Planning for Treasury Tomorrow

In such a rapidly evolving business environment, treasurers must ensure that they are not only meeting the needs of their organisations today but also preparing for the future. This involves questioning the status quo and upgrading everything from systems to treasury talent.

Although many treasurers’ minds will currently be occupied by the fallout from the global coronavirus pandemic, treasury never stands still. As such, while it is critical to focus on immediate challenges – from liquidity issues to increased cyber risk – it is also vital to think about ways to make treasury more robust in the future.

Reassess treasury models

One of the first steps on this future-proofing journey is to determine the appropriate organisational model for treasury for the years ahead. Over the past decade, treasurers have typically sought to centralise their activities to improve visibility over cash and data, and increase both financial and operational control at a group level. And as emerging business risks such as cybercrime increase, the benefits of centralised processes and controls remain as important as ever.

Nevertheless, the means by which treasury departments achieve centralisation is changing, particularly as innovative technologies are becoming more widely available. As reported in the 2019-2020 Journeys to Treasury report produced by BNP Paribas, the European Association of Corporate Treasurers (EACT), PwC and SAP, some treasury functions are therefore opting for a ‘virtual’ centralisation model. This works by enabling treasurers to gain visibility over cash and financial risks while local business entities stay close to customers in order to serve them in the most efficient way. Technologies helping to drive this change include cloud computing and application programming interfaces (APIs).

Having a treasury department that is centralised virtually rather than physically can help the company to remain as relevant as possible, while meeting specific cash and treasury management needs in each entity or country. It also provides flexibility for the future, in case business or operating models undergo a dramatic shift.

Bolster team talent

Whether or not it is achieved through technology alone, centralisation is driving another interesting future trend – the expansion of the treasurer’s strategic role. According to the report, some treasurers believe that once a central view over cash and risk has been established, they are often tasked to take on greater responsibilities. This might involve leveraging their operational and strategic skill set more deeply or accessing critical liquidity and risk data to help the board make better-informed decisions.

Other areas where treasurers are taking on an increased role include credit management and building greater insights into customer and supplier risk profiles. Investor relations is another role that treasurers are becoming increasingly involved in, requiring them to interface with new stakeholders both internally and externally.

Rather than just using their ‘core’ skills, treasurers of the future must draw on a range of strengths – from strategic thinking to enterprise risk management, project management, problem-solving and driving innovation. While some of these skills can be acquired through training, or brought into the team through strategic – and diverse – hires, collaboration with internal and external business partners will also be critical. Treasurers cannot effectively analyse the suitability of new technologies without the help of IT, for example.

Against this backdrop, recruiting and retaining top treasury talent has never been so critical. Treasurers need to build the skills and expertise within their team to recognise and respond to future threats and opportunities. This means working closely with HR, recruiters, national treasury associations and universities offering treasury-related degrees to ensure that current and future recruits are prepared for the new normal that exists beyond the traditional cash and risk management remit of treasury.

Manage change itself

Alongside softer and more strategic skills, treasurers would also do well to add ‘change management’ to their arsenal in order to prepare for the future. This was something Kati Vellinki, Group Cash Manager, SSAB, learnt when overseeing the implementation of a payments and collections factory at the company in 2016. As part of a major organisational restructuring to reflect the acquisition of Finnish steel producer Rautaruukki Oyj, SSAB needed a new cash management structure.

Although technology played a significant role in the project, humans were the most critical factor in its success. “Understanding cash management needs across the group and working out what type of cash management solution we wanted to build was vital,” explains Vellinki. “We also had a proactive communications campaign, with monthly updates across the business of the project status and a forward view of the next entities to be included within the project.”

While a co-ordinated effort on communication was important, change also needed to be managed at a local level. “The experience of migrating cash management operations was different for each entity. For some, their operations were already managed in the shared service centre, so the process was quite straightforward. For others, we needed to communicate in more detail about what we were doing and why, and what the implications would be.”

Breaking down individuals’ habits was another important part of managing the change successfully. “Ultimately, most people want to do their best, so we needed to listen and be responsive to both individual and organisational concerns, and adopt creative enablers to overcome them. At an individual level, one of the most frequent objections we heard was, ‘But it only takes five minutes!’ While this may be an individual’s perception, even if the reality is somewhat different, five minutes multiplied across the entities in scope, every day, and across multiple activities: downloading and printing bank statements, manual reconciliation etc., the resource implication becomes enormous at a group level: over 1,200 days according to our calculations,” Vellinki explains.

“Most people do not question what they do every day and why, so some people felt that a project to centralise and digitise was a threat and became defensive. However, in other cases, people enjoyed the opportunity to explore new ways to do things and learn new skills, and saw the value of being an early adopter. The more people we could encourage to think this way, the better able they were able to influence their colleagues.”

In other words, building a shared mindset and positive attitude towards change was critical in ensuring a smooth transition towards a more future-orientated payments and collection set up at SSAB. Now that the project is complete, treasury has been able to close some 200 external bank accounts, and has vastly improved visibility over cash, as well as more accurate cash flow forecasting.

And by proactively managing the required changes in the organisation, treasury has freed up talent to put their skills to better use, “allowing employees the opportunity to shape and contribute more actively to our future success,” Vellinki concludes.