around the developing SWIFT standards in this area. Wheeler explained how Wall Street Systems is playing a part in the next trial, which is aimed at getting multiple corporates sending information into a bank, and then the bank responding back to the corporates. In terms of the developing market in eBAM vendors, Wheeler described how this is adding momentum in the move to establishing eBAM. At the same time, he was bullish about his own company's chances of maintaining a strong presence in the market: "At the moment there's lots of noise, but when corporates and banks become more educated about the types of offerings that are describing themselves as 'eBAM', some vendors will fall away." 

A main challenge that Wheeler sees facing eBAM is the difficulty in making it multibank. This is something that Wall Street Systems are counselling the banks about, but the move towards multibank could slow the adoption process. Wheeler commented that SWIFT needs to be strong on this issue to ensure the process doesn't become bogged down.

The Credit Crisis Legacy: Treasury Risk Mitigation and Management

Publication: Global Treasury Briefing, Volume 3 Issue 3

The variety of risks that the treasury function is responsible for increased markedly as a result of the credit crisis. Ben Poole examines the risk topics that were top of the agenda for treasurers attending Global Corporate Treasurers Forum Europe 2010. 

The role of a treasurer within an organisation can vary considerably from company to company due to a variety of factors - size and scope of the company, industry type, location of the business and subsidiaries, etc. Over time, the role of the treasurer has also expanded or contracted in line with economic forces - from a basic receivables and payables focus to a ‘mission-creep’ situation, where functions that traditionally resided in other business units, such as risk, IT and operations, began finding themselves on the treasury ‘to do’ list. 

Then came the credit crisis. When the money markets started to see funds ‘break the buck’ and acronyms such as CDO, CDS and ABS were attracting the attention of corporate boards, treasurers had to focus almost exclusively on shoring up or renegotiating lines of credit and reevaluating investment strategies across the board. The tumultuous market conditions put the treasury department firmly in the corporate spotlight - communication with the board was becoming commonplace and treasurers had an opportunity to demonstrate the added value that their function can bring to the organisation. But with this rise in profile came associated risks - senior management were now expecting much more from treasurers, but in many cases were not prepared to back this expectation with additional resources and staff, creating enterprise risk. And in daily treasury activities, risks were enhanced or even created from scratch - which corporates could have envisaged performing counterparty risk analysis on their banks in case they fell over? Added to the scenario were extreme movements in foreign exchange markets that created severe turbulence for multinationals of all shapes and sizes, while pension funds formed a risk headache in some countries rather than others. 

All in all, the portfolio of risk that corporate treasurers are facing now that the credit crisis is receding is vast and complicated. As such, it is no surprise that risk was the conversation topic of choice for many of the treasurers who gathered at the gtnews Global Corporate Treasurers Forum Europe 2010 (GCTFE 2010), at London’s Grosvenor House hotel. This feature gathers the main risk management takeaways from the event. 

Enterprise Risk Management - What is the Treasurer’s Role in Risk? 

The PricewaterhouseCoopers (PwC) UK Treasury Survey 2010 found that nearly 90% of respondents think the credit crisis has led to their department gaining increased attention from the board. In addition, nearly 80% said they think the treasury function is increasingly thought of as adding value, while even 60% said that business units are showing an increased interest in treasury. All of these are impressive numbers, but unfortunately just over 20% said that the level of budget invested in treasury had been increased to match this new position within the organisation - treasurers are effectively being asked to do more but without more resources. This lopsided position carries inherent risk. It is here that an enterprise risk management (ERM) strategy is required. 

Today, audit committees are frequently asking for ERM projects to be demonstrated. These are not like buzzword-projects of the past - such as economic value add (EVA). ERM is based on common sense and looks at all elements of risk. The first step in achieving this is to identify the critical risks for your organisation. A risk register can be hundreds of pages long, so the advice in the workshop was to investigate a framework tool, such as the Committee of Sponsoring Organizations (COSO) framework, which can aid the risk identification process. 

Treasurers entering this process need to have a firm understanding of the risk environment in their organisation - are they risk-taking, risk-neutral or risk-averse? Different business areas have different risk profiles and treasurers should only take risks that are acceptable to their shareholders - other risks should be managed away. Corporates must understand the internal environment that they operate in. Once this has been established and the risk framework is in place, the treasurer will be in a position for objective setting, event identification, risk assessment and risk response. All of these processes should be linked to the budget cycle. 

At the Global Corporate Treasurers Forum Europe 2010, John McAnulty, group treasurer at Richemont, explained that his company initially identified 10 risks, but then realised that this was too many and so reduced it to four or five critical risks that had the potential to knock the company off course. They then produced a very thin executive summary and action plan. McAnulty admitted that lots of groundwork has to be put in at the start of the ERM project, but that this gets easier. A consolidated risk report was also issued to key internal stakeholders, while standard risk action plan templates have been included by the company in strategic plans and budgets and a risk statement is included in the annual report and accounts., McAnulty explained how the company uses a common risk language to ensure this is clear and transparent to all parties. 

So if you don’t already have an ERM strategy, should you? Quite a few companies now identify and spell out key risks in their annual report. Any treasurer thinking about this will get huge support from non-executives at the moment, as risk management is a big topic of conversation for this group. Additionally, audit committees are increasingly looking at this. However, there are likely to be several challenges within the organisation to tackle on the way to establishing an ERM programme, and the following comments may crop up: 

• “This is just another management fad.” 
• “Risk is good.” 
• “We don’t have time for this.” 
• “This is no different from internal audit.” 

While this process may take the treasurer outside their comfort zone, the embedded understanding of risk that the treasurer has makes him or her the perfect owner of this project as part of a group management team. 

Managing FX Swings 

One of the areas of risk management that treasury is used to dealing with, but gained additional exposure as a result of the effect the credit crisis had on western markets, is the management of foreign exchange (FX) risk. Given the volatility in the currency markets, it is no surprise that the FX risk management workshop drew the attention of many delegates at Global Corporate Treasurers Forum Europe. Richard Roering, from the consultancy Zanders, illustrated that FX risk falls into the following categories: 

Transaction exposure: risk of value changes depending on where the transaction is. Some transaction exposure is not shown in the P&L because it has not yet been recognised, or the contract is anticipated rather than committed to. 

Economic exposure: future impact on cash flows as a result of long-term FX rate changes. 

Translation exposure: The FX exposure seemingly most likely to be forgotten by many treasury departments. It occurs when a subsidiary has a functional currency other than the reporting currency of the holding. This concept can be split into two further categories: profit translation exposures and asset translation exposures. 

FX management objectives are linked to company policy - therefore, common FX objectives include: 

1. Reduce the uncertainty of cash flow (protecting short-term cash flow implies a short hedging horizon). 
2. Protect business at budget rate or better in order to protect it within a defined time horizon. 
3. Reduce long-term P&L volatility. Hedging is typically 1-2 years forward on a rolling basis, with layered hedge ratios. 

Current thinking seems divided as to whether multinational corporations (MNCs) should hedge FX profit translation risk. Those in favour argue that translation gains or losses exist only ‘on paper’, while those against counter that translation gains/losses have an impact on the reported profit of the company. So what about in practice? Roehring had three points here: 

1. While they are in the minority, some MNCs can face a risk at the EBITDA level. 
2. Credit ratings are a key determinant in positive hedging decisions 
3. Larger MNCs are more likely to hedge FX profit translation risk. 

A group treasurer attending the workshop explained to the other delegates that their company had decided not to hedge its transaction exposure. The reason for this was that the company would have had to involve all of its investors, which would have added complexity. It has an impact on reporting - the company would have had to have shown like-for-like figures, and they wanted to protect this information. The factors involved in weighing up whether to hedge this risk or not requires a full evaluation by corporates. 

Pension Risk Looming Large in Certain Countries 

Many western countries are facing severe risk issues in the corporate pensions market. In the UK, this is particularly the case with defined benefit (DB) pension schemes, which have total assets of £775bn but total liabilities of £975bn.1 Pension schemes are closing and members of these schemes are ageing, meaning that the funding imbalance here will remain for a long time to come. At Global Corporate Treasurers Forum Europe, Chris Sheppard from professional services group Mercer addressed some of the issues that corporates need to be aware of in their pension risk management strategies. 

Because companies and trustees have different interests at stake in a DB pension, it is important that a model for the risk management process of the pension scheme is agreed upon by both parties. Sheppard produced a basic five-point plan to create such a model: 

1. Define the mission. Is this to provide short-term balance sheet control for the sponsor, or long-term self-sufficiency for the scheme? 
2. Quantify the risk budget. What is the sponsor’s tolerance of cost variability, and what is the trustees’ tolerance of funding level deterioration? 
3. Decide how the budget is spent. Will you target rewarded risks and value creation, or unrewarded risks and value protection? 
4. Allocate responsibilities. What are the roles of the company and the trustees in the governing and executive functions of the scheme? 
5. Establish a process. What events will be triggers in your scheme management, and what will be the responses to these triggers? How can you ensure ongoing monitoring? 

There are a number of market trends that could have an effect on the five points above. Increasingly, swaps are being used to hedge interest rates and inflation at predetermined trigger levels. Longevity solutions are on the rise as mortality reserving increases. Enhanced transfer value exercises will continue and increase as accounting reserves increase (so that P&L impact reduces). There is an increased use of equity derivative solutions to reduce downside risk. Schemes are being closed to future accrual and the search for lower risk alternatives is continuing apace. 

Against the backdrop of these market trends, what action can treasurers take to ensure the best for their organisation? Sheppard made the following suggestions: 

• Understand the risk being taken in your DB schemes. 
• Assess the impact of those risks on the company. 
• Define your company’s tolerance to risk. 
• Set risk reduction triggers appropriate to this tolerance. 
• Ensure that robust risk governance is in place. 
• Establish a process to monitor and take action. 
• Monitor market trends and opportunities. 

Conclusion 

The risk management portfolio that treasurers are responsible for today is considerably greater than it was a couple of years ago. It is too early to tell if this additional burden will subside as the credit crisis fades, but perhaps from the treasurer’s perspective it would be better if it didn’t. The current elevated role of the treasurer provides an opportunity for those in the role to add value to the business and demonstrate the skills that will take their personal careers one step closer to senior management. By taking control of the various risk management functions mentioned in this article, treasurers can demonstrate their overall corporate finance skill-set, and prove to senior management that the treasury function offers much more than merely a cash management functionality.

Making the Business Case for a New TMS

Publication: gtnews Buyer's Guide to Treasury Management Systems 2010

‘Expense management’ and ‘corporate streamlining’ are two phrases that have stalked the corridors of treasury departments around the world since the credit crisis hit. Against this backdrop, Ben Poole examines how treasurers can make the business case for a new TMS. 

While the recent financial crisis did much to elevate the role of the treasurer, it also resulted in widespread cost cutting and expense control in the corporate world. The new financial environment has seen treasurers taking on greater responsibility and a larger work portfolio, while finding that their resources – in terms of budget and staff - have been frozen or reduced. Against this environment, all spending will be thoroughly scrutinized and treasurers may find themselves in for a challenging time when trying to justify new purchases, particularly for something as comprehensive and expensive as a treasury management system (TMS). How can treasurers address this challenge, and what are the main business points that can support a treasurer when pitching to senior management and IT purchasing managers?

Where is the Cash?

Cash flow is the main cause of financial risk within a business, so it is vital that treasury has an accurate, timely and transparent view of the company’s cash position. This needs to cover areas such as accounts payable (A/P) and accounts receivable (A/R), between treasury centres in different countries and the various foreign exchange (FX) exposures that these generate, as well as across banking relationships, covering account fees, interest rates, etc. As TMS can seamlessly integrate a variety of areas of treasury activity, from electronic dealing (e-dealing) to reporting, confirmation matching to cash forecasting, they can provide an accurate view of enterprise-wide cash flows to help effectively manage the liquidity and improve investment returns. In addition, the transparency allows treasurers to compare lending rates between different banks and move away from expensive borrowing.

But getting control over cash visibility is not simply a case of plugging in a TMS and finding that all your treasury worries are over. Quite often, the implementation of a new TMS goes hand-in-hand with a restructuring of the treasury function along more centralised lines as treasurers follow an ongoing quest for efficiency. If you want to streamline the way that you process your A/P and A/R, the chances are that a centralised approach to treasury management is the best way to achieve this and then gain the benefits of cash visibility already mentioned. A centralised approach, together with a TMS, helps strip out the ‘dead wood’ from many processes, and instead puts the focus on a treasury management structure that receives automated updates from the various business units and banking relationships, rather than trying to collect disparate data on myriad spreadsheets. In turn, the enhanced quality of data will benefit overall cash and liquidity management, while merger and acquisition (M&A)-related integration will be simplified against this backdrop.

Senior management, including those as high as board level, have been particularly keen on timely and accurate cash and liquidity information since the credit crisis first struck. These parts of the business have since been educating themselves on every nuance of liquidity management, corporate financial compliance issues and banking relationships, and require real-time information on these topics at a moment’s notice. Companies that were operating largely decentralised organisational structures, especially if the majority of treasury work was being conducted manually on spreadsheets, will have been particularly hardpressed to provide the relevant information quickly and accurately. By contrast, a centrally-managed treasury with a TMS is ideally positioned to provide this information.

Rise of Risk Management 

The variety and depth of risks that treasurers have to manage today is far in excess of that which existed before the credit crisis. Large corporates can find that they don’t have an overall view of risk, which can lead to risks being missed or mismanaged. A good TMS will provide a wide range of functionality to help treasures measure and manage financial risk. In addition to providing monitoring capabilities for limits, TMS can also provide scenarios analysis and modelling capabilities to model the effects of cash flows and guide risk management decisions. A treasury that relies on spreadsheets will have no way of finding out its real-time cash positions, and indeed this is also not always an option with enterprise resource planning (ERP) systems.

Take counterparty risk as an example. Before the credit crisis, it is fair to say that, for many companies, the scope of their counterparty risk measurement began and ended with the ups and downs of their derivative portfolio against counterparties. Today, corporates are looking to add their balance position, credit facilities and bank exposure to this mix, highlighting how just one risk has escalated postcredit crisis. In this area, a TMS can assist the treasurer by allowing them easily to set the risk parameters in line with their counterparty risk policy, as well as producing customised reports to that effect.

As is clear from the first two topics in this article, visibility over a corporate’s cash position and the management of financial risk are intrinsically linked. The constantly shifting sands of a corporate’s cash position across the organisation need to tracked accurately and in real time in order for a treasury department to maximise the company’s liquidity and ensure best practice in risk mitigation. Today, TMS offer enhanced functionality in areas such as bank account administration and treasury reporting, in addition to corporate connectivity to SWIFT, as a way successfully managing these two large challenges. This is not something that a treasury operating largely on spreadsheets will be able to get a handle on. While spreadsheets can be a cheap and available short-term solution, these corporates will be potentially missing crucial risk exposures and losing money through poor cash management. The business case for a TMS here is clear.

Maximising Banking Relationships

TMS can help corporates to integrate with financial services providers’ systems, enabling them to have realtime access to data from banks. For example, banks have invested in up-to-the-minute balance reporting capabilities that a TMS can give you access to. In the payment hub space, payments and cash movements can be tracked through the TMS, just as you’d track a package on a courier’s website. It can also help in better managing the fees and aggressively managing compensation.

The possibility of integrating electronic bank account management (eBAM) with a TMS is intriguing at this point. This is surely the next logical step for both of these two products, enabling a treasurer to centrally manage cash flows and risk across the organisation, while simultaneously having the ability to open, move and close bank accounts, for example. TMS vendors will have to keep up to speed with the standardised message types that SWIFT are developing in their eBAM programme, but this is a concern that they should be able to address easily, leaving corporates with a powerful bank relationship tool as part of their integrated TMS.

Information Reporting 

When it comes to information reporting, TMS can offer a number of advantages for corporates. One of the main challenges that treasurers face when using spreadsheets or ERP systems for this function is the lack of real time information available in areas such as payables and receivables. A welldeployed TMS can provide right data to the right people at the right time to improve control, decision making and reducing expenses. Banks have portals that are capable of directly sending the reporting information that corporates need directly to their system in a seamless manner. ERP systems can do this integration, but TMS tend to be more versatile and flexible because of their specific focus on treasury processes.

The benefit of having this real-time view is that the treasurer has greater freedom to make key decisions over whether they should look at investing or borrowing, safe in the knowledge that they have up-to-date and accurate information. In addition, as this process is automated, it reduces the workload on an already-stressed treasury department.

Enhanced Efficiency

As with any system, the automation that a TMS brings can improve efficiency and productivity by removing manual processes and improving accuracy. In a situation where you have multiple users in multiple areas of the company, a TMS can define workflows, meaning that the right people have the right access to the right information. This identity and access management (IAM) role lets the system do the work for the treasurer once the entitlements have been set up and the workflow established.

This also adds a very important level of security to treasury operations. Spreadsheets by their very nature are insecure and open to abuse. With a TMS, access to all data can be set by treasury and access privileges managed depending on whether staff move departments or leave the company. This should drastically reduce the prospect of data theft or manipulation. In addition, the TMS can provide a ‘paper trail’, detailing which user has accessed or input which data at which time, which can be vital for internal auditing purposes.

An end-to-end TMS can replace multiple spreadsheets that rely on the manual keying in of data, and therefore removes the prospect of human error that exists here. In addition, this frees up treasury staff from having to deal with timeconsuming and repetitive data entry, and they can instead focus on the role of treasury analyst and become more productive this way.

Conclusion 

TMS offer clear business benefits over the use of spreadsheets and some ERP modules in a number of areas. They allow visibility over a company’s cash position, leading to more accurate cash forecasting and the liquidity and working capital advantages this permits. In addition, the variety and depth of financial risks that corporates face in the postcredit crisis world are far easier to make sense of and manage through the use of a TMS than other options. When it comes to interacting with banking partners, a TMS can enable corporates to get real-time account information at the click of a button. They are also able to provide a wide array of reporting information when called upon.

And last, but not least, the efficiency that a TMS can bring to a treasury department cuts across several areas - by removing manual input, the system reduces the potential for human error, allows a small treasury team to achieve an exponentially large amount of accurate work, and provides for a security of data that can help treasurers sleep at night. In terms of making the business case to senior management or IT purchasers, these points should help to make a positive impact.

In addition to these points, the treasurer has additional resources available that they can draw on when putting together the business case for a TMS. Get close to the business, understand why business units operate in the way they do, and have a two-way, open conversation about how a TMS can improve financial management across the organisation. Not only will this help build the business case, but it will also be invaluable when it comes to choosing the best fit TMS for your company.

Advice on how to put together the business case can also be sought from your main relationship banks. After all many of the main banks have TMS offerings of their own in some shape or form. By speaking to your main bank, you can hopefully get valuable advice to help in building a solid business case.