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CASH MANAGEMENTTheshifttogenuineinformationmanagementLIQUIDITYKnowingwhereyourcashisatalltimesRISKWhydoesn’tthetreasurertakeabiggerroleinmanagingriskFUNDINGAccessingcreditingoodandbadtimes

International Cash and Treasury Management

A Special 15th Anniversary Supplement

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ThisyearEuroFinancecelebratesthe�5thanniversaryofitsInternationalCashandTreasuryManagementConference,aneventthatbringstogetherthetreasurycommunityannuallytodebatethelatestissuesandexchangeopinionsonbestpracticeandfuturedirection.

Lookingback,ourjournalistsandeditorswerestrugglingtopinpointa�5-yearperiodinhistorywheresomuchchange--politically,economically,technologicallyandsocially–hadimpactedcompaniesand,inparticular,theirfinancialoperations.Ofcourse,isolatedevents,fromwartostockmarketcrashes,havealteredthebusinesslandscapesincethebeginningoftime,butthepast�5yearsofdevelopmentstakenintheirentiretyhaveshiftedcorporatebehaviourforgood.

Muchofthiscomesfromtherelentlesspursuitofglobalisation.Themorecompaniesgoglobal,themoreglobalriskstheyface.Evenifacompanyhasnopresenceinaparticularmarket,itinevitablycarriesthatmarketrisksomewheredownthelinebecauseoftheinterdependencebetweensuppliersandbuyerstheworldover.TodayitispossibletobuyaproductinAmericawheretherawmaterialsweresourcedinChina,assembledinCambodia,shippedfromDubai,andtheninvoicedfromSingapore,allinthenameofefficiency,expediencyandcost.Butallthiscomeswithanexposuretorisksintheentirechain.

Duringthepast�5years,wehavewitnessedtwoGulfwars,theendofapartheidinSouthAfrica,thebreak-upoftheSovietUnion,andHongKongreturningtoChineserule.Ontheeconomicfront,theNorthAmericanFreeTradeAgreementwassigned,creatingtheworld’slargesttradingbloc.TheEuropeanUnioncameintoexistence,asdidtheeuro,whichbecamelegaltenderin�2EUcountries–thebiggestmonetarychangeoverinhistory.ChinajoinedtheWorldTradeOrganisation,agreeingtoopenitsmarketsandsignallingitsintentiontobecomeaneconomicpowerhouse.Oilreachedarecord$78abarrel.

AnunprecedentederaofcorporatescandalbeganwiththecollapseofTheBankofCreditandCommerce(BCCI)�5yearsago.ThiswasfollowedbyTheLong-TermCapitalManagementhedgefundfailure,energygiantEnron’sbankruptcyfilingwith$�6bnofdebt,andthemulti-billiondollaraccountingfraudatWorldCom,tonamebutafew.TheSarbanes-OxleyActof2002,knownasSarbOx,passedintolawinresponsetothemanyscandalsthatshookcorporateAmerica,forcingcompaniestoputtheirhousesinorder.

And,ofcourse,terrorismbecametrulyglobal.Althoughour�5yearshistoryopenedwithanIRAceasefire,elsewhereterrorismattacksbecamemoreaudaciousoratleastthevisionofthemdid,courtesyofCNN.WhocouldforgettheimagesofdeathanddestructionastwoplanesslammedintothetwintowersoftheWorldTradeCenterinNewYork?9/��wasfollowedbyfurtherhighprofileattacksinBali,MadridandLondon,nottomentiontheongoingcarnageinAfghanistanandIraq.Theterm‘suicidebomber’isnowfirmlyinourvocabulary.

Theworldalsowitnessedfirsthandthepowerofenvironmentalrisk:aChristmas-timetsunamiintheIndianOceandevastatedAsia,takingmorethan200,000lives;HurricaneKatrinadestroyedNewOrleans;andboththeSARSvirusandbirdfluthreatenedtheworldwithpandemics.

Noglobalcompanywasimmunetothefalloutfromanyofthesehistoricevents,whetheritopenednewopportunitiesandmarkets,orpresentednewrisks.

Evensociallylifechanged.PrincessDianawaskilledinacarcrash,givingrisetoaphenomenonofworldgrieving.Thefirstanimalever,Dollythesheep,wascloned.Meanwhile,companieslikeGoogle,YahooandAmazonbecamehouseholdnames,andthedot.combubbleburst,takingoutthousandsofotherhopefuls.

But,perhapsthebiggestimpactofthepast�5yearswasonthetechnologyfront.WhenTimBerners-Leeunleashedthesoftwarethatunderpinnedtheweb,andthefirstwebserveroutsideEuropewentonline,whocouldhaveimaginedhowitwouldchangecompanies,theircommunicationsandfinance.

GlobalisationandtheInternethavechangedcompaniesforgood,bringingnewopportunitiesbutmuchgreaterrisks.Thisspecialsupplementlooksathowthesetwodrivershaveimpactedcashandliquiditymanagement,riskandcorporatefunding,andtheveryroleofthetreasurerinthefinancefunction.

LeslieHolstrom-Editor

ChangingtimesContributorsValerie HartValerieisastaffwriteratEuroFinance.Previously,shesetupHartEditorialtoprovideeditorialandresearchservicesforcompanieslikeBNPParibasandtheLegal500.ValeriewasformerlymanagingeditoratStandard&Poor’sinLondonandpriortothisatTechnicalReviewMiddleEast.ShehasalsoworkedatInternationalFinancingReviewinLondonandInvestmentDealers’DigestandtheGeneralAccountingOfficeinWashingtonDC.

Leslie HolstromLeslieisaconsultanttoEuroFinanceresponsibleforeditorialproductofthecompany.ShewaspreviouslyajournalistworkingforanumberofpublicationsincludingTimeandFortune,andwasadirectorofapublicrelationsandmediacompanyprovidingservicestofinancialandconsumerclientsacrossEurope.ShebeganhercareeraseditorforspecialprojectsandresearchguidesatEuromoney.

Dr Mark KirklandDrMarkKirklandistheglobalheadoffinancialservicesatPhilipsInternationalBV.PriortojoiningPhilipsinDecember�998,DrKirklandworkedforMerrillLynchinLondon,NewYorkandFrankfurtinthefixedincomeandcommoditymarketsfornineyears.HeholdsaBSc(Hons)inMathematicsandaDoctorofPhilosophyinthefieldofStatisticalStochasticSimulation.

Julian Lewis Julianiseditor-in-chiefofStrategicCommunicationLtd.Hefoundedthecompanyin2003toprovideadvisoryandeditorialservices.RecentclientsincludeABNAMRO,theAfricanDevelopmentBank,Bain&Company,theDailyTelegraph,EigerCapital,EuroFinanceConferencesandmtn-i.Hehadearlierworkedinfinancialjournalismandinvestmentbankingfor�4years–mostrecentlyasheadofresearchservicesforDanskeSecurities.JulianbeganhiscareerasastaffwriterandheadofresearchforEuromoneyandwaslaterdeputyeditorofEuroweek,senioreditorofInternationalFinancingReview(IFR)andnewseditoratAlfredBerg.Julianalsocontributesonaregularbasistoresearch,writeandprovideeditorialguidanceforEuroFinanceconferencesandtraining.

Carolyn MeierCarolynMeieristhemanagingdirectorofEuroFinance,havingpreviouslybeentheregionalconferencesandprogrammingdirectorforEconomistIntelligenceUnit,EconomistCorporateNetworkandEconomistConferencesinAsiaPacificforoverfiveyears.Priortothisshewasthegeneralmanager–Asiapacificfinancialsector,forTerrapinninHongKong.Shespent�2yearsinpublishingandexhibitionsintheUKpriortoher�0yearsinAsia.

Katharine MortonKatharineMortonisamediaconsultantwhobeganhercareer�5yearsagoaseditorofEuromoneyTreasuryManager.ShewentontoeditavarietyofinternationalpublicationsincludingInternationalBondInvestorandEnvironmentRiskandin�996movedtoHongKongtoeditFinanceAsia.ShehasworkedinmanydifferentmediarangingfrombeingacurrentaffairstelevisionproducerandpresenteratEuropeanBusinessNewstodailynewswirejournalismatBloomberg.Katharinealsocontributesonaregularbasistoresearch,writeandprovideeditorialguidanceforEuroFinanceconferencesandtraining.

Chris SkinnerChrisSkinnerrunsBalatro,anetworkingorganisation,researchfirmandadvisoryservicededicatedtotrackingfuturebusinessandtechnologytrendsinfinancialservices.HewritesregularcolumnsonthefutureofbankingfortheBankerandFinextra,aswellascontributingtoothermedia,includingtheBBCandFinancialTimes.PriortocreatingBalatro,ChriswasvicepresidentofmarketingandstrategyforUnisysGlobalFinancialServices,�998to2002,strategydirectorforNCRFinancialServices,�995to�998,andinsurancemarketsdirectorforWangandHighams,�987to�995.

Claire Wolstenholme and Aimee Watson -ResearchDave Kawan -DesignandproductionFox Printing Services Ltd - Printing

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OVERVIEWWillthelasttreasureroutthedoor,pleaseswitchoutthelights?In�5yearswillcompaniesstillemploytreasurersasweknowthemtoday?Orwilltherolesinacompany’sfinancefunctionblurtotheextentthatafinanceprofessionalwillneedtobeajackofalltrades?LeslieHolstromopensthesupplementwithadiscussiononwheretheprofessionisheaded.

Contents

CASHMANAGEMENTThenewbreedofinformationmanagementTodaytreasurersexpectaleveloftransparencyaboutcashflowsthatwassimplyunimaginable�5yearsago.JulianLewisexaminestheshiftfromsimplychasingcashflowandpositiondataacrossmultiplesourcestowardgenuineinformationmanagement.

PAYMENTSNolongerloosechangeChrisSkinnerstudiestheevolutionofmoneyfromitsearliestformstotheprospectsofpayingwithamicrochipinone’swatch.Howwillconsumertrendsimpactcorporatepaymentsinthefuture?

LIQUIDITYLookingforliquidityHasmanagingliquidityreallybecomethatmucheasier?Newtechnologyhascertainlyputthetoolsinplaceforgreaterautomation.Butincreasingcomplexity,asbusinessactivitybecomesevermoreglobal,andthedriveformoreefficiencyandtransparencyareputtingpressureontreasurerstoknowwhereeverypoolofliquidityiseachminuteoftheday.ValerieHartreportsonthenewregime.

RISKRiskybusinessTreasurymustmovefromabackroomprocessingunittoreallyaddingvaluetothebusiness.Onewayitcandothisistotakeonabiggerroleinmanagingrisk.Thoseintreasury,surely,arebestqualifiedinacorporatetounderstandcertaintypesofrisk,arguesDrMarkKirkland,GlobalHeadofFinancialServicesatPhilipsInternational.

OPINIONSTalkingheadsExpertsinthebusinesstakeafewminutestoponderonthechangingroleofthetreasurer,areasonwhichheorsheshouldfocusandwhatthenextgenerationoftreasurywillbringtothebusinesstableinthecomingyears.

FUNDINGDomesinthesky:�5yearsofcorporatefundingCorporatesarefacedwithasmorgasbordoffundingoptionstodaythankstotheglobalisationofinvestmentandbusinessactivity.Butalldependsontheconfidenceofthemarketplace,which,asKatharineMortonfindsout,canbefickle.

CHINAOpenforbusinessAsChinarelaxessomeofitsregulationstoenableatwo-waytrafficofbusinessbetweenitselfandtherestoftheworld,LeslieHolstromexplorestheopportunities.

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OVERVIEW

newmarkets;theInternetandemail,whichhaverevolutionisedtreasuryoperations;theadvanceofregulations,bothinaccountingandcorporategovernance;andthecontinuedpathtowardsstandardisation,haveallcontributedtoanewtreasuryenvironment.

Suddenly,asbarrierscamedown,companieswereexpandingintonewandunknownmarkets,likeChinaandRussia,andencounteringalltheattendantrisksthatcamewithglobalisation.WiththeInternet,thetreasurercouldcommunicateinrealtime,trackingcashpositionsandmarketmovementsthatimpactedthecompany’sfinancialpositionaroundtheworld.Newregulationsalsomeanttreasurerswereforcedtothink“biggerpicture”andemploytechnologyandprocessestomakethefinancialsmuchmorevisibleandaccountable;andfinally,changingtechnologyandtheadventofstandardisationbroughttheveryrealpossibilityofstraightthroughprocessingtomuchofthetreasuryoperation.

“Developmentssuchastheglobalisationoftheeconomy,theexplosivegrowthoftheweb,technologiessuchasimageandthecontinuedmovementtowardoutsourcingcutacrossallareasoftreasury.Allthishastransformedtheroleofthetreasurerdramaticallyfrom�5yearsago,puttinghimorherinamorevisiblestrategicrolewithintheorganisation,”saysTimothyLaney,GlobalCorporateSalesExecutiveforBankofAmericaGlobalTreasuryServices.

Willthelasttreasureroutthedoor,pleaseswitchoutthelights?

Fifteen years ago, there was a small amount of lip service paid to the changing role of the treasurer. In print media and conference and seminar programmes, the topic of the role of the treasurer was an afterthought. “Should the treasurer take on more risk responsibility?” asked various media. “How can the treasurer become involved in non-traditional areas such as long-term funding or M&A for the company?” Conference agendas discussed how the treasurer could become more strategic, and some consultants and banks rebranded their services based on elevating the treasurer to business partner and board level reporting.

Butthereality,otherthanforahandfulofcuttingedgecompanies,wasthatcash,bankingrelationshipsandFXmanagementformedthecoreoftreasuryresponsibility,andfewtreasurershadanopendoorintotheboardroom.Backin�99�,ifyouaskedatreasurerwhetherheorshewasgettingclosertothebusinessunitsandinfluencingbusinessstrategy,thereply,wouldbe:“Nicethought,butno.”Workingcapital,pensions,acquisitions,investorrelationsandthewiderriskpictureallusuallysatwithindifferentareasofthefinancefunction.

Butdramaticeventsandthetechnologicalrevolutionoftheintervening�5yearshavechangedtheworldoftreasuryforever:therelentlessexpansionofcompaniesinto

In�5yearswillcompaniesstillemploytreasurersasweknowthemtoday?Orwilltherolesinacompany’sfinancefunctionblurtotheextentthatafinanceprofessionalwillneedtobeajackofalltrades?LeslieHolstromopensthesupplementwithadiscussiononwheretheprofessionisheaded.

Treasurerstookonnewresponsibilitiesandneededtothinkinnewways.Thestakesbecamemuchhigherintermsofaccountability.Butthisincreaseinresponsibilitydidnotcomeovernightanditcontinuestoevolve.Therearestilltoomanycompanieswheretreasuryremainsaback-officeprocessorsitsoutsidethecorebusiness.

“Inourresearchwedoaskcompaniesaboutthedifferentrolesthattreasurersplay,andweareseeingagradualexpansion.Thisisnotdramaticbutaprocessthatwilltakeplaceovermanyyears,”saysStephenBaird,Principal,TreasuryStrategiesInc,theChicago-basedconsultancyfirm.“Weareseeingayear-on-yearincreaseintheirlevelofinfluence.Certainlyweseetreasurerssettingitasanobjective.”

AdrianRodgers,directorofArcSolutions,anindependenttreasuryconsultancyfirm,agreesthattreasurersarebeginningtocarveoutnewroleswithintheorganisation,butthatitisnotatrendacrosstheboardincompanies.

“Theevidenceisinconsistentandpatchy,”hepointsout.“Insomecorporationsthetreasurer’sroleisnowrecognisedasavalue-addingcontribution;thechallengeistopositiononeselfasakeyadvisertotheCFOandboard.Inothersitappearsthattheroleoftreasurer(andbyimplicationthatoftreasuryasafunction)isoperationalandisbeing,ifanything,downgraded.Outsourcingoftreasuryremainsrelativelyunpopularalthoughitisaprovenmethodofachievingfocusonvalueadded,”hesays.


2006-ItallsoundsfamiliarThetopicsaresimilar�5yearslateralthoughonecanreplace‘Internet’for‘electronic.’Butlookathowthescopehasincreased:• Real-timeliquiditymanagement• ManagingtreasuryandriskinChina,RussiaandIndia• Innovativesolutionsforthesupplychain• Instantaccessworkingcapitalanalysis• Takingcontroloftax• LeveragingERPsystemsasaninformationmanagementtool• Enterpriseriskmanagement:gettingtogripswithglobalriskacrossthecompany• ManagingFX,interestrate,commodity,political,countryandcreditrisk• Eliminatingtraderisk• Balancesheetmanagement• Alternativefinancing• Hybrids,convertibles,tappingintohedgefunds• Mergersandacquisitions• Insurancesolutions• Anewlookatpensions• Emissionstrading

�99�-Whattreasurersweretalkingabout• Wheretolocatecashmanagementstructuresfromataxperspective

• Achievingmoreefficientcross-borderpayments

• Internationalpaymentsystems

• Theimportanceofcashforecasting

• Lendinginstrumentsandbank-lendingpractices

• Usingdebtmarkets

• Rationalisingbankaccountsandimprovingbankingrelationships

• Centralisationversusdecentralisation

• Cashpooling

• Nettingsystems

• Electronicbanking:howsecure?

• Choosingcashmanagementsystems

• Managingforeignexchangerisk

• Whatthemediaandvariousconferencesconcludedforthecomingdecade(2000-20�0):acorporatetreasurerwillneedtobecomemorestrategicandworkmorecloselywiththeboardsothatthetreasuryroleisbetterunderstood.Technologyintegrationwithinanorganisationandbetweenthevariousprovidersandbankswillneedtodeveloprapidlytomakeadifferencetoefficiencyinthetreasury.

OVERVIEW

EuroFinance,theLondon-basedtreasuryresearch,trainingandconferenceprovider,eachyeartracksattendancetrendsbytopicintheapproximately70conferencesandtrainingeventsitrunsinover25countries.Inevitably,themostpopularsessionsarestillliquidityandtraditionalcashmanagement,but,inrecentyears,EuroFinancehasfoundamarkedincreaseinnumbersattendingnon-traditionaltreasurytopicssuchasworkingcapitalmanagement,enterpriserisk,growthandacquisitionsstrategies,andalternativefundingtechniques.

Bairdtakesapragmaticviewandsaysbluntlythattreasurerswhodon’tadaptbyofferingaddedvalueintheorganisationwillbecomemarginalised.Hebelievesthattechnologyinthecomingfiveto�0yearswillmeanthatatreasurerwhooffersnostrategicinfluencecouldwellbeoutofajob.

“ThereisarealriskoftreasurybecomingmarginalisedandviewedbytheCFOasaback-officeprocessthatcanbeputonauto-pilot.Treasuryabsolutelyhastobecomemorestrategic,focusingonissueslikeworkingcapitalmanagementimprovement,establishingriskmanagementframeworks(forexample,ERM),andsuccessfullypartnering.Thereisalotofworktobedoneiftreasuryistoestablishitselfsquarelyintheseareas,”saysBaird.

Buttheonusforamorestrategictreasuryshouldnotjustresidewiththetreasurer.CFOsandCEOsofthecompanyalsoneedtorecogniseandtakeadvantageofthetreasuryskillset.“Treasurersshouldcombinestrategicthinkingwithtacticalskills.Thetreasurerhascertainskillsthatarenecessaryforcontinuedperformanceofthecompany,”saysFredCohen,Partner,PricewaterhouseCoopersinNewYork.“Inareaslikecapitalefficiency,

treasurersdealwithitbothstrategicallyandtechnically,especiallyaroundthemodellingofeconomiccapital.Theythenshouldeducatetheboardonkeyriskdriversandhowtotakeadvantageofopportunitiesastheyariseandtomitigatetherisks.”

EasiersaidthandoneElevatingthetreasurer’sroletobusinesspartnerandboardconfidant,however,iseasiersaidthandone.Mosttreasurerswhohaveraisedthetreasuryprofilehavedonesowithhardworkoveralengthyperiodoftimeandhavemadesuretogetpoliticalbuy-inandtrustfromthoseinvolvedintheprocess.

FollowingresearchwithtreasurerslastyearinbothEuropeandtheUS,TreasuryStrategiessaysthetwomostlogicalareasthetreasurercanimpactquicklyanddecisivelyareworkingcapitalandrisk.Workingcapitalisanareaofthebusinessthathasbeenlessaggressivelymanagedinmostcompaniesandrarelyviathetreasury,althoughthisischanging.Riskisanaturalareabecausethewiderriskpictureimpactsspecificfinancialrisksthatarealreadyhandledbythetreasurer.

“Iseetreasurybecomingmorestrategicbyexpandingitssphereofinfluencetoincorporateareassuchasworkingcapitalmanagementandenterpriseriskmanagement,andbysuccessfullybusinesspartnering.Treasuryhasacoresetofcompetenciescentredroundquantitativeanalysisandstewardshipofcapitalthattiesinwellwiththeareasofenterpriseriskmanagementandworkingcapital,”saysBaird.

JoergenJensen,HeadofProductManagementattreasurysystemsproviderTrema,advises:“Inthepasttreasurershavejustbeenadministratingthecashforthecompanyintheirivorytower;inthefuturetheyneedto

becomeclosetotheoperatingunitstohelpthemoptimiseworkingcapital.Thetreasurersneedtounderstandbetterhowtheycanoptimallyfinanceeachpartofthecompanyandprotectthemagainstfinancialrisks.Theyneedtobefreedfromthemundaneworkofday-to-dayoperationssotheycanconcentrateoncallingonoperatingunitsandunderstandtheirrequirementsbetter.”

Banks,companiesandserviceprovidersallagreethatthemostsimpleandeffectivewaytoincreaseinfluenceistogetclosertothebusinessunits.“Visitthebusinessunitsandfigureoutwhattheprioritiesare,”saysBaird.

JenniferCeran,TreasurerofeBay,thefast-expandingonlineauctionsite,believesthattreasuryexpertiseinvariousareashas,amongotherthings,delvedsofarintothebusinessunitsthattheyhavehelpedtheirownproductdevelopmentteamsbuildvaluablenewproductsfortheircustomers.

“Treasuryprofessionalshavetheopportunitytoinfluenceinmanyways.Companiestendtovalueourexpertiseinthetraditionalareassuchasoptimisingcapitalstructure,aswedecidehowtofinanceourcompanyandmanageglobalcashliquidity.Wecanleveragetheseskillstoexpandourinfluencetootherareasthatdrivevalueforthecompany,”saysCeran.

ShepointstorecentexampleswhereexpertiseinthecapitalmarketsatPayPal,thepaymentsprocessoreBayacquiredin2002,hashelpedoptimisecustomerproducts.Alsotreasuryexpertiseinbankinginfrastructurehashelpedreceivableandpayablesgroupsstructureandimplementimprovedsolutionsfortheirbusiness.

“Treasurersshouldbepartnerstocorebusinessunitsinanorganisation,”pointsoutMartinBina,EuropeanTreasurerofCaterpillar,

Source: EuroFinance Conference Programmes 1991-2006

AChangingView;aChangingRole?


theUS-basedmachineryandequipmentcompany.“Treasurersarestartingtobemorestrategicthanoperationalplayers.Nowalotmoreoftheadministrativetasksaredonemechanicallyduetotechnologicaladvances,leavingmoretimefortreasurerstothinkandbeabletoplayastrategicroleforenterprises.“

TimothyMcDonald,AssistantTreasurerofDiebold,theUS-basedleadingproducerofATMmachines,believesthatthesinglemostimportantissuefortreasurersinthecomingdecadewillbe“gettingaseatatthetableandbeingviewedasbusinesspartners.“He,likemanyotherexperts,believesthattreasurerswillbecomekeydriversinenterpriseriskmanagement,tax,workingcapital,corporatefinance,sharedservicesandM&A.Diebold’streasuryusesapartnershipapproachwithrelatedareasinfinanceandnowhaswideneditsresponsibilitiesvisiblyinthepastfewyearstoincludeworkingcapitalandtax.

DaveNelsonistheUS-basedHeadofGlobalInvestorRelationsatTataConsultancyServices,India’sleadingproviderofoutsourcingservices.Nelson’scareerswitchfromtreasurycameaboutafterpackaginginvestorrelationsintothetreasuryfunctionwhenatSeagate,theUSindependentmakerofdiscdrives,andlateratURS,theworld’sleadingengineeringdesignfirm.

Hebelievesthattreasurywillcontinuetochangeinthenextfewyears,withgreaterautomationmeaningtreasurersdoinglessday-to-daylow-valuebusiness.And,withacontinuedpushtowardsoutsourcing,somethingmanytreasurersresist,thenatureofthejobmustshift.

“Itmakessensetocombinesomefunctionswithintreasuryandotherdivisions,”hesays.Inhisexperienceheisseeingfirms

begintocombinetreasuryandtax,ortreasuryandERM,aswellastreasuryandinvestorrelationsortreasuryandM&Ainordertofullyusetheskillsetofthetreasurer.Hesaysthattypicallysmallerandmedium-sizedcompaniesalreadyhavecombinedfunctions,butthat,ultimately,itwillhappenwithlargercompaniestoo.

TheriskfactorGlobalisationhasbroughtrisktointernationalcompaniesatunprecedentedlevels.Multinationalcompaniesthatdevelopedinthe�950s,�960sand�970swereusedtoisolatedrisksonlyinthemarketsinwhichtheychosetoexpand.Butwithgrowinginterdependenceonsuppliersandcustomersglobally,multinationalcompaniesnowfaceglobalriskswhetherornottheyhaveaphysicalpresenceinparticularmarkets.

Furthermore,thesizeandfrequencyofmajorunforeseenevents(9/��andotherterroristacts,alongwithAsia’stsunami,HurricaneKatrina,SARSandtheBirdFluthreattonamebutafew)haveforcedbusinessestothinkmorebroadlyabouttheirownresilienceandtothinkinalongertimeframethanjustfromtheperspectiveofshort-termmarketrisks.

“Treasurershavetolookatcapitalefficiencyanddeploymentbasedonlonger-termsurvival,”saysPwC’sFredCohen.“Youcanseecompaniesspendingmoretimeandmoneyonrisk-adjustedcapitalreturns.”

Thisundoubtedlyaccountsfortheincreasedfocusonriskbytreasurersaroundtheworld.LastyearinmarketresearchEuroFinanceconductedwithover�,500treasurersin33countries,riskwasconsistentlynamedasoneofthetopthreeissuesonthe

corporatetreasuryagenda.ThesurprisingfindingwasthatrisknolongermeantjustFXrisk,but,increasingly,areaslikecommodity,politicalandcountryriskaswellasbusinesscontinuityissues.

Citigroup’sNaveedSultan,HeadofCashManagement,EMEA,explainshowthishasimpactedthetreasurer:“Themostimportantdevelopmentinriskmanagementhasbeentherisingconsciousnessofthemultiplicityofrisksthatmultinationalfirmsrunandtherepositioningoftheroleofthecorporatetreasurerasbeingattheheartofriskmanagementinthefirm.Amorecomplexriskenvironmentgoeshandinhandwithglobalisation.”

Inadditiontoglobalisationrisks,regulatorychangehasalsosignificantlyimpactedthetreasury.AccordingtoAnnCairns,CEOofTransactionBankingatABNAMRO:“Thebiggestimpactinriskmanagementhasundoubtedlybeentheincreaseinregulation(FAS�33,Sarbanes-Oxley,IAS39,BaselIIforbanksandsoon)aimedatensuringtransparencyincompanies’finances.Certainly,treasurershavebornethebruntofthesedramaticallyincreasedreportingrequirements.”

Mosttreasurers,bankandconsultantsbelievethatriskmanagementwillcontinuetobeabigissueforthetreasuryteamyetprovideanopportunitytostepuptoboardlevelreporting.

“Riskmanagementwillbethebigissuefortreasurers,theirCFOsandcompanyboards.Iamtalkingriskinthebroadestsense:geopolitical,operationalandcreditrisk.Wehaveallexperiencedgreatervolatilityoverthepastdecade,andbusinessresilienceandflexibilitywillbecoreskillsgoingforward,”saysCairns.“Butthismayalsobenefittreasury–byensuringmorevisibilityfortreasuryatboardlevel.”

“Iwouldsaythattodaytreasurersaremainlygoodcashandliquiditymanagerswithexpertiseinriskmanagement,tomorrowtheywillhavetobecomegoodriskmanagerswithstrongcapabilitiesincashandliquiditymanagement,”saysPierreBoisselier,SeniorGeneralManageroftheTreasuryatArcelor,theLuxembourg-headquarteredsteelmaker.

CuttingtothecoreofworkingcapitalandsupplychainWorkingcapitalmanagementhas,inthepast,rarelybeentheresponsibilityoftreasury,but,increasingly,researchisshowingthattreasurerscanputtogethermulti-disciplinaryteamstotakecontrolofanareathatisfundamentaltoabusiness’survivalandgrowth.Oneofthemosteffectivewaystreasurycaninfluenceworkingcapitalistodelveintoitscornerstone:supplychainmanagement.

OVERVIEW

Strategic

Analytical

Executional

Business Unit PartnerBoard-level AccountabilityValue-Added Functions

LiquidityManagementCashFlowForecastingFinancialRiskManagementInsuranceManagementBankRelationshipManagementPerformanceMeasurement

TransactionExecutionCashFXDebtInvestment

Source: Treasury Strategies, Inc.

TheIncreasingImportanceoftheTreasurerMovinguptheorganisationalpyramid


OVERVIEWSupplychainintegrationhasprovento

beasourceofcompetitiveadvantageasmuchasacompany’sserviceandproductinnovation.AccordingtoCitigroup,researchoverthepast�0yearsindicatesadirectlinkbetweeneffectivesupplychainmanagementandcorporateoperatingresults.Majorcorporationsidentifiedashavingbest-in-classsupplychainmanagementhaveconsistentlyshownmarketcapitalgrowthofbetween�0and20%abovetheirindustrypeergroup.

“Supplychainmanagementisoneofthemosteffectivewaysofachievingorganisationalagility,”saysMichaelGuralnick,ManagingDirector,HeadofEMEAClientManagement,CorporateandPublicSectors,Citigroup.“Businessesneedtofocusonsupplychainefficiencytoreducecost,stimulatesales,gainmarketshareandmanagerisk.”

HewlettPackard,theworld-renownedhigh-techequipmentcompany,hasahighdegreeofstandardisationandaveryforward-thinkingapproachinallareasofitstreasuryfunction.Oneareaitispayingseriousconsiderationtoisworkingcapitalmanagementandthelinkagewithsupplychainmanagement.

“Wehaveasingleglobaltreasurymanagementsystemandahighdegreeofstraightthroughprocessingwithinourtreasuryoperations.Thishasbeenachievedthroughstandardisationofprocesses;dataformatsandinterfacesandhasresultedinourtreasuryoperationsbeingrecognisedasworld-classinexternalbenchmarkingstudies.Sothethoughtishowcanweachievethatsamedegreeofautomationandprocessefficiencyinourfinancialsupplychainprocesses,forexample,inthewayinwhichweexchangeinformationwithourcustomerandsupplierbase,”saysSarahJones,TreasuryDirectorEMEA,HewlettPackard.

Inpractice,Hewlett-Packardhastheopportunitytoeliminatewholedownstream,inefficientprocessesbyfocusingontherootcausesofinefficienciesandonupstreamprocessautomation.Oncethishasbeenachieved,thereareopportunitiestocreatenewmarketplaces,forexample,invoicefinancing.Traditionallyfactoringandsecuritisationhavebeendoneonabilateralbasisbutconsidertheopportunityonceyouhaveelectronicinvoicedatabeingexchangedvia‘hub-type’utilities.Overlaytheuseofdigitalauthentication;authorisationandnon-repudiationandthereisanopportunitytocreateamarketplaceor‘e-Bay’forinvoicefinancing.Thisshouldleadtotheabilitytodynamicallymanagepaymentdiscounts,morecompetitivepricingandhasthepotentialtoofferthetreasureranadditional

sourceofday-to-dayliquidity.Ultimately,acompanycouldachieveend-to-endtransparencyacrossmultiplelevelsofthesupplychainandtheopportunitytomitigaterisksthatmayliehiddenintoday’spaper-basedworld.

Jonessaysthatinordertooptimiseworkingcapital,treasurersneedtobeabletoeffectchangeinthepartsoftheorganisationthatthemselvesimpactworkingcapital.Inmostcompaniesthismeansbreakingdownorganisationalsilos.Onewaytoachievethisistofocusonmetrics.“Peoplehavetypicallylookedatworkingcapitalmanagementpurelyfromabalancesheetpointofview.DSOandDPOmetricsonastandalonebasiscanmaskhiddenimpactsonacompany’sP&L,”shestates.

JohnSculley,formerCEOofAppleComputerandPepsiCoandco-founderofActivationCapitalPartners,aLondon-basedfirmthatprovidescross-bordersupplychainfinancing,isadamantthattheintegrationoftreasurywiththesupplychainshouldbethefocusoftreasurersforthenextdecade.

“Combiningtheorganisation’ssilosintooneprocessflow,whereboththefinancialandphysicalsupplychainsworkintandemandtheautomationofmanualandpaper-basedprocessesistheimmediatebenefitofincreasedintegration.Butweneedtothinkbeyondthat.Aretheprocessesrightinthefirstplace?Andwhatcantreasurersoffertothesupplychain?”heasks.

“Treasurymanagementislikelytobeseeninanewlightinthenextfewyears,withincreasinginvolvementfromtreasurystaffintheoverallcorporatefinancialsupplychain.Indeed,withtheautomationofthe‘basic’treasuryfunctionssuchascashforecasting

andmanagementandinvestmentandFXactivities,treasuryislikelytobeaskedtolookfornewwaysofreducinginefficienciesandimprovingoverallfinancialperformance,”saysHahrokhMoinian,HeadofCorporateCashManagementSales,WestEurope,DeutscheBank.“ThisbroaderrolewillinvolvegreaterinvolvementinmattersrelatedtoA/PandA/Rmanagement,aswellasinvendorandsupplierfinancing.DaySalesOutstanding(DSO)reductionbymeansofe-billingsolutionsandincreasedinternalefficiencieswillalsoseegreaterinvolvementfromthetreasury.”

ManagingtherelationsDaveNelsonfromTataConsultancyServicesbelievesthatanotherareathatcanbenefitfromtreasuryinvolvementisinvestorrelations(IR).First,thetreasurerisalreadyspeakingtothefinancialcommunity,dealingdirectlywiththebanks,thebankgrouportheratingagencies.“ByaddinginIRyouareessentiallycreatingaconsistentmessage,withonevoiceforallinteractionwiththefinancialcommunity,”hesays.

Second,companiesarerealisingthatmanyofthetalentsthatthetreasurerhasaddvaluetotheIRfunction,includingskillssuchasfinancialmodellingorratioanalysis.HandlingIRalsoforcesthetreasurertobetterunderstandwhatdrivesacompany.

“HavingtheIRfunctionalsomakesastatementaboutthetreasurer,”hepointsout.“Asidefromtheobviousfinancialskills,itshowspresentationandcommunicationskillsandthattheyareadeptatdevelopinggoodrelationships.Havingadditionalskillsetsoutsidethepuretreasuryfunctionalsotranslatesintohighersalaries.”

BusinessUnitInvolvement

EnterpriseRiskManagement

CorporateFinance

WorkingCapitalManagement

BalanceSheetPlanning

MergersandAcquisitions

Tax

Pensions RealEstate

InvestorRelations

CoreTreasury

Source: Treasury Strategies, Inc.

TheExpandingRoleoftheTreasurerMovingbeyondcoreresponsibilities


JohnWeisenseel,SVPandCorporateTreasureratpublisherTheMcGraw-HillCompanies,agreeswithNelson.ManagementrecentlyaskedhimtooverseeIRbecauseitseemedalogicalstepinthetreasury.“Allotherfinancialrelationships–thebanks,thebrokers,insurance,etc,aremanagedthroughtreasury,soitjustmadesense.”

focusonservingtheinternalfolksliketax,legalandthedifferentfinancegroupsintheoperatingsegments.Ifyoufocusoninternalyoudevelopareputationassomeonethepeopleinthebusinesscanturnto,thatiswillingtoassist.”

Itisaself-fulfillingrolesaysWeisenseelfromthepointofviewthatonceyouoffer

OVERVIEWThenextphaseintreasuryAllpartiesinthetreasuryprocessfrombankstocorporatesagreethattosecurethefutureoftreasury,treasurersneedtobemorestrategicandalignthemselveswithbusinesspriorities.Theyalsoneedtomakeitcleartoexecutivesinthebusinessthattheywantaseatatthemanagementtable.

“Treasuryremainsananomaly.Itisasmallcorporatefunctionfocusingonfinancialrisk,withpotentialtoachievefarmorethaniscurrentlyachieved.ManyCFOsstilldonotunderstandhowtoleverageexistingtreasuryskillstoaddmaximumvaluetothecorporation;andthishasbeenthecaseforovertwodecades,”saysconsultantRodgers.

Whatisbeginningtochangeistwofold:moreandmorecompaniesarelookingfortreasurerswithwiderbusinessexperienceand,inturn,theyarethenrequiringtheirbusinessexecutivestohavesomeknowledgeoftreasury.

“Exposuretothetreasurydepartmentonaglobalbasisisakeyareathatseniorexecutivesneedtohave,”saysPwC’sCohen.“Treasuryskillsareincreasinglyimportant,particularlyriskmanagementskillsandunderstandingtheefficiencyanddeploymentofcapital–bothviewsarenecessaryforheadsofbusinessunitsandCEOs.”

Cohenexplains:“Itisbecomingincreasinglydifficultforasinglepersontorunthecompany.TheCFOisbecomingaco-leaderwiththeCEOascompaniesbecomemorecomplexanddiversified.ThisC-suiteapproachmeanstheynowgobeyondtheirtraditionalskills.”

Anothertrendincorporatebehaviouristhecreationofnewrolesthatpreviouslyhadnoneedforexistence:chiefcomplianceofficer;chiefriskofficer;chiefethicsofficer.TheserolescreatemoreoverlapsandresponsibilitiesandfurtherencourageaC-suiteapproachtomanagement.

Bearingthistrendinmind,thetreasurertooneedsadditionalstrategicskillsifheorshedoesn’twanttogetleftbehindinthisnewbusinessmodel.

McGraw-Hill’sWeisenseelsumsitup:“Therearetwokindsoftreasurers:theoldschoolthatgrewupthroughthecashmanagementsideofthebusiness–theyarecomfortableanddon’twanttogetoutsidethat;andthereareotherswithamorevariedbackgroundwhoviewthemselvesasbusinesspeopleratherthanjusttreasury.WhenIwashired,itwasassumedthatthetreasuryskillsareagiven,butalotmorethanthatwasexpected.Inthenextdecade,that’showyouhavetolookatit:whatareyougoingtodobeyondthegiven.”n

“Wethinkofourselves(treasury,financialanalysis,controllerandtax)asonehomogenousgroupinteractingandhelping

eachother.Teamworkisencouragedandrewarded.”

Pensions:treasurytakesall?Inmostinstances,forward-thinkingtreasurerswhohaveaddednewresponsibilitiestotheportfoliohavedonesothroughconsultation.Expandingthejobdoesnotmeana‘seizeorgrab’mentality.Itcanbeamulti-disciplinaryapproach,withthetreasurerasaconsultanttoareasofthebusinesswhereheorshecanaddtheirvaluableexpertiseandanalyticaltools.

Forexample,WeisenseelfoundhimselfmanagingtheglobalpensioneffortofthecompanyafterbecominginvolvedfirstdomesticallyandlaterintheUK.Weisenseeliskeentopointoutthattheonlywayhewasabletotakeonthetaskandsuccessfullydealwiththeissueswastovisitthebusinessunitsaroundtheworldtogetahandleoncommitmentsandtoworkwiththerelevantdepartmentstoensurethebestsolution.

Hesaysthatpensionsisjustoneareainwhichhebecameinvolved,andnowthatinvestorrelationshasalsobeenaddedtothetreasuryportfolio,hecanidentifyotherareasinwhichhecansharehisanalyticalorbusinessskills.“Forexample,ifyouaresettingupabusinessinanothercountry,youneedtodecideinwhichcurrencyyoushouldbill,investandsoon.Thetreasurershouldbeabletoworkwiththebusinessunitstomakethosedecisionsfromthestart,”hesays.

“Wethinkofourselves(treasury,financialanalysis,controllerandtax)asonehomogenousgroupinteractingandhelpingeachother.Teamworkisencouragedandrewarded.”

DevelopingacustomerperspectiveinternallyWeisenseelcomparestreasuryroleexpansiontobettercustomerservice.“Youhaveyourexternalcustomerslikethebanksthatloantoyouandtheinvestorsthatinvestinyourstock.Mosttreasurydepartmentsservicetheexternalside.Wearetryingto

goodadvice,theycomebackformore,andthetreasuryscopestartstoexpandnaturally.“Onceyoudemonstrateyoucanaddvalue,itpresentsyouwithmoreandmoreopportunity.”

TreasuryStrategies’Bairdconcurswiththisview:“Inbusinesspartnering,itwillbeimportantfortreasurerstofirstaligntreasuryprioritiestothebusinessacrosstheenterprise,andthenestablish‘customerservice’orientationthroughfunctionalexcellenceandaglobaltreasurystructure,andfinallytostaycloseandspendtimewithtreasury‘customers’–visitingwithandinteractingwithbusinesspartners.”

ExternalimpactTreasurersarealsoinfluencingexternalpractices.DavidBlair,TreasureratmobilephonemakerNokia,andDaveHolland,TreasureratCisco,thetechequipmentmanufacturer,havedevelopedareputationforfurtheringcorporatetreasuryissues,particularlyaroundthefieldofstandardisationandRosettaNet,abusinessprocesssolutionbringingefficiencytothesupplychain.OtherslikeTomBuschmann,formerlyofShell’streasurycentreandnowchairmanandCEOofTWIST,thestandardsgroupworkingonSTPforcorporatetreasury,hasspentyearsfurtheringthestandardisationcauseonbehalfofcorporates.

“Treasury’sinfluencecanalsohaveapositiveimpactonthebankingcommunitybyclearlycommunicatingwhatourneedsareandhelpingthebanksbuildoptimalsolutionsfortheirclients,”sayseBay’sCeran.”MymostrewardingexperienceinthisareawaswhenIworkedinEuropeandcollaboratedwithateamoftalentedandforward-thinkingbankersandcolleaguestocreateafully-automatedcross-borderpooling/ZBAsolutionformanagingcashcentrallyintheposteuro-environment.Wewentliveforfivecountriesonemonthaftertheeurobecameareality.”


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CASHMANAGEMENT

“Oneofthekeyareasofinterestforcorporatesduringthepastfewyearshasbeeninformation.Withinboththephysicalandfinancialsupplychains,theend-to-endflowofinformationhasbeentheprerequisitefortheimplementationofsecureandstreamlinedoperations,”saysHahrokhMoinian,HeadofCorporateCashManagementSales–WestEuropeatDeutscheBankinFrankfurt.

OrasJohnSculley,theformerCEOofbothAppleComputerandPepsiCoandnowaconsultantandventurecapitalist,putsit:“Withnewtechnology,financialinnovations,standardsandregulations/deregulations,thecashmanagerhasevolvedfromagathererofdatatoananalyseranduserofinformation.”

MomentumgrowingininfomanagementBesidesthekeyroleoftechnology(seebelow),centralisation(regional/globalsharedservicecentres(SSCs),globaltreasuries)andrationalisation(account/relationshipstreamlining,cashpoolingandconcentration)havecontributedsignificantlytothemajorincreaseinvisibilityovertheperiod.This,inturn,hasallowedcorporatetreasurerstomakebetternearandlonger-termforecastsoftheircomingcashrequirements.

Asaresult,cashmanagershavebeenabletoseeksuperiorreturnsontheirliquiditywhileassuminglowerrisk–see

“Today, businesses have large quantities of data available virtually in real time. As a consequence, they address and resolve economic imbalances more rapidly than in the past,” noted Alan Greenspan in a 2002 comment.

Thenewavailabilityandaccessibilityofcorporatefinancialdata–particularlypayables,receivablesandcash–identifiedbytheformerUSFederalReservechairmanhasdrivenaprofoundshiftsincetheearly�990s,accordingtobankers.“Treasurersnowexpectaleveloftransparencyaboutcashflowsthatwasunimaginable�5yearsago,”judgesAnnCairns,CEOofTransactionBankingatABNAMROinLondon.

“Today’streasurersnotonlywantimmediateaccesstoinformation,butalsotheexpectationisthatitisreal-time,electronicandintegrated,”addsTimothyLaney,GlobalCorporateSalesExecutiveforBankofAmericaGlobalTreasuryServices.

Accordingly,oneofthekeydevelopmentsincorporatecashmanagementoverthepast�5yearshasbeenashiftawayfromsimplychasingcashflowandpositiondataacrossmultiplesources(bankingrelationshipsoftenindoublefigures,bankaccountsthatcouldreachintothehundredsincompanieswhereeverysubsidiarywashighlyinvolvedinitsownfinancialoperations).Increasingly,focusisongenuineinformationmanagement,fromanoptimal,centralisedvantagepoint.

liquiditymanagementfeature(p�8).Thisabilitycanalsobeseenasachallenge,accordingtoBofA’sLaney.“Withreal-timeaccesstoinformation,andbettertoolstomanageit,largemultinationalcorporationswillbechallengedtomanageidlebalancesmoreaggressively,”hesays.

Technology’sgrowingpower,sophisticationandsecurity,combinedwiththeInternet’seaseandintuitivenessofuse,hasimprovedbanksystemsinthepast�5years–creating‘single-window’solutions,totheevidentbenefitofcashmanagers.

“Clearlythecontinuedimprovementintheprice/performanceofcomputertechnologyhasbeenthemostimportantdriverofinformationmanagement.Thedevelopmentofrelationaldatabaseshasfacilitatedveryflexiblewaystostoreanduseinformationandhasthereforebeenoneofthetechnologicalunderpinningsoftheincredibleenterpriseresourceplanning(ERP)systemsthatwehaveseenemergeoverthepast�5years,”notesNaveedSultan,ManagingDirectorofCashManagementforGlobalTransactionServicesforEuropeMiddleEastAfricaatCitigroupinLondon.

Bothbanksandsoftwarevendorshavealsomadesomeprogressinreducingwhatcanbeadauntingnumberofinterfacesintreasury,giventheavailabilityoftreasurymanagementsystems(TMS),treasurymodulesofERPsystems,tradingplatforms,marketinformationproviderssuchasReuters

JulianLewisdiscussestheshiftfromsimplychasingcashflowandpositiondataacrossmultiplesourcestowardgenuineinformationmanagement

Thenewbreedofinformationmanagement

�0|September2006 www.eurofinance.com www.eurofinance.com September2006|��

CASHMANAGEMENTandBloomberg,andotherinternalandexternalsystems.

“Technologyhasclearlymadeitsimpactinthisfield,bringinginautomationandend-to-endflowofinformation,”saysDeutsche’sMoinian.Asexamples,hecitesautomatedconfirmationofforeignexchangetransactions,dematerialisingtheflowofdocumentsinatradedealorthemanagementofbankaccountinformationwithininternalsystems.

TheInternet’simpacthasbeenparticularlysignificant,specialistsagree.“Themostimportantdevelopmentininformationreportinginthepast�5yearshasbeentheadventoftheweb.TheInternethasreallyrevolutionisedthedistributionofinformation,makingitpossibleforcorporationstoachievethebenefitsofwidelydistributedprocessingwhilealsoachievingcentralisedcontrolandvisibility,”saysStephenBaird,PrincipalatTreasuryStrategiesinChicago.

StillfurthertogoEvenso,theinformationmanagementerahasmuchfurthertogo.“Thereisstillmuchthatneedstobedonetoimprovethefinancialsupplychain,”believesScully.

Thegoaloflargelyautomated,ultralow-costtransactionapproval,execution,processing,confirmationandpaymentremainssomewayoff–evenifsomecurrentTMSpackagesalreadyofferstraightthroughprocessing(STP).

Nonetheless,theeventualrewardsoftheseamlessscenarioabovewillbehigh.Ithasthepotentialtofreetreasuryprofessionalsfrom‘themundaneworkofday-to-dayoperations’tofocusonvalue-addedsupporttooperatingunits,particularlyinoptimisingworkingcapitalandloweringrisk,accordingtoJoergenJensen,HeadofProductManagementatTremainFrankfurt.

Accordingly,awealthofcurrentinitiativesisunderwayintheseareas.Inparticular,thekeyconceptofcorporateconnectivityisbeingdrivenforwardbydevelopmentssuchasMemberAdministeredClosedUserGroups(MA-CUGs),SWIFTNet,TWISTandRosettaNet.TheimplementationoftheSingleEuropeanPaymentsArea(SEPA)isalsolikelytoproveakeydriverforcompaniesexposedtotheEurozone.

SEPAseepingintocorporateconsciousnessEverycompanywithrevenuesandoutgoingsintheEurozoneknowsfromunhappyexperiencehowwidelypayments

andothercorebankingservicescanvarybetweencountriesinthesinglecurrency.WhilethatcanmaketheprospectofSEPAseemstillfaroff,momentumisbuildingpowerfullytowardsthisvitalpieceofinfrastructure–scheduledforintroductionin2008andduetosupersedenationalpaymentsystemswithapan-Eurozoneschemetwoyearslater.

Putbriefly,SEPArequiresbankstopriceallcross-bordersettlementineurosatthesamelevelasthecomparabledomesticproduct.Althoughfewcountriesappearparticularlyadvancedinphasingouttheirnationalarrangements(assomelocalinstrumentslikechequesandbillsofexchangearenotincludedinSEPA,theirretentionhasalsotobemanaged),regulationsandmessagestandardsarealreadyinplace.Moreover,thelegislativeunderpinning–thePaymentServicesDirective(PSD)–iscurrentlybeforetheEuropeanparliament.

Accordingly,SEPAisoncourseto“bringthebenefitsoflowerpricingandgreatertransparencyforpaymentstocorporatetreasuries,”ABNAMRO’sCairnsaffirms,inatypicalcomment.

However,shecautionsthattheinitiativewillrequireoperationalchangesthattreasurersshouldalreadybeplanningfor.Mostobviously,theseincludereducinglocalaccountsacrosstheEurozoneorevenmovingtoasingleconcentrationfacility;thetax,complianceandrelationshipconsequencesofdoingsoalsohavetobeexamined.

Companiesgenerallywelcometheeasier,cheaperenvironmentthatSEPAshoulddeliver.Somehaveexpressedconcernthatitcouldrequirethemtoacquirenew,dedicatedsystems.Othersbelieve,though,thattheirexistingERPorothersoftwarepackageswillbeadequateforthenewenvironment.

Source: The Banker

WorldRank Bank Country Capital Assets Capital Pre-TaxProfits $mn $mn AssetsRatio% $mn

�. SumitomoBank Japan �5,785 407,907 3.86 �,953

2. Dai-IchiKangyoBank Japan �4,766 426,855 3.46 �,525

3. FujiBank Japan �3,779 398,32� 3.46 �,4�3

4. SanwaBank Japan �3,437 40�,465 3.35 �,623

5. UnionBankofSwitzerland Switzerland �3,220 �80,6�2 7.32 895

6. CreditAgricole France �3,�86 302,983 4.35 �,38�

7. MitsuiTaiyoKobeBank Japan �2,�55 407,502 2.98 �,�82

8. BarclaysBank UK ��,924 260,048 4.59 �,465

9. MitsubishiBank Japan ��,883 4�2,783 2.88 �,295

�0. NationalWestminsterBank UK �0,700 233,468 4.58 972

��. DeutscheBank Germany �0,4�3 267,702 3.89 �,63�

�2. CreditLyonnais France 9,7�8 285,238 3.4� �,5�3

�3. IndustrialBankofJapan Japan 9,553 289,�79 3.30 958

�4. BanqueNationaledeParis France 9,368 289,747 3.23 603

�5. SwissBankCorp Switzerland 9,048 �48,926 6.08 83�

�6. ABNAMROBank Netherlands 8,964 232,694 3.85 �,��3

�7. CompagnieFinancieredeParibas France 8,7�7 �84,232 4.73 �,098

�8. BankofChina China 8,�90 �64,5�5 4.98 �,�80

�9. TokaiBank Japan 7,8�8 248,986 3.�4 754

20. Long-TermCreditBankofJapan Japan 7,390 200,064 3.69 7�6

Top20WorldBanksbyCapitalin�99�

Source: The Banker

WorldRank Bank Country Tier�Capital Assets CapitalAssets Pre-TaxProfits $mn $mn Ratio% $mn

�. Citigroup USA 79,407 �,493,987 5.32 29,433

2. HSBCHoldings UK 74,403 �,50�,970 4.95 20,966

3. BankofAmericaCorp USA 74,027 �,29�,795 5.73 25,�55

4. JPMorganChaseandCo USA 72,474 �,�98,942 6.04 �2,2�5

5. MitsubishiUFJFinancialGroup Japan 63,898 �,508,54� 4.24 �2,786

6. CreditAgricoleGroup France 60,599 �,380,6�7 4.39 �0,355

7. RoyalBankofScotland UK 48,585 �,337,5�2 3.63 �3,664

8. SumitomoMitsuiFinancialGroup Japan 39,573 88�,593 4.49 8,887

9. MizuhoFinancialGroup Japan 38,807 �,226,627 3.�6 8,349

�0. SantanderCentralHispano Spain 38,377 954,473 4.02 9,033

��. ChinaConstructionBankCorporation China 35,647 568,232 6.27 6,860

�2. HBOS UK 35,584 93�,255 3.82 8,278

�3. UniCredit Italy 34,030 928,395 3.67 4,799

�4. BarclaysBank UK 32,533 �,59�,524 2.04 9,09�

�5. ABNAMROBank Netherlands 32,302 �,039,052 3.�� 6,705

�6. IndustrialandCommercialBankofChina China 3�,670 799,745 3.96 7,355

�7. BankofChina China 3�,346 587,352 5.34 6,668

�8. UBS Switzerland 30,39� �,567,564 �.94 9,928

�9. WellsFargoandCo USA 29,873 48�,74� 6.20 ��,548

20. RabobankGroup Netherlands 29,326 597,I85 4.9� 3,�64

Top20WorldBanksbyCapitalin2006

�2|September2006 www.eurofinance.com www.eurofinance.com September2006|�3

Position FXBank

�. Citi

2. JP

3. NatWest

4. Lloyds

5. Chemical

6. BofA

7. RBC

Top7FXBanks�99� Top7FXBanks2006

Source: Euromoney

Position FXBank

�. DeutscheBank

2. UBS

3. Citi

4. BarclaysCapital

5. RBS

6. GoldmanSachs

7. HSBC

CASHMANAGEMENT

Thepast�5yearshavewitnessedtheshrinkingofthecopperage.Lightnowgoesaroundcornerscourtesyoffibreoptics(photonics),whichbecamethebackboneofbroadbandandtheInternet.High-speedcommunicationsareheretostay.Therehavebeenobviouscommunicationchangesinthepast�5years(whendidyoulastsendatelex?),buthowhavecommunicationsreallychangedtreasury?

Theyear�99�wasseminalinthedevelopmentoftheInternet–TimBerners-Leeunleashedthesoftwarethatwastounderpinthewebon6August,andon�2DecemberthefirstwebserveroutsideEuropewentonline.ForAnnCairns,CEO,TransactionBankingatABNAMRO,itmarksthemostsignificantchangefortreasuryoverthepast�5years:“Ofcourse,ithastobetheInternet,orperhapswehadbettersaytheworldwideweb,[that]hasrevolutionisedallourlives,inandoutoftheworkenvironment.”

Fullyportableemailisablessingandacurse.Fortreasurers,theBlackberryisthebestandworstthingeverinvented.Quipsonetreasurer,interruptedintheCaribbeanforthisarticle:“Aholiday?What’sthatnowadays?”AndwhiledisasterscanbeavertedfromtheCostasortheCaribbean,thereisoneunplanneddownside.“Thedifficultywithallthis24/7availabilityisthatyoucannolonger–ordon’twantto–delegatewhenyouareaway.Thatmeansyoursubordinatesnolongergettomaketreasurydecisionsforthemselves,nolongergettocuttheirteethonthejobandthatcanonlybeabadthinginthelongrun.”

Apartfromthefactthatmanytreasurersarenowgrumpilyavailableonholiday,treasurersshouldnotshootthemessenger.Itismoretheunderlyingmessagethathasbeenchangingthanitsimmediateavailability.Andthatisinformationtechnology.

SaysJohnSculleyatActivationCapitalPartners:“Whileinformationtechnologywillcontinuetoplayakeyroleinfuturetreasuryoperations,itisnotthetechnologyitselfthatmakesitsuccessful,buthowitisused.Aprocess-centricviewis

important,andtreasurerswillneedtobeabletodefine,measure,improveandbenchmarktheirorganisationsandprocessesinaconsistentway,bothinternallyandexternally.”

Somepartsoftechnologyriskarebecomingtotems.Computermodelingofcreditandliquidityriskhashadapositiveimpactontheefficiencyofcorporatetreasury.Butyoucanhavetoomuchofagoodthing.SaysIntelligenceCapital’sPersaud:“Thecultofquantcanbedangerousifthemodelsbecomesocomplicatedthatonlyspecialisedcomputeranalystswithlittleunderstandingoftheunderlyingbusinessrisksknowhowrisksareassessed.IfCFOsnolongerunderstandhowtheirrisksareforecast,theynolongerknowwhattheydonotknowandthatisnotasaferplace.”

Forsome,it’snotsomuchwhatthetechnologycando,it’smakinguseoftechnologythatalreadyexists.

“Nirvanaiswherecorporatesagreeonpaymentdetails.Whatthenistheretostopusagreeingonasinglenettingsystem?Thenwhatwillweneedbanksfor?Theycouldstilltradenetpositions,butwecouldverysignificantlycutbanksout.I’mdisappointedwhenIlookatwhattechnologycando,howfarbehindweareinactuallytakingadvantageofit,”saysonetreasurer.

Thereareareasthatremainblissfullyinuredtothechangesofthepast�5years.Cashflowforecastinghasnotbeenparticularlyaffectedbynewtechnology,anditremains,asonetreasurer(forobviousreasons,anonymous)pessimisticallyputsit“justaslousyasitwas�5yearsago.”

Allthesenewtechnologicaldevelopmentscanmeaninformationoverload.ToparaphraseCambridgeprofessorandpoetAEHousman:“Onethingaboveallisnecessaryandthatistohaveahead,notacabbageonyourshouldersandabrainnotporridgeinyourhead.”Thetruetreasurerusesinformationwisely.KM

Communicationsandtechnology:isthereeverybodyoutthere?

MasteringMA-CUGsMorethan�00pioneeringcorporatesaroundtheworld,especiallyinContinentalEurope,nowuseMA-CUGstolowerback-officeandprocessingcosts.Some30industry-specificgroupsprovideaccesstothebank-ownedSocietyforWorldwideInterbankFinancialTelecommunication(SWIFT)’sinterbanknetwork.

Bystandardisingcommunicationwithalloftheirbanksacrossdifferentaccounts,countriesandcurrenciesviaasingleplatformandinterface,SWIFTNet,MA-CUGmembersareachievingsignificantsavings–anddoingsoinasecureInternetprotocol(IP)environment.

Besidescashmanagement(paymentinitiationandconfirmation,balancereporting),furtherbankingservicesarealreadyalsoaccessibleviathischannel.Theseincludeforeignexchangeandsecuritiestransactions,aswellascustody.Morearelikelytobecomeavailableintime.

Concernsremainovercomplexity,functionality,upfrontcostandopenstandards,though.Moreover,SWIFTNetmaynotbesuitableforcompanieswherelocalentitiescompletetheirownpayments;thoseequippedwithanSSC,paymentfactoryorsomeotherhighlevelofconcentrationarebetterpositionedtostartthedemandingprocessofimplementingaSWIFTNetconnectionviaaMA-CUG.

SomecorporatesregardEdifactandXMLasfutherissuesinthisarea.AnumberreporthavingimplementedEdifactinpreferencetoSWIFTnet,aspartofaninternalbankwithcentralinterfacestoalimitednumberofbanks.

InJuneSWIFTannouncedanewcorporateaccessmodeltoSWIFTinadditiontothecurrentMA-CUGandtreasurycounterpartymodels.SWIFTclaimsthenewmodel,whichisopentocorporateslistedonaregulatedstockexchangeinaFinancialActionTaskForcemembercountry,willmakeiteasierforcorporatestousetheSWIFTnetworkandcommunicatewithmultiplebanks.Thenewcategorywillallowqualifyingcorporatestojoinasingleclosedusergroup(CUG)containingmanyfinancialinstitutions,wherecorporate-to-financialinstitutionSWIFTNetmessagingandfiletransferaresupported.Sincemostcorporatesaremulti-banked,thisshould

gosomewaytoremovethefrustrationofcopingwithdisparateelectronicbankingsystems,withproprietaryformats,processesandsecurityprotocols.ThenewmodelwillgoliveinJanuary2007followingapilotprogrammeby�0banksandsevencorporatesstartingthisOctober.

OpeninguptoopenstandardsAtthesametime,thedemandforopenstandards–andautomatedbankingservicesbaseduponthosestandards–ismountingamongcorporatetreasurers.TheTWISTinitiativeisakeydriverinthisdevelopment.TWIST,whichdevelopsnon-proprietarystandardsforworkflows,messagesandinterfaces,hasalreadycontributedtheISTHarmonisedPaymentKernelforSEPA,amonganumberofcontributions.

TechnologycompaniesarealsolookingtoRosettaNet,whichsponsorsstandardisedcommunicationacrosstheelectronicsindustry.

However,somecompaniesfearthatbeingattheforefrontofTWISTandsimilarinitiatives’growthwouldinvolvesignificantcost.Anumberalsoseeopenstandardsasapotentialsourceofsecurityrisks.Somefearmakingthewrongchoicefromtheplethoraofformatsandstandardscurrentlyonoffer,leadingthemtoholdbackuntilthelikelywinnersaremoreclearlyvisible.n


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PAYMENTS

andsocietiesfromthenon,withthegradualchangefromatokentocoinmadefromapreciousmetal,suchasgoldandsilver.Thisensuredthecoinappearedtobeofrealvalue,ratherthanjusttokenvalue.

Itisonlyinmorerecenttimesthatanothermonetaryevolutioncamearoundwiththeinventionofthebanknoteandthecheque:theformerduringthe�6thcenturytoenableexpansionofnavalempiresandthelatterinthe�9thcenturytoenableexpansionduringtheindustrialrevolution.

Finally,50yearsago,wesawtheinceptionofplasticmoneywithcreditanddebitcards.Thishasenabledagradualtransitionfromcoinstopapertoplastic.Ascanbeseen,inthelast20years,societyhasadoptedcardsasanewformofpayment,whichiseasierandmoreconvenientthancashorcheque.

Thisevolutionfromcashandchequetoplastichasbeenasignificantchangeinthehistoryoftheworldfortworeasons:•Itenabledindividualstoleveragecredit•Itisthefirstformofpurelyelectronicmoneytoexistsincetimebegan.

Withoutcards,theconsumerboomofthelast�5yearswouldhavebeenvirtuallyimpossible.Thediscussionsofaconsumer-basedeconomyandgrowththroughconsumerdemandwouldnothaveoccurredifconsumerswereunabletoleveragethemselvesthroughborrowing--creditinotherwords.

Credit,andthecreditboom,hasledtoUSconsumersbeingover$�0trnindebtby2003

Nolongerloosechange

2006 has been an interesting year, with a soccer World Cup won by Italy, war raging across the Middle East and George Bush in office. It may not seem so different to 1990, a year before EuroFinance set up, when the World Cup was in Italy, war was raging across the Middle East and George Bush was in office, senior that is, but times have changed dramatically for corporate behaviour and in particular for payments. SWIFT now allows corporates direct access and companies have to take payments from mobile telephones. What will 2020 be like?

Wetakemoneyforgrantedtoday.Wequitehappilyacceptthatwetradewithnotesandcoins.Yet,moneyhasnotalwaysbeenaround.Originallywebarteredandexchangedreal,physicalgoods,wherefoodmightbetradedforseashells.Noonewouldtrusttheexchangeofpaper.

Thingsfirstbegantochange5,000yearsago,whenmoneywasinventedbytheancientSumeriansocietyinordertofacilitatereligiouspowerandsex.Youmaynothaverealiseditbutmoneywasinventedforsex.Theoldestknowncoins,theSumerianshekeldatingfrom3,200BC,weretokenstoprovethatthebearerhadpaidtheirwheattaxestothetempleoftheGoddess.Bytakingwheattothetemple,thefarmerreceivedtheshekel,whichcouldbeexchangedforsexwitharepresentativeoftheGoddessherself.

ThissimpleexchangeofmoneyintheformofcoinscontinuedthroughGreek,Roman

ChrisSkinnerstudiesthewayinwhichmoneyhaschangedthroughtheyearsandoutlinesthekeyconsumertrendscorporatesneedtoknowaboutforthefuture.

comparedto$7trnin2000.Althoughmuchofthisistiedintomortgagesandrealestateloans,alargeamountisrelatedtoborrowingoncards.Infact,USconsumerscarriedanaveragebalanceofover$�2,000eachontheircreditcardin2003,amountingtoover$735bnintotal;afigurewhichisincreasingrapidlyas,byJune2006,UScreditcarddebthadincreasedtoastaggering$2.�9trn.

TransitionawayfromtraditionalpaymentservicesButwhatofpaymentservicesofthefuture?Withinthenextfiveyears,athirdofallretailpaymentswillbemadethroughnewmobileandInternetpaymentoperators,andconsumerswillrapidlytransitionfromcashandchequetocontactlesscards.Let’slookathowthisoccurs.

First,thereisamajorincreaseinmobilepaymentsduetodownloadsandringtones.Forexample,theringtonethatrecentlyirritatedtheworldwastheCrazyFrog.Thiswasajabberingnoisylittlecartoonfrogthatgenerated$75mnrevenuesintheUKaloneduring2005,throughmobiledownloadsat$5to$�0ago.Infact,mobilemusicisexpectedtogeneratearound$7bnayearworldwide.ThatmakesitamarketworthmorethandoublethevalueofCDsinglesalesexcludingdownloads.ItisthereforenosurprisethatNokiahasnowpurchasedLoudeye,aninternetmusiclibrary,tocompetewithiTunes.


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PAYMENTS

“The question for corporates must then be: will there ever be a day when pure paperless processing of payments can take place? ”.

ThementionofiTunesleadstothenextsecondmajormarkettransition:micropaymentsonline.Incontext,eachiTunesellingforaround99UScentsand,withover2milliontunesinthelibraryandabilliondownloadssoldbyFebruary2006,representsaround$2bnayearinrevenuesforAppleComputer.That’smorethanApplegeneratesfromsoftwareorperipherals.

Similarly,wenowseePayPaltransactionsgrowingintoamassivepaymentsbusinessthatcompeteswithtraditionalbanking.SincePayPal’screationinDecember�998,PayPalhasgrownphenomenally,achievingover$27.5bnoftransactionsin2005,up45%year-on-year,andwith35.8%ofrevenuesoutsidetheUSA.PayPal’ssuccessisduetotheeBayeffectinsomepart,butmostlyisthroughpureeaseofuse,convenienceandtheabilitytopayforsmallitemsovertheInternet.Forexample,youcanbuythingsthroughPayPalforlessthanadollar.Tryanddothatwithatraditionalcreditordebitcardanditwasdifficult.

PayPalisalsonofoolhardyorganisation,andsothelaunchofPayPalMobileinQ�2006shouldalsoconcerntraditionalpaymentsproviders.ThereasonPayPalMobilelaunchedisbecausemobilepaymentswillbewortharound$75bnbytheendofthedecadeandsoitwantsamajorsliceofthatmarkettoo.

Betweenmobileandmicropayments,wearealreadyseeingamajortransitionawayfromtraditionalpaymentsforms.Theresultisthatasonlineandmobilecommercegrows,banksandtraditionalpaymentsproviderswillbeincreasinglychallenged,withbestestimatesthatover30%ofallpaymenttransactionswillbeswitchedfromtraditionalpaymentmechanismstoonlinepaymentsinstrumentsby20�0.

Thatdoesnotmeanthatbankscannotplayinthisspace,withexamplessuchasHeongLeongBankinMalaysiaandBankofAthensinSouthAfricaofferingmobilepaymentservicesasacomplementtotheircorebankingsystems.

ContactlesscardusegrowsAthirdmajordevelopmentinpaymentsistherapidlygrowinguseofcontactlesscards.Thisisanevolutionintheuseofplastic,andisbaseduponincorporatingaRadioFrequencyIdentificationTechnology(RFID)chipintoaprepaid,debitorcreditcard,soyoucan‘tapandgo’onacontactlessreceiverratherthanhavingtosignorPIN.

Contactlesspaymentsarealsobignewsforbanksbecausetheyappealtofast-serviceoutletssuchascinemas,petrolstationsandfast-foodrestaurantsandcanleveragemerchantacquisition.Asaresult,oneofthelargestdeploymentsofthesecardsisthrough

JPMorganChase’sBlinkcardprogrammeintheUSA.Thereasonthebankbelievesitimprovesmerchantloyaltyisbecausecontactlesspaymentsspeeduptransactiontimebyaround20%andincreasecustomerspendbyaround25%comparedtoacashpayment.

MasterCardreleasedsimilarresultsrecentlyinitsanalysisoftherolloutofitscontactlessprogramme,PayPass.PayPassisbeingusedbyaround�0millionconsumersin32,000merchantlocationstoday,withconsumersusingtheircards�8%moreoftenonaverage,witha45%increaseintotaltransactionsperaccountandalmosthalfofthosetransactionsforpurchasesbelow$�0.ItisforthisreasonthatRoyalBankofScotlandhasnowcommittedtorollingoutPayPasstoallofitsUKcustomers.

Prepaidcardsarealsosignificantinthiscontextinthat,combinedwithcontactless,theyprovidearealalternativetocash.Traditionalcash,intheformofbanknotesandcoins,arestillcriticalbecausetheyaretheonlyformofpaymentthatistrulyanonymous.Notesandcoinsdonothaveyouridentityonthem,whilstdebitandcreditcardsdo.Chequesdo.Butprepaiddoesnot.Youcanbuyaprepaidcardanduseitonlineorinstores

withoutgivingawayyournameorsigning.Asaresult,theprepaidmarkethasagreatopportunityforgrowth,withrecentresearchestimatinga€75bnprepaidmarketinEuropeby20�0,a600%increaseover2005,with375millioncardsincirculation,up�000%.

Finally,inthelongerterm,cardswilltransitiontopureembeddedchipssothatuserscanpayfortheirgoodswithwatches,keyringsandothertokens.Afterall,acontactlesschipinacardcouldjustaseasilybeacontactlesschipinaring.Atsuchapoint,thebankcouldbegintogiveawaysuchjewelleryanddifferentiatebaseduponwhoprovidesthebestaccessories.Youmaythinkthissoundscompletelyoffthewall,butChineseandotherbanksinAsiaarealreadytakingthisoffertomarket.

Forexample,ChinatrustCommercialBankandMasterCardPayPass,workingwithAustrianwatchmakerLAKSandOnTrackInnovations,introducedthecontactlesspaymentwatchaspartofapromotiontiedtothe2006FIFAWorldCupinJune2006.Thewatchallowswearerstosimplytaptheirwatchonacontactlessreadertopayfortheirpurchasesandistheworld’sfirstwatchequippedwithMasterCardPayPass.

Thequestionforcorporatesmustthenbe:willthereeverbeadaywhenpurepaperlessprocessingofpaymentscantakeplace?

Theanswerispossibly,butapaperless,cashlesssocietyisunlikelyinourlifetimesduetoculturalinertia.However,corporatesdowanttomovetowardssuchaworldasAmericanfirmspayaround$60foreachincorrectlypostedpaperinvoiceinreprocessingcharges,andEuropeanfirms€50.Thatequatestoover$60bn(€50bn)inreprocessinginefficiencies,andiswhytheEuropeanCommissionandcorporatesarefocusingsoclearlyone-invoicingforthenextfiveyears.ThisistoachievestraightthroughcommerceaswellastoincreaseproductivityandcompetitivenessacrossEurope.Forexample,oneEuropeanbank,Nordea,usede-invoicinginFinlandtoeliminatealmost�00millionfinancialinvoicetransactionsoverthefiveyearsfrom�999to2004and,asaresult,reducedpaymentsstaffnumbersfrom67,000to20,000.

Evenwiththeseefficiencies,andeventhoughpaperlessinvoicingandpaymentsisarealitytoday,thepaperlessbusinessisaboutasrealisticasapaperlesstoilet.Why?Becausesocietyandcorporationswillneedtochangetheirwayssignificantlytokeepupwiththemyriadofnewformsofpaymentsandleveragetheircapabilities.

Inasocietalcontext,evenwithallthepaymentformsoutlinedabove,mostpeoplestillusecashforpayments.Thisisbecauseitiseasyandanonymousandacceptedeverywhere.Reducingtheconsumerspreferenceforcashwillbeachallengeandwillnotdisappearformanyyearstocome.Forexample,althoughtheiPodappearstobeeverywhere–eventheQueen,thePopeandGeorgeW.Bushhaveone–itisunlikely,notwishingtobeageist,thatthoseofmatureyearswouldloadtheiriPodwithiTunesorevenknowwhatonewas.Inthesameway,payingforsomethingwithacontactlesswatchformanyover-35swouldbeunlikelyinthenearterm.

Inthemeantime,formanycorporationstheinterestine-invoicingorpaymentsperseisnotontheradar.Ifitwere,corporatetreasurywouldgetmoreattentionfromtheboard.Afterall,howmanytreasurersdoyouknowwhoregularlyattendtheircorporation’sboardmeetingsorsitontheexecutive?

Untilcorporationsfocusupontheefficiencygainstheycanachieveinpayments,thevaluethismeanstoprofitabilityandtheincreaseinsalesnewformsofpaymentscouldprovidefromtheircustomers,wewillstayquitehappilyinthe20thcentury.n


LIQUIDITY

“Corporateshaveworkedoutthemathematics:ifyoucanutiliseliquiditymoreeffectively,thereareveryrapidrewards,withhugecostsavings,”saysJamesPollock,RegionalSalesManagerofSunGardAvantGard,thegiantUSsoftwareandprocessingsolutionssupplier.

CentralisationcontinuesGlobalisationhasspurredtreasuriestocentraliseasmuchaspossible,withcorporateshavingcustomers,suppliersandsubsidiariesinmoreregionsthaneverbefore.Centralisationbegangraduallywithsimplevisibilityofcashpositions.InEurope,theadventoftheeurowasthecatalysttocorporateslookingatmoreregionalsolutions.Then,increasedregulatoryoversightbegantoforcecompaniestobecomemoretransparent.Corporatescannowhaveabettergripontheirfinancialpositionsandrisk,inturnallowingthemtobemuchmoreambitiousinmanagingliquiditythaninthepast.

Lookingforliquidity

Fifteen years ago there was little or no centralisation, and most treasury operations were done locally. It took time and effort for head office to collect data and reconcile cash positions of business units just down the road, let alone overseas. But 15 years down the line, companies have embraced a variety of new technology and many have centralised to some degree, more and more have centralised fully. With the advent of enterprise-wide systems, straight through processing of transactions and the Internet, the treasurer can now track operations across the globe, often in real time, and act immediately on that information. In the process, liquidity management has changed beyond recognition.

Ithasn’tbeeneasyimplementingnewsystemsandprocesses.Almostanytreasurerwilltellyoutherehavebeenhiccupsalongtheway,withhumanresourceandcross-borderissues.Onthetechnologyfront,therehavebeenlegacyproblemsandhugeinvestmentcosts,lackofco-ordinationandtechnologyglitches.Today,everythingdependsoncomputernetworks;thethreatofY2Kbroughthomejusthowmuchwehavecometorelyonthem.Increasingglobalisationandchangingregulatorylandscapesalsohavebroughtevenmorecomplexity.But,ingeneral,treasurerswilltellyouitsallbeenworthit–incostalone.

ValerieHartlooksathow�5yearsoftechnologicaladvancesandglobalisationhavetransformedthecorporatetreasury

“Moretreasuriesarecentralisingsotheycangainaccesstocashthroughouttheentireenterprise,givingthemmorecontrolandvisibility,”saysElyseWeiner,MD,GlobalHeadofLiquidityandInvestmentsatCitigroupGlobalTransactionServices.

Thedegreeofcentralisationdependsontheneedsofthebusinessandmarketsthecompanyoperatesin.WhilemanyFortune500firmsaretotallycentralisedoutoftheUS,otherschooseregionaltreasurycentresthathavesomecentralisedfunctions.Fewerandfewercompaniesaredecentralised,buttheymayhavelocaltreasurypresenceinhighlyrestrictedmarkets.

PepsiCo,forexample,hasfairlycentralisedtreasuryoperations,saysKeithJennings,SeniorTreasuryManagerforGlobalLiquidity.“Itischallengingformultinationalcorporatestobefullycentralisedbecauselocalbusinessoperationsrequirereal-timeresponsesandknowledgeoftheirsovereignrules–mostmultinationalsarecentralisedinEuropeandinsomekeymarketsinAsia.”

Source: Treasury Strategies’ 2005 US and European Corporate Treasury and Liquidity Research Programme

All Companies – United States

1. Regulatory issues

2. Technology/systems

3. Risk management

4. Bank relationship issues

5. Credit and funding issues

KeyTreasuryIssuesin2005

All Companies – Europe

1. Investment management

2. Cash forecasting

3. Risk management

4. Technology/systems

5. Ensuring access to cash and liquidity


LIQUIDITYDeutschePost,whichthroughitsDHL

unit,isoneoftheworld’sleadingprovidersofexpressdeliveryandlogisticsservices,alsointroducedaconceptthatprovidesfullliquiditycontrolatthecorporatelevelforallitsEuropeansubsidiariesandbeyond.“Oneoftherealobstaclesinintroducingtheconceptwaslocalmanagementresistancerelatedtothelossofcontroloverlocalbankrelationships.Anotherdifficultywastheeffortrequiredtokeepthedifferentinitiativesalignedandthesystemdevelopmentsynchronisedthroughoutthedevelopmentandroll-outphase.Itishardandlabour-intensivetointroducenewprocessesandtostandardisetheminacommonplatform,”arguesDanielRobrechts,HeadofTreasuryOperationsandComplianceatDeutschePost.

OnemultinationalautomotivecompanyEuroFinancespoketoindicatedithascentralisedcashmanagementforallitsEuropeanaffiliatesintoaregionaltreasurybasedintheUK,whichalsoisresponsibleforcashandfundingplans,localfundingincludingsecuritisation,balancesheetandworkingcapitalmanagement,andgeneralbusinesssupportontreasury-relatedmatters.Butglobalcapitalmarketsactivities,includingdebtissuance,cashandpensioninvestments,FXandderivativesarecentralisedintoitscorporatetreasurybasedintheUSA.Onadailybasis,cashispooledfromallcompaniesinEuropeandtheninvestedfromtheUS.

TheEuropeantreasurerforthiscompanysays:“I‘mnotsuremanycompaniescanaffordtohavefull-timetreasuryemployeesineachmarket,particularlysincebankingsystemsarenowsuchthatyoucandocashmanagementinmostmarketsremotely”.

Incontrast,DowChemicalCompany,thelargestUSchemicalcompanyandsecond-largestglobally,hasfourmajortreasurycentresaroundtheworld–intheUS,Singapore,BrazilandSwitzerland(andsubcentresinSouthAfrica,DubaiandChina)–carryingouttheircashoperationsautonomously,includinginvestmentofsurpluscash,thoughthisispreferablyplacedwithafellowcompany.

Someleveloflocaltreasuryknowledgeisstillrequiredbyeventhemostcentralisedorganisation–localtaxregulationsorpaymentterms,forexample.Itisimportanttobeabletoadoptotherorganisationalmodels,arguesBartParren,SeniorProductManager,XRT,whichsellstreasurymanagementsoftwaretolargecorporatesandbanks.“Subsidiariesareclosetotheoperationsandacentralisedtreasurydoesnotknowdetails.Internettechnologyisenablingustohavetheadvantagesofcentralisationwithoutthe

disadvantages.Bydividingcontrolbetweenthecentraltreasuryandsubsidiaries,globalvisibilityremainsatthecentrallevel,butinformationismanagedbythesubsidiaries,sowedon’tlosethelocalknowledge.”

CentralisedstructuresemergeNewstructureshaveemergedthroughwhichcorporatescancentralisetreasuryandpayments-relatedactivities.Paymentfactories,forexample,enableacompanytochannelallitspaymentsthroughasinglepipe,effectivelydoingawaywithpaymentsprocessingatthelocallevel.Pressuretocutcostsfrommiddle-andback-officeoperationshavedrivencorporatestolookforgreatereconomiesofscalethroughsharedservices.Andnowmorecompaniesareestablishingsharedservice

bankstotheirsubsidiaries,whichbeforehadgonetolocalbanks,handlingliquidityandhedgingneedseitherthemselvesorasaconduittorelationshipbanks.Treasurerscannowmatchdebitandcreditbalancesacrosstheorganisation,therebyreducingtransactioncostsandexternalfunding.Somemultinationalsalsouseintra-companynettingsystems,enablingthemtooffsetpayableswithinthegroup.

PoolingofliquiditypositionsKeytotheevolutionofcashmanagementhasbeenthepoolingofliquiditypositions.While�5yearsagothenormhadbeenadomesticzerobalancingstructure–cashconcentratedwithinasinglelocation,thetrendsincethenhasbeentocentralisethemanagementof

“I‘m not sure many companies can afford to have full-time treasury employees in each market, particularly since banking systems are now such that you can do cash management in

most markets remotely”.

centres(SSCs)onaglobalscalethankstoadvancesininterconnectivitywithenterpriseresourceplanning(ERP)systems.Simple,routine,highlyrepetitiveprocesses,likeaccountspayable,nowtendtobehandledbySSCs,withentireservicecentresorpaymentfactoriessetuptodothisonamassivescale.Oftentheyarerelocatedoffshoretocutcostsevenfurther.Goingforward,companiesarelookingatwaysoftransferringmorecomplexprocessestosharedservicemodels.

Meanwhile,anincreasingnumberofcentraltreasuriesareactingasin-house

liquiditypositionswithinregionsandevenacrossregions,therebymaximisinguseofinternalfundsandreducingbankloans.Withtheadventoftheeuroandconvergenceof��currenciesintothesingleeuro,therewasastrongimpetusforrunningaregionalcashpoolinEurope,typicallymanagedbytheEuropeanregionaltreasuryandusingafinancingsubsidiaryasanin-housebank.

TheeurohascertainlymadeabigdifferencetoDavidBlair,TreasureratNokia,theworld’sbiggestmanufacturerofmobilephones.Hehasfewercurrenciestoworry

Position Corporation

�. GeneralMotors

2. RoyalDutch/ShellGroup

3. Exxon

4. FordMotor

5. ToyotaMotor

6. InternationalBusinessMachines(IBM)

7. IRI

8. GeneralElectric

9. BritishPetroleum

�0. Daimler-Benz

��. Mobil

�2. Hitachi

�3. MatsushitaElectricIndustrial

�4. PhilipMorris

�5. Fiat

�6. Volkswagen

�7. Siemens

�8. SamsungGroup

�9. NissanMotor

20. Unilever

TopCorporatesbyShareholderFunds�99�

Source: Fortune Global 500 issue 27 July1992

Position Corporation

�. ExxonMobil

2. Wal-MartStores

3. RoyalDutchShell

4. BP

5. GeneralMotors

6. Chevron

7. Daimlerchrysler

8. ToyotaMotor

9. FordMotor

�0. Conocophilips

��. GeneralElectric

�2. Total

�3. INGGroup

�4. CitiGroup

�5. AXA

�6. Allianz

�7. Volkswagen

�8. Fortis

�9. CreditAgricole

20. AmericanInternationalGroup

TopCorporatesbyShareholderFunds2005

Source: Fortune Global 500 issue 31 July 2006

20|September2006 www.eurofinance.com www.eurofinance.com September2006|2�

LIQUIDITY

Date TargetName AcquirorFullName ValueofEffected Transaction($mn)

�4/03/9� ContelCorp GTECorp 6,243

03/0�/9� MCAInc MatsushitaElectricIndustrialCoLtd 7,406

03/03/9� NMBPostbankGroepNV Nationale-NederlandenLevensverzekeringMaatschappijNV 7,458

�6/09/9� RacalTelecomPLC Shareholders 4,606

0�/04/9� SaitamaBankLtd(AsahiBank) KyowaBankLtd 8,093

2�/06/9� EnimontSpA(EnteNazionaleIdrocarburi/Italy,MontedisonSpA) EnteNazionaleIdrocarburi{ENI} 3,795

�9/09/9� NCRCorp AmericanTelephone&TelegraphCo 7,893

06/�2/9� BritishTelecommunicationsPLC Investors 9,267

3�/�2/9� C&S/SovranCorp NCNBCorp,Charlotte,NorthCarolina 4,259

�7/07/9� BancadiRomaSpA CassadiRisparmiodiRomaHolding(EnteCassadiRoma) 3,292

Top 10 M&A Deals 1991

Source: Thomson Financial

Date TargetName AcquirorFullName ValueofEffected Transaction($mn)

09/08/05 ShellTransport&TradingCoPLC RoyalDutchPetroleumCo 74,559

30/06/05 TelecomItaliaMobileSpA TelecomItaliaSpA 28,82�

�2/08/05 NextelCommunicationsInc SprintCorp 38,975

03/03/05 AlmanijNV KBCBank&InsuranceHoldingCoNV 20,89�

0�/�0/05 GilletteCo Procter&GambleCo 54,907

�8/��/05 AT&TCorp SBCCommunicationsInc �4,733

0�/�0/05 UFJHoldingsInc MitsubishiTokyoFinancialGroupInc 4�,43�

30/08/05 MayDepartmentStoresCo FederatedDepartmentStoresInc �6,466

�0/08/05 UnocalCorp ChevronTexacoCorp �8,7�9

23/��/05 BayerischeHypo-undVereinsbankAG UnicreditoItalianoSpA �8,257

Top 10 M&A Deals 2005


aboutandcross-currencypoolingisnotsuchanissue.InthelastfewyearsNokiahassimplifieditscorporatestructureandhaslessexcessordeficitcashoutsideitsthreemaintreasurycentres,thereforerequiringlesspoolingandliquiditymanagementingeneral.

But,whiletheregionalliquiditypoolconcepthasbeenextendedtoAsia,itisprovingfarmoredifficultbecauseofmonetarycontrols,restrictionsoncashflowmovementsandnumberofcurrenciesinvolved.However,regionalpoolingofUSdollarsinAsiawasachievable,andcouldbejoinedwithsimilarpoolsinEuropeandtheAmericas.Nokia,forexample,hasthreepoolsofliquidity:AsiaoutofSingapore,EuropeoutofLondon,andUSoutofNewYork.ItsweepsallitsAsianUSdollarsatcloseofbusinesstoLondon,andthenontoNewYork,resultinginallitsavailableUSdollarsendingupinasinglebankaccountinNewYorkwhentheFedcloses.Theendresultisthatitknowswhereallofitsdollarsandeurosare.

“Thesetypesofpoolseliminatetheneedtophysicallyswapcurrencies,andmultiplecurrencies,ie,dollarsandeuros,canbecombinedintoasinglemulticurrencypool,”saysCitigroup’sWeiner.However,sheconcedes,theissuesaroundcurrencyandcountryrestrictionsinmuchofAsiaandLatAmremain,leadingtoareasoftrappedliquidity.

AccordingtotreasuryconsultantChrisRobinsonsomecompanieschoosenottorunseparatecurrencypools:“SincespreadsintheFXmarkethavenarrowedbecauseoftheincreasedtransparencyofrates,itischeaperfortreasurerstomanagemulticurrencycashpoolsusingswaptransactionsratherthanusingcross-currencypoolingproductsormanagingeachpoolindividually.”

BlairarguesgovernmentregulationsandlackoffiscalharmonisationstillstopmoneyflowingfreelyaroundEuropeandglobally.“Wecanpoolinonecountry,and,technically,wecanglobally,butwearenotallowedto.Wecannotautomateitinasmoothwaybecauseofregulations.We’vedonewhatwecanbyorganisingourselves,andthebanks,too,areorganisedreasonablyefficiently.”Goingforwardhehopescountriesbecomemorerationalintheirfiscalarrangements.

ThepathwillbeeasedsomewhatinEurope:�0morecountriesaccededtotheEuropeanUnionin2004andwilleventuallyconverttotheeuro,andfourmorecountrieshavesinceappliedforEUmembership.AlsointroductionofpaymentsstandardisationinitiativetheSingleEuropeanPaymentsArea(SEPA)in2008willfacilitatecross-borderpaymentsandreducetheneedforlarge

numbersoflocalbankaccounts.Inclusionoflocalpaymentsystems,however,isbeingstaggered,with,forexample,Germany’sonlyreadyin20�0,andcompanieswillhavetomakeconsiderablesystemenhancements.But,asoneEuropeantreasurersays,itwillbeworthitintheend.

TechnologicalsolutionsToday’streasuryenvironmentisallaboutstreamliningandautomationtoensurealevelofstraightthroughprocessingthatmitigatesanyinstancewherevaluedayscouldbelost.Aswellasthedriveformoreproductivity,increasingpressurefromregulatorsandthereforetheneedformoretransparencyandaccountabilityaremakingautomationofcertainprocessesessential.TechnologicalsolutionsintheformofERPandtreasurymanagementsystemsandweb-enabledplatformsallowcompaniestocentraliseandintegrateprocessesallalongthefinancialsupplychain.

Thetreasurymanagementsystemisthepivotalpieceofsoftwareatthecentreofthetreasury,linkingintothebanks,accountinganddealingsystems,etc.TheERPsystemisintendedtoprovideasingleplatformacrossthewholeenterprise,withallfunctionalbusinessunitsintegratedintotheonesystem.Inreality,implementationofERPsystemstendstobemorepiecemeal,theresultofhavinginstalleddifferentmodulesandincorporatingotherERPsystemsduetomergersandacquisitions.However,inessence,corporatesarenowabletolookat

thetreasuryfunctionmoreholistically.Andliquiditycanbeextractedfromeverystepofthefinancialsupplychaininbothdirections,allowingcompaniestofindtherightlevelofworkingcapital.

“Fromatreasurer’spointofview,automationofthewholesupplychainwillbeoneofthekeydriversinthenextfiveyears,”remarksRichardChallinorofHSBCGlobalPaymentsandCashManagementAsianSalesTeam.

Astreasurerstakeonmoreresponsibilitieswithinorganisations,mostimportantwillbeefficiency,commentsSunGard’sPollock.Andasbusinessesgrow,leadingtoincreasingvolumesoftreasury-typeAPandARtransactionsgoingthroughthesystem,processeswillneedtoincreasetheirefficiencyacrossthefullbreadthofthefinancialsupplychain.

Hugestrideshavebeenmadeinthemethodofinformationexchangeorconnectivity–howacompanyinteractswithitsbankorfinancialservicesproviderfortheexchangeofinformationaroundallthesenewstructures.ArangeofInternetportalsandweb-enabledbankingplatformsnowoffersreal-timeinformationdelivery.“Weareseeingmorehost-to-hostapplicationswhereinformationisexchangeddirectlybetweenbanksandtheircustomers’ownERPandtreasurymanagementsystems,”explainsCitigroup’sWeiner.

BankshavebeenuppingthegameintermsofreportingandtheirownelectronicbankingcapabilitiesandInternetservices


A truly centralised global treasury: Danisco A/S

Business challenges Complex, wide-spread, global organisation Multiple local cash positions with multiple banks and with inconsistent interest positions USD 2 billion external debt; desire to reduce interest costs Inefficient (expensive) inter-company funding Need for effective interface between bank payments systems and central SAP Rationalisation of multiple group ERP systems to single, SAP structure

Strategic objectives Truly centralised treasury (liquidity and risk) Liberation of up to USD 0,2 billion ‘idle’ cash from subsidiaries Optimised daily working capital; reduced external borrowing costs Reduced number of bank relationships Fully automated in-house bank managing all inter-company FX and deposit/loan facilities Global payments factory; potential evolution to global/regional SSC

“We wanted to manage a single EUR position; ABN AMRO’s winning solution has evolved over time to include new countries, new banks and even new technologies that continue to help us to make the most of group-wide EUR liquidity.” Torben Vingaard, Treasury Manager, Danisco

ABN AMRO solutionThe company wanted cash concentration to be based on end-of-day zero balancing. ABN AMRO’s automated, cross-border zero balance cash pool solution consolidates EUR liquidity from multiple accounts throughout Europe into a single position.

Further, the client uses an innovative ABN AMRO multi-bank cash concentration solution to sweep EUR balances held with other banks to its central EUR pool. This fully-automated “hands-free” process eliminates the burden (and cost) of manually consolidating multiple bank balances.

As Danisco’s commercial reach expands - for example into Central Europe - ABN AMRO’s cash concentration solution evolves accordingly. EUR balances held with ABN AMRO in new business locations are incorporated seamlessly within the solution, further enhancing overall cash liquidity.

EUR payments initiated from the company’s global Payments Factory are executed via an automated interface between Access Direct -

ABN AMRO’s proprietary host-to-host transaction initiation and real-time reporting channel - and the company’s central SAP system. Receivables are also centralised, technically, via Access Direct although reconciliation is managed by individual Group entities.

The company also uses Access Online, ABN AMRO’s web-based channel for integrated execution, tracking and reporting of cash, trade and FX transactions, to support its corporate treasury activity.

“ABN AMRO is a very good partner for us; a strong working relationship, good technical and account set up, direct interface with our internal SAP and innovative and evolving transaction banking solutions fully support our goal for completely centralised treasury and cash management.” Torben Vingaard

Client benefits Fully-automated zero balance cash pool; all EUR cash flows centralised with ABN AMRO Non-ABN AMRO EUR balances included in central pool (automated multi-bank cash concentration) Seamless, centralised payments management; direct interface via Access Direct between ABN AMRO (and other) bank systems and company ERP (SAP) Completely centralised treasury function; maximum efficiency with minimum treasury resources More efficient inter-company and external funding; centralised currency risk management

“Centralised treasury management, an in-house bank and the cost and STP efficiencies gained from our global payments factory are a win-win for all parties.” Torben Vingaard

Making more possibleABN AMRO Transaction Banking delivers cash, trade and supply chain and card products and services to corporations and businesses, financial institutions, retail customers and private clients globally. These services are available in some 3,000 locations worldwide, including LaSalle Bank in the US and Banco Real in Brazil. Underpinning this extensive globalnetwork is integrated technology supporting billions of payment, trade and card transactions every year. Global scale, a commitment to continuing product and service innovation and an in-depth under-standing of local and global markets are key components of our offer.

To find out more, please contact your ABN AMROadviser. Alternatively, please visit us atwww.abnamro.com/transactionbanking

Through organic growth, merger and acquisition, Danisco is one of the world’s leading producers of ingredients for food and other consumer products and food-related biotechnology. Headquartered in Denmark, it has ten divisions, operating out of more than 40 countries, across six continents.

To effectively manage its complex payment and cash-flow infrastructures, Danisco operates a truly centralised global treasury. Regional pooling structures, a global payments factory in Copenhagen and a fully-automated in-house bank providing all inter-company FX and loans further support optimal visibility and liquidity of this company’s enterprise-wide cash.


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HBFullerfindsanewsolutionwithBankofAmerica

Ask your Bank of America treasury management sales representative for the complete case study of HB Fuller’s transition to a new outsourcing provider, or email us [email protected] receive the article complimentary.

TheChallengeWhenanexperiencedtreasuryoutsourcingmultinationalhadtofindanewsolution,theyturnedtoBankofAmerica.DavidAsh,DirectorofFinanceatHBFuller,shareshiskeyevaluationcriteriaofthepotentialprovidersandlessonslearntintheprocess.

HBFullerhasbeenutilisingtreasuryoutsourcingsince200�.Inlate2005,wefoundourselvessearchingforanewoutsourcingproviderwithinaverytighttimeframe.Ourcurrentproviderwasquittingthemarketplace;wewouldhavetomovefasttonotgetlostintheshufflefromalltheothercompanieswhowouldalsobelookingforanewprovider.

Duringthefirstweekofdiscussionswithpotentialproviders,anotherbankalsoannouncedtheywerequittingtheoutsourcingbusiness.Havingtwoprovidersexitthebusinesssoclosetogethermadelong-termcommitmentofparamountimportance.

Whatwewanted| We had to be absolutely certain that the provider we

appointed was in the business for the long haul.DemonstratedCommitment.BankofAmericaimpresseduswiththeseniorityandtherelevanceofthepersonneltheybroughtintomeetus.Additionally,theyhaveadedicatedsalesofficerstrictlysupportingoutsourcing.

Superiortechnology.Ournewserviceisverywell-integratedandintuitiveallowingasinglesystemforfunctionssuchasnettingandintercompanylending.Oneofthefactsoflifeweenduredwithourpreviousproviderwasthelackofinteractivitybetweenourcontrollersandthesystem.

Dedicationtocompliance.TheBankofAmericaInterntaionalFinancialServicesCenterinDublin,hastheirSAS70certificationwhichmeansthatHBFullernolongerhastoconductourownaudits.Previously,wehadtobearthecostsassociatedwithintensiveSarbanes-Oxleytesting.

TailoredSolutionsandImplementationProjectManagement.Giventheincrediblytighttimelineswewereunder,asmoothimplementationwascritical.ItwasobviousthatBankofAmericahadclearlydonesomecomprehensivepreparationduringtheproposalstagetounderstandwhatourobjectivesandneedswere.Whentheywereawardedourmandate,thatpreparationworkcarriedoverintoaqualityimplementationplan–whichwasadheredtothroughouttheprocess.Allthevariousimplementationstageswerecompletedontimeandwemadeourgo-livedateforfullproduction.

Lessonslearnedfromexperience| We are certainly very satisfied with the timely and

efficient way in which the outsourcing implementation was conducted.

VisitthepotentialprovidersinDublin.Itiswellworththeeffort.Itwillallowyoutogainagoodqualitativefeelforwhatthevariousproviderscanoffer.Inourcase,italsoallowedustoseeareallydetailedwalk-throughoftheavailabletechnology.

Ifyouarealreadyoutsourcing,givealltheprospectiveprovidersaccesstoexistingprocessdocumentation.Thebankstenderingforthemandatewillhavealltheinformationtheyrequiretoprovideaverydetailedandtailor-madeproposals.Wefoundthismadethetenderingprocessconsiderablyfasterandfarlessiterativethanitwouldotherwisehavebeen.Italsoallowedthebankstobefarmorepreciseintheirpricingquotations.

Askforextremelydetailedimplementationplansaspartoftheproposals.InthecaseofBankofAmerica,thequalityofthisimplementationplangaveusconfidencethatthebankknewexactlywhatitwasdoing.

Allowadequatetimeforcontractnegotiations.Wefoundourselvesrunningratherclosetotheimplementationgolivedeadlinebeforethecontractnegotiationswerecomplete,whichintroducedacertainamountoftimepressure.

ADVERTORIAL


LIQUIDITY

“The first supplier that can incorporate all bank accounts globally and the management of excess liquidity or funds on

a single platform will stimulate major changes in the way multinational treasury departments operate.”

inresponsetocustomerdemandsandincreasedcompetition.Theyareprovidingclient-centricsolutionseitherthroughproprietyservicesorglobalcommunicationsnetworkssuchasSWIFT.Andtheyaredevelopingmoresophisticatedliquidityproducts,includingautomated,cross-borderglobalfundssweeping,multi-bank(third-party)sweeping,varioussingleandmulti-currencynotionalpoolingstrategies,aswellastreasuryoutsourcingcapabilities.Allthisenablesclientstomaximisereturnsoractivelypaydowndebtastheycannoweasilymovecashtowhereitismostneeded.

Developmentofelectronicbankingsystemswithmulti-bankreportingcapabilitiesisacaseinpoint.Treasurerscannowgetahandleonhowevermanybankaccountsthecompanyhasandwhattheflowsare.FrankTaal,HeadofPCMProduct,SolutionandChannelManagementatINGWholesaleBanking,saysitoffersaEurope-widesolutionasincreasinglymoreclientswantedregionalsolutions.“Ifwecanuseourownnetworkwewill,butifneededwecanalsoworkwiththird-partybankstocomplywithclientneedsinaspecificcountry.”

PhillipLindow,HeadofGlobalTreasuryandInvestmentManagement,TransactionBankingatABNAMRO,whichalsoprovidesamulti-bankcashconcentrationservice,saysitcanautomaticallymoveitsclients’third-partybankbalancesintoitsown.“Thislevelofautomationresultsinourclientsnothavingtospendvaluabletimeonmonitoringandmovingthesepositionsmanually.”

Citigroupalsohasrespondedtoclientneedsbyexpandingitsautomatedtarget-balancingnetworktoincludethird-partybanks,therebyincreasingautomationandSTP.ItsaysitsTreasuryVisionportalnowhasexpandedreportingcapabilitiesandanalyticsaroundglobalcorporatecashbalancesandpoolstructures.Theportalalsogivesclientsonlineaccesstoavarietyofmoneymarketfunds,wheretransactionscanbedoneautomatically.

“Thefirstsupplierthatcanincorporateallbankaccountsgloballyandthemanagementofexcessliquidityorfundsonasingleplatformwillstimulatemajorchangesinthewaymultinationaltreasurydepartmentsoperate.Thispossibilitydependsonwhetherbankswanttomakethatinvestmentandhowfast,”saysPepsiCo’sJennings.

CustomisedreportingWiththewidechoiceofbankplatformsandcapabilitiesnowavailable,smallercompaniesdon’tneedtobuyanexpensiveproprietarysystemtogaincashvisibilityandcontrol.

Therearemanywaysacompanycaninteract,especiallywithnewweb-basedtransaction-reportingtechnology.

“Biggercompaniescanaffordtospendalotofmoneyoncustomisedproprietarysystems,butsmallerfirmscanimplementafairlyrobustliquidmanagementstructureusingbasicbankreportingsystemsandproductcapabilities,”commentsWeiner.

Acergy,amid-sizedinternationalseabed-to-surfaceengineeringcompany,withabout$2bnayearinrevenues,recentlyadoptedatreasurymanagementsystemthatprovidesfunctionalityfromcashmanagement,throughdealingandriskmanagementtobackofficeautomation.InstalledintheUKoffice,selectedlocationshavefullaccessviaaCitrixconnection,whileothershavebrowser-basedaccess.“Itgivesusgoodvisibilityofourcashgloballyatalltimesandflexibilitytomovecashtowherewecangetthebestreturnseachdaywithoutputtinginplacealargecomplicatedstructure.We’vecoveredthecostofinvestmentwithinthefirstyear,”saysDavidRooke,Acergy’sCFO.

Hesaysthenextstageforhiscompanyistohaveinsightintoallthegroup’sbankaccounts.“Wedon’thaveclarityitembyitem;wewanttogetageneralledgersystemreportingintoshort-termcashforecastsandprovidinguswithbetterinformationsowecanimproveourinvestmentdecisions.Weoughtthentobeabletouseitasaglobalreconciliationtool.”

ActiveversuspassiveSometreasurersprefertoactivelymanageliquiditybybiddingtransactionsacrossseveralbanks;however,othersforgeapassiverelationshipwithasinglebankthatwillofferamarket-basedyieldorbenchmarkrateforallaccountsandpools.AnexampleishowsomecompanieswillmanageasinglecashpositionacrossmultipletimezonesusingabanktosweepfundsfromAsiatoEuropetoNorthAmericatomaximisetheinvestmentreturnsinaUSDmoneymarketfund,followingthesunaroundtheworld,explainsconsultantChrisRobinson.

Passivetreasurymanagementleadstofurtherautomationandestablishingprocessesthatrequireminimalinterventioninday-to-dayoperations.Thisachievessimilar

cost-savingbenefitstotreasuryoutsourcingwithoutlockingthecompanyintoitscurrentexecutionprocesswithanexternalprovider.Robinsonthinksthecurrenttrendisfortreasurerstousemorepassiveproductswherebanksarepreparedtooffermoneymarket-equivalentrates.

DowEuropeadoptedaone-bankpan-Europeansolutionthreeyearsago,allowing

farmoreautomationandenablingitsentireEuropeanoperation,whichhas$20bnannualsales,toberunbyjustfourpeople,Furthertechnicaladvances,however,wouldallowittomoveawayfromthissolutionandoperatethroughanin-housebank.ItislookingtocutitsbankaccountsinEuropefrom�00toaround20,usinginternalandreversefactoring.

Meanwhile,althoughthenumberofcompaniesoutsourcingtreasuryoperationsisgrowing,ithasn’ttakenofftothedegreemarketresearchenvisagedafewyearsago.ItisprimarilyUScompaniesoutsourcing,andtheEuropeanmarkethasnotgrownasmuch,saysNeilFleming,FinancialDirectorofAIBInternationalFinancialServices,whichprovidestreasuryservicestoalargenumberofcorporates.However,heisseeinggrowthcomebackintothemarketascompaniesstarttorevisittheareaafterbeingdistractedbygovernanceissuessuchastheSarbanes-Oxleynewfinancialandaccountingdisclosurelegislation.Whilesomemajorbanks,likeABNAmro,havepulledoutofthemarket,otherprovidershaverampeduptheirbusiness.

Flemingwarns:“I’veseencompanieswithonlyafewsubsidiariesinvestinginfull-blowncashmanagementsystems,andnotseeinganyrealbenefit.Benefitscouldhavebeenachievedbyfocusingonthebasics,ie,knowingwhereyourcashis,consolidatingitandutilisingthesurplusefficiently,whichdoesnotalwaysmeanputtinginplaceaverycomplicatedzero-balancingandpoolingsystem.”

RealtimefutureInfutureinformationwillneedtoberealtime,remarksSunGardAvantGard’sPollock.Thiswillenablecounterpartyriskmanagementofbanks,suppliers,vendors,customers,etc.“Thereisnoreasonwhyonecannotgetareal-timeviewofalloftheseconsideringthetechnologyavailabletoday.”


LIQUIDITY

“Bigger companies can afford to spend a lot of money on customised proprietary systems, but smaller firms can implement

a fairly robust liquid management structure using basic bank reporting systems and product capabilities.”

PepsiCo’sJenningswouldliketoseeallcashpositionsonanongoingreal-timebasisandthereforecentralisedvisibilityintoallthecompany’smarkets.“WeneedcentralisedanalyticssosomeoneinNewYorkcanmakeadecisiononcashinSingapore.”

Pollocksaysthatbanks–throughpressurefromtheircustomers–arenowrealisingtheneedtomovefromthecurrentstatementfeedofonceaday(overnight)toreal-timestatusupdates.InfactbanksaregoingthroughasimilarchangethemselveswithTarget2,whichallowsthebankstocentraliseandmanagetheirintradayliquiditythroughtheircentralbankaccounts.Plannedtogoliveinthesecondhalfof2007,Target2willreplacetheexistingTargetinfrastructureofindividualclearingsystemsandprovideasinglesharedplatformforprocessinghigh-valueeuropayments.Thishasledtothebanksidentifyingtheneedforchangeandinvestmentinnewsystems.Throughthecollectionofdatafromtheirbankaccounts,thebankshaverecognisedtheopportunitytoincreaseprofitandreducerisksthroughintradayliquidity.

Evenifthecompanyhasgotoversightorvisibilityofthebalancesofitsaccountsinrealtime,doesithavetheabilitytodosomethingwiththatinformation,questionsHSBC’sChallinor?“InChina,forexample,itismuchmorechallengingtoutiliseliquidityoutsidethecountry.Itdependsonthecurrencyandmarketyouaredealingwith.Itistheabilitytoutilisethosefundsthatisthemostimportant.Itismoreaquestionofreceivablesthanpayables,asyouknowwhatyourpaymentswillbe.”

“Differentpartsoftheorganisationneedinformationflowsatdifferentspeeds,forexample,realtimeforaccountsreceivable,endofdayfortreasury,”headds.

Asthetreasurer’sroleexpandsbeyondtraditionalcashmanagementintofullworkingcapitalmanagement,he/shewillneedtohaveglobalvisibilityinrealtimeofallelementsofthefinancialsupplychainandthemeanstooptimiseworkingcapitalasmuchaspossible.

Withtechnologydoingsomuchmore,financialofficerscannowtalktoanalystsandinvestorswithconfidenceaboutthecompany’scashposition.Theinformationcomingfromthetreasuryfeedsrightthroughtotheboardroom,enhancingthetreasurer’spositionwithinthecompanyasshe/heincreasinglyaddsvaluetothebusiness.

AlternativeinvestmentsAkeydevelopmentinhowtreasurersmanagecashinthepast�5yearshasbeenthemoveintoalternativestobankdeposits,suchas

moneymarketfundsandenhancedcashproducts.Moneymarketfunds,orAAAstablenetassetvaluefunds,wereintroducedinEuropeinthemid�990s,withthemarketnowhavinggrowntonear$300bn.SimilarproductshavebeenavailableintheUSsincetheearly�970s,wheremarketvalueisnowaround$2trn.Theseproductsofferahighlevelofsecurityandsame-dayaccess.

MarcDoman,ManagingDirectorofAIMGlobal,aspecialisedfundmanagementcompanythatsellsmoneymarketfundsdesignedspecificallyforthetreasurymarkettoactlikeabankaccountforshort-termcash,butofferbetterreturns,saysheforeseesmoreintegrationandautomationasanaturalconsequenceofthewaytreasurersusetheseproducts.“Moremoneymarketfundsarebeingusedinanautomatedway

throughelectronicinterfaceslinkedintobanktransactionportalsandindependenttreasurysystems.Automationprovidesforall-in-oneclickdealing,payingandupdatingbackofficerecord-keepingsystems.

Morerecently,enhancedcashfundswithahigherriskandreturnprofilehavebeendeveloped.“Thesefundsenableinvestorstotakehighercreditorinterestraterisk,aswellasstructuredproducts.Themostrecentdevelopmentwithinthisuniversethoughistheuseofderivatives,suchasinterestrate,creditdefaultandtotalreturnswaps.Portalsarealsobeingdevelopedthatofferarangeofdifferentfundproviders’productsandinvestorscanpickandchoosetheinvestmentfromonelocation,”saysJonathanCurry,HeadofEuropeanCashManagementatBarclaysGlobalInvestors.Buthedoesn’tthinktheseareaswidelyusedastheyaretalkedaboutintermsoftotalflow.

Meanwhile,fundprovidersaretryingtogetabroaderunderstandingandacceptancewithinEurope,withtheInstitutionalMoneyMarketFundAssociationlobbyingforformalregulation.

Domanthinkstheregulatoryspotlightcouldalsofalloncorporatetreasurers.“Corporatetreasuryis,defacto,aninvestmentbusiness.Althoughitisbeingcarriedonforthebenefitofthecorporate,itisultimatelyforthebenefitoftheshareholder.Governmentshavenotbeenslowrecentlyinregulatingcorporatebehaviour–thecombinedcodeforcorporategovernanceisacaseinpoint”.

“Withtheworldbecomingamorevolatileplace,moneymarketfundsmanagingshort-termmoneycandoalltheduediligence,creditmanagementandriskanalysisforthetreasurer.Butforlonger-termmoneythetreasurerplaceshimself,willhebeabletodoalltheequivalentcreditworkhimself?”

Ifregulationsdocomeout,theyarelikelytoincluderequirementstoundertakeallthenecessarycreditworktobackupthedecisiontomaketheinvestments,whichwillbeexpensiveandonlythelargemultinationalsarelikelytobeabletoaffordtodothem.

AccordingtoDomanthesolutionisforfundproviderstorolloutawholerangeoffundscateringfordifferenttermmoneythatwillallowthetreasurerofthosecompaniesthatdon’twantthecreditobligationstodeployalltheircashinpurefundbusiness,

withthefundsdoingallthecreditandinvestmentmanagementonbehalfofthecompany.

Goingforward,liquiditywillalsobeimpactedbythedirectionofinterestrates.AccordingtoNokia’sBlair,interestratesareheadedup.“Interestratesandcreditspreadshavebeenhistoricallylowandtheworldawashincash,enablingcompaniestoborrowverycheaply.Weassumeconditionscouldrevertbacktohistoricnorms,whichwouldmeanlessliquidity.Companieswouldneedtobeevenmorecarefulandpreciseintheirliquiditymanagementastoleranceformissinglittlepoolsofliquiditywilldecrease.Forexample,youwon’tbeabletoleavecashlyingidleinChinaanymore.”

Today’streasurernotonlywantsimmediateaccesstoinformation,butalsoforittobereal-time,electronicandintegrated.In�5yearstimethiswillbecommonplace.Canwelookforwardtoafull,end-to-endautomatedtreasuryenvironment,wheretechnologyhastakenoverthebasicbackofficetreasuryfunctions?Thiswillfreeuptreasurypersonneltotakeonmorestrategicroleswithintheorganisation.Theincreasinglyglobalnatureofbusinessandchangingregulatorylandscapeswilldemandanewlevelofexpertiseinthetreasury.Especiallysincethetreasurerwillbeabletoinvestineverythingfromplainvanillatoexoticinvestmentoptions.She/hewillneedtobeatrader,riskmanager,strategist,accountantandgeneraljackofalltrades.n


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Unlockingthevalueinthecorporatesupplychain

Thequestforimprovedefficiencyintreasuryactivitiestodaytranscendsthedriveforcostefficiencyateverystageofthefinancialvalue-chain;increasingly,wehearfromourclientsthatend-to-endintegrationofthecorporateandfinancialsupplychainistopoftheagenda,astheirbusinessunitsstrivetogenerategreatersalesandvaluefortheirfranchise.

Integratedglobaltransactionservicessolutionsfocusedonfinancialsupplychainoptimisationencompassbothsolutioncomponentswithinthecashmanagementandtradefinancefamiliestocreateauniqueofferingtohelpclientsmeettheirstrategicbusinessgoals.

Citigrouphaswitnessedthischangeasanestablishedprovideroftransactionservicestomajormultinationals,localcorporates,thepublicsectorandfinancialinstitutionsaroundtheworld.Michael Guralnick,ManagingDirectorandHeadofClientRelationshipManagementforCorporateandPublicSectorsacrossEurope,MiddleEastandAfrica,(EMEA)commentsonthefutureoftreasury.

ThedriversofevolutionTheoperationaltreasurymanagementchallengesfacedbycorporationstodayareimpactedbynewdemandsbroughtonbyanumberoffactorssuchas:(�)theglobalisationofcommerce,(2)higherlevelsofcompliancedemandedbyregulators,and(3)businessgrowththatisdrivenbothorganicallyandthroughmergersandacquisitions.

Astrategicgoalformanycompaniesisbringingtogetherdiversefinancialandcommercialactivitiesthathavebeenestablishedbyoperatingunitsaround

Overthelast�5years,therehasbeenatransformationinthefocusofcorporatetreasurersasmarketdynamics,technologyinnovationandevolvingclientdemandshavecompelledchange.Increasingglobalcompetitivenesswithinallindustriesandanemphasisonstrategiccostmanagementrequiresthebalancingofcapitaltosustainprofitabilitywhileretainingtheabilitytoinvestininnovation,geographicalexpansionandongoingservicequalityimprovements.Theseareallcriticalcomponentsformulti-nationalcompaniesinthe2�stcenturydrivingforsustainablecompetitiveadvantage.

theworld.ManycompaniesareseekinganenhancedreturnontheirinvestmentsmadeonnewtechnologyplatformssuchasEnterpriseResourcePlanning(ERP)systemsandTreasuryWorkstations(TWS).Thegoalofachievingend-to-endautomationofthefinancialsupplychainisstillaschallengingaseverandinfact,maybemorecomplexasdistributors,suppliersandcustomersarespreadacrosstheglobeintoday’stechnologicallyconnectedworld.

Standardisationhasbeenathemeinrecentyears,andtheconvergenceoftoday’sEDIandXML-basedcorporatemessagingstandardswithSWIFTnetwillbekeytoconnectingthefullvalue-chain.However,thequestionremains:howfastwillthesenewstandardsbeadoptedandwillallfinancialinstitutionssupportthem?MarketplaceinitiativessuchasTWIST(TransactionWorkflowInnovationStandardsTeam)shouldhelptakestraightthroughprocessing(STP)toanewlevelforthecorporatetreasuryintheyearstocome;thequestionistimingandrateofadoption.

BeyondtransactionprocessingManycompaniesareseekingtomaximisethereturnfromtheinvestmentsmadeinavarietyof3rdpartytechnologyplatforms.Citigroupisworkinghand-in-handwithmanyofthesetechnologysuppliers–anumberofwhomareCitigroup’sclientsthatareusingtransactionservicessolutionstogainefficienciesthemselves--toensurethatCitigroup’stransactionbankingtechnologyandtreasurytechnologyseamlesslyintegratetomeettheneedsofourjointclients.


Strategicpartnershipswill,increasingly,characterisecorporaterelationshipswithkeytransactionbankingprovidersintheyearstocome.Whereproprietarysystemswereoncebuiltin-house,andtreasurymanagementcapabilitiesaremorerecentlyboughtfrommarket-leadingproviderssuchasCitigroup.PPGIndustries’treasuryoutsourcingpartnershipwithCitigroupillustratesthistrend.

Case Study : PPG Industries is a global supplier of coatings, glass, fibreglass and chemicals. Headquartered in Pittsburgh, Pennsylvania, they have approximately 120 production facilities worldwide. For the treasury team in Pittsburgh, funding the business as cost effectively as possible is a continuing objective. In Europe, PPG sought to take advantage of the introduction of the Euro to streamline cash management and centralise its European treasury operations. At the same time, it wanted to avoid the need to hire full-time, dedicated treasury staff in Europe. Instead, PPG Industries outsourced its European treasury operation to Citigroup. “The interest benefits we achieve through this and other programmes are much higher than any resource savings,” said Alex Etherson, manager of European finance and global foreign exchange in Pittsburgh. As well as cash concentration, netting of account balances and investment, Citigroup also manages other activities for PPG in Europe including a European commercial paper programme and foreign exchange transactions totalling $2.5 billion. “We are financing our European operations much more effectively now than we could do either from the individual countries or from here in Pittsburgh,” Etherson said. “Communication with Citigroup has also been good so PPG’s in-house staff have not felt remote from day-to-day treasury activity.”

Deliveringsupplychainoptimisation“Supplychainmanagementisoneofthemosteffectivewaysofachievingorganisationalagility,”saysMichaelGuralnick.“Businessesneedtofocusonsupplychainefficiencytoreducecost,stimulatesales,gainmarketshareandmanagerisk.Anarrayofcash&treasurymanagementservicescoupledwithleadingedgetradefinancesolutionscomponentsdirectlysupportCitigroup’sclients’supplychainobjectives.Citigroup’sinnovationeffortswithinthetransactionservicesarenaarefocusedondeliveringforourclientsanintegrated,bundledsupplychainsolutionlinkingbusinessandcommercialflowstohelpthemcompletetheircommercialworld.”

AccordingtoCitigroup,researchoverthepast�0yearsindicatesadirectlinkbetweeneffectivesupplychainmanagementandcorporateoperatingresults.Majorcorporationsidentifiedashavingbest-in-classsupplychain

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Inthisregard,Citigroupisrollingoutnewgenerationtransactionservicestechnologysolutionsfoundedonknowledge-basedtoolsandanalytics.NewtoolssuchasCitigroup’sTreasuryVisionprovidecorporatetreasurersandtheirteamswithgreatervisibility,transparencyandcontrolbyprovidingthemwiththeabilitytoanalyseandpredictcashmovementsandliquiditypositionsmorequicklyandefficiently.Citigrouphasbeenimplementingthesenewknowledge-basedtoolswithclientstoassisttheminexecutinga‘followthesun’liquiditymanagementstrategywherebyliquidityismovedfromregiontoregionthroughoutthedaytooptimisereturnsonexcesscash.

Theremitoftoday’s2�stcenturytreasuryorganisationgoeswellbeyondtraditionalbalancesheetandcashmanagementactivities.Increasingly,corporatesarelookingathowtheycansupportmoreextensivein-housebankingasanothermeansofoptimisingefficiency.Citigrouphasbeenattheforefrontofhelpingclientssetupandrunregionalandglobalsharedservicecentres,andwithCitigroup’sglobalfootprint,leadingedgetechnologyplatforms,anddepthofexpertisegainedthroughmanydecadesofservingclients,wearewell-positionedtoassistourclientsinmeetingtheircriticalstrategicdeliverables.

Case Study : Freescale Semiconductor is a global manufacturer of semiconductors with over 22,000 employees and operations through 39 entities worldwide. They established shared service centres (SSCs) in China, Europe and the US in 2000 to improve its productivity and service quality. The SSC in Tianjin, China was launched with 14 staff, initially to provide inventory and cost accounting services. Accounts payable and procurement were added following the implementation of SAP in 2001. Following the divestment from Motorola in 2004, Freescale appointed Citigroup as their banking partner to support a growing range of financial functions handled by the Tianjin SSC. Freescale implemented Citigroup’s CFS (Citibank File Services) gateway in 2004, whereby services including tax payments, payroll, along with non-financial payment requirements were transferred from Motorola to the Tianjin SSC. Freescale further implemented a global system for travel, netting, foreign and local currency payments and management reporting in 2005. With staffing levels now standing at 57, plans are in place to further expand the shared service functions for finance and non-financial activities. “It’s extremely successful. But we haven’t yet leveraged enough on that success and moved forward fast enough,” says Alan Campbell, CFO for Freescale. “The success of this Centre of Excellence feeds itself.”

managementhaveconsistentlyshownmarketcapitalgrowthofbetween�0%and20%abovetheirindustrypeergroup.

ConnectingcorporateclientsbothonthebuyandsellsideisattheheartofCitigroup’ssupplychainoptimisationstrategy.Akeyobjectiveistointegrateexistingandnewtrade-basedsolutionsandservicesintothewaythatcorporatesacquire,move,monitorandpayforgoodsinthesupplychain.“Successdeploymentoffinancialsupplychainsolutionsrequiresclosecoordinationwithmultipleclientstakeholdersincludingprocurement,logistics,finance,accounting,riskandtreasurywithfinancialservicespartnerstocompletetheircommercialcycle,”saysGuralnick.“Inaddressingthefinancialsupplychainobjectivesofitsclients,Citigroupsegmentsthegoalsofbothimportersandexportersrespectively,deliveringsolutionsthatsupportboth.”

Fromsecuringtradeflowstomitigatingcounterpartyriskandofferingreceivables-basedfinance,thesebuildingblocksoftradefinanceactivities,oncecoordinatedandintegratedacrossthefinancialandcommercialsupplychain,drivesvaluecreationintermsofriskmitigationandcostefficiencyacrossthepurchasingcycle.

CustomerserviceisthestrategiccompetitivedifferentiatorInarapidlyevolvingmarketplace,companieswillseekoutpartnersthatunderstandtheirgoals,shareasimilaroperationalfootprint,anddemonstrateprovenexpertisewiththeirsolutionset.Understandingtheglobalcompetitivepressuresofourclients,workingtogethertodesignandstructuresolutionstofacilitatetheircommercialactivities,anddeliveringbestinclassservice,lieattheheartofCitigroup’sconsultativeapproachtoensuringclientsatisfaction.

“Wearechangingthewaywemanageourclientrelationshipstomorecloselymatchthewaythattheydobusiness.Inotherwords,wearelookingacrossthespectrumofcashandliquiditytooffersolutionsthatencompassriskandtrade,andalsoofferapartnershipapproachthatallowsourclientstoachievetheirobjectiveslocally,regionallyandultimately,globally,”saysMichaelGuralnick.

Deliveringthefuture,todayOverthelast�5years,wehaveseenadramaticevolutionincashandtreasurymanagement,andmuchofthechangeisdrivenbyadvancementsintechnologiesthatallowtreasuryprofessionalstodotheirjobsfaster,moreefficiently,andmoreeffectivelywithmoresecurityandcontrol.Today,corporatesarelookingforpartnerssuchasCitigroupwhohavethebreadthofgeographicalnetwork,commitmenttotechnologyinvestmentand,mostimportantly,skilledtransactionservicesprofessionals,tohelpthemdesigntherightmodelfortomorrow,today.


RISK

seemedsimple–lookatthefuturecurrencymixofthepayablesandreceivablesandmatchtheliabilitiesofthecompanytothesefutureflows.Infact,youcouldevenchooselowerinterestcurrencieswhichwerehighlycorrelatedtothesetradeflows,saySwissfranctoDeutschemark/Frenchfrancflowsandthusreduceborrowingcosts.Iwasblissfullyunhinderedbytheaccountingoftransactions/debt,releaseofresultstoincome,effectivenesstests

Riskybusiness

It’s now a little over 15 years when I started out my working life in an American investment bank. I remember back to my first year. I learned the jargon of the trade – the day counts, compounding frequencies, how swaps, forwards and options were priced and risk managed. Having spent the previous seven years studying pure mathematics and statistics, it was light relief to find that the Nobel Prize award-winning Black & Scholes model was actually a solution to the heat equation!

Aroundthistime,anotherinvestmentbankrananadvertisingcampaignshowingamanswimmingtowhatappearedtobeadesertisland.Helookedrelievedthatafterhislongswimhehadreachedthesafetyofdryland.Hecouldnotseethattheislandwasinfactpartofawhale.Themoralofthepicturewasthatthebankmayhaveadifferenttakeonriskandseeasituationdifferently.Ironicallyenough,acoupleofyearslater,thebankitself,wastakenoverafterariskmanagementfailureonitsownpart.Themoralofthestorytome,eventoday,isthatriskisintheeyeofthebeholder.Theanswertowhetherafixedorfloatingratemortgagehasmoreriskwillprobablydependontheliquidityoftheborrower.

Returningtomybankingdays,Iwaseventuallyallowedtomeetclients.Itall

Whatisriskytooneorganisation,isgoodbusinesspracticetoanother.DrMarkKirkland,GlobalHeadofFinancialServicesatPhilipsInternationalBV,revealshisexperiencesinenterpriseriskmanagement.

andchangesinthefairvalueandnotanaccrualorworsestillcompletelyignoremarketmovementswhenmeasuringandreportingthevalueoffinancialinstruments.The‘desertisland’bankwasactuallyhintingthat(forthem)largeopportunitiesexistedwhereindividuals/companiesviewedriskandvaluedifferentlyfromthem.Atthebank,itdidnottakelongtorealisethatcustomerswhofocusedonmarktomarketweremuchlesslikelytodoprofitabletrades

“The moral of the story to me, even today, is that risk is in the eye of the beholder. The answer to whether a fixed or floating

rate mortgage has more risk will probably depend on the liquidity of the borrower.”

andfacingaCFO,whointurnhadtofaceequityanalystswithdetailedexplanationsofanylargeP&Lswings–yes,thosewerethedays!Thesedays,alotolderandalittlewiser,withrenewedinsightintotheriskofamultinational,Isitontheothersideofthedesk.BrightyoungthingsflyfromLondontogivethesermonIusedtopreach.IcanseetheirfacescloudoverasIdiscussthevagariesofIAS39andFAS�33.

Ofcourse,notalltheseaccountingrulesarebad,infact,inmyopiniontheyarenotbadatall.Atleast,allpreparersandusers(inthemost)focusonthemarktomarket

thanthosewhorecognisedallassetsatparregardlessofmarketmoves.Betterstill,addtotheequationafrustratedtraderandyouhadthemakingsofthe‘riskjunkie’.Eventually,mostofthesecharactersareforcedtoresigntooblivion(occasionallyjail),leavingbehindlargenegativeresultsandshockedshareholders.In�993,windfallprofitsweremadebymanyoftheseriskjunkies(andtheirhelpfulbanks).Theplaysbecamebolderandbolderuntilthetreasurydepartmentsofsomecorporateswereeffectivelyrunningcasinos.Theinabilitytoindependentlypricetransactionsdid


RISKnotseemtoholdanyoneback.Knockouts,lookbacks,digitals,rangefloatersandevenpoweroptionsweredeemedtobethecuttingedgeofriskmanagementtechniques.Buoyedbygoodresults,controllersandCFOsturnedablindeyeandallowedtheirtreasuriesmorelatitude.Veryfewareriskadverseinthefaceofeasyprofits!

DerivativescomeunderfireIn�994,asratesstartedtorise,theunwindingofleveragewassofastthatmanywereleftwithpositionsthatweredeeplyunderwater.Theimmediatereactionfrommanywasthatderivativeswerethesourceofallevil.Manythoughtthatderivativesshouldbeforbidden,ortheOTCmarketregulated.Istillbelievethatderivativesarelikeaspirins:oneortwotakenattherighttimecanbeverygoodforyou–swallowthebottleanditmaybefatal.Intheend,commonsensereignedsupremeandchangestohowcorporateswereobligedtoaccountforderivativeswereintroduced.TherulesIAS39/FAS�33,asweallknow,arefarfromperfect,butIbelieveourshareholdershaveabetterhandleonthevalueandsensitivityofthederivativesacompanyisusingandwhythecompanyisusingtheseinstruments.

Thesecondfalloutfromtheratesdebacleof�994,thecoppercrisisof�995andthetequilacrisisof�996wasthatmostcorporatesdecidedtreasuryshouldbeacost(ornowadaysvalue-added)centreandnotaprofitcentreinitsownright.Ahandfuloftreasuriestodayknowinglytaketradingpositions.Therearethreeimmediateoutcomesfromthisdecisionandindeedthecrisesthemselves.

First,thetreasuryshouldhedgetodissipatefinancialrisk.Whatdoeshedgingmean?WhenIfirstmetmycurrentboss,heaskedmeifinmyopinionprotectingcashfloworP&Lwasmoreimportant.Afterspendingthepreviousnineyearswithaninvestmentbank,Iwasadeptatpoliticalanswers.IansweredthatoneshouldprotectcashbutkeeptheP&Limpactinmind.Ittookmeoneyearofworkinginacorporatetounderstandthequestionfully.Inhindsightitwasaprettygoodanswer.

Thoseofyouwhoworkinhighlyleveragedcompaniesorrunsmallbusinesseswillunderstandthatcashisking.Ifyoudon’thavethecash,yougooutofbusinessregardlessofyourperfecthedgingofincomeorequity.Mostofuswillbeawarethatmeasurementofprofitorlosscanchangeovertime.Havingtakenawrite-

Sarbanes-Oxley:aquestionofcomplianceTheSarbanes-OxleyActof2002representsthemostsweepingoverhauloftheUSfederalsecuritieslawsinceGlass-Steagallseparatedinvestmentandcommercialbankingactivitiesin�933.WhileGlass-Steagallcameinthewakeofthe�929stockmarketcrash–blamedontoomuchrisk-takingbycommercialbankswithdepositors’moneyinthestockmarkets–Sarbanes-OxleyisareactiontocorporatescandalslikeEnronandWorldComandanattempttorestoreinvestorconfidence.ItincludesalawmakingCEOsandCFOscriminallyliableforfraudulentfinancialstatements.

However,corporates,largeandsmall,arestrugglingwiththehugecostsandlackofguidanceontheadditionalaccountabilityandinternalchangesrequired.Affected,too,arenon-UScompaniesfilingintheUS,witheitherdebtorcapitallistedonaUSstockexchange.MostunpopularisSection404,requiringallSEC-registeredcompaniestoincludeintheirannualreportastatementbymanagementandtheexternalauditorsontheeffectivenessofinternalcontrolsoverfinancialreporting.

ACFOmagazinesurveyearlythisyearshowedjusthowmuchpaincorporatesareincurring.Financemanagersatcompanieswithannualrevenuesof$500mnormoreindicatedSarbOxcompliancehadcostonaverageover2%oftheiryearlyearnings.Whilerespondentsatbusinesseswithsalesofunder$500mnsaiditaddedanextra4.5%eachyear.Theysaidmuchofitgoesonincreasedmanpower–likeextrainternalauditorsandaccountants.

Thesurveyshoweditistakingmuchlongerforauditorstosignoffaccountsastheytestandretestinternalcontrolstoensuretheirsign-offsarebeyondquestion.Manyfinanceexecutivesquestionthevalueofidentifyingandmonitoringhundreds,ifnotthousands,ofinternalcontrols.Evenregulatorshavecommentedonthemassivedocumentation.Amongthecomplaintsoffirmsofsomeauditors:theyareexpendingtoomucheffortonlower-riskareasandignoringhigher-riskones;theyarenottakingintoaccountriskprofilesofindividualfirms;ortheyarefocusingonformofdocumentationratherthanthesubstanceofthematter.

“WhySarbanes-OxleyhasprovedsocostlyistheconservativewayexternalauditfirmshaveinterpretedAuditingStandardNo2.Thiscautiousapproachhasresultedinmanagementdocumentingandtestingadditionalcontrolsoverfinancialreportinginordertosatisfytheauditfirmsrequirementsratherthantocomplywiththelegislation,”saysTonyCorkett,GroupFinancialControlsManageratBGGroupplc,theFTSE20oilandgascompanywith£5.6bnofglobalrevenuesin2005.BGGroupplchasasecondarylistingontheNYSEandisclassifiedasalargeforeignprivateissuerwithafirstcompliancedeadlineof2006.ThecompanystarteditsSarbOxprogrammein2004,documented2000controlsacrosstheorganisation,andhasperformedmanagementtestingofthekeycontrolstodemonstratetheyworkeffectively.

Therehavebeenbenefits.Manycompanieshavehadtorethinkhowtheyhandlesomeoftheirbusinessprocesses,andareputtinginplacenewsystemsandcontrols,leadingtoincreasedefficiencyand,ultimately,costsavings.CorkettaddsthatatBGGroup“benefitshavecomefromexaminingfinancialreportingrisksindetailandbroadeningtheresponsibilityforfinancialcontrolownershipacrossthegroup.”

WhileAndyMorris,PartneratDeloitteinLondonsays:“Thecostshavedrawnalotofcriticism,butmanyofourclientshavebenefitedfromimprovedcontrolsandexecutiveunderstandingofhowfinancialreportingactuallytakesplacewithintheirorganisation.Thosecompaniesthathaveincurredthemostcostshavenotimplementedarisk-basedtop/downapproach.”

So,hastheActachievedwhatitwassetuptodo?“WehaveyettoseeenoughtestcasesofcompanyfailurespostimplementationtoknowwhetherSarbOxhasdriventhebenefitstheUSgovernmentwaslookingfor,”commentsMorris.

Also,insomeways,theActmaybedetrimentaltoriskmanagement.Manycorporatesmissthetypeofcounselauditorsprovidedinthepast.Sections�03and20�oftheActlimittheservicesanexternalauditorcannowprovide,inparttoeliminatetheclosenessthatledtoproblemsatEnronandWorldCom.AuditorsarenowwarytoevenofferadviceontopicsthatarenotrestrictedbySarbOx,likeM&Asandtax.

ApossiblesideeffectisthatsomecompaniesmightbechoosingtoraisefinanceinLondonandHongKongratherthanNewYork,deterredbytheonerousregulatoryrequirementsandsign-offneededbytheCEOandCFO.In2005,24ofthe25largestIPOswerelistedonexchangesoutsidetheUS.

“WhetherthedecreaseinIPOactivityofforeigncompaniesintheUSisdirectlyattributabletoSection404isdebatable.Rather,Ithinkitisduetoacombinationoffactorsincludingthegrowingsophisticationandliquidityofnon-USmarketsthatareprovidingmoreattractiveinvestmentalternativesthaninthepast,increasedregulationandthelitigationenvironmentintheUS,”saysJimLee,ChiefAuditoratPricewaterhouseCoopers.

TheSEChasbeenunderextremepressurefromcompaniesandCongresstoreformtherules.Itagreedtoextenditsdeadlineby�2monthsforcompliancebyforeignandsmallercompanies.Whileithasissuedaconceptrelease–asetof35questionsforpubliccomment–tohelpitframefutureguidance,withthedeadlineforsubmission�8September.“TheSECislookingtoputinplaceguidanceforassessinginternalcontrolsthatisspecificallytailoredforcorporatemanagement,whichwebelievewillmakeapositivedifferenceontheeffectivenessandefficiencyoftheprocess.Previouslymanagementlookedtotheguidanceforauditors,asnothingelsewasavailable,”saysLee.

And,mosttellingly,thePublicCompanyAccountingOversightBoard(PCAOB),setupunderSarbOxtoregulatetheaccountingindustryandoverseenbytheSEC,isrevisingitsauditingstandards.Itistryingtobecomelessrules-andmoreprinciple-based.TheSEChasalsoproposedarulegivingaone-yeartransitionperiodoninternalcontrolreportingrequirementsforcompaniesdoinganIPOintheUS.

TheUSChamberofCommerce,whichrepresentsaround3millionUScompanies,wrotetotheSECandPCAOBinAugustaskingforthemtofurtherdelaycompliancefornon-acceleratedfilersandforeignissuersuntilthenewstandardshavebeenadoptedandtestedwithafullyear’sworthofexperienceforlargerissuers.Initsletteritsaiditwouldbeinappropriatetopushthesecompaniesintoimplementationuntiltheyweresuretheprocesshasbeensubstantiallyimproved.VH


RISK

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downinincomedoesnotnecessarilymeanyouhavethecash!Hedginginmyopinionshouldalwaysfocusonphysicalflowsofcash.Thehedgesofnon-cashflowtranslationitemswill,inturn,themselveshaveacashflowimpact!

Relatedtothisissuetherehasbeenageneraltrendtowardssimplerinstrumentsthatclosermatchtheunderlyingexposures.Ibelieveatoolkitcomprisedofsomeswaps,forwards,boughtoptions,interestrateswapsandbasisswapsprobablyservesmostcorporatetreasurersratherwell.Valuationissimplerandsignificantlymoretransparent.

Second,reportingofriskbothinternallyandtoshareholdershasbecomemuchclearer.Therehasbeenatrendtosimplifyriskmanagementdowntoonefigure–theso-calledVARmetric.Thisonefigureappearstobethenirvanaofriskmanagement,representingriskinjustonefigure.I,however,havemydoubts.Tomymind,mostoftheassumptionsthatnormality,historybeingagoodpredictorofthefutureandrelationshipsbetweenfinancialindices(currenciesandinterestratesforexample)donotchangeovertimeareflawed.Ingeneral,whenthemarketstartstocrash–newrelationshipsareformed–currencymarkets,corporatebonds,equitymarkets,commoditymarketscanallmoveintandem.Thus,duringriskytimes,VARdoesnotappeartobeaverygoodpredictorofrisk.SoisVARausefulmeasure?Iliketokeepriskreportingsimple–sensitivitiesofthe�0mainrisksofacompanycanbeeasilyunderstoodbytheboardandshareholdersalikewithouttheneedofexplaining(oromitting)complexcorrelationassumptions.

RationalisationThefinalimpactisthatonceyouareanon-profitcentre,therewillbeadrivetoperformoperationaltreasurytaskswithfewerpeopleandlowercosts.TheriseoftheInternethasledtomoreefficientcommunication.Combinedwithtradingplatforms,automatedtrade-checkingtoolsandCLS,centraliseddealingroomsandbackoffice,evenquitecomplexcompaniescanoperatefromonelocationwithahandfulofstaff.Liftingofcapitalcontrolsalsoallowsforcentralisationofliquiditymanagementprocesses,fromestablishingthegroup’sliquidityandplacingthiscentrallyatoptimalrates.ManycompanieshavealsousedtheInternettooptimisecommercialpayments,againeliminatinginefficientpaymentmethodsandestablishingstandardisedlow-costpaymentmethodologies.

Therecentpushforcentralisationoftreasuryfunctionsisintheendadirect

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CrudeOilPrices(US$/barrel)

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Top�0LowestRisk Country

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Top5HighestRisk Country

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�0. Ireland


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RISKresultofthisfocusoncostofexecutionoftreasurytransactions.Documentationrequirements,Sarbanes-Oxleyandotherinternalcontrolrequirementshaveencouragedstandardisation,which,inturn,lendsitselftocentralisation.Thisisthepresent,sowhatofthefuture?

Ibelievetreasurycanachievefurthereconomiesforthegroupbyintegratingfurtherwiththebusinesses.GrabbingdatadirectlyfromERPsystemseliminatesthetime-consumingprocessesofreportingrisks,largeinflowsoroutflowstotreasury.

Wemustmovefromabackroomprocessingunittoreallyaddingvaluetoourbusinesses.

Therearemanyopportunitiesinourtraditionalrealmofinfluence.Doesyourforeignexchangehedgingreallyprotecteconomicexposure?Doyourbusinesseshavetimetoadapttoanewforeignexchangerate?Doyourbusinessesdestroyvaluetogeneratecash?Treasurycouldhelptoestablishoptimalworkingcapital.

Commercialcreditriskcanbemeasuredandmanagedforgrowthratherthanleavingthetasktobusinesspeoplewhomaynothaveafullgrasponthetimevalueofmoneyortherelativecreditworthinessofcustomersorsuppliers.Investmentbanksarebusyslicinganddicingloanportfoliostoproduceproductsfordifferentinvestorclasses.Corporateshavelargeportfoliosoftradereceivables.Thereseemstobeanuntappedappetitetotakesomeofourunwantedriskaway.Insidethecompany,we,intreasury,aresurely,thebestqualifiedinacorporatetounderstandtheserisksandpursueopportunitiestogrowprofitablesaleswhileeliminatingrisk.

Inmyopinion,thereisarolefortreasuryevenbeyondthetraditionalscope.Treasurycanteachtherestofthecorporatelessonsonenterpriseriskmanagement–identificationofriskandhowriskcanbereported.

Insummarythen,Iwouldliketoleaveyouwithfivethoughts:

�) Cashisking–hedgecashflow.

2) Keeptheinstrumentssimple–makesureyoucanpricethem.

3) Beawareofthefairvalueofthefinancialinstrument(yourbondsforexample)anddonotenterintotransactionsdrivenpurelybyaccountingvalues.

4) Keepreportingsimple,sothatyoucanexplaintothelaymanwhatyouaretryingtoachieve.

5) Seekoutnewopportunitieswheremanagingriskcandriveyourbusinessforwardandbeacatalysttogrowth.n


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EverytimeI’monaplaneandit’stakingoff,IalwaysthinkbacktothefirsttimeIevertravelledabroadforbusiness.Itwas�5yearsago–in2006–ayearafterstartingmynewjobastreasuryassistant.

datatocashflowsusingamodelfromasubsidiarywithasimilarbusinessmodelandaddittothetotalcompanycashflowforecastfromthismorning.Asthetreasurysystemcrunchesthenumbers,Ithinkbacktohowlongthisprocessusedtotake.Weeasilyspentweeksworkingaroundtheclockjusttocollectandconsolidatethenumbers,leavingverylittletimetoanalyseandstructurethefinancing.Evenifthewholeteamhadhelped,itwouldhavebeenfarlessaccuratethanwhatIcandotoday.EvenwhenI’monaplane!

Oncethemodelforthefinancingisready,Iaskthetreasurysystemtosendthedataovertothreeinvestmentbanksandaddanoteaskingforadviceonalternativefundingoptions,includingafulltermsheetwithpricing.Itagtherequest‘veryurgent’–thatwillmakethebankersworkfortheirheftyfees.Ileanbackinmychairandfallasleep.

LandingsoonandIquicklyreviewthepresentationI’vebeenplanningforthesubsidiaryI’menroutetomeet.WhilstI’vebeensleeping,allthreebankshaverespondedwiththeirstructuringadviceforfundingtheacquisition.Thesecondoneisparticularlyclever,attractivelypricedandsolvesourdowngradingconcerns,soIdoubleclickonthetermsheetfileandhavethetreasurysystemautomaticallyimporttheinstrumentdefinition,createasimulatedtransactionandpriceit.Ispendtherestoftheflightanalysingvariousscenariostoreallystresstestallaspectsoftheconsolidatednewcompany,includingthenewfunding.Itlooksreallygood,andIsendoffashortsummarytomyCEOwiththeproposedtransaction.

ThelastthingIneedtodo,unavoidablyinthecabtothemeeting,isensureweopenanewbankaccountinSouthAfricatobereadytomakepayment.Iapprovetheinternalrequestfromthecashmanagerandletthetreasurysystemsendtherequesttothebank.Twominuteslater,thenewaccountnumberflashesuponmybankaccountmonitor,andIwatchastheaccountregistersinourtreasurysystem.

Westillmanage500+accountsacross�0banksglobally,butnowwedoitfromonesinglescreenandwecontrolthesignatoryrightsofallaccountsinrealtime.Itcertainlysavestimewhenmanagingongoingstaffchanges.Afterapproval,thetreasurysystemcommunicatesdirectlywithallbanksandupdatesautomaticallyinrealtimetheapprovedsignatories.IquietlychuckleasIremembertheolddays,whenthatlittlejobcouldtakeweeksincertainbanks,createdahugepapertrailandinvolvedmanualentryinmultiplesystems.

BeforeIpowerdownthemobile’sbrowser,IhaveaquicklookatthepossibilitiestohedgetheFXriskoftheacquisitionusingacompoundoption.Iletthetreasurysystemsendoutanorderrequesttotheelectronicexchangesandbanksandwatchthescreenfillupwithcompetitivequotes.Idoubleclicktoacceptthequoteandletthesystemautomaticallyupdatetheinstrumentset-upandinsertthetransaction.

AsIsettlebackinmyseatandplugmyheadphonesintothemobile,IreflectonwhatIjustachievedonmytrip.In2006,itwouldhavetakenweeksoflabour-intensivework,buttodayitisreducedtohoursthankstoefficienttechnologyandclearmarketstandards.

Now,ifonlythetreasurysystemcouldupdatemyMP9libraryandfindmeagoodrestaurantforthisevening,itwouldbeideal…Ohwell,nooneisperfect.

Backthen,itwasarelieftogoonabusinesstrip,leavingtheothercolleaguestodoallthetediousmanualwork–callingupbanks,loggingintobankstations,sendingfaxesandspendingdayscrunchingnumbersburiedinhundredsofspreadsheetstodointernalandmanagementreportingintime.ButnomatterhowhardIwasworking,Iwasenjoyingmychosencareer.Havinggraduatedfromuniversityanddecidingtogointofinance,Iwaslookingforwardtomyfirstproperbusinesstripasafully-fledgedmemberofacorporatetreasuryteam.

Asmyplanelefttherunwayallthoseyearsago,Irememberwonderingwhatlifewouldbelikeinthefuture.Forastart,wouldIstillbeintreasury?Wouldalltheworkstillbesomanual?WouldIevergettothetopandbecomethetreasurer?Woulditstilltakeweekstoaddanewsignatorytoourbankaccounts?

So,hereIam,�5yearslater,onaplanetoseeasubsidiarytotalktotheirmanagementabouttheirbusiness,workonrefiningthemodelfortheirfuturecapitalrequirementsanddiscusshowwecouldbundlemoreaddedvaluefinancialservicesintotheirproductsandservices.Mytrainofthoughtissuddenlyinterruptedbythebleepingofmymobile,soIslipinmyearpiece.

It’sacallfromanewsalesmanagerfrommycompany.He’skeentoknowwhetheraninvoicefor€5mnhasbeenpaidbythecustomer.Hewantstosignaneworder,butthecreditlineisexhausted.Hesayshewantstoknowifthecustomerreallypaidtheinvoice�0minutesago’.

Whyishecallingme?Heshouldknoweverythingisupdatedinrealtimeinoursystems.Idon’tevenbothertolookatmymobile’sscreentocheckourtreasurysystem,asIalreadyknowtheanswer.Instead,Ijustreassurehimthathecancontinuetolookathisonlinedashboardforthepaymenttoarriveandthatheshouldinformthecustomerthatthe“wepaiditviaourbankyesterday”excuseisnotworkingwithourcompany.

IdecidetotryandgetsomesleepasthemeetingswillcommenceassoonasIarrive.Nosuchluck–myphonebleepsagain,andthistimeit’sourCEO.Havingbeenpromotedtoheadupthecompanyfromherpreviouspositionastreasurer,shewantstoaccessSAR�5bnbytheendofnextweekforapossibleacquisitionofoneofourcompetitorsinCapeTown.Theboardwouldprefertopaycasheventhoughourcreditlinesarestretchedafteranacquisitionlastquarter.Usingoursharestobuythecompanywouldhurttheearningspershare,sotheCEOhasruledthatoutandIneedtofindanothersolution.Thisdecisionisnotriskfreeasitcouldendupwithadowngradeofourcreditrating.She’skeentogetmyadviceonthematter,andsendsmesomefilesforinstantdownloadthatwillgivemebackgroundinformationonthetargetcompany.

Iaskforinformationonthefuturecashflowforthetargetcompany,andtheCEOsaysshewillgettheCFOtoforwardmetheestimatesonfutureinvestmentsneededinthenewcompanyandtherevenueandcostforecasts.She’slookingforfundingalternativestopresenttotheboard,soIneedtogetintouchwiththebanksrightawayforsomestructuringideasandviablefundingalternatives.

Asmyplanebreaksthesoundbarrier,mymobilepingswithanalert.It’sanemailfromtheCFO,whohasbeenworkingonpreparingdataonthetargetcompanyandhassentovertheforecastedinvestmentandtherevenuesandcostnumbers.Iconverttheaccounting

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“Thesinglemostimportantissuefortreasurersinthecomingdecadewillbethefurtherdevelopmentoftheexistingin-housesolutionsofcustomersintheinternaltreasury.Theywillneedtotargetcollectionofrisksincludingcommodities,same-daypresentationofallcashandliquiditypositions,integrationofinternalrequirementsandbuildingupanextensiveautomatedtreasurysystemoftheinformationdelivery.”Ulrich Tiegel, Head of Sales Individual Products, Trade Finance & Transaction Services, Commerzbank

“Centralisation,automationandstandardisationwillcontinuetocharacterisethenextdecadeintreasuryandbanking.Thesetrends,drivenbytheneedtoreducecostsandincreasecontrol,willultimatelyresultinmoreefficientandstreamlinedbusinessesandbest-in-classoperations.However,embarkingonsuchprojectsrequiresupfrontinvestments(forexample,theimplementationofasingleERPglobally),whichneedbuy-infromthecorporateatthehighestlevels.Drivingthesechangesinternallyanddemonstratingtheirlong-termbenefitsversustheinvestmentsrequiredintheshortrun,wouldbeoneofthemainissuesfortreasurerstocopewithoverthenextfewyears.”Hahrokh Moinian, Head of Corporate Cash Management Sales, West Europe, Deutsche Bank

Fromthesuppliers“Inthefutureallfinancialsupplychaininformationwillneedtoberealtime.Thiswillenablecounterpartyriskmanagementofbanks,suppliers,vendors,customersandanyotherfinancingtoolsthecompanyisusing.Thereisnoreasonwhyonecannotgetareal-timeviewofalloftheseconsideringthetechnologyavailabletoday.Banks–throughpressurefromtheircustomers–arenowrealisingtheneedtomovefromthecurrentstatementfeedofonceaday(overnight)andprovidetheabilityforreal-timestatusupdates.”James Pollock, Regional Sales Manager of SunGard AvantGard

Fromthebanks“Riskmanagementwillbethebigissuefortreasurers,theirCFOsandcompanyboards.Iamtalkingriskinthebroadestsense:geopolitical,operationalandcreditrisk.Wehaveallexperiencedgreatervolatilityoverthepastdecade,andbusinessresilienceandflexibilitywillbecoreskillsgoingforward.Butthismayalsobenefittreasury–byensuringmorevisibilityfortreasuryatboardlevel.”Ann Cairns, CEO of Transaction Banking at ABN AMRO

“Weanticipatethatasmorenon-corecomponentsofbusinessesbecomepartoftheshifttowardoutsourcing,managingliquiditypositionsregionallycouldbeoutsourced–transformingtreasuryintoastrategicbusinessdriverandpartnerversusatransaction-orientedsupportfunction.Wealsobelieveregulatoryenvironmentsaroundtheworldwillcontinuetohaveagreatimpactontreasury.Itwillbeimportanttostayabreastoffuturetrends.While,inthenearterm,regionalcurrencyrestrictionsmaypresentchallengesandrequirecertainliquiditystrategies,thedevelopmentofeconomicinfrastructureincountrieslikeChinaandIndiawillhaveahugeimpactonhowliquidityismanagedonaglobalbasisgoingforward.”Timothy Laney, Global Corporate Sales Executive for Bank of America, Global Treasury Services.

“Thedirectimpactthetreasurerhas,orcanhave,onthefirm’sP&Lisonlypartiallyunderstood.Firmsdounderstandthathardwonefficiencygainsonthefactoryfloorcanpaleincomparisonwithrelativelyquickwinsinmanagingcurrencyriskandliquiditymoreeffectively.Themostimportantissueforthetreasureristocontinueonthepathofbeingarecognisedcommercialactorinthefirm,continuallyseekingnewwaysacrossthefinancialsupplychaintounlockvalueanddeliverefficiencies.”Naveed Sultan, Head of Cash Management, EMEA, Citigroup

“Themovetowardsfullfairvalueaccounting–derivatives,financialinstruments,leasing,debtandpensions–willmeanthatthetreasurerwillhavetobecomeanexpertinfairvalueaccountingandinmanagingtheramificationstotheP&L.”Jeff Wallace, Managing Partner, Greenwich Treasury Advisors

“Inmostcompaniestreasurersareexpandingintonewresponsibilitiesforbusinessefficiencyandmoreriskmanagement,butwearestartingtoseetheendofwhatcorporatetreasurerswilleverbeinvolvedin.Itisbecomingalimiteddiscipline.JustastheTreasuryManagementAssociationbecametheAssociationofFinanceProfessionalstoexpand,corporatetreasurerswillhavetodothat.ButthisistheCFO’sjob,andsoitmaynothappen.”Jack Large, Partner, J&W Associates

“Treasurerswillneedtofocusincreasinglyondeliveringtheserviceswhichtheunderlyingbusinessneedsinordertoachieveitsstrategicobjectives,andondemonstrating/articulatingthevalueofthoseservices.Thiswillincludesupportingtheglobalisationofbusinessandthedramaticgrowthintheworld’snewereconomies.Thebiggestimpactontreasuryinthenext�5yearswillbeglobalisationandtheshiftofeconomicpowertonewgeographies.”Sebastian di Paola, Partner, PricewaterhouseCoopers

“Lookingaheadtothecomingdecade,everythingpointstocontinuedautomation,streamliningandglobalisation.Infact,Ithinkwe’vepassedtheinflectionpointwherewhat’slefttobedoneisfarlessthanwhat’salreadybeenaccomplished.Continuingbankconsolidation(especiallyinEurope),SEPA,continuedERProlloutsbythecorporates,growthofon-linetrading,deregulation(e.g.,inChina)allofthiswillleadtoatreasuryenvironmentthatapproachesfull,end-to-endautomation.”Stephen Baird, Principal, Treasury Strategies

OPINIONS

Weaskedexpertsinthebusinesstotakeafewminutestoponderthechangingroleofthetreasurer,areasinwhichheorsheshouldfocusandwhatthenextgenerationoftreasurywillbringtothebusinesstableinthecomingyears.

Talkingheads


“Technologywillmakethetreasuryfunctionmorestreamlinedandtakeovermostback-officefunctions.Standardsettingssuchasbusinesspartners,dealinglimitsandbankaccountswillbecontrolledbyhumansinthebeginning,butonceitishasbeensetup,onlythesystemwillcontrolwhetherthedealerisactingwithinlimits.Dealswillbedoneonline,andconfirmationswillbe�00%automated;payments–whethertradeortreasury–canonlybemadetoapprovedaccountsandonlywithinpredefinedlimits.Theywillbepaidautomaticallybythesystemwhentheyaredue,sotherewillbenoneedtohavemanybackofficestaff–ifany.Anyapprovalhastobepre-trade,notpost-trade.Onlyad-hocpaymentsneedtobeapprovedbymorethanoneperson.Thebackofficetaskshavebeenautomated.Thesystemistheextrasetofeyes.Thiswillalsofreeuptreasurypersonneltoconcentrateonmorevalue-addedwork.”Joergen Jensen, Head of Product Management at Trema

Fromthemedia“Thereisonethingaboveallelsethisgenerationoftreasurersmustaddress–thequestionofcorporategovernance.ThedismalrollcallsinceBaringsofcorporatescandalsanddisastersonbothsidesoftheAtlantic–Enron,Parmalat,WorldCometal–hasmeantthatgovernancehasrisentothetopofthecorporateagenda.OfficialresponsestothesecorporatehorrorsincludetheSarbanes-OxleyActintheUS,whichholdsthosefirmsthatfilestatementstotheSECintheUSpersonallyresponsible;thiswillhavesignificantrepercussionsfortheauditingandgeneralgovernanceofEuropeanfirms.TheEU’s8thDirectiveonCompanyLaw,whichwasimplementedinJanuary2006,coverssomeofthesamegroundasSarbanes-Oxley,butappliestocompaniesregisteredinEurope.

Corporatefraudmaynotoriginateinthetreasurer’sdomain,buthehastobeeveronthewatchforit.Internalcontrolsareavitalpartofcorporategovernance,andParmalat,especially,demonstratedtheimportanceoftreasurersandCFOsindetectingpossiblefraud–moreimportanteventhaninternalauditingandaccountingiftheactualperpetratorsareCEOsandboardmembers

Anyfinanceprofessionalworthhisorhersaltshouldnotbedeceivedwhenbackedupbyadequatesystemsandprocedures.Inshort,atreasurer’slifetodayisfarmoredemanding,butalsofarmoreinterestingandpotentiallyrewarding,thanitwasadecadeago.”Robin Page, Publisher, TMI

Fromthecorporates“Theimportantissuesfortreasurersinthecomingdecade,inEurope,willbetheintroductionofSEPA(impactonsystemsandcustomerrelations)andtheincreasedinvolvementoftreasurersinthequestionofpensionfunds.Worldwide,theissueswillbethefullapplicationofIASnormsandalsoAsiangrowth.Treasurerswillbemoreinvolvedinriskmanagementingeneral(effectsofclimatechange,CO2options,energypricesvolatility)andclosertooperations,suchassalesandsuppliers(increasedfocusonworkingcapitalmanagement).”Pierre Poncet, Chairman of the European Association of Corporate Treasurers.

“WhatIwouldliketoseeinthenext�5yearsiscontinuedcollaborationbetweenthecustomerandtheirbankingpartners,andourbankingpartnersthemselvestocreatemorevalue.Let’screatemoretransparentpaymentprocessing(fixtheproblemofmanualpaymentreconciliationonceandforall)andvisibilitytoinformationtoreducefinancialandoperationalriskforthebanks,clearingsystemsandcompaniesthatusetheseservices.”Jennifer Ceran, Treasurer, eBay

“Thesinglemostimportantissuefortreasurersinthecomingdecadewillbeforthemtogetinvolvedevenearlierinthestrategicplanningoftheircompanyinordertobetteranticipatefutureneeds.”Olivier Brissaud, European Association of Corporate Treasurers Board Member and General Manager, Volkswagen Group Services SCS

“Inthecomingdecade,treasurerswillneedtomakechangestotheirtechnologytoautomateactivitiesandprovidebetteranalysisandreporting.Forthosecompaniesthathavelimited,tonotechnology,theywillneedtopurchaseasystemandimplementit.ForthosewithexistingERPsystems,theywillneedtobringinthetreasurycapabilitiesandpotentiallyupgrade.Thosewithageingtechnologywillneedtopurchasenewthird-partysystemswithbettercapabilities,ormovetotheERPplatformwheretheITinvestmenthasalreadybeenmade.

Thetreasurershouldbeinvolvedinidentifyingtreasuryissuesthattrulyaffectthebusinessintermsofimbeddedfinancialrisksinprojectsandcontractsandbeinvolvedwiththeentireworkingcapitalchain.Anarrowfocuson‘just’optimisingprocessesdoesnotbuildagreattreasuryorganisationovertime.”Torben Winther, Director and Treasury Management, A.P.Moller-Maersk

“Ithinkweareonlyhalfwaytherewithourtechnologicaladvances.Thekeyistheadoptionofnewtechnologyfromsmallercompaniesbycorporates.Banksandcorporatesneedtoseeeachotheraspartnersbecauseasinterconnectivityandtechnologyadvances,itchangestherelationshipbetweenthetwo.Forexample,thedirectivefromtheEuropeanCommissionforSEPAwouldbenefitcorporates’costbutlowerbanks’incomefrominterest.Also,inthepast,themostimportantinterconnectivitychangewastheintroductionofe-trading.Thenextbiggestshort-termchangeintermsofinterconnectivityistheopeningofSWIFTtocorporates,whichwouldenablebetterstreamliningbetweenbanksandcorporates.”Martin Bina, Treasury EMEA, Caterpillar

OPINIONS

“Weareataturningpoint,wheretreasurershavetobothbecomemoregeneral(inordertoworkmorecloselyandintelligentlywithvariousstakeholdersamongthecorporateenvironmentsuchascontrollers,accountants,taxandinsurancepeople,sales,etc),butalsotodevelopspecificexpertise(inriskmanagementforinstance).Asaconsequence,itwillpushthetreasurycommunitytodemonstrateitscapabilitytorisetothis‘schizophrenic’challenge!”Pierre Boisselier, Treasury General Manager, Finance, Arcelor Treasury SNC

“Thetreasurer’srolehaschangedandhasbecomemorestrategicinnature.Nowthetreasurerneedstohavemorebusinessandaccountingknowledgeontopoffinancialexpertise.Onebusinessareathattreasurerswillneedtofocusoninthecomingdecadewillbepensions.”Kimberley Ross, SVP Chief Treasurer and Tax Officer, Royal Ahold n

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borrowingcostsandopenupinvestmentopportunitiesthatwerepreviouslystarvedoffunding.Thewidertheaccesstocreditors,thelowerthefundingcoststoborrowershasbecome.Todayacompanydoingbusinessinonecountrybutwhosebusinessisinanothercurrencycanbetradedingloballyandhaveaccesstodebtandequitycapitalmarketsaroundtheworldaccordingtoinvestordemand.SaysAvinashPersaud,ChairmanofknowledgetransferfirmIntelligenceCapital:“ToparaphraseUKPrimeMinisterHaroldMacmillan,corporatetreasurers‘haveneverhaditsogood.’”

Globalisationmay,asonecorporatetreasurerquips,havebeena“definitenegative,inthatit’stakenawaythefunofbeingatreasurer–thebiggestsinglekilljoybeingtheintroductionoftheeuro.Intermsofcorporatefunding,though,it’sopenedupawholebunchofopportunities.”

Butwithalltheopportunitiesarisingfrombeingabletocentralisetreasuryactivities,theincreasedabilitytopoolcashacrossborders,toaccessthemostefficientmarketsandtogetawayfromthestagnantwatersofexcesscashtrappedinexoticlocations,comeunintendedcosts.Singapore-basedDamianGlendinning,VicePresidentandTreasurerofLenovo,theChinesePCmanufacturerwithannualsalesof£9,000mn,observes:“Thedownsideisthatitreducesthesourcesofdiversificationinpeopleandincreasestheconcentrationofrisk.”

As EuroFinance celebrates the 15th anniversary of its international conference on cash and treasury management in Florence, Italy, the opening day also marks the birth of the father of international corporate finance in that city.

Cosimode’Mediciwasbornon27September�389andranthelargestbankinghouseinEuropeandfundedthePapacyfromthebeautifulItaliancity.Butthepinnacle–quiteliterally–ofhislife’sachievementinfundingtookplaceoveraspanofover53metresinwidthandabout�5yearsintimewhenhesponsoredabankruptandveryhigh-riskarchitect,FilippoBrunelleschi,tocompletethecupolaofthedomeoftheCathedralChurchofSantaMariadelFiore,completedin�436.Itshowshowmuchcanbeachievedinadecadeandahalf.

AwiderconsequenceofBrunelleschi’sdomewasitsinspirationofStPaul’sCathedralinLondonandtheUSCapitolinWashington,D.C.Itchangedthefaceofarchitecture.Globalisation,diversification,privatisation,securitisation,disintermediationareallfeaturesthathavecometochangethetreasurylandscapeinthepast�5years.

Forthegeneralpublic,globalisationmayseemlockedinwiththeideaofworldtradeagreementsandthefailedDoharround,butforcorporatefundingitisadifferent–anddaily–reality.Theglobalisationofinvestmentandbusinessactivityhasincreasedcorporateaccesstocapitalandhelpedtolower

MoreregulationAnegativeconsequenceofglobalisationhas,tosomeextent,beentheinternationalisationofcorporatescandal(Enron,Parmalat,WorldCom,etc)andtheresultingchangesinregulation.Manyagreethatthelegislativeresponsetosuchscandalsmayhavebeendisproportionate.Perhapsitistooearlytotell,butSarbanes-Oxley(SarbOx)andnewerbankingregulations,particularlyBaselII,arecertainlyhavinganimpactoncorporatefunding.

JohnSculleyisaformerCEOofPepsiCoandAppleComputerandistheco-founderofActivationCapitalPartners,aLondonfirmwhichprovidescross-bordersupplychainfinancing.Hesays:“Regulations,suchasBaselII,areactuallychangingthefinancinglandscapebyhamperingnormalbankfinancingtogrowthcompanies.Asaresult,duringthepastdecadecorporatedebthastransferred,with50%tohedgefundsandothernon-bankinstitutions.”

Inaddition,theburdenofSarbOxandothernewregulationshasmadeithardforsomecompaniestoremainpublic.“Wheretheyhavepredictablecashflows,theyhavebeenluredtotheprivateside,”saysPersaud.Butheaddsanoteofcaution,“thisisnotacounter-trendtosecuritisation.Privateequityinvestorstakingthesecompaniesprivatearestilllookingforinstrumentstheycansellonlater.”

Indeed,Persaudregardssecuritisationitselftobethesinglemostimportanttrendincorporatefunding.Fifteenyearsagosecuritisationwasonlyforaselectfewoflarge,primarilyUScompanies.Sincethen,

FUNDING

Whatgoesaroundcomesaround.KatharineMortondiscussesthecyclesofcorporatefunding

Domesinthesky:�5yearsofcorporatefunding


FUNDING

Issuer NumberofTranches AssetType PrincipalAmount-Sum ofAllMarkets($mn)

SearsRoebuckEuroAccounts 1 N/A 750

CollateralisedMtgSec7PLC 3 Portfolioofmortgages 585

TMCPIMBSSeventhFinancing 1 Portfolioofmortgages 518

FifthAvenueCapitalTrust 3 N/A 500

DriveSecurities 1 Portfolioofmortgages 414

TMCPIMBS6Financing 1 Portfolioofmortgages 413

CollateralisedMtgSec8PLC 1 Portfolioofmortgages 392

MortgageFundingCorpNo.4 2 Portfolioofmortgages 345

HMCMortgageNotes8PLC 1 Portfolioofmortgages 337

TempleCourtMortgagesNo.2 2 Portfolioofmortgages 279

Issuer Numberof OriginatorName AssetType PrincipalAmount-Sum Tranches ofAllMarkets($mn)

GermanPostalPensions 3 DeutscheBundespostTelekom N/A 9,700

GracechurchCorpLoans2005-1 17 BarclaysBankPLC Cash 8,643

Smile2005SyntheticB.V. 6 ABNAMROBankNV SmBusinessLoan 8,097

GracechurchMtgFundingPLC 16 BarclaysBankPLC ResidentialMtg 7,979

Granite2005-4 17 NorthernRockPLC Non-jumbomtgloans/residmtg 6,830

GELDILUXTS2005S.A. 12 BayerischeHypo-undVereins Loans 6,623

INPS6 3 SCCIINPS Loans 5,870

SCIP2 3 Italy Realestateloan 5,598

HolmesFinancingNo9 4 AbbeyNationalPLC Residentialmtg 5,472

Granite2005-1 9 NorthernRockPLC Non-jumbomtgloan 5,391

Top�0SecuritisationDealsin2005

Top�0SecuritisationDealsin�99�



Rank IssuerName IssuerNationality Exchange TotalValue$mn

1 TelefonosdeMexicoSAdeCV–TELMEX Mexico MexicanStockExchange;NYSE;SEAQ 2,282

2 NationalPowerplc&PowerGenplc UnitedKingdom London 1,608

3 MBNACorp UnitedStates NYSE 862

4 GrupoTelevisaSAdeCV Mexico MexicanStockExchange;Portal;SEAQ 823

5 TelecomCorpofNewZealandLtd NewZealand AustralianStockExchange;NYSE–NewYork;NewZealand;SEAQ 782

6 HealthtrustInc–TheHospitalCo UnitedStates N/A 560

7 XLCapitalLtd UnitedStates NASDAQ 539

8 Owens-IllinoisInc UnitedStates NYSE 528

9 VolksfuersorgeHoldingAG Germany Berlin;Frankfurt;Hamburg 439

10 DuracellInternationalInc UnitedStates N/A 433

Top�0GlobalIPOs�99�

Source: Dealogic

Rank IssuerName IssuerNationality Exchange TotalValue$mn

1 ChinaConstructionBankCorp–CCB China HongKong 9,227

2 ElectricitedeFranceSA–EDF France Paris 9,032

3 GazdeFrance France Paris 5,465

4 ChinaShenhuaEnergyCoLtd China HongKong 3,272

5 LinkRealEstateInvestmentTrust HongKong HongKong 2,801

6 BankofCommunications China HongKong 2,161

7 PartyGamingplc Gibraltar London 1,897

8 GoodmanFielderLtd Australia AustralianStockExchange;NewZealand 1,594

9 HuntsmanCorp UnitedStates NYSE 1,593

10 PremiereAG Germany Frankfurt 1,561

Top�0GlobalIPOs2005

Source: Dealogic

thatfundingrevolutionhaswidenedacrosscountriesandcompaniesanddeepenedacrossproducts.“FifteenyearsagoaCFOofamid-sizedEuropeancorporatestillfearedthemeetingwiththebankmanager,todayit’sthemeetingwiththecreditratingsanalystshe(orhe)fears,”hesays.

Theedgesbetweenequityanddebtfinancinghavecontinuedtoblur.Europeanequityfundingintheinternationalcapitalmarketshascertainlyperkedupsincethehiatusafterthedotcombubbleburst,withthepeakof$26,7�2mninitialpublicofferingsinthesecondquarterofthisyearsecondonlytothebonanzaof$3�,970mnseeninthefourthquarterof�999,accordingtodataproviderDealogic.Moreover,thetotalmarketforIPOsinEuropehasremainedconsistentintermsofdealflowandvolumeovertheyearssincethebeginningof�994withanaverageperquarterdealsizeof$��,353mntomidAugust.

PrivateequityfundsgoonabuyingspreeMeanwhile,though,privateequityfundshaveshownwithgreatelantheirabilitytoreshapecompanieswithdebtfinancing(leveragedbuyouts)andthenbringthemtotheequitymarketwheretheyhaveaccesstoawiderrangeofinvestorsthaninthedebtmarkets,particularlyinatimeofsuchlowinterestrates.SponsoreddealsinEuropealoneoverthepastfiveyears(principallyIPOsfollowingonfromaleveragedbuyoutbyaprivateequityfund)amountedto$38,273mntotheendofQ32006accordingtoDealogic.That’snearly�7.5%oftheIPOsinthefiveyearsfrom200�todate(includingtheleanyearsof2002/3).

Poorreturnsforequityinvestorsmayyetstymietoomuchfurthergrowthinthissectorthough.

Theparalleltrendofprivateequityfundingforcorporateprojectshasitselfbeenaliberatingoneforcorporatetreasurers.Theappetitefromprivateequityfirmsisclear.Forexample,fundsraisedfromprivateequityinvestorsintheUKalone,accordingtotheBritishVentureCapitalAssociation,rosenearlyten-foldoverjustayearfromover£3bntoapproaching£30bnin2005.

Privateequityfundshavebeenlookingthroughthebooks,identifyingsafecashflows,buyingthemupandthenfundingthemwithhigherleveragedborrowing.Thisnewdemandforsteadycashflowshasmeantthat

manyprojectsthatwerepreviouslyfinancedinternallybycorporates,becausetheywereconsideredtoolargeortoolong[induration]fortheequitymarkets,arenowbeingrelativelyeasilyfundedbyprivateequityorbythedebtmarketsor–mostimportantly–therightmixofboth.

Whatgoesarounddoeshaveatendencyofcomingaround–afterall,thebiggestLBOtodate(albeitpossiblytobebestedbyUShospitaloperatorHCAhealthcare’s$2�bnLBO,plusacceptanceofmorethan$��bnofdebt)inlateJulybyagroupofprivateequityinvestorsincludingKohlbergKravisRoberts(KKR),BainCapitalandMerrillLynchremainsthatofRJRNabisco’s$29bnbuyoutin�989(againbyKKR).Fromtobaccotohealthcarein�7yearsbut,atleast,mortalityremainsthecommondenominator.Timewillalsotellwhetherprivateequityfinancingwilldelivervalueforthelatestbatchofcompanies.

“Itwillbeinterestingtoseehowmuchofthisdevelopmentisrelatedtoanextraordinarilylongperiodoflowinterestrates,”saysPersaud.“Isuspectafairamount.Buttheinnovationsthathavebeenmadewillnotbeunmadeandhavepermanentlyaddedanewstringtoacorporatetreasurer’srepertoireoffundingoptions.”

Thelogicof‘justintime’stylemethodologythathasevolvedoverthepast�5yearshasalsobeenappliedinlargeparttoaccessingdebtmarkets.Takecommonplatformdocumentation,forinstance,characteristicofcommercialpaperthatallowsaccesstotheCPmarketthroughouttheyear.Inthedistantpast,bycontrast,long-termdebtissuancereliedupontheissuanceofaprospectus,duediligence,etc,foreveryissue.Widespreaduse


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EvidenceofVisaPurchasing’seffectivenessisitsadoptionandendorsementbyawiderangeofPublicSectororganisations.Forexample,theUKGovernmentProcurementCardisexclusivelybasedontheVisaPurchasingplatformandhasdeliveredprocesscostsavingsofover€450mntodate.

ThereareanumberofspecificadvantagesforusersofVisaPurchasing.Itisacceptedat8millionlocationsacrossEurope.Itsimplifiesthepurchase-to-paymentprocesssavingaround80percentofthetimespentoneachpurchase.Itallowsgreatercontroloveremployeespendingandtherangeofsuppliersbeingused.Finallyallpurchasesareconsolidatedontoasinglepaperorelectronicstatementsothattransactionscanbeanalysedprovidingpowerfulmanagementdatatosupportnegotiationswithsuppliers.

DeliveringInnovationVisaisalsocontinuingtoinnovatetoprovideanevermoreenhancedservicetocorporateorganisations.OneexampleisVisaInformationSource(VIS),aweb-basedreportingandexpensemanagementproductthathelpscompaniesmonitorexpenditure,streamlineadministrationandmakebetterbusinessdecisions.Itisalreadyaprovensuccessaroundtheworldwitharound30milliontransactionsperyeargoingthroughVIS.

VISprovidesbusinesseswithacomprehensiverangeofreportinganddataanalysisincluding:onlinereportingwith25monthsofhistoricaldata,standardreporting,usercustomisablefileextract,cardholderstatementreports,asupplieranalysissolution,acostallocationsolutionandanexpensereportingsolution.

VIScreatesthepotentialforsizeablesavingsonbothbusinessexpensesandadministrativeoverheadandcaneliminatemanualexpensedataentrybyofferingdirectdatafiledownloadsintoarangeoffinancialaccountingsoftwarepackages.Itcanbetailoredtomeetdifferentcustomerrequirements.

Byallowingcompaniestomanage,trackandanalysebusinessexpenditureingreaterdetail,VISenablesmoreinformedbusinessdecisions.Otherbenefitsincludeincreasednegotiationpowerswithkeysuppliers.

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FUNDING

Rank Issuer Nationality DealValue(Face)($mn)

1 BritishGasInternationalFinanceBV UnitedKingdom 1,500

2 BritishGasplc UnitedKingdom 664

3 LufthansaInternationalFinance(Netherlands)NV Germany 653

4 OntarioHydro Canada 500

5 FranceTelecomSA France 445

6 CemexSAdeCV Mexico 425

7 SocieteNationaledesCheminsdeFerFrancais–SNCF France 422

8 ElectricitedeFranceSA–EDF France 358

9 Hydro-Quebec Canada 355

10 NationalPowerplc UnitedKingdom 354

Rank Issuer Nationality DealValue(Face)($mn)

1 ScotlandGasNetworksplc UnitedKingdom 3,925

2 DeutscheTelekomInternationalFinanceBV Germany 3,914

3 SunGardDataSystemsInc UnitedStates 3,000

4 HertzCorp UnitedStates 2,666

5 FranceTelecomSA France 2,411

6 Procter&GambleCo UnitedStates 2,347

7 RasLaffanLiquefiedNaturalGasCoLtdII–RasGasII Qatar 2,250

8 PortugalTelecomInternationalFinanceBV Portugal 2,019

9 DaimlerChryslerNorthAmericaHoldingCorp UnitedStates 1,979

10 DanishOil&NaturalGas–DONGA/S Denmark 1,957

Top�0Non-FinancialCorporateEurobonds(excl.JapaneseIssuers)2005

Source: Dealogic

Top�0Non-FinancialCorporateEurobonds(excl.JapaneseIssuers)�99�

Source: Dealogic

chainfinancing(‘paymenow’solutions)andcustomerfinancing(‘getproductnow–paylatersolutions’)willincrease.Thismeansthatthechoicesoffinancingwillincreaseandthustheprice(interest)decrease.Non-valueaddedwholesalersthatsimplyprovidefundingtosupplierscanbeeliminated,resultinginincreasedoperatingmarginsthroughouttherestofthesupplychain.”

Bankersknowthatwhenitcomestosupplier-buyerrelationships,thefulltruthistheonethatdarenotspeakitsname.Ifthebankcantakethatarbitragewhollytoitself,itishappy,butabigbuyermaylooktotakesomeofthatbenefittrickledback.Saysone

ofmedium-termnoteprogrammesmeansthatdebtissuanceoffapredeterminedlimitorshelfhasbecomeeasier.Before,amajorpartoftheheadachewasgettingthetiming,currencyandmaturityissuesrightbetweenwhencapitalwasrequiredandhowandwhenitcouldberaised.Nowwindowsofopportunityacrosstheyieldcurvecanbeleaptthroughbeforethecurtainsaredrawnandcorporatetreasurerscanbemuchmoreefficientintheaccesstoandallocationofcapital,reducingthetotalcostofcapital.

Buthereagainnewregulationmaybegettinginthewayofthegoodtimesandrollingbacksomeofthegainsofthelastdecade.ThenewBaselIIbankingruleswillmakeitincreasinglydifficultforbankstooffercreditlines.“Inessence,companieswillhavetofinancialself-insurethemselvesmorewhichwilladdtocosts,”saysPersaud.

HiddenconsequencesofprivatisationThephenomenonofprivatisationbeganintheUKinthe�980sbutwithoutdoubt,fromthemomentofEuroFinance’sfirstconferencein�99�ithadturnedintoaninternationalmanifestation.Ofcourse,�99�alsomarkedthelaunchofRussia’sprivatisationprogrammeinwhichPresidentYeltsinlaunchedthevouchersystemwhichsawtheentirecountry,accordingtoBillBrowder,thenatSalomonBrothers,valuedatjust$�0bn–lessthan5%ofthevalueofBPorExxonatthetime.Asidefromthatanomaly,initssimplestformprivatisationwasthesellingofstatedinosaurmonopolies,releasingthemfromthedeadhandofthestateintothefreedomoftheprivatesector,butequallyexposingthemtoitsdisciplines.Privatisationcreatednewfundingneedstoreplacestatefundingandsubsidies.Perhapsmoresignificant,however,wasthereleaseofprivateinitiativeandtherecognitionthatthetreasuryfunctionconsideredinitsnarrowesttermsof30/90/270/364-dayfunding–cashflow–couldbecomethefuelfortheengineoflonger-termdebtflows.

Thissuccessfulchangetowards‘acute’cashmanagement(workingcapitalmanagement)hasallowedforlong-terminvestmenttobefundedbydailycashmanagement.Itmaybethatthedistinctionbetweenday-to-daytreasurymanagementandmedium/long-termfundingwasalwaysartificialbutfewreallywouldhavethoughtbackin�99�thatelectricpowergenerationcouldhavebeenfundedbybetterknowledgeaboutmonthlyutilitybills.AndwherewouldRyanairandEasyjetbewithoutusingacutecashmanagement?Theygivecomforttothosehappyenoughwiththeunderlyinginvestmentbutlooking

forcashflowtosupporttheunderlyingasset.Notonlythat,butasGlendinningatLenovo(whichitselfwasbornofglobalisationwhenIBMdecidedtospinoffitsPCbusinesstoaChinesecompany–whichhadpreviouslyrebrandedfromLegendtoLenovoin2002withaviewtogoinginternational)pointsoutthatsomeofthethingsthatarehappening–withtheadventoftechnology,enterpriseresourceplanning(ERP)systemssuchasOracleandSAP,negativeworkingcapitalmanagement–arequitesurprising.Notleastamongthesearebulkbuyingoflargeblocksofpowerortelecomsandsellingthemon,helpingsupportprofoundchangesininfrastructurefunding.

“Peopleoftenunderestimatetheextenttowhichthefinancialmodelhaschanged:wecanhandleinformationthatwecouldn’t�5yearsago.”

Forsure,corporatetreasuryisincreasinglylookingtothesupplychainasameansoffundingdebt.And,onthefaceofit,itlookslikeawin-winsituation.Butwhatofthefuture?SaysSculleyatActivationCapitalPartners:“Supply

bankerwhodeclinedtobequoted:“PushingoutDPOs[DaysPayableOutstanding]byabigbuyer,whilstatthesametimeensuringfinanceisprovidedtothesupplieratthecreditratingofthebigbuyer,isseenasanidealwayofobtainingfundingbymanybigbuyers.”IfCompanyABCinvolvedin,forinstance,retailinghasaverageDPOof35days,theyareoperatingatacompetitivedisadvantagetoCompanyXYZwithaverageDPOof90days.Thisisarealexample.Butthebankeradds:“DareIsayit,certainbigbuyersarelookingtotakea‘turn’inthedifferencebetweenthebigbuyercreditratingandthesuppliercreditrating.”

Innowaydobankswanttoencouragebigbuyersintoeventhinkingtheycandemandacutofthedifference.“Eventhoughthelendingbankmaybetakingaviewonthecreditriskofthebigbuyer,thatbankisstilllendingmoneytoasmallersupplieranddeservestoberemuneratedaccordingly,”thesamebankersays.

GlendinningatLenovohasnohesitationinsayingthatforhimthemostsignificant

corporatefundingtrendoverthepast�5years–althoughitwasalreadybeginningtohappenbeforethis–iscorporatedisintermediationawayfrombanks.“Largecompaniesaregoingstraighttothebondmarketsthemselves.Banksarestrugglingtounderstandanddeterminewhattheirroleinlifeis.Alotoftraditionalrolesaretherepurelybecauseoftradition.Today,technologyallows[treasurers]tobypassbanksinmanyareas.”

Couldthebankseverbecutcompletelyoutofthepicture?Mostthinkitunlikely.RichardBottomley,HeadofCIBSalesEuropeHSBCsaysthatbank-to-corporaterelationshipsareevolvingrapidly,withrationalisationand


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FUNDING

Thefigurescanalarm.NearlyhalfofBritishAirways’marketvalueistakenupbya£2.�bnpensionsobligation.“Apensionfundwithwings,”ishowitschairman,MartinBroughton,describesthecompany.InthereportAccounting for PensionsbyactuariesLaneClark&Peacock,BA’sliabilitiesof£�2,�26mnaccountedfor424%ofits2005marketcapitalisation.GeneralMotorsCorptoo,despitebeingtheworld’slargestautomotivemanufacturer,haslongbeendescribedasapensionfundthatmakescarsonthesideandthefirmoftenblamesitshugeliabilitiesforsomeofitswoes.

Recognisingdeficitsonthebalancesheethasbeenoneofthemostsignificanttrendsofthepast�5years.Promptedbyongoingharmonisationofinternationalaccountingreportingstandards,transparencyhasbecomethewatchword,andEuropeanpensionliabilitieshavecometothefore.InDecember2004,LaneClark&PeacockreportedthattheoveralldeficitforcompaniesintheDowJonesStoxx50wasEu��6bn,butthereportnotes:‘hadthecompaniesreportedunderIFRSin2004weestimatethatthedeficitwouldhavebeenshownasEu�32bn,someEu�6bnmorethansuggestedinthe2004accounts.’

Whilelike-for-likecomparisonsstillremainfiendishlydifficult,pensionsprovisionsarenotthebiggestsinglethreattocorporateearningsthatsomehavesaid.Moreover,fewtreasurersregardthemastheirissue–andgiventhedifferentnatureofthetypesofpensionschemesofferedacrossEurope,itrarelyhasbeen.IntheUK,wherethisproblemhasgrabbedthemostheadlines,corporateshavebeenrespondingtoanewregulationdesigned

toprotectpensionersbydecidingtooptoutofrisksinpensionprovision.Thistheyaredoingbymovingtodefinedcontributionplans(asmosthavealreadydone)orbysellingoffdefinedbenefitcommitments(asmanyarenowtryingtodo).Already,theoveralldeficitinthecountry’sFTSE�00pensionschemescamedownby8%intheyeartoJulyaccordingtoLaneClark&Peacock.However,thathastobeseeninthecontextofrising(andvolatile)equitymarketsandthefactthatthecompanieshadincreasedtheircontributionsby�2%toarresttheshortfall.

Elsewhere,companieshavebeenbackingawayfromexpensivedefined-benefitspensions.InMarch,aftermorethanayearoflosses,GeneralMotorsannouncedthatitwouldreplaceitscurrentdefined-benefitspensionformanyofits36,000salariedworkerswithadefined-contributionplanstartingnextyear.Thechangewasplannedtocutthecompany’syear-end2006pensionliabilitybyabout$�.6bn.

SaysAvinashPersaud,ChairmanofIntelligenceCapital:“Bythenext�5yearsyouraveragecorporatetreasurerwillprobablynotknowwhatadefined-benefitpensionplanisandwhyhe/shewouldhaveanythingtodowithit.”

Whilethatmaybeso,theflip-sideofthepensionscrisismaybemorerelevanttothetreasurerinthefuture.Whathappenswhenthepensionsfundsthemselvesstartblowinginsteadofsuckingandfunds,whichwereacheapsourceoffundinginthebabyboomyearsforequitybecomenetwithdrawersandconsumersofcapitalastheboomersretire?Prepareforabumpyride.KM

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Pricingdatebyquarter

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Source: Dealogic

relationshipissuesbeingtothefore.“Thetieronelendingbanksnowfindthemselvesintheoverwhelminglyprimespotwhenitcomestotheallocationofancillaryincome.”Whilecorporate-to-corporatelendingmayseemtosomeliketreasuryheaven,therearelikelytobesignificantpitfalls.Bottomleyadds:“Beingbank-to-corporaterelationships,thecorporatesareshieldedfromagooddealofregulatoryinterferenceandreporting.”

Notonlydoesthatincludedepositinsuranceandthetypesofsystemicriskthatbankstendtocover,butalso,thereistheissueofriskaggregationanddiversificationthatbanksdealwithdaily.

InareportentitledThe next generation of the treasury services business, Chicago-basedconsultantsTreasuryStrategiesnotesthatbanksarenottakingfulladvantageofcorporatespendingontreasuryservices:“Oneonlyneedstoconsiderthatcorporationsworldwidespendover$�trnperyearonservices,technology,informationandpeopletomanagetheirworkingcapital.Banks’treasuryservicesdepartmentsenjoylessthan5%ofthattotalspend.”While,asthereportnotes,thismayrepresentamajoropportunityfortheindustry,itisquestionableatwhoseexpense.

FicklecapitalmarketsBankshavebecomemoreinterestedinfeesfromtransactionswheretheyhaverepackagedrisksorgivenfinancialadvicethanearninginterestfromputtingarisk-weightedcorporateloanontheirbalancesheet.Thisisinpartthefaultofregulationthatbiasesbanksawayfromtakingrisks.Duringthegoodtimesthisdevelopment

wasgoodforeveryone.Banksearnrisklessfeesandcorporatesbenefitfromthebestavailablefundingratesfromawiderangeofcreditorsintroducedbytheirbankers.Persaudcautions:“Theproblemwiththisbreakdowninthelendingrelationshipwillcomeinthebadtimeswhenthenotoriouslyficklecapitalmarketssuddenlystoplending.Corporateshavebecomedependentonawiderangeoffundinginstruments,butallofthemdependontheconfidenceofthemarketplacethatisoftentherebutsometimesisnot.That’swhencorporateswillmissthatgrumpyoldbankmanagerwhosighedalotwheneveryouofferedhimsomebusiness,butactuallyunderstoodthelong-termriskshewastakingandwashappytodoso.”

Thisisahardyperennial.Capitalmarketshavealwaysbeenfickleandsavvytreasurerswilltryandensuretheyhavearealdiversityoffundingsourcesforwhenbadtimeshitandnotjusttheappearanceofvarietythemarketcanofferingoodtimes.Forallthediversesourcesofdataavailable,theytellalesscomprehensiblestorythan�5yearsago.Oncetherewerejustcorporatebonds,bankfinancingandequity.Nowcorporatescanbeforgivenforthinkingfundingisdeterminedasmuchbywhatyouwantasbytheliquidityofthepeoplewhowanttogiveyoumoney.Ifcorporatefundingisregardedasraisingcapitalforacompany,thefundamentalmoneyflowsremainthesame;it’sjusttheedgesthatgotblurred.Nowmanytreasurersyearnforsimplertimes.Doesanyonewanttofundanewdome?n


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thesametimelocalbankshaverampeduptheirproductandservicesportfolio.

Butreformsthatwouldaffectacompany’sliquiditypracticeshavenotkeptpacewiththeexplosivegrowthofbusinessinChina.Fromacash,liquidityandriskperspective,ithasbeenvirtuallyimpossibletoduplicateglobalstructuresthatcompanieshaveinplace.TreasurersinChina,whetherofdomesticorforeigncompanies,havelonggrappledwithafragmentedclearingandbankingsystem.Foreignexchangecontrolsarestilltoostringent,theregulatoryenvironmentiscomplex,andoneofthebiggestcomplaintsfromtreasurersoperatingthereissimplythesheervolumeofpaperworkrequiredforordinarytransactionsortoopenabankaccount.

AlthoughtheChineseentrustedloansystemhasallowedphysicallocalcurrencypoolingforsometime,foreigncurrencyinitiativeshavebeenmuchslower.BecauseChinahaskeptitscapitalaccountsclosed,trappedcashremainsaseriousproblemforbothMNCsandChinesecompanies.However,pressurefortheauthoritiestoaddressliquidityissueshasresultedinSAFE,theStateAdministrationforForeignExchange,undertakinganumberofpilotprojectsonacase-by-casebasiswithcompaniesinordertotestthewaterforfurtherreform.

PudongNineMeasuresLatelastyearSAFEissuedwhatisknownasthePudongNineMeasures,whichapplytoqualifiedforeignandChinesecompaniesinthePudongareaofShanghaionly.Itishopedthesemeasures,whichincludeallowingforeigncurrencycashpoolingviatheentrustsystem,willbethefirststepinaneventualliberalisationoftheChinesemarket,puttingthecountryonparwithdevelopedones.ForChinatoencourageregionaltreasurycentrestolocateintheircountry,however,thePudongschemewillneed

Visiting Shanghai after a 15 year absence, the most notable difference is the lack of difference between China’s buoyant city and any big metropolis around the world. Coffee is drunk at Starbucks, burgers consumed at McDonalds, people buy clothes from Prada and other western clothing brands, and furnish their apartments with furniture from IKEA, that ubiquitous self-build Swedish furniture store, the curse of do-it-yourself non-enthusiasts the world over.

NoothercountryintheworldattractsasmuchforeigninvestmentasChinadoes.Accordingtothe Economist,lastyearsome$60bninforeigndirectinvestmentfoundahomeinChina,about�2timestheamountinvestedinIndia.ThemarketforstrategicstakesinChinesecompaniesisalsovibrantwithover$�5bninvestedsofarin2006,includingminoritystakes,accordingtoDealogic.

ThemainattractionsofChinatotheworld’smultinationalcompaniesareitshugedomesticmarket,withapopulationinexcessofabillionpeople,andthatthecountryisbothacheapbasefromwhichtomanufactureandaplacefromwhichitiseasytoexport.Thecountry’sphenomenalGDPgrowth,atover9%forthelastdecadeisanaturalinducementforcompaniestotakeinvestmentstakesinbusinessthere,particularlyiftheyareunabletoacquireoutright.

EasingthewayOnceatightlyregulatedmarket,China’sreformsandWTOmembershiparehelpingittoopenupandeasesomeoftheobstaclescompaniesfacewhendoingbusinessthere.China’sentryintotheWTOin200�andfullliftingofbarriersbytheendofthisyearhave,inparticular,greatlyimpactedthebankingenvironment.Nowforeignbankscanprovideforeigncurrencyandlocalrenminbiservices;theyhaveenteredintokeypartnershipswithlocalbanks,whileat

toextendtoothercitiesandregions.ThiswillbeparticularlyimportantifrumouredtaxreformseliminatethefavourableratesthatforeigncompaniespayinPudong.Theresultantincreaseincosts,alongwithescalatingpropertyandlabourratesinShanghai,couldwellpersuadecompaniestolooktolower-costregionsinChina.

Meanwhile,thegovernmenthasitseyeonliberalisingrulesforitsowncompaniestodobusinessabroad.RecentlegislationhasfacilitatedoutwardgrowthandChinesecompanieshavejumpedontheM&Abandwagon,buyingupforeignassetslikeneverbefore.Ithasnotbeenwithoutitspitfalls.Learningtodealwiththeculturalphobiatowardsforeignacquirershasbeenjustoneissue.Forexample,intheUS,wherethousandsofjobshavebeenlosttocheapmanufacturinginChina,high-profileattemptsbyChinesecompaniestobuyUSbusinesseshavegonedownlikealeadballoon.ThisisasimilarbacklashthathappenedtoJapan’sexpansionattemptsintheUSinthe�980s.(TwohighprofileUSdealswhichfailedtogelhavebeenChineseoilgiantCNOOC’sunsuccessfulbidforUnocalanddomesticappliancemanufacturerHaier’sbidforMaytag.)

Therehavealsobeenseveraldealsthathavetakentheshineoffforeignacquisitions,likeTCL’spurchaseofRCA,whereitmisjudgedthevalueofthebrandandtheMGRoverdeal,withacquirerNanjingAutodiscovering,afterthefact,thatanotherChinesecarcompanyhadpreviouslyboughttherightstosellcertainRovermodelsinChina.ChinesecompaniesarestillhamperedbytheirlackofEnglishandofpeoplewhounderstandtheacquisitionprocess.

ButdespitetheChinesegovernmentactivelyencouragingoverseasinvestment,theamountsinvolvedinforeignM&AarefairlyinsignificantcomparedtoMNCinvestmentinChina.Thatislikelytocontinueforsometime.Change,toowillcontinueinChina’smarketplace,butonChina’sterms.n

CHINA

AsChinarelaxessomeofitsregulationstoenableatwo-waytrafficofbusinessbetweenitselfandtherestoftheworld,LeslieHolstromlooksatsomeofthesuccessesanddisappointmentssofar.

Openforbusiness


The treasurer’s role has changed dramatically in 15 years. Carolyn Meier, EuroFinance’s Managing Director, discusses the future in terms of training tomorrow’s treasurers.

Fifteenyearsagothefirstversionoftheworldwidewebwasjustbeingimplementedandtheuseoftheinternetasanythingotherthanamodeofopencommunicationwouldhavebeenconsideredanunacceptablerisk.Globalisationwasinitsinfancyandtreasurershadclearlydefinedroles–theirskillsoftenhonedonthejobratherthanthroughexternaltraining.Sarbanes-Oxley,SEPA,outsourcingandunder-fundedpensionschemesweretermsyettobreakintothetreasurer’svocabulary.

Fifteenyearslater,regulatorychangeisgatheringpacenomatterthelocationofacompany’sheadquartersortreasurycentre.Technologynowplaysapivotalrole–atrendwhichwillcontinueunabated.Shareholdersdemandaddedvalue,reducedcostsandtotaltransparencyfromtheboard.TheCFOmustdelivertherequiredcompanyresults,providefullregulatorycomplianceand,insomejurisdictions,facepersonalliabilityissues.Thetreasurer,whosedepartmenthastakenthebruntofthe‘streamlinedapproach’overthepastfewyears,hasseenhis/herrolebecomemultifaceted,withliquiditystrategyandriskmanagementaskeydrivers.

DeliveringthebasicsandmorebesidesThetrainingindustrywillalwaysberequiredtorespondtotheneedfordefinedfoundationcoursesandintermediateleveltrainingonbestpractices.Itmustbecommittedtodelivercoursesandcurriculacomplimentarytoqualifications,butmostimportantofall–relevanttotherealjobrequirementsoftoday.Specialisttrainingorganisationsareuniquelyintouchwithboththebuyandsellsideandabletofocusonthefullskillsetsrequired.TopicscontinuallycomingupinEuroFinanceresearchinclude:howdoesyourteamgetthebestresultsfromserviceproviders?Whatarethebestriskmodelstoemployandhowdotheycompare?Howdoyouplanliquiditymanagementforthefuturewhenliquidityfluctuationisdifficulttopredict?Whattreasurystrategywillmostcloselyservethecorporatedirectionandhowdoyoubestpresentthistotheboard?Thisdemonstratestheswitchinemphasisfromtoolstostrategy.Thistrendcanonlycontinue.

DevelopingthetreasurerforastrategicfunctionAsthelinesbetweendepartmentsblur,thensowillthetreasuryroledemandmoremulti-disciplinedskills.Thetreasurermustdevelopbroaderbusinessskillsnow.AstheCFO’shorizonshaveexpandedintotheboardroom–oftenbecomingthenextCEO;theCFOrolecanbeoneofthenextstepsforthetreasurer.

Trainingtrendstoday:deliveringthebespokeapproachAgrowingtrainingtrendistherequirementforuniquecoursessuitedtoindividualorganisationalneeds.Designedafterin-depthconsultationwithtutors,oftentakingmonthsofpreparationandplanning,thiscustomisedapproachaddressestrainingrequirementsexactlyandin-house.Notwocoursesarethesame,justasnotwocompaniesare.Onesizedoesnotfitall.Thisbespokeapproachtotrainingislikelytocontinueandisonekeyareawhereindependentspecialistscandeliverskillscomplimentarytostandardqualifications.Thepaceofchangeandcustomisationrequiredisparticularlynoticeableinemergingmarkets,wherethe‘leap-frogging’effecthasalwaysbeenafeature.Treasuryandcashmanagementisadevelopingrequirementthatwillmovefasterthanexpected.Demandfortrainingisgatheringpace,needswillchangefastandcoursecontentsmustbetailoredtotheindividualmarketneeds.

e-learningalreadyindemand–anintegratedtrainingapproachWhenEuroFinancetalkstoover�,500corporatetreasurersacrosstheglobeeveryyear,inmatureandemergingmarketsalike,regularaccesstotrainingandselfassessmentisacontinuingtheme.Anincreaseddemandfortheintegratedprogrammeapproachisalreadybeingfelt.Anindependente-learningtreasuryfacility,withtutorsinconstanttouch,providingbriefingpapersandon-linecourses;self-evaluationpapersonmultipletopics–acoherentcourseavailableacrosstheyearanddeliveringinformationacrossthesuiteofbusinessskills.Interestinglyenough,thisdemandforconvenienceandflexibilityhasnotremovedtheappealofface-to-faceinteraction.Theresidentialschool–totalimmersionintreasury–ismorepopularthanever,andEuroFinanceishavingtoturntreasurersawayasclasssizelimitsarecontinuallyreached.Treasurersdemandflexibilityandchoice,buttheface-to-faceexperiencestillholdssway.

Thenext�5years–atreasurydepartmentdifficulttorecogniseAsindependentexperts,EuroFinanceiscommittedtoworkingwithallparticipantsinthetreasurycommunity.Aboveall,welistentocorporatetreasurers,butarealsocommittedtoworkingtogetherwiththeassociationsthatrepresentthem;banksandserviceproviders–togetherweneedtoprovidecomplimentarytrainingsolutionsforthefuture.Butweallneedtodelivertherightskillsandnotjustthosethathistoricallyhavebeenrequired.Willthetreasuryroleasweknowevenexistin�0yearstime?Technologyandtreasurysystemswilltakeoverbasiccashmanagement,outsourcingwillincreaseandthetreasurydepartmentwillcontinuetoshrinkasaresult.Inthisscenario,thetreasurerwillneedtodemonstratebroaderandmulti-disciplinedbusinessskills,withlessemphasisontheconventionalcashmanagementskillsofthepast.‘Strategic’isatermmuchover-usedinconsultingandbusinesscircles–buttheseskillsarekey.

Formoreinformationvisitwww.eurofinance.com/training.

Tailoringtrainingtothetreasurer


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