Tracking Treasurers’ Progress In Handling Greater Corporate Responsibilities

A business climate of rapid technological innovation, shifting geopolitical forces and changing risks have introduced a new conversation about the corporate treasurer: how can this position react to these trends and become a strategic part of the enterprise?

As corporates and the treasurers themselves examine the issue, a new report from Marsh & McLennan Cos., along with the Association for Financial Professionals, finds the vast majority of the 344 senior-level executives surveyed agreed that there is a greater role for the treasurer today than there was three years ago.

But just because treasurers are held to a higher standard doesn’t mean they’re meeting those standards quite yet.

In their Strategic Role of Treasury Survey, the AFP and Marsh & McLennan identified the forces pressing companies to shift the treasury department into a more strategic position. Nearly three-quarters of those surveyed said senior managers are now demanding greater visibility into liquidity and risk exposures and have turned for corporate treasurers to achieve this insight.

Meanwhile, 68 percent cited the growing importance of liquidity management, and nearly half cited the trend of more closely monitoring financial metrics, as their top reasons for promoting a strategic role of corporate treasurer.

Already, corporate treasurers have taken on new responsibilities that perhaps were not as common three years ago. Nearly 80 percent said the treasury department plays the lead role in long-term borrowing activity, for example, while more than half also said their treasurers take the lead on long-term investments, payment strategies, and working capital management.

Handling Volatility

The role of corporate treasurer now expands beyond handling foreign exchange volatility. Instead, these professionals are now tasked with juggling volatility around geopolitical trends, with global organizations now being exposed to new types of risks.

Most professionals said geopolitical risk has led to concerns over a loss of revenue or customers, while 49 percent cited the concern over currency risk. Other worries include supply chain disruptions, counterparty risk, loss or reputation and both commodity and personal risk.

Over the next three years, 64 percent of executives said cash management and forecasting will be critical in the treasury department as they navigate these risks and concerns. Capital allocation, financial risk management, and treasury and payment technologies are also key areas of focus, researchers found.

Progress Ahead

But as the role of the corporate treasurer has certainly changed, and as the position has already taken on new responsibilities, the journey toward having a more strategic treasury department is ongoing.

Only about half of finance professionals said their businesses are optimizing the potential of the treasury function today, for example, and only about a quarter of those surveyed said the treasury department has an “excellent” ability to communicate with their organization’s C-suite.

Technology is key to helping  treasurers achieve their goals, the report noted, but nearly half “either disagree or are noncommittal” about whether technology has actually enabled their company’s treasury departments to better manage risk and heighten the role of corporate treasurer. Forty-two percent of respondents said cost and business case are the largest challenges treasurers face when adopting new technologies.

As corporate treasurers continue to face the shifting challenges of their organizations and take on more responsibility, a spirit of collaboration, analysts said, will be critical.

“With increased scrutiny on treasury, organizations have metrics in place to measure the success of the function’s performance,” concluded Marsh & McLennan and the AFP. “As treasurers lead and manage their team, they need to ensure the metrics implemented tie back to the vision and goals of the organization and there is complete clarity for the team with no gray areas. Treasury leaders should not assume that others are connecting the dots and reading between the lines.”