Treasury function crucial for finance policy

A company’s treasury function is key to determining its financial strategy and financial policy.

Other finance areas such as accountancy typically focus on understanding the history of transactions to develop and provide data measuring the performance of the firm, assessing its financial position so they may prepare financial statements.

Treasures differ as, in essence, they consider the most effective funding vehicles for each activity, manage the financial risk the company is exposed to and handle the organisation’s banking requirements to ensure that at all times it has the cash to meet its obligations.

Firms in the Middle East are increasingly realising that treasury should be a core part of the finance function but there is a long way to go. A survey by Deloitte in June this year found that 50 per cent of respondents don’t believe their treasury strategies are aligned with the company’s current business model. This number should be much lower as for a firm’s treasury function to be truly effective, it must be a strategic partner to the business, supporting key financial decisions.

As an example, Dubai Aluminium (Dubal) was recently presented with an Association of Corporate Treasurers (ACT) Middle East ‘Deals of the Year’ Award for their market-leading approach to organisational structure and technology innovation that significantly 
improved the way the company delivered financial decision making. In terms of raising 
finance to meet business strategy, the treasury function at Asiacell were instrumental in its recent listing on the Iraqi bourse, the biggest IPO in Iraqi history, widening the size and depth of the company’s investor base.

Evolving the treasury function from a cost centre that needs board approval into a business partner that adds value takes time but is a crucial exercise if the businesses of our region are to capitalise in the potential for growth the economic upswing could potentially provide. The ACT sets the benchmark for international treasury excellence. As the chartered body for treasury, we lead the profession through our internationally recognised suite of treasury qualifications, by defining standards and championing continuing professional development. Through our work over the past seven years, we have increased the number of trained and qualified treasurers in our region that, has helped develop the economies they work in.

Whilst treasury may be a relatively young financial profession in this region, it is one that is gaining more and more respect in terms of the reliance boards place on the advice of those within the function.

In order for us to capitalise on the opportunities available to us in the UAE, such as Expo 2020 and the surge in investment and economic growth that economists have forecast, we need to invest in the people within those organisations leading this development.

The phenomenal surge of activity within the Islamic economy presents organisations in the Middle East with a further opportunity to raise finance. Research has found that global Islamic Banking assets reached $1.1 trillion in 2012 compared to $826 billion in 2010. In the Gulf region alone, Islamic Banking assets are expected to grow to $990 billion by 2015 from $416 billion in 2010. In October, Dubai announced its strategy to become the global capital of the Islamic economy and as such, the attention of many finance professionals has turned away from conventional finance towards Islamic options.

Potential investors, whether they specialise in conventional or Islamic finance, demand a high level of risk management, which require businesses to have a treasury function made up of qualified professionals to respond to these demands.

In the future, therefore, treasurers who are involved in growing a firm’s treasury infrastructure in place can gain valuable skills and experience that are harder to come by in more developed markets where advanced treasury functions already widely exist. This need to build knowledge of the treasury profession for the good of the wider financial community and the decisions associated with the organisations based here is why I am involved with the ACT.

We must work to encourage more of our students to consider treasury as a career so we can continue to support the economy and support our next generation of finance professionals. To do this, organisations must embed career development plans for junior employees to guide them through the ranks. Indeed, we must also ensure we encourage the next generation of Emiratis to choose treasury or finance as a career by highlighting the importance of professionally qualified experts leading the country into the next decade. At Mubadala, we have put a plan such as this in place and I personally have seen junior colleagues thrive as a result.

I have dedicated my career to championing the work of treasury teams across the world and with time, I hope that our profession will be fully recognised for the value that my colleagues can bring to financial strategy and decision making.

The writer is the chairman of Association of Corporate Treasurers Middle East and executive director group 
treasury, Mubadala Development Company. The views expressed by him are his own and do not reflect the newspaper’s policy