Treasury

Shifting Treasury From Operational to Strategic Relevance

At the heart of a strategic transformation for treasury is a commitment to making treasury matter by helping the company make informed decisions.


As the global economic effects of COVID-19 unfold, treasury has become more relevant within companies because of its cash provision and oversight role. Once the economy transitions to a new normal, treasury can emerge stronger by seizing this opportunity to solidify its strategic role.

To do so, treasury must take deliberate steps outside of operational tasks, get buy-in from senior management and become a trusted partner in its company’s strategic decision-making process.


Understand the Company's State and Objectives

It’s vital that a treasury organization has a complete understanding of the company’s larger goals and direction, as well as how other internal partner functions are expected to execute on these business goals and how their progress is measured. This comprehensive insight provides treasury the opportunity to act as an internal consultant and apply its knowledge to identify key gaps, obstacles or pain points hindering progress.

Treasury’s value lies not only in addressing known gaps but in uncovering and resolving hidden ones, which benefits the whole company.

 

Understand the State of Your Treasury

The analysis of stakeholders’ concerns also reveals which tasks treasury is currently expected to perform to successfully support them. All types of treasury work have operational, analytical and strategic components. As an example, consider these three categories of work as they relate to cash positioning.

Cash Positioning: Operational, Analytical and Strategic Aspects

  • Operational
    • Download daily statements
    • Compile in one location (e.g., an Excel spreadsheet)
    • Add expected outflows and inflows from other sources
  • Analytical
    • Review transactions that occurred on the account
    • Review expected payments
    • Review buffer amount based on payment volumes in past periods
    • Decide on required transfers from other accounts or permitted measures, such as commercial paper issuance, to fund immediate payouts or invest excess cash in allowed instruments and over available periods
    • Analyze funding cost and investment gains, compare to budget and benchmark externally
  • Strategic
    • Backtest historic and planned payments to review cash buffer amount adequacy
    • Review funding instruments and policy to optimize costs and returns
    • Leverage insights to enhance cash forecasting process and scenario analysis

Using these categories to conduct a granular review of all work within treasury can help uncover precisely where transition will need to take place. The key is to gain a complete understanding of how team members spend their workdays, what category their tasks fall into and how much time they spend on these tasks.

Operational activities will always exist. However, depending on the achievable level of automation, treasury can significantly decrease these activities and shift toward more analytical and strategic ones. Look for areas where you can reduce manual steps with high amounts of human touch and migrate paper workflows to digital environments.

 

Identify Opportunities and Prioritize

With business goals in hand and the deep dive of the current state complete, treasury can determine what the future state of its organization should look like and how to prioritize in alignment with company goals. Consider how ongoing treasury work already supports business objectives. If this support is purely operational, identify how treasury can create more value to the business through improved analytics and strategic components.

This is also the time to take a look at treasury’s role in mergers and acquisitions and how it can contribute to realize synergies. You want to further understand how data available to treasury can be turned into a tangible benefit to the whole organization’s decision-making efforts. You also want to determine whether additional technology enhancements, such as a treasury management system or a business analytics tool, are warranted.

In this process, you will uncover gaps between current and desired treasury support that directly tie to the treasury team’s capabilities. Approach this with the necessary sensitivity you would show with any major change. It’s critical to analyze whether training or hiring is required to improve the team’s skillset. Don’t hesitate to get HR involved to hash out a talent plan.

Use this information to construct a prioritization matrix based on effort and benefits to the stakeholders of potential treasury activities. Treasury should push for activities that are more logically aligned with other departments and shift in that direction. From here, you can build out your roadmap to the defined future state.

The final push forward is putting together a compelling business case that clearly articulates these transformation benefits to treasury, individual stakeholders and the company as a whole. This should be balanced with the sizing of expected resource needs and required budget to implement the changes. You should also include an implementation plan to present a holistic solution that reinforces the critical nature of your efforts for executive management’s approval and treasury’s accountability.

 

Make the Transition

Once you have buy-in, treasury can begin the transition. Start by putting together an extensive communication plan for treasury staff and internal stakeholders. Timely, consistent and practical communication from beginning to end is key to the transition’s success. During the transition, it’s essential to be upfront and transparent about progress and any issues that arise. Senior management will appreciate the directness, while treasury staff will see how the broader organization recognizes and values their efforts.

If you haven’t already, appoint a project manager to oversee tasks and milestones, hold task owners accountable, conduct regular check-ins on progress and make adjustments if necessary. 

Don’t underestimate the power of quick wins—they can show you are on the right track and significantly increase the support treasury experiences to push through the transition. Celebrate and recognize these.

Linda Birta-Mammet

Once excitement for the project takes hold, teams will become more motivated to bring forward ideas. It’s important to balance the addition of ad-hoc changes with the risk of scope creep.

If the budget permits and completing a transition with solely internal resources is unrealistic, consider engaging outside consultants for all or at least specific subtopics of the transition. Your banking partners might be able to support you in a cost-effective manner.

 

Stay Current

The work doesn’t stop when the transition is complete. Maintaining a mindset of continual improvement will ensure that treasury continues to make large-scale business impacts for years to come. Treasury should aim to turn itself into an internal brand that stakeholders view as a positive force for their needs.

Make the Most of a Strategic Transition

  • Build a process framework that encourages treasury staff to stay current and maintains the momentum to continually minimize operational components of tasks for every aspect of their work
  • Implement treasury key performance indicators and create a framework to regularly report progress to the treasury team, external stakeholders and especially senior management
  • Participate in industry conferences and events, many of which are virtual, to meet peers and stay up to date on trends and best practices 

As a valuable source of data, intelligence and guidance, treasury can be a crucial partner to the company as a whole. Soon, stakeholders will wonder how they managed without treasury’s support and ask for more. Make treasury matter by making a real business impact.

Corporate Treasury Consulting Treasury