HSBC's Guide to Cash, Supply Chain and Treasury Management in ...

Three Phases of Treasury Evolution
David Blair, Independent Treasury Consultant, Singapore
• Usually, at an early phase in its evolution, treasury is inward looking, concerned with optimising
its own efficiency.
• In the next phase, treasury looks outwards to the rest of the company, to optimise treasuryrelated
processes at a company-wide level.
• In the final phase, treasury looks to optimise the company’s entire supply chain, as the focus
shifts from department to enterprise to customer.
• There are various dimensions of treasury evolution – such as demand chain management, risk or
technology – and each expresses itself uniquely according to the underlying needs of a business.
Treasury suffers from the intrinsic problem of being non-core to the commercial enterprises that it
serves. Treasury is thus condemned to the role of a back office department. In this role, it can be
hard for treasury to connect with the core objectives of the business. This in turn can cause treasurers to
focus on professional efficiency and optimising the treasury department rather than to look at the wider
picture.
Treasurers understand that their role is critical to their enterprises’ health and even survival. Simply
ask sales people if they want to be paid in sales – or even profits – or in cash! However, even treasuryrelevant
goals like cash flow can seem remote from the day-to-day focus on cash planning, funding,
investment and foreign exchange (FX).
Of course, the basics – the sometimes conflicting goals of risk and cost reduction – will always be crucial
to successful treasury, especially the key risk of liquidity, of ensuring sufficient cash for operations.
Unfortunately, these are negative successes. The exceptions are enterprises that have experienced neardeath
cash flow deficits. If they survive, senior management tends to place serious emphasis on cash
flow.
To a large extent, treasury is a hygiene function, whose role is to make sure that:
there is cash where and when needed (liquidity risk and cash management in the short term and
corporate finance and capital structure in the long term);
HSBC’s Guide to Cash, Supply Chain and Treasury Management in Asia Pacific 2012 47