Treasury hunting

Introduction

With ongoing inflation putting the squeeze on margins, working capital, and cash flow, now would seem to be an opportune time for finance leaders to intensify their focus on the treasury function.

The fast-rising cost of capital, supply chain disruptions, and other macroeconomic effects have created the kinds of constraints and challenges that companies haven’t encountered in decades. As lending tightens, CFOs can collaborate with treasurers to control costs, improve liquidity, and better manage and monitor their banking relationships. At the same time, CFOs can take this opportunity to recalibrate their companies’ treasury-related market risk exposures, such as foreign currency and interest rate moves.

In the Deloitte 2022 global corporate treasury survey, a nearly unanimous proportion of respondents say that enhancing liquidity risk management (96%) and acting as a steward of risk management for the company (94%) are either “critical” or “important” mandates that the board or CFO has assigned to treasury. The global survey drew responses from 245 participants, nearly two-thirds of whom serve as treasury team leaders.

In addition, 91% of respondents describe being a value-add partner to the CFO as either “critical” (51%) or “important” (40%). That is fortuitous, given how much work awaits the corporate duo. In the survey, most respondents report that their organisations are planning to take actions to, among other feats, improve cash forecasting, address market risk, and boost capital structure—all within a year or so.

To deliver on the aforementioned mandates, treasury may also need to increase its operational efficiency, improve visibility into global operations, and deploy technological infrastructure to consolidate operations. In addition, treasury remains responsible for managing bank balances, asset positions, and financial contracts.

In this edition of CFO Insights, we’ll help guide CFOs and treasurers in increasing the function’s efficiency and resiliency by, for example, pinpointing transparency gaps, identifying new risk exposures, and considering future needs. How disciplined is the company’s approach to managing counterparties, such as banks? How adequate are its controls around mitigating cyber risk and fraud? And what working capital initiatives should the company undertake to offset rising costs driven by inflation, interest rate increases, and geopolitical risk?