Treasury is the face of the corporate with the external financial markets, underlining its high profile and strategic importance. Since the global financial crisis more is expected of treasury as it has become the financial nerve centre for the organisation, and it has to prove its value to the organisation, without necessarily having the luxury of more resources. This is against a backdrop of an environment that continues to change – making things more challenging but also creating opportunities to be more efficient. Some of the drivers for change have been:
- Regulatory changes (e.g., Basel III) – derivative products and bank funding is getting more expensive and potentially scarcer for the corporate. This places more pressure on the corporate to optimise internal liquidity and to diversify funding away from banks
- The necessity to optimise banking relationships has increased – treasury must now better match a bank’s capabilities to the corporate’s needs and ensure the bank’s return expectation can be managed given the available wallet size
- New complexities bring new risks, meaning risk management is becoming more important – there is an increased risk from security breaches and fraud
- In order to grow their business, corporates are entering new markets and jurisdictions where challenges may be totally different from the home base. The treasurer as custodian of the cash and financial risks have a pivotal role to play in this
- Realising that liquidity gives business continuity, senior management now better understands the strategic importance of the treasury function
- As the profile of treasury has increased, there is closer scrutiny from the board, and consequently they are demanding a more formal measurement of treasury performance.
What does success look like for a corporate treasury?
Treasury typically looks inward in order to optimise its own efficiency. But with the increased strategic role treasury can play and technological advances there is an opportunity to optimise treasury related processes at a company-wide level. In addition, as treasury becomes more involved in working capital management, supply and procurement, this influence can go further, possibly extending to the end customer.