The more a treasurer understands their business, the more value treasury creates. One option for deepening that understanding is increased engagement with management below the C-suite on financial risk topics.
Operational units, procurement and commercial teams generate the underlying or structural exposures that treasury ultimately manages. Therefore, engaging teams below the C-suite builds a risk-aware culture, improves raw exposure forecasting at the source and ensures daily operational decisions align with enterprise risk strategy.
Hearing the signals
Aidana Zhakupbekova, Chief Operating Financial Officer at Rydoo, agrees that there is value in finance leaders spending more time understanding how the business operates end-to-end.
“Managers across the business can help identify where processes are slowing things down, whether teams have the capacity to deliver on strategic priorities and where they may be stretched to the point of operational risk,” she says.
These issues don’t always show up in the numbers straight away, but they matter just as much to the financial decisions the business takes. This is partly to do with better information flow but also down to trust.
Zhakupbekova notes that managers are more likely to raise a problem early if they know finance will act on it rather than just logging it. “Building a two-way relationship between finance and the rest of the business takes time but it is one of the most effective risk mitigation tools we as finance leaders have available,” she says. “It costs nothing to be willing to listen.”
CleanSpark CFO, Gary Vecchiarelli, also observes that the people closest to a project, customer, system or supplier often see a change before it appears in a financial forecast.
“Treasury and finance need a regular way to hear those signals, test their financial impact and escalate them without waiting for the next board cycle,” he says. “That also makes risk management more useful to operating teams as it becomes part of everyday decisions rather than a periodic reporting exercise.”
Involving business unit leaders and functional managers improves early warning and builds ownership of risk instead of leaving it as a finance-only topic. It also gives the next generation of leaders a better understanding of how operating decisions affect cash, liquidity and covenants.
Spotting changes
CFOs and CEOs often receive aggregated information. In contrast, treasury, sales, procurement, operations or local finance managers sometimes spot changes weeks or months earlier. Involving these levels therefore improves early detection and reduces the risk that relevant information will be lost on its way to management.
That is the view of Peter Schmid, Senior Manager, Zanders, who reckons a clearly defined risk owner model is particularly useful.
“For every material risk, there is a designated person responsible for continuously monitoring exposure, early warning indicators and countermeasures,” he says. “At the same time, responsibility should not be delegated exclusively downward. Top management must set the risk appetite, escalation thresholds and strategic priorities.”
In mid-sized companies in particular, director and general manager level is where the risk actually sits, for example the country finance manager who knows the customer is paying late or the operations head who knows the supplier is fragile.
The C-suite sees the aggregate whereas the signals are two levels down says interim fractional CFO and Managing Partner of Bangkok-based smeCFO, Jerome Le Louer.
“The practical solution at group level used to be a debtor meeting with the people who actually chase invoices in each country on one call, comparing dunning cadence, credit limit changes and when to escalate,” he says. “The regional CFOs learned more about collection risk from that hour than from a quarter of reports.”
