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.
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.
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:
- Think two steps ahead and identify a target of what you are working towards.
- 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.
- Build your network. Proactively make contacts that can aid your job search.
- 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?
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.
