Treasuries are undergoingtechnological transformations to enable their corporations to growand prosper in a difficult global marketplace. Take Itron, a technology company that buildselectric, gas, water and thermal energy meters for utilities. Its2007 acquisition of Actaris doubled its size overnight andcatapulted the company, now with $2.4 billion in annual revenue,into complex global operations and exposures. Since the merger,Itron conducts business in 130 countries using 40-plus currenciesthrough a highly decentralized structure.

The merger was a wake-up call for what had been a basic domestictreasury function. Itron kicked off a finance and treasuryreinvention by adopting leading-edge solutions, including migratingto a single global instance of an Oracle ERP system, implementingspecialized applications from FiREapps, Reval and FXall, and an IT2treasury workstation with SWIFT messaging integration.

Meanwhile, companies that have completed technologytransformations are finding tactical ways to move to mobile access,cloud hosting, smarter data mining and reporting, tightermanagement of FX risks, and preparing for electronic bank accountmanagement (eBAM).

The two biggest differentiators of the new generation oftechnology are cloud hosting and mobile access to treasurysoftware, notes Bob Stark, vice president of marketing for treasuryworkstation vendor Kyriba.

“The heaviness of treasury systems is dropping away,” Starkobserves. “Three years ago, it was all about gaining completevisibility to liquidity and counterparty risks. Now the goal isshifting to using that information to make better decisions.”

At Itron, which also makes software and communications tools forutilities, people came before technology. Itron CFO SteveHelmbrecht first made sure he had a sophisticated treasury teamwith global chops and plenty of tech experience to handle the newtools.

Byron Jackson, an assistant treasurer at Motorola who wasinstrumental in the company's 2003 Alexander Hamilton Award-winningcash management project, signed on as treasurer in 2008. Ed Barrie,who had been a leader in Microsoft's much-decorated treasury, wasrecruited in 2009 to head up treasury operations and global foreignexchange.

Rounding out the global treasury team at Liberty Lake,Wash.-based Itron are Kimberly Millikan, director of capitalmarkets; Yvonne Tanak, director of risk management; and Guillaumede Contenson, director of international treasury.

When Itron looked at its priorities, managingforeign exchange topped the list. “We had more than 50 subsidiariesin 40 countries, each of which was buying and selling in localcurrencies as well as in non-functional currencies,” Barrierecalls. And each unit used a different instance of a legacy ERPsystem with a distinct and separate chart of accounts.

“Our exposures at the subsidiary level were hard to see,” headds. “The only hedging we could do was at the Itron Inc. level andat our offshore finance operation” (a mini in-house bank thathandles intercompany loans, located in Luxembourg).

So the first big step was to bring in FiREapps. “We had to startby getting our hands around our global FX balance sheet exposuresand build out the technology to support an effective hedgingprogram,” Barrie says. “We needed FiREapps. That system is able topick up the [general ledger] balances of all the subsidiaries,normalize them and map them to our corporate chart of accounts sothat we can clearly see our exposures globally.”

FiREapps packages that visibility just the way the treasury teamwants to see it. “We tag our exposure by 18 categories like cash,intercompany, trade AP and trade AR, and we can see our exposuresby category, as well as by currency and subsidiary,” Barrieexplains. “These are robust analytics that bring our balance sheetexposures into sharp focus and allow us to manage them withtargeted hedging.”

Much of the analysis focuses on changing exposures. FiREappsreports spot changes and allows treasury to drill down to what'sdriving them “so we can have conversations with local controllersabout the situations,” Barrie says. “We find out if it is atemporary blip or some shift in the fundamentals.”

Barrie suggests Itron will keep the FiREapps program even afterthe global rollout of Oracle standardizes the company's ERPenvironment and the IT2 workstation aggregates a lot of treasurydata.

“In fact, we plan to expand our use of FiREapps frombalance-sheet analytics by piloting their revenue and expenseanalytics, and start to see and control exposures in our incomestatement,” he says. “Once we can do the analysis, we can furtherdevelop our FX hedging programs.”

Itron is already on top ofits balance-sheet FX changes down to the twitch level. Compared toany treasury workstation—Itron looked closely at five beforepicking IT2—FiREapps is a sharp-edged tool. “None of theworkstations can pull data from the ERPs and slice and dice it likeFiREapps can,” Barrie says. “You can upload data into a workstationat the corporate or subsidiary level, but you can't mine it andanalyze it in a workstation like you can in FiREapps. They own theniche for pre-trade data abstraction and analytics. That's theirsweet spot.”

But Itron wanted razor-sharp tools that even FiREapps can'tprovide.

“FiREapps shows you what to expect,” Barrie explains. “But nowwe load in our actuals and analyze the delta [deviation] with adecomposition model we built ourselves. At month-end close, we seehow much of a gain or loss we had that month from FX. With ourdecomposition model, we're able to see how much of that gain orloss was from mismatched hedging, trade-rate differences, from cashconversions or from transactions that were booked at somethingother than the income statement rate.”

The result is more effective control over balance sheetvolatility related to FX and “more comfort that our data areaccurate and consistent,” Barrie says. “We're now hedging 25 to 30currency pairs a month, using one-month forward contracts, outrightforwards for deliverable currencies and non-deliverable forwardsfor untradeable currencies, and hedging exposures on an aggregatedcorporate basis.”

“Our reason for this,” notes CFO Helmbrecht, who's picturedabove, “was to reduce volatility of financial results through aprudent and well-managed hedging program. With this effort, we arestreamlining internal processes and lowering our operational costs,both of which are key components of the long-term financialstrength of our company.”

Itron will continue to use Reval for derivative accounting andrisk management and FXall for multibank FX trading, and will employIT2, its first global treasury workstation, primarily to get globalcash visibility through prior and current-day bank statements,delivered via its SWIFT service bureau; perform automated bankaccount reconciliation; issue global cash forecasts; trackintercompany loans and bank mandates, and generally centralize andstandardize all banking information, Barrie explains.

Itron is not likely to leverage the technology platforms ofindividual banks. “We're a global company that is a collection oflocal companies,” Barrie says. “Our business is driven by localcountry requirements. We could never use one global bank to processall our transactions. We will pay and collect locally butconcentrate to our relationship banks, relying on SWIFT andmultibank, third-party software for communication. We want toleverage technology as much as possible to streamline ouroperations and solve business problems.”

Big Boost From Small Enhancement

Itron launched a big project to make big changes and earn bigrewards, but sometimes a single enhancement by one vendor can bringa tactical breakthrough with little effort.

For $1.2 billion Cadence DesignSystems in San Jose, Calif., that breakthrough is ClearwaterAnalytics' new Beta reporting capability, notes treasury managerCraig Cutright, who oversees investments of $500 million in variouscash portfolios.

Until recently, hosted services offered canned reports, henotes, and users had to adjust their operations to fit standardreporting options. Now Beta gives Clearwater users flexibility.

“We can change the reporting on the fly to get just what wewant,” Cutright says. “We can start with one of the standardreports and modify it, or we can start from scratch and grabwhatever data we want and produce reports in any format, includingExcel and PDF. This is a big step forward. We're saving a lot oftime we spent manually modifying the old canned reports. I hopeother providers of hosted services will follow thislead.” —Richard Gamble

For more stories about tech transformations, seeAchieving Efficiency with a Single Instance of ERP andEADS Treasury Opts for Risk Management Muscle.