Trends in Treasury Management (Quiz Available)

A number of important trends in treasury management represent a continuation of former trends

are thus considered evolutionary, while others represent major changes and are considered
revolutionary. Electronic Commerce and globalization are examples of evolutionary trends, while
recent legislation such Sarbanes-Oxley and the Check Clearing for the 21st Century Act (“Check
21”) represents revolutionary trends. Whether evolutionary or revolutionary, the following trends
signify substantial changes to the treasury profession’s body of knowledge and or significant
changes to treasury management practices:
- Total Working Capital Management: As the treasury profession has matured, there has been a
shift away from its original, narrow focus on cash management (i.e., the cash account on the
balance sheet) to a broader focus on total working capital management. There is an emphasis on
managing all current asset and current liability accounts.
- Management of the entire balance sheet: in many organizations. Treasury’s role involves more
than managing working capital (current assets and current liabilities). It also includes managing
the entire balance sheet (total assets, total liabilities and equity).
- Expanding Roles and Responsibilities of Treasury: The responsibilities of treasury have been
extended to areas such as operational risk management, insurance and pension fund management.
- Collaboration with other departments: Treasury has become an information hub for financial
information used by other departments. In turn, effective liquidity management depends upon
timely exchange of information with persons responsible for sales, purchasing, production,
inventory, accounts receivable, accounts payable and capital project expenditures. It is especially
important that treasury maintains timely exchanges of relevant information with accounting and
other key departments.
- Greater Technological Expertise: Electronic gathering and exchange of information and
electronic transfer of value are basic to treasury practice today. Familiarity with enterprise
resource planning systems, financial and value transfer software, file access protocols, hedging
software, and other tools are essentials.
- Significant Legislation: Sarbanes-Oxley (SOX), the Patriot Act and “Check 21” are among the
laws that have made major impacts on the treasury profession and the financial services industry.
- Corporate Governance and Ethics: Ethics have always been an important issue for treasury
professionals. However, recent corporate scandals and bankruptcies have reinforced the
importance of focusing on corporate governance.
- International Treasury Management: AS the trend toward globalization continues, especially
with the establishment of a unified currency (the euro) in the European region, many companies
are establishing regionalized or centralized international treasury operations using Shared Service
Centers (SSCs).
- The use of derivatives to manage foreign exchange (FX) risk is no longer confined to large
multi-national firms , but now extends to small and mid-sized companies, as well.
- Outsourcing: As the trend toward outsourcing treasury functions continues, the nature of the
relationship between treasury departments and third-party service providers has become more
complex. More companies use a wide variety of non-bank financial services providers (FSPs) to
perform functions formerly managed in-house or by commercial banks.