THANK YOU FOR SUBSCRIBING
Todd Gosserand, Vice President, Risk Management and Treasury Projects at TAQA Group
Traditional Corporate Finance typically is focused on three tasks: Decision to undertake capital investments, short-term financial decisions that focus on operations and the sourcing of debt in support of a firm’s long-term capital needs. The following will describe how the technological advancements of a Treasury Management System support each of these activities in detail:
Through technology, the TMS allows a CFO, Treasurer and Corporate Finance Manager to gain visibility of liquidity, investments, and debt
The decision to Undertake Capital Investments The TMS will allow an organization to execute Discounted Cash Flow analysis to judge the viability of a project in a formalized manner with industry-leading computations. In addition, the system will calculate the Weighted Cost of Capital (WACC) which is essentially the DCF analysis. In addition, the system will permit the firm to compare each of the potential endeavors in parallel to judge their viability or provide differentiation from a Required Rate of Return (RRR), which is also calculated automatically within the system.
Short-Term Financial Decisions that focus on Operations The TMS will automatically create a Cash Flow Projection from underlying information that is collected by the system from accounting and finance. This cash flow will assist a firm in successfully systematically managing liquidity that maximizes investment return and minimize issues associated with the cash needed for operations. The system will also technologically adapt real-time adjustments based on unforeseen actual transactions so decisions can be augmented to dynamically manage liquidity.
Sourcing of Debt in support of Long-Term Capital Needs The system will support the analysis of the underlying characteristics necessary to analyze historical rates, accurately price the transaction, manage the credit risk associated with the decision and understand the current debt structure of the firm to make an informed decision on the addition of new debt. Historical data is captured inside the system automatically and debt pricing from both a present value and mark-to-market perspective is easily available. In addition, a unique credit model is offered to analyze counterparties, and the current credit diversification of the book is automated as well as the current fixed versus the floating structure of the company. Each of these attributes will be presented deliberately in unison as is necessary and are completely automated.
It is critical for Corporate Finance to eliminate the need for spreadsheets and embrace the technology associated with a Treasury Management System to execute the underlying activities in a more organized manner, create robust reporting and ensure uniformities in the underlying data necessary to make the best decision in regards to an organization’s best financial interests.