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Treasury’s Rising Star

Growth and globalization are changing the role of corporate treasury.

29Jul

To paraphrase an old advertising slogan, this isn’t your father’s treasury function. But unlike the ill-fated subject of that slogan (Oldsmobile, whose attempt to reinvent itself ultimately failed), treasury’s star is on the rise, according to a recent CFO Research survey.

The survey was sent out at the end of 2012 to corporate, finance, and treasury executives at large companies around the world to find out about their plans for their treasury functions over the next two years. According to 661 respondents from North America, South America, Europe, and Asia/Pacific, the scope of the treasury function’s activities will grow in the years ahead. (The complete results of the survey appear in two reports, co-sponsored by the enterprise software and service firm SAP, titled “The Next Generation of Treasury: From Cash Manager to Strategic Advisor,” and “What Corporate Treasuries Want from Their Banks.”)

As companies look for new sources of growth, the treasury function is being called on to become more of a strategic adviser to the business, the survey indicates. One respondent wrote that treasury staffers are “taking over roles previously covered by financial control, HR, etc.,” and another offered that treasury is being asked to have “increased involvement in investor relations, operational efficiencies, and employee-benefit management.”

Globalization, not surprisingly, is one of the factors spurring the need for new and improved information capabilities. Survey respondents said that there would be greater demand in the future for such capacities as providing a “centralized real-time cash position for international operations” and “better integration of our local international platforms so we can quickly and tax-efficiently move resources from positive-cash-flow-country operations into resource-demanding ones.”

Treasury’s role is changing partly because of its heightened need for better data to inform its reports, which now include tracking cash flows across multiple geographies. One executive in the survey said that for his company, the largest change for treasury has been that “we’re significantly more involved in partnering with operating businesses.” To be valued in the executive suite, treasury will have to foresee changes in cash flow and in liquidity. “Our leadership is always asking for more anticipation and simulations,” wrote one executive.

The bottom line, another respondent said, is that most treasury activities need to be “focused on providing funding for future long-term growth.” (See “Growing Forward,” above.)

Bonding with Banks
Treasurers’ changing role will also reshape their relationships with their commercial banks. Beyond credit lines and transaction processing, treasurers will also need banks to supply them with information, expertise, and insight. As a controller from a Latin American health care firm wrote, businesses now want their banks to “provide solutions that will allow my company to grow.”

Those solutions will develop from end-to-end visibility into and across companies’ accounts, regardless of where those accounts reside or with which banks. Corporate clients will be clamoring for better integration with their banks’ systems and more input from their banking advisers on such matters as creating new revenue streams and identifying cost-effective funding methods.

Executives also want to be able to easily and quickly integrate banks’ information with their companies’ own data, and have “access to data from all used devices (laptop, cell phone, etc.),” as one survey respondent wrote. The velocity of management decision-making must keep pace with rapidly changing markets in all corners of the world.

Cloud Funding
Supporting technology, such as foreign-exchange trading platforms and investment portals, may help a treasury function gain increased visibility over critical information—but executives said they will need an assist from their banking partners. In fact, nearly all of CFO Research’s respondents, 91%, reported that they will be looking to upgrade the technology they use to support banking relationships, risk management, and treasury activities. So, for example, they will demand from their banks a “single-window system, where everything is available at one stretch and at one place,” as a director of finance at a manufacturing company put it.

Finance and corporate executives appear especially eager to employ cloud-computing technologies to improve communication and interaction with their bankers. A majority of respondents in the CFO Research survey said that their companies were likely to be among the first to adopt cloud-computing capabilities for banking relationships. These respondents characterized their companies as either “early adopters” or “fast followers” for cloud-based banking communications. (See “Sky-High Expectations,” above.)

Cloud-based services represent an immediate opportunity for banks. “Banking-critical” respondents—those who said they will need “significant improvement” in their banking relationships—are twice as likely as others to be ready to adopt cloud services; nearly 4 in 10 (38%) said their companies would be “early adopters” of cloud computing for banking relationships, compared with just 16% of all other respondents.

The treasury function knows the tools it needs to kick into higher gear. As for the direction the function is headed in, one senior vice president
of a European technology company described the journey quite succinctly: “Treasury has moved from a transactional service provider to a strategic adviser with strong execution capabilities.”

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