By Mark O’Toole, Vice President Commodities & Treasury Solutions at trading and risk management firm OpenLink
Two powerful leaders joining forces to overcome volatile global conditions and seemingly insurmountable obstacles? OK, so the ‘Treasurer vs. the Chief Risk Officer’ may not ring out as a box office hit – but there is an interesting parallel between these rising execs in the corporate world and the comic book icons.
Like the relationship between Batman and Superman in the latest film, there is some way to go before CROs and treasurers align. It is easy to see why, as pre-2008, a more positive economic outlook meant businesses were inclined to take on risk, as opposed to managing it. Corporates didn’t really see the need for a specialist risk expert, and even today, many still don’t have one in place. However, as geo-political shocks such as Brexit continue to fuel market volatility, there is an increasing trend towards corporates placing an extra seat in the boardroom. From the need for greater transparency across different business lines, to a plethora of new regulations putting a greater emphasis on automating reports, there has never been a more appropriate time for risk officers to take their seat at the table.
As for treasurers, particularly those working for firms trading commodities or with heavy exposure to volatile currencies, daily price fluctuations have created untold accounting and forecasting headaches. If this wasn’t enough, they are under constant pressure to reduce costs and increase margins. With this laser beam focus on the bottom line, treasurers are always looking for new ways to do more with less. Many are currently focused on reducing the number of systems and manpower to operate them, as well as adopting new technologies to help them take a more proactive approach to managing risk. Having the right tools in place undoubtedly makes for a healthier bottom line, but global economic uncertainty means more needs to be done. An ever more forward-thinking and collaborative approach to risk management is needed – particularly as we enter the uncharted waters of negative interest rates.
The upshot is that the treasurer needs additional expertise to overcome these major challenges, and the CRO has the skills to support. It’s unlikely to happen overnight, but in the same way Batman and Superman eventually came together, an alliance between the two could well be what the major corporates need to overcome the challenges that lie ahead. While the story of ensuring businesses have a complete and transparent view of their risk exposure may not be one for the big screen, it is certainly one for the boardroom.