The CFO Perspective: The Strategic Value of Treasury

ONE WAY TO MEASURE TREASURY VALUE IS BY HOW STRATEGIC IT IS 29 Sponsored by: Modern treasury management systems that provide better forecasting, financial metrics, improved visibility through integration with bank systems, ERP, and third-party information services have become enablers that give treasury a bigger view of risk. “Now treasury has a more holistic view around how all these risks interplay with the rest of the business. For example, if there are significant changes to tax law, treasury can see how that impacts a company’s ability to source or sell product. Treasury can look at the impact on interest rates, foreign exchange, cash-management risks,” says Hoffman. Or if a counterparty bank is downgraded, that information is immediately available and its impact quickly understood. These capabilities give the CFO a new level of confidence in critical financial information so that he or she can spend less time questioning financial data and more time focusing on the business activities that depend on it. But for all these benefits that come from a modern treasury, how do you measure its value to the business? “This is a challenging area for many treasuries and companies,” Hoffman says. “We can all get metrics on the number of payments we make, what our foreign exchange gains and losses are. These are the obvious ones. But what is treasury doing beyond that? How do you measure that strategic value?” One way to do this, he suggests, is to think of treasury as a profit center rather than just a cost center. “For example, you can make treasury a profit center for the purposes of foreign-exchange risk management. You set a benchmark at the beginning of the year and say, ‘We want to beat that benchmark.’ Then you work to beat the benchmark, add value and are appropriately compensated for it.” You can make treasury a profit center for the purposes of foreign-exchange risk management. You set a benchmark. Then you work to beat the benchmark.