What is in this article?:
The most important tool that a treasurer has to make effective financial decisions is accurate cash forecast. Without confidence in cash and liquidity projections, no treasury decision can be made.
If you look down the annual lists of the most stressful jobs, the corporate treasurer never appears in the top ten. While treasurers certainly don’t face anywhere near the level of acute stress as military and law enforcement do, it’s certainly true the role comes with a certain amount of pressure. Aside from being responsible for managing potentially billions of dollars of corporate cash, treasurers also have to ensure that their organizations generate the highest risk-free returns, all while ensuring adequate liquidity, minimal idle cash, and keeping compliant with myriad internal and external regulations.
With this in mind, what are the key issues that keep the treasurer up at night? More importantly, what can be done to lessen the stress that they cause so that counting cash during the day doesn’t lead to counting sheep at night?
While compliance will always be a critical element of the treasurer’s role, it’s less about the prospect of needing to comply with regulations that causes concern, but more about the sinking feeling of“uh oh, our compliance wasn’t good enough,” and the company remains exposed on both an internal and external level.
Internal compliance primarily focuses around the audit and control processes established by the finance department, and the need to ensure that they are both strong and transparent enough to be effective. If the treasurer implements insufficient controls, the potential for either inadvertent or malicious errors increases. Examples include the transmitting of incorrect payments or making the wrong trade (perhaps with an extra ‘0’). While such mistakes are reversible, there are financial costs and the magnitude of those costs depends on just how quickly the errors were found.
A more sinister impact of not having the right controls and checks in place could also be the potential for fraudulent activity to occur, since you don’t have the right procedures to control payments or bank accounts being opened or emptied without your knowledge. While the possibility of a fraudulent event may seem low, it takes only one instance to create a series of sleepless nights.
In addition to error-based and fraud-based compliance issues, treasurers also need to ensure that they comply with internal treasury policies, such as investment counterparty limits or hedging program limits. Even in the event of financial loss, if the treasurer followed policy; at least that may be an acceptable explanation to the CFO and potentially the board. However, if they didn’t follow policy, the oversight could be career limiting.