So far, the move has proven easier and more rewarding for tight supply chains where a relatively small group of buyers and suppliers do most of their business with each other–just-in-time inventory in the automotive world or vendor-managed inventory in retail are obvious candidates. Loose supply chains that lack concentrated business relationships will have a harder time finding efficiencies and justifying costs. But with better and cheaper technology, more companies will be drawn into supply chain optimization projects.

Many companies have started addressing the physical supply chain. But in recent months, attention–particularly among vendors–has shifted to the financial links and development of financial supply chain solutions. The cost of billing, settling and booking transactions is roughly equal to the cost of logistics and transportation, HSBC's Bennett points out. And since virtually all players in supply chains use banks to settle transactions, banks see a future in helping companies build an industry-appropriate financial supply chain infrastructure. A simple first step, says Bob Warren, treasurer of Canton, Ohio-based Diebold Inc.: "Invoices will die." Buyers will pay from a purchase order once receipt has been confirmed.

Another focal point: Lenders are addressing the inefficiency of foisting the financing burden on small suppliers with the highest cost of funds. A few banks and supply chain finance companies are offering to buy receivables at a stated discount that theoretically reflects the buyer's credit, not the supplier's. It's off-balance-sheet financing at a rate that should beat financing or factoring.

2. CORPORATE GOVERNANCE: Debates about the effectiveness of Sarbanes-Oxley as the main corporate governance tool–some would say hammer–will no doubt continue for years to come. But the spirit of the law is now in the hands of the investing public, as well as external organizations like regulators, auditors, D&O insurers and credit rating agencies–a situation that is adding to compliance demands. "It has made matters more complicated for companies, but that will settle down eventually," predicts Beth Young, senior research associate at The Corporate Library. She expects that companies will have an easier time explaining their compliance standards to external parties as they move away from the "checklist mentality" that dominates those efforts today. "It will force companies to develop a detailed defense of their practices," she says, "relate corporate governance practices back to business goals and be able to discuss how corporate governance, even in areas of compensation, is in sync with the strategic direction of the company." Better guidance from the Securities and Exchange Commission (SEC) and the Public Company Accounting Oversight Board (PCAOB) on management reviews of internal controls and Auditing Standard No. 2 should also make the road ahead easier to manage.

Globalization will add its own pressures. "There are significantly different demands in Europe and elsewhere, including around the social framework of companies, and U.S. companies will need to bridge those gaps, just as overseas companies must adapt somewhat when tapping U.S. capital markets," says Ken Bertsch, managing director of corporate governance analysis at Moody's Investors Service. "Companies will have to deal with differing expectations and varying disclosure rules on executive pay and greater transparency globally, on how top executives are paid and board structures," says Bertsch. Should stock markets make good on the promise to link with partners overseas, the initial phase of coordinating regulatory requirements and listing standards will add to the confusion for companies, although eventually universal standards will have to be the goal.

Hedge funds and private equity investors will also play an increasingly important role in financing and corporate governance matters. "Some of these funds have decided to make shareholder activism their primary approach to investing," says Patrick McGurn, executive vice president and special counsel at Institutional Shareholder Services. That influence could be dramatic in shaping governance initiatives and holding boards in check. Even the current issue of excessive executive compensation will filter up to the board, as more transparent requirements lead investors to hold board-level compensation committees accountable for approving outsize pay packages. "There'll be more pressure on boards to act independently from management," adds McGurn.

3. ENTERPRISE RISK MANAGEMENT: Enterprise risk management (ERM) hit the scene a decade ago as a way for banks to manage the wide-ranging risks threatening capital adequacy and profitability. Although initially slow to catch on outside the financial arena, ERM took off like a rocket once companies began to wrestle with Sarbanes-Oxley.

Today, ERM has become the best-practices standard to minimize losses and improve business performance. But while all companies aspire to the four tenets of ERM–identification, quantification, creation of a governance structure and informing the board of the quantified risks–it's fair to say that only a few have achieved any of them with the scientific rigor or holistic thoroughness that should define the activity.

Over the next 15 years, expect more active CEO and board involvement in the ERM process. "New governance requirements posed by SarbOx, Basel II and stock exchanges are focusing board members on their collective and individual accountability for risk," says James Lam, president of James Lam & Associates, a Wellesley, Mass.-based ERM consulting firm. "Boards are forming risk committees and taking the lead in terms of monitoring risk and policy development. They have a heightened recognition that there will be more engagement, requests for information and data, and more policy-oriented decisions at the board level relating to risk."

With the increased transparency that additional regulation is providing comes the added pressure to anticipate rather than just react. That will also prompt top management and boards to push ERM attitudes and procedures down to business units, which will shoulder more responsibility for managing risks, particularly as they relate to financial reporting. "The unknowable becomes knowable," observes Fred Cohen, partner and global advisory leader at PricewaterhouseCoopers in New York. "CEOs realize they are on the hook if an event that happened at another company happens at their companies and they weren't prepared. [This requires] governance and compliance risks to be baked into business operations and not layered on top."

But it will not just be the who, but also the what that will be morphing. While most companies generally are focused on operational, credit and market risks, the most important risks–and perhaps the most elusive ones–are strategic and business risks. "Companies are boiling the ocean, identifying thousands of risk issues," says Lam, who has the distinction of being the nation's first chief risk officer. "Yet research indicates that the most significant earnings shortfalls or drops in market value are due to strategic and business risks, such as lacking a sound growth strategy, succession planning program or M&A strategy, or not pricing products correctly."

The biggest impediment to deeper analysis has been quantification. "The risks that seemingly defy quantitative analyses, such as reputation and supply chain risks, are the ones that will require greater involvement across the enterprise in the future," PWC's Cohen says.

Alex Wittenberg, managing director of corporate risk consulting at Mercer Oliver Wyman in New York, projects that scenario planning and probabilistic modeling techniques will be used to look at a range of events that can cause failure in business essentials, such as its supply chain: "The way to quantify strategic risks is to decompose them, break them down into discrete events to measure the risks and then tie this back into the performance of the firm."

4. ACCOUNTING COMPLEXITY: It's entirely possible that 15 years from now, relaxed accountants everywhere will look back at the current period as the tail end of the Dark Ages of the profession, when a long list of weighty issues still needed to be dealt with, when the leap to international standards had yet to be made and when many of the sharpest finance departments relied on something called Excel to keep track of their books.

Getting to the good life of the future won't be easy. The state of modern accounting and financial reporting is mired in complexity because the state of business has advanced faster than the reporting tools and techniques. "A key indicator to watch is the number and magnitude of restatements and previously issued financial statements," says James W. DeLoach Jr., a managing director at risk management consultants Protiviti Inc. "If they do not get abated and reduced to an acceptable level to regulators and investors, heads are going to turn to the FASB and questions will be raised, like, 'Is the accounting model too complex?'"

FASB, of course, is not to blame for the current state of confusion, but expect things to get tougher before they get easier. "The movement toward fair-value accounting signals the end of historic-cost accounting for financial instruments," says Jeff Wallace, managing partner at Greenwich Treasury Advisors. Within the next five years, he expects that corporate debt and all other financial instruments will be reported on a marked-to-market basis on the balance sheet, and possibly on the P&L as well. "Any treasurer who doesn't understand fair-value accounting will not be treasurer for long," says Wallace.

As fast as accounting content is changing, the formats are changing even faster, most notably, the online data-tagging standard Extensible Business Reporting Language (XBRL). Among its benefits, XBRL will provide a new platform for global markets. "XBRL will allow investors to convert instantaneously between different currencies and languages, so it will be very beneficial for exchanges to attract foreign investment," says Amy Pawlicki, director of business reporting, assurance, advisory services and XBRL at the American Institute of Certified Public Accountants (AICPA). She predicts corporate XBRL adoptions will pick up sharply over the next few years, as more industry-specific taxonomies are produced to capture specific business concepts more precisely.

With the drive toward greater transparency growing, another area likely to get a regulatory overhaul is the Management Discussion and Analysis (MD&A) disclosure. "Management may be held more accountable for MD&As," says David Richards, president of the Institute of Internal Auditors. The reason has much to do with the reliance investors have on such statements to understand the strategies and future direction of a company. "There may be a movement, in areas of disclosure, to use Sections 302 and 404 of Sarbanes-Oxley as a model," says Richards.

5. TECHNOLOGY CONVERGENCE AND PARTNERSHIPS: Today's finance departments are in the early stages of incorporating technologies that will deliver greater efficiencies in a more highly controlled environment for years to come. There are many drivers behind the shifts that are reshaping the tech landscape, but one of the most important involves the business models of the vendor community. The acquisitions-based strategy of the past–with its promise of all-in-one systems from a single, large vendor–is increasingly giving way to fluid partnerships involving multiple best-of-breed specialists supporting a single dominant platform. "We're seeing a real shift in the application market [because of] consolidation and the maturity of the market," says James Shepherd, senior vice president at AMR Research Inc. The basis for the race, involving SAP, Oracle, Microsoft and others, will be platforms, but the real points of competition in the future are more likely to revolve around the depth and breadth of the network of smaller vendor partners that surround systems and feed financial and operational data into the main platform. "Vendors are recognizing they can't and shouldn't build everything themselves, but corporate customers want a single vendor to take responsibility for the system," says Shepherd.

The other significant issue driving convergence involves the architecture supporting the actual applications. The integration point for many of these systems is known as SOA, or service-oriented architecture, and many anticipate a world of benefits for users in the near future. "It allows different vendors to more easily and quickly produce solutions that expand on what they do together," says Sandra Rogers, director of SOA, Web services and integration research at International Data Corp. "SOA offers a lot more flexibility, so companies can consume what they need rather than have to remake an entire system as new applications emerge." SOA is a common set of standards, adopted by a significant number of technology vendors, which create a distributed atmosphere of highly integrated systems. That standardization will make it far easier to link various systems and upgrade to new versions of applications.

It remains unclear what the emerging environment of tightly fitted partnerships will mean for the growth and survival of smaller tech providers, who may have little choice but to attach their small but innovative software business to a giant tech provider early on. Companies will need to adapt their controls under the new convergence paradigms. "IT governance will become that much more important to maintain, manage and have policies that are ubiquitously enforced in this environment," says IDC's Rogers. "Companies are very nervous. When one system is tied to another, something can be compromised more easily. It's a tradeoff between 'what is my risk to do it' versus 'what is my risk not to do it.'"

6. SOFTWARE-AS-A-SERVICE (SAAS): Finance executives typically don't have a lot of time to absorb every twist and turn in the IT environment that comes along. But there are good reasons why they should understand the benefits and limitations of the delivery model known as software-as-a-service (SaaS). Although already gaining in popularity, SaaS in the years ahead will become a major, if not the major, delivery option for Web-based enterprise solutions.

Although vendor definitions and levels of service can vary, SaaS (also known as on-demand) in its purest form refers to Web-based applications in which many client companies use the same solution, with data usually housed on the vendor's own servers. Costs are kept low since users don't really own or license the software so much as subscribe to it for a period of time, and in some cases users pay for only those portions of the application they need and use. SaaS is considered superior to earlier attempts at Web-based applications because most applications are based on SOA, making integration with other applications easier and less costly. That can allow whole systems, ranging from supply chain management and sourcing to procurement and payrolls, to be up and running in much less time than in traditional deployments, at far lower cost and faster return on investment. Peter Kastner, vice president and IT research director at Aberdeen Group, sees SaaS as especially attractive to smaller companies that can, for the first time, consider automating their travel and expense management functions with larger vendors, something that might have been beyond their means with older Web-based technologies. "CFOs care a lot about uncontrolled expenses, and so even small companies can turn to vendors who can handle their travel expense approvals and reimbursement processes, cutting down on labor and review costs and controlling their use of cash," says Kastner.

Because it involves a considerable loss of control on the part of the corporate customer, SaaS raises legal and compliance issues that are just now being considered. "Companies need to be sure it is the right step for them, and understand how legal and data storage issues are addressed by the SaaS provider," says Michael Rasmussen, vice president of risk and compliance research at Forrester Research Inc. That's especially true in areas of record retention and archiving policies, where a vendor's policies must be understood and monitored throughout the relationship.

7. SINGLE VIEW OF CASH: A single, global, real-time view of all corporate cash is so close, some treasur-ers can taste it. Through a combination of treasury workstations and bank systems, cutting-edge treasuries like PepsiCo's, Lucent's, General Electric's or Microsoft's are extremely close. But the ultimate picture of all bank cash; debt instruments; securities issued or held as investments; and all capital markets transactions, completed or scheduled is still months off–even for the best treasuries.

The enabling technology is already in place, at least for cash assets, but internal politics still keep most companies from getting the full picture, says David O'Brien, assistant treasurer of EDS Corp. in Plano, Tex.: "If you hang onto an overly complex, fragmented cash system that relies on many banks, the single view will elude you or you'll have to work really hard to get it."

Traditionally, the cash position snapshot came from polling software that would dial into multiple banks automatically to retrieve and consolidate balances. It was useful domestically, but not on a global basis. Today, there is a better option for companies with global banking networks: They can join the SWIFT network, through which they can contact their global banks directly, without a banking intermediary.

Through SWIFT, banks such as Deutsche Bank have already established a communication standard that spans all SWIFT-enabled banks and makes multi-bank balance reporting feasible. "There has been substantial recent migration to Internet protocols and standards like XML that are making it easier to get data to flow from one system to another," notes Jonathan Ashton, global head of channel management and integration services in the global transaction banking and cash management unit of Deutsche Bank. "While there is not yet a single standard across all banks and corporations, the industry is moving that way."

One of the first corporations to see the benefits of SWIFT has been Microsoft. "We'll have instantaneous electronic messaging with virtually all of our banking partners and 100% visibility of our accounts and balances intra-month or even intra-day if we want it that often," reports treasurer George Zinn. "The technology is finally here. What has always been our goal will become a reality in the next 12 months."

Other banks like Citigroup–as well as treasury technology vendors like Trema–have chosen to build their own solutions that feature best-of-breed technology that can poll banks on a daily basis globally–even in remote areas. According to Paul Galant, managing director and global head of the cash management business for Citi's Global Transaction Services, the bank's TreasuryVision will soon incorporate analytics on how a company's cash holdings can best be used, including opportunistic adaptations in purchasing strategy.

The payoff? Seeing cash is the necessary first step to optimizing liquidity. It simplifies bank account reconciliation, and having consolidated cash reporting makes it easy for a company to set up shared service centers and comply with Sarbanes-Oxley. "Our simplified cash system allows me, from corporate treasury, to certify cash balances and transactions for the entire enterprise," observes EDS's O'Brien. "Without that single, global view, 200 local controllers would have to do that certifying."

8. FRAUD: It's in the news more frequently than any senior executive cares to read: A laptop is stolen containing personal data on thousands of clients; a corporate computer system is successfully hacked; intellectual property is compromised.

Few CFOs could have imagined a decade ago how big a role anti-fraud and IT security controls would come to play in their job. The degree varies by industry, but for most, understanding risk management strategies and internal controls for protecting sensitive data, including financial reporting, are becoming as important as forecasting cash flow or making your quarterly numbers.

Looking at exceptions at the end of the month or quarter are not nearly enough, thanks to fraud-risk assessment for SAS 99 and Sarbanes-Oxley compliance, and companies are beginning to turn to real-time financial policing systems, such as continuous control monitoring and tools that search all transactions for anomalies. Duplicate payments or checks made out to false vendors could be the first indicators of fraud–or at the very least, misstatement risks. But this kind of internal analysis of transactions is just the first step. "In the future, the focus will include external sources, [and risk management might include] sharing whistleblower hotlines with vendors, suppliers, counterparties and other third-party providers and doing background checks on them," says Don Fancher, national managing principal of forensic services at Deloitte Financial Advisory Services LLP.

Leading-edge companies are already asking employees through focus groups to brainstorm on how an internal or external source might try to defraud the company, Fancher adds. Based on that intelligence, controls are set to mitigate risks.

IT security will present its own set of challenges. Many companies can see what the future holds by looking at changes underway at large banks and other financial service providers where vast stores of sensitive customer information are held. More and more companies will move away from older single-factor authentication methods (passwords) to double-factor methods (passwords plus cards or token rings). Encryption software will also increasingly come into play. "Large financial institutions are building the environment to encrypt everything and anything that is remotely stored, on laptops, desktops and storage tape, to prevent a loss of information," says Paul Adamonis, director of security solutions at Forsythe Solutions Group, a Skokie, Ill. consulting group. Data is encrypted in code that can be unscrambled only with the aid of an encryption key, making a lost or stolen laptop with sensitive files or access to such data far less of a security threat. And then one day, someone will steal the encryption key. "That will drive the next wave of technology," says Adamonis.

9. ACCESS TO CAPITAL: In many ways, one could call these years some of the best of times when it comes to corporate access to capital. Besides the stockpiles of cash many U.S. companies are sitting on, there is a whole new frontier of lenders and investors lining up to give at least some companies money.

Two sources that have attracted considerable attention are the growing pool of foreign capital in China and India and the rise of hedge funds and private equity investors. While both are eager investors, they each come with their own caveats.

It has only been in recent years that the Chinese were even permitted to invest outside the country, but now that the government has seen the virtue of economic stakes overseas, the floodgates have opened. China's savings rate is currently among the highest in the world and has fueled the growth of domestic pension and mutual funds, which now look eagerly westward for investments. But as quickly as the gates opened, there is always the political risk of retrenchment.

It's not just the Chinese with savings to invest. European pension funds also are playing a bigger role in the markets outside their respective countries. Additionally, the increasingly aggressive European exchanges are trolling for U.S. takers, and for the first time in recent memory managed to beat out the U.S. in both value and volume of initial public offerings.

Some experts blame the level of regulation in the U.S. for the IPO desertion, and even the SEC must believe the hype to a certain degree, because it recently moved to give newly public companies an extra year to comply with Sarbanes-Oxley's Section 404. Even if they are right, however, the trends in Europe and even in China are toward more transparency and internal controls, both of which would necessitate a more regulated climate.

Hedge funds and private equity groups have probably had the most significant impact. While estimates vary, hedge funds had as much as $1.3 trillion in assets at the end of 2005–roughly 3% of the world's market capitalization. With a laser-like focus on returns, hedge funds have already become an irritant to many companies where they've invested. "While one cannot generalize about hedge funds," cautions Stanley Dubiel, senior vice president of global research at Institutional Shareholder Services, "a number have taken an activist role in pressuring companies to realize hidden assets and shed underperforming divisions." The one interesting twist: While they have a lot to say about management, they don't necessarily suffer the mistakes, having hedged away much of the risk.

10. METRICS: There were times during the past 10 years when a discussion of risk-adjusted metrics would raw blank stares. No one had the time for a value-based metric–people were too busy watching their stock price to pay attention to any other measure.

Since that time, however, companies have become more adept in measuring their financial performance. One of the most significant advances for measuring performance was the rise of value-based metrics, such as EVA which stands for economic value added and measures profits generated over the cost of capital. "In the past 10 years, companies have gotten a lot more sophisticated incorporating capital charges into their performance," says Stephen Baird, a principal at the advisory firm Treasury Strategies. "But in the next 10 years, we're going to get a lot more focused on risk."

EVA was a good start, he notes, because it captures the cost of capital, but going forward, companies will turn their focus to capturing the risk aspect of performance. One metric that Baird expects will become increasingly important in the coming years is RAROC, or risk-adjusted rate of capital. This measure is common at banks and other financial institutions, but Baird argues that the measure will become increasingly widespread as the role of the treasury becomes more strategic and analytical and as risk metrics evolve and become the core of all business activity. Another metric that Baird expects will become ever more important with interest rates on the rise across the globe is working capital and the cost of carrying that capital.

But a company can go metric-crazy as well. "One of the principal attributes of a world-class company is [that they have] fewer metrics, not more metrics," says Richard T. Roth, chief research officer of The Hackett Group, an Atlanta-based consulting firm and part of AnswerThink Inc. "I can tell I'm dealing with a lagging company when they tell me that they have a scorecard that measures across 350 metrics." Another important attribute of a world-class company: They succeed in measuring nonfinancial measures such as customer satisfaction.

One thing to remember about metrics: "They present a mosaic rather than a precise picture of a company," says William E. Rottino, vice president and senior credit officer at Moody's Investors Service Inc. Moody's uses 80 metrics to measure liquidity with no one telling the whole story about a company's liquidity.

11. CHINA, INDIA AND GLOBALIZATION: The early euphoria over closer ties between U.S. companies and their counterparts in China and India is giving way to recognition of a wider set of challenges and possibilities to be confronted in the next decades. The two largest and most important emerging markets have, to a large extent, shed their reputations as fountains of cheap labor, and the potential now for multinationals is to convert burgeoning middle classes in those countries into consumers. Doing that efficiently involves closer ties, including acquisitions of local distribution networks, suppliers and manufacturers, as well as building local financial infrastructures.

Getting money into and out of China and India can involve a maze of complications for foreign companies, as the finance team at The McGraw-Hill Cos. discovered when it acquired a majority stake in India's largest credit ratings agency in 2005. And at a time of increased scrutiny among regulators and investors, U.S. companies are only starting to come to grips with the increased risk exposures in areas such as intellectual property and accounting practices. "When companies have operations around the world, people do things in a different way, so companies need to educate their employees that what they've done before may no longer be appropriate," says Don Fancher, national managing principal of forensic services at Deloitte, citing the Foreign Corrupt Practices Act as an area that would require attention. "It requires education, monitoring and putting controls in place across a broader spectrum of coverage."

Even for well-established players overseas, having supply chains dispersed across the globe presents the need for tighter controls that can identify fraud and establish workable A/P and A/R protocols. "Distributed supply and distribution chains create challenges, and that is where the bulk of fraud will occur," says Richard Girgenti, head of the forensics practice at KPMG. "Companies need to get processes and controls around their business relationships. It's doable, but it's not easily doable."

The other wild card is political risk, which most companies readily admit they have no real infrastructure or training to assess and manage. Even if they consult with a specialist, it is too often a one-day, intense education that alerts them to potential risks but doesn't provide sufficient time for them to begin the arduous task of developing risk transfer and mitigation strategies.

12. BANKING RELATIONSHIPS: ON THE SURFACE-AND EVEN IF YOU DIG DEEPER-THE RELATIONSHIP BETWEEN bankers and corporate executives would appear to have only grown more distant in recent years, thanks to bank mergers, disintermediation and shrinking bank margins. But don't despair, those of you who pine for days when you actually knew the name of the correct someone to call at your cash management bank. Relationship banking may be staging a comeback as sophisticated bank technology leads to deeper, more complex operational partnerships.

The next step, according to treasury pros like James Haddad, vice president of finance at San Jose, Calif.-based Cadence Design Systems Inc., is the creation of intricate partnerships with small groups of key banks–arrangements that depend upon a high level of operational integration. While such partnerships will add real value, Haddad warns that they also inject the real risk that one or more banks could choose to exit certain lines of business and wreck hard-won operational efficiencies.

Among large banks, the emerging corporate banker will be a relationship manager who can navigate the complex organizations that banks are becoming and get results for his or her client across all services. "Banks present themselves as a unified organization, but if you look under the covers, you see a lot of sub-banks that don't coordinate and communicate well," notes Jennifer Ceran, vice president and treasurer of eBay Inc., also based in San Jose. Masters of the banking maze will emerge, she predicts.

A few large banks will offer a breadth of service and economies of scale that will allow them to offer the best prices, suggests Anthony J. Carfang, founding partner of Treasury Strategies Inc. in Chicago. Smaller banks will offer institutional relationships, he predicts, but with a smaller product menu and somewhat higher prices. Credit will also play a lesser role, except in the case of small companies, thanks to access to capital markets.

Such developments as the creation of the SWIFT network, which allows companies to directly send and receive messages, and the coming of the Single European Payments Area, a kind of pan-Europe ACH, will simplify the business of electronic payments and global banking in general. And as individual banks become less necessary in that global network, they will have to rethink their strategic role and look for other ways to bring value and derive revenue. "We have to figure out where our customers are heading," says Dan McCarty, senior vice president for treasury management services at Comerica Bank in Detroit, "and get there ahead of them so we're positioned to bring value."

13. GLOBAL WARMING: DESPITE THE SKEPTICISM OVER THE LAST DECADE ABOUT THE ACCURACY OF PREDICTIONS about the earth's warming trends, companies are seemingly coming to accept it as gospel. After the onslaught of hurricanes in 2005 that practically wiped out one of the nation's largest cities, discussions with insurers and brokers about climate change-related weather became, if not commonplace, then certainly not uncommon. "The disagreement is over its cause–is it man-made through carbon dioxide emissions or something natural?" says Brian Storms, CEO of insurance broker Marsh Inc. "But whatever is causing it, the fact is that it affects hurricane activity, and our markets and clients are dealing with it nonstop."

Suddenly, global warming has become the cause or justification for many of our decisions, and the prospect is for much more of the same. For corporations, the trend has many implications, particularly in risk management–property premiums are rising dramatically and business interruption because of catastrophic weather events is much more of a factor in planning. "I'm no meteorologist, but storms are more frequent and we had better be prepared," says Joseph Plumeri, CEO and chairman of Willis Group Holdings.

But the trend should also alert corporations to another phenomenon with which they will have to contend: populations far more attuned to violations of the environment. This should give many pause as more powerful socially responsible investor groups start to target those they see as corporate offenders. General Electric Co. was an early convert to the need to be more sensitive to its corporate responsibility to preserve the environment and last year initiated a major initiative to develop a "green" product line. Here, the company saw the environmental movement as an opportunity to enter a new market, as opposed to a threat to its business, and many advisers suggest that GE's attitude will turn out to be far more productive as the next generation of more environmentally conscious consumers grows up.

14. WORKING CAPITAL EFFICIENCY: After lingering long in the low-tech realm of phone calls, faxes and postage stamps, the critical working capital channels of accounts payable (A/P) and accounts receivable (A/R) are getting a serious technological overhaul that's long overdue. New applications being deployed by a small group of pioneering companies are showing the way to the future of working capital management. The results promise tighter, more efficient relationships between companies and their suppliers, and customers and banks that, in turn, will drive down working capital needs through a combination of greater visibility into cash flows and cost-saving opportunities.

At the cutting edge of payables are Web-based systems that can track the status of payment requests and update invoices automatically. A few companies are already using the increased control to implement dynamic discounting, which allows companies to negotiate terms for deliveries and payments that match up with their cash needs and opportunities to invest. This functionality proved particularly attractive to buyers when interest rates were low and return on short-term investments was exceeded by what you could get out of sellers looking to pocket cash quickly. Such arrangements are not common now, but they will be as more companies raise their level of automation and understand the benefits of tighter working capital controls.

Similarly, in receivables companies are finding new opportunities through technologies that tie them closer to their customers and provide insight into which are actually the most profitable. In this area, a new discipline of supply chain financing is developing to get money into suppliers' hands in a timely and more predictable fashion.

One organizational innovation that has caught on, particularly with multinationals, is the shared service center–a centralization of transaction-related operations in one location. Among its strongest justifications, besides lower transactional costs, is enhanced working capital efficiency and internal controls. Its structure also overcomes a big impediment to WCM: The authority over the process is divided among several functional titles within finance and treasury.

Globalization could throw operational obstacles in WCM's way, but companies are becoming more attuned as they make decisions about offshoring to cut down on labor and material costs. While such manufacturing arrangements can potentially lower a company's cost of inventory, they can also extend its supply chain and increase days of inventory outstanding as finished goods take longer to be delivered from overseas. Companies will have to consider ways to offset such negative working capital impacts, according to Stephen Payne, global practice leader with consultants Hackett-REL. "Its all about optimizing cost and flexibility," says Payne. "The next five years will be fascinating as more manufacturing goes offshore and we see more sophisticated supply chains."

15. THE AGING WORKFORCE AND HEALTHCARE: AMERICAN SARE GETTING OLDER, AND IF MEDICAL INFLATION KEEPS rising at the pace of the past few years, we may end up getting sicker as well. The question is, what can companies do to both protect their employees and insulate their balance sheets from rising costs? Admittedly, this has been a source of concern for years, but the confluence of a growing senior demographic and rising medical costs may force companies over the next decade to get more actively involved in developing structural solutions rather than expending energy on figuring out ways to simply shift unacceptable costs. To date, companies have addressed healthcare and an aging workforce as two separate issues–one is a balance sheet concern and the other a workforce issue. But forward-thinking companies are connecting the dots: Fix one, and you mitigate at least some of the problems created by the other.

The current silver bullet for healthcare is consumer-driven health plans, coupled with health savings accounts or health reimbursement accounts. These teach employees (sometimes the hard way) to become more aware of the real costs of healthcare. This kind of consumerism is expected to play an even greater role in the next decade, according to many healthcare experts. But it remains an open question as to whether consumerism really addresses the underlying causes of the inflation, since most health-related spending is done by Americans suffering from chronic conditions, who often have little choice about whether to pursue care.

One strategy that could make a difference to the bottom line over the next 15 years is a growing emphasis on improving the health of the workforce through lifestyle and preventive care, and there is a good degree of optimism that if this approach will work, it will be with the Baby Boom generation that brought us health food and the diet and exercise crazes of the past two decades.

Companies are certain to be at the forefront of this change. In fact, not since the late 1980s, when Chrysler Corp.'s then-chairman and CEO Lee A. Iacocca talked about the need for socialized medicine, has Corporate America been quite so outspoken. Recently, General Motors Corp. CEO G. Richard Wagoner presented testimony in Congress calling for important changes in healthcare. Rather than bemoaning the state of GM's onerous costs related to employee and retiree healthcare and asking for relief, Wagoner's testimony addressed the problem of the aging workforce and the need to promote health initiatives. Other corporate leaders are adding their voices to the growing chorus. These are two strategic risks that companies will increasingly be forced to grapple with–or suffer the consequences.