How can treasury insights support strategic decision making and scenario planning?

Treasury tells the cfo if and when their profit turn into cash. Also it tells FP&A when the budgets turn into cash and if the business can afford the plans in the budget. Regarding the future treasury tells the whole of finance if they have the cash in the future to pay salaries Overall treasury keeps the company afloat; now and in the future!

Treasury data helps you make smarter financial decisions. Here's the short version: See your cash flow clearly: Know where your money is and where it's going. Plan for the future: Invest strategically and avoid financial surprises. Reduce risks: Be prepared for changing markets and economic downturns. Basically, treasury insights are your financial crystal ball for better decision-making.

Understanding treasury insights is pivotal for informing strategic decisions and scenario planning. By delving into the nuances of treasury management, we gain invaluable foresight into cash flow dynamics, liquidity risks, and capital allocation strategies. These insights empower organizations to anticipate and adapt to various scenarios, whether it's navigating market fluctuations, optimizing investment opportunities, or mitigating financial risks. Leveraging treasury insights effectively enables us to steer the ship with confidence, ensuring our decisions align with broader strategic objectives and ultimately drive sustainable growth.

Taking a prospective view from a long-term liquidity base plan and operational forecasting can provide valuable insights. For example, during a strategic M&A scenario with debt financing, you can better align the required debt terms and covenants with the current behavior of the businesses with scenario analysis. If a large proportion of your receivables occur quarterly, moving to a three-month interest payment schedule can optimize working capital. Additionally, this approach allows you to highlight potential risks to certain covenant metrics, enabling the business to address these issues before entering the agreement and thus improving negotiation outcomes.

Treasury insights provide important data on cash flow, liquidity, and risk exposure, which helps the organization's executive team make informed strategic decisions. We are able to do this by analyzing trends and financial forecasts. We also identify potential risks, optimize capital allocation, and ensure funds are available to meet the organization's needs.

As a Treasurer, managing financial risks effectively is an important part of my KPI. I do this by conducting thorough risk assessments, identifying potential threats and their impacts on our organization. Then I implement robust risk management strategies, such as hedging and diversification, to help mitigate these risks. I also actively monitor market trends and economic indicators, staying vigilant for any changes that may affect our organization financially.

With the volatility of exchange rates and interest rates, entities face a significant financial risk. To mitigate the risk treasuries can provide insights in a such way that can shape the strategies of the organization. For example, how an entity manages its open position of the different currencies will help reduce exchange rate risk arising from market risk. How an organization manages interest rate risk is also important in managing financial risk. For example in a period in which interest rate is reducing it is ideal to block investments for a longer tenor at a higher fixed rate. However, the mix of interest rates and tenors will depend on the different requirements of the organisation.

The ability to spot market trends and yield curve is a critical skill for every Treasurer to have, this allows to spot potential financial risks (FX and interest rate) and potential investment opportunities.

Managing financial risks during strategic business planning is the core of Treasury. By understanding strategic goals, Treasury can plan for associated risks. For example, when taking on a new business or entering a new commodity line, Treasury can analyze how these new asset classes will interact with existing streams. This analysis can identify potential offsets or the need for hedging within a certain ratio, leading to necessary adjustments in processes and policies.

The major role of treasury is to align all financial strategies with business strategies. While you are working on handling the daily cash & liquidity management, risk management, etc, your focus should be on how it aligns with the organizations' strategic goals and objectives.

Enhancing Liquidity Management: Assessing Current and Future Liquidity: Treasury insights provide a clear picture of your current cash flow, working capital, and funding sources. This enables you to identify potential liquidity gaps or surpluses and proactively manage them. Optimizing Cash Conversion Cycle: By analyzing cash inflows and outflows, you can identify areas for improvement in the cash conversion cycle, which is the time it takes to convert a sale into cash. This optimization frees up trapped cash and improves overall liquidity. Supporting Strategic Initiatives: Evaluating Investment Opportunities: Treasury insights help assess the financial feasibility of potential investments or acquisitions.

For me, treasury insights are invaluable in enhancing my capabilities. By analyzing market trends and economic indicators, I gain a deeper understanding of our financial environment, enabling me to make informed decisions. These insights also guide me in optimizing cash management strategies, identifying investment opportunities, and managing risks effectively. Also, regularly reviewing key metrics and benchmarking against industry standards helps me refine our treasury practices and adapt to changing market conditions.

Treasury capabilities encompass financial risk, accounting, tax, data, and payment products. However, the true value of treasury lies in effective communication and understanding all internal stakeholders. This enables treasury to identify processes that add little value to the company's strategy and determine actions that can make a significant impact, they can be very small in effort. For example, in a marketplace business model, introducing the right product manager to banking partners and supporting quantitative analysis on payment flows and inquiries can enhance collections and payment services, improve customer conversion, and provide a better experience. These KPIs shine in management reporting.

It's beneficial to step back from core operations and assess where treasury can enhance group value from a financial or business perspective. Two key areas to explore are: - Functions with interdependent requirements, such as customer payments, to ensure they're fully utilizing transaction potentials. - Strategic projects or corporate development, where finance often is the final stakeholder. Being proactive here can save time in planning and provide valuable financial insights or benefits. As finance experts, we shouldn't underestimate the power and value we can unlock, often assumed to be known by stakeholders. Proactively engaging in these areas can significantly enhance overall group value.

How capable your organizational treasury or yourself as a treasurer will depend on your skills, ability to call the right people right time, and the trust and relationship you have in the industry. Further being innovative and tech-driven is the key to enhancing treasury capabilities. For example knowledge of Python and libraries like pandas and numPy. I have seen both these areas enormously helping treasuries and treasurers in difficult times. As these couple, it leads to better strategic decisions as well as informed scenario planning.

All companies face liquidity and risk issues (e.g. how much liquidity is enough? How much risk is too much?) After all, if you are out of cash / lack access to capital, you are out of business. Larger companies have a Treasury function to answer the questions above, but smaller companies do not, yet they face the same issues too. Regardless of size, all companies need to create success metrics that go beyond EBITDA to focus on a company's cash conversion cycle and its access to external sources of capital. These metrics when coupled to "enough" talent and technology, will enhance treasury and / or a company's ability to compete.

In scenario planning, financial data insights enable you assess different financial outcomes, plan for contingencies, and adapt to market changes, which ensures the organization's sustainable growth.

Nothing is going to have a better drive in scenario planning than having the correct KPI above your department i.e. debt coverage ratio, net open position or FX exposure. If you have a decent liquidity plan. Building scenario planning into FX risk and IR risk can be as straight forward as ensuring forward and futures curves are being applied to the future expected cashflows on the plan highlighting the markets expectation. You can then add a simple +/- additive shock to simulate different scenarios. This approach highlights potential impacts and helps in preparing for various market conditions.

Engage external consultants specializing in treasury management to bring innovative solutions tailored to your organization. For instance, we used an external consultant to help renegotiate banking fees, resulting in a 15% reduction. In one of my previous roles, implementing a Treasury Management System (TMS) centralized global cash management, enabling real-time visibility of cash data worldwide first thing in the morning. This streamlined processes by eliminating manual work and red tape, allowing the treasury team to shift their focus from routine tasks to strategic initiatives. Additionally, incorporating ESG criteria into your investment decisions can attract green financing options and lower your cost of capital.

thinking about FX here it's key to pre-decide what you're going to do in terms of FX operations indeed, our emotional state might create turbulences in our decision making and a clearly defined action plan based on KPIs will save the day

Technology alone is not going to solve a company's liquidity and risk issues. Implemented incorrectly it only allows a company to make its mistakes faster, usually not a goal. Even when implemented correctly (e.g. a Treasury management system or TMS) it needs to be used by non treasury users too since operating cash flows are generated by business units, not treasury. Only when used on an enterprise wide basis will a "good" TMS alert the company to situations where operating cash flows are / will be insufficient