Relationship of corporate treasurers with CFO’s, Audit Committee and Board.
The role of the treasurer has evolved over the years, and even more so since the various crises we have experienced. They are faced with an ever-increasing number of challenges, an ever-expanding scope of tasks and new financial regulations, in an increasingly complex economic environment. These challenges offer him an opportunity to reposition himself and to raise his profile by reminding himself of the importance of treasury. Its role can become as strategic as some claim. But is he capable of seizing this opportunity, and what is his relationship with the C-level? That's the question you need to ask yourself.
A constantly evolving role
If there's one financial function that has undergone strong growth and many changes, it's that of treasurer. It is one of the most sophisticated, broadest, and most technical functions, requiring the most varied skills and IT tools. Apart from the arrival of IFRS, consolidation and accounting have not changed over the last thirty years. Management control is unchanged, and let's not even mention mergers and acquisitions, for which the only change is the method of financing (a treasury function). The scope of the treasurer's duties has expanded to include many different tasks, such as pension fund management, reinsurance captives, Enterprise Risk Management (ERM) sometimes, customer risk management, etc. Financial regulations have made the treasurer's life more complex. Each crisis has affected the function, and each is an opportunity to strengthen the legislative framework. The undisputed Master of Finance is cash or liquidity. Cash management is a kind of pulse of the company's financial health, which we forget can survive (accounting) losses but not once a lack of liquidity to meet its obligations. The treasurer is the knight of finance and the CFO's major pawn (if we compare to chess), his queen, or a rook, perhaps.
Is treasury the royal road for the finance department? Perhaps not
We know that treasurers rarely end up as CFOs, although there are a few exceptions. A few recent cases in Germany might suggest that things are gradually and slowly changing. We can only rejoice. In my opinion, this is due both to a fantastic and unique job that's hard to give up, and to the character of the typical treasurer. Treasury is undoubtedly a gilded cage. It's surprising that this specialist in financial risk management doesn't more often become the CRO (i.e., Chief Risk Officer). He is in the best position to manage, mitigate and quantify risks. And yet... few become CRO's... We don't prepare them to change roles during their career. What's more, with so much to do with multiple crises, poly-crises, challenges of all kinds, he lacks the time to campaign to become CFO. He's so busy that he forgets to manage his own career. It's a shame, yet so common. He has many opportunities to shine, but either he doesn't take them, or he comes back into the limelight for a fleeting crisis, and then he's forgotten. Financial memory is special in that it is short. A treasurer whose work is valued and who has the support of the CFO in general will have a more successful career and a greater chance of becoming CFO than one who is left to his own devices. It's a question of culture. The company's financial situation is also an important factor and will place greater or lesser demands on the treasury position.
Relation with the C-level
Admittedly, the relationship with the C-suite has grown over the years. It's true that he must produce more content for the Board and Audit Committee than ever before. But here again, it produces without necessarily presenting. Audit Committees receive tons of documents, but in the end they are more accounting documents than financial or treasury documents. What should be the central part of the reports is sometimes a minor part of the report to the Audit Committee. The relationship is generally good, though not perfect. Let's just say that it has improved over time. It seems to us that the presence of the Treasurer would be essential for any Audit Committee. On the other hand, perhaps not on the Board of Directors (unless you belong to the "C" level). Admittedly, each crisis has put pressure on the treasury department, but has also repositioned it (at least temporarily).
Technology, the enabler to become (more) strategic.
Technology is the ideal way to reposition yourself and become truly "strategic". By using technology, we can reinforce internal controls, lighten the day-to-day workload, and enable the treasurer to concentrate on analysis and even more on strategy, by not just producing figures and analyzing them, but also making recommendations to the C-level. Technology now makes it possible to achieve a real level of hyper-automation, with ever more powerful solutions and above all consolidation tools, such as FENNECH, to extract the quintessence of the various solutions and give them what they sometimes lack. Rather than digitizing or thinking that a TMS means being automated, we need to go to the next level, the level of what I call hyper-automation. It's a long road, and a goal that never stops being pushed back. Too many treasurers rest on their laurels and neglect automation by accepting spreadsheets. In a post-WIRECARD world, it's more important than ever to demonstrate excellence in treasury management.
What the treasurer needs to reposition himself
The first thing he or she lacks is the ability to communicate better and "sell" himself/herself. The ability to synthesize figures and reports to get to the heart of the matter. He/she needs to stop believing that "more is better" when it comes to financial reporting. He/she needs to be concise. Finally, he/she needs to get closer to the operational subsidiaries and develop partnerships with operations. To evolve towards the strategic role, he/she is promised, he/she must pass through an essential stage: automation. Technology is the vector that will enable him/her to move from a role that is still too operational, to a role that is partially analytical and above all strategic. But to become more strategic, it needs to improve the efficiency and quality of what it produces. It's no longer enough to produce a report, but to produce it reliably, more rapidly, not to say immediately, and with relevant recommendations. When you lose yourself in the pain of producing figures, you end up forgetting how to interpret them. Freeing up time is therefore a prerequisite for any strategic evolution. We believe that curiosity is also a necessary quality, given the constant evolution of the function.
We shouldn't forget that very few CFOs have a treasury background. Is it a lack of interest in treasury? An unfamiliarity with this technical function? A background as a financial controller? It's hard to say why so few CFOs come from a treasury background.
The treasurer's future may lie in becoming a CLO
We could see the treasurer becoming a kind of "Chief Liquidity Officer" (i.e., CLO). To do this, we'd need to add a new "C" and bring him even closer to the CFO and/or his/her Deputy. If cash is king, then its stewardship must be a priority and entrusted to seasoned professionals with greater power. Its repositioning is well established, but it is magnified during a crisis, and temporarily returns to the limelight until the crisis fades. This title would be the perfect recognition of his/her crucial and enhanced role. The treasurer's humility should not hide his/her enormous skills and potential. Whatever happens, his/her role will continue to grow and develop and further crises will regularly remind the CFO of it. It's up to each treasurer to reposition himself or herself more appropriately, and to work on personal branding and communication to convince superiors of his or her intrinsic value and under-exploited abilities. I see a bright future for the modern treasurer, capable of acquiring the "soft skills" needed to evolve.
François Masquelier, CEO of Simply Treasury – Lisbon – September 2023