From Operational Efficiencies to Strategic Value: Realising Treasury’s Potential
by Jean Furter, Vice President, Treasurer, Brocade
Recognised as the Treasury Team of the Year 2011 in the gtnews awards, and winner of the Grand Prize in the AFP Pinnacle Award in 2010, Brocade’s treasury department has raised the standard to which every treasury can aspire. In this article, treasurer Jean Furter describes how Brocade’s treasury has differentiated itself, and the value that it has been able to contribute to the business.
From operational to strategic
Treasury is at the heart of every complex multinational organisation. The right treasury strategy can have a major impact on the company’s ability to anticipate and respond to changes in market conditions and deliver on new business strategies. With this in mind, it always surprises me how many treasurers continue to take a tactical view of their activities, concentrating only on how to increase efficiency in operational cash and risk management activities. Often, considerable attention is given to technology and processes to achieve this.
At Brocade, we have a different approach. Technology has a role to play, of course, but intimacy with the business is what facilitates improvement. Treasury has to be a strong strategic presence in the organisation, and play a role in defining business strategy. The greater treasury’s knowledge and depth of involvement in the company at a strategic level, the more effective it can be, and the more efficient in delivering on its specific responsibilities. This article looks at how Brocade’s treasury has become an integral strategic force in the business, and how performance has been enhanced as a result.
The need for business intimacy
One observation I have made in my discussions with treasurers is that many remain quite isolated from the business itself. Without having an in-depth knowledge and involvement with day-to-day decision-making, it is very difficult for treasurers to become involved in strategic planning, such as launching a new business initiative, or mergers and acquisitions. Consequently, treasurers are often ‘blindsided’ when they have to respond by providing the necessary support. Being the last to know inevitably makes it impossible to plan the most effective way of supporting the business, whether expanding into a new market, sourcing financing or delivering a customer or supplier financing programme.
Before I joined Brocade, the treasury function was, like most others, largely tactical, with no input into strategic planning. There had been a number of situations where treasury could have contributed significantly to plans such as expanding into a new region by raising issues such as dealing with non-convertible currencies etc. We knew we could perform our role more effectively by being part of the team that makes the major strategic decisions, so we could help to shape business strategy and deliver the right solutions to achieve it.
Developing business proximity
The first step in reaching this goal was to develop a greater depth of understanding of the business. We did this by meeting with key stakeholders across the business to understand what they do. Listening is key! Having identified their pain points, we could then start to deliver solutions to address them, therefore building credibility and trust. We took a similar approach with the executive management team and the board of directors. We reviewed the corporate structure and debt profile and devised solutions that would add value by increasing earnings per share (EPS). We have also developed a strong relationship with the financial planning organisation resulting in full treasury involvement in the company’s financial and strategic planning processes. All financial projections presented to executive management and board now include a treasury section. This approach takes time, and needs to be developed incrementally, but it is a process that delivers value along the way, whilst elevating treasury’s profile amongst the key decision-makers in the business.