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Interesting times for corporate treasurers

Every crisis is an opportunity in disguise. The recent financial crisis was no different. Prior to the crisis, the treasury department was as an offshoot of the accounting department. Post crisis, the treasurer has assumed a more strategic role, moving beyond managing working capital to becoming involved in risk management across the organisation, and with additional focus on improving the bottom line.  

Beyond the crisis

In the post-crisis period, risk management and liquidity has taken centre stage. Corporates have to deal with counterparty, liquidity, forex, and operational risks just to name a few.

The treasurer is now required to evaluate not just trading partners but also the banks, especially in the wake of many needing state support to weather the crisis. In times of surplus, the funds have to be managed for optimal growth. In times of scarcity, safeguarding capital becomes a priority. Volatility in relatively stable currencies such as the Dollar and Euro has become de rigueur during the financial crisis. The need for a greater understanding and control over funds as well as greater efficiency in the financial supply chain is now paramount at every stage.

Though there is a case to be made for the consolidation and centralisation of treasury functions, loss of agility and response times are the side effects. Treasurers have to consider a model (centralised, decentralised, or hybrid) that works best for the company while delivering on the broad spectrum of challenges facing them.

Balancing act

Corporate treasurers are dealing with changes in role definition, increasing board scrutiny and varying ranges of performance metrics, among other issues. The treasurers role has changed from being largely administrative to that of a strategic business leader charged with balancing the need for overall efficiency with the broader strategic goals of the organisation. The old Chinese proverb, “May you live in interesting times”, which can be a curse or a blessing seems very appropriate for the present day corporate treasurer!

 

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