MANCHESTER -- During a panel session Tuesday afternoon at the 2017 Association of Corporate Treasurers (ACT) Annual Conference, UK practitioners weighed in on the way treasury’s role has grown to become the “captain” of the organization. With that expansion has come some unique challenges.
We’ve heard frequently that treasury’s role began to expand and become more strategic following the 2007-2008 financial crisis. But according to Ian Chisolm, vice president corporate finance for BHP Billiton, treasury’s role actually started its expansion a good while before that—in the late 1990s/early 2000s. “It’s been given a hyperdrive boost from financial crisis,” he said.
Yuri Polyakov, head of financial risk advisory for Lloyds Bank, treasurers need to “think bigger” in their new role. “Something that worked for you 10 years ago may not work now,” he said.
Polyakov pointed to treasury’s role in cybersecurity as an example of how its role has branched off into new areas. It’s not treasury’s responsibility to patch vulnerabilities to protect against a cyberattack, like the one that hit multiple businesses over the weekend. “But the treasurer is responsible for responding if the IT department doesn’t catch the cyberattack,” he said.
Working capital is another area that has become vastly complex in recent years, and treasurers have had to spend a lot more time focusing on it as their roles have expanded, explained Llewelyn Mullooly, director of working capital for Lloyds Bank. He noted that traditionally, working capital has been within the treasury remit, but not necessarily under the treasurer’s direct control. “That means that it requires a broad range of skills for the treasurer to sell the business case to the board, as well as influence different areas of the business,” he said.
Mullooly added that British companies saw robust economic growth towards the end of 2016. And when companies are focused on growth, they tend to be more focused on the top line and margins. “And that means working capital can slip down in the priorities,” he said. “That’s what we’ve heard in conversations with clients, even if, historically, they’ve had working capital as a strategic KPI. Treasurers are finding more of a challenge to get the right focus.”
This is potentially exacerbated by the lower interest rate environment, which has resulted in relatively cheap access to debt. “That means the business case for a finance solution or issuing long-term debt is simpler and easier—and there is inherent risk that there is inefficiency creeping into the business,” he said.
Hurdles to overcome
Panelists were asked what the biggest hurdle is that treasurers need to overcome with their broadening scope. Polyakov elaborated more on his earlier point that treasury departments often get stuck in old mindsets. “A lot of treasuries do things exactly the way they’ve done before, because they don’t want to change anything,” he said.
Additionally, Polyakov has observed many practitioners lacking in key communications skills that are necessary for working across the organization. “They’re not sure how to communicate a strategy to the stakeholders. They’re not sure how certain things will be perceived by the board,” he said.
Lynn Lochhead, AMCT, deputy head of treasury, John Lewis Partnership, agreed, noting that communication is key for the strategic treasurer. With the amount of business partnering that treasury is taking on, they need the softer skills—good communication skills, being able to effectively build relationships, being able to persuade business partners,” she said.
Chisholm added that soft skills have gotten more important over time. “I think one of the key questions is always about that balance between specialists and generalists. For sure, technical skills are absolutely vital, but you need to understand the business and be able to talk the same language as the business,” he said.
When asked if he believes if most treasurers have the soft skills necessary to influence senior stakeholders, he responded that “we all need to keep working on that.”