The Future-Proofed Corporate Treasurer, who will he/she be?
One of the few merits and benefit of the recent long pandemic is the repositioning of corporate treasury, closer to the C-level. The treasurer’s role has become more visible, as after every crisis, with a more focus on his/her future role, more strategic and more as a partner of operating businesses. We want to address the key priorities for the coming years and how the treasury department skills must evolve.
Fast-changing role in a fast-changing world
In a fast-changing world, the corporate treasurer’s role had to adapt and evolved a lot in the last years. In such a moving and complex landscape, treasurers must keep adapting and on-boarding the right skills and mindsets within their teams. I would not say their role became more strategic, as it has always been, by nature. However, I believe treasurers must become better business partners. There is room for a better collaboration between finance (i.e., treasury) and operations. Furthermore, treasurers can play a key role in ESG, in M&A and in finance department general digital transformation. In the meanwhile, their role is broader and may cover new areas. Technology and fintech’s, associated to API’s, are the best friends of treasurers in their quest to repositioning their role. Obviously, each crisis is a new opportunity to put treasury in the limelight and to make it more visible. The COVID crisis brought new challenges or reinforced existing ones. They have a fantastic opportunity to make something of it if they are proactive.
But to be more strategic or more visible, treasury must act smartly and demonstrate capacity to change things, to be resilient and to create value. When value has been created, it is equally important to communicate it to the c-level. The opportunity comes from the demands from the operating businesses and subsidiaries, in terms of guidance, risk mitigation, new methods of payment, ways to enhance customers experience, as well as suppliers’ satisfaction, or in terms of way to tackle new markets and emerging countries with all implied complexities they bring. They must calculate, evidence, and present the added value they brought to convince the management of the value of investing in treasury IT solutions and human resources. Treasury should also explain why they need new skills and profiles to complement their teams and increase their delivery capacity.
Much more than a simple risk manager
However, the modern treasurer is much more than that, if he/she properly take responsibilities for which they are perfectly fit. The treasurer can also become a commercial partner of the operations. For that, the treasury must be agile, proactive, and looking how to best help and support operations. For example, in centralization FX risks and in automating them, they can enable operations to sell/buy in local currencies of counterparties and get them hedged by treasury via automated dynamic hedging processes and tools. Then, they bring value to operations and a competitive advantage to the company. It also passes through a better understanding of the underlying businesses of the subsidiaries, from commercial and operational sides. By offering new methods of payments, new ways to collect funds, they also bring valuable support to operations, while enhancing working capital.
Increasing role in M&A
For couple of years, we have many M&A operations. Nevertheless, the corporates and the real economy is victim of the extremely dynamic acquisitions by Private Equity Funds. The corporates are more selling and spinning of assets rather than buying new ones. One of the problems wit spin-offs is the decoupling and how individual assets without own treasury will survive. It implies periods of decoupling and again complexifies life of treasurers. We should also consider that in decoupling some staff members can leave and make life heavier. It is therefore important to involve treasury team into the M&A operations as soon as possible to organize exits (spin-offs) or/and acquisitions (for integration).
There is a major change in payments too. We see emergence of crypto currencies and even Government digital currencies (i.e., CBDC’s), new methods of payments and even SWIFT has started to develop faster payment methods. All these new e-payment methods complexify the life of treasurers. But it also opens doors to opportunities. Payments are now possible in real-time and enables payments against deliveries. Time is the issue and treasury doesn’t escape to this basic principle. In a very competitive environment, it is essential to offer customers and suppliers alternative payment solutions. The adoption of new online business models during the pandemic has made it more important than ever for companies to offer customers access to the right payment methods. The speed of execution and speed for paying and collecting may soon impose to manage cash even more dynamically and to review treasury positions even during the day. With all these new payment methods and by on-boarding new ways of dealing, treasury can bring a real added-value to the business.
“Please little treasure” (Depeche Mode)
One of the most complicate tasks of modern treasurers is and will be recruitment. You cannot imagine how complicate it is to recruit different profiles from his/hers and to change what you have always done in recruiting colleagues in treasury. Yet, it is crucial to start shifting recruitment habits, to get rid of past requirements and to search for other types fo profiles more adapted to future needs. I recently saw a large tech American company recruiting for its treasury department executives with R studio and Python skills. It proves that mindsets have changed. Herding is not the right approach. We need new sorts of sheep. Priorities have changed and IT become so important that we must diversify our team skills and competencies. The good news with companies well organized and highly digitalized, home working works well and doesn’t increase risks. But it is also important to maintain a good team spirit, a good coordination among treasury staff, given the nature of our business. The new way of working was for lots of us a catalyst for changes and automation. We should not forget soft skills too. These skills also become important to fulfil this evolving role of treasurer. Appetite for innovation, curiosity, openness to changes, ability to work alone (with increasing home working) and the desire to improve the organization are certainly the main qualities I would suggest considering when hiring future members of the treasury team. The future treasurer will have to partly work remotely and should be prepared to work in solo. It also means that recruiting treasurers in future may be more challenging and difficult. Working from home is great and appreciated by many workers. However, in treasury, working as a team is key especially when processes are not completely and well automated and secured. Digitalization is in my opinion the first pre-condition for successful homeworking. Without, your business would be at risk.
Increasing role of technology
Technology has enormously changed over the last years and keeps evolving fast(er). Nevertheless, it also offers opportunities to enhance the treasury organization and to reach the next level of digitization. It is a challenging situation, but with high potential of disruption and improvements. Of course, no IT project is simple to implement. The good news come from the fintech’s proposing native SaaS solutions, which are more adaptable, customizable and fit for needs, while cheaper and faster to implement. Once implemented (and it requires new / additional IT skills), the challenge is to analyze data produced and better reporting to make use of it and take faster decisions. The digital journey started years ago is suddenly reaching the next level and can be accelerated, if properly addressed. We are still far from the final developments and capabilities machines will offer. Nevertheless, we can feel the great potential and need to prepare our teams to these coming changes and to adopt the right technologies, rather than to patch new solutions or ETL on IT legacy, often outdated and not anymore adapted to the needs of the groups. An example of area where AI has demonstrated capabilities to help treasurers and to enhance significantly results, is cash-flow forecasting. Some IT systems offer even real virtual accounts (i.e., not the bank IBAN’s) to completely change the way treasury is run and to reduce to a tiny portion the number of bank accounts. IT and new technologies, as well as Fintech’s and API’s, will become the best allies of treasurers to broaden further their boundaries. For example, the acquisition of Bellin by COUPA may pre-figures a move into the procurement and a better integration of the financial chain by treasurers, who can see their role extended given technologies. Treasurers are fantastically placed to be “the controllers” of all key financial flows within the corporation.
We all know that ESG and sustainable finance are also changing the function of treasury. The growing focus on sustainability and Environmental, Social and Governance (ESG) factors will continue in the coming years. Treasury may play a major role in this new way of doing finance. The ESG must be embedded in finance decision processes and having an ESG fiber, an ESG appetite may be qualities searched by recruiters. A good and clear ESG strategy may also be a good factor for attracting new young talents, often interested in ecology. By this role in ESG compliance, treasurers can bring value to the business and to operations.
You will not become a modern treasury by miracle
A modern treasury function, adapted to a changing and global world must be build and created gradually, based on solid technologies and evolving teams. With a broader role and new missions, the treasurers must develop skills or hire them. Treasurers need to understand new technologies if they are to fulfil their “broader mission” effectively and will need to onboard colleagues with broader and more tech-oriented skills to adapt to the changing environment. An open mindset and diverse skills will be an absolute necessity to cope with new duties and evolving tasks. Treasurers must be able to manage changes and be open to changes, which is often a counter-nature attitude to adopt.
The chance is somewhere the recent COVID crisis, which as each crisis brought focus on treasury function. It is also a fantastic opportunity to re-design the treasury function and to adapt to changing environment. Obviously, all those changes require new mindsets, new skills, and a more adapted and diversified team to fulfil new missions and roles. Such a role requires a services mindset and ability to serve customers, even internal ones.
François Masquelier – Luxembourg December 2021
Disclaimer: This article was prepared by François Masquelier in his personal capacity. The opinion expressed in this article are the author’s own and do not necessarily reflect the view of the European Association of Corporate Treasurers (i.e., EACT).