In a challenging business climate, treasury skills and expertise are in demand.
Once-in-a-lifetime events keep on coming, geopolitical tensions show no signs of abating and financial volatility is a confirmed feature of the landscape.
Treasurers are well-placed and well-used to managing risk, but nevertheless face a full agenda when it comes to providing intelligence, responding to business needs and maintaining their organisation’s cash and liquidity position.
According to this year’s Business of Treasury report from the Association of Corporate Treasurers (ACT), treasury professionals are providing more and more input on strategy rather than simply responding to events. To do that effectively, they need traction with their banks and other external stakeholders such as credit rating agencies, as well as within their own organisations.
Boards are showing greater interest in capital and liquidity management, business strategy and risk management compared to last year’s Business of Treasury report. Good enough reason to be prepared and ready to reinforce treasury’s expertise and perspective in boardroom discussions.
It is potentially an area of opportunity, too. Moving treasury from ad-hoc presenter at board meetings to regular participant greatly enhances treasury visibility and enables treasury to provide more proactive support on critical areas such as payments and cash flow, says Sarah Boyce, associate director, policy and technical, at the ACT.
“It means they can develop meaningful relationships instead of merely providing ad-hoc information, which, in turn, puts the treasurer in a stronger position if the business environment gets tougher,” she explains.
Treasury visibility elsewhere around the business also counts. Alexandra Lewis, group treasurer at National Grid, argues that the inflow of data and information into treasury is crucial for fund raising, for example. It takes a treasury team with strong internal connections to ensure that input takes place.
“At the end of the day, we are raising finance for National Grid and we are therefore a drawer of information from the business, so that we can explain to our potential investors and current investors what we are doing. We therefore need to ask lots of questions of the business,” she says.
That’s best achieved by treasury professionals who are embedded in their organisations and making the most of their internal networks.
“A good example of this from the last few years is green financing, where you are talking to your investors in some detail about what projects their cash will be invested in. You actually need to get not just the finance teams, but the engineers and sustainability professionals in the business to come together to say, ‘Well, this project does x and the impact it has is y’.”
The validity of the fund-raising team is enhanced by these wider connections. “We always do better when we don’t work in silos. We always do better if we reach out and get other inputs.
“All of this just adds to the richness of our collective expertise and insight,” she continues.
If we are close to our business, understand what it’s doing and what our customers want, we can drive conversations with our financial providers to meet those needs
Richard Garry, group treasurer at exhibition and business information giant Informa, says the profile of his treasury team internally is strong and those links mean the team can be effective. “It goes from top to bottom. I report into the CFO; we get board-level visibility via the CFO – and straightaway, just by virtue of that interaction, we get the attention of other executives. That can be very helpful in terms of knowing what’s going on across the business,” he says.
He makes a similar point to Lewis about being visible and connected internally at other levels throughout the organisation.
“We try to be commercially useful,” he says. An example of that is staying aware of what’s going on in customer relationships. As Informa’s face-to-face trade shows have resumed, so have the commercial meetings between the business and its clients. While treasury doesn’t have to be alongside for day-to-day operational activity, it can support by keeping commercial heads up to date on payment and collections, for example.
“If we are close to our business, understand what it’s doing and what our customers want, we can drive conversations with our financial providers to meet those needs. And we do that by interacting with the business, with the operations people in a particular location and not just by me interacting with divisional heads.”
Treasury and banking technology can enhance transparency around payments further.
“We don’t let exhibitors into our exhibitor halls until they have paid, for instance. And as you get closer to an event, more and more customers will be trying to pay you.”
Making it easy for customers to pay and ensuring that information flows through to key people in the business enhances the customer relationship and customer journey. Application programming interfaces, providing real-time updates on cash inflows and bank balances, can facilitate that information exchange. “I don’t need to know minute-to-minute what our balances are doing. But actually, that’s a good example of when the business would like to know in real time.”
Essentially, treasurers need to be business partners. Business partnering, says Boyce, is all about understanding the business and applying that knowledge in helpful and useful ways.
Close relationships with customer-facing parts of the business are especially helpful in fast-moving business environments. If a treasurer knows that a new customer intends to pay on the 10th of each month, they can avoid borrowing on the 9th for longer than necessary – useful intel in a higher interest rate environment, suggests Boyce.
That mindset is an important one for treasury leaders to cultivate and foster, Lewis argues. While liaising with credit-rating agencies and maintaining strong relationships with banks is a core part of the treasury job description, internal networking and understanding the business can be a part of the job that needs encouragement.
Treasury teams are often quite naturally external facing, but internal relationship building often requires little more than a willingness to be curious about other areas of the business and to conduct open conversations. “People think they need an agenda. And that can sometimes get in the way.”
A helpful approach may be to simply set up meetings with the sole purpose of understanding each other’s roles better. “If you just go in with: ‘it would be helpful if you understood what I did and vice versa’, and literally let that be the basis of the conversation, that can actually uncover helpful insights,” Lewis says.
“Just being clear that actually you’ve no agenda other than: ‘maybe we could see whether we could uncover any areas where we think we should work a bit more closely’, can be super helpful.”
There are, of course, no guarantees that times won’t get even tougher. And in times of crisis, a strongly internally connected and outwardly visible treasury team is essential.
“When things are just handle-turning and business as usual, it’s much less of an issue. But when there is some turmoil in the financial markets and there’s lots of change happening, which could impact you in ways you don’t realise, treasury has to be one of the people at the table,” says Lewis.
This year’s Business of Treasury survey revealed that treasurers have become more influential as a result of the pandemic. For the first time in nine years, treasurers are weighing in more on defining strategy rather than just providing information to contribute to it. That said, it is treasurers with greater longevity in a role who are most likely to be involved in defining strategy (66%).
But will this strategy-setting prominence continue? For some treasurers, the increased interaction with the board was temporary – on a ‘needs-must’ basis. But significantly more of those who had increased interaction have kept it going than those for whom it fell away.
See the ACT’s Business of Treasury research here.
Liz Loxton is a freelance journalist and former editor of The Treasurer
This article was taken from Issue 4, 2022 of The Treasurer magazine. For more great insights, members can log in to view the full issue, If you're not an ACT member, you can sign up for eAffiliate membership.