Educating the Treasury Profession
As the environment in which businesses operate evolves, with new corporate governance requirements, increasingly competitive markets and continuing pressures on margins, the role of corporate treasury is also changing. New technology, the need for active working capital management and shifts in hedging policies driven by the transition to international financial reporting standards have impacted all types of treasury, from departments run by a single person through to multi-national companies with treasury centres globally. These changes require re-education among the treasury profession and, accordingly, the UK’s Association of Corporate Treasurers (ACT) has launched a new syllabus for its AMCT qualification.
Treasury is an integral part of the financial management of a business.The origins of the profession are rooted in the changes in the management of risk and liquidity which began in the 1970s. In this new dynamic environment, financial management was facing currency, interest rate, fiscal and legal risks on a scale that was unfamiliar. A new function and a new profession became the focal point for dealing with what was rapidly being recognised as the ‘treasury’ responsibility.
Since that time, the role of the treasurer has evolved simultaneously with the changes in the requirements of the business it serves. New opportunities and products have aided this evolution. Many treasuries used to be based around cash funding, foreign exchange and interest rate risk management. Whilst these are still important and make up the core business of many treasury departments today, the remit has grown to encompass all aspects of financial risk management and corporate finance. The treasury area is having to become more sophisticated and its techniques and processes have developed accordingly.
The abolition of UK exchange controls in 1979 was a significant milestone in driving the growth in the discipline of treasury. Treasury took over activities that might have been performed by controllers and “chief cashiers”; these individuals had seen the safe custody and measurement of cash as their primary interest, rather than the dynamic and value-adding challenge of managing liquidity and risk separately and together. There was a conviction that the existing disciplines, such as accountancy, did not cover all the areas that arose in sufficient detail. Extra manpower and different skills were needed to cover the new complexities.
In particular, the need for the treasurer to quantify, understand and manage risk has developed substantially, extending beyond the traditional disciplines of interest and currency risk management to the impact on future cashflows that will determine the ability of the business to meet the expectations of shareholders in the long term. How will the management of this financial risk be reported in the company’s financial statements and what will be the impact on its credit rating? Risk is not an issue restricted to treasury, but a holistic issue across the organisation and central to all strategic decisions which drive the business and increase the value of the entity for stakeholders, principally the shareholders. The skills acquired by corporate treasurers – senior business professionals who deal with global risk issues on a daily basis – are positioned to manage treasury-specific issues and are ideally qualified to contribute to the broader strategy of the board.
To reflect evolving business imperatives, this month, the ACT is unveiling a new syllabus for its AMCT qualification. The AMCT qualification, which provides Associate Membership of the ACT, combines theoretical knowledge, practical skills and strategic insight into treasury and risk management and has become a prerequisite for treasury appointments among leading employers. The revised AMCT encompasses the core principles of treasury, risk management and corporate finance. The new syllabus supports treasury professionals in providing knowledge, depth of expertise and insight in dealing with daily treasury issues, as well as how to contribute to strategic decisions on risk and return in the business.
The current syllabus, which will run until April 2006, provides a unique treasury qualification and forms the basis of the new syllabus. The new syllabus has been developed in response to feedback from existing AMCT holders, consultation with employers and the evolving needs within business and the finance industry as a whole. Existing papers have been updated to reflect, for example, the impact of international financial reporting standards, and new papers have been introduced from which students will choose in order to support both their personal and their employer’s objectives. The launch of the new AMCT also develops cohesion amongst the ACT’s qualifications as holders of the Cert ICM qualification will be able to credit their Cert ICM pass as an AMCT paper. Enrolment onto the new syllabus will commence in June 2005 and the study programmes will prepare students to sit the new syllabus papers for the first time in April 2006.
Areas of broad financial concern such as pensions and governance have become highly topical issues. The impact of a pension fund on the valuation and risk management requirements of the business mean that an understanding of pension management has become increasingly important for treasurers. With these issues in mind, ACT will continue to increase the choice of papers available as part of the Associate Papers, ensuring that the AMCT qualification provides the necessary learning areas across the wider spectrum of treasury-related issues. These papers will have a broader appeal and benefit beyond those taking AMCT. For example, new papers in Financial Risk Management and the impact of Pensions on the financial management of the business will be beneficial to all those wishing to extend their knowledge and enable career progression, including existing AMCT and MCT holders. These papers will be launched as independent certificates and individually as a valuable contribution to Continuing Professional Development (CPD).