I have been a member of the ACT almost since inception having joined in 1980.
It is remarkable to see the strides taken by treasury since that time. In those days, the treasury function was regarded very much as the back-office accountants who dealt with investing large sums or making borrowing arrangements. In the eighties I always thought that there was a certain mystery behind the really big “treasury” departments! In practice, big or small, these departments, and the people who ran them, had a significant role to play. In my opinion there are three key areas and I have looked at how these have developed over the last 40 years.
A major part of treasury has been the placing of deposits and the arrangement of loans. Cash management, liquidity, working capital control, credit control, fundraising and financial reporting have been standard day to day parts of the treasurer’s role. Interest rates, loan periods, security, conditions and covenants together with foreign exchange transactions have always been essential items of difference to gain the best deal and a competitive advantage. Over the years these have become increasingly complex and sophisticated as new markets and new territories have opened up. A myriad of banks and financial institutions are now available, and the growth of hedge funds and other financial intermediaries has enabled the treasurer to explore new ideas. The use of Hire Purchase and leasing arrangements has also added to the many financing options now available to a treasurer.
Financial transactions lead to balance sheet review and the treasurer has always spent significant time assessing the value of assets and understanding liabilities (sometimes contingent). Similarly, an understanding of pensions, particularly final salary schemes with their large deficits has increasingly featured as an area of risk for the treasurer. The treasurer has often worked with the auditor (either external or internal) to ensure best practice, good governance and appropriate policies.
Hand-in-hand with financial transactions and funding arrangements went the assessment of risk and a deep understanding of the trading areas across the globe. Short-term and long-term finance, together with different industry requirements (construction vs food retailing for example), became watch words for the treasurer. Add to this the growth in technology which has increased financial options, especially within developing countries. A review of fundamental economic conditions together with the constant threat of boom and bust from emerging territories has meant that risk assessment forms a major part of the treasurer’s responsibilities – this is as true now as it was in the past. In turn, I have found that the treasurer needs to spend more time reviewing insurance options to mitigate such risk and to take responsibility for the risk/reward of such cover. Qualitative as well as quantitative assessment of risk have become important and boards are increasingly looking to the treasurer for answers.
The role of the treasurer now effectively combines the two areas above and, in all companies (even small ones) the “treasurer” has become a key member of the executive team, often working with the CEO on new projects. Whether in large multi-nationals or a small charity, the attention to detail, common sense and level headedness required of the treasurer will make a fundamental difference to success or failure. Some aspects of treasury will inevitably blur with the finance department, for example budget setting and investor relations but bench-marking and ratio analysis are natural measuring tools for the treasurer.
I hope that this has set out the major differences that a treasurer can bring to an organisation. Brexit, Trump and China, rising global inflation are today’s hot issues. But what will tomorrows be? The role of the treasurer will always be important and make a difference!
