During 2007, gtnews published over 60 features, including special reports, detailed guides and commentaries. We have compiled a list of the top 10 most-read features, which indicates the challenges and issues that have been preoccupying the treasury community in the past year. It is clear that both corporate treasurers and banks have been feeling the sharp end of the credit crunch and are increasingly focused on improving efficiencies and productivity in the treasury department. Optimising global visibility and control over cash flows is an essential part of increasing working capital efficiency, while it is evident from the top 10 features that more attention to risk management was also a must for treasury practitioners in 2007. The importance of the financial supply chain did not go unnoticed and features on this theme also made their way into the list of most popular articles.
It is likely that these issues will not immediately disappear in 2008. The new year is likely to bring a continuation of pressure from the liquidity crisis, forcing many treasurers to prioritise risk management and seek further efficiencies. Other predictions for 2008 include the US dollar exchange rate, developments in technology and an increased interest among corporates in the single euro payments area (SEPA). The list below highlights the top 10 most-read features of 2007.
|1||What Keeps Treasurers Awake At Night?||05 Feb 2007|
|2||Is Corporate Cash Management Changing?||19 Jul 2007|
|3||Corporate Risk Management: Practical Guide for Strategic Decision-Making||26 Mar 2007|
|4||Financial Supply Chain Management||17 Apr 2007|
|5||What Now? What Next?||21 May 2007|
|6||Survey Reveals High Levels of Inefficiency Within Internal Treasury Operations||22 Jan 2007|
|7||A Strategy For Future Growth: Banking Challenges and Trends||16 Aug 2007|
|8||The SWIFTNet Revolution and Corporate Connectivity: What Corporates Should Know||11 Jul 2007|
|9||How To Manage Your Rating Agency Relationship||12 Feb 2007|
|10||Global Trends, Local Practice||16 Jan 2007|
* This list reflects the cumulative reads of each feature as of 18 December 2007. The longer a feature has been on the site, the more likely it will have a higher number of reads therefore the date of publication of each article should be taken into consideration when looking at the list of most-read features.
The most-read feature on gtnews in 2007 was the results of the survey on readers’ greatest concerns and nightmares: What Keeps Treasurers Awake At Night?. The survey polled over 500 treasury professionals (54% of those were corporates) and found that, for most respondents, the issues that proved the greatest challenge were improving treasury’s productivity and optimising global cash flows. These concerns were reflected elsewhere in your reading preferences, and topics such as obstacles to treasury efficiency were the central theme of two other features in the top 10 list.
The survey results feature on the changing nature of cash management, Is Corporate Cash Management Changing?, was the second-most read feature of 2007. This survey found that cash flow forecasting has the most potential to improve cash management efficiencies. A surprising number of corporate treasuries, including medium and large companies, do not have any form of cash flow forecasting at all, while the vast majority of those that do have a forecasting method use spreadsheets (such as Excel). The notorious inefficiency and error-prone nature of spreadsheets means that treasurers have scope for improving the process, which will reap rewards in cash management efficiency and working capital.
Another well-read survey also looked into making treasury processes quicker and more reliable: Corporate Risk Management: Practical Guide for Strategic Decision-Making. Again, this survey highlighted the lack of automation present in communication between treasuries and their subsidiaries. The majority of subsidiaries hold data in multiple formats, while most treasury-to-subsidiary communication is done through email or spreadsheets. There is much that corporate treasurers can do to improve communication by upgrading from spreadsheets to systems that can be integrated with treasury management systems (TMSs) or enterprise resource planning (ERP) systems.
Cash Flow Optimisation
Gaining as much visibility and control over liquidity as possible is also a continuing priority, according to the three surveys cited above. Over 50% of all corporate treasurers who responded to the survey at the top of our best-read list, (What Keeps Treasurers Awake At Night?), said that the issue of optimising global cash flow was a high priority. With suppliers and manufacturers based all over the world, and the pressure to cut costs and increase cash management efficiencies, treasurers need to gain total control over all incoming and outgoing payments in order to then feed data accurately into cash flow forecasting systems and increase working capital efficiencies. The survey Is Corporate Cash Management Changing? found that companies with centralised treasury structures, which tended to be the larger corporates, were more likely to focus on cash management techniques such as cash pooling, cash flow forecasting, short-term investments and funding, which are key to improving cash flow efficiencies.
The fifth feature in the top 10 list is the first part of a guide examining the central issues affecting treasury management today – and what treasurers can do to improve their treasury processes: What Now? What Next? – Part 1. Author of part one of the guide, Citi’s Hugh Davies, looks specifically at centralisation through shared service centres. He writes: “Globalisation, increased M&A activity and the evolution of new technologies is fuelling a renewed focus on SSCs, as companies reassess their operations and SSC model in order to increase visibility and control.” The second part of the guide, Corporate Credit Cards, examines the market for corporate credit cards, including purchasing cards (or p-cards), which it argues can also help companies to gain visibility and control over their corporate cash flows. Author Vincent Eavis writes: “Using a p-card for payments can help companies control disbursements and maximise working capital. It enables companies to control when they pay each supplier and to improve their control over cash flow.”
Risk management was also a very popular topic in 2007, which is not surprising considering the market volatility following the US sub-prime crisis and the US dollar’s downward spiral against other major currencies. The guide to corporate risk management proved a big success with gtnews readers in 2007, and was the third most-read feature: Corporate Risk Management: Practical Guide for Strategic Decision-Making. Part one of the guide provides a comprehensive overview of the issues associated with risk management and explains how “The number and complexity of risks have increased while, at the same time, risk tolerance among board members has decreased, which has resulted in a growing focus on managing risks.”
Financial Supply Chain
The integration of the financial supply chain with the physical supply chain was another hot topic in 2007, and looks set to continue drawing attention in 2008. Companies are increasingly under pressure to improve efficiencies within the financial supply chain, while there continues to be demand for guaranteed and faster trade transactions. The guide series (Changing Dynamics) covers trends in trade finance, electronic transactions management, greater visibility from improved management information systems (MIS) and supply chain financing. The first part of the guide recognises the increased importance that global corporates have to place on the financial supply chain: “As the reliance on low-cost countries for sourcing and contract manufacturing becomes more intense, and as more key supply chain management-related processes are outsourced or off-shored to third parties, the complexities, risks and costs associated with long distance supply chain management have increased.”
Corporates – Looking to Expand
The topics mentioned above were key themes for all treasury professionals in 2007, regardless of whether they were banks or corporates. However, there are significant and telling differences in the most-read articles when separated according to either bank or corporate readers. Although many of the most popular features on the lists are the same, it is interesting to note that our corporate treasury readers showed considerably more interest in regional treasury practice. This could indicate the increasingly global nature of modern business: many companies are expanding, or are moving their manufacturing or service centres abroad, predominantly to central and eastern Europe or to India and China. The guide Global Trends, Local Practice was the fourth most popular feature for corporate readers and it examined the details of treasury and banking practices in three countries in Europe: Germany, Poland and Turkey. Each part of the guide gave readers an insight into how to set up a treasury in each country, and the regulatory pitfalls to look out for. While giving sound advice on payments and clearing in each country, the guide also touched on useful cultural differences, such as the more formal approach to business meetings in Germany, and the best ways to address your Turkish colleagues.
The ninth and 10th most-read features also indicate the interest among corporate treasurers in managing their liquidity abroad – this time in Asia. Part six of the guide to global liquidity, Liquidity Management in Asia, looks at regional treasuries and shared service centres in Asia, and also considers regulatory and tax issues affecting companies with operations in Asia, as well as strategies for liquidity management. The popularity of this feature shows that gtnews’s corporate readers are very interested in learning about the practicalities of managing treasury operations in Asia. The popularity of our Q&A feature on China, Liquidity Management in China – Readers Questions Answered, reinforces this and shows that China continues to be a tantalising business proposition – in particular for US-based corporates. In the Q&A, three Chinese treasury experts provide answers to questions sent in by gtnews readers on topics including deregulation of the renminbi, central bank regulation of the renminbi money markets, compliance with the Pudong Nine Measures and also the advantages of operating as a foreign-invested enterprise (FIE) in China.
|1||What Keeps Treasurers Awake At Night?||05 Feb 2007|
|2||Is Corporate Cash Management Changing?||19 Jul 2007|
|3||Corporate Risk Management Framework: Exposure Identification (Step 1)||09 May 2007|
|4||Global Trends, Local Practice||16 Jan 2007|
|5||Survey Reveals High Levels of Inefficiency Within Internal Treasury Operations||22 Jan 2007|
|6||Shared Service Centres||21 May 2007|
|7||Corporate Access to SWIFT: Living Up to Expectations?||11 Jul 2007|
|8||The Credit Rating in Context: Its Value to the Corporate and the Investor||12 Feb 2007|
|9||Liquidity Management in Asia||15 Aug 2007|
|10||Liquidity Management in China – Readers Questions Answered||06 Jun 2007|
Banks – Focus on Optimising Cash Flows
The banks’ top 10 list of features indicated that they are more interested in cash management techniques. The report The Future of Global Notional Cash Pooling appeared at number eight on the banks’ best-read features, while it did not appear at all on the corporates’ top 10 list. The report examined the benefits and method of setting up a multi-currency, global, notional cash pool with a notional overlay structure to eliminate the need for currency conversions and hedging. It also highlighted the case studies of three treasurers from multinational companies who have improved their cash flows considerably through using the tool. While few banks currently offer this structure, it is evident that many banks would like to develop the product for their own corporate clients.
The banking readers also read features on banking challenges and trends and SWIFTNet for corporates – both topics that have more relevance for them rather than for corporates. In the commentary A Strategy For Future Growth: Banking Challenges and Trends, gtnews considered the latest trends and developments in banking strategy and investment surrounding technology, industry collaboration and regulation. The commentary notes that banks are under constant scrutiny from regulators to comply with standards and regulations to prevent financial crime, while investment in technology remains their most pressing priority to remain competitive in a market rife with mergers and acquisitions (M&A).
Corporate connectivity to SWIFT via SWIFTNet is also a hot topic for banks, belied by the appearance of the guide at number seven on the best-read list. The first part of the guide, Why Connect? Why Now?, discusses the current challenges of existing bank-to-corporate connectivity models. It is possible that many corporates are still not fully aware of the potential of SWIFTNet for facilitating their bank messages and payments. Banks, on the other hand, are very interested in this topic because they will benefit from a standardized interface to their corporate clients. The gtnews commentary from SWIFT’s annual conference highlights further issues related to the banking industry and SWIFT: Gaining Momentum at Sibos 2007.
|1||Is Corporate Cash Management Changing?||19 Jul 2007|
|2||What Keeps Treasurers Awake At Night?||05 Feb 2007|
|3||Changing Dynamics||17 Apr 2007|
|4||Shared Service Centres||21 May 2007|
|5||A Strategy For Future Growth: Banking Challenges and Trends||16 Aug 2007|
|6||An Overview of the Risk Management Landscape.||26 Mar 2007|
|7||Why Connect? Why Now?||11 Jul 2007|
|8||The Future of Global Notional Cash Pooling||26 Sep 2007|
|9||Liquidity Management in Asia||15 Aug 2007|
|10||Survey Reveals High Levels of Inefficiency Within Internal Treasury Operations||22 Jan 2007|
Themes for the Year Ahead
So we have looked at the top concerns and themes that have dominated treasury in the past 12 months. But will the same issues continue to have the same importance in the year ahead? While treasury efficiency, cutting costs and optimising cash flows have been at the top of corporates’ agendas due to pressure from the volatile financial markets in the wake of the US sub-prime mortgage crisis, will the credit crunch ease in 2008? Or should we expect more stormy seas and bank losses in the coming months? Corporates have been very interested in treasury practices in central and eastern Europe and Asia (particularly China), but will this demand expand to other emerging markets in 2008?
gtnews asked several treasury experts (with combined industry experience of over 150 years!) for their opinions on how the market will change and the issues that will take centre stage over the coming year. Their views make interesting reading. It is clear that many experienced market figures do not believe that we have reached the end of the credit crisis just yet. It is likely to continue causing liquidity and funding problems for companies well into 2008, but companies will be able to reduce the impact of the credit squeeze through efficient liquidity and cash management.
SEPA is another issue that will be more talked about than ever in 2008, as the first SEPA instrument comes into use on 28 January, when corporates will be able to receive incoming SEPA Credit Transfers. Until now, SEPA has largely been discussed by the European regulators and banks, but corporates will need to become more involved in 2008. Our treasury experts also had views on topics such as the slide of the US dollar (they optimistically predict a rally against the euro) and developments in technology (contactless and mobile payments were much talked of in 2007, but are set to gain in popularity in the coming year). Read the top 10 predictions from experts in the list below.
Top 10 Predictions from the Experts: Treasury Veterans Share their Views
1. Liquidity crisis:
Senior banker at a global bank: The current credit squeeze will continue for a while, which means that companies will be looking for ways to use existing surplus liquidity available within the company rather than relying on external sources of funding. Therefore, they will increasingly involve banks and their cash concentration technology to automatically channel funds from low yielding local bank accounts to subsidiaries with a funding need.
Consultant in the payment cards industry: Liquidity and cash management will be the key to survival during this crisis.
2. The US dollar:
Senior banker at a European bank: The US dollar will gain value against the euro, but will remain volatile during the first months of the year.
Senior banker at a global bank: When the first SEPA instruments are introduced in 2008, many companies will play the waiting game to see what other companies are doing rather than making changes at the outset of SEPA on 28 January.
Senior banker at a European bank: SEPA will move from an internal banking project and become a discussion point for corporates.
Senior consultant at a financial consultancy: Generally, corporates across Europe will not be impressed by SEPA, but they will seriously start investigating the impact of SEPA on their business. As long as the Payment Services Directive (PSD) is still to be implemented in the national legislation of member states, the corporate community in general will not see a huge benefit, and will not feel the urge to adopt SEPA standards for SEPA Credit Transfer only. Widely used national legacy products are either outside the scope of SEPA or are more efficient than their SEPA counterpart. This fact suggests that most companies will not see an economic justification for a SEPA project, because rationalisation of cash management structures will prove difficult to implement. Of course some companies that operate across Europe will incorporate SEPA compliance and SEPA standards in a wider business case for centralisation (e.g. set up a payments factory). Later in 2008 banks will seriously consider what strategy to use to earn back their SEPA investments; increased account fees, repair cost, increase pricing for legacy products, ‘declare’ critical mass, urge politicians to step in (we did our part of the Lisbon Agenda, now you have to live up to the promises) etc. which will do no good for the image of the sector.
4. Global cash centralisation:
Senior banker at a global bank: The trend towards centralisation of liquidity at the global level will accelerate in 2008. Companies in Asia will further centralise their liquidity operations and link these to their liquidity positions in Europe and North America setting up global cash pooling structures.
Senior consultant at a financial consultancy: Corporate treasuries will seriously look at performance measurement. For years now treasury has been integrating with core business. Treasury processes are increasingly modelled on mainstream business processes. Treasury management is forced to become more professional, including performance benchmarking, which is necessary to prove value and secure budget. The challenge for treasury professionals is that often treasury manages opportunity losses/profits, which are difficult to quantify in hard dollar numbers using simple models only.
5.Technology and automation:
Senior product developer at a global software company: More integrated offerings of automation front to back will emerge first in FX and extend across asset classes from technology vendors as revenue margins from trading thin out and risk reduction grows even more important.
Senior banker at a European bank: Technology will accelerate solutions such as mobile banking and supply chain management.
6.OTC derivatives market:
Senior product developer at a global software company: The OTC derivatives market will continue to expand in volume and instruments but in the US there will be regulatory scrutiny and legislation as a fall out of the credit meltdown in sub-prime lending, once the connection to asset-backed derivatives are noticed to have had a role in this phenomenon.
7.Financial supply chain management:
Consultant in the payment cards industry: There will be significant improvements in financial supply chain efficiency during 2008.
8. Credit-linked settlement:
Senior product developer at a global software company: CLS will come under increased pressure to lower rates substantially as financial institutions find ways to net trades prior to delivery to CLS.
9. The FX market:
Senior product developer at a global software company: FX processing and controls will be seen as models for other capital markets instruments while its volume grows from algorithmic trading.
10. Application service provider (ASP) software:
Senior product developer at a global software company: Non-bank players will demand more user friendly and low cost ways to reduce risks enforced by their sell-side counterparts. Banks will white label vendor ASP software to provide solutions to their clients.
While 2007 has been a tough year for many, it seems that the pressure will not ease much in 2008, at least not initially. Our treasury experts suggest that corporates will be under as much pressure as ever to improve cash management and treasury performance. During the coming year, gtnews will cover the key issues affecting the world of treasury, but we also welcome your views about the main areas that will affect you, whether in accounting, payments, capital markets, investment or any other area.