June 2017

Clarissa Dann takes a close look at some of the discussions from the Association of Corporate Treasurer’s annual conference around themes of redefining treasury

Living with uncertainty, making changes to business as usual, along with technology’s enabling potential, resonated as underlying themes as the Association of Corporate Treasurers (ACT) held its annual conference on 16-17 May 2017 at Manchester Central.

Seismic shifts in leadership across major trading nations over the past year and with multiple uncertainties surrounding Brexit and the General Election (the shock result the UK woke up to on 9 June was still three weeks away), contingency planning seemed to be occupying the broad agenda of most of the 325 organisations in attendance. As Lord Michael Dobbs, House of Cards author and peer put it in his opening talk, “We won’t ever go back to whatever we think normal was, to the way things were. The world is not standing still, it is moving on.”

Validation and resolution

Among the 1100 attendees that descended on Manchester, a couple of group treasurers were sufficiently bold to go on camera and say why they had taken two days out of their schedule to attend (a snapshot of this year’s conference can be viewed here).I

“I’ve only been here for a few hours but I’ve already bumped into three or four of my relationship managers – we had a few outstanding issues which we were able to resolve really quickly because we can talk face-to-face and not over the phone. Sometimes you call people and you get the answering machine but when you’re here face-to-face you can get things resolved really quickly,” said Head of Treasury at Nomad Foods, John Meehan. He was not the only one using the opportunity to catch up with his bank – most banks (including Deutsche Bank) had a busy programme of back-to-back meetings around the conference sessions. And treasurers appreciated the networking opportunities with other treasury professionals. “I come to the conference every year, it’s a great opportunity to catch up with banking partners, to catch up with fellow treasurers, learn what people’s issues are, what they’re thinking about at the moment,” added Jill Harrison, Group Treasury Manager of Whitbread Group.

Deutsche Bank Stand

ACT advocacy

In his welcome remarks, ACT President Peter Goshawk explained the ACT serves more than 7,000 members and students ranging from large organisations, not-for-profit and government departments from 85 countries around the world. He reported on how the ACT had worked with the Bank of England on the development of the new UK Money Markets Code – setting out the standards and best practice expected from participants in the deposit, repo and securities lending market (published 26 April 2017).ii  

He introduced the organisation’s new chief executive, Caroline Stockmann who had taken up the reins three months earlier. Her experience at Unilever, Save the Children and The British Council had, she said, helped her appreciate the foresight of the ACT’s foundation “by a group of forward-thinking individuals who understand treasury plays an important, discrete and special role in business”.

Post Article 50

Dr Monique Ebell, Associate Research Director, National Institute of Economic and Social Research (NIESR) opened with her perspective on the impact of Brexit on trade. In a somewhat stark introduction, she demonstrated how potential increases in UK trade with all the BRIICS (Brazil, Russian, India, Indonesia, China, South Africa) or Anglo Americans (for example US, Canada Australia and New Zealand,) from new free trade agreements would not be anywhere near enough to offset the reductions in in UK trade with other EU members once the UK has left the single market. “New free trade agreements are unlikely to make up for leaving this highly effective trading bloc on our doorstep”, she said “unless they are as deep and comprehensive as our current arrangements with the EU.”

She also made the point that services trade is much higher within the EU than between the EU and the rest of the world, and that “there are not many examples of countries leaving trade agreements in peace time”.

Google’s plans to invest more than £1bn in a UK R&D hub and Dyson’s £3bn in robotics R&D came up towards the end of Ebell’s talk. “Why are Google and Dyson investing in the UK just as we are leaving the EU?” she asked. The answer – it’s similar to Israel – a centre of technology excellence in a country that is small, and surrounded by developed and wealthy economies with which trade is difficult because of politics.

Paul Watters, head of corporate research at S&P Global Ratings (who had spoken at an internal Deutsche Bank client briefing the previous month), predicted “significant uncertainty over at least the next two years”, and a slowing of UK growth to 1.2% in 2018 compared with 1.5% in the Eurozone. Most corporates that S&P had spoken to so far, he said, had steering groups and contingency plans in place. “In the worst case scenario (not our base case), the EU treaties cease to apply on 29 March 2019. The UK would no longer participate in the EU-regulated framework and in the absence of any established free trade agreements the UK as well as the EU would have to adopt foundational WTO rules for bilateral trade. Tariffs would average 11% for agriculture and 4% for non-agriculture.“iii

“Without a significant extension of electronic customs clearing procedures, delays and costs obtaining customs clearances on cross-border trade could be at least as expensive as the WTO tariffs themselves”, he added. Currently HM Customs handle around 100 million customs declarations a year – outside the EU this looks set to increase to 350 million, said Watters.

As for services, 13,000 UK and EU financial services firms would, he said, lose ready access to each other’s markets. “Supply of services under WTO rules has not as yet been well defined as that of goods”, observed Watters.

Redefining bank relationships

Chaired by Ian Tyler, Managing Director of consulting firm Alvarez and Marsal, the opening panel session heard from Andrew Binnie (Vodafone), Jill Harrison (Whitbread) and Emma Hayward (DS Smith) about their insights into the factors they consider when managing their bank relationships. Common themes running through the somewhat revealing conversation were:

  • Financial strength and structuring. Banks need to be able to meet the commitments of a corporate’s revolving credit facilities. One panellist confirmed €8bn of them and added that they also required “diverse capital markets capability, distribution and underwriting capability, ability to provide derivatives and structuring solutions, as well as mergers and acquisitions corporate financing capabilities”.
  • Geography. These corporates expect banks not only to have the geographical reach into markets they are expanding into now, but into countries they might enter in the future. “It’s about future proofing,” said one panellist.
  • Expertise. Banks are regarded as the “go to” for specialist expertise. “I need to be able to go to my relationship manager with questions and be directed to the right experts,” said one corporate. While they agreed not every bank could be an expert on everything, the service that was provided needed to be “spot on”.
  • Agility and innovation. “We need our banks to be agile so that when we do something new they can move with us,” was one comment. Another made it clear that banks were expected to generate ideas and bring new initiatives (rather than products) to the table and continually challenge themselves as a bank.

As for fees, these were not the main deciding factors. However, banks are expected to take a long-term and holistic view of the client relationship. “We appreciate fees are important but we expect you to consider the whole relationship – broker fees, investment banking. We expect banks to be competitive on things such as deposits and FX and we want a fair price and expect quality in return for those fees,” said one panellist.

These themes are consistent with the findings of the ACT’s 2017 report based on responses from 196 of its members, The Business of Treasury 2017.iv This revealed that the time qualified treasurers are spending on strategic issues (rather than operational ones) has risen from 24% in the 2013 survey to 40% in the current survey. It also illustrated how treasurers are identifying financial and non-financial business challenges and taking a leading or collaborative role in managing those challenges for their organisations.

Treasury 2020 – mind the gap

corporate treasury
Paul Cuddihy (left) and Michael Turner (right) grapple with future proofing corporate treasury

Paul Cuddihy, Deutsche Bank’s Director of Working Capital Advisory, chaired a popular workshop entitled ‘Treasury 2020 – mind the gap’. With technology often termed as the great amplifier of human intent, this was an opportunity to see what it could do in the treasury space. More than 50 delegates packed the seminar room to come and find out.

 He explained, “The focus of the workshop was to discuss how technology is transforming business models and understanding what that means from a payments, collections and liquidity perspective. It also looked at how corporate treasurers should set up their treasury functions policies and governance to manage new levels of competency in operating models.”

Geert Matthys, Deutsche Bank’s Head of Digital Product Development, got things rolling with an insightful description of how new technology such as the internet of things, APIs, payment service providers all interlink to create a new model for personal transport. He gave the example of how an individual would approach a car in a car sharing scheme. His thumb print enables him to open the car door and hire the car because the data for his account is held by the provider. He drives the car and toll road payments made from his account. If he plays music, the car records his purchases of music streaming downloads, all deducted from his account with royalties paid to the relevant artist. During the entire time he is in possession of the car there is a real time statement of what he has spent.

The point of the example was to show how technology could bring together new business partnerships, in this case IT companies with car manufacturers and music streaming providers. While few delegates wanted to openly discuss transformation of their business models, there was agreement from treasurers that they should take more ownership in selecting and governing payment service providers. They also cited the challenge of linking multiple ERP systems, billing systems and points of sales systems an ensuring the back office could keep up in terms of automation and control around cash flows.

Source: Industry 4.0: Building the digital enterprise (PwC)

One of the slides provided a helpful summary of what consultants PwC dubbed “Industry framework and contributing digital technologies” in their 2016 Industry 4.0 Survey (page 6). v

In response to a general audience poll, around 20% to 30% of those attending the workshop indicated they were either looking at or had implemented some form of ‘on behalf of’ or virtual account type solutions. Michael Turner, Deutsche Bank’s Head of Corporate Cash Management for UK & Ireland challenged the audience of treasurers to embrace and lead technological innovation, if not necessarily running it, but to be a leader advocating change in their organisations.

In the final part of the workshop, Matthys provided a clear description of distributed ledger technology and then described how it could be applied to the trade finance world to improve transparency, control, improve settlement times and potentially help treasurers manage their liquidity and fund their requirements better. There was a lot positive appetite for this type of technology among the delegates although there was a challenge around how banks and other organisations would align their technical platforms to make this a reality. Matthys explained that one of the key tools is APIs, which should hopefully help overcome some of these challenges.

The Association of Corporate Treasurers Annual Conference, with lead sponsorship from Deutsche Bank, HSBC and NatWest, took place 16-17 May at Manchester Central Convention Centre, UK. The 2018 event will be held in Liverpool on 15-16 May 2018.
Note: All photographs are courtesy of and copyright the Association of Corporate Treasurers


iSee photos and video at www.treasurers.org/annualconference
iiSee www.treasurers.org/node/333173
iiiSee also Watters’ article Life After 50: Opportunities From Uncertainty for Corporates in the UK on
ivSee the ACT’s report, The Business of Treasury 2017
vSee Global Industry 4.0: Building the digital enterprise published by PwC in 2016

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