By Anne Friberg
At this year’s EuroFinance in Miami, “world class”—for both treasury and banks—meant being global, not just international, and being a true partner to the business.
“Discover how to be global, not just international.” That was the theme of this year’s EuroFinance conference on International Cash and Treasury Management, which convened in Miami May 9-11.
What the “be global not international” idea ultimately meant, according to a panel on the topic, was that structuring a global treasury depends on the company and the business model it is meant to support. Zero balancing and pooling, for example, does not apply in Tishman-Speyer’s real estate business, noted treasury director Craig Mondschein, because each building has a loan attached to it and cash flows are first used to service the debt. Processes, on the other hand, should be streamlined in accordance with best practices.
BUZZ WORDS 2012: WORLD CLASS
One of the key challenges for a global treasury is not just to be global but to be World Class in doing it, too. Almost an entire morning’s worth of plenary sessions was dedicated to panel debates on what constitutes world class for treasury and for banks (see related story in IT, February 2012 ).
One session had on its corporate panel Oswaldo Ramirez, manager at Cameron International (a Houston-based equipment and service provider to the oil and gas industry), John Gleason, assistant treasurer at computer giant HP and Debra Crow, treasurer of Yahoo. Their co-session leaders on the bank panel were David Bochnovic, executive VP at Phoenix-Hecht (the Raleigh, NC-based market intelligence and education provider for the financial services industry), Robert McKillip, Americas co-head of markets and international banking at RBS and Juan Pablo Cuevas, Bank of America Merrill Lynch’s GTS head for LatAm.
WORLD-CLASS TREASURY ORGYS…
Despite their different businesses, the corporate panelists were in general agreement that world-class treasury emanates from factors like strategy and objectives; operations and processes, including technology optimization and continuous improvement; and people.
Strategy and objectives: Yahoo’s Ms. Crow said her department’s objectives are to provide liquidity, manage risk, “control what we can control,” and do it as efficiently as possible. Mr. Gleason added that the strategy needs to “focus on the right things” and one of his main priorities is that treasury should not be noticed for the wrong reasons, i.e., only when something goes wrong.
Operations, processes, technology, improvement: Along the lines of focusing on doing the right things, these factors zero in on the need to do those things right in order to be world class. Processes need to be effective and efficient with the use of technology for speed, control and transparency. Key to success in this area is the ability to measure performance and track progress. While benchmarking studies like those the Hackett Group provides can be useful, Mr. Gleason remarked that they are more focused on cost and not value, so for a reality check, he relies on other measures as well, such as those gained from peer benchmarking (HP belongs to several of The NeuGroup’s treasury peer groups, for example).
The panelists also noted the value of using dashboards to keep track of various performance-related metrics but also for monitoring key financial information like cash balances, and external factors like FX rates, capital markets data and other inputs that impact treasury’s performance and elbow room.
People: It can’t be emphasized enough that the right people are hard to find and retain and managers of treasury talent are keen to ensure that new hires are properly trained and supported and that career paths and opportunities can be offered to retain and develop the best. Companies with large treasuries (like HP) or finance organizations can offer sustainable career opportunities that smaller organizations may need to work harder at providing. While on the topic of people, treasury’s key partners also came up: internally, treasury works closely—unsurprisingly —with tax, legal and accounting, and regional finance; Ms. Crow observed that Yahoo has regular calls with tax and legal to get documentation right and check in with finance entities in EMEA and Asia. Mr. Gleason emphasized the danger of treasury becoming disconnected from the business and said it is key to stay in close touch with the AP and AR teams on matters that affect cash and working capital metrics.
…AND THEIR WORLD-CLASS BANKS
And of course, the primary external partners for treasury are banks. In the world of new regs—Basel III most notably—banks will be forced to choose and prioritize which business they want to be in, and no bank will be able to be all things to all people. This, noted Bank of America’s Mr. Cuevas, will necessitate some diversification of banks for corporates, while a renewed focus on relationships as a result of prioritization will be a force for concentration of business with a few primary banks. He also observed that a new definition of a relationship will evolve with more transparency in what is expected of each partner.
The bankers on the panel agreed that, while banks should compete on service delivery and relationships, they should collaborate on things “that make sense,” i.e., develop common solutions for eBAM: “companies push us to work together on this,” Mr. Cuevas said.
These days of outsourcing, Mr. Cuevas underlined that world-class banks take ownership of processes and risks they have been entrusted with; this is the operational parallel to taking and owning financial risk instead of palming it off on others in a never-ending chain.