Published: April 01, 2012
As globalisation and financial sophistication have increased over the past 30 years, the role of the treasurer has taken on new meaning, catering to the liquidity and financial risk management requirements of multinational and large domestic companies. Despite this, few people would have been able to describe what role treasury fulfilled in their business until the end of 2008. Since then, treasury’s profile has increased enormously, as company boards have sought reassurance that their companies do not have excessive exposure to financial risks and that liquidity channels remain open. However, as all treasury professionals are well aware, treasury does not exist simply as protection against the elements, but it has a valuable role to play in good times and bad. While the crisis may have elevated the profile of treasury at a senior level in the organisation, treasurers themselves need to raise awareness, and demonstrate how they can add value more widely across the business.
Today, the treasury department at Agrium has a presence in Canada, the United States, Europe, Australia and Latin America. Together, these units collaborate to provide treasury services across the world whether to provide liquidity, manage cash or mitigate risk exposures.
While some activities that treasury undertakes have a high profile, such as M&A financing, most daily tasks are barely visible and many individuals and departments within the organisation might be unaware of how treasury can support them to fulfill their own responsibilities. Treasury’s opportunity is to work with these groups to understand their business challenges and assist with creating solutions and driving value where possible.
To achieve this ambition, however, treasury needs to educate the business about how it can enhance their activities and look to develop trust and credibility. This is beneficial for a number of reasons: not only can treasury support the business more effectively, but treasurers who may have a better understanding of what is happening around the group, can become involved early in the process versus having to react to situations and ‘fire fight’ later on.
One priority for treasury at Agrium in recent years has been cash flow forecasting. We recognised that a robust approach to cash flow forecasting was essential to enable more strategic borrowing and investment planning, to identify risks more effectively, and to maintain liquidity across the business. Consequently, we defined a more rigorous cash flow forecasting process in order to better determine future income and consumption by businesses. This has involved new processes both at a treasury level and amongst business units in order to ensure the quality and timeliness of data that is required for accurate forecasting.[[[PAGE]]]
Having explored different approaches to forecasting, we concluded that the most effective method would be to use a treasury management system (TMS). We reviewed available solutions, focusing on system strengths in cash flow forecasting, and made the decision to implement Treasura from Wallstreet Systems.
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As part of this project, we put together a Treasury Dashboard (figure 1) as a way of sharing cash flow forecast updates, including the accuracy of data received from business units. This has been highly successful, as business units are more motivated to provide high quality, timely data, and to focus on constant improvement.
Although cash flow forecasting was our original objective when implementing a TMS, we recognised that a new treasury tool would enable us to automate and enhance the integrity of other processes in treasury such as cash positioning, investments, debt management, and risk. As the solution is licensed on a SaaS (software as a service) basis, we did not need to dedicate significant technical resources to its implementation or maintenance, and the solution is scalable as our treasury needs evolve in the future.
Consequently, although we originally intended to use the Treasury Dashboard as a tool to communicate and monitor cash flow forecast information across the group, we have been in a position to extend its purpose, and we are now able to communicate a range of important financial metrics across the business. For example, we now use the dashboard to share information on our cash and liquidity position, debt profile and FX exposures. By communicating proactively and systematically with the business, using the dashboard has helped to educate people on some of the things we are responsible for, share information with people that may be impacted or could impact treasury’s activities, and develop stronger relationships both with business units and other central functions.
We have also been able to develop a second dashboard called the Financial Risk Summary Report. This report is designed to provide a clear, straightforward summary of the company’s financial risks that are managed by treasury, including liquidity, FX, financing, and counterparty credit risk. This report is distributed to senior finance managers and members of the Audit Committee, part of the board of directors. Similar to the Treasury Dashboard, the Financial Risk Summary Report is helping to provide senior management with greater insight into treasury’s activities and how the treasury supports the business in its operational and strategic objectives.[[[PAGE]]]
In addition to formal treasury reporting, we are also leveraging opportunities such as Agrium’s CFO Townhall which enables different parts of the business to update the CFO’s team and others in the company on key transactions or interesting activities, and showcase major achievements. For example, recently, treasury’s insurance team gave a presentation to the CFO’s team on events and transactions they had been managing, including an ’Insurance 101’ session to explain some of the issues associated with corporate insurance.
Another opportunity for proactive communication has been through the company newsletter. We have used this successfully to inform the wider group about the objectives and progress of our TMS implementation, which has received considerable interest and feedback. This in turn has been very useful when defining project scope and any changes that are required.
Looking ahead, we plan to roll out the TMS more widely, both across a broader range of treasury activities, but also geographically, including Europe, South America, and Australia. With a strong technology platform in place, and an established communication mechanism with other parts of the business, we can now take a more strategic approach to treasury management.
We have been fortunate at Agrium that the global financial crisis has not put us in a position where we have had to spend our time ‘fire fighting’. Consequently, we have been able to spend more time bringing value-added ideas to the business to cut costs, reduce risk or help to win new business. Whatever initiative is being undertaken, its success rests squarely on treasury’s ability to understand the business need and establish open, two-way communication with business units, senior managers and other central business functions.
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