The treasury of the future, implications of change

We continue the theme from last month where we considered the influences of changes in the financial services sector on treasury management. These included:

The Implications

We now consider the implications of these changes which are probably along three dimensions:

• Role of the treasurer
• Treasury design
• Treasury career

Along all these dimensions the effect will differ by size or rating of company. Larger, higher rated corporates may well be unaffected but smaller, lower rated corporates could be highly affected. This could mean that treasurers may find it difficult to switch from one to the other in their career as the challenges facing each type of firm will be different.

Generally we have become used to bulking up products in the last twenty years or so in treasury, centralising as far as possible and this trend may have to change.

Role of the treasurer changing, the treasurer needs to:

• be more of a businessman
• become closer to operations
• become closer to customers and suppliers
• be more visible to the board
• understand more products, such as many different debt products to allow diversification of financing
• be adaptable

Treasury design

• In house banking may become more difficult
• Netting is likely to remain a key tool
• Pooling may be more difficult / costly but remains a key tool
• There will be a trend away from centralisation as many services are provided locally, such as trade finance products and supply chain finance
• Treasuries will be less factory like and more boutique as they deal with more products following diversification
• Increasing regionalisation means more supervision of local and regional treasuries, where skill sets need to be managed to higher
• There will less mathematics and more horse trading or gut trading as markets become thinner
• There will be more relationships to manage

– Banks, bond holders, PP lenders, ECAs, Credit insurers, Exchanges

Treasury career

• A treasurer needs to show he can be more of a businessman
• A treasurer needs to widen his communication skills to deal with a more diverse audience, from financial service providers to operational management and customers and suppliers
• Prior experience will be more important for job applications as sector and credit strength history become important factors in treasury
• Qualifications will be more important to allow treasurers to move between sectors and company size as qualifications teach diversity
• An adaptable treasurer will be a good treasurer

By Will Spinney