MIAMI –– October 14, 2012 –– As a result of the critical role that
corporate treasury departments played in sustaining their companies through the
recession, companies are expanding the role of the treasury function, according
a survey by the Association for Financial Professionals (AFP). With the crisis abating, corporations are not
scaling back this role but doubling down on it while continuing to lower
treasury banking costs and demand efficiency from the function.
The 2012 AFP Treasury
Benchmarking Survey, underwritten by PNC, found that
fifty-five percent of organizations expanded their treasury’s mandate over the
past five years versus just five percent that narrowed the focus. This
expansion is even more common at large companies with annual revenues over $1
billion.
Two-thirds
of survey respondents said that their treasury department now oversees at least
18 functional areas ranging from cash flow forecasting to financial risk management,
financial planning & Analysis, M&A, and investor relations –– all the way to employee benefit management. This
expansion of the treasury role appears to be permanent, indicating the
importance of treasury in good times and bad.
“The best companies are
distinguished by great treasuries,” said Jim Kaitz, AFP’s president and CEO. “Yet, the current business environment means
that companies are demanding a high level of efficiency in treasury cost structures
and process design. Corporate treasurers
find they must make necessary tradeoffs.”
Significantly,
the corporate treasury departments that have expanded recently tended to do so
with normalized cost structures that barely differ from departments that have
not seen a significant change in structure, though they also tended to have
larger staff to absorb additional work. Also
indicative of the overriding efficiency concern: the two most common success
metrics for treasuries are reduced banking expenses (79 percent of
organizations) and improved efficiency (71 percent).
Treasurers surveyed did
not think that cost efficiency itself was a universal measure of a treasury
department’s success, due to variables in business type, borrowing structure
and business model. Anecdotally, some companies measured treasury success by
maintaining liquidity and paying down debt whenever possible. Others sought
opportunities to repatriate overseas cash to pay down U.S. debt and measured
success by the ability to keep interest expense below budget. A number of treasurers said they are judged
on their ability to identify opportunities to put cash to use versus keeping it
idle.
ABOUT HE SURVEY
The 30-question survey evaluated operational issues for treasury departments
that directly affect an organization’s success and generated responses from 715
organizations. AFP also conducted substantive interviews with corporate treasurers
related to the survey for further insight on survey topics.
Corporate treasury
departments use the AFP Treasury Benchmarking Survey as a basis for comparison
with the best of their peers. The report identifies performance levels of
participants, analyzes performance by peer group, and defines world-class (80th
percentile) targets across key operational areas ranging from processes to
personnel to technology.
Report highlights and
interactive treasury benchmarking dashboards are available on www.afponline.org/benchmark
ABOUT AFP®
The Association for Financial Professionals (AFP), headquartered outside
Washington, D.C., is the professional society for more than 16,000 members in
corporate treasury and finance. AFP provides articles, economic research and
data, treasury certification programs, networking events, financial analytical
tools, training, and public policy representation to legislators and
regulators. AFP's global reach extends to over 150,000 treasury and financial
professionals worldwide, including AFP of Canada; London-based gtnews, an
on-line resource for the treasury and finance community; and bobsguide, a
financial IT solutions network.