Corporate structures ‘hindering treasurers’ strategic role’

Lack of cross-pollination between corporate divisions is preventing treasurers’ insights from reaching the ears of board members, says report

Corporate structures are not helping the strategic advice of treasurers to reach boardrooms through CFOs, a new study warns – with the risk that anti-fraud guidance is potentially slipping through the cracks.

Published by CFO Research – in partnership with leading treasury software provider Kyriba – the study quizzed 167 senior finance executives on the relationships they have with their companies and management.

Among its conclusions, the report highlighted a lack of inter-departmental cross-pollination that would promote the focused delivery of financial advice.

The report asks: “After decades of investing in finance, treasury and risk management systems, why are some CFOs still not able to meet their board’s expectations for information and insights?”

It notes: “The most commonly cited factor is a suboptimal organisational structure, in which different corporation functions and business units are walled off from each other in their own silos – a hindrance cited by one in every two survey respondents.

“Other major contributors include a corporate culture that does not promote or facilitate a better relationship between the CFO and the board (41%) [and] a lack of time on the CFO’s part (30%).”

The report flags up six, main subject areas in which boards feel that CFOs are not providing them with enough input:

  1. Fraud monitoring and mitigation (cited by 36% of respondents);
  2. Performance-based risk management (32%);
  3. Strategic and operational risk management (32%);
  4. Growth strategy support (26%);
  5. Cost control and reduction (25%); and
  6. Strategic decision-making (25%).

Focusing on the top subject of that list, the report points out: “Fraud risk is high on boardroom agendas in large part because it remains a stubborn and growing problem.

“Although many com¬panies have embraced a broad range of fraud-fighting tools and strategies – including user-authen¬tication processes, expanded use of electronic payments rather than more vulnerable paper checks and daily reconciliations – the incidence of fraud shows no signs of slowing down.”

Indeed, according to the research, 40% of finance executives say that their industries are experi¬encing higher rates of payments fraud than they were two years ago.

Turning to treasurers’ involvement in tackling the issue, the report says: “Given that a big part of corporate treasury’s role is safeguarding corporate cash, it’s not surprising that this focus on payments fraud interests the board.”

The study listed the top three treasury functions that are most critical to boards, as:

  1. cash and liquidity management and forecasting (cited by 66%);
  2. risk management across the full spectrum of risks (46%); and
  3. financial transactions, including debt, investment and FX (also 46%).

Despite boards’ dissatisfaction with information flows on key areas, the report does impart some good news: that 94% of the respondents said that boards perceive their CFOs as “critical, strategic business partners”.

Download the report from Kyriba’s website.

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