Standardisation can be good / Risk management must be good

Events keep dishing out lessons that we ignore at our peril. The massive oil leakage in the Gulf will fuel several books but one lesson we should reflect on is the view we all take of risk management.

Do we really consider the scenarios that could adversely impact on our organisations? In the past those trying to raise the profile of the negative scenarios might have been branded as pessimists. Today we can get the attention of the Board to consider the potential scenarios – however remote. Remote they may be but are we clear that we can handle them?

I have long been a believer that insurance should, for large companies, be viewed as part of the disaster mitigation plan. So a hefty slug of self insurance is usually cost effective. However, depending on the risk and the size of the company, disaster insurance (if available) should only be dismissed after rigorous evaluation – where the Board is confident that the organisation can handle the disaster scenario. If insurance is not available or not cost effective and the potential impact of an event is far reaching in financial terms there are other questions the Board must ask itself!

The ACT recently took the unusual step of issuing a press release that opposed the proposals published by ABI, BVI, IMA and NAPF for the standardisation of model covenants for sterling and euro bond issues. To précis our press release:
The ACT supports the concept of standardisation. However, for any market to flourish there has to be an appropriate balance of interests between the parties as to terms, pricing, amounts and, especially, conditions.

This is a unilateral attempt (by investors) to move the market in a particular direction rather than taking account of existing custom and practice and suitability of terms in different sections of the market – investment grade, intermediate and sub-investment grade.

Today there is a shortage of bank funding. Businesses are more dependent on capital markets where they will have to compete with banks issuing more long-term debt as a result of more onerous bank regulation.

The ACT has sought and received assurances from the Chairman of the ABI Bond Committee (Rod Paris) that they will engage with the ACT to find those areas where standardisation can be made to work or where a genuine "menu of building blocks" approach can be crafted. Clearly a helpful move.

Displaying a truly non-partisan stance, we have now covered the three main political parties at the ACT Annual Dinner by confirming Alastair Campbell as speaker for this year’s dinner, taking place at the Grosvenor Hotel on Wednesday 10 November. Mr Campbell is a controversial figure and I am sure this will be an entertaining, lively and relevant after-dinner speech.

If you have not yet booked your table, don’t delay too much as we are already three-quarters full!

The J.P. Morgan Asset Management Global Cash Management Survey represents a unique barometer of cash management trends around the world. Now in its 12th year, the survey has provided a benchmark for corporate treasurers since its launch in 1999. The quality of the survey’s data and its long track record allows meaningful comparisons to be made and long-term trends to be identified. The survey also represents the only truly global analysis into the cash management industry, providing a vital resource for treasurers looking to measure themselves against their industry peers around the world.

The survey will be conducted between 1 July and 30 September 2010, with the full results available early in 2011. For the first time this year, all participants in the survey will receive preliminary results, broken down by their particular industry. These preliminary results are expected to be available in November. You can make your voice heard by participating in this year’s survey via the J.P. Morgan Global Liquidity website at www.jpmgloballiquidity.com or click here to complete the survey now.

The ACT Middle East network continues to grow and we are seeing a rising demand for suitably qualified treasury, risk and finance professionals across all types of organization. To help satisfy the increasing demand for treasury knowledge, a digital version of The Treasurer Middle East Supplement is now available at www.treasurers.org/thetreasurer/middleeast/201006

The closing date for nominations for the ACT’s Middle East Treasury Awards is 29 July in the categories Bond Deal of the Year, Loan Deal of the Year and Treasury Team of the Year. Submit your nominations to peter.matza@treasurers.org. The awards will be presented at the Gala Dinner on 13 October after the Annual Conference in Dubai, the major Middle East treasury event of the year. For more details, including early booking discounts, click here

By Stuart Siddall