Steve Jobs, the late founder of technology giant Apple, once said: “Great things in business are never done by one person. They’re done by a team of people.”
That principle applies just as much to treasury as it does to any other business function, perhaps even more so given the need for treasuries to maintain segregation of duties or the so-called ‘four eyes’ principle.
Segregation of duties is the notion that no employee should be in a position both to commit and conceal fraud or errors – whether deliberately or accidentally – in the usual course of their duties.
To prevent fraud or error occurring, several people and/or technology systems should be involved in the life cycle of a transaction.
In treasuries – or at least in treasuries that are relatively large – segregation of duties has traditionally been maintained through the concept of the front, middle and back offices.
Traditionally, the responsibilities of a treasury front office include – but are not limited to – dealing, hedging, cash management and fundraising for the business.
The middle office monitors transaction limits, ensures that deals are transacted in accordance with authorisation rules and reports on exposures, among other responsibilities.
Meanwhile, it is the job of the back office to confirm treasury transactions in a timely manner, settle deals when due, perform bank reconciliations and account for transactions, alongside other tasks.
Naresh Aggarwal, associate policy and technical director at the Association of Corporate Treasurers (ACT), summarises the set-up as: “The front office does the deal, but doesn’t settle the money. The back office settles the money, but doesn’t do the deal. Historically, the middle office is a control function that does the reporting and ensures that system controls are enforced.”
In other words, their respective functions can be broken down as:
Role descriptions vary by office but, in a large treasury, each office might have its own treasury manager and treasury analyst, while an FX trader or commodity trader would sit in the front office and a treasury accountant in the middle office.
In many cases, back-office functions – such as confirmations and settlements – are outsourced to shared service centres. The treasurer and the deputy treasurer generally oversee activities taking place across the entire front, middle and back office.
While the concept of a three-part treasury office structure may be seen as the ideal for segregation purposes, many treasurers do not have the luxury of a middle office.
In fact, some do not even have the luxury of a dedicated back office. The reality is that treasuries come in all sorts of shapes and sizes, from those with tens of staff and a multitude of responsibilities down to one or two-person teams that primarily look after cash management and execute a few FX deals.
In terms of team structures, COVID-19 definitely created an increased workload for treasury teams, particularly around forecasting and liquidity
What’s more, in many organisations, certain treasury activities are not even done by a treasury function at all, but by different members of the finance team, sometimes in multiple locations.
Regardless of how a treasury is structured, or how treasury duties are performed, Aggarwal believes it’s always possible to create segregation of duties and effective control. “Sometimes you have to look beyond the treasury team,” he says. “For example, in one of my jobs, the head of internal audit would approve changes to system configuration.”
While it is important that roles and responsibilities are clear, there can be some interchangeability in terms of who executes a specific process.
“It doesn’t matter who executes a deal and who confirms it, as long as they are not the same person,” Aggarwal explains. “The fundamental challenge is to go back to basics, identify what can go wrong and then look at how the existing arrangements provide adequate preventative and detective controls.”
Treasuries tend to organise themselves in many different ways, regardless of whether they are able to accommodate a three-office structure or not. The nature and structure of the team will be informed by the size, sector, geography and strategic requirements of their business and the role of treasury within the organisation.
For example, a business issuing a lot of debt may have a specific team focusing on this while the rest of treasury focuses on day-to-day activities.
At a micro level, the specific skills, experiences and career aspirations of team members may also help to determine the composition of treasury.
Since treasury’s remit is likely to include supporting the business to maintain its daily operations, as well as deliver on its future strategy, some treasuries may have people who work closely with other business functions.
For example, they may liaise with finance, or with the M&A team on acquisitions, or with IT if treasury tech is used for business activities. They may also work with divisions within the business if those divisions have specific banking or financing needs, or FX risks to manage.
Where businesses have a wide geographical spread, the treasury team may not all be based in one place. Many operate a regional treasury model.
“A lot of US companies will have European regional treasuries that are responsible for cash management and FX risk in Europe,” says David Stebbings, head of treasury advisory at professional services firm PwC.
“The North American treasury will be responsible for the same activities in North America, while the group treasurer will be based in North America, managing the capital structure and debt, and setting strategy.”
Other organisations may be even more decentralised, having a multitude of treasury people around the globe doing similar activities, aligned to specific business divisions, with perhaps a very small global treasury team at the centre.
Additionally, many have moved certain day-to-day activities into internal or outsourced shared service centres as part of a shift to more efficient operations.
While larger treasuries in particular may have a defined organisational structure, there is scope for treasury professionals to experience different roles, potentially moving from the middle to the front office, for example.
“That can give people really good career progression and help them to further develop their skill sets,” says Rachael Crocker, head of the treasury practice at recruiter Brewer Morris.
“Lots of treasury professionals will often start in the back or the middle office. That gives them a good basis for understanding treasury processes and prepares them well to move into the front office if they wish to do so.”
What’s more, treasury job titles are not always an accurate indicator of what people actually do in practice. Often their job might be more or less complicated and varied than the title suggests.
“You can have people called treasurer doing day-to-day cash management,” says Stebbings, “and people called treasury manager doing complex hedging strategies.”
He also points out that the head of treasury may not even be a treasurer by profession at all if the function is combined with tax and possibly also insurance.
Agnė Masiulytė is senior director of treasury at Vinted, Europe’s largest online international consumer-to-consumer marketplace dedicated to second-hand fashion, with headquarters in Lithuania.
She built her own treasury function up from scratch after joining the company in 2020. She now heads up a team of three – herself and two treasury managers – and doesn’t follow a strict set of rules when it comes to allocating responsibilities to team members.
“Vinted is a fast-growing company where everything is changing very quickly,” Masiulytė explains. “So, we need to be flexible and agile to support growth. We have a wide scope of small projects that we share between us.”
As well as leading the function, Masiulytė describes her main responsibility as: “Having a big-picture view of where we want to go.”
Many treasury teams are hiring data scientists to fully exploit business intelligence tools that visually organise data
She says: “From a strategic perspective, I’m mostly involved in large projects like M&A and financing, since, as a start-up, we consider different options at different stages on our journey.”
One of her treasury managers is charged with bank relationships, performing cash management-related tasks and overseeing currency-related activities such as hedging. The other is more focused on reporting and forecasting short- and long-term cash flow, while making recommendations for improving working capital.
When it comes to managing segregation of duties, the Vinted treasury team may go outside the team for approvals – for example, they may approach the CFO or some of the finance directors.
“In some areas, we do the four-eyed principle within the team and we get CFO approval on big transactions,” says Masiulytė.
Fundamentally, the structure of Masiulytė’s treasury team remains flexible. She says: “In six months’ time, one project will be over and another will come, and maybe we’ll shift around again.”
Over the past couple of years, the working practices of treasurers – like those of most office-based workers – have evolved significantly in response to the COVID-19 pandemic.
“New hybrid- and remote-working patterns have allowed organisations to access talent from further afield than previously,” Crocker explains. “In terms of team structures, COVID-19 definitely created an increased workload for treasury teams, particularly around forecasting and liquidity. This looks set to continue and is driving some headcount growth in certain teams.”
As major risk events, both the pandemic and the conflict in Ukraine could prompt organisations to focus on ensuring that their risk management capabilities, including treasury, are fit for purpose.
Furthermore, the return of inflation and potentially material positive interest rates in the developed economies will require treasury teams to gear up in these areas.
“One thing that’s coming back is interest rate risk management,” says Stebbings. “When I first started in treasury, interest rates were 10% and people focused on interest rate risk management. Now, with a few notable exceptions, they do not. So, that’s going to have to come back.”
Overall, today’s uncertain business climate is creating plenty of work for treasury.
Luckily, according to the ACT, three-quarters of organisations are using ACT qualifications and training to support employees’ career development. This has risen since 2021 (65%), and is especially prominent in the UK, demonstrating that the ACT is instrumental in developing treasurers’ skills. (See learning.treasurers.org)
Undoubtedly, technology is also helping to transform the way that treasury teams operate.
“Treasurers are expected to have greater technology skills and an increased aptitude for drawing insight from data and information,” says Bob Stark, global head of market strategy for treasury and finance software provider Kyriba.
“In addition, with treasury teams facing labour shortages and increased challenges around retaining skilled employees, we have seen CFOs intensify their investments in automation across their teams. This is so they can deliver better business continuity and are less impacted when employees leave.”
Stark adds that automation “has the added benefit of increasing job satisfaction for existing teams, which also helps employee retention”.
Powerful technology tools are also creating new opportunities for treasurers to influence the strategic direction of their organisations.
“The next wave of treasury technology uses API connectors to help treasury teams deliver better insight from the increased volumes of data that they have to manage every day,” explains Stark. “Many treasury teams are hiring data scientists to fully exploit business intelligence tools that visually organise data into intelligent narratives.”
So, given the multitude of treasury set-ups that exist, can there even be such a thing as the ideal treasury team structure? It seems the answer to this question is ‘no’.
“While there are some key rules and principles, it all depends on what’s important to your organisation,” says Stebbings. “Geographical scope, business culture, the risks being managed and the role of treasury can vary from business to business and so can the set-up of the team or teams.”
“There’s no one right answer,” concurs Crocker. “You need to think about what you want from your function and the value that treasury can add to the organisation.”
Aggarwal agrees. “It can depend on culture and it can depend on operating model, and sometimes the people involved,” he explains. “At the ACT, we say that no two treasury functions are the same.”
It is not just team structure that matters in treasury. Composition is extremely important as well. To be effective at influencing strategy and managing risk, treasury should be composed of people with a broad range of skills and perspectives. This is where diversity comes in.
“Diversity is high on everybody’s agenda,” says Crocker. “There’s definitely an appetite to improve the diversity of treasury teams.”
Margherita Della Valle, CFO of communications giant Vodafone Group, believes strongly in the importance of all types of diversity, including gender and cultural diversity. For this reason, she has launched a mentoring programme to support Europe’s next generation of female finance leaders.
“Having diverse teams, by definition, leads to better decision-making,” she says. “Another example of diversity that is really important is having diversity of experiences.”
To acquire that diversity, treasurers and other professionals within the finance function at Vodafone are encouraged to rotate between different roles.
“For example, one of our treasury talent is now running our Africa regional governance after a successful controller assignment in Tanzania,” says Della Valle. “I think the best careers are diverse careers, no doubt.”
Sally Percy is a freelance business journalist and former editor of The Treasurer. This article was taken from Issue 2, 2022 of The Treasurer magazine. For more great insights, log in to view the full issue or sign up for eAffiliate membership
