When it comes to financial risk management, time is money.

That truism applies across investments, debt, and management of cash balances, of course—as well as every other aspect of treasury impacted by interest rates or foreign exchange. It also applies to the ability to acquire and leverage all kinds of data. Being the first company to respond to critical information about changes in the external economic environment can mean the difference between successful response as a market leader and a corporate quagmire that results from getting left behind. Likewise, understanding challenges faced by a business partner before they are more widely recognized can provide a competitive advantage.

Both winners of this year's Alexander Hamilton Awards in Financial Risk Management have a firsthand view of the rewards available to the organization that best leverages the tenet "time is money":

  • Silver Award:  At HR outsourcer Paychex, the default choice of frequency for filing customers' payroll taxes was eliminating any risk of a negative customer event—but at the same time, those decisions were costing the company up to five weeks of float on tax funds. The risk management team undertook an initiative to educate the rest of the company about the concept of opportunity cost. Based on a thorough analysis of historical data, they convinced their colleagues in operations that the positive impact to cash flow of slowing down tax payments where appropriate was worth introducing a minuscule risk of unwanted IRS communications to a customer.
  • Gold Award:  Treasury leadership at Corning, meanwhile, turned a process-improvement eye toward the organization's approach to credit risk management. Its legacy process was highly manual and entailed a full credit review of every major customer or bank counterparty, whether or not it was covered by external rating agencies. For large-cap companies, Corning treasury developed an analytics model that automatically pulls in data from external sources, then estimates the company's likelihood of default. Now credit analysts can focus their efforts on the credit counterparties for which external information is sparse. Better yet, the automated model alerts the treasury team immediately whenever a large-cap customer or bank counterparty experiences a change that affects its credit risk.

"We don't have to wait for the rating agencies to see things starting to deteriorate," says Steve Propper, vice president and corporate treasurer for Corning. "Once they downgrade a credit, that company's problems are very well-known, and it might already be experiencing a mass exit. Our new process lets us take action sooner, which is helping us better manage our counterparty risk."

Congratulations to Corning and Paychex for these award-winning projects! And thank you to the judges of this year's competition: Jean-Francois Heitz, former deputy CFO and treasurer of Microsoft; Craig Jeffery, managing partner of Strategic Treasurer; Marie Hollein, former president and CEO of Financial Executives International; and Prashant Patri, a principal in Deloitte's Global Treasury Advisory Services practice.

Finally, thank you very much to GTreasury, Citi, and ION for sponsoring this year's Alexander Hamilton Awards program. Stay tuned for additional articles and webcasts throughout the year to recognize the winners in our other categories, as well as the winner of the 2019 Alexander Hamilton Overall Excellence Award.

NOT FOR REPRINT

© Touchpoint Markets, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more inforrmation visit Asset & Logo Licensing.

Financial Risk
Alexander Hamilton Awards