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About Treasury

The (corporate) treasury function is generally responsible for

(i) procuring working and investment capital and/or investing excess cash,

(ii) financial risk management, and

(iii) policies for managing cash in the group.

History of Treasury

Before the deregulation of the financial markets in the 70-ties and early 80-ties, the treasury function was mainly an accounting and administrative function managing the company’s cash, loans and foreign exchange. During the 80-ties a combination of deregulation of the financial markets and the evolving information technology made the treasury very risk focused and so called “trading” emerged. At that time treasury was many times not integrated in the core operations of the corporation.

During the last few years there has been a trend to streamline and integrate the silos in a corporation. The role of the treasury is changing from being a “black box”, only managing financial risk, financing and cash management to become a central function fully integrated with the other functions of the corporation. The requirements imposed by Sarbanes-Oxley Act (SOX) enforced that trend. The treasury now takes on other tasks, such as pension liability management, enterprise risk management, insurance and tax. Corporate treasury is thus becoming a much more strategic function and is expanding its remit within the corporation.

Future of Treasury

During the last couple of decades the largest corporations have outsourced a substantial part of its supply chain and mainly kept R&D, Sales & Marketing, finance and treasury in-house. This has undoubtedly changed the focus of these organizations from being manufacturing centric to instead managing the financial supply chain and extract the value locked therein.

This coincides with the financial industry being in a dramatic change. It will be further globalized and streamlined. Because of strong regulation and the role of the banks in society, the financial industry has lagged dramatic change, such as the airlines, music, shopping, telecommunications etc industries have experienced.

In the future however it will face many new entrants within most areas of the value chain. Key drivers are globalization and visualization, altered regulation and governance, and increased harmonization.

The regulators are nowadays more keen on creating an efficient financial infrastructure to support the society instead of only ensuring financial stability, as was the sole focus of the past. SEPA (Single European Payment Area)[http://www.ecb.int/paym/sepa/html/links.en.html] is just one example of this new policy. The expectations of the consumer enforce this change. Just think of that in the Internet era, when you can chat, talk, distribute music and information in real-time to anywhere in the world, it still takes several days for a payment to reach its recipient. And a payment is only a small string of data, not at all as large and complex as music and voice.

The change in the financial industry creates ample opportunities to develop organizations with different business models. By combining treasury industry knowledge with technology expertise, NFS assists clients to realize these opportunities.