Internal Treasury Relationships

However, in many ways, modern companies can be difficult places to collaborate and work with our colleagues: conflicting priorities and objectives make it challenging to obtain the resources and help we need to do our jobs. This goes from the traditional problem of sales teams who want to increase payment terms to improve revenue, to IT departments, for whom treasury’s needs are often far from being a top priority.The call took place before the failure of First Republic Bank, and its acquisition by JPMorgan.

In our calls, participants regularly complain of the challenges in getting the help and cooperation of other functions, and the low priority for resources which comes from being a cost centre. We organised this call to go through the challenges people face, and see which actions work best.

The functions treasurers have issues with are fairly consistent: sales, procurement, tax, accounting, FP&A, legal, IT. The single issue which came through the most was KPIs and compensation: if treasury’s risk management recommendations get in the way of achieving a KPI, that can mean a reduction in personal income for someone.

If there was a simple solution to this problem, we would have all implemented it by now. But some common themes emerged:

• Communicate, communicate, communicate: sharing a problem or a viewpoint does not guarantee help – but it does increase the chances of getting it.
• At the risk of stating the obvious: a lot depends on the people involved
• Try to communicate facts and data: positions are respected better when they are backed up by data.
• Try to create a win/win situation: everyone noted that cooperation increases significantly when the other side also needs you. As one participant put it, the team in Egypt needs help: they are more likely to cooperate than the one in Japan, which does not.
• It is important to have the backing of management.
• Of course, there are situations where Treasury can help the functions meet their KPIs – that improves relationships!
• One participant has a CFO who will not entertain a meeting on any subject until all the functions reporting to them have reached consensus. This forces everyone to agree – but it can slow down the decision making process.
• It was not always easy to obtain the cooperation of shared services centres, especially for functions such as accounts payable. Most treasurers retain control of at least their front office functions, but some back office activity has migrated to SSCs.
• High staff turnover was reported as a risk with SSCs located in low wage countries: staff there often leave, once they have acquired the necessary training and experience. They take with them the relationships which have been established.
• Vendor financing requires the cooperation of Procurement, who can be very reluctant to engage in difficult discussions with suppliers, or allow Treasury into the relationship. This can change very quickly once suppliers are on board, and appreciate the product – this has very much been the case since COVID.
• As a consequence of recent geopolitical events, several participants reported an increase in the awareness of political and sovereign risk, with more meaningful discussions about cash and investment levels in riskier countries.
• Managing personal relationships is always difficult. While there is a lot of pressure to avoid confrontation, several participants agreed that it is important to earn respect – and this can require using the dreaded “no” word.
• One participant managed the IT resource issue by outsourcing maintenance of their TMS. This was not the preferred solution, but it worked.
• Risk management can be a problem: the business is often reluctant to spend money on insurance premiums, risk mitigation equipment such as fire sprinklers, or even currency hedging programmes. However, those same people are often very quick to allocate blame to others when things go wrong. One participant remarked that is important to remain calm during these discussions, and not take them personally.
• Many functions today, such as Procurement or IT, employ business partners to ensure effective communications with other functions. This is generally helpful.
• One participant found it was very beneficial to sit down with other functions (such as Procurement), to thrash out and document who is responsible for what.
• Another issue which surfaced was inefficiencies caused by KPIs: one participant’s business has tight capex controls – so the business units often lease equipment, even at very high implied interest rates. Addressing these situations can be contentious.

Bottom line: in any human organisation, work can only be achieved with and through other people. In companies, those people often have conflicting objectives – objectives which can affect how much they earn, or even whether they keep their jobs. All functions in a company are competing for scarce resources: not everyone can be satisfied.

Managing all these relationships is an art, not a science. There is no simple, universally applicable solution – after all, you are dealing with people. But communication always helps: please read the many situations below. They are very informative.