Treasury’s traditional back-office function is no more. In today’s workplace, treasury has transformed into a strategic operation that can drive a company’s bottom-line growth.
The evolution is the result of a few key factors, including regulatory changes, geopolitical unrest and economic uncertainty. Together, they require an updated approach by leadership to maximize treasury’s potential. Here, we’ll explore the capabilities that define this new breed of treasury professional.
With innovations in artificial intelligence, machine learning and other automation tools, treasury professionals must embrace technology. AI and machine learning can turn tasks such as trend analysis and identification of patterns and predictions—which used to take days or weeks—into near-instant functions.
Kimberly Isaacs, Executive Director of Corporate Treasury Consulting at JPMorgan Chase Commercial Banking, believes properly equipped and trained treasury teams can use innovative technology more as a teammate than a tool.
“The data and information inherent in cash flows is a gold mine,” Isaacs said. “Treasury has moved from big data to smart data. This rich information and cash flow data will enable treasury teams to drive and inform strategic business decisions.”
Now that treasury has a seat at the table, treasury professionals can proactively support the business with sophisticated data and insights. Treasury can support not only funding and cash decisions for optimal investment and working capital strategies, but also provide support in designing the payments experience of customers and vendors.
“Executives now regularly ask treasury for more than just numbers on cash positions. They’re looking at the strategy and value-add,” Isaacs said. “They want to know what happened, why and what might happen next.”
The breadth of new data allows for more accurate forecasts, she said. Having individuals who understand where to look for insights and who can improve those activities takes a different skillset.
“Even just a few years ago, if a forecast was off by 15%–20%, that was OK,” Isaacs said. “Now, the treasury organization is much more involved in how the business runs, and there’s an expectation that treasury can provide valuable, accurate analytics to the rest of the company.”
Treasury’s foray into business influencer means that treasury teams increasingly need to be involved and equipped to deliver toward the project.
Treasury is now playing a much more active role in enterprise-level change. When a company adds or upgrades to a new enterprise resource planning system (ERP) or treasury management system, the transition could take months. That carries a real cost for companies: The longer the rollout, the more expensive it usually becomes. Additionally, even temporary disruptions could affect payments and other areas within cash management.
Treasury also plays a key role during M&A activities, not only as the advisor on the preferred financing structure of the deal but also during the integration or separation activities after the deal closes—everything from the rationalization of bank accounts to ERP system integration and accounts payable- and accounts receivable-consolidation efforts.
“You need to have the skillset to know what might delay a project and avoid those delays,” said Myrna Vega, Vice President, Corporate Treasury Consulting at JPMorgan Chase Commercial Banking. “You need to be a project collaborator. Treasury may be asked to perform in-depth due diligence before the implementation of any new finance systems and facilitate communication across internal and external partners.”
It’s not enough to understand what the tech can do and what the data says; treasury teams need to be able to convey the risks, consequences and benefits of treasury strategy in the boardroom.
“In the past, treasury organizations were purely transactional and operational within the organization,” Isaacs said. “Now, treasury teams are working cross-functionally and have become key advisors on strategic business matters.”
An effective treasury team has the interpersonal skills to be able to listen, present, tell stories and build consensus with people who may not have similar financial backgrounds—like legal, tax or IT.
By working across departments, treasury professionals can foster a cash culture throughout the company and help ensure the whole operation understands how liquidity and working capital impact finances.
J.P. Morgan’s Corporate Treasury Consulting team can help your organization review its treasury processes, assess its skills and develop a roadmap toward transformation. Contact your relationship banker to learn more.
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