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.