1 February 2019

The ACT Brexit poll is into its 4th month and it’s interesting to see how treasurers are progressing with their preparations. If you have 3 minutes, it would be great to get an update from you of where you are on your preparations.

planning Q1 I understand my worse case funding/liquidity requirements Q2 I know I have sufficient liquidity facilities Q3 I have collected a list of all relevant legal contracts Q4 I have reassessed my FX risk Q5 I understand how my cash pooling will be affected Q6 I understand what changes are needed to my existing bank account arrangements Q7 I understand the tax impact Q8 I understand how the business is changing and impact this has on treasury

Implement Q9 I know I have access to sufficient liquidity to fund my business under stress Q10 I understand how my legal contracts will operate post Brexit Q11 I am able to withstand FX volatility in line with policies and stakeholder objectives Q12 I have made all of the necessary changes to my cash management Q13 I knpw that treasury remains fit for purpose


The overall message seems to be that most responders have taken sufficient steps to ensure they have sufficient liquidity and are comfortable with their existing / revised approach to FX risk management. Even in the area of cash management and banking (which is the hardest to change), almost two-thirds felt they had done enough to ensure their banking arrangements could continue to support the business. We understand that part of this is a result of the increased likelihood of a no-deal Brexit which has forced teams to focus on Brexit planning.


It is promising to see that almost two-thirds of those surveyed had undertaken an analysis of their liquidity requirements (including some form of stress testing). This is significantly higher than January when less than 50% had undertaken some analysis. We understand that part of this may be a clearer understanding of the impact on supply chains from procurement teams and as the effect of stockpiling on working capital becomes more tangible. Given the importance of actual liquidity to all organisations, it is heartening that over 90% of responders have stated that they have reviewed and tested their liquidity facilities and feel they are sufficient for both BAU as well as any specific stress event. We know of one example where the Treasurer has negotiated a specific facility as an insurance policy just in case Brexit has some unintended consequences for their own liquidity. Overall this is great news as we are all aware of cases where facilities suddenly became unavailable (sometimes because the sole signatory had left the company years ago!)

FX risk management

Currency markets have experienced significant volatility since the results of the referendum were announced. For many well organised treasury functions, their policies and procedures have managed to cope with the large moves and their risk appetites have not needed any changes. For the less mature organisations, there has been a need to review and ensure that policies, procedures, risk appetites and reporting remain fit for purpose and what has become a new norm. Our survey shows that almost 80% of responders have now reviewed their currency exposures and are comfortable that they can withstand any additional FX volatility from current levels. This demonstrates a lot of work that has gone into engaging with the business and modelling exposures to build hedging strategies that can manage currency risks and mitigate any margin erosion. More detailed discussions with banks and corporates suggest that: 1. Some corporates are taking advantage of current levels to hedge currency receivables for a longer period than normal (but within policy limits) 2. Some importers are reducing their level of cover of uncommitted exposures for the next 12-24 months (but within policy limits) 3. Some corporates have added to the portfolio of currencies they include in their hedging programme 4. Some corporates have left orders in the market to manage the impact of any steep movements 5. A number of corporates are taking specific action for March 29th 6. Given how close March 29th is to the year end for a number for companies, translations risks are being watched as is any swapping of surplus currencies The overall message seems to be to manage within policy and keep residual risks to a minimum to avoid any surprises.

Cash management and Banking

These are arguably the most complex and time consuming to amend given the documentation requirements. Over 80% of respondents now understand what changes they need t make to their banking arrangements and over 70% have been able to implement these changes. Our discussions with treasurers suggests that the main activity has been opening a bank account within the EU27 to ensure continued access to SEPA. Cash pooling is more complex and although the results here are lower, almost two-thirds have implemented to necessary changes to their cash pooling and general cash management activities to ensure they remain effective and just as importantly – efficient (ie with no additional manual intervention).

Treasury still fit for purpose

Our last question asks if the treasury function remains fit for purpose. It is reassuring to see that over 70% of responders feel that their treasury function continues to be ready to support the business. This suggests that treasurers have invested significant time and energy engaging with the business to reassess their requirements and to ensure they can continue to manage the financial risks the business is exposed to. Thank you to all those that responded and please keep participating.


BREXIT POLL How are your Brexit plans progressing?


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