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Treasury Repositioning

The purpose of Treasury is to manage a company’s liquidity and to mitigate its financial and operational risks. As such this is the one function ensuring solvability, i.e., preventing bankruptcy in the first place. Therefore, it is legitimate to say that Treasury is strategic and should be the most important department in finance, yet it is often overlooked and underestimated. Alas, this can only become real if CFOs, if not the C-suite, finally decide to recognize the true value of the job and its vital importance. If a crisis like COVID isn't enough, what will it take to restore treasury to its former glory? I ask you. I try to answer that question in this article.

Treasurer’s role is strategic and should be considered as such

The treasurer's role and its importance will be recognized when the C- suite finally understands the criticality of treasury, too often the poor cousin in finance. The role has certainly been reviewed, expanded, developed, and made technically more complex, but it will only be truly strategic if the stakeholders consider the treasurer as a key person (which he or she is) and an essential part in finance. The treasurer generally reports to the CFO. The CFO is often a former controller, accountant, or former auditor, graduated in (general) finance and very rarely a former treasurer. He/she is only partially interested in treasury, or takes that for granted, and most of the time is focusing on producing accounts and controlling budgets. This lack of interest, taste and attraction for treasury does not help the treasurer to position himself/herself well, to be recognized for his/her function and his/her essential role. To position the treasurer properly, the CFO must finally understand his or her function and its importance. Add to this the fact that the treasurer is probably not the best at "selling himself", and we can better understand the gap between finance and treasury.

Example of M&A transactions

Naturally, the CFO is a key player in a M&A transaction, in the board itself as well as in the interaction with the investment bankers and lawyers. But when it comes to execution, anticipating the impact on leverage and rating, securing the financing by debt or bonds, taking the appropriate strategic FX hedging, etc. this is the Treasurer who acts. Sadly, we have experienced too many times a too late involvement of the treasurer with consequently significant impacts on the execution itself. Again, if the role were as strategic as it should be, treasury would be involved in 100% of M&A transactions from early on. Unfortunately, this is not always the case. The treasurer would be able to do prevention, rather than curative medicine, because we have forgotten to involve him/her in the deals. More broadly speaking, in many companies, banks are the first suppliers. Shouldn't treasury, which is responsible for these suppliers, be given more consideration? The biggest supplier of the company, whoever it is, must be well treated and looked after. This is the key role of the treasurer in highly indebted companies.

Treasury as main part of the modernization of the finance function

The CFO should review the entire finance function, and this includes the least IT-equipped treasury. Unfortunately, they often fail to understand what is possible or what exists. "They don't know what good looks like", as one of my friends uses to say. And so, not knowing what would help them, if the treasurer doesn't tell them, they simply ignore it. Yet, treasury is the keystone of any finance transformation. That's when you think it's a shame to miss this unique opportunity. It's up to the treasurer to show what good or better is and how it can be used to move forward. But don't tell me anymore that the treasurer has a more strategic role if the CFO is not aware of it and doesn't treat it as such. If it were as strategic as it deserves to be and should be, the treasurer would be at the very least the "deputy CFO" or at the same level as the CFO and would report directly to the CEO. It is therefore understandable that whatever treasurers increased role, their broader and more complicated tasks, they will only be more strategic if the CFOs finally understand them and only if they consider them worthy of their tasks and their importance. Unfortunately, we are a long way from that.

Whose fault, is it?

The fault for this non-recognition is undoubtedly due to the treasurer himself first, then to the CFO and the lack of demonstration of this crucial role. The lack of digitalization is penalizing because it prevents from freeing oneself from mechanical, repetitive, and useless tasks, creating more risks of error. The solution can only come from intelligent automation. That's why I always talk about "smart treasury", and hyper-automation, which is the only way to really get the recognition it deserves. You must blame yourself first and challenge yourself. As I have often written, a "road map" and a review of the situation by a third party will help paint a picture of the situation and determine the lines of action. To evolve and change, you must accept that you can do better and that is the real starting point: humility and honesty. The solution will come from educating the CFO and giving them the right message. You also must work on your message and get it out. You would be well advised to start by defining your current and future organization and setting the course. Too often, the treasurers I meet do not have an itinerary, a "road map" and not knowing where they are going, they cannot define a strategy to reach their goal. The best way to get lost is to not know where you are going. And then, when the sea is calm, every boat has a good captain. When crises break out, as they did recently, you see who stands out.

Diverse hiring would strengthen the real role of treasury

Treasurers hire treasurers, and by hiring only their clones, they bring neither folly, nor innovation, nor fresh talent to a department that needs it. This is one of the areas of focus for a treasurer who would like to reprofile or better position themselves. It is also due to the humble, down-to-earth, conservative, not very innovative and respectful character of the treasurer (in general) which does not lead him to show off. A certain inability to produce synthetic and specific reports and a pleasure in producing figures do not make him or her a born communicator or a tribune. The treasurer drowns in numbers and often thinks that more is better than less and that the more numbers, the better the report. Since treasurers are often content and pleased with what they have, they don't think about selling a (new) project or a way to improve cash and treasury management.

Shaping the strategic treasury transformation

Obviously, the transformation of the treasurer's more strategic role necessarily involves automation (before talking about AI or other things that are still very far away) and a reconsideration of who he/she is. It's all about perception and if you are not perceived as playing a strategic role, you must convince all stakeholders. You should rethink your operating mode and ask yourself the right questions. It is not by not changing anything that the treasurer will suddenly be repositioned. Take charge and define a plan of action at different levels to make the treasurer's profession more attractive and noble. Free yourself from production and operations to analyze and become more impactful while bringing value to the CFO's decision-making process. People only have the image that you reflect to them. And then take some risks and dare. I'll end with this Swedish proverb: "A ship in a harbor is safe, but this is not what a ship is built for."

François Masquelier, CEO of Simply Treasury – Luxembourg

Disclaimer: This article was prepared by François Masquelier in his personal capacity. The opinion expressed in this article are the author’s own and do not necessarily reflect the view of the European Association of Corporate Treasurers (i.e., EACT).

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