About Me

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I am deputy editor at The Banker, a Financial Times publication. I joined the magazine in August 2015 as transaction banking and technology editor, which remain the beats I cover. Previously I was features editor at Profit & Loss, an FX and derivatives publication and events company. Before that I was editorial director of Treasury Today following a period as editor of gtnews.com. I also worked on Banking Technology, Computer Weekly, and IBM Computer Today. I have a BSc from the University of Victoria, Canada.

Friday, 23 November 2012

EuroFinance 2012: Q&A with Damian Preisner, Global Treasury, and Gerd Klevenz, Head of Treasury Operations, SAP Germany

23 Nov 2012

gtnews spoke with SAP Germany’s Damian Preisner and Gerd Klevenz about their sessions at EuroFinance 2012. Preisner led a discussion on the strategic advantage of the ISO 20022 eXtensible Markup Language (XML) payment standard, while Klevenz participated in a panel discussing what a centralised treasury looks like in different industries.

SAP is a global software vendor, headquartered in Germany, with annual turnover of €14bn. The company’s treasury team is made up of 30 employees, is organised centrally and uses a treasury management system (TMS) that is part of the SAP enterprise resource planning (ERP) system.

Question (gtnews): What were the main discussion points during your session entitled ‘Changing Standards: Is Anyone Using Them to Strategic Advantage?’ at EuroFinance 2012?

Answer (Damian Preisner, global treasury, SAP Germany): The session examined the business case for moving to the ISO 20022 XML payment standard now and the amount of preparation still needed on the banks’ side. The financial industry is being pushed to adopt XML by the single euro payments area (SEPA) end date, but there is much more to it than SEPA Credit Transfers (SCTs) and Direct Debits (SDDs).

The Common Global Implementation (CGI) initiative, which includes banks, software vendors and corporates, is trying to develop a more standardised global approach to payment formats. Its aim is, to quote, for “a corporate to be able to use the same message structure for all their payments with all of their transaction banks reaching any payment system across the globe.” SAP participates as a software vendor, so treasury is not involved directly but we have chats with our colleagues who are.

A standardised global approach will provide a level of bank interoperability that has not been reached before. Previously, there were other so-called global formats, such as MT 101 or Electronic Data Interchange for Administration, Commerce and Transport (EDIFACT), but now XML has begun a new journey. SEPA is a part of that journey, and the CGI and the new version just agreed by banks and software vendors should be another step in that journey to support corporates operating globally.

Question (gtnews): Are banks keen to adopt the ISO 20022 XML standard?

Answer (Preisner): We have worked with two banks, the Royal Bank of Scotland (RBS) and Bank of America Merrill Lynch (BofA Merrill). It requires significant investment from the banks, but it provides them with better transparency and visibility. A few banks truly understand that transparency is an advantage, not a disadvantage. That means that only a few will make that investment; if a bank believes that this is its core business, then it will invest.

Question (gtnews): Are corporates adopting the XML standard?

Answer (Preisner): SAP is an early adopter, and we one of the corporates which are ahead of others  since we use only one SAP version for all subsidiaries and have set up a payments factory. In the past few months I have discovered other early adopters, each facing specific pain points. Every company has its own organisational history and is confronted by different challenges with regards to master data, processes and shared services. It is difficult to compare, but there are some common experiences.

Answer (Klevenz): For example, some corporate treasury departments are solely responsible for treasury payments. They need to cover critical payment types with the XML format on a global scale but they may not have the volume within treasury needed to make this a feasible option. Others are considering XML from a SEPA-compliance perspective - they have to be compliant and instead of tweaking an old format in one country, they see the potential of standardising payment files at a global level. If you go that extra step and cover most of your entities, then it gets progressively easier to support payment files. The end point is when you only need IT knowledge based on XML. Currently if there is a problem with a German payment file, you need someone who knows the structure of a German payment file; or if there is a problem in France, you need to understand the French rules. SEPA is a trigger for many corporates to adopt XML.

Answer (Preisner): This is a great chance for treasury to explain how an XML migration can provide efficiency savings for IT because they do not have to support local formats. At SAP, treasury tries to find benefits for all stakeholders.

Question (gtnews): Did you start the journey from a SEPA-compliance perspective?

Answer (Klevenz): The XML project was connected to the integration of a newly acquired corporation for which we had to deliver new payment files out of the ERP system. It was the right time to connect closely the two initiatives and work with banks in the CGI group to deliver the new format.

Answer (Preisner): We took the chance to innovate. It was a strategic decision not to use the old payment file but to innovate instead. We had some early adopter pain points, but we have a holistic approach as a software vendor. We want to reduce the pain for our customers by solving problems in advance so that no one else has to experience them or at least “limit the pain” for the customer.

Question (gtnews): Moving on, Gerd what were the main discussions points during your session entitled ‘Centralising the Treasury Function Can Mean Different Things’?

Answer (Klevenz): The panel, which included Irina Bobrysheva, head of group treasury, Severstal, and Rudmer Wedzinga, international treasurer, Coty, discussed what a global infrastructure looks like for treasury. The main discussion points were around how treasury can achieve transparency with regards to cash: where is it, how much is there, what are the different approaches, etc. Everything came back to how important good data is as a basis for sound decisions.

The panel consisted of three corporates - a retailer, a large steel conglomerate and an ERP software provider - with different approaches due mainly to the business model. Severstal, for example, has to focus on commodity risk. Foreign exchange (FX) risk is also top of mind - even though it is a Russian company, it has US dollars as the functional currency, which is not the currency in which it pays salaries.

At SAP, we have a special approach to managing FX risk by securing the balance sheet of each legal entity. The euro is our functional currency as a German company. If a Swiss legal entity has local currency Swiss francs, then it is exposed to risk. From a group perspective, many companies wouldn’t hedge because it gets converted one-to-one to the group balance sheet. However, we will hedge because we want to secure the local profit and loss (P&L). If a company has a large euro exposure in Switzerland and doesn’t hedge, then the local entity will suffer if the market moves in the wrong direction. We try to ensure that the local subsidiary hedges its exposures, not externally with the bank but with SAP AG. Then we look at the exposure from a group perspective and hedge it externally in the market.

The panel also discussed how to centralise liquidity, which raised differing opinions. One treasurer said that their company uses zero balancing with cash pools across different currencies. SAP, on the other hand, focuses on zero balancing in euros and US dollars only. We don’t centralise other currencies daily, but rather on a monthly basis to avoid daily changes in our FX exposure. We also discussed problematic countries for extracting money, such as China, India and South Africa.

For all these risks we depend on our ERP system to get information in real time. We get most of the risk data from the accounting/financial system of SAP. Our TMS, which is part of the ERP system, is then used to enter hedges.

Question (gtnews): What do you think were the hot topics at this year’s EuroFinance?

Answer (Klevenz): Executing on the ISO 20022 XML file is a hot topic because having a plan is just a small part of the whole project - execution and going live takes a lot of time.

Answer (Preisner): The SEPA end date is putting a bit of pressure on the industry; however solely focusing on SEPA misses the bigger picture. The journey has started and SEPA is one milestone, but the whole industry could go further. Treasury should take this as a chance for further investments to restructure or rebuild whatever is there, not only in payments but looking at other business processes as well.

Answer (Klevenz): We haven’t touched on the transmission channel for the payment files. It is counterproductive in a shared service environment if corporates have to use a variety of electronic banking (e-banking) systems to serve different countries. In the end someone ends up with 10 different tokens to administer these payments. It is also difficult to centrally control a variety of e-banking systems which are partly maintained in Cyrillic, Urdu or Chinese characters, so compliance becomes an issue.

Answer (Preisner): All these multiple channels should be reduced to a minimum or in a best case scenario to one channel - for example in a global payments factory -. SWIFT could be part of the solution because it eliminates proprietary banking connections.

Answer (Klevenz): Yes, if treasury deals with several banks, SWIFT might prove to be a good solution. If you have a single banking infrastructure for most of your payments then a host-to-host connection might be acceptable. For us it is SWIFT.

Answer (Preisner): As we said before, every corporate is set up differently. If you have one or two banks, then it doesn’t make sense to invest in one pipeline such as SWIFT; instead it makes sense to invest in proprietary e-banking connections. But that set-up may restrict you - in a crisis you never know whether the bank you are with today will be there tomorrow. You have more flexibility with one channel that is ready for multiple banks. From an end-to-end perspective, if a XML payment file format, which contains all the data needed, is extracted from the source system, accepted by many banks and routed through a multi-banked channel such as SWIFT, then you have the possibility of being more flexible to change bank for any reason.

Question (gtnews): Is there is one thing that would make treasury more efficient?

Answer (Klevenz): That is easy: having direct access to IT resources in order to be able to react more quickly. That is an issue even for SAP treasury - we do not have immediate access to developers because they have to focus on developing. Having access to IT resources is critical, no matter if it is internal or external developers or consultants.

First published on gtnews.com.

EuroFinance2012: Q&A with Harry Blok, Director Corporate Finance, AkzoNobel

19 Nov 2012

AkzoNobel is the largest global paints and coatings company and is a leading producer of specialty chemicals. gtnews interviewed the company’s director of corporate finance, Harry Blok, to get his views on the hot topics at EuroFinance, as well as adjusting to a ‘new normal’ of limited growth going forward.

Question (gtnews): What do you think were the hot topics at this year’s EuroFinance?

Answer (Harry Blok, director corporate finance, AkzoNobel): This is a cash management event and many treasurers will be looking for solutions for cash management problems, but I am not sure that they will find new solutions for day-to-day issues. What they will be looking for are the relationships that will help them develop a way forward. New ideas and innovations are desirable, but you do not need an event such as EuroFinance to get up to speed with new technologies. The event is useful to meet with the people behind the technologies, in order to get a better understanding, or just meet new people and expand your network.

If you look at the speakers and panel discussions, the conference is focused on risk management and volatility. I expect to hear about regulatory changes that are coming in as a result of the economic downturn, how to handle your cash management affairs in a volatile environment, etc. A panel earlier today said that you don’t need to know exactly what is going on - when and what will happen - but you need to be prepared for change and able to deal with volatility. The situation is not as predictable as it was before and the models we used to work with are no longer relevant.

Q (gtnews): How, in your opinion, has this volatility affected a treasurer’s job?

Answer (Blok): This level of volatility is new for most treasurers. A treasurer typically wants to know what is going to happen, what the cash flows are and how to manage foreign exchange (FX) and interest rate (IR) risk. A treasurer typically wants to forecast, anticipate and hedge risk. But the outside world is changing and treasurers need to find ways to deal with this instability. Most importantly, they need to understand the fundamentals behind this volatility. I guess this is the most important reason for treasurers who come to EuroFinance.

Looking at the poll conducted in the opening plenary session, many believe that they are well prepared to solve certain problems, even though their treasury systems are not up to speed. People trust that, within their network, there is someone who can support them. This relates back to volatility: you can’t always anticipate what is going to happen, but you must ensure that either you are well prepared for different scenarios or have access to the right resources - people and systems - to be able to manage new situations. The new dynamic within treasury is to deal with such uncertainty and to operate more like a businessperson who normally operates in a changing market, looking for new opportunities, looking to build the network, making it stronger and creating value with partners.

Partnering is extremely important. When I first joined AkzoNobel, as an in-house tax advisor, we cherry-picked our consultants depending on the region/country and specific expertise but then we decided to go with one global non-audit service supplier. That move was extremely difficult, because we had to build new partnerships and that takes time.

I see the same thing happening today with banking relationships. It is not just a product that a corporate buys; banks need to understand your needs and you need to understand what the bank can offer. Trust is so important within my team, banks, government bodies and regulators. It is important to invest in the relationship, which is why treasurers are here.

In addition, corporates want to learn from each other, and this conference is an easy access point for knowledge without spending too much money. A treasurer can discuss with a peer from another company about a SAP problem, for example; whereas if they hired an SAP consultant they would have to pay for that expertise. That is the beauty of a professional peer network.

Q (gtnews): What keeps you awake at night?

Answer (Blok): I sleep very well. But if you are asking me what the top priorities are, fundamentally I think we need to adjust to a situation where there will be limited growth in the mature markets going forward, within the foreseeable future. As a company, if we still want to outperform in the market then we need to focus on operational excellence, innovation and sustainable growth. These are key themes and I am concerned that not everyone is aware of this.

If you only assume that your company’s growth rate will be the same as the gross domestic products (GDPs) of the countries where you operate and expect to stay alive, then I think you are wrong. These GDP growth estimates are based on historic data and are still too optimistic, as far as I am concerned. In business we need to be very realistic about where our opportunities lie and where we can still grow, or project our growth as well as we could in the past.

If you translate that into what a director of corporate finance does, I try to efficiently fund our operations and repatriate cash as efficiently as possible to headquarters to distribute to our shareholders. I want to make sure that these are based on realistic business growth projections. I believe that there are many opportunities in the areas of innovation and optimisation of current businesses, but we need to make sure that these are incorporated adequately in our businesses’ projections.

Global sustainability is one issue that personally concerns me. If the world continues at the current level of material consumption, then I do not believe that it is sustainable. We need to have a clear view as to how to meet future demands/requirements, not only set on a voluntary basis by consumers, but also by what the planet can handle. The challenge is for corporates to anticipate and behave accordingly. The main focus is not only sustainable finance, supply chains and value chains within the group, but also in terms of interacting with governments, banks and funding.

Banks have an important role here. There are many small and mid-sized enterprises (SMEs) that are extremely concerned about funding. Innovation does not only take place at the blue-chip level but especially at SME level. This is an untapped market for banks. These entrepreneurs are worried about funding, but they also believe in their ideas and innovative capabilities enough to be willing to pay risk premiums. I believe that sustainable growth comes from a very healthy SME market with innovation, entrepreneurship and risk taking.

Risk is also about opportunities. Entrepreneurship requires risk taking and looking for challenges, and for some people to do the things that other people won’t do. This requires a different mind-set from traditional banking and treasury.

Q (gtnews): Do you think the role of the banks will further diminish in the future?

Answer (Blok): If I look at the overall trends in the market, I find a strong focus on IT and process efficiency in cash management. Companies want to integrate their IT systems and processes with their banks, to make cash management as efficient as possible. But by offering this process optimisation, banks - to a certain extent - make themselves redundant.

For example, a company wants its cash management bank to work as efficiently as its in-house bank (IHB) in cross-border cash flows. This is not currently possible due to monetary restrictions, but also because within many banks there is a lack of IT system and process harmonisation. But if cash management is viewed purely as a process that can be automated, then an off-the-shelf product should fulfil the requirements. Will that part of a bank’s activities disappear over time? In the long run it may be destined to, because cash management could be considered a routine/standard process that can be automated.

However, banks do much more, and offer other products and services complementary to cash management services. And one cannot ignore the role banks play in debt and capital markets transactions. As the market requires them, I am sure that banks will continue to be - or become more - innovative and remain in business. But as in any other industry, the landscape will look different in 10 years from now.

Q (gtnews): What effect will new regulations have on the relationship between corporates and banks?

Answer (Blok): Basel III is one of the reasons that the blue-chip corporates with strong investment grade ratings have access to cash and credit. The question is whether the capital requirements set by Basel III are really as rigid as people think, or are they just typical given the type of business the banks are in.

Solvency II, Dodd- Frank and Basel III all aim to force financial institutions (banks and insurers) to manage their risks appropriately. Should banks be risk-averse in this volatile environment? Probably not, as the economy needs entrepreneurs, also in the banking sector.

Large corporate are well represented at this EuroFinance event, and there are only a few SMEs. If you posed the same question to the SME market, you would get a very different answer because they are concerned about liquidity. Although this conference focused on the big corporates, the needed boost to the global economy will also come from the SME segment, which is full of entrepreneurship, innovation and creativity.

In short, the question, what effect the new regulations will have on the relationship between corporate and banks is not easy to answer because there are different effects for different corporates. But banks and regulators should be mindful of the fact that credit is not only required by blue-chips with strong ratings, but also by SME’s with higher risk profiles. And, again, this should not be seen as a risk only but above all as a growth opportunity.

First published on www.gtnews.com.

EuroFinance2012: Q&A with Daniela Sibille, Director, Corporate Treasury EMEA, SunGard

13 Nov 2012

Cash and risk management were the hot topics at this year’s EuroFinance event, according to Daniela Sibille, director, corporate treasury Europe, Middle East and Africa (EMEA), SunGard. The eurozone crisis still looms large and contingency planning is the order of the day.

Question (gtnews): What do you think were the hot topics at this year’s EuroFinance?

Answer (Daniela Sibille, director, corporate treasury Europe, Middle East and Africa (EMEA), SunGard): The hot topics were cash and risk management. Although these are usually good generic topics for most treasurers, this year they are even more important because of the constraints in the marketplace. Although we always talk about cash management, it has become more important because liquidity is much scarcer than it was previously. As treasurers, we must strive to ensure our companies have the liquidity that they need to run the business.

In this way cash management touches on risk management. The market is changing - banks have had to review their balance sheets because of incoming regulations, which will impact their ability to lend. As it becomes more difficult for corporates to access bank funding, they will need to rely much more on their own cash. Treasurers will also need to look at alternative sources of funding.

In the various EuroFinance sessions these two themes came up quite often, even when we spoke about credit ratings agencies (CRAs) and why it is important to review your rating. Because if you want to move away from bank funding and look at issuing in the bond market, you will need to have a good credit rating.

The conversation was really around how we can raise funds for our companies and make sure that the liquidity is available, when and where it is needed.

Q (gtnews): What keeps you awake at night?

A (Sibille): If I knew what the next big issues were going to be, then I would be more relaxed. What is troubling is that the economic crisis does not appear to be winding up. Things are not improving and it seems as though the current situation will stay as it is, or get worse. The euro crisis is a big issue, particularly the situation in Greece. During the Vivartia presentation, I was surprised that some companies think that it would be better if Greece defaulted, or even left the euro. Unfortunately this is still a possibility and it is very difficult to anticipate what the consequences would be.

We can try to build contingency plans, but this is something we have never dealt with before. So theoretically we can try to mitigate risk, but we don’t really know how big the impact will be and whether other countries would then leave the euro. A Greek exit could have an avalanche effect. This is the biggest issue at the moment, although as a company we do not have much exposure to Greece. But any repercussions across the eurozone would be a concern.

Q (gtnews): How, in your opinion, has the job of treasurer changed since you started your career?

A (Sibille): It has changed considerably. The crisis has put treasurers in the spotlight. We have moved from a role that was within the finance department, or close to accounting, to a more defined role in the company and have taken on responsibility for a large proportion of the company’s risk management. The constraints on financing, and also the currency volatility seen in the past few years, have meant that there is a greater awareness of what treasurers do and their role within the company. Today treasurers have greater access to the board of directors and are able to add insight to commercial decisions.

Q (gtnews): Do you think the role of the banks will further diminish in future? If ‘yes’, which alternative sources of funding will fill the gap?

A (Sibille): Banks are challenged in today’s environment and will continue to be challenged by the economic crisis and incoming regulations. They have had to change the way they approach lending. The new regulations are here to stay and there may be further regulations that make the lending business even more difficult. It is quite possible that some banks may have to withdraw from the lending arena.

This means that corporate treasurers will have to look at alternatives source of funding. Banks will still be there for the cash management and foreign exchange (FX) activities, but companies need to start thinking long term about funding alternatives in case their banks are not able to lend. Corporates can explore cash retention, or look at borrowing in the Asian markets where there is more cash availability. Maybe Asian banks will have a greater appetite for business in future years.

Q (gtnews): What steps will you take in the year ahead to make your treasury department more efficient?

A (Sibille): It will be important to focus on the information quality that we produce internally, particularly cash flow forecasting in terms of amounts and currencies. It is possible to be more precise in understanding our cash needs and surplus. We plan to do an in-depth risk analysis in order to begin to understand and forecast risk before it materialises in front of us. These are the two main areas we are looking to improve.

We want to be able to do an evaluation of risks versus opportunities. It is important to clearly define what level of risk you are comfortable with and also identify opportunities. You might be prepared to take on a certain level of risk if you see a good opportunity from an investment or other activity. This is a decision that should be taken together with the business.

By undertaking a risk analysis, it may be possible to find another way to achieve the same end. It does not mean that we are not going to do the activity. If we can identify the risk and measure it, we can hedge to eliminate the risk. For example, we proactively hedge and use insurance policies.

It is important not to ignore risk because it is not going to go away - it is still there whether you like it or not. Risk analysis is also an opportunity to learn because once you have done it, then you have a path to follow. You may find some new opportunities just by taking a look at the risk and alternatives open to you to offset it.

Q (gtnews): Do you expect several more years of difficult economic conditions? If so, how should a treasurer respond to the challenge?

A (Sibille): The current economic environment is here to stay, or even get worse. A treasury needs to ensure that the company is covered to face a longer crisis period. The company must be funded and should never face the situation where it can’t access funds. Treasurers should review every opportunity to fund the company, which may include improving and enlarging banking relationships. This is now the time to examine how the company is funded and look for possible alternatives. This should be done now because it needs to be effective in two, three or four years.

We need to be looking at the medium- to long-term cash flows. We can’t look just at one to two year flows, but must look at least five years out and understand where the company will be at that time. Previously, it was possible to refinance six months or a year before you needed the funding, but now you need to start at least two years in advance.

First published on www.gtnews.com.

EuroFinance2012: Q&A with Marie-Astrid Dubois, Assistant Treasurer EMEA and Asia, Honeywell

13 Nov 2012

Marie-Astrid Dubois, assistant treasurer Europe, Middle East and Africa (EMEA) and Asia, Honeywell, talks about the effects of Basel III on banks’ lending practices and corporates’ access to funding, as well as the importance of attracting good staff, particularly in emerging markets such as Asia.

Question (gtnews): What do you think were the hot topics at this year’s EuroFinance?

Answer (Marie-Astrid Dubois, assistant treasurer Europe, Middle East and Africa (EMEA) and Asia, Honeywell): Treasury is a trade where things are always similar but, of course, the world changes around us. Therefore we need to anticipate changes and be ready to adapt to them. We need to be constantly looking at what is happening - and in that sense risk management is high on our agenda. I think that the hot topics this year include cash management and risk management, as well as process automation.

Similar to most treasurers, when I attend EuroFinance I am looking to achieve a number of objectives. First, I need to meet with my bankers and often I have topics to discuss if my company is looking at specific projects. I want to test these ideas out, not only with my bankers but also with my corporate peers. I also want to assess the general environment.

Conferences like EuroFinance are mainly about getting a general idea of where you are, compared against what is happening in the marketplace. It’s a unique opportunity to meet everyone at the same time. It is an intense three days of conversing with banks, corporate peers, software vendors and consultants. I try to gather all the ideas together to ensure that I am moving in the right direction in terms of the projects that I am working on.

Q (gtnews): What keeps you awake at night?

Answer (Dubois): Most people are concerned about funding and cash. Honeywell in the US does look closely at the funding part because it has debt there; outside of the US, which is what I manage, the company has surplus cash. This difference is quite important. Treasury must ensure that the company has access to funding on one hand, while at the same time making sure that it efficiently uses the cash it has. We need to effectively maintain and preserve capital, as well as ensure that it is safe in every country and entity that we have around the world - Honeywell is present in 100 countries. This is one issue that keeps me up at night.

Counterparty risk is another area of concern. Treasury needs to ensure that it observes certain parameters and is proactive in thinking through what could happen, as well as considers various alternatives and options on a forward-looking basis. One of the topics we will be examining in the next few months is zero yield. How do we handle that? What are the options that we want to capture? These are the issues that we need to solve.

Q (gtnews): Do you think the role of the banks will further diminish in future? If ‘yes’, which alternative sources of funding will fill the gap?

Answer (Dubois): Today, large corporates have access to bank and market funding and I think this will continue. The importance of building, maintaining and developing strong relationships will continue to be paramount. Bank funding will continue to be important but may develop into a different type of funding, for example supplier financing. In that sense, we need to explore different funding avenues.

Basel III will have an impact on the cost of funding and in the way some corporates will be treated by certain banks. Depending on your rating, it will be easier for some corporate categories to have access to bank financing, while others may not have the same level of access and will have to explore different avenues of funding. I feel confident that Honeywell will have access to bank funding.

As a result of the Basel III capital ratios, banks will try to demand certain things from corporates, such as longer-term deposits. In return, banks will need to develop new products - and some have already - that are flexible enough for corporates not to feel trapped or constrained. In this market banks will develop new products that are compliant with what Basel III requires but flexible enough for their corporate clients.

Q (gtnews): How, in your opinion, has the job of treasurer changed since you started your career?

Answer (Dubois): Corporate treasury has gained greater visibility in an era of crises - whether banking, economic or sovereign debt. With interest rate and foreign exchange (FX) volatility, our advice is sought more often at the board level. In addition, we now have input into a wider variety of business areas, such as supply chain, real estate and investment. The good news is that we are increasingly visible and closer to the business units. We have to be - we cannot be housed in an ivory tower and only speak to the banks. We need to communicate with the business units and really understand their needs, making sure that we help them drive growth for the company. I think all of those are important aspects of the job.

We also need to manage reality. Reality may be tougher but we need to find solutions. And that is the ethos I want to drive in the organisation.

Q (gtnews): What steps will you take in the year ahead to make your treasury department more efficient?

Answer (Dubois): To make treasury more efficient, we want to invest in automation technology. That is a big thing we are driving forward. We will also invest in staff. It has become more difficult to attract good individuals, so we need to ensure that we develop, coach, train and mentor them. It is important to ensure they are engaged with what is happening around them, because the last thing you want is to have a stale and inwardly focused treasury department. You want people who have an understanding of their business partners’ requirements and are able to bring value to the relationship.

Q (gtnews): Do you expect several more years of difficult economic conditions? If so, how should a treasurer respond to the challenge?

Answer (Dubois): I am a pessimist, so unfortunately I think the years ahead will continue to be tough. However, as I said, there are always options and alternatives. Basically we need to assess business requirements - their demands and what they need from treasury in terms of financing suppliers and customers, as well as making sure they have access to capital. We need to find solutions because fundamentally we don’t have a choice - the business will not develop otherwise.

Q (gtnews): Have you put in place contingency plans in case of a eurozone break-up?

Answer (Dubois): Honeywell’s Greek exposure is limited, so it is lucky to that extent. We have made some basic decisions similar to those taken by other corporates. For example, we have not left any cash in Greece. We have opened non-resident bank accounts, so entities have their own cash but it is no longer held in Greece. Of course they are part of the euro cash pool, so that simplifies things as well. For years now we have concentrated on monitoring counterparty risk, from a country, banking system and counterparty bank standpoint. We have also set up a euro task force and are frequently assessing various risks.

Q (gtnews): Are there specific challenges to operating in Asia?

Answer (Dubois): Yes. Understanding the regulations is very difficult, for example in China or India. It is important to have people that can decipher them for you. That is why finding the right people at the right level who really understand the corporate culture, as well as understanding the local culture, is critical to operating in Asia.

Honeywell has a regional treasury centre based in Singapore, with an arm in Shanghai. The red tape that we have to cut through is extremely cumbersome. And like many corporates operating in the region, cash mobility is a challenge.

First published on www.gtnews.com.

Corporations Expand Mandate for Treasurers, Finds AFP Survey

16 Oct 2012

As a result of the critical role that corporate treasury departments played in sustaining their companies through the recession, companies are expanding the role of the treasury function, according a survey by the Association for Financial Professionals (AFP), released on 15 October at the AFP’s annual conference. With the crisis abating, corporations are not scaling back this role but doubling down on it, while continuing to lower treasury banking costs and demand efficiency from the function.

The 2012 AFP Treasury Benchmarking Survey, underwritten by PNC, found that 55% of organisations expanded their treasury’s mandate over the past five years versus just 5% that narrowed the focus. This expansion is even more common at large companies with annual revenues over US$1bn.

Thomas Hunt, certified treasury professional (CTP), director of treasury services, AFP, said that external pressures, such as the volatility in the environment, stretched supply chains, rapidly evolving regulations and globalisation, were impacting treasury, effectively broadening its remit and encouraging treasurers to embrace a more strategic role within the company.

Two-thirds of survey respondents said that their treasury department now oversees at least 18 functional areas ranging from cash flow forecasting to financial risk management, financial planning and analysis (FP&A), M&A, and investor relations - all the way to employee benefit management. This expansion of the treasury role appears to be permanent, indicating the importance of treasury in good times and bad.

Significantly, the corporate treasury departments that have expanded recently tended to do so with normalised cost structures that barely differ from departments that have not seen a significant change in structure, though they also tended to have larger staff to absorb additional work.

Staff expansion was true of the two treasuries - Toyota Financial Services (TFS) and Cliffs Natural Resources - represented on the panel discussing the results. Both treasury professionals, Lisa Chao, liquidity risk and FTP manager, TFS, and Dwayne Petish, director, global treasury strategy, Cliffs, reported adding to the number of full-time equivalents (FTEs) in treasury, moving from 25 to 40 FTEs over a period of five years in the case of TFS, while Cliff almost tripled its number from five to 14 FTEs in 18 months.

Also indicative of the overriding efficiency concern: the two most common success metrics for treasuries are reduced banking expenses (79% of organisations) and improved efficiency (71%). Annette LaPrade, global deployment lead, IBM benchmarking programme, reported that organisations that measured an increase in efficiency typically boasted departments with fewer FTEs and lower costs for treasury operations.

Treasurers surveyed did not think that cost efficiency itself was a universal measure of a treasury department’s success, due to variables in business type, borrowing structure and business model. Anecdotally, some companies measured treasury success by maintaining liquidity and paying down debt whenever possible. Others sought opportunities to repatriate overseas cash to pay down US debt and measured success by the ability to keep interest expense below budget. A number of treasurers said they are judged on their ability to identify opportunities to put cash to use versus keeping it idle.

Read the article ‘Results of the 2012 AFP Treasury Benchmarking Survey’ for a deeper analysis of the survey results. 

First published on www.gtnews.com.

AFP2012: Increasing Your Organisational Influence

17 Oct 2012

In order to succeed in raising treasury’s profile and influence within an organisation, treasurers should look at three areas: initiation, education and communication.

In a world where being strategic is becoming a burning imperative for treasury, the question of how to raise the department’s profile within the organisation is one that resonates with many treasurers.

More than 150 financial professionals packed into an AFP conference session entitled ‘How Treasury Can Increase its Organisational Influence’, led off by Carrie Moore, managing director, treasury sales executive, energy and power at Bank of America Merrill Lynch (BofA Merrill). She was joined on the discussion panel by Kim Sipes, certified treasury professional (CTP), director of treasury, Duke Energy; David Symons, treasury manager, Southern Company Services; and Rene Bustamante, staff vice president and assistant treasurer global cash management, FedEx.


Bustamante tackled the first topic: initiation. FedEx, which is divided into four operating companies, operates in more than 200 countries and has 300 treasury team members in three treasury centres in Memphis, Brussels and Hong Kong. Bustamante has been at the company in different roles for the past 19 years; two years ago he was promoted to his current role. At this point he decided that it was critical to get to know everyone in treasury and set a time limit of 60-90 days to meet all that reported up to him.

“The pulse of any company is at the bottom,” he said. “I wanted to build bridges and hear what treasury employees has to say - the good, the bad and the ugly. Clearly, what they were saying was that they wanted to have more strategic input in business operations.

Bustamante said that it was important to educate the chief financial officers (CFOs) of the different business divisions as to what treasury did. “It is an invisible function that is the lifeblood of the company but no one understands what exactly we do,” he explained. However, he did not just stop at educating company CFOs, but also built bridges with tax, legal, accounting, HR and sales.

“The strongest bridge is with tax,” he said. “Tax tends to move to its own beat and treasury is the last one to know what they are doing, yet it has a big impact on treasury. Understanding what each other does is the first step in building a communication pipeline.”


Duke Energy’s Sipes continued on the theme of education. With seven million customers, Duke Energy’s business relies on customer service and satisfaction, and the treasury should be no different. “Treasury’s customers are internal business customers; therefore they should be treated the same as external customers. We work in partnership with many company parts. Education is a two-way street and it is important not just to educate others but also to be educated by them.”

Sipes said that treasury initiates contact and looks to be educated by business partners first to ensure that it has a seat at the table. “We go to them and learn about their processes, pain points, objectives and incentives. All of these business units touch cash, and in a situation where cash is king, incentives are tied to efficiencies around cash.” She added that treasury has the ability to see the big picture and how each business unit fits into that picture. Once the relationship is established, then it becomes easy to tailor the treasury message specifically to them.


Symons from Southern Company Services pointed out that for treasury to achieve its goals, it needs a communication plan to get across what it wants at the right level. It is important to identify whom you are speaking to and what do they know/expect from treasury.

He highlighted a number of useful tools such as networking and mentoring groups, which can be used to promote cross-functional understanding. “It’s not just about saying this is what we do, but a great opportunity to sell treasury by connecting it something meaningful to what they do,” he said.

Symons used the example of a mentor meeting when he was asked if treasury could help with a remittance project. “Even if it is just a minor part of your job, this is an opening to do something more. Don’t throw away such opportunities,” he warned.

Build It and They Will Come

Duke Energy’s Sipes outlined a number of tips for the audience:
  • Communicate both top down and bottom up.
  • Know your audience.
  • Give them a seat at the table and they will reciprocate.
  • Share webinars, articles, etc that will help in understanding treasury’s role.
  • Offer shadowing opportunities to help with knowledge sharing.
  • Bring in business partners for bank and vendor meetings.
  • Enthusiasm is contagious.
  • Listen well, be patient and follow through.
She concluded with a specific example of how treasury was engaged to review the company’s card programme, which was made up of three completely separate schemes - management, providers, etc. The company wanted to bring all divisions onto a single card programme. One division had to be brought kicking and screaming to the table. But as soon as they truly understood the benefits, they became the biggest proponents of the card programme and treasury.

First published on www.gtnews.com.

AFP2012: Risk Lurks in the Back of Treasurers’ Minds

15 Oct 2012 

The current economic environment, particularly with the threat of a fiscal cliff hanging over the heads of US treasurers, has done nothing to ease the minds of financial professionals. Therefore, it is not surprising that sessions dealing with risk management were a popular choice for attendees at the Association for Financial Professionals (AFP) Annual Conference in Miami.

Risk management remains a major concern for corporate treasurers attempting to steer their companies through choppy economic waters. Many are looking to uncover best practices in identifying, measuring, mitigating and measuring risk, but also trying to discover ways to turn risk into opportunity.

In the session entitled ‘Best Practices in Corporate Financial Risk Management: Market Study and Case Study with Pepsi’, Jiro Okochi, chief executive officer (CEO) and co-founder, Reval, presented recent survey results. Ada Cheng, vice president and assistant treasurer, Pepsi Co, joined him on the panel to illustrate treasury best practice in risk management.

The main findings of the survey include:
  • The vast majority (92%) of chief financial officers (CFOs) see the main objective of risk management is to reduce earnings volatility. Forty-one percent of treasurers chose reduction in profit and loss volatility, while an equal amount said that protecting cash flow was of paramount importance.
  • Most that review/update their risk management policy at least once a year. Still 12% say that they don’t have a formal risk management policy.
  • The overall hedging strategy has returned to a traditional conservative approach, compared with 2010 when treasurers used selective hedging in reaction to market volatility.
  • Exposure measurement is still a thorn in treasurers’ sides. Over half (58%) find measuring bank counterparty exposure difficult, whereas 63% find foreign exchange (FX) exposure difficult to measure. For most companies, FX is still not fully hedged.
  • Only 20% use either a treasury risk management (TRM) system or a treasury management system (TSM) to hedge. Almost half (45%) still rely on spreadsheets for hedging.
Case Study: PepsiCo

Cheng said that PepsiCo, which operates in more than 200 countries and has 60-70 employees working in a centralised treasury structure, has generic risk management policies that are reviewed once a year. This does not mean that they are updated every year, but are regularly reviewed. It employs a conservative hedging strategy for underlying exposures.

Commodities risk is a focus area for PepsiCo, as volatility in commodity pricing increased dramatically between 2007-2012. These market changes, as well as changes within PepsiCo itself, in the past two to three years drove the need for change in commodities risk management (CRM) approach. The main CRM questions revolved around the global scope of the company, transparency, clarity of roles and simplicity.

PepsiCo developed a new centre of excellence (COE) model and upgraded the CRM model in order to put in place key risk management processes. The CRM was global in scope and approach. It defined coverage standards, defined governance process and standardised performance tracking across geographies and commodities.

Treasury and accounting, in partnership with global procurement, played key roles in executing risk management as defined by the COE. The COE developed global commodity playbooks, a new governance model, global reporting and an underlying data infrastructure. The playbooks included category insights, market groupings, strategy and coverage horizons, as well as detailed geographic background.

Cheng stressed the importance of understanding the business manufacturing side in order to hedge. As a result, PepsiCo treasury works very closely with business, for any change in the manufacturing cycle or country specific issues will have an impact on the hedging strategy.

First published on www.gtnews.com.