The Changing Role of the Corporate Treasurer

Ever since the global financial crisis in 2008, the role, responsibility and strategic importance of the corporate treasurer has evolved considerably.

With increasingly challenging markets, stricter regulation and the ever pressing need to accurately monitor finance performance and accounting requirements, along with the necessity to anticipate and manage financial risk, the significance of the corporate treasurer has never been more pivotal.

Before the crisis, the corporate treasurer’s place within the larger business function was arguably less diverse – often concentrating on capital structures, arranging funds, managing financial hazards and liquidity risk, amongst other finance-focused tasks. However, in a post-recession business environment, the role has become evidently more strategic, less static and highly centralised. They are crucial in driving operational effectiveness, achieving business success and facilitating the overall corporate decision making process.

Treasurers as Business Advisors

Treasurers are now expected to be increasing proactive and are being called upon in a more advisory capacity to COO’s and at board level. They’ve also expanded their influence across the organisation and the gap between treasury and the key strategic influencers is closing. They are more able to utilise their knowledge and insight in financial risk management to highlight any challenges facing the business. Additionally, with the increased levels of regulation, they are also responsible for ensuring companies meet legal obligations surrounding accounting compliance. All-in-all, the role is now paramount to the overall business function of any corporate entity.

Globalisation can be viewed as one of the key drivers as to why business leaders are increasingly seeking the assistance and advice of corporate treasures. As businesses expand their operations into new markets and global territories, corporate treasurers are well equipped with acute knowledge and advice concerning issues such as international regulations, foreign exchange, and international money markets. It’s this understanding that can be called upon in order to make well informed strategic business decisions.

Treasurers as Strategic Planners

This increased responsibility also brings rise to certain challenges; one of the biggest tasks is responding to stricter financial regulations. An ongoing example of this can be seen with the IFRS new lease accounting standard that was announced at the beginning of the year (2016).  This will require all operating lease figures to be presented on-balance sheet and for large global organisations with extensive lease portfolios and assets distributed over multiple locations and sites around the world, preparing for the new regulations will involve a huge amount of planning and risk management. These changes to accounting legislation has led to organisations relying on their corporate treasurers to assess the impact of the new regulations and outline contingency plans to act accordingly and avoid any unwanted issues when transitioning to the new standards. This is just one example of many accounting regulations that has seen the dependence on corporate treasurers elevated.

New Challenges – IFRS 16 and FASB New Lease Accounting

With all the new challenges facing the modern treasurer, it’s essential that strategic thinking takes precedence within their role; additionally it’s equally important that treasurers prioritise what’s important to their department and to the business as a whole.

A survey carried out by the Association for Financial Professionals (AFP) revealed that 84% of respondents agree the treasury is playing a more strategic role compared to five years earlier. Additionally, 83% anticipate a further growth in treasury’s expanded role over the next five years.

Last year, corporate treasurers prioritised closer integration between treasury and the business, along with further centralisation, standardisation and automation. These developments will be just as important over the coming years, particularly with the developments in new global lease accounting standards.

These will require a collaborative effort between treasury, procurement, legal and accounting leaders within a business to locate, analyse and report on the required operating lease data. Treasurers will be called upon in a managerial capacity to provide the greater communication, centralisation and consistency required to ensure full compliance is achieved within the implementation deadlines.

Download our concise overview of the new lease accounting standards, IFRS 16 to learn how to prepare for the financial impacts of compliance

The treasury departments of tomorrow will comprehend the importance of having access to the latest financial data and the analytical skills required to effectively process the information giving them a more complete understanding of any short-term tactical goals along with the more important long-standing strategic objective of the company. To achieve this, elements of the role will need to be highly centralised and increasingly automated. Evidence of this shift in function is already apparent as many leading treasurers are turning towards advanced cloud solutions and software to help ensure the business is perfectly situated and optimised to deal with constantly changing requirements and financial challenges. Advancements in cloud computing has opened a new digital world as to what can be achieved with data storage, analytics and automation, with many vendors satisfying a specific business niche. Anything from lease management and accounting to sales and marketing – there is often a flexible solution that can help simplify processes and improve business proficiency.

The Future

In the future, corporate treasurers will be more reliant on such technologies to enhance operational efficiencies and enable them to easily process complex, real-time financial data and act quickly in anticipation of any impending challenges and help drive positive transformational change. It’s this apparent flexibility that is attractive to businesses and importantly to the treasury function as it provides operators with all the relevant tools to become less reactive and more proactive. This readiness to find alternative systems is helping treasury departments to centralise their activity and integrate more closely with other business units.

Although many of the world’s top economies are recovering from the financial crisis, the world’s economic outlook still remains unclear. With stricter regulations and changing accounting regulations such as the IFRS 16 - lease accounting, the importance of the corporate treasurer is likely to take on an even greater strategic importance as companies adapt to a shifting business and economic environment.

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