Convened in New York, London, Frankfurt, Hong Kong and Shanghai, seven themed discussions have focused on the impact of the continuing crisis in the global credit and liquidity markets and how it is altering perceptions of the Treasurer’s role. Some recurring observations suggest a need now to question the traditional view of Treasurers as the narrow technicians of the finance function.
New demands on the role…
1. In managing the corporate balance sheet, it is no longer sufficient just to know the numbers. The collapse in asset values and the prolonged freeze in the global credit and liquidity markets have left question marks hanging over the real trading value of most numbers on both sides of the balance sheet that refer to anything but cash. Treasurers accordingly need to make critical judgements about matters that go well beyond the latest accounting treatments. They must make risk and strategic assessments that will call, in most cases, for a broader knowledge of current developments in the markets than has been required at any previous point in their working lives.
2. Corporate Boards have turned to their Treasurers for fuller and more frequent briefings. The global economic downturn has put a premium everywhere on liquidity. Given the uncertainties over balance-sheet valuations and short-term liquidity, most Boards are looking for an unprecedented level of information and reassurance on the financial health of their companies – and to provide it, Treasurers will need communication skills that have not always been a priority in the past. They must have the self-confidence to communicate difficult and complex messages and to work with Board Directors, in ways that previously were more exclusively identified with the role of the CFO.
3. The newly risk-averse stance among bankers has left Treasurers faced with a need to be much more pro-active in the marketplace. They have worked for decades in an environment essentially defined by aggressively competitive commercial and investment bankers. For Treasurers, it was a ‘buyers’ market’: those providing the services were eager for their business and ready, as financial intermediaries, to shoulder virtually any technical tasks required of them. Now this world has been turned upside down. Treasurers are confronted with banks reluctant to lend and offering only sharply curtailed intermediary services. Treasurers themselves must be prepared to identify and directly engage with a much wider range of funding sources, and to take responsibility for a larger share of the technical work involved in dealing, for example, with private placements.
4. The stereotype of the Corporate Treasurer is a familiar figure: he (or she) is more introvert than extrovert, more comfortable delivering a service and deliberating over subtle financing choices than trying to sell ideas or influence senior colleagues. Without resorting to caricature, it is fair to say Treasurers have typically come from relatively narrow accounting backgrounds and have been seen as specialist technicians within the finance-function family. The requisite skills for the role have rarely included an ability to steer discussions at Board level. Now they do – and Boards need to take a more expansive view of the role, considering a wider range of prospective candidates accordingly. Basic accounting skills are going to remain essential, of course. But the most effective Treasurers are likely to be those with strong communication skills and a background that includes some experience of creative policy-making.
5. Senior directors, and especially CFOs, have traditionally been inclined to assume that good bankers rarely if ever make good Treasurers. The marketing and entrepreneurial flair of the successful banker has usually been regarded almost as the antithesis of the skill-set needed for the cautious oversight of Treasury operations. Indeed, this view was several times expressed during the recent EZI forum discussions. But has the time come to reappraise it? We believe so. As Boards take stock now of the challenges facing any new Treasurer, they may find they need someone with exactly the skills of a creative banker and should be ready to meet good candidates from banking backgrounds. Needless to say, there will be no shortage of them in present circumstances. This may entail reviewing a crowded field, and some companies may feel deterred by this. But the opportunity is there, to bring in appropriate fresh skills just where there are needed.
6. The continuing crisis in the financial markets seems certain to raise the profile of the Treasurer in many companies. The position will offer strong performers an opportunity to enhance their reputa¬tion at Board level, and may provide a path to appointment as CFO (or even, eventually, CEO) more commonly than in the past. For instance, Treasurers are likely to be seen, now more than ever, as executives with the ability to take important decisions – setting them apart from most Financial Controllers, whose mission is generally to report and analyse. At the same time, the harsh economic environment for many companies today is opening up opportunities for the re-deployment of talented younger executives. In these circumstances, many companies should think seriously about using any appointment in the Treasury function to promote a promising internal candidate, for whom it could provide a valuable stepping stone to a future Board career.
7. Finally, and taking a longer term view of the Treasury department’s evolution, it may be high time to leave behind the traditional assumption that select, long-serving teams are the best guardians of the function. This is not to say that staff numbers need expanding. Even in the largest companies, the Treasury will remain a relatively small department. Rather, rotating executives through it from other finance functions more regularly might be a more promising way forward. This would allow a larger pool of skilled professionals with Treasury experience to be built up in-house. It would facilitate better succession-planning and ought also to ensure ready access to an additional source of new talent when it is needed. There exists today only a limited pool of senior professionals ready to contemplate an external career move, and relying on outside appointments may leave some companies uncomfortably vulnerable to unexpected departures.