The Strategic Treasurer: Custodian of Cash Flow and Financial Risk
By Bas Rebel, Senior Director, PwC The Netherlands
An evergreen theme for publications about treasury is how the role of the corporate treasurer has become increasingly strategic and has grown in relative importance within organisations. However, whilst it is undoubtedly true that some people in the profession have reached a strategic position within their organisation, the evidence for a wholesale shift is more patchy and to some extent aspirational; few of these articles define what a strategic treasury is and even fewer back up their claim with evidence.
Analysis of the responses from participants to the PwC Global Treasury Benchmark Survey 2017 entitled The virtual reality of treasury may shed some light on how far the profession has advanced. This article will explore to what extent treasury has become strategically relevant and how European companies differ from companies in other regions. Taking stock of the current situation may provide an understanding as to how wide the gap is between aspiration and reality and how that gap can be closed.
Strategic treasury is typically the pinnacle of a treasury maturity model like the one PwC developed a decade ago (see figure 1). These maturity models are highly intuitive. But without clear definitions, the observer can put his own imagination to work. The more mature treasury becomes, the more benefit and value it can create.
Fig 1: The PwC Treasury Maturity Model
The advanced stage in the PwC Treasury Maturity Model is that of Strategic Treasury. At this stage the treasurer operates as custodian of cash flow and (financial) risk. He co-ordinates enterprise-wide processes and is no longer just the manager of a corporate department. He (or she) has become the trusted advisor and treasury expert to the business operations and executive management. At this stage treasury is involved in structuring business initiatives, looking after cash flow and (financial) risk. Treasury’s involvement up front allows for pro-active detection and resolution of cash flow and (financial) risk issues and the implementation of best practice process engineering. Transaction processing is highly standardised and automated, and may already have been outsourced to a shared service centre that generates the reports used in managing (future) liquidity and exposures effectively. In summary the focus of a strategic treasury is on interacting with stakeholders and discussing the reasons for undertaking treasury transactions.
By contrast, less mature treasuries at the other three stages in this model, are characterised by a focus on perfecting the execution of treasury transactions. They tend to focus on the “how and what to do?” type of business questions.
Treasuries in the first phase are busy setting up processes from scratch and with the aim of avoiding losses, (regulatory) mistakes, penalties and fines. Typical projects at this stage include documenting processes, configuration of key treasury applications and e.g., basic cash and exposure reporting. More often than not processes are spreadsheet-based and highly manual.
Treasuries in the second stage are working on standardisation, centralisation of core treasury processes and pruning bank infrastructures. At this stage treasury typically selects treasury technology for the first time and explores basic forms of in-house banking and central finance structures.
1 https://www.pwc.com/gx/en/services/audit-assurance/corporate-treasury-solutions/publications/corporate-treasury-benchmarking-survey.html All graphs are based on the benchmark data collected and for the purpose of this article we have filtered 214 responses of the data set available today most relevant and complete across European, North American and Asian companies. This data set includes new responses and exclude some that had been included in the survey published earlier this year. Therefore graphs may differ slightly from those published in the survey. The respondents demography is skewed towards Europe, as only 26 %and 10% are working for American and Asian companies. Also note that not all of the 70 questions had been mandatory.