Corporations Expand Mandate for Treasurers, Finds AFP Survey

As a result of the critical role that corporate treasury departments played in sustaining their companies through the recession, companies are expanding the role of the treasury function, according a survey by the Association for Financial Professionals (AFP), released on 15 October at the AFP’s annual conference. With the crisis abating, corporations are not scaling back this role but doubling down on it, while continuing to lower treasury banking costs and demand efficiency from the function.

The 2012 AFP Treasury Benchmarking Survey, underwritten by PNC, found that 55% of organisations expanded their treasury’s mandate over the past five years versus just 5% that narrowed the focus. This expansion is even more common at large companies with annual revenues over US$1bn.

Thomas Hunt, certified treasury professional (CTP), director of treasury services, AFP, said that external pressures, such as the volatility in the environment, stretched supply chains, rapidly evolving regulations and globalisation, were impacting treasury, effectively broadening its remit and encouraging treasurers to embrace a more strategic role within the company.

Two-thirds of survey respondents said that their treasury department now oversees at least 18 functional areas ranging from cash flow forecasting to financial risk management, financial planning and analysis (FP&A), M&A, and investor relations – all the way to employee benefit management. This expansion of the treasury role appears to be permanent, indicating the importance of treasury in good times and bad.

Significantly, the corporate treasury departments that have expanded recently tended to do so with normalised cost structures that barely differ from departments that have not seen a significant change in structure, though they also tended to have larger staff to absorb additional work.

Staff expansion was true of the two treasuries – Toyota Financial Services (TFS) and Cliffs Natural Resources – represented on the panel discussing the results. Both treasury professionals, Lisa Chao, liquidity risk and FTP manager, TFS, and Dwayne Petish, director, global treasury strategy, Cliffs, reported adding to the number of full-time equivalents (FTEs) in treasury, moving from 25 to 40 FTEs over a period of five years in the case of TFS, while Cliff almost tripled its number from five to 14 FTEs in 18 months.

Also indicative of the overriding efficiency concern: the two most common success metrics for treasuries are reduced banking expenses (79% of organisations) and improved efficiency (71%). Annette LaPrade, global deployment lead, IBM benchmarking programme, reported that organisations that measured an increase in efficiency typically boasted departments with fewer FTEs and lower costs for treasury operations.

Treasurers surveyed did not think that cost efficiency itself was a universal measure of a treasury department’s success, due to variables in business type, borrowing structure and business model. Anecdotally, some companies measured treasury success by maintaining liquidity and paying down debt whenever possible. Others sought opportunities to repatriate overseas cash to pay down US debt and measured success by the ability to keep interest expense below budget. A number of treasurers said they are judged on their ability to identify opportunities to put cash to use versus keeping it idle.

Read the article ‘Results of the 2012 AFP Treasury Benchmarking Survey’ for a deeper analysis of the survey results.

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