It was an old joke, but the audience of corporate treasurers and other finance executives laughed anyway. Asked at last week’s Sibos conference in Hong Kong how he sleeps at night, Dennis Tosh, global director of capital markets and risk management at Ford Motor Company, answered: “Like a baby – which means that I wake up every two hours and cry.”
Many in Asia can sympathise, especially those manning treasury at export companies, which have been hit as hard by the economic crisis as the US carmakers. But there is an upside. At Ford, says Tosh, treasury has become a key function, “a quantum change from what it was as recently as five years ago.” These days, the CEO, CFO and the board are all focused on treasury issues.
It’s happening not only at Ford. “My most marked observation from dealing with my corporate clients in this period is that corporate treasury is now centre stage in every discussion,” said Lloyd O’Connor, managing director and regional product executive, treasury service, at JPMorgan, who was a panellist along with Tosh at a Sibos session.
The reasons are not difficult to discern. In times of financial stress, companies need to know their cash position to the minute and to the last cent. Total visibility becomes crucial for rapid decision-making, for satisfying creditors that debt covenants can be met, and for assuring analysts and investors that the business remains viable. A well-run treasury can maximise usage of available resources and thus avert (or at least minimise) the need to contract new debt.
But are treasury functions in Asia and elsewhere ready and able to deliver on the new expectations? Going forward, will treasurers and their staff wield their new clout effectively for the benefit of their company and their own career?
For a treasurer keen to consolidate gains, one obvious path is automation. In an interview, Kenneth Dummitt, president for banks and corporations at SunGard, notes that its receivables solution is one of the easiest to sell in the current environment. “The cost justification is so strong and the return so quick that we actually have people tone down their internal cost justifications because otherwise it’s not believable,” he says.
The key is to present compelling cost justification. “There’s a built-in cultural resistance to going to ask for capex around the globe right now,” Dummitt explains. He estimates that about 10% of SunGard deals over the last year were initially turned down by the board. But nine out of 10 subsequently won the green light after the proponents came back with numbers showing how much the company will save by spending on the system.
The same tactical approach can be used in automating other treasury and cash management processes, including payables factories, SWIFT connectivity, and shared services and/or third-party outsourcing solutions. With those basic tasks automated, treasury can then address data mining, analytics, forecasting and other high-value functions that will cement its new central role in the business.
“Never allow a crisis to go to waste,” Rahm Emanuel, US President Barack Obama’s chief of staff, said on a Sunday morning talk show. “They are opportunities to do big things.” It’s a mantra that corporate treasurers will do well to heed.
When it comes to the relationship between Europe and Britain – uniformity isn’t a word that currently springs to mind. And that’s not just a reference to Brexit. Whilst the Europe and Britain do find themselves in the midst of a political break-up – their monetary policies are also showing signs of divergence.
Europe’s introduction of the General Data Protection Regulation (GDPR) next May will have implications for businesses around the world and US corporates should start getting ready if they haven’t already done so.
As anticipated, US organisations exited prime money market funds en masse following last year’s SEC reforms. AFP’s latest Liquidity Survey indicates what it will take to encourage them back.
The statement issued by the bank also suggests that fiat currencies are superior, due to their price stability.