By Joseph Neu
According to EuroFinance, stressful times require all of the above, plus ample hydration to keep treasury minds sharp.
Better exercise your treasury muscles and drink lots of water, because the global economy is likely in for a rocky period. Accordingly, firms with a strong yet flexible treasury able to think clearly during stressful periods will succeed versus those without such support. This was the storyline from EuroFinance’s latest International Cash & Treasury Management conference in Copenhagen in September. To that end, treasurers should enhance their flexibility, work on strength and speed in responding to current events, and maintain sustainable fitness in order to respond to future crises. Here are other key takeaways:
Stay hydrated. By far the easiest takeaway to fulfill is to drink plenty of water. Jogi Rippel, Founder & CEO of the Tignum consultancy presented data based on studies his firm does on senior executives. Using a mobile brain scanner, they can show how senior executives’ brains can develop connectivity “holes” over a heavily scheduled day or during stressful periods. After proper hydration, these “holes” go away, again, as seen by the brain scans.
Sustain businesses through slower growth. The more difficult one is how to support global business lines that have been sapped of their primary growth engine in China. In his opening address, Chairman of The Economist (as well as Chairman of Royal London Insurance and former Deputy Governor of the Bank of England) Rupert Pennant-Rea dashed hopes that another country, such as a Modi-led India, might pick up the slack. India’s GDP is not nearly as big as China’s ($2T vs $11T and still 4x smaller in PPP terms) and it has only grown faster than China in one year since 1990 (that was 1999). India’s political system is also too democratic and fragmented.
Be flexible in order to respond quickly to change. Today’s global corporations need to be able to respond to big changes in growth dynamics, such as the current swing away from emerging markets growth drivers after years of overachievement relative to the developed world. Lord Rose, the former Chief Executive and Chairman of Marks & Spencer presented on how CEOs must embrace a culture of flexibility and responsiveness to change.
Treasury needs to be central to planning, business support and be ready with cash. And how does treasury fit in? “Treasury used to be seen as a service function in the past, but this is no longer valid,” Lord Rose said. “Finance and treasury are now at the center of the business. Treasuries help ensure companies are ‘fit for business’.” One tangible way they can do this is ensure the cash is there to move when needed.
Get a scalable, comprehensive treasury management system. Ditching paper and spreadsheets for the best available treasury technology solution will certainly help treasury meet its new mandates. In the case of F. Hoffman-La Roche, a treasury transformation project built with the help of an SAP treasury platform (and corresponding SAP harmonization effort) enabled it to win this year’s EuroFinance Award for Treasury Excellence. The Roche group treasury is based on a single SAP treasury system linked to all the SAP and non-SAP systems within the group. This “TOP” system allows Roche to run its global operations—serving well over 200 companies around the world—solely out of HQ in Basel, Switzerland, with a team of 23 professionals plus a dedicated IT support team.
While all the above takeaways and more from the conference will make treasury better able to cope with change and a rocky period for economic growth and hence financial risk, the unintended consequences of regulationand government/central bank policy, implemented in response to the financial crisis almost 8 years ago, continue to curb treasurers’ range of motion as they prepare for the next global downturn.
Whether it is Basel III’s impacts on the sustainability of banking services that force companies like Shell to scramble to find a new transaction bank for western Europe after RBS sees it can no longer provide such services profitably, the tax planning consequence of the OECDs BEPS initiative or the consequences of a monetary policy that has treasurers bragging that they can earn 40-60bps on their cash—all this saps treasurers of flexibility, strength and speed, along with the fitness to sustain positive action. For this reason, more should heed the call of one assistant treasurer who challenged her peers to engage more actively in conversations with regulators and policymakers to make the unintended consequences of their actions known.