The Rise of Treasury

The current business environment is marked by uncertainty, and the demands on all corporate teams, including treasury, continue to grow. As a result, treasury’s contribution to the organization has become more holistic than ever before. And as the “2022 AFP Strategic Role of Treasury Survey,” supported by Marsh McLennan, reveals, maintaining a high-functioning treasury team that can leverage processes and technologies to effectively execute core areas of responsibility is critical.

“Against a landscape of global supply-chain challenges and record-high inflation, treasury has an opportunity to rise to the occasion and provide sought-after guidance and expertise,” says Jim Kaitz, president and CEO of the Association for Financial Professionals (AFP).

The Evolution of Treasury

Treasury teams are increasingly finding themselves supporting other corporate functions, which highlights how their role has expanded into areas that did not traditionally include treasury. According to the AFP survey, treasury supports business continuity planning at 82 percent of organizations. Eighty percent of treasury professionals who responded to the survey are now supporting accounting and SEC compliance, and 76 percent are supporting financial planning and analysis (FP&A).

It should come as no surprise, then, that the list of capabilities treasury teams use most in supporting their organization is dominated by “soft” skills. The top five skills respondents cited are forecasting, critical thinking, leadership, communication, and being a change agent in their company. In fact, the AFP survey demonstrates that non-technical skills—those that enable treasury teams to collaborate across the organization to drive forward broader business goals—have become crucial. In the face of a limited talent pool, treasury leaders must focus on building their soft skills, in order to adapt to shifting demands and embrace new ways of working.

A majority (53%) of senior treasury professionals believe they are increasingly applying critical thinking and leadership skills to assist their organizations. At the height of the pandemic, business leaders were tasked with mitigating the effects of situations they had never faced before, such as mandated lockdowns and remote work. Employees were working increased hours, experiencing greater levels of stress and other emotional issues, and were rightfully looking to their leaders for support and guidance. The result? Senior treasury professionals had to ensure they were effectively leading their teams and making decisions that were beneficial for both the organization and its employees.

According to the AFP survey, nearly three-quarters of treasury groups (72%) also started placing a greater emphasis on liquidity and cash planning over the past two years. Other areas in which treasury seems to be increasing its focus include:

• Cash management and forecasting (68% of respondents);
• Payment, treasury, and related technologies (53% of respondents); and
• Implementing technology and analytics to improve efficiency, accuracy, and compliance of processes (51% of respondents).

Challenging Tasks

Four issues, in particular, topped the list of challenges treasurers are dealing with right now. The first is improving payment processes, both incoming and outgoing, which was cited by 64 percent of respondents, a proportion that didn’t vary with the respondent’s seniority.

Next is working capital improvements, named by nearly half of respondents. A larger share of core treasury professionals consider working capital improvements to be challenging, compared with senior treasury professionals (53% vs. 45%).

Protecting the organization through sound internal policies and procedures for money movement came in at number three, with 42 percent of respondents reporting it as their greatest challenge. And the seniority bias worked in reverse for this task, with a higher proportion of senior treasury professionals reporting it to be a challenge.

Finally, we come to cash forecasting. In the throes of the Covid-19 crisis, organizations grappled with severe liquidity challenges. Although it has been nearly three years since the crisis began, finance professionals are still cognizant of managing cash in ways that help safeguard their companies from any unprecedented liquidity issues that may arise. In fact, more than half of both senior treasury professionals and core treasury professionals said they are increasingly applying their cash forecasting skills to support their organizations.

The Bottom Line: New Challenges, New Capabilities

Treasury teams came up against three tremendous challenges at the beginning of the coronavirus pandemic: remote work, liquidity, and increased interaction with other finance functions. Prior to March 2020, working from home was not a common practice among many companies’ treasury teams. So, when the pandemic began, treasury leaders were compelled to assist their teams through the transition, virtually overnight.

At the same time, the global pandemic sparked a liquidity crisis for businesses around the world, and senior leaders increasingly sought out their treasurers for solutions and strategies. Forty-three percent of survey respondents saw treasury’s interactions with the C-suite and CFO increase over the past two years.

Additionally, many treasurers needed to be more involved in other functions, such as FP&A and accounting, than they had been in the past. Forty-three percent of survey respondents said treasury’s interactions with accounts payable increased as well.

All of this is to say that the need for treasury to work collaboratively, efficiently, and effectively has never been greater. And with that shift comes the emphasis on new (or enhanced) soft skills.

Survey respondents believe that an assortment of skills and competencies are important for treasury leadership to have in order to manage their teams during these unprecedented times. The capabilities they consider most important are:

• Communication (96%),
• Strategic thinking (91%),
• Treasury expertise (91%), and
• Ability to collaborate (90%).

In today’s highly unpredictable world, treasury needs to think strategically, operate efficiently, and work closely with both internal and external stakeholders. Treasury departments are responsible for their organizations’ cash and investments, and they need to ensure they are safeguarding these assets from the prevailing uncertainty.

Communicating with others is critical in conveying any concerns and issues. Managing teams to work together collaboratively is essential, too. Now is an opportune time for treasury professionals to rise to the occasion and provide the guidance and expertise being sought by their peers.

Tom Hunt, CTP, is the director of treasury and payments services for the Association for Financial Professionals. Hunt is the staff subject matter expert on bank relationship management, cash management, and treasury technology. He is in charge of AFP’s Treasury Advisory Group, the member committee dedicated to meeting the needs of the profession and helping keep members current on developing topics.

Mariam Lamech is the director of survey research for the AFP. In this role, Lamech manages the project lifecycle for AFP’s proprietary research, including survey rationale and design, survey administration, analysis and interpretation of survey data, and writing and producing AFP’s survey reports. Lamech leads and executes AFP’s survey research with a focus on enhancing the value of AFP’s external survey projects to the treasury and finance profession through the development and production of ancillary products. She has nearly 25 years’ experience within research functions at associations.

Learn more: Read the 2022 AFP Strategic Role of Treasury Survey in its entirety.