Aberdeen Group: The Integrated Approach to Treasury and Risk

This report, based on a survey of 100 organizations, outlines the
reasons that organizations integrate treasury and risk data, the
key capabilities of a Best-in-Class organization, and the benefits
of an integrated solution.
THE INTEGRATED APPROACH TO
TREASURY AND RISK: ACHIEVING
GREATER RETURNS THROUGH
AUTOMATION AND VISIBILITY
June, 2014
 Nick Castellina, Research Director,
Business Planning and Execution
Report Highlights
Best-in-Class
organizations are
50% more likely to
have implemented
integrated treasury
and risk
management
solutions.
The Best-in-Class are
27% more likely to
be able to manage
cash and risk
together.
The Best-in-Class are
29% more likely than
All Others to have
the ability to
monitor and detect
fraud.
Organizations with
an integrated
treasury and risk
management
solution see a
greater return on
short term
investments and
have a lower cost of
short-term borrowed
capital.
p2 p5 p9 p11

www.aberdeen.com
The Integrated Approach to Treasury and Risk: Achieving Greater
Returns through Automation and Visibility
2
Today's finance department is in a state of evolution. No longer
is finance purely looked at as a back office process that lacks
innovation and does not serve any strategic function. Rather, a
modern finance department can be a source of efficiency,
collaboration internally and externally, and as a source of
valuable insight that can be used in decision-making. Aberdeen's
2014 Excellence in Financial Management Survey noted that the
second and third leading priorities of finance departments are
the automation of core functions and promoting collaboration
across all finance roles. The number one priority: to conduct
assessments of financial processes and technology capabilities.
This means that today's finance function is looking for
technology that will automate processes and provide integrated
views of data across finance functions. Take, for example,
treasury and risk management. These two functions can benefit
greatly through effective integration. This is why Best-in-Class
organizations are 50% more likely than All Others to have
implemented integrated treasury and risk solutions. From
payment and other operational financial systems, to cash and
liquidity management, to debt and investment management,
through to financial risk management; top performers can
benefit from an integrated, end-to-end approach to treasury and
risk. This report, based on a survey of 100 organizations, outlines
the reasons that organizations integrate treasury and risk data,
the key capabilities of a Best-in-Class organization, and the
benefits of an integrated solution.
The Need for Integration in Finance
When asked to indicate their "top two" pressures, respondents
to Aberdeen's 2014 Excellence in Financial Management Survey
placed the most emphasis on risk and how it relates to cash
forecasting and treasury management (Figure 1).
From payment and
other operational
financial systems, to
cash and liquidity
management, to debt
and investment
management,
through to financial
risk management;
top performers can
benefit from an
integrated, end-to-
end approach to
treasury and risk.

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3
The Aberdeen maturity class is
comprised of three groups of
survey respondents. This data is
used to determine overall
company performance. Classified
by their self-reported performance
across several key metrics, each
respondent falls into one of three
categories:
• Best-in-Class: Top 20% of
respondents based on
performance
• Industry Average: Middle
50% of respondents based
on performance
• Laggard: Bottom 30% of
respondents based on
performance
• Sometimes we refer to a
fourth category, All Others,
which is Industry Average
and Laggard combined.
Figure I: Pressures Impacting Treasury and Risk Management
Forty-one percent (41%) noted increased financial risk. Further,
36% cited an inability to accurately forecast cash flows. But risk
can take many forms. One example could be the risk of
regulatory oversight. Another could be the risk of customers
defaulting on payments. This could have a significant impact on
cash flows. For these reasons, among others, 21% indicated that
they had insufficient information to effectively hedge or ensure
against financial risks. Therefore, modern finance organizations
must find a way to provide greater visibility across finance and
risk factors in order to aid in decision-making, compliance, and
efficiency.
As a result of these priorities, Best-in-Class organizations have
initiated a variety of strategies that will help to improve treasury
and risk management. Organizations were asked to select their
"top two" strategies and all are important, but there are two key
strategies that Best-in-Class organizations have particularly
differentiated themselves with. These include the
implementation of technology and the automation of processes
(Figure 2).
16%
21%
32%
36%
41%
0% 20% 40% 60%
Lack of visibility into and understanding of
outstanding accounts receivables
Insufficient information to effectively hedge /
insure against financial risks
Greater regulatory and compliance oversight
Inability to accurately forecast cash flows
Increased financial risk (foreign exchange, interest
rate, sovereign risk, commodity risk, etc.)
Percentage of Respondents, n = 100
Source: Aberdeen Group, June 2014

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4
In Aberdeen's 2014 Excellence in
Financial Management Survey,
respondents were ranked on the
following criteria:
• Days to report global cash
position:
o Best-in-Class - 1.9
o Industry Average - 7.4
o Laggard - 8
• Variance in global cash
forecasting:
o Best-in-Class - 3%,
o Industry Average - 8%
o Laggard - 11%
• Change in risk exposure over
the past year:
o Best-in-Class - 20%
decrease
o Industry Average - 1%
increase
o Laggard - 2% increase
Figure 2: Best-in-Class Strategies to Align Treasury and Risk
By implementing treasury and risk management solutions,
organizations can connect related functions in the finance
department. And by automating financial transactions, and
other processes, organizations can ensure efficient hand-offs
and connected process flows. For example, this could enable
organizations to build out deals based on liquidity requirements,
or dynamically update cash forecasts in real time. The goal is to
create a comprehensive approach to risk management. These
strategies may be accomplished through the implementation of
a variety of capabilities that relate to treasury and risk, whether
separate or integrated.
Key Capabilities for Effective Treasury and Risk Management
Effective treasury and risk management starts with integration.
Note that Best-in-Class organizations are 47% more likely than
All Others to have integrated business systems that serve as a
complete and auditable system of record (Figure 3).
21%
10%
27%
53%
38%
16%
21%
21%
47%
68%
0% 20% 40% 60% 80%
Formalize risk management and cash
flow forecasting processes
Implement new treasury and risk
management technology
Centralize treasury and payments
processes
Improve cash flow forecasting
Automate financial transactions
Percentage of Respondents, n = 100
Best-in-Class
All Others

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5
Figure 3: Taking an Integrated Approach
What does this mean? One thing that it means is greater
visibility. In fact, Best-in-Class organizations are over twice as
likely to have real-time updates to financial metrics. This ensures
that they can react to business events immediately and make
agile decisions. Integrated systems also enable the ability to
connect related functions that may have existed in silos
previously. For example, the Best-in-Class are 27% more likely to
be able to manage cash and risk together. Taken separately,
there are two key components of this strategy: risk analysis and
visibility into cash:
 Best-in-Class organizations are 56% more likely than all
others to have the ability to identify and quantify risk
exposure. This means that organizations can identify the
factors that may impact performance, as well as what
that potential impact may be.
 Sixty-eight percent (68%) of the Best-in-Class have real-
time visibility and control into all cash account balances.
Therefore, they may understand how much cash is
72%
61%
56%
61%
68%
49%
28%
44%
39%
58%
0%
10%
20%
30%
40%
50%
60%
70%
80%
Integrated business
systems serve as a
complete and
auditable system of
record
Real-time updates
to financial metrics
Ability to manage
cash and risk
together
Ability to identify
and quantify risk
exposure
Real-time visibility
and control into all
cash account
balances
PercentageofRespondents,n=100
Best-in-Class All Others

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6
available to them at any given time in order to aid in
decision-making.
When focusing on treasury specifically, Best-in-Class
organizations have implemented a variety of capabilities that
impact visibility, efficiency, accuracy, and enable advanced cash
management functionality (Figure 4).
Figure 4: Enhanced Cash Management
Over 60% of all organizations have the ability to forecast cash
positions for defined time periods. This is the foundation of
effective treasury management and extremely valuable across
the organization. With visibility into future cash positions,
business leaders can have confidence that cash will be available
when committing to investments or attempting to build a war
chest.
But treasury management is so much more than simply
providing visibility into cash positions; there are essential and
advanced processes that Best-in-Class organizations implement
at a higher rate. For one, 67% of Best-in-Class organizations have
streamlined and centralized payment processing. This helps to
ensure accuracy, efficiency, and consistency. It can also ensure
61%
67%
58% 56%
72%
60% 59%
33% 30%
51%
0%
10%
20%
30%
40%
50%
60%
70%
80%
Ability to forecast
cash positions for
defined time
periods
Streamlined and
centralized
payment
processing
Ability to invest
end-of-day surplus
cash
Ability to support
multiple pooling
structures and bank
relationships
globally
Support for
integration of new
banks / accounts

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7
that data is updated more quickly and available across the
organization for other functions such as reporting. It can also
impact customer satisfaction.
But these treasury management capabilities are pretty
consistent across all organizations, where the Best-in-Class
really differentiate themselves is in some of the more advanced
capabilities. For example, due to greater visibility, Best-in-Class
organizations are 76% more likely than All Others to have the
ability to invest end of day surplus cash. Provided they
understand risk factors, this enables organizations to get greater
value of the capital that is available to them. Further, capabilities
such as the ability to support multiple pooling structures and
bank relationships globally (56% vs. 30%) enable more creative
and flexible ways to manage cash that can lead to greater value.
This flexibility can be attained by utilizing business solutions to
efficiently manage the new integration of banks and accounts, a
capability that best-in-Class organizations are 41% more likely to
have.
The connection between treasury and risk comes through
reporting, data sharing, and control (Figure 5). In order to ensure
that processes are completed efficiently and that data is utilized
effectively, there must be control that ensures best practices are
adhered to, such as the enforcement of standards based on the
presence of risk that will allow or limit spending. Additionally,
organizations must enforce regulatory compliance in a dynamic
regulatory environment. There is value in tracking all financial
instruments and activity in a single, consistent database, with
accurate accounting and compliance. This is why the Best-in-
Class are 73% more likely than All Others to have continuous
process compliance monitoring.

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8
Best-in-Class organizations monitor a
variety of risk factors at a higher rate
than All Others:
• Credit risk: 47% vs. 36%
• Interest rate risk: 37% vs. 25%
• Counterparty risk: 32% vs.
16%
• Reputational risk: 26% vs.
21%
• Do not track risk: 21% vs. 44%
Figure 5: The Importance of Reporting and Control
The integration of treasury and risk also impacts visibility across
functions and enables more robust decisions. The Best-in-Class
are twice as likely as All Others to have automated financial
reporting. One specific example is the automation of transaction
posting to general ledger and other financial systems, a
capability that 74% of the Best-in-Class organizations have
implemented.
Through these links top performing organizations are able to
gain access to a variety of risk management capabilities (Figure
6).
Figure 6: Effective Risk Management
71%
50%
74%
41%
25%
51%
0%
10%
20%
30%
40%
50%
60%
70%
80%
Continuous process compliance
monitoring
Automated financial reporting Automated transaction posting
to general ledger / financial
systems
72%
67% 67%
33%
41%
46%
51% 52%
21%
39%
0%
10%
20%
30%
40%
50%
60%
70%
80%
A risk- and
compliance-aware
culture is established
to ensure
accountability and
alignment to
organizational
objectives
Ability to evaluate
credit
Ability to monitor and
detect fraud
Ability to optimize
and automate
hedging strategies
Ability to optimize
cash and support
intercompany
funding and lending

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9
Effective risk management starts with making risk a part of
organizational culture. Best-in-Class organizations are 57% more
likely than All Others to accomplish this. Risk is an extremely
broad topic, but there are many capabilities that Best-in-Class
organizations are more likely to have, including those that factor
risk data back into treasury management. These include:
 Sixty-seven percent (67%) of Best-in-Class organizations
have the ability to evaluate credit, in comparison to 51%
of All Others. These organizations can then ensure that
they are taking on customers which will be able to pay
on-time. This will enable accurate cash forecasts.
 The Best-in-Class are 29% more likely than All Others to
have the ability to monitor and detect fraud. Fraud is a
potential risk factor, and this capability allows
organizations to account for it in plans, react to it more
quickly, and potentially avoid it.
 The Best-in-Class are 57% more likely than All Others to
have the ability to automate hedging strategies. This
capability enables organizations to monitor risk and
utilize the data to manage cash through making
investments to reduce the risk of changes in the price of
assets.
 Forty-one percent (41%) of the Best-in-Class have the
ability to optimize cash and support intercompany
funding and lending. Optimization comes through careful
analysis of what may happen, which requires insight into
risk factors.
These capabilities create an organization that is able to utilize
risk broadly across the organization. Something that is difficult
to do without modern solutions.

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10
The above capabilities are enabled, in part, by a variety of
technologies. By implementing this technology, organizations
can help to facilitate processes, gain greater visibility, ensure
compliance, and increase collaboration within finance. Best-in-
Class organizations are more likely to implement solutions for
treasury and risk management, as well as governance, risk, and
compliance (Figure 7). But where organizations can truly
differentiate themselves is by implementing solutions that
provide this functionality and link this information to provide a
more connected view of the essential data. Therefore, Best-in-
Class organizations are 50% more likely to have implemented
integrated treasury and risk management solutions.
Figure 7: Key Tech Enablers of the Best-in-Class
The Benefits
Compare organizations with integrated treasury and risk
solutions to those without (Table 1). Organizations with these
solutions deliver a greater amount of more accurate reports to
managers in the time that they need to make decisions. This can
impact overall forecast accuracy because decisions are based on
real business conditions and take into account risk data. These
50%
44%
39%
33%
30%
26%
0%
10%
20%
30%
40%
50%
60%
Treasury
Management
System
Governance, risk,
and compliance
(GRC) solutions
Integrated
Treasury and Risk
Management
platform

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11
are broad metrics, but pay close attention to have integrated
treasury and risk solutions impact treasury and risk metrics
specifically. For example, organizations with an integrated
treasury and risk management solution see a greater return on
short term investments and have a lower cost of short-term
borrowed capital. These organizations are able to forecast cash
twice as effectively. On the risk side, organizations with an
integrated treasury and risk solution saw half the loss due to
unmitigated risk over the past two years as compared to
organizations without a solution, and saw a 5% decrease in risk
exposure over the past year. Combined, these improvements
provide a compelling case to implement an integrated treasury
and risk solution.
Table 1: The Benefits
Average Performance Integrated
Treasury and
Risk
Not
Integrated
Percentage of reports delivered in time needed
by managers for decision-making
84% 73%
Accurate financial reports in the last 12 months 90% 80%
Variance in revenue forecast between forecast
and actuals
9% 17%
Average return on short-term capital investments 2.6% 2.4%
Average cost of short-term borrowed capital 2% 2.8%
Variance in global cash forecasting 4% 8%
Loss due to unmitigated risk over the past two
years
2% 4%
Decrease in risk exposure over the past year 5% 0%

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12
Key Takeaways
A modern finance department prioritizes automation of
processes and collaboration across finance through the
investment in technology. Rather than individual silos, finance
must be a comprehensive, cohesive unit, with end-to-end
visibility, control, and automated process that are in alignment
across finance. Treasury and risk management are perfect
examples of processes that can benefit from this approach. In
order to accomplish this, organizations should heed the
following recommendations:
 Take an integrated approach to finance and GRC. Best-
in-Class organizations are 47% more likely than All Others
to have integrated business systems that serve as a
complete and auditable system of record
 Provide visibility into cash management and forecast
effectively with predictive data. Over 60% of all
organizations have the ability to forecast cash positions
for defined time periods.
 Identify risk factors and monitor them on an ongoing
basis. Best-in-Class organizations are 56% more likely
than all others to have the ability to identify and quantify
risk exposure.
 Automate transactions and reporting. The Best-in-
Class are twice as likely as All Others to have automated
financial reporting. Further, 74% of the Best-in-Class have
automated transaction posting to general ledger and
other financial systems.

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13
 Utilize key technology. Best-in-Class organizations are
50% more likely to have implemented integrated treasury
and risk management solutions.
Following these steps can help organizations to maximize the
value of their cash while avoiding the negative impact of risk.
These are valuable tools in the modern environment.
For more information on this or other research topics, please visit www.aberdeen.com.
Related Research
Integrated Cash Flow and Balance Sheet
Planning: Accurate Forecasts, Confident
Decisions; May 2014
The Modern Approach to Cash Forecasting:
Enhanced Accuracy Enables Smart Decisions;
December 2013
Treasury and Risk Management: Top Financial
Risks and Tools to Ensure Business Continuity;
February 2013
Effective GRC Management: Strategies for
Mitigating Risks and Sustaining Growth in the
Tough Economy; May 2012
Author: Nick Castellina, Research Director, Business Planning and Execution
(nick.castellina@aberdeen.com)
About Aberdeen Group
For 26 years, Aberdeen Group has published research that helps businesses worldwide improve performance. We
identify Best-in-Class organizations by conducting primary research with industry practitioners. Our team of
analysts derives fact-based, vendor-agnostic insights from a proprietary analytical framework independent of
outside influence. The resulting research content is used by hundreds of thousands of business professionals to
drive smarter decision making and improve business strategy.
Aberdeen's content marketing solutions help B2B organizations take control of the Hidden Sales Cycle through
content licensing, speaking engagements, custom research, and content creation services. Located in Boston, MA,
Aberdeen Group is a Harte Hanks Company.

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