Enterprise risk management: opportunity for the treasurer.

• Author: Jeffery, Craig
• Position: Treasury

Sarbanes-Oxley, and the regulations that flowed from the Act, provided many controllers with the opportunity for additional visibility in some areas within their specialty--financial reporting and internal controls. With the Act's emphasis on compliance, the controller gained a major role, while the treasurer was often on the sidelines. It may now be the treasurer's turn for visibility. Indeed, the renewed emphasis on enterprise risk management (ERM) may provide such an opportunity for treasurers to expand their influence and increase the value they bring to their organizations. And, it may happen without the equivalent amount of Sarbanes-Oxley regulations.

Microcosm of the ERM Methods

Most ERM frameworks foster a discipline examining overall risks together, rather than simply looking at each risk on a stand-alone basis. This mirrors what occurs in treasury at the financial risk-management level.

In the financial risk world, treasurers will look at all foreign exchange (Fx) situations and transactions as part of how they create their overall Fx policy. Further, they will use their knowledge of the enterprise, along with that policy, to see whether a hedge or transaction is even necessary. Treasury will usually know whether there are offsetting currency flows which make several/many trades completely unnecessary. This is made possible by the clear guidance set as they created policies, by knowledge of their business needs and access to accurate and current information.

This type of skill and experience is learned, and treasurers are already actively engaged in this process. Treasurers are equipped to apply these skills more broadly, as ERM requires. Thus, applying these skills to a broader ERM effort means adding some non-financial components to a familiar process. Concurrently, the amount of interaction from business areas must increase, and will require significant attention for optimal success.

Strategic Business Partner

To be truly effective in his or her role, a treasurer needs to be a strategic business partner, and ERM can help refine his or her abilities in this area. By understanding the entire business and each business area, the treasurer can bring unique expertise and skills to bear on various business problems the organization faces.

Being a partner can be contrasted with being a vendor. The treasurer who acts like a vendor might secure funding or services to fill an order of one of the business areas. Alternatively, the...