The changing role of the treasurer: FIS Q&A - Part one

Are treasurers having a greater influence on the business as a whole?

I think it’s a perception that they definitely are. And I think it’s their own perception that they are. We see it as well, just in our interactions with treasury professionals.

It’s partly driven by the fact that we’re in a complex world at the moment. There’s always been interest rate risk and foreign exchange risk and cash management, but the world is changing, you’re seeing open banking, you’re seeing regulatory changes, you’ve got geopolitical changes. So, all of those things will have an impact on a business.

Treasury is often the first place that the CFO is going to go to ask what’s going on and get some idea on what the general direction is of the market, of what the impact that might be on the business. I think you’re also seeing a shift in the commercial model of businesses as well.

It’s no longer a case that the traditional business model is being employed at a company, they’re looking at how do they change that as well, as the world is changing. As they change, the commercial side of their business changes, whether it’s moving, to different sorts of payment models, or different service models, or more recurring subscription-based models. That has an impact on cash, has an impact on cash flow, and liquidity and risk and those things will feed back to Treasury. So, we’re seeing a much greater connection between the Treasury Department and the business teams when they’re making those decisions.

How is the relationship between the treasurer and CFO evolving?

The treasury function has always reported into the CFO, it’s always been one of the CFO functions. The CFO’s reliance on the treasury function is increasing and they’re actually having a more enhanced role and a larger seat at the table.

As far as the CFO goes, when looking at what their remit is, and what their dependencies are, they would want to see the treasurer being far more strategic and far more engaged in those discussions, as opposed to having a diminished role and the CFO necessarily taking the lead.

The treasurer then becomes much more of an advisor to the business runner through the CFO.

What are the next generation issues for treasurers?

Open banking is one – if you look over the last 30 years of treasury software and evolution, treasury software has been an enabler for companies to manage their banking relationships in a slightly different way, having a little bit more fungibility and ability to change between banking providers, because they have their own core TMS, treasury management software, that they can use to make the switch.

That’s opposed to relying just on one bank with its software that would lock you in a little bit. So open banking does provide an evolution of that change. What it means though, for the treasury manager with the different sorts of services that they’re going to be able to get, the speed of changing between providers, it’s all going to be of an increased pace.

The other thing is real time payments. That’s the next thing coming down the track and obviously, that is very prevalent in the P2P space, and in the retail settlement space.

Treasuries are still, for the most part, nine to five operations. Settlement is maybe same day, but often it can be plus one plus two, and you have visibility. Certainly, it’s not necessarily having to do a cash position at three o’clock on a Saturday afternoon, it’s always middle of the morning on a Monday or Tuesday, Wednesday. So, with real time payments, the biggest impact is going to be how that operation works.

Are real-time payments necessarily a good thing for treasuries?

Do you want money instantly getting out the bank account? You need to have workflow and controls around it otherwise it’s very difficult to manage your cash position. Just imagine, you don’t know whether you’re overdrawn or not in an account, some large payment is going through – and particularly when it’s large value payments, that definitely has an impact.

For treasurers that does create challenges. Obviously, it’s no different from receipts of cash as well, suddenly, your live balance appears in your account, it happens late on a Friday and you haven’t done anything in the bank holiday weekend, and it’s sitting in your checking account, and you lose three days of interest. That will be a problem, not so much of a problem at the moment, because the interest rates are quite low, but it has the potential to be a missed opportunity.

So, it’s definitely going to change how treasuries have to operate. I think it’s an evolution of what we’ve always done. But it’s something that I would expect, if you ask the question to a treasurer, it’s another headache they’re going to have to work through.

But it also has a lot of potential for them. The thing that comes with real-time payments is not having cut off times. You don’t need to have settled everything by three o’clock, you could potentially sell something at 6pm. So, you could have greater flexibility as well to bring with it but certainly it has a big impact on the operation of our treasury work.

Andrew Bateman is EVP, Group President, Capital Market Solutions – Buy-Side at FIS