For the corporate treasurer, times have changed drastically since the financial crisis. Pádraig Floyd finds out how they manage the pot and achieve consistency while the storm of economic uncertainty rages.
As liquidity dried up, business leaders needed to know if their plans could be financed and, if not, how to manage expectations. Since then, the demands on corporate treasurers have steadily increased.
The changing role of treasurers has been
closely followed by the Association of
Corporate Treasurers (ACT) in its annual
report, The Business of Treasury.
It won’t come as any surprise that the primary expectation of a corporate treasurer is outlined in this report as being “proficient in running and delivering an effective and efficient treasury operation”. Yet, while core competencies of operations, funding and cash management remain crucially important, within some businesses these are now simply baseline expectations. Treasurers need a broader palette of skills if they are to achieve everything demanded of them.
Across the ACT’s worldwide
membership, capital and liquidity
management takes up the greatest
amount of a treasurer’s time at 29%.
This is followed by treasury operations
and controls at 25% – taking the most
time in the EU and APAC regions.
Other tasks taking up a treasurer’s time are risk management (15%), corporate finance (11%) and business strategy (7%).
It might be argued that by expecting more from corporate treasury, organisations are simply acknowledging the expertise they have within their team. But this has a downside.
Demand for specialist insight into additional areas of the business means a treasurer’s focus is being split and other responsibilities are getting on top of them. This includes risk management, technology and volatility – whether that involves Brexit or other geopolitical or financial disruptors.
Though these additional tasks may seem relatively minor compared to the demands of the day job, the ACT report shows they are becoming increasingly onerous. The only task to have receded in the past year is pension management.
Risk management, business strategy, corporate finance, communication and relationship management have increased considerably, stretching the treasury function very thin across the organisation.
In greater demand
This used to be as simple as approaching the bank, asking for a loan and agreeing terms. While bank finance remains the primary source of funding, innovative new ways of raising cash are becoming more common.
Liquidity dried up very quickly during the last financial crisis. Businesses with banking relationships dating back more than a century found they couldn’t even get short-term credit to buy inventory to satisfy existing orders.
So treasurers needed new and flexible ways to access the financial markets, for example considering equity and debt capital markets to raise funding.
Uncertainty is currently the greatest concern. The financial markets are experiencing volatility as a result of short-, medium- and long-term influences, which may be characterised by – but not limited to – Brexit, the US trade war with China and what this means for the global economy, and the cyclical nature of all economies.
The tyranny of regulation
The European Market Infrastructure Regulation (EMIR) on derivatives, central counter parties and trade repositories, and the impact of new payment practices such as confirmation of payee and reporting across a range of business areas, places a strain on existing reporting structures.
Keeping abreast of the data is increasingly difficult if you do not have an integrated enterprise system. Even if you do, it may not provide the information you need.
As systems become software as a service (SaaS) and move into the cloud, treasurers are being asked to not only find the funding for the transition, but understand and explain the risks to the board.
Many treasurers find their efforts frustrated by a lack of implementation and technology workarounds. Too many businesses will aggregate data across Excel sheets gleaned from accounts and other information platforms as part of a culture of keeping things close to hand, ie, on specific local machines, against all the security and business continuity protocols. This does nothing to reduce risk and simply makes a treasurer’s job more difficult.
Managing cash flows under complex financial arrangements across multiple international sites demands accuracy and processes that are as frictionless as possible if financial risks are to be controlled and mitigated.
There has been a move to make the corporate treasurer’s role more strategic over the past few years
Help from outside
“The banks are providing their clients with application programme interfaces so they can connect directly to the bank’s own systems, allowing real-time analysis of their financial positions and activity with the banks,” says Dan Barnes, a finance and technology journalist.
Banks are also providing data as a service. This used to be information used by the banks to help them understand their customers. Now they offer it to help their clients build analytics based on their activity with their financial services partners.
“That’s a very useful service to treasurers,” adds Barnes. “Because they can build much more quantifiable structured models of the relationships they have with their banks.”
In addition to corporate banks, there are many businesses offering new data reporting technologies and payments services that simply were not available to treasurers in the past.
Doing more for less
Ultimately, treasurers are being asked
to step up to a more strategic, board-supporting role and generally do more
“Human and capital investment has really shrunk over the past few years, while there has been a move to make the corporate treasurer’s role more strategic,” says Naresh Aggarwal, associate director, policy and technical, at the ACT.
With fewer resources and less time to manage treasury processes directly, treasurers have been forced to change the way they work, says Aggarwal.
“Being involved in strategic developments at board level is good, but it is time consuming. Being more strategic means it has become critical for treasurers to develop soft skills around managing teams, meetings and time,” he explains.
Being developed into a more effective manager can only be positive for an individual’s future career. But it should be remembered that treasurers are often very process-driven and may find the transition to a strategic role more difficult than some, unless offered the appropriate support (see The treasurers’ view).
What happens next?
Treasurers will be involved in a considerable amount of additional activities in the coming year, with Brexit being the immediate focus. If it should bring a slowdown in activity, this will undoubtedly have an impact on working capital. Not only should treasurers ensure they have a coherent and proportionate Brexit plan in place, they must also have lending lines secured, says the ACT’s Aggarwal.
All agreements should be analysed
and a Libor plan prepared if it might
affect their business. It is not only loans
that have Libor clauses, but many
commercial agreements have penalties
that could be as high as 6% or more.
Now is the time to make sure these are
In the longer term, it is environmental, social and governance (ESG) matters that are likely to present the most risk to businesses. Though some treasurers see the reporting requirements as manageable, they may become more onerous – and regulated – if levels of compliance remain low.
But it is ESG that is dragging treasurers
into the communications arena, and just
one of the reasons many anticipate the
role of treasurer having a seat on the
board in the near future.
“Treasurers can understand the impact of certain matters on the organisation’s ability to raise finance,” says Aggarwal.
Payments processes and regulatory
compliance may appear more obvious
business disruptors, he adds, but the
corporate treasurer will find they have
the opportunity to present a more
nuanced position that ultimately still
benefits the business.
“Promoting gender diversity, for example, may allow the business to borrow for 10 basis points less,” says Aggarwal. “That has a value the treasurer can articulate to the board in terms they will understand.”
The treasurers' view
“We are now much more involved with the CFO and talking with the board about overall exposure risk and what can be done to alleviate that risk,” he says.
Soft skills are also important for the transition to be successful, said another.
“This can be a difficult transition for those who are more process orientated, because they’ve been dragged from their quiet offices, doing their own thing, to take on a broad range of business areas and are expected to come up with novel ways of dealing with the challenges,” she explains.
Another treasurer outlined the board’s expectations of finding new ways of managing the core elements of treasury.
“Once it would be just about taking a loan or adding some additional stock, but now it’s become much more of a creative conversation about how we achieve these objectives.
“Once the loan document has been signed, treasurers are much more involved with other discussions. In the past five years this has moved to cover insurance risks, then overall operational risk and also counter party risks.”
This evolution is expected to continue: “The role will continue to move away from transactional processes towards more overall corporate governance. You will be expected to make sure the organisation is the right fit for what it needs to do, that it has the liquidity to do it, and that the right structures are in place to make it run properly.”
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- 13 Nov 2019 (12: 00 AM GMT)
- First published
- 18 Nov 2022 (12: 00 AM GMT)
- Page updated with Further reading section, adding related resources on the changing role of the corporate treasurer. These additional articles and eBook provide fresh insights, case studies and perspectives on this topic. Please note that the original article from 2019 has not undergone any review or updates.