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Treasury Management

No-Apologies Treasury

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February 07, 2017

Corporate treasury isn’t out to win any popularity contests, so should mitigate risks any way it sees fit.

football x's and o'sTreasury is commonly part of finance, but it is also known as a separate specialist group within an organization. Typically, there is a need for treasury and finance teams to work as one, yet there are boundaries that define the two teams and their respective core areas of responsibilities.

All members of the Asia Treasurers’ Peer Group, in a recent pre-meeting survey, agree there is a clear delineation of accountability and governance between finance and treasury, yet there are still some grey areas. For one, treasury’s main goal is risk management, and they make no bones about being popular or not (not that others in finance seek this). For example, several ATPG members cited examples where treasury has inserted itself – to the chagrin of the business units – in order to achieve an important objective, most notably in the area of forecasting. In many instances, members have found BU cash forecasts to be deficient, to the point it is disrupting liquidity planning and FX hedge accounting. Treasury relies on these forecasts to manage exposures and when they are off significantly and repeatedly treasury’s efforts are degraded. The relationship gets more challenged when treasury takes the bold and needed step to report on the deficiencies and the risks it creates. And in some cases this has resulted in treasury being viewed as a “roadblock.” Treasury is also viewed as a meddler when they impose their needs or views in other areas on behalf of the greater good of the company.

Although there are occasional conflicting priorities between treasury and finance, the working relationship is usually highly collaborative. One member considers treasury as part of finance and believes that they should naturally work well together. He has to rely on finance people in some countries where treasury activities are not sufficient to warrant a treasury FTE.

AR factoring came up as a contentious issue with the business. One member noted that financing along the supply chain needs to be approved by treasury. The business perspective is that selling receivables alleviates credit concerns and frees up capacity to sell more to the customer, saying it is the only way to do business in certain cases.

All groups and functions in a company have their role and mandate, which should ideally work cohesively to achieve the ultimate outcome for the company. However, several areas naturally conflict, such as sales and collections, treasury and tax and treasury and procurement. Left to themselves, the most likely result will be counterproductive relationships and outcomes; therefore, management may have to intervene and outline the preferred priorities and operational limits of each group.

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