Size matters when it comes to corporate treasury departments performing various functions outside of core treasury. Meanwhile, some less common functions, such as investor relations (IR), may be worth taking on board.
At a recent NeuGroup Assistant Treasurers’ Leadership Group (ALTG) meeting, one member presented his analysis of a recent survey of corporate treasury roles and responsibilities at ALTG member companies. Although not a statistically meaningful survey, he noted, it provides insight into the shape of treasury departments of large multinational corporations (MNCs)
For example, of the 20 respondents, 14 departments were centralized with regional operations, while only three were decentralized and four were centralized at headquarters. Most participants said the treasury structure at the companies largely remained the same from when the survey was completed nearly two years ago, when the ATLG group was formed, although one member said her group had moved to become fully centralized.
The session leader noted his company was fully centralized and said he saw little relationship between whether a treasury department is centralized or not and its roles and responsibilities. However, the size of the department clearly has an impact. Looking at headquarters with fewer than 10 employees, those with 10 to 18, and those with 19 or more, the session leader noted that smallest staffs are significantly less likely to handle risk and insurance, derivative accounting and enterprise risk management, while the largest in the group are much more likely to handle strategic investments. Interestingly, the data shows the smaller HQs were more likely to handle credit and collections as well as investor relations.
On the investor-relations front, when the session leader asked if any members handled this function, just two attendees raised their hands. In one case, the company’s current treasurer had worked in IR before. Another member said she had talked recently to treasurers who had taken on IR as a way to “grow their skill,” and suggested the makings of a trend. “Both treasury and IR talk to bond investors anyway,” she said.
Another participant added that treasury tends to be overlooked when business is growing smoothly but that including IR in its stable of functions gives it a seat at the strategy table, as well as the ability to tell the company’s story. However, IR can be time consuming. Another member said she now sits on her company’s disclosure committee, adding, “That gives you exposure to IR activities without actually being in IR.”
Given that ATLG treasuries with fewer than 10 employees globally don’t handle some significant functions, the session leader asked if any attendees had used group size to argue against taking on new duties. One member responded that his team had used such an argument to resist taking on enterprise risk management (ERM), a function that stayed in audit. Three other members said their treasury is responsible for ERM, while others placed it in legal department, facilities and strategic planning.
He noted that companies in the $1 billion to $10 billion range on average have 9.4 people in the headquarters office and 5.1 in all other locations. Those in the $25 billion to $50 billion, and over $100 billion ranges also had greater headcounts in headquarters than other locations, with only companies in the $50-billion-to-$100 range having the reverse—32.5 in headquarters compared to 44.9 in all other locations.
The group was asked how many member companies have someone below the CFO who oversees both treasury and tax. Three members responded affirmatively, and another said his treasurer is also VP of tax.
Returning to the issue of whether it is better to centralize treasury departments or not, there was agreement among members that developing and increasing employees’ skills tends to be easier under a centralized structure, largely because it’s difficult to rotate positions in a decentralized structure.
“I like it when IR is a part of the treasury team because I feel it helps retain talent—people can move around, do more interesting projects,” one member said.
Plus, added another, “When you’re centralized you get better controls.”