The Treasurer May 2007
Location, location, location
Several hundred treasurers and other financial professionals gather in May in Edinburgh for The Treasurers’ Conference. The interest generated by the event suggests a treasury profession which is in good health. The conference programme underlines that treasurers have full agendas and are being asked to face issues of key importance to the well-being of the global economy. One of the strengths of the treasury profession is its capacity to network, its willingness to engage in debate about the best way to approach and resolve problems and issues.
A confident profession is one that is not afraid to listen and to learn from others. A prime example is the pension crisis, where treasurers have used their contacts in the banking industry and the actuary profession to form an alliance that is manifestly helping pension trustees and sponsoring companies fulfil their obligations to current and future pensioners in many organisations. Over the past couple of years, as the perfect storm of the pension crisis has broken, treasurers have demonstrated that they are comfortable being at the centre of events, where they can see and explain the bigger picture, as well as understand and work out the fine detail.
The pension crisis isn’t an isolated incident. Risk management, shareholder value, private equity and taxation are of equal concern to directors in the boardroom, who are looking for solutions from the treasury department. Of course, this has to be seen in context. Treasurers are competing with other professions to retain and enhance their educational status and their corporate prestige. Treasurers face challenges from technology, changing organisational structures and corporate trends, such as the financial restructuring engendered by private equity.
The career of the treasurer never can, and never should be, taken for granted. But treasurers should not forget they have advantages too. A year ago at The Treasurers’ Conference, Paul Tucker, the Bank of England’s Executive Director for Markets, said that treasurers were positioned where the real economy met the financial economy. He was right then and he’s right now. This splendid location allows treasurers to translate the financial economy to the real economy, and vice versa – and sometimes a lot of explanation is needed. Events such as The Treasurers’ Conference are one way of ensuring the treasury profession remains aware of the challenges it faces and is as well equipped as possible to meet them.
PETER WILLIAMS
Editor
marketwatch NEWS (TT May07 p4-6)
Workers pay the price of private equity ownership
Private equity firms that take over companies and bring in new management teams cut jobs and hold down wages, but management buyouts that take companies private expand jobs and have a softer impact on wages, according to a report by The Work Foundation.
Transactional cashflows still drive hedge activity (TT May07 p8)
Companies’ hedging activities remain squarely focused on hedging transactional cashflows, with 12 months the most common maximum tenor for hedging forecasted transactions, according to a recent study.
marketwatch TECHNICAL UPDATE (TT May07 p10-11)
Moody’s backtracks on banks
Ratings agency Moody’s has revised its methodology for incorporating its Joint-Default Analysis (JDA) into its bank ratings and as a result has downgraded the ratings of 44 banks it only recently upgraded.
Shell heads back to dollar market (TT May07 p13)
Shell International returned to the US dollar market with a 
1bn debut offering last year, and investors required some spread concession from the Aa1/AA issuer.
Ask the experts:Ask the experts: A question of attitude (TT May07 p14)
What is the relationship between shared service centres and the treasury function?
The inconstant MPC (TT May07 p16-17)
The Monetary Policy Committee is not inclined towards consistency and has a habit of choosing what may be regarded as a pressure point, only to drop it when it proves to have been an exaggerated concern. The market expects to see a divergence of 4.35% between prevailing short-term interest rates and the CPI inflation level towards the end of this year. If this happens, it will be the highest level of real interest rates since 2001. The consumer is starting to be less vigilant on price increases. Over the past decade every time that manufacturers and retailers have tried to increase prices by more than an amount justified by the inflation rate, consumers have gone on a buying strike.
Broader horizons (TT May07 p18-19)
UK pension schemes still take the vast majority of their rewarded risk in the equity markets. Diversifying into alternative assets and use of structured solutions is a way of reducing risk without necessarily reducing expected returns. Other mainstream sources of return such as credit risk are currently being underexploited.
Probing the issues (TT May07 p20-22)
Adnams FD Stephen Pugh talks to Peter Williams about brewing, the pitfalls of hedging, and green roofs.
An era of customisation (TT May07 p24-26)
Franck Robard and Antoine Loudenot of Société Générale Corporate and Investment Banking look at alternative funding: hybrids and their derivatives.
The Treasurers’ Conference (TT May07 p28-33)
Adrian Coats, Chairman of the Treasurers’ Conference 2007, summarises the key topics at this year’s conference and identifies the important issues for the treasury community over the coming year.
A single position (TT May07 p36-37)
The global cash management industry is challenged by consolidation, intense competition and business customers who are not only more demanding, but increasingly global. Consequently, corporate customers need greater standardisation and transparency of bank products, pricing and payment systems.
Focus on the nuts and bolts (TT May07 p38-39)
Small and medium-sized enterprises are vital to the success of any economy, but few SMEs can afford to have large treasury teams on their books. However, they still have to cope with treasury transactions which can be as demanding, complex and important as those undertaken by large companies. So how can smaller companies effectively and efficiently deal with treasury?
The party goes on (TT May07 p40-41)
Leveraged lending continues apace. According to Standard & Poor’s Leveraged Commentary & Data (LCD) volume in US and Europe has increased from a low in 2002 of €180bn to €500bn in 2006. And with the appetite seeming to grow on what it feeds, 2007 could be a bumper year.
The silver lining (TT May07 p42-43)
Recent acquisitions in the TMS industry mark the end of a prolonged period of consolidation that has created a more focused market. The driving force behind the latest round of mergers and acquisitions has been a flood of cash. Dissatisfied with the service they are getting or with their TMS supplier, treasurers are looking for replacement systems. Acquisitive suppliers reject suggestions that they have bought up rivals to terminate their products.ERP treasury modules have come a long way since they were first designed and may become more popular with treasury departments.
The battle for talent (TT May07 p44-45)
Matthew mattheou and deborah thomas offer some timely advice for positions and for candidates cutting a path through the career jungle and ponder what may come.
