16 Oct 2012
As a result of the critical role that corporate
treasury departments played in sustaining their companies through the
recession, companies are expanding the role of the treasury function,
according a survey by the Association for Financial Professionals (AFP),
released on 15 October at the AFP’s annual conference. With the crisis
abating, corporations are not scaling back this role but doubling down
on it, while continuing to lower treasury banking costs and demand
efficiency from the function.
The 2012 AFP Treasury Benchmarking
Survey, underwritten by PNC, found that 55% of organisations expanded
their treasury’s mandate over the past five years versus just 5% that
narrowed the focus. This expansion is even more common at large
companies with annual revenues over US$1bn.
certified treasury professional (CTP), director of treasury services,
AFP, said that external pressures, such as the volatility in the
environment, stretched supply chains, rapidly evolving regulations and
globalisation, were impacting treasury, effectively broadening its remit
and encouraging treasurers to embrace a more strategic role within the
Two-thirds of survey respondents said that their
treasury department now oversees at least 18 functional areas ranging
from cash flow forecasting to financial risk management, financial
planning and analysis (FP&A), M&A, and investor relations - all
the way to employee benefit management. This expansion of the treasury
role appears to be permanent, indicating the importance of treasury in
good times and bad.
Significantly, the corporate treasury
departments that have expanded recently tended to do so with normalised
cost structures that barely differ from departments that have not seen a
significant change in structure, though they also tended to have larger
staff to absorb additional work.
Staff expansion was true of
the two treasuries - Toyota Financial Services (TFS) and Cliffs Natural
Resources - represented on the panel discussing the results. Both
treasury professionals, Lisa Chao, liquidity risk and FTP manager, TFS,
and Dwayne Petish, director, global treasury strategy, Cliffs, reported
adding to the number of full-time equivalents (FTEs) in treasury, moving
from 25 to 40 FTEs over a period of five years in the case of TFS,
while Cliff almost tripled its number from five to 14 FTEs in 18 months.
indicative of the overriding efficiency concern: the two most common
success metrics for treasuries are reduced banking expenses (79% of
organisations) and improved efficiency (71%). Annette LaPrade, global
deployment lead, IBM benchmarking programme, reported that organisations
that measured an increase in efficiency typically boasted departments
with fewer FTEs and lower costs for treasury operations.
surveyed did not think that cost efficiency itself was a universal
measure of a treasury department’s success, due to variables in business
type, borrowing structure and business model. Anecdotally, some
companies measured treasury success by maintaining liquidity and paying
down debt whenever possible. Others sought opportunities to repatriate
overseas cash to pay down US debt and measured success by the ability to
keep interest expense below budget. A number of treasurers said they
are judged on their ability to identify opportunities to put cash to use
versus keeping it idle.
Read the article ‘Results of the 2012 AFP Treasury Benchmarking Survey’ for a deeper analysis of the survey results.
First published on www.gtnews.com.
- Joy Macknight
- I am deputy editor at The Banker, a Financial Times publication. I joined the magazine in August 2015 as transaction banking and technology editor, which remain the beats I cover. Previously I was features editor at Profit & Loss, an FX and derivatives publication and events company. Before that I was editorial director of Treasury Today following a period as editor of gtnews.com. I also worked on Banking Technology, Computer Weekly, and IBM Computer Today. I have a BSc from the University of Victoria, Canada.