Treasurers and FDs get together

The constant creation of so much new and more sophisticated technology means that certain jobs become defunct overnight. Recently, it was even suggested that, with the near eradication of hedge accounting and the development of hi-tech software to deal with foreign exchange transactions, the role of the treasurer could be on the verge of extinction.

Indeed, privately it is even suggested (and if you look hard enough you’ll find evidence) that so many finance directors have treasury experience that they could pick up the slack if the treasurer leaves the company. In short, the lines between treasurer and FD are beginning to blur.

Even the Association of Corporate Treasurers (ACT), the voice of UK cash handlers, shows concern. Richard Raeburn, chief executive of the ACT says: “With the development of integrated financial systems and centralised core services, I’ve argued that treasurers might be under threat because the flow of information might not be going to them and then the treasurer becomes a pure controller. If they haven’t been key to that process then their influence will be diminished.”

The flipside is that the more ambitious, proactive treasurers are leading the way in transforming the role and potentially challenging the traditional FD. Rather than dying out, what’s happening is that where the role of the FD has radically changed over the past decade, that of the treasurer is now also evolving and, in some cases, taking on duties that were previously the preserve of the finance director.

“My view is that proactive treasurers have always seen the role evolving,” says Raeburn.

Today’s business environment is all about proving your worth. For treasurers, busy calculating complex financial structures behind the scenes, this is proving more difficult than it might for others.

Silent force

When it comes to communicating their specialist skills it gets awkward because most treasurers are reticent by nature. Few like to discuss what they’re working on – understandably so, given that most of the time negotiations are commercially sensitive. Fewer still like to be quoted in the press and when they do, it’s only to tout a completed successful deal.

But with cost-cutting affecting all areas of business, no one is immune from the hand of thriftiness. Where once the finance function and, indeed, the treasury function, could happily sit out on a limb within the hierarchical structure of a company, the treasury function has been drawn back into the bosom of business where treasurers are obliged to play a more inclusive, interactive role within the organisation.

This is, in part, thanks to the evolution of the FD role, allowing the FD to hive off some of their activities on to the treasurer.

Angela Potter, head of international trade and cash solutions at Barclays, says: “There’s a trend for the treasurer to be more consultative within the operation of the business; to discuss credit control issues within the business. It’s more about how they add value rather than being a central function.”

Sacha Kenny, group treasurer of Regus, office space suppliers, supports this view. “There’s more of an interactive role within the business. It’s about spending more time with the business and understanding the business needs.”

Drive for change

The globalisation of business is what’s driving much of the change. According to Tom Gunson, partner at PricewaterhouseCoopers, three things are forcing through developments in treasury. They include compliance and control issues; the constant push for efficiency; and the need to provide insight to the overall business.

The reason the issue has suddenly come to light is because, for the past five years, treasurers have been so distracted with complying with new regulations and legislation (Sarbanes-Oxley and IFRS) that they haven’t had the time and resources they would have liked to focus on proving their worth in a value-add sense, Gunson says.

“Treasurers aren’t fire-fighting anymore. That, combined with the fact that they are beginning to see the benefits of efficiency gains through automation in terms of time and resources to invest in activities that support the business, means they can provide more value-add,” Gunson says.

With the teething problems of compliance dealt with, treasurers can focus on what makes a business great: working capital management, balance sheet structuring and risk management.

But it’s not just the financial side of risk that treasurers need to deal with. “As risk managers, traditionally, the treasurer looked after the currency and FX and interest rate risk. Good treasurers can see ways of applying the same techniques to the wider business. They have to demonstrate they have a handle on risk. It’s an opportunity and a threat,” Raeburn argues.

Rise to the challenge

Whether today’s treasurers have the ability to rise to the challenges is the crucial question.

In a study carried out by PwC, European Treasury Survey 2006, the findings reveal that at least treasurers are aware of the challenges they face and believe a genuine opportunity exists for them to prove their worth.

Some are surpassing current expectations. In the past year, there have been examples of treasurers becoming finance directors. In July last year, Stephen East, 48, became finance director of Woolworths plc. He was formerly group treasurer at Redland plc.

Kenny at Regus, who is part of the new generation of treasurers, is positive about the opportunities. “It’s a good thing for treasurers and the market to see treasurers stepping up to CFO roles. It’s also good to know the skills transfer easily across. I hope it happens more often.”

Raeburn says: “We’d like to see more being considered as a natural successor for the CFO and CEO positions.” But in some cases this can be a double-edged sword. “We have seen some instances where if the FD has got a treasury ba ckground, then when the treasurer leaves, no replacement is found. Of course, it depends on the size of the company,” says Potter.

To meet the challenges head on, treasurers have to develop new skills to fill the requirements of the modern business world.

James Colhoun, consultant at executive search firm Spencer Stuart, says that when FDs are looking to recruit a treasurer, they are looking for broader skills to those that were traditionally sought in a treasurer.

“FDs are now looking for people who have broader commercial and influencing skills to talk to all parts of the business. In the briefs that I’m seeing, they want treasurers who can be the next CFO or divisional MD,” says Colhoun.

Potter argues that the evolution of both roles is complimentary. She says it’s important to point out that, despite technological advances, “IT solutions aren’t a slam-dunk” for treasurers. “Many ERP solutions don’t go as smoothly as intended, so treasurers still need the traditional skills. But their prominence in other areas is rising.”

Treasurers are now responsible for corporate governance, tax as well as risk. Supply chains and procurement are becoming the preserve of treasurers. To ensure the smooth running of their own business, treasurers are frequently getting involved in helping suppliers improve their credit rating, cash flow and overseas purchasing. “These decisions impact on the business as well as the finances of a business, and treasurers are at the forefront.

“The appetite and dynamics of business are radically changing. Five years ago, you’d never have seen a mid-market UK company trying to open a manufacturing business in Asia. A lot of what the treasurer does is growing in importance from the financial and governance and control perspective,” says Potter.

Interestingly, the PwC survey found that 25% of those polled do not use formal performance indicators to demonstrate how they are adding value, because they find it difficult to define. If they are to win the battle for relevance and influence this must change.

For now, treasurers must work more closely with FDs to lighten their load and demonstrate and communicate to the wider business world what they do that improves business.

If treasurers want to remain relevant, they must evolve, develop new relationship-based skills and seek out areas where they can improve efficiency. Otherwise, there is also the potential for the treasurer to lose importance and influence.