As the economy tilts treasury priorities toward riskmanagement, technology choices are starting to reflect that. WhenEADS, the 49.1-billion-euro ($63.7 billion) European aerospace anddefense giant, decided on a new treasury system, it selectedCalypso, opting for the kind of risk management muscle usuallyassociated with banks.

“Volume-wise, we're like a small bank,” says AndreasDrabert, head of treasury controlling at EADS and sponsor of theselection and implementation project. “A corporate system couldn'tquite give us all the capacity and features we need. We have astrong order book and subsequently big currency exposure, mainly toUSD and, to a smaller extent, towards GBP.”

Risk management is becoming a focal point for treasuries acrossindustries and company sizes. Treasury technology for cash andliquidity management is mature and unlikely to take quantum leapsforward, but the tools for risk management are “still in theirinfancy,” notes Joe Siu, director of financial risk management forChatham Financial in Kennett Square, Pa. “The crisis spurred a lotof innovation around risk management. That will be the excitinggrowth area for the next decade.”

Within risk management, investment risk is the most developeddiscipline and currency risk is developing most quickly, Siu notes.Commodity risk is coming on strong, but supply chain risk remains abig challenge. “It's hard to pull data that show how your suppliersand their suppliers are doing,” he says.

Banks, with their huge investment portfolios and their role asderivatives dealers, pioneered quantitative risk modeling anddeveloped sophisticated metrics and reporting around risk. Untilrecently, that level of detail was considered overkill fornonfinancials, and it still is for most companies.

“I don't think a small or medium-sized industrial company couldjustify it,” Drabert says. The price for EADS? He says only, “Thisdecision was not primarily driven by cost, but more by the fit toour future requirements.”

Strong growth and the post-2008 economic environment sent EADSsearching for a new treasury system in 2009. “We'd had our oldsystems for 10 years. During this time our business had doubled andwe had more subsidiaries using our in-house bank,” Drabert notes.“We needed capacity to keep growing, more tools for risk managementand something that could accommodate more regulations that could becoming out of Brussels and Washington.”

EADS put 10 treasury systems vendors on its long list and threefinalists got careful consideration before Calypso won.

The decision involved tradeoffs, concedes Claas Kohl, head ofmiddle-office in the treasury controlling team. What Calypsooffered for cash management was bank-side, not corporate-side. Withthe stakes high, EADS and Calypso worked together from 2009 to 2011to develop a cash management module that would accommodatecorporate needs.

“Today, we have sleek and sexy cash management,” Kohl says.

There are other differences between bank andcorporations in terms of regulatory risk and how to allocate riskcapital. “We looked closely at corporate systems and bankingsystems,” Kohl says. “The classic corporate systems were very goodat cash management but not as strong at risk management. We had todecide which camp we wanted to be in and with whom to close thegap.”

EADS manages big cash—some 15 billion euros of cash, cashequivalents and securities, as of June 30—and through its cashpooling process it consolidates the transactions in the hundreds ofbank accounts of almost 200 subsidiaries globally. But the value oftop-notch tools is even greater around the company's OTC currencyderivatives—$84.1 billion as of June 30—made up primarily offoreign exchange forward contracts. Calypso brings the best toolsaround trading, confirming and booking those transactions andproviding accounting.

Having a bank-like system brings more than operational capacity.“It helps us see how the banks measure us,” Kohl says. “We cannegotiate better when we understand how the bank would apply pricesto us. We can understand their pricing, anticipate the fees andnegotiate down our charges around OTC derivatives.

“Already we get indications that we are getting much closer toobservable market prices than the traditional pricing methods basedon discounting and used with most corporations,” he says.

In addition to gaining risk management muscle, EADS consolidateda number of different treasury technology platforms it was usingonto the Calypso platform, run by company IT inside the EADSfirewall. “This is not an activity we'd consider outsourcing,” saysFarid Boussatha, head of treasury applications in the treasurycontrolling team. “We want everything to be internal. That was ofkey importance to us.”

The high degree of automation, the high volume of activity andthe all-in-one-system integration, which was fully implemented in2012, are paying off in efficiency. “It has definitely increasedthe speed of our cash management and cash-pooling process,”Boussatha says. “The import of bank account statements, theirprocessing in the system and the subsequent distribution of therelated internal account statements to the subsidiaries against atough cut-off time, which used to take one hour and 50 minutes, nowonly takes 15 minutes.”

Furthermore, “the hedge effectiveness testing around ourinterest rate derivative portfolio, including the accountingentries, is now highly automated and working well,” Boussatha says,“in particular when compared to our old process that requiredunfortunately also manual steps.”