Treasury’s contribution to an organization is more holistic than it has been in the past.

Treasury in 2022 is playing a distinct leading role in some areas that include borrowing long-term (capital funding/sourcing), interest-rate risk management, payments strategy and execution, currency risk management, LIBOR transition and investing long-term, according to the 2022 AFP Strategic Role of Treasury Survey, supported by Marsh McLennan.

“In addition to taking a lead in certain areas, treasury increasingly supports other functions and is increasingly providing support to the finance and accounting functions as well”, said the survey report.

“At 80 percent of organizations, treasury supports Accounting/SEC compliance, while 76 percent of respondents confirm that their organizations’ treasury function is doing the same for FP&A,” the report further added. Other areas that are increasingly relying on treasury’s support are  business continuity planning, mergers and acquisitions, business development and enterprise risk management.

Since 2003, the Association for Financial Professionals’® (AFP) Strategic Role of Treasury Survey has tracked the shifting and evolving role of treasury. This year’s survey was conducted in May 2022 and received 390 responses from senior and core treasury professionals.

The report identified senior treasury professionals as those treasury professionals with titles classified as Director of Treasury, Senior Director of Treasury, Associate Treasurer, Assistant Treasurer, Treasurer, Global Treasurer, Vice President of Treasury, Vice President of Finance & Treasury, and Senior Vice President. Those titles that comprise core treasury professionals are Treasury Analyst, Senior Treasury Analyst, Manager of Treasury, Cash Manager, Manager of Finance & Treasury, Treasury Coordinator, and Assistant Manager.

As per the survey, the treasury team of today is interacting more with the C-suite and the CFO and is increasingly supporting both traditional and non-traditional treasury areas to strengthen risk, resilience and business strategies.

Treasurers looking inward: focused on improving payment processes and working capital

Against a backdrop of uncertainty and volatility, the two most challenging tasks facing treasury are payment processes and working capital improvements.

Source: 2022 AFP® Strategic Role of Treasury

This has made treasurers look inward at the organization and improving payment process; incoming and outgoing payments (cited by 64% of the respondents) and working capital improvements (mentioned by 48% of the respondents) are the tasks that will test treasurers most.

Improving incoming and outgoing payment processes is a challenging task given “The IT resources needed to complete the task, especially as companies are moving to cloud-based ERP solutions and the technology needs of the department have to keep pace with the demand of its constituents,” the report explains.

Improving working capital through optimizing the cash conversion cycle is a tough task and more critical than ever, particularly in difficult times when the emphasis is on maximizing working capital so that it can reduce the company’s reliance on debt or other forms of external financing. It should come as no surprise that a larger share of core treasury professionals considers this task to be challenging compared to senior treasury professionals (53% versus 45%).

Protecting the organization through sound internal policies and procedures for money movement (42%) is the third biggest challenge, ranking higher for senior treasury professionals than core treasury executives. This is also expected, given that the liquidity crisis that first emerged two years ago continues to concern treasury professionals.

Current priorities within treasury

Treasurers have faced a cavalcade of challenges over the past two years. Cash management and forecasting (via scenario analysis), and liquidity and cash planning remain at the heart of the treasurer’s work, and this year’s survey highlights the continued importance of these areas.

Source: 2022 AFP® Strategic Role of Treasury

“Sixty-eight percent of treasury practitioners report that cash management and forecasting is currently a priority for treasury at their organizations, with a higher percentage of core treasury professionals (74 percent) citing it as a priority compared to senior treasury professionals (64 percent),” the survey noted.

The 10-percentage-point difference between senior and core treasury professionals indicating cash management and forecasting as a priority can be explained by the more tactical approach adopted by core treasury executives that is, perhaps, a by-product of the uncertain business environment.

Liquidity and cash planning is another key priority area for 63% of respondents, with an equal percentage of senior treasury professionals and core treasury executives acknowledging its importance at their organizations.

Forty-six percent of survey respondents cited payments, treasury and related technologies as a priority, with more core treasury professionals listing it as a priority compared to senior treasury professionals. This may be because core treasury professionals are responsible for implementing technology to improve operational efficiency.

Treasury professionals increasingly apply ‘soft/people’ skills to help support their organization

Of the top five skills treasury professionals increasingly applied in order to help support their organizations, four were ‘soft/people’ skills, namely, critical/strategic thinking, leadership, communication, and being a change agent within the company.

Source: 2022 AFP® Strategic Role of Treasury

Over half of senior treasury professionals (53%) are applying their critical/strategic thinking skills and leadership skills to assist their organizations.

Treasurers and their teams have faced numerous challenges since the advent of the COVID-19 pandemic. First, treasurers assisted their teams’ transitions to remote work amid the spread of lockdowns. Remote employees were working longer than before, which elevated their stress levels and added to a rise in unpleasant emotions. Treasury leaders were sought out at organizations to provide their team members support and guidance, even as the entire crisis morphed into a liquidity crisis.

Treasurers’ roles quickly evolved as a result. They were tasked with providing their team members solutions and strategies to help them overcome the crisis, and they bore responsibility for bringing their teams together to work collaboratively and effectively. This meant they had to hone their soft/people skills and abilities to operate in an uncertain environment and make people decisions that were beneficial for both the organization and its employees.

The pandemic drove treasury practitioners to do things differently. Treasury leaders needed to be the change agents who would adapt the new methods and processes, which explains why more senior treasury professionals (48%) than core treasury executives are playing the role of a change agent at their organizations.

Since senior treasury executives are often responsible for managing and motivating their teams, collaboration and people management are two other skills of importance that senior treasury professionals demonstrate a larger share of than core treasury executives. 

“Against a landscape of global supply chain challenges and record-high inflation, treasury has an opportunity to rise to the occasion and provide sought-after guidance and expertise”, said Jim Kaitz, AFP president and CEO. “Effective communication and collaboration will be critical for treasury departments as they help their organizations navigate the prevailing uncertainty.”

Actions taken to curb staff attrition within the treasury and finance function

In response to the great resignation, a term coined in May 2021, 56% of survey respondents indicate their organizations are attempting to curb staff attrition within the treasury and finance arena (16% indicate specific active steps are being taken, and 40% say some action is being taken).

Source: 2022 AFP® Strategic Role of Treasury

Allowing flexible work arrangements (71%) is the most frequently mentioned specific action being taken to reduce employee turnover. Eighty-five percent of respondents from organizations with annual revenue of at least US$5 billion report that they have permitted flexible work to rein in staff attrition.

The second most-cited specific action being taken by companies to prevent employees from resigning is offering growth opportunities within the organization (53%), followed by offering enhanced compensation and benefits (51%) and more career management and learning opportunities (42%). As expected, “flexwork”, better pay, career prospects, upskilling or retention are measures being deployed to engage staff that may be nurtured and guided in an environment more conducive to growth and success.

Conclusion

A volatile and uncertain business environment has forced treasurers to look inward more than ever to fund business growth, manage challenges and priorities, and support other functions. In trying times, looking within will help treasury leverage people, processes and technologies to effectively execute core areas of responsibility, evolve continually, and leverage its analytical mindset and unique skill set to serve as a strategic adviser to the board, the CFO and the overall business.