Over a quarter of FTSE 150 corporates may be heavily exposed to financial volatility given the lack of effective treasury and risk management (TRM) systems in place, new research has found. According to the survey, released by Reval on Monday, 26% of FTSE 150 businesses have not implemented automated TRM systems, “leaving companies unable to adequately handle a multitude of risks.”
Furthermore, only 50% of those corporates with a TRM system in place have the latest version installed. The study, conducted in February and March this year, surveyed 95 of the FTSE 150. “The financial world is getting more risky, not less,” says Nigel Sirett, EMEA Managing Director at Reval. “Therefore the importance of accurate, timely information is critical to managing the treasury business.”
Conflict of interests
The report’s findings also highlight the difficult position in which many corporates find themselves: the need for an effective TRM investment becomes ever greater as the Eurozone crisis worsens; yet the very same troubled market conditions restrict the corporate treasurer’s financial room for manoeuvre.
More worryingly, if the FTSE 150 cannot attain best practice, then what does this suggest of other companies? The reality is that many corporate treasurers must still contend with old systems and using good old Excel files as the basis of daily reports. Moreover, not every treasurer or company has the resources – time, cash or otherwise – at hand to implement a TRM system.
“This report does not surprise me,” says Marianna Polykrati, Group Treasurer of Vivartia. “There are a number of reasonable factors behind a company’s decision not to proceed with the implementation of a TRM system.”
“Take Vivartia for example. Structural stability within the group has played a significant role for not adopting a TRM system yet. Our group has undergone many administrative and shareholding changes in recent years. But in order to prepare and start a TRM system effectively, the business needs to have a very fixed structure in place. Since arriving at Vivartia in 2006, I have had stable periods of six months approximately that the company was not changing.”
Long nights at the office desk. Weekends spent at work. The implementation of a TRM system can be arduous at the best of times. But a treasurer’s workload is heavy enough as it is in the current economic climate. Indeed, all this is before cost enters the equation. According to one treasurer, who preferred to remain anonymous for the article, a TRM system can easily set even a small business back £100,000 (€125,000).
Reval’s findings should be viewed in a long-term context, however. An up-to-date TRM system is the backbone of any effective treasury risk management strategy. But that is the long run. Sustained market volatility means that treasurers must focus on short-term considerations for now.
If that means playing tactics at the expense of strategy, treasurers argue, then so be it.