A Bigger Chair for Treasury at the Corporate Table

Treasury was, for many years, viewed as a cost centre within many organisations. The treasurer’s remit was primarily that of a watch keeper, ensuring that corporate cash was tracked and kept secure, but he or she had limited powers to impact corporate strategy.

A significant reason for this very tactical role was that the core process of maintaining daily cash visibility – accessing bank portals, entering balances into spreadsheets and manually checking the status of transfers – was so time-consuming and labour-intensive that there was little time to perform more strategic activities. Even for those who did have the time, parsing actionable data and performing analytics using data from spreadsheets was a similarly complex task.

As a result, there is still a common perception among its practitioners of treasury as a predominantly tactical function. In fact, the higher up an individual within the treasury organisation, the more likely (s)he is to view it as tactical. As the chart below shows, treasurers and chief financial officers (CFOs) are twice as likely to view the treasury department as primarily tactical in function, compared to other members of the treasury team.

Kyriba strategic v tactical treasury 

This fact is borne out by the types of activities in which treasurers are involved. According to research that Kyriba carried out earlier this year in Association with the UK’s Association of Corporate Treasurers (ACT), just 19% play an active role in market expansion decisions, and 17% taking part in revenue growth acceleration initiatives. In fact, only 37% of treasurers view data analysis for decision support as one of their top three tasks, far behind activities such as cash position reporting and forecasting and bank reporting. Bear in mind that this data is not for treasury departments as a whole, but for treasurers themselves. Many of them continue to spend much of their time and resources on similar activities – such as cash position reporting and forecasting and bank account management – as cash and treasury managers, whose roles are much more focused on these tasks.

A Question of Perception

It’s clear that before treasurers start to promote themselves for a bigger role at the corporate table, there needs to be a change in self-perception among the treasurer community, with them pushing for a deeper role in broader business initiatives. Without this self-belief and drive, it will be difficult for treasurers to convince executive leadership to give them a broader remit for driving strategy and value. Executive leadership teams are full of type-A personalities, so for a treasurer to become part of this group there needs to a considerable amount of cheerleading for treasury’s contribution to the organisation.

However, there is some positive change taking place within the treasury department and its focus on more strategic business initiatives. According to research, 48% of treasurers see their role as becoming more strategic in the past two years, compared to just 8% who see themselves being less strategic. One significant factor behind the shift in this perception is that as more and more organisations have moved the bulk of the treasury processes from spreadsheets to treasury management systems (TMSs). This has both freed up resource and provided the visibility, data and analysis needed for treasury to support broader business decisions and initiatives.

While at their most simplistic TMSs enable enhanced productivity, this is the gateway to much higher-value benefits – from increased financial controls and deeper global visibility to more effective decision-making capabilities. All of these contribute to treasury becoming a strategic partner to the business as a whole. With a treasury system in place, treasurers can both proactively offer a deeper level of insight into larger business decisions, and in turn (although this will certainly not be an overnight change), will have their opinions sought on these issues as a trusted resource.

Delivering Value

To give a practical example, as many large organisations continue to hold onto large cash reserves in the wake of the Great Recession, and interest rates remain near historical lows, organisations are looking to the treasurer to deliver new ways to achieve value for their cash. On top of traditional treasury-oriented initiatives for cash optimisation, one area where treasurers are starting to have a deeper impact throughout the organisation is supply chain finance (SCF). While supply chain has usually been the domain of procurement, programmes such as dynamic discounting enable cash-rich buyers to leverage their excess liquidity to secure discounts on invoices from their vendors, often providing returns significantly higher than existing market rates.

Merger and acquisition (M&A) is another area where the potential impact of treasury’s input cannot be understated. Treasurers can help with a variety of critical issues, from the planning stage to the execution of the deal, through to the integration of the two organisations’ financial operations. Specific examples include:

• Assessing the impact of currency and interest rates on price for, and value of, acquisition targets.
• Advising on the ideal capital structure and the availability of financing options to finance the deal.
• Measuring the deal’s impact on credit ratings, borrowing capacity, financial exposures and regulatory compliance.
• Determining redundancies in the combined organisation’s treasury and banking operations.

As TMSs become more widely adopted in the corporate environment, treasurers are able to provide deeper insight and analysis of liquidity positions and how cash can be better deployed. This insight can then be parlayed into more treasury input into major transformation initiatives, further increasing the treasurer’s profile in the organisation. While a board seat is probably not on the agenda for many treasurers, there is no reason why the treasurer shouldn’t be viewed as an integral part of any forward-thinking organisation’s management team. Whenever any major corporate initiative is being planned, one of the most important questions should be “has treasury been consulted on this?”

All statistics and graphs taken from the Kyriba/Association of Corporate Treasurers Treasury Surveys of 2013 and 2014. More information can be found here.


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