By Geri Westphal
USD strength and shareholder activism, among other things, promise to bring new hurdles for 2015.
With much of the past seven years being a bit of a sideways march from an economic growth perspective, many believe that 2015 will finally be the year for a measured and sustainable bull market for the USD. It will also likely be the year for increased shareholder activism as corporate cash continues to attract those looking to unburden those companies of their growing cash piles.
no shortage of volatility
Forecasters also predict it will be a year of increased volatility, as fundamental issues abound. These include the rollback of stimulus in the US and eventually rising US interest rates, continued economic weakness in the eurozone and the prospect of additional quantitative easing there, devaluation in Japan, falling oil prices, and geopolitical turmoil—all of which continue to drive turbulence in FX markets.
Still, treasurers have identified USD strength as one of their most urgent prioritiesfor 2015 as they evaluate exposures and recommend strategies to manage the negative impacts to earnings that a stronger USD can bring.
Shareholder activism is another area of great interest for 2015, as 2014 saw the continuing evolution of proxy contests and crusading shareholders. Industry professionals expect an increase in activism in 2015 in light of falling prices and growing success of other activists. Activist investing has never been polite, and some believe their battles could get even uglier in 2015 as hedge funds continue their trend toward piling into the same stocks. That could lead to louder campaigns against companies, which could increase their chances of success. It could also open the door to in-fighting. All parties are increasing in sophistication, and having a playbook ready that addresses various scenarios is a prudent step in managing this growing market risk.
bank on yourself
In light of changes coming to banking services and to further develop cost-savings initiatives, this is a good year to assess the current stage of evolution you have toward a “fully-functional” in-house bank (IHB). Several members have made substantial upgrades to their IHB platforms in anticipation of SEPA or in contemplation of its next-generation outgrowths for pay-on-behalf-of, and receive-on-behalf-of arrangements.
The question to ask this year is, not only will I benefit from a significant new refinement to my intercompany cash/working capital utilization infrastructure, but what operational and other risks might I offset in terms of reducing reliance on banking services in regulatory flux? Smart treasurers will add tax considerations, too.
The global tax landscape continues to evolve rapidly, and over the last year the OECD has made impressive progress in relation to its Base Erosion and Profit Shifting (BEPS) Action Plan. Some governments are already making changes to their tax regimes in anticipation of likely recommendations. At the request of G20 finance ministers, the OECD has produced its 15-point Action Plan on BEPS that will help ensure that multinationals pay their fair share of taxes. September 2015 and December 2015 bring very important due dates for potentially significant milestones in the OECD’s tax agendas related to transfer pricing, artificial avoidance of permanent establishment, and other important topics. Are you ready for these changes? (See related story, “Leaks Push EU Tax Reform to Fore”).
e-payments on the rise
Based on statistics from The Better Than Cash Alliance, more than a third of the world’s population is excluded from the formal financial sector, in part because of their inability to pay for goods and services electronically (see related story, “Key to Africa Banking is Mobile”). In addition to expanding a particular market base, the roll-out of electronic payments significantly reduces costs, improves transparency and provides greater security than the cash-only method.
Treasurers are continuing to discuss the advancement of digital payments and what it means for their organization in light of the increase in recent cyber-attacks on large corporations. Members continue to seek ways to increase efficiency and cut costs, while at the same time remaining mindful and vigilant in the face of online security threats.
All these issues as well as other priorities will keep treasurers on their toes for the foreseeable future.
Activism Rises
According to the Economist, activist investors have a lot of cash at their disposal, running funds with at least $100 billion of capital. In 2014 they attracted “a fifth of all flows into hedge funds” and in 2013 they began 344 campaigns (or attacks, depending upon your view) against public companies, both large and small. Over the past five years “one company in two in the S&P 500 index of America’s most valuable listed firms has had a big activist fund on its share register, and one in seven has been on the receiving end of an activist attack,” the Economist says.
The latest notable and successful shareholder campaign was led by Carl Icahn against crane-maker Manitowoc. According to press reports, Mr. Icahn, the company’s second-largest shareholder, will have the option to nominate a person to the company’s board as part of a settlement agreement. Mr. Icahn will also have the right to nominate a person to the board of the company’s food services business after its recent spinoff.