2009: Treasury Management Under an Economic Shadow

Publication: gtnews.com

2009 has been a tough year for many in the financial industry, as repercussions of events from the preceding 18 months continued to resonate throughout the year. This commentary looks back over the most-read gtnews content over the past year, with comment from industry experts. 

Comparing the beginning with the end of 2009, you could use the cliché that the global economy has been involved in a game of two halves. The problem is that it can’t be said that the financial services industry ‘won’ either half. However, I think it’s safe to say that most would prefer the current economic conditions to those of January. The year began with terrible news and results almost everywhere - annual performance data from the major stock markets showed substantial falls, with Germany’s Xetra Dax, Japan’s Kikkei 225 and the UK’s FTSE 100 recording the worst performances in their history; bank stocks at major institutions continued to slump, leading to a shift in global power evidenced by both UBS and the Royal Bank of Scotland (RBS) selling their stakes in the Bank of China; while governments around the world implemented stimulus packages to bail-out their economies, failing banks and other major industries, at the taxpayers’ expense. According to Thomson Reuters, the amount of money pledged to economic stimulus around the world, as of 21 December 2009, stands at an eye-watering US$7,199,037,381,538. To follow how events have unfolded throughout the year, take a look at parts 1 and 2 of gtnews’ regularly updated Credit Crisis Timeline. 

All the time that the global economy was charging towards apparent meltdown, corporate treasurers across the world were fighting hard to ensure that their organisations were in the best position to survive, or even prosper in, the storm. Before the credit crisis hit, the role of the treasurer was rather low profile, and had already begun to expand into a number of different areas beyond core treasury competencies, such as cash management. But the credit crisis has brought the role of the treasurer front and centre. As Dub Newman, global treasury executive at Bank of America Merrill Lynch, pointed out to gtnews: “There’s now a treasurer-level focus in the C-Suite business.” Treasurers have never engaged with their chief financial officers (CFOs) and chief executive officers (CEOs) as much as now. And judging by the content that gtnews readers have been reading this year, the focus for treasury has now clearly shifted back to basics - managing cash, liquidity and payments.

Best Practice in Cash Management Crucial 

Renewed focus on pooling techniques 

With the credit crisis biting hard in 2009, the main focus for corporate treasurers has been on their cash and liquidity management strategies. Topics such as netting and pooling, for a long time thought of as dull, dusty topics, have suddenly found themselves back in vogue as treasurers are forced to examine every possible avenue in their quest to achieve best practice in cash management. This is one example of the ‘back-to-basics’ approach to treasury management that has grown out of the credit crisis. 

Two of the top three most-read features on gtnews look at the subject of notional pooling - although from fairly different perspectives. In Evolution of the Global Notional Cash Pool, Karen Kombrink, executive vice president, and Greet van der Steen, managing director, from Bank Mendes Gans looks at the evolving uses of the global notional cash pool. 

To understand the potential benefits of global notional cash pooling, it is important to understand what it is and how it works. In a traditional notional pool, credit and debit positions are offset, which reduces the expense of paying interest on overdrafts, and there is no physical movement of funds. A global notional cash pool uses a global overlay structure based on either a notional or inter-company loan cash pool (physical or zero balance cash pooling); in both cases the need to perform FX and/or swap transactions is eliminated. Again, no funds are physically moved. This offsetting process results in a total consolidated cash position, which is used to apply proper interest conditions to all of the cash pool accounts. The cash pool bank re-allocates the cash pool interest margins, which is effectively an intercompany margin, to its customers on compensated balances in the cash pool. The global notional cash pool is supported by a suite of applications on the internet. These should include bank account reporting, third-party payment abilities, and full integration of data into treasury workstations, enterprise resource planning (ERP) systems and proprietary bank systems. 

Figure 1: Global Overlay Cash Pooling at BMG 

The case that BMG makes for notional pooling is convincing - however, as with all corporate-bank relationships, there are areas that treasurers need to pay close attention to in order to ensure the process fits their needs. The Treasury Insider, featuring gtnews’s own treasury professional blogger, drew attention to these points in their post Are the Days of Notional Pooling Numbered?. The top three points from this blog are: 

1. For a bank to have even a chance at meeting a Basel II partial offset possibility, it will have to have credit facilities in place for the overdrafts and documentation to ensure full right of set-off in an insolvency. The documentation will probably encompass crossguarantees that may affect negative pledge clauses in other bank documentation. Ask any corporate that has recently put a notional pooling agreement in place what the major headache was and documentation often comes out on top. 
2. There is more attention being given now to thin capitalisation rules. Whereas in a company-wide group, consolidation may be adequately capitalised, notional pooling arrangements (just like intercompany lending) may mean individual companies are inadequately capitalised. 
3. There is the possible tax impact with notional pooling. Unless notional interest costs and revenues are charged based on the usual arm’s length principles, the tax authorities may not look favourably on the profit transfer effect of pooling. 

These are all valid points that treasurers should explore before entering such a banking relationship. However, when it works, companies do find benefits. For example, Stacy Cordier, assistant treasurer at Thermo Fisher Scientific, found that their global notional cash pool gave the company “much better visibility of our cash around the globe.” The company is now also self-reliant in terms of working capital requirements. Cordier adds: “Where we have excess cash, we can move that into money markets to increase the return a little bit - even though, in today's markets, excess cash does not generate much return.” Another of BMG’s clients, PSA Peugeot Citroën’s treasurer, Benoit Mulsant, explains how its two global notional cash pools proved their worth during the credit crisis, with reference to the company’s subsidiaries in eastern Europe. “The money markets were so disrupted that liquidity management would have been just unaffordable on these markets. With [our global notional cash pools], we were still able to manage our cash at money market rates without extra spreads. It has provided considerable protection for us,” explains Mulsant. 

Accounts receivable takes centre stage 

In 2009, the gtnews Fourth Annual Cash Management Survey, in association with SEB, produced interesting findings pertaining to how corporates were managing their cash in the credit crisis. In particular, when asked about which cash management process has the greatest potential to improve, our survey respondents did not disappoint. Over the past four years, survey respondents have provided different responses - reflecting the changing dynamics of the cash management environment. In 2006 and 2007, cash flow forecasting was highlighted as the cash management process with the greatest potential for improvement; last year, liquidity management topped the survey. In 2009, the priority has shifted once more, with 33% of the respondents agreeing that accounts receivable (A/R) is now the process with the greatest potential for improving cash management. 

“Working capital management has been elevated on the corporate agenda and for companies assessing their internal operations, A/R is a logical starting point to improve working capital management from a process-orientated angle,” explains Niclas Osmund, head of cash management advisory, at SEB. 

Osmund adds: “The current concern for corporates is not when they will get paid but whether they will get paid at all by some of their customers. As with any balancing act, there are two sides. It is very easy for corporates to get stuck between customers prolonging payment terms and suppliers requesting early payment in order to survive today. If this is the case, it is time for them to consider different options for discounting their cash flow.” One respondent, a senior manager at a western European company with revenues of US$500m- 1bn, commented: “Decreasing margins in the business and longer payment terms demanded by our clients means that we carry the working capital burden. This is coupled with shorter payment terms from suppliers as a result of high insecurity in the current economic climate.” Another, an executive/director at a North American company with revenues of US$500m-1bn, said: “Maintaining current payment terms with customers can be difficult, as they look for longer terms to aid their own working capital.” 

The important thing to remember during this potential squeeze between customers and suppliers is that, by and large, everyone is experiencing the same problems. The key is not to alienate either side of this problem, as in the long-term this could lose your organisation important ongoing business. It is certainly a time for the arts of negotiation and diplomacy to take centre stage - for example, if you can work with your suppliers on payment terms that help them avoid bankruptcy, they may well be willing to provide more beneficial terms for you later on. 

Trade Finance Best Practice to Manage Cash and Counterparty Risk 

Treasurers can use trade finance techniques to help optimise their working capital position, but another gtnews survey in 2009 found that there is still a knowledge gap on this subject in some treasury departments. The gtnews Trade Finance Survey 2009, in association with SEB, highlighted a ‘blind spot’ between how corporates manage their trade finance activity and the way they manage and monitor other cash flows. Only 20% of those surveyed manage their trade finance operations on a global basis, compared to approximately 75% that have global control over their cash management. By centralising the trade finance function, treasurers can claim control over a process that has a significant impact on their company’s working capital position. 

The credit crisis drove corporates to leverage their trade flows, but this in turn has, in some cases, exposed weaknesses in both the physical and financial supply chain processes. This comes back to a company’s governance models for trade finance processing, for example identifying who takes responsibility for trade flows. Corporate treasurers need to examine many internal issues before they can truly leverage their trade flows. For example: 

• How efficient and accurate are the invoicing/trade document procedures? 
• What proportion of the trade flows is included in the forecasting? 
• What are the payment conditions, for example, for a Chinese supplier? 
• Is the buyer fundamentally financing their operation as well? 
• How much political risk is the purchaser covering and has the new risk factor in the Organisation for Economic Co-operation and Development (OECD) countries horizon been strategically evaluated and a procedure developed for how to handle this risk (given the fact that many corporates lack a risk management strategy for the emerging market)? 

The focus on counterparty risk that currently exists among corporates has spilled out into trade finance, with the previous trend towards open account trade finance now actually falling away as many see it as increasing counterparty risk. To mitigate this perceived risk, instruments such as guarantees, documentary collections and letters of credit (LCs) are back in fashion again. LCs are being pushed by suppliers as they give them stronger contracts with the buyer, and also by the buyer themselves, who are seeing the free provision of funded credit facilities from banks, such as overdraft facilities, dry up. Instruments that were being faded out are now fashionable again - another example of the ‘back-to-basics’ approach to treasury management that has come out of the reaction to the credit crisis. 

Payments Automation and Standards 

Managing payments has been one of the other key treasury issues in 2009. The credit crisis has pressured treasurers into finding the most efficient ways to run their operations, and in the world of payments one of the best ways to achieve this is to automate the process and remove paper as much as possible. However, treasurers may also find that, due to the economic uncertainty, their company is less willing to provide the funds needed in the short term to aid the move from paper to electronic processes. To overcome this resistance, treasury departments need to build a convincing business case for the expenditure, something that Chris Bozek, integrated debt and treasury solutions manager at Bank of America Global Treasury Services, highlights in his well-read 2009 article, Payments Automation: Building the Business Case. Bozek argues that corporates need to have the ability to construct a compelling business case and financial model with all the relevant components, and that accounts payable (A/P) departments not aligned with finance, procurement, and technology groups need to agree on and drive forward a change process. His four-point plan to achieve this is: 

1. Conduct a high-level enterprise to enterprise audit by key payment types. 
2. Build a financial benefits model focusing on revenue and potential cost savings. 
3. Form a comprehensive plan to internally sell the business case. 
4. Construct a framework to evaluate solutions in the marketplace to support your organisation's specific goals. 

Automation can help corporates quickly improve their bottom line. However, the increasing number of choices combined with the process to drive change can be daunting. Treasurers should engage their banks and technology providers for help and advice about what is available to them and which solutions suit their specific needs. 

SEPA deadlines pass to mixed responses 

One of the largest ongoing payments projects in 2009 was the continued implementation of the single euro payments area (SEPA). November 2009 was the key implementation month for SEPA, with both the Payment Services Directive (PSD) and the SEPA Direct Debit (SDD) scheme coming into being. Well, sort of. Implementation of the PSD has not yet been universal across all participating countries, banks don’t have to accept SDDs until November 2010, and some countries are culturally opposed to any kind of direct debit at all. Speaking to gtnews, Jonathan Williams, director of strategic development at Experian Payments, sums up the problems SEPA implementation has faced in 2009: “While French banks earlier this year declared that they were planning to make SDD available only from November 2010, German retailers have now stated that they don’t see any direct benefits from SDDs in the first place. For retailers in Germany, the current ELV system works perfectly fine, so why would they want to make changes? Furthermore, a band of consumer and industry groups suggested that SDDs could be in danger of failure if issues on pricing, security and migration are not resolved.” 

Additionally, as Tony Richter, director, global transaction banking from HSBC Global Transaction Banking points out in Part 1 of our Guide to European Payments, on 24 April 2009, the European Parliament revised Regulation 2560/2001, stipulating that it will be mandatory for banks in the eurozone to be reachable for SDDs by 1 November 2010 onwards. For banks that operate outside the eurozone, the deadline is no later than 2014. While this has been a frustration for those that wish to see SEPA up and running as soon as possible, it does at least hold the tantalising possibility of 2010 being the year that SEPA gets one step closer to an end date. Speaking to gtnews, Richard Davies, director of global payments at Logica, agrees: “A mandated end-date for SEPA is needed for it to progress, of course. 2010 has to be better than 2009, so for example the end date of November 2010 for banks to be compliant for the SDD scheme will help.” Despite this, the way that implementation of SEPA seems to be so disjointed is a concern. “It is a shame that SEPA Credit Transfers (SCTs) went live before SDDs, as this led some banks to implement short-term fixes for SCTs, rather than taking an overall approach to SEPA,” notes Davies. 

But in the meantime, what are the potential issues for countries that are delayed in implementing the PSD or the SDD scheme? Ruth Wandhöfer, head of payment strategy and market policy, EMEA, Citi, asks the question as to how these delays will affect the rollout of services from payment services providers in the first part of our Guide to SEPA and the Changing Payments Landscape, which provides a first assessment of the live state of the PSD. 

The positive news on this matter is that the EC recently issued a statement that "Swedish PSPs will still be able to adhere to the SDD scheme if they wish to do so, as long as the scheme rules do not conflict with existing laws in Sweden. SDDs may therefore be offered in Sweden and cross-border on a temporary contractual basis, before the directive is implemented.” This sets a precedent that should apply to the other Member States that have also failed to transpose the PSD. 

One positive view of SEPA is to see the process as a catalyst to develop harmonised solutions across Europe. This is the view put forward by Vincenzo Calla, global head of CIB international cash management at BNP Paribas, in his article, Latest Techniques for Pan- European Cash and Liquidity Management, for the following reasons: 

1. The EU opted for three SEPA means of payments: 

• SEPA Credit Transfer (SCT) - From January 2008. 
• SEPA Direct Debit (SDD) - From November 2009. 
• SEPA Card Framework (SCF) - From January 2008. 

2. SEPA will promote homogenous means of payments across the eurozone and reduce cross-border charges. 

3. It will be based on one common standard (ISO UNIFI 20022 XML), which will facilitate end-to-end automation and facilitate payment reconciliation data. 

4. SEPA will lead to the introduction of additional optional services (AOS), such as electronic reconciliation, electronic invoicing (einvoicing), improved straight-through processing (STP), cost reductions, better cash flow forecasting and compliance. 

5. SEPA will also lead to the development of new solutions such as electronic bank account management (EBAM) standardisation, i.e. one public standard for interoperability and dematerialisation of the account management process as developed by SWIFT. 

Clearly for these benefits to come online for corporates, banks, PSPs and, indeed, governments need to provide consistency of implementation and service. But while this is lacking at the moment, treasurers can still prepare for how to efficiently use SEPA services as part of their overall treasury operations. Patrick Villers, managing director, global business services, corporate treasury at General Electric (GE) advocates that a company's SEPA strategy game plan is also an important project to consider right now in terms of pan- European liquidity management: "A SEPA review must be consistent with other internal strategic initiatives, such as centralisation, automation and standardisation through SWIFT and XML," Villers says. "There is no right and wrong blueprint but it helps to use a structured approach to evaluate what is best for your business." 

This year, ISO 20022 has emerged from the bank-to-bank space, and it is not just in Europe that this has been the case. As Experian’s Williams explains to gtnews: “For US banks, this development has provided a reason to join in with international bank account numbers (IBANs), as it reduces the number of standards that have to be maintained - one of the wider benefits Europe is already experiencing as part of the migration to SEPA. However, given the hesitations corporates have had in migrating to SEPA, especially around the conversion to IBAN and bank indicator code (BIC) formats, the US can learn a valuable lesson when it comes to standardising formats. 

“While a single, global payment initiation format is still some time away, the US should be looking at converting its data in time, setting clear guidelines and communicating the benefits to avoid wide-spread confusion among the corporates and the banks,” Williams adds. 

Banks Buffeted by Post-crisis Winds of Criticism 

The banking industry has clearly emerged from the credit crisis showing the most damage. The huge bank failures of 2008 were followed in 2009 by some vast restructuring programmes - swathes of staff laid off, take-overs and mergers, as some previously large players found they were unable to protect themselves, and of course, ultimately, the (part-) nationalisation of some of the largest financial institutions in the world in order to prevent their certain collapse. Such all-permeating failure of management among the world’s largest financial institutions led to a collapse of corporate confidence. Because of this, banks are now desperately trying to win back the confidence of disaffected customers, mainly by attempting to prove how great the value-added services that they offer are. But while attention is on innovative new technologies, such as contactless and mobile payments, the number of transactions generated by these emerging channels is still low. It is the traditional card-based payments that continue to generate significant transaction volumes and revenues. Speaking to gtnews, Paul Love, business solutions consultant at ACI Worldwide, comments: “While it is important that banks are ready to adopt new products when they reach critical mass, they must also ensure that their current card products remain competitive so that they bring in that important core payments revenue.” 

Love added: “The biggest innovation a bank should make is to equip itself with a stable, reliable and flexible platform to drive its current payments products and to facilitate smaller-scale innovation, where new products are configured, rather than coded, and then tested on selected customer segments. If a bank’s core platform can deliver this without the need for additional development or capital spending, it reinforces the business case and encourages innovation. When approached in this way, innovation can be very quick to market and can carry much lower operational and reputational risk than usually associated with the introduction of new products.” 

Looking globally, and while the large banks from Europe and North America continued to suffer in 2009, there were some strong signs of life in Asia and the Middle East. Chinese banks found themselves in a position to buy back stakes that overseas banks held in them, and the renminbi (RMB) is now being offered as a trade settlement currency outside of China. 

The Middle East has also seen a growth in its banking business, something that has meant financial institutions in the region have had to pay close attention to compliance issues in the new markets they are entering. Speaking to gtnews, Nolan Gesher, senior product manager at Fiserv, pointed out that banks in the region are putting more emphasis on controls, “especially with automating transaction matching and accounts reconciliation.” 

Regulatory Response to the Credit Crisis 

2008 cast the largest shadow over the regulatory world in 2009. How had such huge failures been allowed to happen? How can similar catastrophes be prevented in the future? Speaking to gtnews, Selwyn Blair-Ford, senior domain expert at FRSGlobal, points out that acceptance in the financial community that the regulatory environment has to change has occurred inf four phases: 

1. The aftermath of the Lehmans collapse - banks realised that, in this financial crisis, anyone can go. 
2. Passive acceptance of change. 
3. Denial from the financial services industry (some of which is still around). 
4. Arrival of the new liquidity regime, and other regulatory policy initiatives - change can now happen. 

The early part of 2009 saw a series of regulatory reports published, such as the Financial Services Authority (FSA) papers and the Turner review in the UK and the Geithner review in the US. Reports and reviews of this kind were all designed to tackle the both the problems caused by the credit crisis and address the underlying factors that created the crisis in the first place. 

When it comes to looking at how the implementation of the reports has gone, Blair-Ford says that we are currently in a dangerous place: “ The issue is now in the political arena, where they’re used to having a year or two to debate these issues. It is important that the political will around post-credit crisis regulation does not lose impetus.” 

While the recommended regulatory change will happen, it may take six to 12 months to really start achieving this implementation. With this time lag, it’s possible that these changes will no longer be at the top of the agenda for the financial services industry and it may be caught out by the changes when they are implemented. Political will may also fade and the regulators need to be wary of this happening. It is possible that, rather than all of the regulatory changes being made, some may not be implemented because of the lack of political will. There’s a real danger that if this happens - if not all of the issues are tackled and changes implemented - financial services could sleepwalk into another financial crisis of a comparable magnitude. 

Focussing on the UK, FRSGlobal’s Blair-Ford sees that the parliamentary election next year could potentially have a disastrous effect on the new regulatory regime. The policy being promoted by the opposition party, the Conservatives, of abolishing the FSA is clearly votedriven and short-termist. " In fact, their pledge to abolish the FSA if the Conservatives win the next UK election would set the UK's regulatory landscape back by seven years. The FSA is little more than ten years old and it has taken the best part of the last decade for the financial industry to adjust to them as regulator," he adds. 

Signing Off in a Stronger Position - but it is all Relative 

The economic conditions that treasurers operate in are, by and large, more positive than they were this time 12 months ago. Whereas at the turn of the year, treasurers could have been forgiven for feeling uncertain that all of their banking partners would still be standing the following week, today you can be fairly sure that they will be, thanks to the M&As and unprecedented government action. Credit can still be hard to come by, but there is a general acceptance that it is available (if not necessarily at the exact time you want it and for an inflated price). This level of certainty means that corporate treasurers can get on with the business at hand - managing their company’s cash and liquidity to the best of their ability. The re-evaluation of old methods of cash management and trade finance, for example, have seen treasurers find new and innovative ways of adapting to the poor economic climate. And as well as merely going ‘back to the future’, treasurers have also shown a great appetite for the latest technological breakthroughs that can add efficiency to their department - for example, EBAM and SWIFT connectivity are both issues that have appeared in the most read gtnews content this year. This flexibility of combining the best of traditional methods with the latest technological developments is something that treasurers can rightly be proud of as 2009 comes to a close.

Counterparty Risk a Key Concern as Treasurers Predict More Bad News to Come

Publication: gtnews.com

In late October, the EuroFinance International Cash and Treasury Management conference in Copenhagen, Denmark, saw risk management issues top the agenda. 

In October, the annual EuroFinance International Cash and Treasury Management conference took place in Copenhagen, the capital of Denmark. The city will be dominating the global news media next month when the UN Climate Change Conference brings world leaders here, but first it was the turn of bankers, vendors and practitioners to enjoy the Danish hospitality and discuss finance issues of the day. 

The View from the Delegates 

After a slight mix-up in the running order, the first session of the initial day began with the audience being polled on the issues of the day. The audience’s starter for 10 was ‘Is the crisis over?’ A landslide 71% of the audience predicted that there will be more bad news to come, a result in line with a similar poll at the Association for Financial Professionals annual conference in San Francisco in early October. This may be seen as a sign of the banking crisis making the transition into the real economy, which could spell bad news for retailers as we approach the end of the year. Fourteen per cent of the audience, very honestly, said that they didn’t know if the crisis was over or not. 

Given the response to the first question, the statistics to the second question, ‘Are you bullish or bearish?’ provoked an interesting counterpoint, with 64% of the audience stating that they were feeling bullish for the future. This could be a sign that, while most believe there will be more bad news coming out of the crisis, they may also believe this could present them with opportunities, perhaps for M&As at a knockdown price. At last year’s conference, only 41.5% of the audience said that they were feeling bullish, so this year’s results indicate a major shift in confidence - hardly surprising seeing as last year’s event occurred just a month after Lehmans collapse. 

Cash management 

Turn to cash management and the crisis doesn’t seem to have to much of an impact on the overall pattern of treasurers collecting their invoices, with 56% of the audience saying that that they collect at the same time as last year. Those saying ‘earlier’ (20%) and ‘later’ (25%) are fairly balanced. In contrast, when it comes to paying invoices, a mere 3% of voters in the auditorium are doing this earlier than last year, with 33% giving themselves the extra breathing space of paying their invoices later than last year. The overwhelming majority (64%) stated that they’re paying their invoices at the same time as usual, showing a consistent payables strategy. 

As always, cash forecasting accuracy remains a concern for corporates, and the Copenhagen crowd proved to be no different, with the following split of results when asked how far into the future they were comfortable forecasting: 

• One year plus - 14% 
• Six to twelve months - 15% 
• Three to six months - 19% 
• One to three months - 22% 
• One month - 18% 
• One week - 8% 
• In the dark - 7% 

Fifty-five per cent of those polled stated that they are not comfortable predicting cash flow beyond three months. Reasons for this could include incomplete or late data from business units, inefficient forecasting systems and methods, and of course the fluctuating market activity - if 71% of the audience expect more bad news to come, it could be that they are keeping a healthy scepticism towards the data they are seeing. 

Bank relationships 

Since the Lehmans collapse of September 2008, the majority of delegates (52%) said that they are still using the same number of banks that they were before. The rest of the delegates showed a clear split in strategy, with 28% indicating that they are using fewer banks, while 21% opted for the counter opinion of increasing their bank relationships. On the one hand, there was a clear ‘flight to quality’ during the height of the crisis, which would explain why some corporates reduced the number of banks they used. However, because at one time it seemed a very real prospect that more major banks might fall by the wayside, it seems realistic that other corporates would be looking to spread their banking counterparty risk among as many institutions as they could conceivably manage. It will be fascinating to see how these different strategies play out in 2010. 

With a large number of the delegates made up of bankers, it will come as no surprise that some of the poll results had a very different complexion to them when you drill down into the different demographics. When asked ‘Should the G20 be so concerned about bankers bonuses?’ on the face of it the audience voted 58% to 42% in favour of the G20 being concerned. However, it might not surprise you to learn that this figure was much higher among the corporate demographic (72%) than the bankers (33%). Kudos to the third of bankers who agreed though, it can’t have been easy to effectively take the role of turkeys voting for Thanksgiving. Hopefully, for them, the polling data will remain anonymous from their bosses. 

The split theme continued on the topic of pricing. Looking at the past six months, delegates were asked if lenders been measuring and pricing risk more realistically or too conservatively. On the face of it, this split the auditorium in two, with ‘too conservatively’ just pipping it with 51%. However, predictably, nearly two-thirds of corporates (63%) voted for ‘too conservatively’, compared to just 29% of bankers. And, when asked if banks are unfairly using the crisis as a way to get higher prices, there was an even greater disparity - 72% of corporates said yes, compared to just 15% of the bankers in the room. While this type of polling can be a bit of fun, it does point to a wider disconnect between the views of the two parties. I’d suggest that there is scope for banks to move into this gap between the two general points of view, demonstrate to corporates how they are addressing these clear concerns, and win a lot of business on the back of this. 2010 will be a competitive year, and banks that have already moved quickly to address their clients' concerns could be the big winners. 

Future concerns 

Looking to the future, corporates have a wide variety of challenges, something reflected by the delegates who, when asked to select their top three concerns are, gave the following results: 

• Counterparty risk - 25%
• Availability/cost of credit - 22% 
• Cash forecasting - 18% 
• State of the economy - 18% 
• Inflation - 4% 
• Lack of yield - 5% 
• More regulations - 8% 

Counterparty risk has an elevated status due to the credit crisis, not least as corporates now need to be much more focussed on their bank counterparty risks than ever before. The availability and cost of credit again comes through, another major trend from the crisis. While the threat of more bad news emerging from the crisis still exists, these twin concerns are likely to be dominating treasury thinking in 2010. 

The Heroic Treasurer 

The first keynote panel discussion, titled ‘Treasurers, Everyday Heroes’, saw a free and frank discussion on the events of the past year among three senior treasury professionals. Moderated by Anne Boden, head of EMEA, global transaction services, RBS, the panellists were Michael Wallace, group treasurer of Marks & Spencer, Gary E. Bischoping Jr., vice president and treasurer at Dell, and Martin Gries, group treasury director for Reckitt Benckiser Group. 

Recalling the worries that were rife 12 months ago, Marks & Spencer’s Wallace said that one of his main worries was another one of their banks would fall over, as well as concern over whether the crisis would hit the real economy. This was particularly important for Marks & Spencer in its role as a commercial retailer. To counter these worries, he explained how his company implementing a new strategy, which was split between: 

• Corporate governance: the board have a keen eye on ongoing concerns such as liquidity, credit rating, counterparty risk. 
• Treasury has to get far more commercial: educating the company about cash, looking after working capital, educating buyers on FX movements, etc. 

Dell’s Bischoping jumped straight into the crisis, rejoining his company’s treasury in October 2008. You have to admire his timing there. For Dell, securing liquidity was a key concern. He’s now seeing downside scenarios being looked at by his board, something that never happened previously. Bischoping also described how Dell needed a strong investment policy, focussed on liquidity first. 

Gries of Reckitt Benckiser was faced with a slightly different prospect, as there is no debt culture in his company. Rather, its funding model is designed around generating cash flow. His board have been following treasury since he started at the company six years ago, and so is used to the scrutiny that some treasurers have only felt for the past couple of years. The main change that Gries said he noticed is that, while he can do everything he did before, it is harder to do and takes longer. The company has big US dollar and euro foreign exchange (FX) exposure, so managing this has also become far more important. 

Nobody on the stage particularly felt that their treasury policy had changed as a result of the policy, it had possibly just been refined instead. Dell’s Bischoping was of this opinion, but noted that some of its investments changed - Dell pulled out of mortgage/asset-backed securities, and I’m sure they aren’t the only company that has done this. Marks & Spencer’s Wallace also concurred that the company didn’t really change policy, but just tweaked a few things and got closer to counterparties. “Don’t leave things to the wire,” was his main advice to the corporate delegates in the audience. The Marks and Spencer credit lines were long-term and in place. Also, Wallace’s treasury is getting involved in commercial decisions. He’s met with suppliers to see how he can help them, which demonstrates a real understanding of the importance of strong and successful corporate relationships with integral counterparties. 

When the question of what the panel wish they’d known pre-crisis, Reckitt Benckiser’s Gries says it would have been great to know that prices would go through the roof, as his treasury would have negotiated longer credit lines previously. Sticking on the funding theme, Marks & Spencer’s Wallace says that if his company finances hadn’t been in good shape going into the crisis, they’d have found the past year a struggle. 

Finally, the number one priorities for each of the panel were as follows: 

• Wallace, Marks & Spencer: Future finance. 
• Bischoping, Dell: Keeping his team challenged. 
• Gries, Reckitt Benckiser: He’d quite like more yield. Gries also mentioned that he’s looking for someone to join his treasury team… not a bad platform to announce this from. 

Stress Testing Treasury and the Integration of Risk 

With the heightened profile of counterparty and liquidity risks, among others, the topic of stress testing treasury has become prominent throughout the year. One of the panels in Copenhagen brought together three senior treasury professionals to discuss what can be learnt about stress testing treasury as a result of the credit crisis. These were Dr Mark Kirkland, VP treasury at Bombardier, Christian Jakobsen, SVP group treasurer with ISS, and George Zinn, corporate vice president and treasurer of Microsoft Corporation. 

To start the discussion, all three panellists gave a quick outline of their funding set-up. For example, Bombardier’s Kirkland explained how his company has a negative working capital position - customers pay upfront for the trains that Bombardier manufacture. Jakobsen from ISS described how his company has been in the highly leveraged markets for four years now and that they look to have as large a funding base as possible. In contrast, Microsoft only entered the debt markets this year. Zinn explained how, through this process, they’ve been getting to know the credit ratings agencies. This wasn’t without its problems however, especially in the area of governance, as the ratings agencies revealed some information that Microsoft didn’t want to appear in the public arena. 

Since the crisis hit, Bombardier’s Kirkland said that he has been frustrated by the speed of decision-making by the banks as it has slowed right down. Before a facility could be negotiated with a couple of phone calls, it was now taking weeks. Internally, his company began having weekly meetings looking at bank ratings, credit default swaps, etc, and in fact they still do. 

Microsoft’s Zinn explained how he spends a lot of time looking at the counterparty risk of his banks and large clients, and that the company like to adopt what they call a ‘360° visibility’ approach to this risk. As part of the 360° view, Zinn from Microsoft pointed out that electronic visibility into funds is important. Microsoft went onto the SWIFT MA-CUG in 2003, which he said made it easier to keep payroll around the world. Bombardier’s Kirkland looked back to his previous role at Phillips, where the counterparty risk management approach was changed to take mark-to-market out of the agenda. Meanwhile today at Bombardier, he’s moving more from bank deposits to funds, as well as using the crisis to explain within the organisation why cash visibility in countries such as Brazil and China is important for treasury. 

It was at this point of the discussion that a major theme cropped up - that of banks deliberately missing their settlement dates. Zinn explained how Microsoft has also changed its approach on counterparty risk, and moved some contracts from banks that missed or pushed back settlement dates. This announcement drew quite a murmur both onstage and among delegates, but was backed up by Bombardier’s Kirkland, who said he had also suffered from late settlement by banks. He was finding banks settling late on one side of an FX payment. Was this because the banks didn’t have the cash to settle and would rather pay the charges in order to settle late? That’s a scary thought if true. However, both Kirkland and Zinn said that they haven’t experienced this problem since April this year. The theme of late settlement from banks was supported by the delegates when questioned about it, with 29% saying that they had occasionally witnessed this problem. Six per cent voted that they are consistently witnessing late settlement from banks - clearly this group need to be re-evaluating their banking relationships and looking for more security from their banking partners. 

Kirkland from Bombardier also gave a presentation at a tracked session later in the conference, focussing on the integration of risks. He started by giving an overview of types of risk measurement and their potential flaws: 

Ratings and CDs 

Ratings are a lag indicator. Kirkland used the ‘fresh’ orange juice principle to explain this - in the UK any carton of orange juice can have the word ‘fresh’ on it, but it could be made up of anything. He equated this to a AAA-rated product from a bank, which no doubt had some bankers in the audience choking on their orange juice. In addition, ratings don’t necessarily reflect recovery. Kirkland used the example that a AAA structured product has a lower expected recovery than a AAA bond. So CDs are the answer? According to Kirkland, these are not perfect, as in an illiquid market they can be easily manipulated. 

Value-at-Risk (VaR) 

On the one hand, VaR presents one clear figure, a summary that is easily understood by non-risk experts and therefore of interest to the board. It combines effects across many asset classes and can be extended to cash flow. However, statistics can be easily abused, and Kirkland uses the example of 2008 annual bank reports and how a bank can claim its VaR is US$3bn, and then ends up losing US$20bn in the year. As Kirkland put it, “there’s no point taking your risk expectations down to just one number, if that number’s garbage.” 

Efficient frontier analysis 

Efficient frontier analysis is carried out by studying a risk-reward graph made up of optimal portfolios. On one hand, this seems rationally to make sense. It’s easy to see the effect of one more risk. But Kirkland has two fundamental problems with the assumptions of this method: 

1. It relies on investors to make rational decisions. 
2. It relies on perfect information in the market. 

Neither of these assumptions are reliable, which casts a large question mark over this form of risk analysis. 

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Keep it Simple - Risk Analysis and Management Tips from Dr Mark Kirkland, VP treasury, Bombardier 

• Carry out scenario analysis of the top 10 financial risks for the company. 
• Stick to using financial instruments that you can value yourself. Identifying exposures is more important than spending time on complex instruments. 
• Be vigilant - read the small print of managed funds, even those that are rated AAA. 
• Keep cash reserves for working capital needs. 
• Review the credit standing of your banks and insurers frequently. 
• Be aware of the tenors of all deposits, especially in funds invested outside the treasury centre. 

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With his final thoughts, Bombardier’s Kirkland enthused the audience with the message that treasury is a skill, and is not just being an accountant. He advised that treasurers need to keep reminding senior management of this. With the enhanced role of the treasurer, every decision is coming under scrutiny so it is vital that, where possible, treasurers can explain what they’re doing to the CFO and the board, and more importantly show why they are taking the positions they are and demonstrate the value this adds to the organisation as a whole. 

The State of Banking 

In an address to the main auditorium, Ignacio Muñoz-Alonso, CEO & partner with Addax Capital and professor of advanced corporate finance at Instituto de Empresa, provided the assembled delegates with some banking truths and pondered some philosophical points: 

1. Banks are risk-taking entities by their nature. 
2. Banks do what they must do - to maximise profits - with what they’re allowed to do, i.e. regulation. 
3. Are markets inefficient because of the way they collapsed… or because of the way that they expanded? 
4. It is certainly difficult to find a salary employment where someone can obtain a similar compensation as some bankers do. 

Despite the salary potential, Muñoz-Alonso went on to underline some of the new limits that the banking world now faces. These include the extra pressure on revenues, new regulations, capital scarcity, capacity reduction, the fact that many banks are retrenching to domestic markets, as well as the fact that banks in many cases face a struggle to rebuild their reputations. 

Competition versus cooperation 

In many ways, a later session in the day gave the banks a chance to tackle that final point regarding rebuilding their reputations, as Catherine P. Bessant, president, global corporate banking, Bank of America Merrill Lynch (BofA), and Marilyn Spearing, managing director, global head of trade finance and cash management corporates, global transaction banking, Deutsche Bank (DB), debated current banking issues, in attempt to win around the corporate minds to the bank perspective. 

For example, the establishment of deposit protection schemes (DPS) has been big news in 2009, but the view from the stage was that this issue is a bit of a red herring, is this what corporates really want? In the US there is the possibility for banks to opt out of the DPS, which is exactly what BofA’s Bessant thinks that many of the big US banks may well do. The overwhelming opinion from the speakers is that the DPS is slightly cost prohibitive and doesn’t affect counterparty risk for corporates. 

Now I’m not saying that some corporates are fickle, but… when the delegates were asked to vote on whether now is the time for a global regulator of payments systems, to ensure consistent risk mitigation, 66% of the those assembled voted ‘yes’. Speaking on this topic, Spearing from DB made the point that, in the crisis, it wasn’t the payment systems that failed. Any day late payments came from counterparty risks and required manual intervention. Following the discussion on payments systems, the original vote was retaken, and now only 32% of delegates said ‘yes’ to the proposal that it is the time for a global regulator of payments systems, to ensure consistent risk mitigation. Needless to say, on hearing this swing of opinion, many banks exhibiting must have been looking forward to pitching to potential clients, in the hope that their opinions would still be so malleable. 

Also in the audience Q&A, the majority of corporates (55%) are not finding that funding constraints are preventing their company from capitalising on good opportunities. However, an even greater number of corporates (59%) say that banks aren’t delivering acceptable lending terms to healthy companies. There’s clearly a lot of dissatisfaction among corporates regarding lending terms, with some feeling that banks may be using the credit crisis to squeeze their corporate clients beyond acceptable levels. 

Slightly more positivity comes in the corporate responses to questions around credit conditions and spare cash levels. Compared to six months ago, 75% of corporates say that the credit conditions for their company have either improved or stayed the same. Similarly, 77% of corporates say that the amount of spare cash that their corporate treasury now holds is increasing or about the same as it was six months ago. This finds corporates in a fairly robust state going into 2010. Looking to next year, corporate respondents gave the following responses when questioned about the plans for their primary use of cash: 

• Reinvest in the business - 25% 
• Return to the shareholders - 12% 
• M&A - 15% 
• Pay down debt - 36% 
• Boost cash reserves - 9% 
• Other - 3% 

SEPA 

While the subject of the single euro payments area (SEPA) was a key topic for discussion at Sibos this year, it didn’t dominate this conference to a similar extent. In some ways this is to be expected, as it doesn’t focus solely on payments as Sibos does. However, this was a little unusual, bearing in mind the fact that this conference was hosted in Europe, and that key SEPA implementation dates were little over a week away. This probably reflects the general mood of corporate apathy towards SEPA, as did the less than full-house attendance for the one session dedicated to the topic, the thrillingly titled ‘SEPA: Embrace or Ditch’. Here, the debate offered counterpoint views as to why SEPA should be supported, or not, by corporates. Jon Alvar Øyasæter, senior vice president at Tieto, was speaking up for SEPA. He pointed out that, through Tieto’s work on the SEPA Direct Debit (SDD), he’s seeing his clients take a more tactical approach to payments, which will surely help them become more efficient in this area. Representing the other view, German consultant Christof Nelischer argued that there isn’t uniformity in SDDs across Europe, which is something that has to be addressed, and that the way it is being run is questionable and should be addressed. Nelischer also compared public awareness between the euro single currency project and SEPA as a way of justifying the ditching of SEPA. However, Øyasæter countered by claiming that you don’t need the average man in the street to understand SEPA, just the key players involved in the process. He also pointed to his conversations with corporates outside Europe, saying that they were very excited about the project. 

Overall, Øyasæter summed up his position as being that: “we’re not in any position to ditch SEPA.” Conversely, Nelischer claimed the statement of the conference when he suggested that: “SEPA will be kicked in the long grass and die a slow death.” Ouch! The outcome of the SEPA debate is probably still closer to the first opinion, a view that was supported by Pierre Fersztand, global head of cash management at BNP Paribas, when he spoke with gtnews. Fersztand made the point that SEPA is a regulation, and that the regulator will get to the end of the regulation. “The EC is very committed, there will be an end date,” he says. 

Additionally, he points out that the SEPA Credit Transfer (SCT) is a good opportunity for large corporates that want to improve their own systems to do it. “Everyone has to go to SEPA. It’s good for corporates and banks that want to rebuild their platforms. SCT transfer will be smooth,” says Fersztand. For example, BNP Paribas will use SCT for all their eurozone payments from mid 2010. Turning to the SDD, Fersztand points out that this instrument is a daily change for consumers, unlike the SCT. He advises that banks must pay attention to the Direct Debit services that they offer. For example, BNP Paribas will offer a corporate mandate management system for their clients. Once the banks have the solutions in place that offer corporates a more efficient way of operating their payment processes, and can make a convincing business case for these solutions, it is likely that SEPA will start to gain traction in the corporate payments space. However, this process may be long and slow, at least initially. 

At the end of the SEPA session during the conference, the audience voted overwhelmingly (80%) to embrace SEPA. The problem is that ‘embrace’ might be an overly positive spin to put on the result of a poll where the only other option was ‘ditch’. It’s more likely that corporates will embrace this project when the banks and the powers that be have assessed how far the project has come, and ironed out some of the flaws that have emerged to date during the current implementation. This was reflected in the 90% of the audience at the session who said it was either ‘vital’ or ‘very important’ to the success of SEPA that there is a formal end date for SEPA migration. And finally, when asked about how advanced their SEPA preparations were, the audience came up with the following mixed bag of answers: 

• Completed - 15% 
• Well advanced - 24% 
• In progress - 26% 
• Just started - 11% 
• Not started - 25% 

Clearly, corporates currently find themselves somewhere in the no man’s land between embracing and ditching SEPA. 

Corporate Social and Environmental Responsibility 

With the UN Climate Change Conference in December this year also taking place in Copenhagen, corporate social and environmental responsibility was also on the agenda at the EuroFinance conference 2009. This was a topic that Maggie Crompton, senior manager, group corporate sustainability at HSBC, discussed with gtnews at the conference. 

In order for banks to advise their clients on social and environmental issues, and in particular the business benefits that pro-active strategies in this region can bring, they first need to prove they have the authority to speak on these topics. According to Crompton, this is something that HSBC has done - for example, the bank has been carbon neutral since Q4 2005, their lending policy takes into account issues sensitive to the environment, and they have a dedicated team focussed on the issue of renewable energy. 

When dealing with their clients, the bank examines how the corporates' sustainability needs can be met while still achieving their business goals. For example, Crompton explained how the bank can help with sourcing new suppliers that are more environmentally suitable, and stressed the links between the financial supply chain, cash management, and the climate. A small change within a corporate’s supply chain relationships can go a long way to improving its carbon footprint, and the associated business and reputational benefits that come with this. Corporates should ask their banks what they are doing on environmental issues such as this, and find out what help they can provide. 

Obviously, with the UN conference a month away, sustainability and climate change are currently on the agenda, and most will be hoping to see commitments from nations such as the US and China to cut carbon emissions and to embrace energy efficiency. However, without being mandated through regulation, it is uncertain how all this talking will translate into tangible results. Perhaps one way that these results may be seen will come through the involvement of the markets - despite a rocky start, the European Union’s Energy Trading Scheme (EU ETS) still has some momentum. If the move continues in the carbon markets towards the auctioning of assets, then there’s a good chance that the business case for strong environmental policies will back the need for sustainable practices. 

Conclusion 

The key topics on discussion at the annual EuroFinance International Cash and Treasury Management conference in Copenhagen reflected the main talking points from the other conferences this season and issues that we’ve covered on gtnews in 2009. The fallout from the credit crisis has made liquidity risk and counterparty risk management become major priorities for corporates. Corporate bank relationships are under the spotlight post-crisis, as treasurers are re-evaluating the performances of their banks in the past 12 months from a counterparty risk perspective. And the role of the treasurer continues to grow in importance within the organisational structure, creating opportunities for treasurers to educate the board on the skills they possess and how these are adding value to the company. Moving into 2010, worries over a ‘W’ shaped recession mean that efficient cash and risk management will remain high on the treasury agenda. And, as some confidence starts to return to the banking market, those banks that can offer innovative and affordable solutions for corporates are sure to find themselves in a prosperous position.

2009 AFP Annual Conference: Blog

Publication: gtnews.com

Post 1: Bang the Drum (5 October 2009)
The AFP Annual Conference 2009 gets drummed into life in style, while thoughts turn to the lack of regulatory reform over the past 12 months. 

The Association for Financial Professionals (AFP) Annual Conference 2009, this year in San Francisco, opened in dramatic fashion, as the San Jose Taiko drumming group began proceedings. This art of percussion started off in ancient Japanese drumming styles and then blended in African, Balinese, Brazilian, Latin, and jazz influences to provide a truly international beat. The drumming gave some forewarning of what was to come in the opening session, as much of the plenary reflected on how the US sub-prime drama also took on international influences in the global credit crisis that followed. But how can treasurers drum themselves out of the malaise? 

AFP’s president and CEO, Jim Kaitz, answered this question early in the plenary, stressing that the main influence the financial crisis exerted on the treasury profession was to increase the importance of professional standards and certification. The AFP itself has helped to certify 20,000 professionals in 54 countries. It seems rather obvious now that certain players in the banking and trading arena were out of their depth and didn’t know what they were doing with the financial instruments they created and repackaged. This had nothing directly to do with the treasury function, but the finance profession as a whole has come out of this crisis with a bad media image. The important thing for treasury professionals to remember is that their role in looking after corporate finances is one of the most important of all in finance. Professional qualifications can aid this mission by providing insight into best practice and also providing the individual treasurer with a toolbox of skills that enhances their own employability. 

The grand prizewinners in the AFP Pinnacle Awards, the treasury department of City of Los Angeles, excellently illustrated this point. Having previously won the Strategy Pinnacle Award, the City of LA achieved the main award for successes such as: 

• Reducing unidentified deposits from 1,220 to less than 20 per month. 
• The automation of general ledger posting in treasury resulting in the reduction of 107 full-time equivalent (FTE) hours per week. 
• Annual float savings from implementation of four controlled disbursements accounts of US$1.1m. 
• Decreasing compensating balances with an associated increase in return on investment of over US$4m. 

All of these were achieved against the backdrop of huge budget deficit, proving the bottom line value that the treasury department can add to an organisation. 

The keynote speaker of the opening plenary was Michael Lewis, the author of several best-selling books, including Liar's Poker, which is based in part on his own experience working as an investment banker for Salomon Brothers. Having noted his Wall Street experiences in the late 1970s and early 1980s and how the sub-prime crisis had snowballed into the global financial crisis, Lewis turned his attention to what had happened - or rather not happened - in the past 12 months. 

The state of the problem was very obvious this time last year, fresh from Lehman’s collapse. But in the past 12 months, the credit rating agencies have not been reformed, Wall Street and banks around the world have collected massive government subsidies, pay levels on Wall Street are bouncing back, and there doesn’t seem to be any political will for large-scale reform of the financial system - Lewis pointed out that 12 months ago people would have found this inaction to be unbelievable. He went on to make the case that, while financial crises can occur relatively rapidly, it can take a much longer time for political and regulatory will to reach a level that demands change. While governments around the world have thrown an awful lot of time, effort, and taxpayers’ money at propping up the financial system, the issues behind the crisis still need to be addressed. 

Lewis’s final point was directed at the treasury professionals in the audience. Highlighting the knowledge of the gathered experts, he advocated that politicians, such as US congressmen, would jump at the chance to pick the brains of treasurers and gain from their experience. This is yet another way that treasurers can prove their value through communication - the credit crisis has inadvertently helped to refine treasury processes and provide a transparency to the value of the treasurer. Treasurers need to be proactive and tell the chief financial officer (CFO), the Board, and even the local politician about it - bang the drum for your profession and, even more importantly, for yourself.

Post 2: Cash Forecasting Strikes a Chord (6 October 2009)
A cash forecasting session at the AFP conference proved to be extremely popular, as treasurers try to come to grips with this important issue during the global economic downturn. 

The renewed focus on cash flow forecasting, as a result of the financial downturn, was in evidence at an early session at the Association for Financial Professionals (AFP) annual conference. The session, called ‘Cash Flow Forecasting: Overcoming Challenges, Past and Present’, had a packed crowd that was willing to brave the freezing air conditioning and the fire marshal’s warning about no standing up in the hall. 

The hosts for the session were panel moderator Timothy Hesler, certified treasury professional (CTP), director, treasury and risk advisory at KPMG, and a panel made up of Joachim Wettermark, corporate treasurer at salesforce.com, and Philip Mattes, senior manager of treasury with CareerBuilder. Taking its lead from the KPMG Cash and Working Capital Survey 2008 - which found that only 1% of companies surveyed had their cash flow forecasts on target - the panel discussed the forecasting processes at their companies. 

Looking at the breakdown of people in their organisation that were involved in the cash forecasting process, both Mattes and Wettermark demonstrated how difficult the quest for accuracy can be thanks to the large number of participants. At CareerBuilder, Mattes described how the financial planning and analysis (FP&A), accounts payable (A/P), collections and international finance groups were all involved in the process. Wettermark had a similar story, with regional controller groups, collections, procure-to-pay, payroll, stock administration, other FP&A and corporate development groups involved in the process. The session drove home the point that you can have the best cash forecasting system in the world, but if you’re not getting accurate or timely information for all the interested parties, your process will still fail. This puts the responsibility on the treasury to communicate with the different business units to ensure they know the reason for the data demands and how accurate cash forecasting can help to boost the bottom line of the whole organisation. 

The pressure to deliver accurate cash forecasts has increasingly come from the chief financial officer (CFO) and the board of directors. The treasurer can benefit from this increased focus because the role of the treasurer becomes elevated to that of an informed decisionmaker. And while setting up a new cash forecasting system can take a lot of time and money, it can provide the treasurer with a great competitive advantage.

Post 3: Career Strategies in an Uncertain Market (7 October 2009)
Moving jobs has become more difficult during the global recession, but networking today will aid career mobility in the future. 

One side effect of the credit crisis that can have the most personal impact is seen in unemployment figures around the world. The number of people that have lost their jobs as a result of the global recession is high, and projected to carry on increasing in many markets. Treasury professionals are not immune to this, and so it was no surprise that an educational session at the AFP Annual Conference run by Martin Campbell, a treasury and cash management recruiter and founder of M. Campbell Associates, garnered such a large audience. 

Career advice for treasurers is widely available, but Campbell adopted a more generic approach in his presentation, starting off by looking at four points that treasurers, both in and out of work, can do in the short-term to strategically plan their careers: 

1. Think two steps ahead and identify a target of what you are working towards. 
2. Carry out a job search for your next target every week or month. The right job for you might not appear when you want it to, so regularly search. 
3. Build your network. Proactively make contacts that can aid your job search. 
4. Have your resume ready because, again, you never know when you may need it. 

Entering into the job application process is essentially about entering into a process to promote your skills and achievements. There, Campbell advised, don’t just list your duties and responsibilities on your resume, but be sure to put all major recent achievements up front and centre. 

A large part of the session revolved around tips for networking. Campbell said that statistically 70% of all job changes are as a result of networking - interesting that someone working in the recruitment industry would promote that information. Campbell highlighted LinkedIn as an excellent contemporary way to increase your network by finding professionals in your industry and research potential employers and recruiters. gtnews has two groups on LinkedIn, the gtnews Treasury Expert Panel, which is exclusive to corporate treasury practitioners, and another that is open to all finance professionals, including bankers and consultants. Either of these could be a good place in which to expand your professional network. 

The important thing to remember with networking is to treat it as a long-term process. The professional network that you start building today need not merely be for the very next job you are looking for. The contacts that you make and, more importantly, maintain will be a collection of valuable assets for your future, whether you need to find a way back into the workforce, or simply advance your career to the next level you target.

Post 4: BRICs: Safe as Houses? (9 October 2009)
What are the effects of the financial crisis on the 'emerging' markets of Brazil, Russia, India and China? 

While the effects of the financial crisis in North America, Europe and Asia-Pacific have been well reported, what about the key trends in the ‘emerging’ markets of Brazil, Russia, India and China (BRIC)? This subject was tackled by a session entitled ‘The Role of Treasury Risk Management in the BRIC Countries’ at the Association for Financial Professionals (AFP) Annual Conference. 

The session was led by Deepa Palamuttam, director of global treasury operations and controls at Intel Corporation. Bearing in mind the high-tech industry that Intel operates in, it’s no surprise that the emerging markets are a focus for them - as Palamuttam said, the small penetration of telecoms in China (less than 50% of population) and India (25%) provide a huge untapped market. But it is not a market that is free from problems, and the session provided these examples: 

Brazil 

• High dependence of commodities. 

Russia 

• High reliance on hydrocarbons. 
• Limited SME sector. 
• Government bureaucracy. 

India 

• Earning disparity - 65% of population works in the agriculture sector, producing 16% of gross domestic product (GDP). 

China 

• 35% of GDP is in exports. 
• Exports are boosted by undervalued currency. 

Fault lines of one sort or another exist in every economy, but all of the above examples highlight the vulnerabilities present in the leading emerging economies. They have been exacerbated by the global nature of the recession that has followed the credit crisis. China and Brazil are seeing weaker demands for products from developed markets. Russia is hit by falling oil prices. India is suffering from a slowdown in services. Foreign funds have haemorrhaged from BRICs stocks, and there has been a slowdown in foreign investments in the four countries. 

So what does the future hold for the BRIC nations? Has the global financial crisis made them a less attractive place to invest and to do business in? Certainly not, in fact some have used the problem to try to identify solutions for sustained long-term growth - for example, China has gone from an economic model that was hugely biased in favour of exports to now looking to stimulate internal markets. Add this to factors such as the large potential workforce and low operating costs that gave the BRIC countries a competitive advantage in the first place, and they’re looking in decent shape for the future, despite the continued fall-out from the financial crisis. 

And who’s tipped to be the ‘new BRICs’? Palamuttam picked out South Korea, Indonesia and Mexico for specific attention.