What Keeps Treasurers Awake At Night?

What keeps you up at night? In a recent poll conducted by gtnews and JPMorgan Chase, over 500 readers ranked issues from 1 (sleep like a baby) to 5 (gives me nightmares!) from which we have derived an ‘angst factor’ allowing us to compare levels of concern about different issues for treasurers and bankers throughout the world. Who would have thought that a treasurer working for a not-for-profit organisation in the mid West of the US has similar levels of professional anxiety to one of his peers in Beirut, or indeed that the most stressed treasury professional in the world appears to be an implementation manager for a major global bank? The data raises some interesting issues and we have asked treasurers from around the world to comment on them.

North America: Up All Night

The poll showed that corporates are most concerned about optimising global cash flow and improving treasury efficiency. The latter also preyed on the minds of the bank respondents and they ranked it as the subject most likely to keep them awake at night. Overall, North Americans have the worst sleep, with 38% scoring answers rated four or five (nightmares), as opposed to 33% for Western Europeans and Asians. The poll revealed that money has the power to make all treasurers sleep soundly: three times as many stressed people are from companies with sales of less than US$1bn, than from companies with sales of more than US$1bn.

Money Makes the World Go Round

Over 50% of all corporate treasurers who responded to the poll said that the issue of optimising global cash flow was a high priority. One corporate treasurer based in France – Anis Rahal, general manager at Box Automation Solutions, and previously a manager in international treasury at Automatic Data Processing – says: “For us the biggest disaster would be not being able to get a view of our global (international) bank accounts.” And Johan van der Pijl, group treasury operations manager at Netherlands-based SigmaKalon Group, a decorative and protective paints manufacturer, is not totally satisfied with the cash flow structure currently used. He says: “More accurate information is needed plus efficient cash concentration and repatriation of funds. We need to know what lies ahead to be able to lower borrowing cost effectively.”

According to JPMorgan’s head of treasury services for EMEA, Alex Caviezel, some of the things treasurers need to consider in order to achieve an optimized global cash flow are:

  • Visibility, control and centralization.
  • Multi-currency solutions including cross-currency pooling.
  • Regulations. Corporates should focus on cash concentration to ensure they have a clear and robust structure with full control, enabling them to comply with Sarbanes-Oxley, Basel II and IAS 39.
  • Corporate access to SWIFT and SCORE should be considered.
  • Physical and financial supply chain – corporates should continue to use the traditional working capital solutions for liquidity management. However, they should also consider it from the point of view of procurement, IT, compliance, audit and shared services.

Doing More with Less

Almost 50% of the corporate respondents claimed to have a high level of concern about improving their treasury’s productivity. This reflects the developing role of treasury, which is increasingly being seen as a department that can deliver an efficient service and bring financial returns. According to Caviezel, this is a very important development for companies. He says: “The role of the treasurer is really expanding – it now involves managing potential risks, not just financial, but reputational as well.” Rob Vogel, treasury director at the oil and energy company Hess Corporation, based in the US, says that it is important for treasurers to think about how they can use their skills to support the business. He says: “There is more we need to do – we need to work harder as a business partner and apply our skills to other areas of the business – for example, we can apply our expertise in FX management to areas such as large capital projects.”

Stress on Technology

Asian and Western European respondents were least concerned with trying to keep up with technology – the results showed that less than 29% of them would be kept awake by this issue, while 37% of North American respondents felt the same way. Vogel, at Hess, confirms the fears of treasurers in North America, as he says he is not happy with where his treasury department currently is in terms of its technology. He says there are still integration issues to solve: “In future, information should flow through treasury to the bank in a fully automated way. But today many payments need manual input.”

According to JPMorgan’s Caviezel, ensuring technology is advanced is of great importance to companies in North America because of the level of competition in the market, so the technology – e.g. for managing accounting and billing, information, forecasting or production – is a differentiator. In Asia, the production costs are lower and the technology is less of a differentiator in that market. However, Caviezel says that Western Europe is a conundrum: “Given the significant competition in that environment, then it doesn’t seem logical that Western Europeans should be less concerned about technology than North Americans. Does it imply less concern about the efficiency of the treasury departments and the efficiency of the corporation, or less of a concern about future performance? This is where surveys like this can open up your eyes to opportunities for further review.”

Are Europeans Too Complacent?

The results showed that preparing for disaster was a priority for some – but not for others. Twenty-eight per cent of Asians and 22% of North American respondents gave this issue a four or a five rating, compared to just 14% of Western Europeans. The level of concern from Western Europe was surprisingly low – one UK treasurer who preferred to remain anonymous felt extremely laid back at the prospect of disaster: “Everything is organized should disaster occur, but it’s not something that worries me.”

Look Out, There’s a Fraudster About!

The issue of fraud is very closely linked with securing company data and the survey found that while 24% of respondents were highly concerned about securing company data, even more – 36% – were very worried about fraud. Fraud is something that affects people across the board and Vogel, at Hess, says: “As good as your technical infrastructures might be, fraud can happen within the company, the bank or it can come from outside.” And Vida Pál, treasurer at Magyar Posta, the Hungarian state-owned mail service, also reports that his company has implemented a system to prevent fraud. He says: “We now have two or three levels of security in place and every process requires two or three people to be involved.” Mark Hodgkinson is the general manager of Shell group treasury operations in Singapore, and he says there is no increased risk of treasury fraud in Asia compared to the US or Europe – especially if companies use a global cash infrastructure and SWIFT standard security messages.

See you Later, Regulator!

Regulatory changes are of more concern in Asia Pacific than in other regions. Sixty per cent of respondents from that region said that regulations would stop them from getting a good night’s sleep. JPMorgan’s Caviezel, now head of treasury services for EMEA, but previously head of treasury services in Asia Pacific, says: “Regulatory change is dictated by the ambitions of certain countries to align with global trends, for example China, and this means treasurers have to react to a constant stream of regulations.” According to Shell’s Hodgkinson in Singapore, Asia-based treasuries operate in many highly regulated markets – China, India, the Philippines and Malaysia all pose regulatory challenges for treasurers – and this would explain why this issue is of high concern. An example of this is Thailand’s recent introduction of currency controls, which, according to Hodgkinson “required significant re-engineering of our treasury processes.”

Keeping up with regulatory change is also a challenge for the North American and Western European respondents. UK pensions regulations have caused problems for some treasurers, while a treasurer at a corporate with a US-based parent company said that Sarbanes-Oxley (SOX) was “the bane of our life.”

Conclusion

Treasury is increasingly a round-the-clock role and you never know when the next regulatory change, market movement or M&A bid will disturb your sleep. Even if you do sleep like a baby, remember that babies often wake up every two hours screaming!

Respondents

There were 502 respondents to the poll. Fifty-four per cent of those were from corporates, 24% from banks and the remaining 25% comprised consultants and others. The results by region were divided as follows: Western Europe 39%, North America 28%, Asia Pacific 19% and the rest of the world, 13%.

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