Experts have been predicting for decades that treasuries would automate more of their processes. The big push has yet to occur. But a recent white paper from Wall Street Systems says the heightened concerns about counterparty risk and an increased emphasis on accurate cash-flow forecasting amid the credit crunch could be the final straws that get treasuries off spreadsheets and onto treasury systems.

Until now decisions on whether to purchase treasury systems have been guided by calculations of the likely return on the investment, says Mark Lewis, director of corporate treasury at Wall Street Systems. “Now there is going to be demand irrespective of the ROI because of what's happening in the markets.”

Eighty-seven percent of companies now cite counterparty risk as a top treasury concern, according to Wall Street Systems' and consultancy Treasury Strategies' interviews with 46 U.S.-based multinationals. Still, the companies surveyed acknowledge that their efforts to manage counterparty risks primarily rely on manual processes.

In the wake of last year's market chaos, in which companies saw supposedly low-risk short-term investments go sour as financial firms like Bear Stearns and Lehman Brothers disappeared, treasuries “are not sure what's still left out there,” Lewis says.

“You've got to use your own common sense,” he says. “But if you don't have the technology in place to tell you who you're investing with and you don't have that in real time, you're blind. You can't make the correct decisions.”

Calculating the ROI on a technology investment related to counterparty risk is particularly difficult, Lewis says. “Until you've had a $20 million, $30 million loss on a bank that just went down, you don't realize that the risk that you're facing is significantly higher than the cost of buying a risk management system.”

The survey also shows that 28% of the companies see cash flow forecasting as a top concern. But a stunning 87% of the big companies surveyed still use spreadsheets for cash flow forecasting.

Lewis points out that the problem of cash flow forecasting is more complex for multinational companies such as those surveyed. “If you don't have visibility of where your cash is and you're in a credit situation where you can't get access to funding, it seems incredible that they're sitting on cash in some locations when they can't get funding domestically,” he says. “They have to figure out where the cash is and how to get it back in order to leverage funding.”

Instant Insights /

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