Companies increasingly are taking an integrated view of risk, across risk types and functions, and linking their enterprise risk management (ERM) programs to strategic planning. Those are the conclusions of the2013 CTC Guide to ERM
, underwritten by PwC.
The guide, which includes detailed examples of how companies are operationalizing ERM, provides a unique view into how treasurers can make risk management a core management concept.
Download the 2013 CTC Guide to ERM here
View an exclusive video from the recent CTC Corporate Treasurers Forum on whether treasury should lead ERM here
While boards, CFOs, risk management committees and vice presidents-strategy increasingly champion ERM, it does not mean that treasury has less of a role to play in driving ERM excellence. Providing the funding to drive strategic plans is a clear area of ERM involvement, one noted in the guide, as treasurers often act as the keepers of the capital structure. In addition, more companies are using the concept of “risk capacity” to measure risk in terms of capital access and economic capital. But there is an area where some leading treasury groups are beginning to play an active role.
“We’re increasingly moving treasury into managing the function with a view toward business intelligence,” reported a senior treasury executive at a large tech company. What she means in practice is that treasury, because of its intimate connection to the markets and to the underlying business flows of the organization, can develop the right process to broadcast information that is critical to broader decision-making. “Treasury is able to spot trends before others can,” she explained. “We notice patterns first. We can add value to the business decision-making.”
Treasurers need to realize they’re sitting on a pool of invaluable intelligence that business leaders often lack, at least until much later. Intelligence about political, macroeconomic and competitives developments—such as asking questions about why expected flows from product sales failed to materialize—can provide senior management with business intelligence they normally don’t have access to in other ways.
“It’s a big deal,” added another treasurer. “The business doesn’t have this viewpoint. If you have a robust ERM program, that sort of information can be channeled to the right people. Without the process and the rigor it’s hard to see what’s coming.”