Looking beyond the current diversions of ‘hard’ and ‘soft’ Brexit, the approaching UK election and the unpredictability of US policy under Donald Trump, where is treasury heading in the years ahead?
The question was considered in a panel session, entitled ‘The future of treasury: from finance specialism to strategic business partner’, on Day Two of the UK Association of Corporate Treasurers’ (ACT) 2017 conference in Manchester.
The session began with an audience poll, in which delegates were asked whether they agreed with the statement ‘The treasury function is a strategic business partner for my organisation.” Just over half the delegates ‘strongly agreed’ and 44% ‘slightly agreed’ with the remaining 5% neutral as there were no dissenters.
Two further audience poll questions produced the following results.
Treasury’s involvement with business strategy within my organisation is as follows
- Treasury defines business strategy 1%
- Treasury works with colleagues in defining business strategy 50%
- Treasury provides information towards defining business strategy in response to specific requests 43%
- Treasury isn’t consulted 6%
Which of the following issues do you feel will impact most on your treasury department going forward?
- The interest rate environment 23%
- Funding decisions 18%
- Brexit uncertainty 45%
- Cyber security/payment fraud 14%
Discussion kicked off with Paul Johns, director of treasury and tax at construction services group ISG, asserting that treasury has to be open to the needs of the business and to respond to them. “You have to establish just what the board expects from you and establish your credibility,” he suggested. “Understanding just where the board is trying to take the company is key if you are to develop an appropriate risk management policy.”
At the same time, said Anglian Water’s group treasurer Jane Pilcher, treasury shouldn’t be so eager to please the board that they assent to the organisation taking a route that they don’t regard as sensible – even to the point of stating bluntly that “this isn’t going to work”. This demands of the treasurer that he/she has the ability to engage with colleagues across other divisions and is involved in discussions from the outset, added the ACT’s chief executive officer (CEO), Caroline Stockman.
Pilcher spoke of the need to translate the “language of treasury” so that it fitted in with the overall aims of the business, which meant being able to tell a story in a way that made it relevant and meaningful to board members. If, as seems probable, the strategic role of treasury continues to grow in importance, its practitioners must develop new communication skills.
“You have to be fairly outgoing and extrovert,” said Johns. “It means selling yourself – and for many that doesn’t always come naturally.”
Pilcher summarised her own role as group treasurer of a major utility company. “Much of my work consists of talking with various banks and investors-and telling them the Anglian Water story if I’m persuading them either to lend money or to invest in us,” she said.
“So you have to know, understand and love the business if you’re going to successfully present it as a good business risk.”
A widening world of crime
A morning session at the conference on payment fraud was led by Jonathan Williams, principal consultant at prevention specialist Mk2 Consulting, who noted that the various categories of financial crime aimed at companies includes ransomware – as demonstrated by last week’s global attack – and also identity fraud, money laundering, insider fraud, card fraud, direct debit fraud, cheque fraud, data theft, electronic banking compromise, director fraud and invoice fraud.
As the steadily mounting yearly haul from UK card fraud testifies, both involving payment cards and remote banking, fraud and financial crime is increasingly a well-run business with the proceeds going to organised crime, which is able to both buy in and outsource services.
Williams made the alarming assertion that the UK and other major economies are “undergoing an Industrial Revolution in financial crime” as fraudsters increasingly utilise social engineering to obtain funds and profits illegally and have the ability to target thousands of victims simultaneously. It was an uncomfortable truth that many of the benefits for business of online banking are also of advantage to the fraudster.
Scams are “limited only by the criminals’ ingenuity” with many now involving a communication purporting to come from a trusted source, such as the police or a financial authority. Jennifer Tinsley, Eurasia treasury director for Kumatsu Minining Corp, offered examples of key individuals within organisations who had been able to perpetrate cheque fraud over long periods of time before they were finally uncovered.
“You can educate your staff as to what is – and isn’t – normal within your business, although this is something that the fraudster is also seeking to discover,” she noted. However electronic bank account management, or eBAM, can help in showing up any suspect transactions. Never let a transaction through that doesn’t have some supporting evidence.”
Tinsley added that treasury should adopt a ‘top-down’ approach in enforcing a culture of greater scrutiny in preventing fraud. This meant encouraging all employees to be ready to ask questions “when something doesn’t seem right”.
“People in our industry have an ethical responsibility to sound the alert and provide details whenever an incident is perpetrated,” she added. “The faster the news (of a fraud) gets out the better. Once the message gets out, people talk about it and solutions can be developed.”
Involving key stakeholders and procurement as well as having an enthusiastic project manager is key to successfully changing banks, treasurers told the BNP Paribas Cash Management University in Paris.
While GDPR and Europe’s revised Payment Services Directive (PSD2) are not contradictory, the fact that the regulators and many banks work on them in silos is problematic, AccessPay executives argue.
We live in interesting times – at least that’s what political and economic commentators keep telling us – However, you could easily say we are experiencing very uncertain and, some might suggest, disconcerting times.
Coffee is the second most traded commodity in the world and is subject to plenty of price volatility. Costa Coffee's treasury manager discusses how the company hedges pricing and foreign exchange risks to minimise volatility.