Maximizing flexibility and continuity in treasury operations

Business continuity has never been more front of mind for corporations, with treasury teams serving a critical role in preserving liquidity and ensuring they maintain daily operations – even when organizational priorities shift. Companies working with lean teams to deliver corporate treasury services cannot afford to introduce operational risk due to key person risk, decentralized or remote trading activities, or inefficient use of limited treasury team resources. In the current environment, many companies are employing flexible resourcing models to bolster their operational capabilities and augment their treasury teams.

Operational continuity

As the COVID-19 pandemic and West Coast wildfires vividly demonstrated, business disruptions can occur with little or no warning. In the same way that corporations develop overall business continuity plans to continue functioning during a disaster, treasury teams must prepare to maintain their front, middle, and back-office operations and workflows. Treasury leaders should consider the impacts that a sudden key-person departure, a major technology disruption, or an unexpected disaster could have on all areas of their operations.

Process documentation

One key area of preparation companies can implement to provide process continuity and enhance controls across remote workspaces is documenting its risk management workflows and processes, including desktop procedures. By developing a comprehensive process map, including how functional roles and processes should shift during specific crisis scenarios, treasury teams can avoid lost time and critical errors.

Personnel transition planning

Whether prompted by temporary leave, internal backfills, role changes, or new team members, timely and complete workflow hand-offs can ensure consistent operations. Determining which internal or external resources you will utilize and then preparing adequate training for personnel in these new roles is a critical component of treasury department continuity.

Financial risk exposure reassessment

Spanning from exposure identification to hedging strategy and execution, recent volatility highlighted gaps in the financial risk management programs for many organizations. For this reason, many treasury organizations are re-assessing these programs to ensure they are still meeting their objectives. If you hedge only a subset of exposures on balance sheet hedges, for example, you may wish to reduce the risk of incomplete data sets and take a deeper dive into your systems to better aggregate data. Conversely, if you hedge most or all of your exposures, you may want to determine whether you can achieve similar outcomes and reduce settlement exposure and forward point costs by optimizing your hedging program to focus on the exposures that most contribute to your risks.

Hedge accounting reassessment

The global response to the pandemic materially impacted companies’ forecasts, from supply chain disruptions to end-customer demand. Increased forecast volatility has led many companies away from simpler hedge accounting approaches such as critical term match and toward more robust and forgiving approaches, including regression. Platforms allowing for automation of the necessary analysis have created even greater streamlining of FX cash flow hedging programs for most firms.

Policy and governance review

Forward-thinking treasurers and CFOs have used today’s volatile environment as an opportunity to review and improve their programs. Even programs outwardly performing well may have cracks in their foundations, and a comprehensive review ensures greater confidence in the program from investors, the board, senior management, and other stakeholders. Reviewing and comparing your organization’s governance and policy documents against leading practices for risk management elevates the level of assurance that treasury can provide to senior management teams.

Ongoing assessment and benchmarking

Continuing to assess your programs across the key functions and benchmark them against peer organizations in your industry can ensure that you follow leading treasury practices and maintain operational continuity.

Operational program support

For organizations seeking to augment their internal resources or obtain an independent, third-party perspective, Chatham Financial provides robust, flexible operational support. We can support front, middle, and back-office functions within your operational hedging program without disrupting your workflows. Our team can fill short- and long-term resource gaps, providing process documentation and treasury personnel training to ensure timely and complete hand-offs of workflows back to your organization once internal roles are filled. You can also partner with us to access transaction preparation, pricing, execution, and analysis for your operational hedging programs, informed by our global daily trading volume. Additionally, we can review and compare your organization’s governance and policy documents against leading practices for risk management, elevating the level of assurance that your treasury team can provide to senior management teams. We can also review and provide benchmarking feedback across the key functions within a program.