Why Managing Cash and Risk Holistically Matters

Mitigating treasury risks requires a holistic view of exposures across cash, debt, and investments.

The five-year anniversary of the global financial crisis is the perfect time to evaluate what has changed in finance since the fall of Lehman Brothers. One thing is certain: Every crisis that has followed has served as a stark reminder of the interconnected nature of our global financial system. For that reason, regulators around the world have begun implementing measures to improve transparency and risk mitigation, which are critical cornerstones of a new, modernized global financial system.

Smart treasury organizations are following suit, putting in place processes and tools they need to gain a holistic view of their risks across cash, debt, and investments. Risk is everywhere in treasury, and it is at the heart of why we are seeing a fundamental, transformative change in the treasury function. Over half (58.8 percent) of respondents in the Aberdeen Group’s 2013 report Treasury and Risk Management: Top Financial Risks and Tools to Manage Them cited financial risks as the greatest market pressure they face today.

Counterparty risk. This encompasses the risks associated with improper assessment and mitigation of a company’s exposure to its major counterparties, such as financial institutions, trading partners, and key suppliers. To gain a holistic view of its counterparty risk, a company needs to consolidate data on its exposure to each entity across multiple asset classes. Doing so can build the foundation for effective decision-making, lower the impact of any financial loss, and save on staff time and resources.Torgler_PQ2_v2

 

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