Several key themes are shaping the evolving role of treasury, including the need to:
A recent survey of 200 CFOs and 296 corporate treasurers from leading multinationals identified that managing risk is a top concern for finance leaders, taking up the largest portion of their time. Seventy per cent of CFOs said their company has been hit over the past two years by unhedged foreign exchange exposures, and many also noted lower earnings due to unhedged interest rate and commodity positions.
Geopolitical factors – including rising protectionism – are having a far-reaching impact on risk management strategies, and there’s increasing pressure to stay on top of changes in foreign exchange regulations and regimes.
The fast-pace of change underlines the critical need for best-in-class risk management strategies and policies that allow treasurers to manage risk through well-defined processes rather than on a reactive basis. This gives CEOs and other corporate leaders the confidence that key risks are being managed in line with their organization’s capital structure, strategic objectives and risk management approach.
Since the financial crisis, the treasury function has played an increasingly important strategic role within the organization. While traditional risk management responsibilities are as important as ever, treasury teams face a range of added responsibilities including working capital allocation, providing analysis and strategic insights to the C-suite, overseeing group financing, managing cash flows and looking after short-term investments.
Many organizations have centralized their treasury teams to make it easier for them to work in step with senior leaders to provide data, analysis and counsel.
Safeguarding financial statements remains high on the agenda. Many treasurers are taking a longer-term approach to hedging, with hedging against medium- and long-term business risks becoming more prevalent.
With growing pressure on treasury teams to do more with limited resources, digital technologies are playing a larger role in bridging potential gaps between organizational resources and expectations. Investing in automated forecasting tools, for example, enables better and earlier risk recognition, which correlates to the ability of treasury teams to take a more strategic approach.
Over half of treasurers surveyed said they’d like to see their teams increase their expertise in IT systems and tools. Other areas of expertise that treasurers would like to see enhanced include capabilities in risk management, cash and liquidity management (including the use of cryptocurrencies), regulation, tax and hedge accounting, and financing alternatives (including blockchain settlements).
Our Rethinking treasury report highlights five key takeaways for organizations that want to shift the treasury function to an increasingly strategic role:
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