Just as the CFO’s role has evolved over the past several years, so has treasury’s. Much like CFOs, treasurers are now becoming more proactive and future-focused. And that means they can be stronger partners to the CFO than before.
“Historically, the treasury function was viewed as an operator supporting the business from a liquidity and funding perspective,” Prashant Patri, principal, risk and financial advisory at Deloitte, told CFO Brew. “And those priorities continue to exist. But over the last decade or so, the role has been progressively becoming more strategic.”
In fact, 91% of respondents to Deloitte’s 2022 Global CorporateTreasury Survey said that being a value-added partner to the CFO was a critical or important part of their mandate. CFOs, Deloitte suggested in a recent article, may want to examine how they work with treasury and identify areas where treasury can bring them more value—especially in today’s turbulent economic climate.
Treasury can inform CFOs of key risks, particularly during trying macroeconomic times, Patri said. The treasury function can alert CFOs to counterparty risks, like those with banking partners, he said, and help them manage such risks. It can also keep abreast of changes in volatile foreign currency markets and work with banks to “hedge that risk appropriately.”
But, Patri said, treasury can add more value by being asked to forecast as well as report. Many CFOs, he said, want treasurers to understand trends in financial markets and “be more forward-looking in terms of managing funding risk.” Treasurers can also forecast cash needs and availability.
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And, he said, in today’s climate of high interest rates, CFOs are “asking treasurers to lean in and become more actively involved” in working capital management. Treasury can “connect across various parts of the business and behave as catalysts for change,” Patri said. For instance, if a CEO wants to see more control over the timing of payments, he or she can ask treasury to work with the AP organization to negotiate with key suppliers on delaying payments.
Supporting treasury: Patri encourages CFOs to bring treasury on board as early as is practicable when making strategic moves such as M&As, divestitures, inorganic expansions, and decisions around capital structure. “Many of those decisions have tactical impacts downstream that a treasurer needs to start thinking about sooner rather than later,” he said.
He also advises CFOs to invest in the treasury function and ensure it has the technology it needs. “The heart of what makes the treasury organization successful is the data that’s available” to it, he said. An investment in treasury technology will likely pay off for the CFO further down the road, as treasury can then have more data to analyze and share with CFO or he or she can make better decisions, Patri said.