Changing financial conditions have called for a change in role for corporate treasurers who are increasingly becoming more involved with different parts of the business, as Christian Doherty reports
The role of the treasurer has undergone a profound change since the financial crisis of 2008. “Up until the crash it was generally seen as a back-office function that focused almost entirely on managing cash,” says Matt Cooper, director of treasury and corporate finance at social housing provider Affinity Sutton.
“But with the onset of the credit crunch, liquidity became harder to find and raising new funding became a lot harder. So if the group wanted to pursue a particular strategy, especially in M&A [mergers and acquisitions], then they were forced to get treasury involved at a much earlier point. That’s pushed us up the food chain.”
Colin Tyler, chief executive of the Association of Corporate Treasurers (ACT) and himself a former treasurer, agrees and says that, while treasury has always taken a broad view of the business needs and risks, it is primarily a case that boards have woken up to the need to bring treasury into strategic discussions.
“I think possibly what’s happened is that directors have had a wake-up call about things they’ve taken for granted,” he says.
Mr Tyler believes the change has given treasurers a great opportunity to work with their organisations and boards on how to design a strategic plan for the company’s financing needs. “Two thousand treasurers worry about risk management – it’s their primary objective – and to manage some of these risks, you have to start talking about the strategy,” he says.
Keeping score after the event doesn’t add any more value to your business. “Fundamentally you need treasurers that can go out there, become ‘go to’ people who can actually make business happen, and make sure you can take opportunities and manage risk. When was the last time you had a chief financial officer say ‘I tell you what, we’re not going to take business opportunities’. It just doesn’t happen. What you’re looking for is people who are effective in making those opportunities happen,” says Mr Tyler.
Treasurers, he says, spend their time worrying about cross-border practical issues on how to take business opportunities and do it in a very high-quality way. “The ACT motto is ‘Prosperity through stewardship’ – you need good quality people, but also innovation. So I’m sure headhunters will be looking for someone who has a little more spark and an innovative approach.”
Directors have had a wake-up call about things they’ve taken for granted
So what does this mean in practice? For Kwok Liu, National Grid’s deputy treasurer, global capital markets, the principal change is in the way treasury works with external stakeholders.
“Specifically, procurement is an area where we’ve made inroads,” he says. “We’re now more involved in contract negotiations, for instance, and at an earlier stage too. Most of our financing is from the bond markets and we’ve always had good interfaces with bond investors, rating agencies and debt investors.”
Mr Liu adds that, given the tightening of the credit markets, boards are now demanding treasury develop solutions to knotty problems. “By raising debt, we’ve had to be creative – we’ve done retail bonds and hybrid bonds – that’s a major area where treasury brings new ideas and ways of working,” he says. “Certainly, because our performance on financing is key to the success of the business, then we’re always looking to be innovative and creative in the ways we raise finance.”
Mike Tucker, a director at MR recruitment, says corporates have moved on from viewing the treasurer as simply someone for compliance and risk management functions. He points to a number of companies that have embraced and promoted treasury to take a lead in structuring financing deals and working with operational business units.
“If you look at a company such as the brewer SAB Miller, where their treasury team has been going through huge transformation as they strive to centralise treasury, they work really closely with business units. Then you’ve got a company such as GlaxoSmithKline who have a dedicated treasury consulting team to act as an interface between business units globally and the mainstream operational treasury team in London,” he says.
Fashion giant Burberry, too, has been recognised as a leader in integrating treasury into business strategy. “They’ve embraced technology, they’ve got involved in supply chain, they’ve got involved in much of the broader areas of the business than would have been the case had the visibility not increased,” says Mr Tucker.
And the headhunter believes that, increasingly, treasurers coming into the profession aspire to emulate Mr Liu’s level of involvement in strategic areas. “I think for many ambitious treasurers, one of the fundamentals for them is that they want board-level association,” says Mr Tucker. “Many treasurers, who are perhaps just below group level, see their next step as going from a very technical role to a much more strategic one.”
Mr Liu certainly represents the best of the new generation of strategically minded treasurers. He says his job now is to involve treasury within a whole range of activities, not traditionally associated with the function.
“It’s about being embedded in the business throughout the business process. Unless you get in early enough then some of the financing options are closed to you. We’re also involved in business development in projects and that means not being the guys at the end saying ‘this is how you could finance that’. We look to get involved at an earlier stage,” he says.
Affinity Sutton’s Mr Cooper agrees. “In terms of supply chain, we never used to get involved in that, bar a little look into working capital calculation. Now, though, you have to get involved in contracts, payment terms, the financial viability of the suppliers and so on,” he says. Mr Cooper also now steps out of traditional compliance role to spend more time on business planning with performance teams.
It seems there is little sign that the volatility of recent years is about to suddenly disappear. Interest rates, banking regulations and the capital markets all require careful financial management, making it even more important for the treasurer’s voice to be heard at all levels of the business.