If you’ve been under the impression that your job in the treasury department has become more complex, far-reaching and visible, you’re not alone. The 2012 Benchmarking Survey by the Association for Financial Professionals (AFP), found that “treasury’s organizational footprint has grown in recent years through its expanded leadership role across many financial functions and its mandate.”
In fact, more than half – 55 percent – of the more than 700 respondents indicated that their treasury departments had expanded their focus over the past five years; just 5 percent had contracted the scope of treasury. Two-thirds of respondents said their treasury departments oversee about 18 functions, ranging from cash flow forecasting, financial risk management, and mergers and acquisitions to investor relations. Treasurers “are being asked to expand beyond their traditional role and be more of a partner to their organizations,” says Tom Hunt, CTP and AFP’s director of treasury services.
Not surprisingly, the financial crisis that continues to make an impact has been driving this shift. “The profession was elevated, because (organizations have) a stronger mandate to make sure their cash and liquidity are in place,” Hunt says. Everybody – CEOs included – wants to know precisely where their cash is and whether it’s safe. The last time the safety of companies’ cash balances attracted as much attention may have been back in 1929, Hunt adds.
Companies’ expanding international footprints also are impacting the treasury department; 57 percent of treasurers said their organizations generate at least some revenue outside their home country, boosting the total cost of treasury operations in most cases. Companies that generate at least 10 percent of revenue abroad spend $0.43 per $1,000 in sales on treasury, versus $0.27 for companies more focused on their domestic markets. “They’re staffing up to augment international expansion,” Hunt says.
And, although it may fly in the face of common perception, 58 percent of treasurers say that executive management within their organizations support technology investments within treasury at about the same level at which they support tech investments in other departments. They’ve probably figured out that “technology is an enabler to help you do more with the capacity you have,” Hunt says. Even so, a significant minority – 30 percent – said their treasury departments receive less support.
Similarly, nearly two-thirds of respondents said its company’s management supports human capital investments within treasury to the same degree it supports similar investments in other areas.
One area that appears not to have kept pace with the changing role within most treasury organizations is the performance metrics used to judge their success and effectiveness. Even as the role of treasury has expanded, the top performance metrics focus on expenses. The top one? Treasury’s ability to reduce bank expenses; more than three-quarters of respondents listed this. Next up was improved efficiency, which was mentioned by 71 percent of respondents, followed by reduced borrowing costs.
In part, the metrics reflect most companies’ focus on cost control and efficiency, Hunt notes. In addition, these metrics tend to be easy to get at – unlike, say, determining the effectiveness of a company’s hedging program.
Overall, the survey shows that this is a good time for those in corporate treasury, Hunt says. “The mandate is changing; the visibility is changed.” More treasurers are reporting not only to the CFO, but to the board. “It pulls up visibility of treasury,” he says. “It’s a great opportunity for entry level treasury analysts.”