Treasury Today Country Profiles in association with Citi

Above and beyond

Person attempting to step outside the circle (their comfort zone)

Treasurers are increasingly getting involved in areas which fall outside the traditional parameters of treasury. What does this mean in practice – and how can this benefit both treasury professionals and their organisations? Five treasury professionals share their experiences of stepping outside the comfort zone.

It’s no secret that treasury has undergone considerable changes in recent years. The days of treasurers operating from their ivory towers are long gone. Since the financial crisis, the treasurer’s role has gained greater visibility across the organisation. At the same time, treasurers are increasingly exposed to new challenges and opportunities on a daily basis in today’s dynamic environment, from harnessing new technologies and techniques to managing risks against a volatile political background.

Not only that – treasurers also increasingly have a role to play in supporting their organisations beyond the traditional remit of treasury. While this means different things in different organisations, many treasurers are having to step outside their comfort zones and become experts in new areas. In some cases, this might mean taking a more proactive role in modelling and analysing potential risk scenarios, or actively shaping business strategy. In others, it might mean taking on the role of change manager and overseeing treasury’s part in a wide-reaching finance transformation project.

It is likely that more treasurers will have to broaden their horizons in the future. PwC’s Global Treasury Benchmark Survey 2017 notes that “CFOs are urging treasurers to be involved in finance processes beyond the traditional scope for treasury such as in working capital management and in actively managing new exposures as these are created by core businesses.” Going forward, the report adds, treasurers should “not only master traditional treasury topics, but also business consultancy, project management, (cyber) security and Fintech developments”. The report also underlines the need for treasury professionals to understand “how to engage and orchestrate people across locations and business functions outside their chain of command”.

Of course, expanding the boundaries of treasury brings certain challenges. For one thing, treasurers need to be more flexible and develop new skills in order to take on new responsibilities and manage a wider range of risks. They may need to become more effective communicators, and work more closely with colleagues across the organisation. At the same time, they still have to find the time to manage their day-to-day responsibilities. In this article, five treasurers describe their experiences of moving beyond the usual parameters of the treasurer’s role.

Becoming a strategic business partner

The ACT’s 2017 survey, The Business of Treasury, found that the vast majority of treasurers around the world see the treasury function as a strategic business partner for their organisations: 54% strongly agree that this is the case, while 35% slightly agree.

The survey also highlighted the extent to which treasurers’ roles have become more strategically focused in recent years. According to the report, treasurers spend 40% of their time on strategic issues, up from 24% in 2013.

The value of the treasurer’s input was also indicated by the survey’s respondents, who noted that treasury recommendations are accepted by the board 84% of the time – a 33% increase in the last five years.

Where most time is spent operationally day to day
Where most time is spent operationally day to day

Source: ACT’s The Business of Treasury 2017

1. ‘Creating your own crisis’

Guillermo Gualino, Vice President & Treasurer at Agilent Technologies, argues that risk management is an area where treasurers can add particular value by communicating threats more proactively with the rest of the organisation. From the financial crisis to negative interest rates, he says that treasurers are the people who are best placed to anticipate and prepare for the impact of major risk events. He notes that in order to protect the company, it is necessary to impart a sense of urgency when communicating with others within the organisation.

“In a way, you have to create your own crisis before a real crisis happens,” he explains, emphasising that the goal of the exercise is not to create problems or cause alarm, but to bring attention to the potential loss that a risk event could lead to. By doing so, treasurers may be better placed to gain support for preventative actions that the company should be taking.

As such, Gualino says that treasurers need to run through a variety of different scenarios and undertake modelling and analysis. By doing so, treasurers can understand the potential impact of a specific event on the company, from the possible FX impact to business loss. This impact should then be communicated with other groups and with senior management in order to explain both the potential impact and the actions that should be taken in mitigation, from changing pricing to introducing a new hedging programme.

He cites the example of emerging market risk as an area where this approach may be needed: “There’s a cycle that tends to happen in certain markets, where capital inflows bring the prospect of growth, which leads to more excitement and capital inflows,” he observes. “Then a few years later, there may be concern that the economy is overheating, followed by currency devaluation. Everyone understands this risk – but when things are going great, it’s hard to imagine that things will move in the opposite direction soon.”

Gualino notes that his approach to communicating potential risks has proved effective in the past. “We’ve mobilised other groups to prepare for events that have happened further down the line,” he says. “People have come to me afterwards and said, ‘Hey, you predicted this’ – but I explain that I didn’t know for sure that it would happen; I just made sure we were prepared. That’s the role that I see treasury playing – it’s about hoping for the best, but preparing for the worst.”

2. Diversifying funding

Rick Martin, Group Treasurer at GasLog, an international owner, operator and manager of liquified natural gas (LNG) carriers, argues that treasurers are only really doing their jobs if they are acting as agents of change. “Looking at my patch, LNG shipping finance, the industry is moving away rather quickly from an exclusive focus on long-term charters, with investment-grade counterparties, toward a rapidly growing proportion of spot business, with a much wider range of customers,” he explains.

“As I see it, the growing complexity of shipping finance is a great opportunity for treasurers to play a leading role in helping to shape the company’s overall strategy.”

Rick Martin, Group Treasurer, GasLog

Martin explains that this naturally underlines the need for a more diverse set of financing tools – a trend which is further emphasised by the increasing regulatory burden being placed on mortgage debt lenders, “the historic bedrock of shipping finance”.

Martin explains that treasurers must be attuned to these types of changes – ideally seeing them coming from a distance – and must work with their colleagues to build a capital structure “that will not only permit continued financing but, even more so, cultivate it as a source of sustainable competitive advantage”.

He adds, “as I see it, the growing complexity of shipping finance is a great opportunity for treasurers to play a leading role in helping to shape the company’s overall strategy, even as one takes obvious primary accountability for driving the aforementioned evolution in capital strategy.”

3. Embracing non-traditional treasury

Jack Spitzer is Vice President of Finance and Treasurer at Isagenix, a global health and wellness company. “I have a few non-traditional treasury areas under my span of control,” he comments. “The largest non-traditional treasury area is our Payment Solutions and Merchant Services area. Since our products are mostly sold online, it is our primary revenue and cash flow source.”

According to Spitzer, the team oversees all inbound payment methods for the company in all of the relevant countries – a task which involves researching, selecting, negotiating and implementing popular in-country alternative payment methods such as bank transfer, ewallet and cash solutions. “They ensure we have the best solutions that open payment flexibility to the broadest range of consumers while increasing sales and cash flow,” he explains.

In addition, Spitzer says that treasury oversees fraud prevention to minimise online transactional fraud that may hurt the company or brand. “I also oversee various other areas, including our company corporate card programme (to maximise rebate),” he says. Likewise he oversees the company’s travel programme, the financial operations of the staff canteen, and ‘Will Call Store’, a location where customers can pick up products they have ordered or buy additional products, “to make sure we contain costs on these ancillary areas”. He adds, “There is a greater focus on understanding operations and behaviour to generate incremental revenue or reduce costs.”

4. Setting up a risk committee

George Dessing, Senior Vice President, Treasury & Risk at global information provider Wolters Kluwer, is another who sees the treasurer’s role expanding beyond its traditional parameters. As a result of the company’s ongoing digital transformation, digital and services revenues now account for almost 90% of total revenue, compared to 25% 15 years ago. The company’s treasury, risk and real estate team is a group of around 30 people based in the US, Ireland and the Netherlands.

Like Martin, Dessing believes that the treasurer is “almost by definition a change manager”. “I see the treasury department as a nexus of information, cash and managing risks, which we do from a global perspective,” he explains.

Dessing explains that in the past, treasury was perceived as being purely about liquidity and cash management. “Nowadays you see it as much more financially, strategically and business focused,” he says. “And that results in the extra responsibilities that a lot of treasurers now have, including not just corporate finance but also risk management, pensions, real estate, working capital and procurement.”

As such, Dessing has taken part in certain projects which go beyond the traditional remit of treasury. This has included setting up a risk committee in order to discuss material risk across the organisation, with a focus on topics such as cyber security, fraud and incident management. “These may not be the traditional risks that you would expect from a treasurer, but more of a broader, holistic way of looking at risks,” says Dessing. “That’s where the treasurer can play a role.”

Dessing says that being a treasurer in the current climate involves some additional skills. As well as strategic and advisory skills, he notes that one of the things treasurers need is the ability to be a people manager and invest in the company’s culture, “as well as in the talents around you”. This involves staying connected with peers both within the organisation and beyond, for example by working on multi-disciplinary projects which go beyond the traditional scope of treasury. “I always say to my team that you cannot hide behind your PC – you need to get up and walk around and be visible,” Dessing adds.

Overcoming the challenges

Expanding the parameters of treasury can bring with it certain challenges. Dessing says that the complexity and uncertainty faced by treasurers requires a certain multi-disciplinary focus. “You cannot only look at certain things in isolation from a financial point of view – you have to take a broader view. You may also need to be a little bit persistent, although you have to listen and be open to new ideas.”

Likewise, Dessing says that treasurers need to be “streetwise, with a bit of courage” and embrace the opportunity to step up when needed. It’s also important to question things: “When I get questions from my team, I always say that what I’m expecting from them is simply people who can say ‘no’, and ‘I don’t understand’,” he notes. “I’m not looking for people who only say ‘yes’, but for people who will take a critical look at the solutions that are being presented.”

However, Dessing also notes that the challenges treasurers face can bring some benefits when it comes to increasing the treasurer’s profile within the organisation. He notes that complexity in the environment, from IFRS 16 (leases) to tax reform in the US, gives treasurers the opportunity to shine. “And finally, more uncertainty also increases our visibility as a treasurer – and it’s great to sit at that board table.”

5. Supporting a major finance transformation programme

As Group Treasurer of Equiniti, Daniel Jefferies has first-hand experience of acting as an agent of change. When Equiniti embarked upon a far-reaching financial transformation programme in 2016, Jefferies had a key part to play in overseeing the transformation where treasury was concerned.

The overall objective of the transformation programme was to remove mechanistic, process-driven tasks and offshore them to Chennai in order to leverage overseas skills and resources. Meanwhile, most of the intellectual capital would be left onshore. “The transformation covered everything including AP, expenses and procurement as well as treasury,” says Jefferies. “The overall objective was to move to a 50:50 split of onshore versus offshore headcount across the finance team.”

For Jefferies, this provided an opportunity to achieve numerous improvements within the area of treasury. “When I first joined Equiniti, I was looking to make some operational improvements to drive efficiency across the team in terms of what we do and how we do it and where we do it,” he says. “So for example, we had processes that were really better aligned to other areas within finance, whether that be general ledger, bank reconciliations or payment authorisations.”

The transformation programme brought an opportunity for Jefferies to separate out these processes and achieve more efficiency by making use of offshore resources. This meant looking at how treasury interacted with other areas within finance and exploring best practice, as well as considering how certain processes could be put into an offshore environment. It also included bringing in solutions to improve existing activities.

The full transformation took 15-18 months to complete, and Jefferies notes that while the treasury part of the process was shorter than this, “you are constantly going back and reviewing and challenging what you’ve done – do we need to look at systems again? Do we need to look at staff again? It’s not something that you simply finish and walk away”.

Such was the scale of the change that Jefferies said it consumed the majority of his day-to-day role for the duration of the project. He also notes that a slightly different skillset was needed in order to approach the transformation successfully. “It had been a while since I was used to operating at that level of detail,” he explains. “This included looking at specific process flows within finance and how they integrate, as well as considering how to maintain the right level of segregation of duties while not putting too much additional workload onto the function overall.”

This brought many benefits where treasury was concerned. For one thing, Jefferies was able to use the programme to improve experience and skills within the team. “It also gave me an opportunity to understand and work a bit more closely with the wider finance function across the organisation and to work more closely with the group financial controller, so it was a learning experience for me as well,” he says. In addition, Jefferies says that knock-on effects have included prompting a fresh look at the company’s treasury management system.

Jefferies observes that while not all treasurers will encounter a finance transformation on this scale, most treasurers will encounter change management to a greater or lesser degree. “The extent to which they’ll encounter change will be dependent on the organisation, how mature it is and where it is in its lifecycle,” he adds.