Treasuries must be both centralised and decentralised to manage today’s turbulent business environment, argued Richard Scase, author and business forecaster on global megatrends.
“We operate in a much more mobile marketplace and in a much more uncertain market [than 20 years ago] because our portfolios, our customers and clients are constantly changing,” said Scase, speaking to the Treasury Leaders Summit in London.
Strategic and operational activities increasingly are being decentralised, to be more responsive to rapidly changing consumer needs. Meanwhile, treasuries are becoming increasingly centralised.
“That is very difficult to manage because therefore treasury, at the centre, are having to approve issues such as financing and business plans without being present,” he said.
“At the same time treasuries are required to keep tight control of things like performance indicators and information systems.
“Treasurers used to discuss whether treasury should be centralised or decentralised. I think the answer is both in terms of organisational structures,” said Scase.
As a solution, treasurers must extend “strategic autonomy” to decentralised units because they need to be responsive and close to the customer, he argued.
New skill sets required
It’s no secret that the role of treasurer is becoming more strategic too. Treasury experts and accountants now need to have negotiation skills to argue strategy issues with the C-suite.
They also need to be imaginative and exercise creative thinking to rise to the task, Scase said.
“All of this means we are having to re-evaluate the role of treasurer,” Scase added.
“We have to focus on productivity in the short term. But the same time we have to be imaginative and have to redefine our risk management models,” he continued.
Scase believes the business environment is seeing huge amounts of turbulence and the uncertainty due to changing consumer demographics.
There has been a dramatic behavioural shift to online consumerism. Consumer demographics are also changing, for example, the world’s population is ageing and the over 60s are economically polarised.
“On the one hand you got the incredibly affluent people (hence, if you look in the Daily Telegraph or Daily Mail, you get page after page of cruise advertisements) and on the other hand, you’ve got other pensioners on the poverty line,” said Scase.
Another issue for the future treasury activities is the ways in which organisations are undergoing continuous change and restructure, according to Scase.
“In the old days we had set organisational structures and there was also a lot of emphasis upon the division structures,” he said.
“Now we have constant change. There are more mergers and acquisitions and constant change in terms of investment.
“Mergers and acquisitions are a bit like a bunch of balloons – some balloons break to make space for other balloons”
“Mergers and acquisitions are a bit like a bunch of balloons – some balloons break to make space for other balloons. This means the treasury function is constantly having to respond to developing these major corporate changes,” he added.
This is because things such as the cash flow and company financial systems are constantly changing as well.
Treasury is increasingly drawn into the debate about whether something a viable project, purchase or investment.
“All these sorts of things come back into the agenda with this constant corporate restructuring,” said Scase.
“Age, occupation and income are no longer predictive demographics – look at Jeremy Corbyn!”
“Advertising agencies have a vested interest in not agreeing with this because they have the software is geared up to postcode analysis,” argued.
Young people, traditional categorised as having less spending power, have money to spend and the less wealthy are spending more on credit.
The wealthy middle-aged demographic is shrinking, “because people in their 30s and their 40s with kids are now acting like people in their 20s”, said Scase.
Data shows that both male and female still go out drinking with their friends on a Friday or Saturday night, for example.
“People in their 30s and 40s have spending patterns like people previously had when they were in relationships in their 20s,” Scase explained.
“My key point is that this huge diversity, this constant change in online and offline consumer practices and consumer attitudes means that organisations have to be very flexible and responsive. They’ve got to be very adaptive to these changing expectations and spending patterns,” he continued.
Taking on new responsibilities
Organisational structures that are in constant flux present plenty of technological challenges, particularly around data protection issues, for which many treasurers are finding they are responsible for, argued Scase.
“In a constantly reconstituted business structure, how do you protect all this data?” he said.
“How can you when you are constantly having to change the software and the artificial intelligence technologies and everything else that goes with operating in a very dynamic business environment?” Scase continued.
What complicates this is an emphasis on increased productivity, focusing upon very much on the short term. Therefore, it is hard to plan for efficiency and productivity in the long term, according to Scase.
Long-term increases in productivity will be made through investments in technology, he argued.