Implementation of a Treasury Management System is Essential to Corporate Finance Activities

Todd Gosserand, Vice President, Risk Management & Treasury Projects, TAQA Group

Corporate Finance is consistently found within the Treasury Department of all organizations, therefore the technological advancements utilized within this department dictates their activities. Due to the complexity of financial decisions, the creation of the automated Treasury Management System (TMS) is the most critical technological advancement in Corporate Finance in the last ten years. Through technology the TMS allows a CFO, Treasurer and Corporate Finance Manager to gain visibility of liquidity, investments and debt. By implementing a TMS system this technology will also ensure a company will lower fraud, increase competitiveness, streamline operations, manage risk exposures, eliminate errors that can potentially lose millions in losses and provide enhanced reporting. The TMS provides the analytical tools necessary to successfully execute the Corporate Finance activities of an organization in the most technologically advanced and holistic manner.

Traditional Corporate Finance typically is focused on three tasks: Decision to undertake capital investments, short-term financial decisions that focus on operations and the sourcing of debt in support of a firm’s long-term capital needs. The following will describe how the technological advancements of a Treasury Management System supports each of these activities in detail:

Decision to Undertake Capital Investments

The TMS will allow an organization to execute Discounted Cash Flow analysis to judge the viability of a project in a formalized manner with industry leading computations. In addition, the system will calculate the Weighed Cost of Capital (WACC) which is essential the DCF analysis. In addition, the system will permit the firm to compare each of the potential endeavors in parallel to judge their viability or provide a differentiation from a Required Rate of Return (RRR), which is also calculated automatically within the system.

Short-Term Financial Decisions that focus on Operations

The TMS will automatically create a Cash Flow Projection from underlying information that is collected by the system form accounting and finance. This cash flow will assist a firm in successfully managing liquidity in a systematic manner that maximizes investment return and minimize issues associated with the cash needed for operations. The system will also technologically adapt real-time adjustments based on unforeseen actual transactions so decisions can be augmented to dynamically manage liquidity.

“Through technology, the TMS allows a CFO, Treasurer and Corporate Finance Manager to gain visibility of liquidity, investments, and debt”

Sourcing of Debt in support of Long-Term Capital Needs

The system will support the analysis of the underlying characteristics necessary to analyze historical rates, accurately price the transaction, manage the credit risk associated with the decision and understand the current debt structure of the firm to make an informed decision on the addition of new debt. Historical data is captured inside the system automatically and debt pricing from both a present value and mark-to-market perspective are easily available. In addition, a unique credit model is offered to analyze counterparties, and the current credit diversification of the book is automated as well as the current fixed versus floating structure of the company. Each of these attributes will be presented deliberately in unison as is necessary and are completely automated.

It is critical for Corporate Finance to eliminate the need for spreadsheets and embrace the technology associated with a Treasury Management System to execute the underlying activities in a more organized manner, create robust reporting and ensure uniformities in the underlying data necessary to make the best decision in regards to an organization’s best financial interests.