By Joseph Neu
Closing out The NeuGroup’s 20th Anniversary Year with key takeaways.
The end of 2014 marks the end of The NeuGroup’s 20th anniversary year, and it seems fitting to end it with a reflection on why we keep leading peer knowledge exchange for treasurers, theirs staffs and their finance and risk management colleagues.
Why now vs. more of the same
In our look back at the articles we’ve published over the last two decades and the meeting agendas of the peer groups we started 14 years ago, we can see the same topics and themes repeated again and again. Doesn’t it all get old, don’t we tire of the same discussion happening again and again and the same takeaways? Yes, no, maybe. But what makes the process valuable is how the perspective of what has come before informs the response today. Plus, the environment in which topics are discussed is ever-evolving and the factors driving the discussion are different, too. This is what keeps it interesting; offer context based on historical perspective, which, in part is pointing out what is different now—that is what gives us staying power.
With this assessment of our business model in mind, here are five takeaways from the first 20 years of The NeuGroup.
- Treasury needs to dissociate centralization from location. That treasury activities should be centralized is an argument largely won, it just keeps getting hung up on the fact that multinational businesses are global, making it difficult for treasury to effectively support them from one place and time zone. Dissociate centralization from location, call it standardization and integration of process, systems, models, data, policy and governance, and arguments for decentralized treasury functions fall away. Time and distance still impact team-building, management control and local capture, but most enterprises are learning to solve this via dispersed centers of excellence linked via technology, such as video conferencing.
- Internalizing Hausbank functionality grows increasingly important. In-house banks continue to evolve in lock-step with the trend toward treasury centralization. The importance of thinking about treasury in terms of bank-like intermediation has only grown in the wake of the financial crisis, since there is growing uncertainty regarding what “Hausbank” activities external banks will be able to provide as affordably, once post-crisis bank regulation kicks in. Borrowing from bank intermediation services will help to standardize treasury activities as they get centralized and maintain links with financial services that migrate to non-banks. It will also help with scalability and severability as enterprises continue to cycle through periods of strategic acquisition and creative deconstruction.
- Treasury has become so efficient that treasurers oversee more than treasury. It’s long been true that treasurers wear many hats, but they were mainly treasury function hats. More and more, we see treasurers that have multiple pieces of the finance function reporting up to them. This is due to treasurers becoming more of a deputy to the CFO and a rotational role to develop future CFOs that is performed by high-potential finance executives with limited or no treasury experience (see below). This means that treasury functions have become so efficient that the job of treasurer is no longer a full-time activity or, relatedly, that it can be delegated to direct reports that have the bandwidth to take on more aspects of treasury leadership. Since these direct reports are increasingly high-potential rotational assignments, technical treasury knowledge thus must be embedded, lost or acquired on the fly (e.g., via peer knowledge exchange).
- Treasury walls fall. The upside of broader treasurer responsibilities and rotational programs is that treasury’s ability to support the businesses has never been higher because treasury advancement runs through the business. If centralized treasury is not defined by location, and with treasurers overseeing other functions, the distinctions between what treasury does and the activities of the rest of finance begin to blur. It is much harder to think of treasury being in an ivory tower if it is not walled within one. As treasury takes growing ownership of cash, working capital, and risk management and treasury staff increasingly don’t have dedicated treasury careers, what defines treasury cannot be the same.
- Standard systems needed to provide better treasury support. To sustain treasury in this way, systems aimed at treasury management must provide better support. To make this economically viable, treasurers need to accept the idea that a TMS upgrade must happen more than once a decade and work with system providers to develop standard solutions for common treasury processes and fuller integration with other systems. The latter will enable vendors to stop the pretense that every installation and systems integration project is a custom job and that a library of meaningful reporting and analytical apps is an unrealistic ask. The former will incent them to upgrade their code base more frequently so that new functionality can be offered sooner and upgrades and new implementations made easier—and make them fully mobile-ready when millennials assume treasury leadership roles.
With the perspective of time, it seems like time itself is in short supply. The older you get, the more time seems to fly by. “Who has time to exchange knowledge with peers? We just need to get things done.” might well be the undoing of our 20-year business model. Yet, it takes time to make time. Invest in the process of exchanging knowledge with peers and you are likely to find that it takes less time, with the knowledge gained, to get done what needs to get done. This is how The NeuGroup can continue to thrive.