Tackling Treasury Concerns Head-on

The role of the corporate treasurer continues to evolve, although certain fundamentals remain constant, according to the first meeting of the European Treasurers Council (ETC), sponsored by Deutsche Bank. The ETC held its inaugural meeting in Zurich, with discussions also focusing on the methodology behind benchmarking and the relevance of social networking.

The ETC, a high-level group of corporate treasurers, was set up to influence editorial policy and setting the agenda at gtnews, as well as suggesting new research and reports intended to benefit European treasury as a whole. Held in London, Frankfurt, Geneva and Brussels during 2011, the ETC will bring together a variety of treasurers from around Europe.

Improving Transparency

Achieving consistency in fee structures and billing was a key discussion topic, with several of those present expressing frustration over a lack of transparency and querying whether fee levels were commensurate with the level of service provided and what could reasonably be expected from a bank account. One participant commented that increasing the banks’ understanding of what corporate treasurers actually did was very important, as he struggled to reconcile the contrast between the products banks promoted and the day-to-day reality of corporate treasury.

One member asserted that greater transparency in bank fees could be achieved by promoting transparency over banks’ capital requirements so that this could not be used as an excuse for high fees. One reason that many present queried fee levels was the spread of fees for borrowing, for example using letters of credit (LCs) – it was argued that these were so high that they could not be regarded as the loss leader that some banks claimed.

Several of those present believed that fee standardisation was weighted heavily towards the largest companies. A popular suggestion was the power of a group such as the ETC to bring about change in fees through lobbying – as even a small number of banks achieving consistency. Holding suppliers accountable for poor or over-priced service was an important discussion point of the meeting.

There was some debate on whether clearer mandate within Basel III could force banks to put clearer fee pricing structures in place – although the Deutsche Bank representatives present attributed this to the range of methods employed for calculating fees. One treasurer commented that he had met with a consultant for this purpose but that this service had been prohibitively expensive.

Slow electronic billing (e-billing) roll-out was also seen as a problem, partly because of inconsistent documentation between different countries. However, participants noted that TWIST was trying to achieve this, while because the International Swaps and Derivatives Association (ISDA) operated across jurisdictions, it was likely that the documentation could be converted to electronic format with the wider adoption of electronic bank account management (eBAM).

Benchmarking: Necessity or Luxury?

One of the headline themes of the meeting was treasury benchmarking – either for internal or external use – on which attitudes varied. Several of those present believed it had value, although more to generate ideas than as a best practice blueprint. Others found they did not have time for the process at all. One member commented that flexibility was vital in this area; by definition, real cash went everywhere in a business. For benchmarking, definitions of what is being looked at and comparability are vital. One treasurer noted that it was important to be careful as to how the figures were read, as the cost of treasury was so country-specific, and there was such a difference between different treasury operations. Sometimes there was difficulty finding a similar non-competitor company to benchmark against.

The data being benchmarked varied markedly within the group, reflecting the wide range of sectors and company sizes represented. One treasurer said their company had done benchmarking on its hedging, at headquarters level rather than considering the operating companies. They added that the company wanted to look at levels of transparency, although this was hard to benchmark.

However, other participants said that the range of treasury experience negated its usefulness. It could, however, be about making the financial supply chain more efficient. For example, no-one seemed to be responsible for the whole credit card collection process.

One participant commented that benchmarking was not very effective at demonstrating what could go wrong, although it could check how efficient the use of resources was. In terms of achieving full automation, he said that the theory was great but not necessarily in practice as ‘knock-on’ work would be extensive as the systems were fundamentally not good. Staff a few levels down who had to implement it new initiatives also had to be considered.

The group also discussed the resources available to treasurers. One member noted that, although magazines covering the field were very good for keeping the treasurer up to date on trends, case study examples tended to avoid dwelling on mistakes made. This, together with the fact that treasurers were reluctant to share their own experience on service suppliers, meant that certain suppliers were not held accountable for poor service.

Another participant preferred to speak to peers about potential suppliers after ascertaining their clients through the generic literature provided, but added that he realised that that was not what was commonly understood by benchmarking.

Taking the Pain From KYC

Know your customer (KYC) regulations were another key discussion point at the meeting. Regulations in this area were described as one of the biggest pain points for treasurers, with some banks apparently taking these to extreme lengths that could impede the day-to-day working of a business. More than one of the treasurers present told anecdotes illustrating the challenging nature of the regulations, which in cases appeared to defy logic in terms of the company position of individuals called upon to identify themselves. This was a particular challenge in situations where companies were refinancing.

One highly topical issue raised was the threat of a two-tier euro caused by sovereign failures within the EU. ETC members suggested bringing in an economist to examine the potential ramifications for corporate treasurers.

The Role of the Treasurer

The role of the treasurer in an organisation – and treasury’s contribution to the business – was another main topic of discussion. Was it proactive or reactive? In the wake of the financial crisis, was the focus still on retaining cash and liquidity or had the priorities largely evolved to financing?

One of the delegates noted that the position of treasurer, although relatively young, had moved on from cash management and foreign exchange (FX) but that some were unaware of this. He added that a vacuum had been left by the automation of many functions that had not yet been fully resolved. However he added that it was a fallacy that the treasurer was in general more valued than previously by the chief financial officer (CFO). He said that treasurers had to consider how their role was going to evolve in the coming years given increasing automation.

Other members argued that the treasurer’s role had indeed become more strategic and more involved with the business. One commented that, although the big decisions such as whether to take on private finance were the domain of the CEO, it was important to evaluate how treasury fitted into this. Another treasurer commented that a larger amount of time spent with the business, instead of the bank, as a measure of success.

The mobility and prospects of treasury staff were also discussed in the session, with members exploring the different attitudes to working in treasury among the senior staff versus the more junior, operational levels. Several members agreed that working in treasury was not seen as a ‘job for life’ as it was in other professions. One ETC member noted that a large proportion of his treasury staff came from banks, while fewer moved the other way. The position of treasurer was not seen as a jumping off point to becoming more involved with other parts of the business, largely because there was more money to be made in treasury compared with other roles at a similar level within businesses. This meant that gaining experience outside the treasury department was less common. This lack of crossover between treasury and other parts of the business had wider strategic implications; there needed to be more awareness of treasury imperatives within other parts of the business to avoid situations where sales were made in regions where payment couldn’t be extracted.

The impact of social networking was also discussed at the meeting. One participant noted that activity in social networking forums for corporate treasurers to give input on products development was often disappointing and wondered whether it was useful or a gimmick. A key problem for some participants with contributing to forums of this kind was time. Others said that a lack of common purpose was another reason that forums failed to pick up momentum. Another issue was generational – several participants preferred real life meetings for interaction and problem-solving.

Overall the ETC meeting in Zurich covered a variety of key concerns that corporate treasurers are facing today. From this discussion, members selected bank pricing as the topic they’d like to discuss further in the next ETC meeting, which is taking place at the Dorchester Hotel in London on 7 February.

Introducing the European Treasurers Council

European Treasurers Council (ETC) is an exclusive network of treasury
executives that meets in small groups in cities across the continent to
discuss critical issues facing treasury and the evolving role of the

Through these confidential interactions, treasurers
identify practical solutions and innovative ideas to improve their
treasury operations and drive the growth of their businesses.

The ETC programme is managed by gtnews, the world’s largest network of
treasury professionals, and sponsored by Deutsche Bank. Members
influence editorial policy at gtnews, and are proactive in suggesting
research and benchmarking projects that will benefit the European
treasury community as a whole.

The ETC programme will grow over
time to include further events, discussion forums, research programmes
and career support services. If you are at the level of assistant treasurer or above and
would like to apply to join the ETC, please email joym@gtnews.com.



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