Insight & Analysis

What’s troubling treasury?

Published: Mar 2020

What are the main challenges that treasurers are facing today? In partnership with Bloomberg, research and analyst firm, Greenwich Associates has released new research which takes a deep dive into the trials of modern treasury practice. We spoke with the author of the report to find out more.

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People often talk about how the role of the treasurer is changing and becoming more strategic in the business. According to new research by Greenwich Associates in partnership with Bloomberg, treasurers still cite ‘liquidity/cash management’ as their top responsibility, with 72% of respondents ranking it so. Thirty percent selected ‘identification of FX/IR/credit/commodity/funding risks’ as their second-ranked responsibility.

Additionally, according to the report, nearly 90% of treasury departments have had their KPIs change in the past five years. Treasurers are now being asked to look further forward into the future and upward to address more strategic concerns.

Surprising findings

Ken Monahan, Senior Analyst at Greenwich Associates and author of the research, found two things that struck him the most. The first, he says, was just how varied the ways in which corporate treasurers go about their tasks are. “For each company, the nature of their business, and also the nature of their stakeholders, means that no two treasurers actually have the same set of tasks,” he says. “Some businesses have tons of foreign sales, lots of FX coming in, lots of risk that needs to be managed, and then others have only large transactions that maybe only need to be done one at a time.” This can make it difficult for service providers, especially technology providers, as there’s no ‘one size fits all’ service or product that will satisfy the needs of all corporate customers.

The second thing, and Monahan notes that in reflection it seems quite obvious, is that corporations are now viewing the treasury department as the centre of analytical excellence, and as a result are stacking additional responsibilities on it. “Everyone is saying ‘data is the new oil’, well what’s the most data-centric part of the company at the management level? It’s the treasury department, because they’ve been managing data for the longest,” he explains. If companies are now gathering more data, they need to deputise someone to manage it. If there isn’t a dedicated data science department, then the next logical solution is the corporate treasurer – owing to the largely numerical format and the fact it’s related to the financials of the company.

Automation is needed

In order to deal with these additional responsibilities, treasurers need more automation in their roles. Monahan notes that the technological tools that treasurers use become more sophisticated the larger the company is, but along with this, treasurers at those larger companies spend more time on projects and in strategic-level discussions than they do managing people or doing their day-to-day operations.

It’s not that treasurers can’t do these extra jobs, Monahan points out. It’s simply that there are only so many hours in a day, so many resources that can be deployed. “It’s not a tactical issue, it’s a time and resource constraint issue that they have to resolve.” There is also the argument that the extra jobs are actually more interesting for treasurers, as it’s a break in any monotonous everyday responsibilities – especially if those are ones that could be easily automated.

However, every professional knows that if those things aren’t automated, then a workload can easily become overtaken by the extra jobs, and the regular responsibilities can fall behind. For Monahan, this then becomes an issue of time management, and also making the business case – where possible – for either more staff or more technology to ease the load. “A lot of our respondents said they made the case to their own managements by saying ‘look, if you want me to do these different things then you have to enable me to hire more people. And if you won’t permit me to hire people, then either the extra jobs don’t get done or we have to find some other way.’”

Connectivity issues

As this is the first such survey by Greenwich Associates, comparative answers are not available. To combat this, Monahan approached the results as if it were one company growing in size. “Assume all the companies in our sample are the same company, as it grows from the size of the smallest company to the largest company. In a way, I’m kind of using the scale of the companies as a time series,” he explains.

By looking at it this way, it is possible to see that the bigger the company, the more the treasurer is being used for the more specific, one-off purposes. Additionally, the use of manual processes, such as spreadsheets, declines and the use of bespoke software increases. However, with more technology and automation, the need for high-quality data increases. “What trips up automated processes are data quality issues, and what generates data quality issues are connectivity issues between the centre and the periphery,” says Monahan.

Interestingly, during the research, participants were asked essentially “If you had an infinite budget, what would you do with it?” Their number one answer? “Connecting the treasury department to the rest of the firm.” This suggests that connectivity and communication is a common pain point for treasurers, and it is unfortunately one that can’t be easily fixed.

“I love the saying ‘There’s many a slip between cup and lip’, because actually successfully implementing these high-tech solutions is much trickier than sales pitches imply,” says Monahan. “Implementation challenges are very large, and if you think about it, you’re building a wall. There are a couple of large bricks that you put down (software like a TMS or ERP), and then you fill in the space with some kind of mortar – and that’s kind of what spreadsheets do. For the bigger companies, they’re able to cover more with the blocks, but even for them, 30% of their tasks are performed with spreadsheets.”

Predicting the future

Businesses have been skimping on risk technology and infrastructure for years because of the benign risk environment that has been experienced for the past decade or so. But this is rapidly changing, and treasurers are having to fast adapt. For the future, Monahan feels that the strategic role of the treasurer is going to continue, and that there’s going to be a shift away from cash management into risk management in both a time focus and a technology spend.

Additionally, he believes there will be a shift in the direction of risk. “A lot of people would say in the course of these interviews that they felt they had been under-investing in the risk aspects. I think that there’ll be a lot more demand for more flexible risk technology that connects into the TMS and ERP systems that they’re so dependent on.”

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