The importance of treasurers in finance

This week , I am departing from writing about something topical, but rather expressing a *strong* point of view on why Treasurers should be considered as top candidates for CFO roles (which in my view, they currently aren’t in the UK).  A Treasurer plays an important role in an organization’s operations. (S)he is responsible for managing the company’s cash flow, ensuring its stability and planning for its long-term financial wellbeing. Despite their significance, the Treasurer’s role often works behind the scenes, overshadowed by other financial roles such as in investor relations, controllership, financial planning & analysis, or internal audit. However, this low visibility should not undermine the importance of a Treasurer in safeguarding the company’s assets and securing its future through effective cash management, investment strategies and risk mitigation.

Effective cash & strategic funding

At the heart of Treasurer’s responsibilities lies cash management; ensuring that the organization has funds to meet its obligations and capitalize on growth opportunities. This involves planning, accurate forecasting and strategic allocation of resources. During times of uncertainty a Treasurer’s ability to secure funding and effectively manage cash flows becomes even more crucial as (s)he directly impacts the company’s operational viability and strategic flexibility.

Mitigating financial risks

Treasurers also play a role in managing risks by identifying assessing and mitigating potential exposures related to currency fluctuations, interest rates and commodities. Their expertise in hedging techniques and derivatives is vital for protecting the company from market conditions. Given today’s economy, with interconnected markets their role becomes even more indispensable.

The lack of discussion regarding treasury roles

Despite their importance, a Treasurer’s role is often not given attention in financial discussions. This is due to several reasons.

• Complexity and specialization: The technical complexity and specialized nature of Treasury functions can make them less visible to those outside the finance industry.
• Operational focus: Treasurers typically focus on operations and debt management rather than the more sexy (equity) financial markets. This often contributes to their lower visibility, than let’s say a Head of Investor relations or a Head of FP&A.
• Misunderstanding of scope: There’s a misconception that Treasury’s role is limited to cash management. This overlooks its contributions to corporate finance and risk management and very often the ever changing financial regulations (especially for FS Treasurers).

Treasurers as candidates for CFO positions

With their skill set, Treasurers are well equipped for CFO roles. Their transition to the position is a progression supported by compelling reasons.

• Broad financial expertise: Treasurers have a deep understanding of both the micro and macro aspects of finance. Their hands on experience with capital markets, funding , liquidity management and risk assessment provide them with insights that’re crucial for a CFO.
•  Strategic vision and risk management: The strategic dimension of the Treasury function, in forecasting, planning and risk management closely aligns with the responsibilities of a CFO. The foresight and expertise of treasurers enable them to navigate financial landscapes providing them with the strategic insight necessary for making important financial decisions at a high level.
•  Leadership & communication: In addition to their financial management skills, treasurers also possess leadership and communication abilities. Most excel in collaborating across functions, negotiating with banks and financial institutions, and presenting financial information in a way that is easily understandable. These skills are crucial as a CFO given CFOs need to communicate financial strategy and the associated risks to stakeholders, while leading the company’s overall financial direction.

In conclusion treasury plays a multifaceted role in finance encompassing tasks such as liquidity management, strategic funding, and risk management. Despite their importance treasury roles often receive lesser attention compared to more visible aspects of finance in controllership, FP&A, investor relations and internal audit. However, treasurers bring a wealth of experience and a diverse skill set that make them exceptional candidates for CFO positions. Their expertise in managing risks, strategic planning, capital allocation combined with their leadership and communication skills uniquely position them to guide companies through the complexities of financial landscapes.

 Considering the increasing volatility and interconnectedness of the ecosystem, there is a growing need for experienced financial leaders who can successfully navigate these challenges. Treasurers, with their knowledge of finance and strategic foresight are not just well suited for the position of CFO but also embody the true essence of leading finance in the modern era. It would be wise for companies (and recruiters) to acknowledge and highly consider the significant contributions Treasurers bring to the table making them strong candidates for CFO roles. This will establish finance leaders who are prepared to tackle future challenges and seize opportunities effectively.