Where and How Treasury Can Develop its Strategic Role

In recent years, helped by the financial crisis, the treasury function has extended beyond traditional activities such as funding, cash management, risk management and credit relations. While these remain important, treasurers can also call on their natural set of skills and competencies to lead, or at least be heavily involved in, other strategic decisions within the corporation.

Traditionally it was often the case that treasury was brought only in when something was already agreed upon by others, or even when something had gone terribly wrong and treasury was asked to sort out the problem. This situation was due to the treasury function being seen as disconnected from the business, working in a specialty niche of financial markets with solely operational responsibilities such as payments.

The role and importance of corporate treasury within a corporation has changed. Chief executive officers (CEOs) and chief financial officers (CFOs) have looked at treasury differently since the financial crisis began. Credit crunch and liquidity risk have changed the scene completely. Yet still the treasury department must struggle to be recognised as functional in adding value and being included in strategic decisions. Having access to senior management at board level and developing communication skills within a corporation are key to being successful and advancing corporate treasury strategically. This is not achieved overnight, but it is something to aim for and work towards steadily.

Looking for Strategic Opportunities

There are many important aspects of strategic treasury with which corporations must deal. The first is the risk/return perspective. Treasurers focus on minimising risk, but may sometimes forget about the potential returns it can offer. This does not mean taking unnecessary risks, but considering both risk and possible return when making any financial decision. A treasurer should not only look for the risk limit, but assign an economic cost of risk to support any decision making. Risk is comprehensive and dynamic so a constant review should take place, which should include all man-made and natural (environmental) factors that play a part in the overall study of strategy. A lack of proper treasury strategy and perspective can become a problem for any corporation. It may mean that it fails to make best use of its resources which, in turn, translates into lack of financial success.

Treasury already plays an advisory role at head office level, but also needs to bridge the gap to the day-to-day business. When it comes to business units and initiatives, the treasury function often seems to be too remote. Local units or group companies need to understand the service and support the treasury function is offering. When these units realise their gain and the impact of a treasury-related decision, they will involve the treasurer and his/her team more automatically and deeply. This could mean that treasury gets involved in strategic decisions, such as whether to expand into a certain country or region or what to choose for a billing currency and why. What the business should be doing financially, how well that business is doing, and where it will likely go in the future are all issues where treasury can support and provide added value. It is still often the case that the visibility and relevance of treasury are not recognised at the business entity level. Becoming more visible also brings a higher strategic impact for corporate treasury, as already basic aspects of the business can be affected by treasury issues.

Operational tasks, such as payments, can also provide a tool or vehicle for the treasury function to move in a more strategic direction, support the whole corporation and be recognised by the single business unit. Straight-through processing (STP) of payments and different payment options for the customer or the business unit can be critical and help the corporation benefit in a way it had not previously considered. Offering different payment options to meet customers’ preferences may lead them to increase the business relationship, if dealing and paying becomes easier and more cost-effective. For industries with commoditised goods or services particularly, the added service offering can be the differentiating factor from competitors.

These are selected examples of different issues that a modern corporate treasury can address and thereby develop in a more strategic way. The overall initiative is to have a more integrated approach, be it through communication, advising or operational tasks. Corporations are beginning to value approaches that are much more integrated than before. When financial issues are clearly and carefully integrated into everything else that the corporation is working with and towards, it operates better as a single entity and can use the information it collects across departments more easily. Strategic treasury helps the corporation to focus on matters from an overall perspective, instead of becoming mired in a single issue.

Overall integration is also the key challenge for treasury personnel. Corporations are looking toward treasury staff to help improve the business and drive financial performance. While that makes sense, issues may arise when treasury staff do not grow and develop quickly enough to take on these additional roles beyond their existing financial expert role. These treasurers must do much more than they have done before, and often with fewer people and fewer resources. It is only natural that they experience trouble when they are overworked and understaffed, making it very easy to overlook something that might otherwise have been easily noticed.


The business environment is also becoming more complex and competitive, requiring treasurers and their corporations to spend time keeping up with new trends, rules, and regulations while further stretching their already thin resources. In order to meet today’s strategic challenges, there needs to be a new type of treasury manager at corporations, able to keep up with the rising demand for more integration and a higher level of strategy while at the same time still offering specific treasury expertise. The required profile is in many respects that of the so-called ‘T-shaped professional’ invented 20 years ago by David Guest, where the vertical aspect represents problem-solving ability (depth)  and the horizontal bar represents communication skills (breadth).

Treasury needs to change perspective on its tasks, its role within the organisation and its personnel, in order to develop the treasurer from a pure administrator and controller of risk and risk limits to an active manager of risks and advisor within the corporation and its entities. In doing so it will become more visible and relevant to the single business unit and be integrated on a wider basis, meaning greater participation and contribution to strategic decisions. That relevance is already there, but it not fully realised. It is up to treasury to make all levels within a corporation – from the business units to senior management – to recognise the importance of corporate treasury and the added value that it can provide.