What’s Treasury Worth?
Covid Accelerates Treasury Management Transitions
By Sameer Shalaby, President & CEO, HazelTree
For Private Equity, Hedge Fund, and Asset Management CFOs, Finance Executives and Treasurers, the Covid crisis accelerated the demand for fundamental shifts in treasury operations that were already underway, forcing a rethink of how the treasury and cash management functions are managed, their role, and the implications for surviving and thriving in an unpredictable environment. Given the unpredictability of the current environment, what was once “possible” for firms has become “necessary.”
Current developments in cloud based treasury management solutions with specific industry vertical functional expertise enables the rethink. Here, treasury moves beyond manual operational processing to an electronic decision tool that advances strategy with potential for significant ROI. All aspects of treasury and the relationships between them are affected: cash, financing, collateral, margin, etc. And technology delivers the ability to scale and support the current remote work environment.
Current manual operations do not deliver the breadth or depth of electronic capability, and apart from the comparative inefficiencies, manual processing has become legacy, not serving firms well in either the near or long term. Risk mitigation and auditable operational controls are even more important in this Covid work environment.
Moving Treasury from Operations to Strategy
Until recently, treasury operations have been a series of error prone, clunky, and manual administrative task processes predominately run on XLS. Transitioning to an electronic environment doesn’t merely increase processing speed, or reduce error risk, or centralize remote workflow. Electronic solutions reposition treasury itself to a strategic opportunity, providing information that enables managers (and, by extension, the firm) to consistently make better decisions. For example, CFOs can decide daily how to generate ROI from unencumbered cash, or financing strategy based on neutral, unconflicted rates.
And, much as Hedge Funds had done a decade earlier, Private Equity firms have experienced a need to ramp up their operational caliber and capability for both the entities themselves and for their portfolio holdings.
Technology Transforms Treasury
Private Equity and Hedge Fund Firms are on different trajectories, but each will benefit from as they transition from manual to electronic processing. Private Equity firms and their executives can leapfrog the operational growing pains seen in the hedge fund space and to move immediately to advanced technology solution sets. Hedge Fund firms, practiced in manual processing will need more of a conversion timetable.
As with other software solutions, both Private Equity and Hedge Fund Firms typically rely on the domain expertise and technology experience of outside providers rather than incur costly building and maintenance of in-house capability.
For Private Equity CFO or Treasury Executive, navigating in the Covid environment, Treasury Operations need to become critical strategic functions, and the use of electronics underlies success in achieving this now essential goal.
FEATURED IMAGE CREDIT: Depositphotos
Covid-19 has underscored financial firms' need to reduce manual processing and create flexible infrastructure.
Firms need to ensure access to public cloud services when needed most, IPC's Jordan Feigenbaum writes.
Specific concerns pertain to equity valuations and unintended risks of fiscal stimulus, DTCC survey shows.
There's more focus on deploying an efficient technology stack across the investment management operation.
Retail inflows into responsible funds were four times higher in the first half of 2020 than a year ago.