Today's Treasury Function.

• Author: Sagner, James S.
• Position: Treasury

Corporations are evolving from the industrial (old) economy to the intellectual (New) Economy, and the resources of value are changing from manufacturing plant and assembly workers to information and financial capital. As this transformation occurs, the traditional line-and-staff form of governance becomes irrelevant. In the new environment, the financial manager will be expected to actively participate in the management of the enterprise, and not just in treasury, accounting, insurance and other finance activities.

The responsibilities of the financial manager have become considerably more than managing the cost of capital, determining that accounting entries are correct and calculating if there are adequate bank balances to cover today's check clearings. The job requires intimate knowledge of the core elements of the business enterprise regardless of his or her functional assignment, in addition to working with other senior managers to optimize operational processes.

Competition's Impact on Traditional Organizations

In the old line-and-staff organization, finance was considered a staff function, separated from and advisory to other business units. This isolation was only overcome at the senior manager level, usually in consultation with other executives. This "silo effect" created a sub-optimizing them against us attitude, while ignoring the purpose of the corporation: to maximize return on equity and shareholder value.

Financial managers typically have not focused on business operations, and may not have insight into the meaning of numbers on spreadsheets or bank statements. They have not participated in sales calls, visited manufacturing facilities or pondered information technology applications. Unfortunately, financial staff often stay confined to their desks, making them largely clueless to the purpose of other company operations.

Financial management is the development and implementation of integrated financial strategies for the business enterprise. Unfortunately, demands for instant information and results that meet or beat forecasts have too often become the focus.

Today's leading companies are now demanding an end to the silo attitude and are focusing on the interconnection among all elements in the business enterprise. This realization results from three factors: 1) the demands of global competition; 2) e-commerce opportunities; and 3) permanently higher costs of capital.

The Global Economy. In the old economy, financial...