What’s on a treasurer’s mind?

We had a great session at the FSClub the other day, discussing the views of the corporate client and their relationship with the bank. The panel consisted of a representative for corporate treasurers; a former head of treasury ops for a major technology vendor; and the head of epayments for a large, global bank.

The corporate treasury representative kicked off the evening by discussing the key challenges for a treasurer. These are roughly summarised by:

• Access to credit: the relationship between the corporate borrower and their bank has fundamentally changed as the bank now looks very carefully at who is asking for how much and what they are going to use it for;

• Regulations: as the uncertainty over Basel III and OTC derivatives regulations are in flux and this could clearly change a treasurer’s portfolio of investments;

• Pensions: where the resources, management and overall structure of the portfolio is being challenged, and the trustees are nervous of reactions of the fund;

• Value-add: both of the treasurer and the treasurer’s bank – the corporation is looking for value-add from treasury functions and this means a clear focus upon processes, technology, employees and customer relationships

He summed up all of the above by making it clear that treasury and treasurers have a real issue right now, which is that they cannot see the lay of the land for the future.

I asked him if the issue of access to credit was down to the banks tightening up so much that they wouldn’t lend, or if businesses just don’t want loans, which is what quite a few banks claim.

His view was that it’s ok if you’re a FTSE100 firm and need to borrow, as the banks don’t want to upset those relationships, but that it’s far harder if you’re outside the FTSE100. Sounded like the old adage of those who owe the bank £1,000 have a problem but those who owe the bank £1 million mean the bank has the problem.

The banker followed by stating that this is the ‘year of disruption’ as focus moves from Western economies to Eastern economies, and that the corporate supply chain would be radically altered as firms re-engineer for dealings with Asian economies, and China in particular.

For these reasons, risk is becoming increasingly important as a factor and this is why firms are moving away from the open account style of trading popularised in the early 2000s to refocus around bank licensed relationships and letters of credit.

He also felt that regulators have a real challenge here as “generals fight the war they fought before”. In other words, regulators have zero foresight, only hindsight, and that is their dilemma.

The banker went on to talk about SWIFT and the fact that the level playing field has also been disrupted.

In this context, it related to SWIFT’s post-9/11 subpoena by the US authorities to disclose any messages that might relate to terrorism. How is SWIFT meant to delineate between those that might relate to terrorism and those that do not? It’s impossible. But this means that the EU cannot agree with the USA on the information sharing rights and access to SWIFT messaging. As a result, SWIFT has to take an increasingly regionally focused approach to financial markets, rather than a global approach.

It made me wonder whether this meant that SWIFT’s role is diminished.

Strangely enough, maybe not, as the banker went on to discuss the increasingly internationalised way of doing business and the fact that the internet and, more importantly, mobile internet is making this even more the case.

Mobile internet banking is enabling many new international organisations to launch so that the old days may have been one of an Asian cash business, a European cash business and an American cash business, but it’s now a Global cash business.

Corporates are expanding globally but, in many cases, they are not big enough to split the world up into the regional structures required and expect the bank to do that for them. This means that there is an increasing focus upon the quality of bank’s service and client engagement.

The former treasury head then had their chance to respond, and said that the top of mind matters for treasury varied by company size and region; whether they were cash rich or exposed to net debt; how they fitted into the supply chain; and whether they were a retailer, manufacturer or producer.

The core question for all of them however is: can I access credit, liquidity, capital, etc. For these reasons, all of them need a good sight of their cash positions and a good feeling about the strength of their banking partner(s).

Her view is that it is still very difficult for a global corporate to find a single global bank relationship for these reasons, as no single bank has a global position or platform that is adequate in every geography. The question however is how many relationships do you therefore have to have: ten, twenty, thirty...

She believes that treasurers will have as many relationships as required to be effective but will then use technology for virtual consolidation to provide that cash positioning dashboard on a globalised basis. In this context, being bank agnostic is the key.

She also believes that the move towards open account trading is inevitable, unlike the banker, and that the procure2pay process will be reengineered to reflect this.

The question then is what are the right timings for netting, pooling and positioning: end-of-day, intraday or real time?

Of course, I would say real-time.

The evening then went into an open Q&A, with a wide range of topics covered from the role of technology to the future of SWIFT; supply chain processes to working capital reengineered; the role of social media to the role of the EACT and EU; the bank relationship and standards to the corporate relationships and TWIST; and more.

All great stuff that could form a blog entry of several thousand words but, at just over a thousand, this will doodle-do.

All in all, an event that looks like it will become a stable Club meeting for years to come.

Oh yes, and what’s on a treasurer’s mind?