Eric H. Nietsch recently had to do something he never has had to do before in his six years as a corporate treasurer: He supervised the sale of a factory in Switzerland. At larger companies, real estate–whether in the U.S. or overseas–is typically outside the scope of a treasurer's direct responsibilities, says Nietsch, treasurer of Greenwich, Conn.-based Blyth Inc., a $1.2 billion manufacturer and marketer of candles, home fragrances and giftware. When his company sold real estate in the past, the job fell most often to either the local business unit or the CFO–when it was a big enough deal.
But Nietsch predicts that this will not be his last foray into real estate. Why? Because CFOs simply no longer have the time to oversee such labor-intensive transactions, and because treasurers these days are increasingly involved in strategic development and execution at the business unit level. "The treasury function moved away from doing pure cash and debt management to more overall risk management," says Nietsch. "It has taken on an international scope to optimize cash flow on a global basis."
Whether it's real estate, structured trade finance, mergers and acquisitions, managing receivables and inventories or even product pricing, treasurers have been finding themselves with a different set of assignments that need to be accommodated in their multi-tasking–and a different set of clients. While previously 70% to 90% of a treasurer's time was spent dealing with capital markets and bankers, today that treasurer is much more likely to be acting as a service center to a company's various business units, helping to determine cash flow and risk management strategies that take into account exposures across the organization.
Recommended For You
"Treasury is now starting to look at itself as a profit center instead of a cost center and is being enticed to do so," says Geoffrey Garden, the New York-based managing director and head of global cash management in the U.S. for Deutsche Bank. "By taking advantage of new technologies and ways of doing business, such as straight-through processing, electronic invoice presentment and payment and outsourcing, fundamental business models are changing. Treasuries have become far more efficient and effective on both sides of the vendor/customer relationship and are now delivering these increased efficiencies to the entire organization."
The 'In-House Consultant'
In essence, "treasurers have become the in-house consultants for companies. They are assuming a leadership role as change managers, not just implementing new processes and systems but creating them," says Robert J. Baldoni, a partner and head of the global treasury advisory group at Ernst & Young LLP in New York.
This gradual expansion of the treasurer's role from transactional gameboy to financial thought leader began in earnest several years ago. CFOs started to be called upon to become growth gurus during the 1990s boom years, leading companies' M&A strategies and initial public offerings and working in tandem with CEOs to present a company's public financial face. A corporate vacuum developed, and treasurers ended up filling in on roles that were once the CFO's province.
But the past 18 months of financial upheaval have exponentially expanded the corporate expectations for the treasurer because of his or her intimate relationship with the vagaries of cash flow. Suddenly, cash flow has become "the life-blood measure of a company," says E&Y's Baldoni, and it has been the treasurer who has been asked to develop early warning systems to detect impending problems in cash and earnings volatility. To a large degree, treasurers are becoming de facto chief risk officers. "They may not be called that, but if you look at their portfolios, that's their job," concludes Baldoni.
With the recent adoption of the Sarbanes-Oxley Act, which forces senior executives to attest to the accuracy of financials, the focus on being able to get a better handle on financial results should only intensify. "Treasury has always possessed a unique skill for managing the balance sheet," says Mary Winston, treasurer at $17.8 billion auto parts supplier Visteon Corp. "Operating management generally focuses on the management of the business, on the P&L. Treasury has always had the primary responsibility for managing the balance sheet and focusing on the cash flow and the value that brings to the company. More and more that value is evident to senior management, so more and more they're looking to treasury, where that knowledge has always resided."
For Winston and other treasurers, that now means getting up close and personal with a company's business units in many cases. "I find myself much more involved with operating folks on how we manage receivables, how we work with customers and managing inventories," Winston says.
David Holland, treasurer of Cisco Systems Inc., agrees. "It is much more about internal outreach now, about developing internal partners to fix mutual problems. It is an ecosystem approach" for making the corporation operate more efficiently, he said at Treasury & Risk Management's Alexander Hamilton Best Practices Summit in October.
In particular, what treasurers bring to the table is a set of analytical tools for risk and cash management. And because of this distinctive skill set, treasury often finds itself leading cross-functional teams at companies like $950 million oil services company UOP LLC, based in Des Plaines, Ill. There, Treasurer George Davidson has gotten involved in "areas as far afield as structured trade finance or export finance, with direct interface with the customer, not only the business guy. Treasury has a unique opportunity to use tools from one area in another area," Davidson says.
Sharing Tools of the Trade
One example of cross-fertilization in which traditional treasury tools can be applied more broadly to aid the corporation is in counterparty risk, Davidson says. Typically, treasurers think of this in terms of the company's dealings with its bankers and customers. But Davidson suggests that the counterparty risk from the corporation's perspective is probably even greater in some of its strategic alliances. "Treasury's value added is in terms of evaluating the creditworthiness of that counterparty," says Davidson. "Is he going to be there three or four years down the road? Is he making the same commitment you are to that alliance? These are things not on the balance sheet, probably not even in the footnotes. It's work in progress, but it's important that the issue of counterparty risk as it relates to non-balance-sheet events is stressed."
Given the potential impact that inadequate risk management can have on cash flow, treasurers also find themselves being brought in on many other strategic operational decisions. For example, says Andrea Tarbox, group vice president and treasurer for the Gartner Group, a $950 million consulting and research advisory firm based in Stamford, Conn., if the corporation was looking to enter a new country market, the treasury function now would probe such uncertainties as the new level of risk exposure from operations in the country in question. "With companies going more global, the treasurer has to look at the financial implications for the corporation as a whole," says Tarbox.
Since taxes have cash-flow implications, treasurers are also likely to become more involved in that arena, says Nietsch, working in tandem with the controller to get the optimal tax and cash flow results from a transaction. "The two are intertwined in managing cash flow. In international transactions, one needs to know not only the tax implications, but the cash flow implications," he says.
As it moves into the operational side, treasury's message often involves how to do more with less by working in a Web-enabled environment and using outsourcing, where applicable, to achieve a more efficient operation with a clearer appreciation of risk exposures. It is a painful lesson that most treasuries have learned the hard way: As the complexity of organizations has grown, the treasury staff often has not. The key to survival has been the smart use of technology, such as browser-based access into the status of receivables and Web-based analytic tools, which have brought speed and the ability to provide real-time financial snapshots. "Treasury has much to offer here with the emergence of ERP systems and the information we have about how our customers do business with us," says Deutsche Bank's Garden. As Microsoft Corp. Treasurer Brent Callinicos described it at T&RM's summit: "It is the treasury equivalent of building a higher quality, more fuel-efficient car and then selling it for less."
All these changes have led to new career paths for treasurers and new required skill sets. The traditional "treasury guy," who came up through the banking route, will most likely not be the "guy" corporations want in the future, says Herbert Marchand, the CFO of Toshiba International Corp. in Houston. Companies are now looking for treasurers with more business acumen, a better understanding of the global economy and how to generate the best bottom line, says Allen A. Geller, managing director at New York executive recruitment firm Raines International. A candidate must also have the ability to step into various operations of a business comfortably.
One need only look at Visteon's Winston, who became the Ford spin-off's treasurer in January of this year, as an example of the new breed in treasury. "I started in public accounting," she says. "I've done M&A. I've done strategic planning. Only five of my 19 years with companies have been in finance. I think it's that combination of things that landed me where I am."
Ultimately, this change could have implications for treasurer compensation packages. Says E&Y's Baldoni: "We are beginning to see companies integrate cash flows in the performance measures of senior management and we believe this trend will grow."
And the future? "Treasuries rarely are designed. They generally evolve," says Baldoni. And evolution is a slow process: Even with today's focus on the accuracy of financials, most companies have not yet made the commitments necessary to develop formal analytical processes to monitor cash flow and earnings volatility. The bottom line for treasurers: Expect a lot more new "assignments" in your in-boxes.
© 2025 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.
