Today, a treasury leader is viewed as a ‘sparring business partner’ and provides insight and advice on business strategy to their CFO whilst contributing to business growth and efficiency. Malcolm Pape, Experian EMEA CFO, speaks to GTNews about how treasurers can bring more value to their CFOs.
“Today’s geopolitical and economic backdrop, combined with widespread disruption and regulatory changes, means treasurers are playing a more crucial role than ever before. Frankly, I expect this trend to continue and even more will be expected of treasury in the future,” Malcolm Pape, chief financial officer (CFO) for Europe, Middle East and Africa (EMEA) at Experian, tells GTNews.
“It has always been the case that treasury plays an instrumental role in an organization, but doing the fundamentals well is now a given and future proofing a treasury function is increasingly about alignment to business goals and integrating into the organisation’s strategy,” Pape adds.
“Although centralisation of the treasury function is common practice today, if it is absent a considered effort to maintain links and communicate directly with the business, it will be suboptimal”, argues Pape. “If you want to establish a competitive advantage through your treasury function today, you must be informed on the latest technologies and trends, understand the broader strategy and goals of the business, then importantly be proactive in taking this, plus your subject matter expertise, to drive the business forward” he says.
While it is vital that the day-to-day operations of treasury are done as efficiently as possible, one of the downfalls in centralisation can be seen when treasury take an overly rigid view, argues Pape. “In previous organisations I’ve seen a very purist view taken on the most efficient way of executing a transaction or activity – but that may compromise the desired business outcome,” says Pape.
“A standard quick and easy solution for treasury is fine, but sometimes a more complicated option will better suit the business needs. This is a break away from a rigid centralised model, moving towards a more flexible approach” he adds. “This is critical when working in a multi-market region such as EMEA and the Experian treasury function is very proactive about coming to the business, asking questions and adding value,” says Pape.
Asking questions such as what capital requirements will be needed for a certain project, what are the forecasting cash flows and how treasury can most efficiently manage the CFO’s needs all contribute towards this. “That can’t be underestimated,” adds Pape. “In other organisations, treasury can be much more passive and a business must press upon treasury more in order to achieve business goals,” he says.
To work well with the business, it is vital that treasury staff reach out and communicate effectively, argues Pape. “The business is really looking for expertise, applied in an innovative and timely manner, to minimise risk, streamline decision making and optimise their objectives,” he says.
“Partnering in the sense of having clear lines of communication, being open and transparent on what the challenges are, and how we’re addressing them has been hugely positive in my experience”
“I would encourage treasurers to ensure their frameworks, policies and objectives are reviewed, agreed and communicated, only after fully understanding the business strategy and goals,” Pape advises. “In return, a close dialogue with the CFO and business will undoubtedly help all parties address their challenges, which across several areas are likely to be common”.
Given some of the challenges faced by both CFO and treasurer are similar, working closely, with open and regular dialogue provides a better chance of working through issues quickly and efficiently, argues Pape. “Partnering in the sense of having clear lines of communication, being open and transparent on what the challenges are, and how we’re addressing them has been hugely positive in my experience,” says Pape.
For example, three almost universal challenges today are technology, constant disruption and change, along with the war for talent. “To be able to address these and thrive you simply must innovate and accept that the skills required to be successful in the past will not be the same in the future. Treasury teams are typically small and specialist, therefore, having the right people is critical and keeping them relevant for future requirements is a must,” explains Pape.
“Being able to take specialist advice from treasury on our IFRS9 and KYC propositions has undoubtedly improved our solutions and so the function is now directly contributing to the company’s growth agenda”
“We want all our teams to be high performing, which encourages every individual and group to really think about how they add value and ensure they really understand the business they work in, irrespective of functional responsibility, this is the best way to unlock innovation” Pape continues.
“We know there are some sizable risks associated with new regulations and changes, but there is also a huge opportunity to help organisations, and consumers, in adhering, complying and protecting people’s personal data, and treasury has taken an advisory role on some of these opportunities for Experian” says Pape. “Being able to take specialist advice from treasury on our IFRS9 and KYC (Know Your Customer) propositions has undoubtedly improved our solutions and so the function is now directly contributing to the company’s growth agenda”.
“This comes back to the need for treasury to be very close to the business,” says Pape. “If you accept that risk levels will increase in the short term, working capital will come under more pressure, businesses will be disrupted and regulations will tighten, then under these circumstances an integrated, strategic, world class treasury function is no longer just desirable but a necessity,” he concludes.
Hear more from Malcolm Pape on how treasurers can better work with their CFOs by attending the Treasury Leaders Summit in London this December 5-6. He will be hosting a seminar looking at how treasury strategies can support business growth and how a treasurer can best support their CFOs.