The Treasury Update Podcast by Strategic Treasurer

Episode 216

The Strategic Treasurer Series: Mastering the Strategic Role (Part 2)

In this second episode of our Treasury Roles and Developments series, we will discuss how strategic and operational roles differ. While it may be more practical to have staff members dedicated strictly to one or the other of these roles, many firms with smaller treasury departments need flexible employees who can transition between the two whenever needed. Paul Galloway and Craig Jeffery, of Strategic Treasurer, both weigh in on their previous experiences jumping between the two types of roles throughout the day.


Craig Jeffery, Strategic Treasurer

Craig - Headshot


Paul Galloway, Strategic Treasurer

Craig - Headshot

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Episode Transcription - Episode #216 - The Strategic Treasurer Series: Mastering the Strategic Role (Part 2)

Announcer  00:04

Welcome to the Treasury Update Podcast presented by Strategic Treasurer, your source for interesting treasury news, analysis, and insights in your car, at the gym, or wherever you decide to tune it.


Craig Jeffery  00:15

Well, welcome to the Treasury Update Podcast. This is Craig Jeffrey, I’m here with another senior adviser from Strategic Treasurer, Paul Galloway, we are discussing treasury roles and development. This is part two of a likely four part series. And just by way of background, operational effectiveness and strategic excellence are two key components for the treasurer role. And this short series explores some of the different types of roles within treasury. We began with an overview of the three roles they were strategic, operational, and hybrid. This is the second session and we’re going to be looking at the strategic role. We’ll call this “Mastering the Strategic Role.” We invite you to provide any feedback you have, or ideas for managing the different roles in treasury. Welcome to the podcast, Paul,


Paul Galloway  01:12

Thanks, Craig. Good to be here.


Craig Jeffery  01:13

You know, as we’re as we’re talking about how treasury professionals have different areas of emphasis or different roles, we’re on to the topic of strategic as opposed to operational or hybrid role, a hybrid role being between strategic and operational, maybe maybe you can start the conversation by explaining some ways in which the strategic role differs from the operational role.


Paul Galloway  01:39

Yeah, Craig, when I think about the operational role, I think of treasures in a normal or a not a normal capacity. But what used to be considered a normal capacity is kind of the day to day blocking, and tackling and treasurer spent a lot of time focused on that making sure the operationally, cash was getting moved, where it needed to be, that the company had access to cash when it needed it, or capital for its balance sheet, that the things that the organization needed from banking relationships to reporting, so it was very functional in nature, still is today, the operational role hasn’t gone away, you still need that. But what they’re doing today is they’re leveraging systems and other functionality within the organization or outside the organization to become more efficient. And what this has done is it’s allowed treasures to start focusing on the strategic aspects of their role, which is relatively new, not entirely new, but relatively new. And it allows a treasurer to step back and say, Okay, from an organization organizational standpoint, how can the Treasury function across the entire platform be able to provide access to cash or capital for the organization to grow. So it’s beyond just day to day functioning, it becomes more of a strategic conversation. And so they’re talking with not only the CFO, but they’re talking to business unit leaders that may need access to cash or capital down the road for very strategic initiatives. So these are these require more thought, more analysis, more internal partnering to come up with potential pros and cons to an approach, or to be able to support the business unit or the business writ large to meet these more strategic initiatives that may be driven from the CEO down or the business unit leaders


Craig Jeffery  03:53

You made a number of good points. It seems like you were indicating that for many treasury groups, they become more strategic of late looking at relationships, a longer term view. And I think that’s true. And you know, on the on the whole, there certainly been a number of treasury groups and teams that have been looking at these strategic activities, the balance sheet out many, many years financing, understanding risks for a long time, and that may differ by industry, company position, so things like non bank financial institutions, companies, like insurance companies, or those that are very heavy in that area often have had groups or multiple people who do that when we look at some smaller organizations. Oftentimes, the the treasurer is in a hybrid role there. They’re having to do multiple items, they get a person who can do cash positioning, or they get a treasury manager who can handle operations and perhaps some of the hybrid activities and they can focus more on the top of the house. So those are, so those are some of the things that we’ve seen happening for a long time. And then an additional focus on making sure organizations are planning for the long term. So Paul, as we look at what type of perspective is necessary for both senior treasury as well as management, when executive management looks at treasury as a department, what should they be looking for? What should they be hoping to, you know, evidence in terms of in terms of their roles? I’ll start with a couple thoughts, Paul, maybe you could fill this in.  I think they are looking management. Leading treasures are looking for people in a group that has at least somebody looking far ahead, and some are looking sideways. And what I mean by that, is, when someone looks ahead, they’re looking at particularly, you know, what does the balance sheet need to look like? What are the risks that the organization faces further down the road? How can I make sure that the balance sheet in particular supports the overall goals of the organization, the mission, you know, whether it’s growing in certain areas, or shifting to different geographies, or picking out new lines of business that they should be looking far and helping the organization anticipate farther than, you know, the next 30 days, not just let’s say short term cash position, but looking further afield. And then on the looking sideways, Paul, you know, this is the, you know, risk orientation, what can come at the organization from the side, whether its liquidity risk, interest rate risk, some type of financial risk, or other element that maybe others in the organization are considering? Treasury needs to have people who are, I don’t want to say paranoid, but very risk oriented. And they walk into a room and there they have a risk manager view, they look at what can go wrong. How do I mitigate that risk? How can I accept the risks that are fine? And how do I address those. So those are a couple things that I’ll start out with, I’d love to hear what you think some of your thoughts on the right types of perspectives to have.


Paul Galloway  07:08

Treasurers today are taking longer views on a lot of different things.  Several, several areas that I can think of, would be you know, forecasting.  Forecasting just going out longer, so that you can understand cash needs and demands. But on top of that, it also is including this component of capital needs. So think about treasures, having ownership in the capital management of the organization. So it’s not just cash, it’s its capital. So that takes a little bit longer view perspective. And so then they’ve got relationships with rating agencies and banks, you know, to help support this capital management view. And so when you start taking those longer views on things, then risk becomes more important. And so you do have to as a treasurer, you do have to walk into the room, with this thought process or this idea that, hey, I want to make sure that I understand what risks matter what things can impact the organization in a negative way, or in a positive way? And how do I mitigate the risks that could be a negative impact to the organization. And there is a certain point where, you know, you’re not going to manage away all the risks, there’s a certain amount of risks that every organization is is willing to accept. It’s just a matter of what are the right belts and suspenders to put in place to make sure that you’ve mitigated as much as possible, and put the organization in the position that given what you know today and what you expect to happen, that there won’t be adverse impacts that would stymie the organization for continuing to do what it does.


Craig Jeffery  09:09

You know, when you said adverse impacts, this is of size or magnitude that would be deleted, or very damaging to an organization taking it outside its, you know, risk, not just as risk capacity, but maybe its its tolerance for risk, which causes maybe overly protective activities after that if they suffer loss, that’s more than they’re comfortable with.


Paul Galloway  09:33

Yeah, no, I think that’s right. Certainly got to look at what are the activities internally, externally? What could the impacts be? What are the magnitudes? Certainly magnitudes can make a difference. There are probably scenarios where you may have something that’s in the infancy and why the magnitude might not be significant. There could be a risk It could impact something that is you’re working on to be bring out to market, that’s a brand new product or service. And so you try to, you know, manage those kinds of risks when you got something that’s maybe very young or new to the market.


Craig Jeffery  10:16

I want to talk about the strategic role, and its view of other roles. We’ve been maintaining that there’s different perspectives, you know, operational excellence as a strategic view, hybrid views where certain roles and functions may require someone to wear both those types of hats are take two types of postures, you know, how do we think about respecting the other roles, if let’s say we are in a strategic role, or working on the debt and capital markets, how should we properly think about those other types of roles, and maybe you can explain that just generally, or perhaps, as you took on a role stood up at treasury department of a fairly significant company, and had to build the department and move from you know, how to do both all the time, to bringing on a team that does that, both both those types of functions.


Paul Galloway  11:12

That was a great learning experience for me.  You know, I had a lot of experience from different organizations that lent itself to doing what I did at this particular company. And there was a great need for a treasury department. But there weren’t people in place, it just wasn’t something that existed. So I had to build it from scratch. So not only was it processes and systems, but it was people as well. And so my role went from building something out, creating something, to working on the operational day to day operational aspects to those strategic aspects. So I’d find myself in the mornings, I spent a lot of time on my team working on cash positioning forecasting, ensuring that we had liquidity sources available. talking internally with my business unit leaders, talking with banks, and just ensuring that from an operational standpoint, everything flowed smoothly.  I spent a lot of time just really intense, really fast pace. And that was my morning, coffee helped me through that, thank goodness.  By the afternoon, I had to switch roles switch hats, because I had responsibility for rating agencies, bank relationships, capital funding, I had to raise capital, I had to put in place liquidity sources, like Federal Home Loan Bank, give considerations to internal, internal or intercompany loans or in-house banking. So I had to spend time on some of these more strategic aspects that took time.  It’s not easy to make that switch.  And so people outside of treasury might not fully appreciate, you know, what is Paul doing? I can see he’s doing some of this stuff in the morning. By the afternoon, it’s, you know, I don’t know if he’s doing anything at all.  I would spend a lot of time on all kinds of different projects. Some of it was quite labor intensive, and took a lot of brainpower and relationship building to get some of these things across the finish line. What about you, you’ve got experience doing the same thing? What kinds of things or challenges have you seen, you know, in respecting the two different roles and capacities.


Craig Jeffery  13:43

When I moved into treasurer, I had moved from area finance, I moved into a management role. So I had supervisors in various team members, a fairly large team to be responsible for. So my role was a bit hybrid, I would be approving things or overseeing activities or filling in one managers route. But I was also responsible to help automate and figure out what needed to be done to make the area more efficient, especially as responsibilities grew, more people got added, there were a number of let’s say, a reduction in force that took place. So one of the things that was important for me as we’re going through that was to take on some of those daily roles, the operational roles, to really understand what’s going on. It’s one thing to get a concept going. It’s another thing to do it for a few days, and I found I was much better at helping to automate processes. When I did the work for a few days. I didn’t have to do it for a week but doing it for a few days, there was a bunch of items and activity that that taught me not only what the work was, but how it made you feel. And I say how it made you feel as I remember, I picked up the cash positioning activity. And we needed automated that was being split out from, I’ll just call it one of the one of the companies. And it was coming over to our so our team had to pick it up going and sitting down with Bob for a few days to see how the process worked. I just remember thinking this is some type of organized chaos, dozens of phone calls, it’s dozens of emails, reports being dropped off, physically reports being sent, communicating with traders to make investments, there’s just like a million individual activities to get things organized. There was two things one it was, we need to automate some of these pieces to get the data coming in digitally. So we’re only reviewing not having a million touch points. But it also set up this idea like you were talking about in the afternoon you worked on, we worked on projects in the morning, you were putting out the fires are working the daily process. And I just remember how I don’t want to say jacked up. But how there’s when there’s so many millions of items there, you get this like, hyper mentality. And then the afternoon, you’re like you’re spun up. And so it’s like, how do you sit there and think deeply when you’re spun up. And so lunch would oftentimes act as a natural break to try to calm down and then say, let’s think about how we do these things on a more long, long term basis. And so that was very instructive to my thinking about these two different roles, it was helpful for how we had automate things. But I just remember, it’s it was hard to shift, it was kind of like you’re grinding the gears, it’s hard to press the clutch in, shift the stick into the right lever and, you know, move the gas pedal in the in the clutch at the right, the right way to make things transition smoothly. There was a bit of grinding of the gears. And so that was, that was some aspect of it. But the other thing, Paul, too, and it’s it seems like they’re certain people are really good at operational excellence and lots of activities, they’re just they thrive on it and do really well, with a million things thrown at them at once. And others, it’s a that would drive them crazy. And others or they need to think long, deeply on certain topics, be very careful in their analysis. And some of those, some of those people aren’t very good at the I don’t know, the myriad of activities that come in operational side, Paul.


Paul Galloway  17:23

Sometimes I saw some of that myself, you know, trying to transition between the two roles. What I say I thrive on the fast paced environment, not necessarily, but I certainly can live within it, I’ve proven it and done it. My preference is more of a strategic, but I did find out I was able to do both. It’s just really TierPoint it’s, it’s difficult to move from one set of activities to another because it requires different pace, different perspective, different focus. And the nature of what’s being done is they’re almost polar opposites. It’s like you got a barbell, and you’re on one end, in the morning, you’re on the other end in the afternoon. Not everyone is able to deal with that. So some people come into a treasurer role that requires more of the hybrid approach, and do just fine and others, they would rather you know, find a organization that is just purely strategic or purely operational.


Craig Jeffery  18:35

It’s ping pong in the morning, lots of motions without moving a lot of weight, they’re like individual, the weight adds up by the sheer number of paddle swings that you have. And in the afternoon, you’re lifting weights, a lot less reps, but very, very different. So it’s just your strength versus speed is looks very different. Maybe we could talk about transitioning between different roles or as you take on more strategic activities. You know, one thing that was, I would say was, was interesting for me, it was there were so many activities, we were always bringing on new business. And so as design and layout, how the process should work. That was something we had to do all the time, build new, you know, here’s here’s a new process outflows the banks had the accounting work, making sure that that’s communicated and documented. And so that became very regular what was being done, but I remember one transition, there was this, reviewing large contracts with banks or technology firms. I remember that was something I put off because you had to sit down and go through things in detail. I remember putting some of those things off and putting them off and putting them off. I remember I was a member of the treasurer saying when are you going to get this done? You need to get this done because the banker had had asked about and so I I made sure I sat down and got all of it done and went through it. And I’ll tell you after that, as I’ve gone through more and more contracts. I mean, I’ve gone through, in my role I’ve gone through, I don’t know how many I mean, it’s it’s 1000s and 1000s of contracts. I mean, every, every week, there’s multiple agreements and contracts that go through. To me, that’s almost like the operational is like, we just fly through them. And I just remember how hard it was to do that type of type of review. Not that reviewing contracts is always strategic. But just remember those transitions are sometimes hard, you get out of your comfort zone in a weakness can become a can become a strength.


Paul Galloway  20:32

I can relate to that, Craig, in a prior role, where I worked in corporate development, and we did m&a transactions and capital funding, I spent a lot of time looking at agreements. So it was either agreements on the deals we were doing, or it was agreements through due diligence. And so I spent a lot of time with lawyers and bankers and various businesses, and I really cut my teeth, learning how to understand that go through legal documents.  Tthat served me well, my role at the prior company were built out the Treasury Department, because I spent a lot of time reviewing agreements there, both for capital funding and for the systems that we put in place. A lot of different agreements that I went through, the more you go through them, the better you get at it, right? I mean, you gained speed, because you understand the things that matter the things that are traditional boilerplate language that you expect to see in there, which are going to make sure it’s in there. And then you can identify where the gaps are, where they’re, you know, legally, there’s some things you may want to have in there that aren’t, there are some things that are in there that, you know, are favorable to you. And so you want to get rid of them. So there’s always that kind of legal cat and mouse game that you play, where you might give up something to get something or you get something by giving up something.


Craig Jeffery  22:01

And then thinking about risk, you know, reviewing contracts, not from a legal standpoint as much from a business standpoint, the risk factors in there greatly.  The last section for our discussion today about mastering the strategic role, I think we’ll probably do this in each section. But we can see if that really works, as we go through this, but what what is the opportunity or the threat here, for automation? For the strategic role? What do you think about that? What are some of your thoughts there?


Paul Galloway  22:30

So there could be it could be said that by automating some things that maybe folks are a little less intimate with the detail, because the details just come in and getting fed into whatever system, and then a report is generated. And you’re taking the report and making decisions off the report. So you might think of, you know, the analogy of understand the nuts and bolts, perhaps some of that you lose some of that through automation. The flip side is that the efficiency gains that you get, can be significant and can save a lot of time and can help decision makers cut through information that would perhaps slow them down in the decision process. There’s opportunity there with the automation, and this opportunity presents itself with efficiency gains, better reporting, more timely reporting, more actionable activity, through automation. So So I think there’s definitely benefits there to it. One of the things that is key, though, and where the nuts and bolts come into play, is the data, you have to understand the data in order to automate meaning, you gotta understand what is it you need. So you do gotta go back to the nuts and bolts to get to a point that you have a source of truth. And you have the moving parts that matter that go into your automation. So if you have lack of data, or you have incomplete data, parts or something, but not everything, the automation doesn’t really mean anything at that point, because whatever it gets put into a report or some other tool within the system to generate decision making, you will make it with incomplete or missing information.


Craig Jeffery  24:31

You were talking about data and some automation. I had no idea what you were going to say on the section we talked about here for the threat or the opportunity, I guess, it spurred me to think in a couple different areas, hearing your responses, you know, when I think about you know in a strategic role, there might be to two different areas to to focus on automation. One is on this risk orientation, how do we effectively understand our risk understand what are its exposures are. And one of the biggest challenges here is getting at all of the data, making sure all the data is accurate. And I think now, in 2022, there is much better opportunities for understanding foreign exchange exposure, exposures in your company, other external exposures, commodity price, other elements, financial risks that exist, I think we have better tools for pulling that information together. And then I think the opportunity and threat is, if we pull it together, we have to make sure it’s pulled together. And it’s accurate. And part of that is becoming more of a technology expert, or having that in your group so that you can do this quickly. Because modeling risks, if they’re long term existing known risks, you can have systems and processes where the data flows in it runs the models for you, and you act on it. But oftentimes, Treasury is looking ahead, things are changing. And so that requires building new Bridges to the Future. It’s not building to the past. And so I think that’s an area that is a is an opportunity for Treasury professionals to make sure we know where the data is that we can get we know what the limitations are, we pull that together, when we might, we might use more business intelligence tools, more Excel modeling, and then something that’s incorporated into a financial risk system into a treasury system. Because we’re modeling something that maybe is new or a combination of things having occurred before, or maybe it is something that’s built, and we’re making sure it’s factored in. And that seems to be one area that I think about I know, we’ve talked about, as we work with companies to to make sure you understand all of your exposures properly, quickly and accurately. You know, I think the other you talked about efficiency. And I think there’s an element of that for when we think about the strategic role, understanding where things are in the future. And that’s a, you know, that’s a, you know, when you run models, you’re looking at what your balance sheet needs to be like. And that’s that’s true, you want that to be, you know, you want that to be fairly efficient. But there’s also a strategic aspect of what do you do with your technology to help the operational and the strategic, but certainly the operational, and that involves understanding tech, to say, what do we do with data, with our connections over time with our systems, and then reporting and analytics as a way of monitoring what goes on if we’re, if we’re undergoing change, I think there’s more change. On the operational side, if it’s less automated operational activities, a larger percentage of that activity can be automated, at least it seems that way to me. And by pulling that into, into systems, we need to think about how do we do that so that it supports not only today’s needs, but over time? And so we make decisions on formats on connections? Are we using file based connections, API’s or streaming? You know, are we anticipating being able to do all our analysis in one system or another? We’re gonna do it freeform in Excel, or we’re also gonna layer in business intelligence tools, how will that factor in with where we put data and information, you know, in a data lake, for example, and we will pull that data into our analysis tool, because we’re running a lot of analysis as a, an analytical group. So a couple of those things, you know, a couple of things you said made me think about those other aspects of strategy around automation, you know, for efficiency, and for analytics and modeling.


Paul Galloway  28:43

Yes, spot on. I mean, organizations today are understanding that data management is become more and more important. You’re finding organizations that are hiring tech savvy people to manage data. And these can be everything from a data scientist to it, folks understand how to manage data lake to get information in to ensure that its source of truth, good information, working with business units that drive the data going into there. And then as well as making connections in the systems and so data management is extremely important for organizations today. I think if people you know, younger, people aren’t understanding that today. They they need to get up to speed on that because more and more companies are going to demand that people understand how to manage data, but also the analytics behind understanding data and what it’s telling us.


Craig Jeffery  29:47

Right, thanks. Thanks, Paul. Thanks for for talking on the strategic role today as part of this series. Really appreciate your time.


Paul Galloway  29:55

Thanks, Craig.


Announcer  29:58

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Treasury Roles (Part 1)

Treasury has many responsibilities. Some are highly operational and important, while others require a strategic outlook with a focus on relationship management and foresight. In this four-part series, we look at the strategic, operational, and hybrid roles of treasury. Listen in as Craig Jeffery and Paul Galloway of Strategic Treasurer kick off this new series.