Question (gtnews): What do you think were the hot topics at this year’s EuroFinance?
Answer (Marie-Astrid Dubois, assistant treasurer Europe, Middle East and Africa (EMEA) and Asia, Honeywell): Treasury is a trade where things are always similar but, of course, the world changes around us. Therefore we need to anticipate changes and be ready to adapt to them. We need to be constantly looking at what is happening – and in that sense risk management is high on our agenda. I think that the hot topics this year include cash management and risk management, as well as process automation.
Similar to most treasurers, when I attend EuroFinance I am looking to achieve a number of objectives. First, I need to meet with my bankers and often I have topics to discuss if my company is looking at specific projects. I want to test these ideas out, not only with my bankers but also with my corporate peers. I also want to assess the general environment.
Conferences like EuroFinance are mainly about getting a general idea of where you are, compared against what is happening in the marketplace. It’s a unique opportunity to meet everyone at the same time. It is an intense three days of conversing with banks, corporate peers, software vendors and consultants. I try to gather all the ideas together to ensure that I am moving in the right direction in terms of the projects that I am working on.
Q (gtnews): What keeps you awake at night?
Answer (Dubois): Most people are concerned about funding and cash. Honeywell in the US does look closely at the funding part because it has debt there; outside of the US, which is what I manage, the company has surplus cash. This difference is quite important. Treasury must ensure that the company has access to funding on one hand, while at the same time making sure that it efficiently uses the cash it has. We need to effectively maintain and preserve capital, as well as ensure that it is safe in every country and entity that we have around the world – Honeywell is present in 100 countries. This is one issue that keeps me up at night.
Counterparty risk is another area of concern. Treasury needs to ensure that it observes certain parameters and is proactive in thinking through what could happen, as well as considers various alternatives and options on a forward-looking basis. One of the topics we will be examining in the next few months is zero yield. How do we handle that? What are the options that we want to capture? These are the issues that we need to solve.
Q (gtnews): Do you think the role of the banks will further diminish in future? If ‘yes’, which alternative sources of funding will fill the gap?
Answer (Dubois): Today, large corporates have access to bank and market funding and I think this will continue. The importance of building, maintaining and developing strong relationships will continue to be paramount. Bank funding will continue to be important but may develop into a different type of funding, for example supplier financing. In that sense, we need to explore different funding avenues.
Basel III will have an impact on the cost of funding and in the way some corporates will be treated by certain banks. Depending on your rating, it will be easier for some corporate categories to have access to bank financing, while others may not have the same level of access and will have to explore different avenues of funding. I feel confident that Honeywell will have access to bank funding.
As a result of the Basel III capital ratios, banks will try to demand certain things from corporates, such as longer-term deposits. In return, banks will need to develop new products – and some have already – that are flexible enough for corporates not to feel trapped or constrained. In this market banks will develop new products that are compliant with what Basel III requires but flexible enough for their corporate clients.
Q (gtnews): How, in your opinion, has the job of treasurer changed since you started your career?
Answer (Dubois): Corporate treasury has gained greater visibility in an era of crises – whether banking, economic or sovereign debt. With interest rate and foreign exchange (FX) volatility, our advice is sought more often at the board level. In addition, we now have input into a wider variety of business areas, such as supply chain, real estate and investment. The good news is that we are increasingly visible and closer to the business units. We have to be – we cannot be housed in an ivory tower and only speak to the banks. We need to communicate with the business units and really understand their needs, making sure that we help them drive growth for the company. I think all of those are important aspects of the job.
We also need to manage reality. Reality may be tougher but we need to find solutions. And that is the ethos I want to drive in the organisation.
Q (gtnews): What steps will you take in the year ahead to make your treasury department more efficient?
Answer (Dubois): To make treasury more efficient, we want to invest in automation technology. That is a big thing we are driving forward. We will also invest in staff. It has become more difficult to attract good individuals, so we need to ensure that we develop, coach, train and mentor them. It is important to ensure they are engaged with what is happening around them, because the last thing you want is to have a stale and inwardly focused treasury department. You want people who have an understanding of their business partners’ requirements and are able to bring value to the relationship.
Q (gtnews): Do you expect several more years of difficult economic conditions? If so, how should a treasurer respond to the challenge?
Answer (Dubois): I am a pessimist, so unfortunately I think the years ahead will continue to be tough. However, as I said, there are always options and alternatives. Basically we need to assess business requirements – their demands and what they need from treasury in terms of financing suppliers and customers, as well as making sure they have access to capital. We need to find solutions because fundamentally we don’t have a choice – the business will not develop otherwise.
Q (gtnews): Have you put in place contingency plans in case of a eurozone break-up?
Answer (Dubois): Honeywell’s Greek exposure is limited, so it is lucky to that extent. We have made some basic decisions similar to those taken by other corporates. For example, we have not left any cash in Greece. We have opened non-resident bank accounts, so entities have their own cash but it is no longer held in Greece. Of course they are part of the euro cash pool, so that simplifies things as well. For years now we have concentrated on monitoring counterparty risk, from a country, banking system and counterparty bank standpoint. We have also set up a euro task force and are frequently assessing various risks.
Q (gtnews): Are there specific challenges to operating in Asia?
Answer (Dubois): Yes. Understanding the regulations is very difficult, for example in China or India. It is important to have people that can decipher them for you. That is why finding the right people at the right level who really understand the corporate culture, as well as understanding the local culture, is critical to operating in Asia.
Honeywell has a regional treasury centre based in Singapore, with an arm in Shanghai. The red tape that we have to cut through is extremely cumbersome. And like many corporates operating in the region, cash mobility is a challenge.
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