By Ursula Conterno
Practical advice for effectively communicating with regional business leaders from the Latin American Treasury Managers’ Peer Group.
Most regional treasurers have two mandates: guide the execution of the corporate treasury strategy in their region and support the local entities in carrying out the business strategy. In a way, regional treasurers act as the enforcers of the treasury strategy in front of business units and as the business advocates at the corporate treasury level. At times, it might seem that their two mandates are at odds. That is far from the truth, as both share the ultimate objective of adding value to the enterprise.
However, the fact that the business units focus on maximizing the operating income line profitability, and treasurers focus on aspects that impact below the OPINC line, like an efficient use of cash, the cost of capital and FX volatility impact causes tension in their relationship. Many times, it is hard for each side to understand the other’s point of view as well as the impact they have on each other. Open communication and engagement are key to showing the business units that both share the overall objective of maximizing shareholder value.
But building those relationships is not always easy. Sometimes treasurers forget to treat their business counterparts as what they are—their internal clients. Treasurers would most likely fire or reduce business with a bank that is unable to spell out clearly its strategy, understand the company’s needs and provide support when needed. Thebusiness units do not have that option when their treasury organization is not responsive. It is the treasurer’s responsibility to engage the business units proactively and to meet their expectations.
Keys To Communication Success
What makes a good business partner?
- Ability to build relationships
- Flexibility
- Market, business and functional knowledge
- Proactivity and responsiveness
- Ability to work in teams
Suggestions to become more proactive
- Establish regular calls with business leaders to understand their objectives and possible implications for treasury
- Provide regular updates to business on key treasury initiatives, cash repatriations
- FX impact and external factors (economy)
- Ensure that the business has a good understanding of the treasury policies
Source: NeuGroup Peer Research, LATMPG, 2016 H1
How to ease up this tension?
At their last meeting, members of The NeuGroup’s Latin American Treasury Managers’Peer Group (LATMPG) exchanged practical advice on ways to increase trust and understanding between treasury and the business units. Drawing on their many years of collective experience, they came up with this list of recommendations, which can be applied across all regions:
- Deliberately expand your network. Regional treasurers should make an effort to get ingrained in the local network. In some companies, treasurers or members of the regional treasury team are hired from the regional local finance pool, which helps in building the network.
But even if that is not the case, making yourself available to participate in the finance leadership executive team as an advisor will give you access to the right contacts . In addition, participating on the leadership team will allow you to stay on top of the business initiatives and their possible impact on treasury operations as well as allow you to offer support promptly.
- Help the business see your point of view. When appropriate, share with the business your list of top priorities, including the impact they might have on their operations and explain how they bring value to the shareholder. The annual strategy meeting is a great forum to share your thoughts. You should also keep them updated on a regular basis—monthly or quarterly—on your progress as well as sharing, as appropriate, dashboards on key treasury metrics that might be relevant to them.
Open communication and engagement are key to showing the business units that both share the overall objective of maximizing shareholder value.
- Set clear boundaries. Make sure there is a clear understanding of your partnership and what falls under your responsibility and theirs. For example, depending on your treasury organizational structure, you might not want any banks engaging with the local finance teams. Your banks need to be aware of that—at the corporate and local level—but also your business partners. If you make your case, based on why this makes sense from an overall relationship management perspective and are responsive to their banking needs, there will be fewer chances that your local partners try to go around you.
- Become a go-to resource. Establish credibility as the treasury expert. Also, provide global context for the local economic and political developments as well as share information that your banking partners provide you.
- But also rely on your local “experts” to form an opinion. Your local counterparts are closer to the idiosyncrasies of the region and might have valuable insights to share. Avoid making decisions for an ivory tower, and make sure you incorporate the local knowledge on your thought process.
Face Time
Don’t undervalue face-to-face meetings. Video and conference calls are great and efficient, especially when you have a tight budget, but nothing can be as productive as a face-to-face meeting. As many of our peer group members know, there is great value in the informal conversations that occur while getting coffee or dinner. There are topics that will not be covered by an agenda because you do not know that they are relevant or because nobody thinks there might be treasury implications. Even on a tight budget, visit your region at least once a year. And when you think there might not be any reason to do it, consider your opinion of a bank that never visits you.