Corona Crisis Readiness – Part I

How To Manage Your Treasury

Corona Crisis Readiness – Part I

The Covid-19 outbreak has brought many organizations to re-think their business models, processes and technologies at an unparalleled level and pace in order to prepare for unprecedented changes.

Treasury teams are critical for effectively managing the financial operations of any organization, being entrusted with managing and protecting the critical assets and cash flows. Treasury technology is at the epicenter of managing critical finance processes, providing the most up to date information for effective decision making in a volatile and ever-changing environment.

Majority of the treasury teams are working on a remote-basis today, one can expect that the various systems will be relied upon heavily in the current situation and it is critical to prevent bad actors. To better understand the differentiators going from a normal to a crisis environment, let’s look at how systems are typically used within Treasury:

 

Normal Environment Crisis Environment
Measuring assets Prior and current day bank statement collection, trade repository, market data and currency rates, intercompany positioning/cash pools, cash and hedge accounting. Increased current day bank statements collection. Multiple intraday ‘market pulses’ to assess market conditions (liquidity, interest rates and FX).
Distributing assets Payments, executing FX trades and hedges, intercompany lending, ZBA sweeps, Supply chain finance, Payment Factories, investing and finance activities. Reduced payment cycles at pre-defined times or established day(s) of the week. Disturbances in supply chain leading to increased working capital management.
Protecting assets Segregation of duties, internal and external controls, fraud alerts, investment, hedging and deal policies, audit reporting. Reduced limits with callbacks for discrepancies, reduced manual workflow with acceptable audit trail replacement.

 

Clear communication channels need to be maintained with all treasury & finance stakeholders across the organization on a global basis. It is of utmost importance to communicate and notify all treasury stakeholders (Internal & External) on the potential changes to the daily treasury operations during a crisis, to ensure all treasury & finance teams have a clear understanding of the processes and control mechanisms being put in place to protect an organizations assets, including:

  1. Internal Controls: Work with IT departments and system administrators to ensure workflows are electronically capable and auditable
  2. External Controls: Place limits and institute call back procedures if limits are breached or if there is a change in routing information at banks, between operating units (such as accounts payable and treasury), vendors, and suppliers
  3. Visibility & Flexibility: Reporting cadence should be increased to allow for maximum real-time visibility of fraud and preparedness for unscripted events
  4. Fraud & Phishing: Educate employees on the risk of fraud and how to identify it. A crisis is the time that we expect to see more fraud and phishing capitalizing on confusion

Checklist for Crisis Preparedness:

  • Increase usage of standard reports vs. custom report requests
    • Reduces burden on mainframe systems
    • Encourages standardization
    • Deployment should be organized with your IT support
  • IT Support Audit
    • Available bandwidth for VPN connections
    • Who is maintaining the stacks/desktops and on-premise work
    • Backup computers and getting people critical devices
    • Ensure two-factor authentication is enforced on critical systems
  • Cyber Hygiene
    • Turn off computer nightly
    • Keep laptops on a hard-flat surface (for ventilation)
    • Disconnect from VPN regularly
    • If using a loaner laptop, understand it may be inferior to regular computer
  • Master credentials for backup access
    • With a pandemic outbreak it is important to have backup personnel
    • Backups & Cross training should be done early and frequently as part of contingency planning
    • Ensure key personnel performing daily operational tasks carry printed copies of contingency procedures
  • Communicate controls to stakeholders
    • Understand where flexibility is needed and where it increases risk
    • Work with banks to understand how external controls will affect a remote organization
    • Review investment , debt and hedging policy with executives before revising capital structure
    • Ensure that dealing mandates are in place and alternative confirmation / approval routes are approved
  • Prioritize the health and safety of your team members
    • A healthy team that performs well is built on trust and flexibility
    • Set up a communication plan to track the well being of the employees
    • Maintain regular communication (leveraging video conferencing) and valuing each other

This list is not meant to be comprehensive and will be updated as circumstances develop.

Please contact Ruben Vela or Sander van Tol more information how to manage your treasury in times of crisis.