Where the retiring generation was preoccupied with making treasury operate and crafting, reengineering and updating a secure, reliable, efficient process, 21st century treasurers–given their departments' high degree of automation and some outsourcing–often find that the jobs that were the prime preoccupation of last century's treasurers are finished with the day's first cup of coffee. It's then that their real work begins. "Superb performance in liquidity management, balance sheet management and risk management has moved beyond a challenge to become a given for the 21st century," observes Susan Skerritt, partner in the New York office of Treasury Strategies Inc. "Where they really distinguish themselves is how well they can go beyond those traditional activities and actively find ways to help the business units do their jobs better."

So, what's that real work? Increasingly, it involves face time with the business units–understanding what they do, what they need and how treasury can play a role in helping them operate better. Counterparts in treasury or accounts payable and accounts receivable at key suppliers and customers are also frequently on treasury's agenda for conversations and planning on ways the financial supply chain can operate more efficiently for both sides of transactions. To make things happen outside the areas that the treasurer controls requires strong managerial skills. He or she must be a persuasive communicator, one who can open up others to the good that proposed changes can produce. "Traditionally, treasurers were buyers. They bought financial services. They were tough-minded, independent and had sales resistance. The 21st century treasurer has to be a salesman, championing solutions and then selling them to the various constituencies that have to buy in," says Jeff Wallace, managing partner of Greenwich, Conn.-based Greenwich Treasury Advisors. "Instead of a smart introvert, he or she needs to be a smart extrovert. Instead of buying skills, he or she needs selling skills."

Most important, it involves taking the benefits from efficient working capital management or risk management or a multitude of other areas under treasury's control and applying them to strategic goals that produce bottom-line results for a company or a unit of the company. For instance, Microsoft's treasury was forward-looking when it designed a foreign exchange risk management solution for a Brazilian subsidiary that didn't just make Microsoft's treasury perform better, but helped that Brazilian sub sell more Microsoft products.

Indeed, risk management is one area in which a treasurer's responsibilities have exponentially grown. Commodity prices, financial markets and especially currency exchange rates have become much more volatile. Treasurers are becoming business consultants to the operating divisions and expanding their role as risk managers, even going so far as to take control over purchases of key commodities, such as palladium for the auto industry, that require that their prices be hedged, says Keith Bergman, solutions manager for Wall Street Systems, a high-end treasury software vendor.

Technology is another must-know for would-be treasurers. The challenge is to do more with less, notes Alfred Carpetto, western hemisphere sales executive at JPMorgan Treasury Services. Today's treasurers must be adroit at adopting new technology to automate whenever possible, exploring outsourcing options and letting vendors know what they would like to see in future products and services, he adds.

In this arena, treasurers are becoming "true process specialists," says Geoff Garden, head of global cash management for U.S. corporates at Deutsche Bank. They are the ones who not only have to evaluate treasury-oriented platforms that provide services such as EIPP (electronic invoice presentment and payment), but they also must ensure that these new systems become part of the operating fabric of the broader corporation, even tying in automatic vendor financing features.

To get treasurers with the right mix of skills is requiring some new training for candidates, and trade associations are getting into the act. The Association for Financial Professionals in Bethesda, Md., has ambitious education and certification programs. To be a Certified Treasury Professional (CTP) for the new century, a person must pass a test on an evolving body of knowledge that will be expanded by 45-55% by 2005, reports James A. Kaitz, AFP's president and CEO. Areas to be increased include working capital, operational risk, asset management, outsourcing and vendor selection, trust and stock administration, and external financing, including leasing, capital structure and dividend policy, he explains. Cash management has shrunk to around a third of the CTP exam, while broader treasury management and accounting and finance have grown to between 30% and 35%, he adds.

A new role means a new career path. Treasury professionals will have less opportunity to advance by hopping from one corporation to another as treasury specialists and more opportunity to move up within one company as they learn the specific needs and nuances of the various business units, notes Les Halpin, CEO of Integrity Treasury Solution, a workstation provider. "There has been a treasury career path in the past, but it's becoming more of a finance career path with advancement based on broad knowledge rather than technical skills," he observes.

Forward-looking companies are also considering candidates who could eventually be CFO. They hire a corporate banker or a financial consultant, throw him or her into treasury operations to learn the process and technology, then promote him or her to treasurer. Holland, for instance, began his career at Apple Computer Inc., where he worked in manufacturing and corporate finance, and then went to Paribas Capital Markets, where he headed the capital markets sales team.

Treasurer is not necessarily the end of the process, Treasury Strategies' Skerritt notes. On occasion, a treasurer will move to work on an important project or two with direct-line accountability to the CEO and then may be shipped to a business unit as its president or CEO, she says.

A cynical half-truth gained popularity in the 20th century: A treasurer was someone who didn't know enough about accounting to be a controller and wasn't smart enough to be the CFO, recalls Greenwich Treasury's Wallace. "That can't be even half true in the 21st century," he says. "The treasurer has to know accounting and has to be smart enough to become CFO."

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LIVING ON THE HEDGE

Hydro-Quebec, one of the world's largest generators and sellers of electricity, has had a pretty good run these past eight years, reporting double-digit gains in net earnings on a balance sheet that is barely growing. And while there are many factors and executives that figure into the success of the Montreal-based operation, which is owned by the province of Quebec, Paul Robillard is certainly one of them. Hydro-Quebec's treasurer for the past six years, Robillard heads a team that has been working hard to make sure hard-earned Canadian dollars aren't lost unnecessarily by sudden price dips or burned up by overly aggressive market hedging to protect against them.

Hedging doesn't make the money, of course; it protects it. And state-of-the-art hedging–the kind of risk management Robillard and Hydro-Quebec are well known for–consumes less revenue in the name of that protection.

During the last two decades, treasurers learned the ABCs of hedging. If they had global operations in multiple currencies, smart treasurers learned to net out their currency exposures and hedge a net position, a less expensive and more effective way to hedge. And they did the same with interest rates and, in some cases, with commodities.

Now Robillard and Hydro-Quebec, which has exposures to currency, interest-rate and commodity volatility, have put all three of those exposures in a single risk portfolio and learned to compute a net position they can hedge. There may be natural offsets between a currency risk and an interest rate risk, observes Robillard. He illustrates: If the Canadian dollar declines in value relative to the U.S. dollar, Hydro-Quebec's exposure to U.S. floating-rate interest would increase, and if you hedged each separately, you'd be likely to over-hedge, incurring unnecessary expense and perhaps dampening financial performance.

But determining how much a bunch of currency exposures offsets a bunch of interest-rate exposures, which in turn may both be offset to some degree by a bunch of commodity exposures, goes a long way beyond the ABCs of hedging. It's the full alphabet. It smacks of off-diagonal elements of variance/covariance on a risk matrix, analytics that are largely the work of a Montreal business professor and five full-time financial engineers who work for Robillard. "The fun begins once we've analyzed our risk and set out to hedge it," Robillard explains. "There is a popular misconception that $1 of interest-rate risk is equivalent to $1 of currency or commodity risk, but all risks are not created equal. That's where you have to make adjustments to find the best way to optimize hedging for the entire risk portfolio."

If Hydro-Quebec's risk analysis and hedging strategies are highly sophisticated, the instruments it uses for hedging are surprisingly vanilla: standard Eurodollar futures contracts for interest rates; standard forward contracts on currencies; and standard futures on commodities, primarily aluminum, traded on the London Metals Exchange. "We have a few tricks and some well-kept secrets, but nothing earth-shattering," Robillard modestly disclaims. "Essentially, we're portfolio managers, weighing the performance of various components and looking for ways to optimize the portfolio. Only what's in our portfolio are not financial assets but risks."

His handiwork wins admiration. "Hydro-Quebec's exposures are linked not just to the dynamics of the currency markets but the dynamics of the aluminum market, so they have to have sophisticated analytics and traders," notes Jeff Wallace, managing partner at Greenwich Treasury Advisors, which counts Hydro-Quebec as a client. "When people benchmark risk management performance, Hydro-Quebec always comes out near the top."

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SILO-BUSTER

At Diebold Inc., treasurer Bob Warren has a curious formula for success: Sometimes you have to advocate solutions that sacrifice treasury goals to meet broader corporate goals. Heresy, you say. But that's what makes Warren a 21st century treasurer. "It's not a sales goal to collect accounts receivable as quickly as possible," he illustrates. "That's a treasury goal. The sales goal is to keep customers happy and continuing to buy. So when I sit down with sales, I look for the best overall solution for our shareholders. Sometimes that means sacrificing treasury performance in the interests of broader enterprise-wide financial performance. For example, we might give longer terms to customers or accept shorter terms from suppliers if what we get is worth more to Diebold than the cash flow we give up."

In his 23 years with the $2 billion Canton, Ohio-based provider of bank ATMs–the last 10 as vice president and treasurer–Warren has helped to engineer a forward-looking treasury that doesn't put its interests first, but still managed to bring in an additional $165 million of cash flow over the past year through reductions in working capital. His company-wide vision also allowed his team to take ownership of the entire global order-to-cash cycle at Diebold a year and a half ago, working cooperatively with sales, manufacturing and logistics, but taking direct responsibility for billing, A/R, credit and collections and cash application, all of which report to treasury now. With these new responsibilities, treasury also serves as the de facto front line for customer service–at least when payment questions are involved, Warren explains.

While only a few years ago Warren spent 80% of his time doing things like reconciling accounts, investing cash and hedging foreign exchange, he now spends barely half of his time doing classic treasury activities. Instead, he is much more involved with strategic planning at Diebold and in direct conversations with his peers at Diebold's vendors and customers about ways to make the supply chain work better, he reports.

Warren has also helped to take Diebold global. "We were very U.S.-centric when I started. Now, we're implementing a very automated global liquidity structure that involves an in-house bank, payment 'factories' and cashless netting," he reports. "We're taking people out of the process when they don't add value. And currency hedging has become a natural part of our routine."

So if Warren, who is now something of a veteran, had to choose his successor to pilot a 21st century treasury, what would he look for? Breadth, articulation ability, persuasiveness, political adroitness and people skills would certainly be part of the skill set, but the most important would be leadership, he says. "It has to be somebody who explains things well, who listens to others and who thinks outside the box," Warren explains. "But in the end, it has to be somebody who can say, 'Here's how we're going to do it. I know it's not your first choice, but here's why it's best for the company, and I'm going to need your buy-in.'"

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PAPERING THE GLOBE

International Paper Co. and its treasurer, Rosemarie Loffredo, think globally: International Paper, because its fastest growth is occurring outside of the U.S., and Loffredo, because everything she has done in her career–from her undergraduate degree in foreign service from Georgetown University, to her first jobs at Bankers Trust and First Chicago Corp. helping clients tap international capital markets, to her stint as the international treasurer for credit card giant MBNA Corp.–has forced her to seek out solutions and resources not necessarily within the borders of the 50 states.

So when she arrived at IP three and a half years ago to become assistant treasurer with no experience at all in the forest products industry, it didn't matter. She and International Paper were already on the same page, so to speak, in the area where it counted most. "I think they wanted someone with no preconceived opinions about how a paper manufacturer should operate financially," Loffredo says. "What's accepted as 'best practices' within an industry isn't always the best way of doing things."

Not surprisingly then, Loffredo spends a lot of time evaluating global expansion opportunities and helping to decide how a new foreign operation should be structured, capitalized, funded, taxed and incorporated. "Whether we build, buy or go in as a joint venture, finding the most cost-effective way to make and protect our investment is a big part of the job now," Loffredo explains. "Location, degree of parental control, tax and regulatory consequences, political risk, internal or third-party funding–these are all part of the analysis. Treasury spearheads a team that thinks through all these elements to find the best solution. We're involved from the beginning. The financial considerations are just as important as the manufacturing, marketing and distribution considerations."

Loffredo's role is definitely beyond traditional treasury involvement. And to get her ever-broadening responsibilities accomplished, she is quick to exploit automation and to streamline processes. Under her direction, a centralized, automated small-ticket equipment leasing operation, which shaved at least 12% off the cost of leasing equipment, was implemented in just a year. "We were using way too many vendors and paying too much in implied interest. Now we've leveraged our considerable purchasing power with fewer than 10 lessors, and we have a clean, consistent paradigm for making leasing decisions across the whole company. It was built by a cross-functional team, but treasury took the lead," she explains.

Loffredo also tapped her deep experience in banking and corporate finance to restructure IP's debt portfolio to get lower interest rates and improve liquidity. "Liability management is a big activity here," she says. "And with my background, I understand the ramifications of not having liquidity."

Given her broader global agenda and post-Enron concerns about understanding how sophisticated financial structures work and the risks involved, Loffredo is more involved with top management and the IP board of directors than treasurers traditionally have been. With this increased visibility comes a need for diplomacy and political skills. These days, she concedes, "organizational agility" may be just as important as that extra five basis points on an investment was for treasurers in the last century.

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TECH TACTICIAN

Jennifer Ceran became vice president and treasurer at San Jose, Calif.-based Internet auctioneer eBay Inc. in April 2003 because she could fill the shoes of a 21st century treasurer. The company "was looking for someone who was creative, who was comfortable thinking outside the box and who had a record of implementing novel ideas," Ceran explains. "Technical skills were important, but eBay also wanted someone with a style that was compatible with their corporate culture–someone open and flexible."

Ceran was a perfect candidate. After three years with Cisco Systems' treasury, she was used to taking on major overhauls that required her to work with departments across the organization and attempt novel approaches.

For Ceran, the creative implementation of automation is key for a forward-looking treasurer. Ceran thinks the successful treasurer of the future will be a master of technology, keeping abreast of the latest developments and finding ways to adopt straight-through processing and exploit evolving, technology-based payment systems. Bringing systems tools to enterprise risk management is especially critical, she thinks. "Operational risk management is a huge concern. Treasurers need to build a risk management framework that reaches across all functions," she says. "We need to be able to reach into a variety of systems in a highly automated way and capture real-time information we need to manage our cost of financial and operational risk globally."

As eBay quickly follows Internet commerce into all parts of the globe, currency risk management has become a top priority. With revenue coming in a huge number of quite small payments in many currencies, eBay needs to remain flexible and alert to new demands on dynamic electronic payment networks. In fact, eBay has become a player in that space with its 2000 purchase of PayPal Inc., a global online payment solution. Although it makes eBay's business model work by providing a secure method to pay online from anywhere on the globe, PayPal significantly adds to demands in foreign exchange, simply because of its global nature. As part of that work, Ceran is now involved in building a global liquidity structure for eBay. She's not reengineering old solutions, but creating one from scratch.

Given the new emphasis on automated treasury functions, one of Ceran's first moves was to reach outside of treasury into IT for a senior treasury operations manager. "We needed to fill a gap and get someone who could help us leverage the latest technology," she explains. But she claims that looking outside of treasury to devise solutions that address the needs of the entire organization is a priority for any 21st century treasurer, whose most important job at the end of the day is to be "a true team player."