Steve Jobs was famous for his focus (not always on the sensible things) and driving to make things simple for the user. He knew exactly what he was striving for. Peter Drucker famously wrote, “Management is doing things right; leadership is doing the right things.” (He had another version of this thought, “Efficiency is doing things right; effectiveness is doing the right things.”)
But what are the ‘right things’ in corporate treasury? Today, the new technologies allow the corporate treasury department to cover a huge range of areas, but should they?
Being more strategic is not a solution, it is the beginning of the analysis
The first problem is that there is no agreement as to what is “treasury”? Marcel Win commented on our item on outsourcing, see, that: “if you ask 20 treasurers across the globe (to define treasury), you will get at least 21 different answers.”
What to do
Marcel Win believes that the main corporate treasury tasks are, “Managing the relationships to their bank, securing the funding of the company and support strategic moves like M&A.” But again, many corporate treasurers would have different views.
PwC in their Global Corporate Treasury Benchmarking Survey 2017 Sebastian de Paolo commented "that today the success of the treasury profession is dependent on how well it adapts to - and operates in - an increasingly virtual environment.” And that “More than ever, treasury professionals have to be jacks of all trades to succeed in today’s environment.” The problem with this view is that it excuses a lack of focus.
On the other hand, PwC see only three main tasks for corporate treasury: managing funding, liquidity and financial risk, but many corporate treasurers would add more tasks to these three items.
Wikipedia write that “Treasury management (or treasury operations) includes management of an enterprise's holdings, with the ultimate goal of managing the firm's liquidity and mitigating its operational, financial and reputational risk.”
Deciding what to do in corporate treasury is not easy.
Criteria for what NOT to do
Deciding what to NOT do in corporate treasury is even more difficult now that the new technologies allow corporate treasury departments to be in contact with almost any process or system in the company and in the financial world.
What are the criteria? Should it be:
- Where corporate treasury department adds value (but what is value?)
- When no-one else is doing the work effectively (Not always a good reason)
- Because we are good at it?
- Does it contribute to our key role in the company?
Corporate treasurers can only answer these questions if they have a clear idea as to what the corporate treasury department’s real business is. This will enable them to identify what they should do and what they should not do.
CTMfile take: What is the fundamental purpose of corporate treasury? What do you do? What do you not do?
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