A summary of the sessions from day 2:
The role of corporate banks on survival strategies
The highlights:
Banks are not on the frontline of the current crisis, unlike previously, but their role now is to provide support, most of which is available via normal commercial routes, but also via government schemes.
Banks also provide valuation attestations for non-rated corporates looking to access CCFF, and there has been extensive take-up of payment holidays by SMEs, which need to be viewed differently than during BAU, and as such bank boards need to react accordingly.
Banks are in a much better liquidity position now compared to 2008/9:
• Central banks are very aggressive in supporting liquidity
• Better buffers due to Basel III
• Liquidity order of magnitude is better compared to the previous crisis
• Banks are reserving capital for potential future waves of the crisis
Capital markets have also helped with high levels of issuance to provide finance for corporates.
Advice to corporates:
• Speak to lenders - RMs now have more capacity for conversation
• Ensure good communication with front line of your business – understand the current situation
• Understand the organisations self-help levers and what the stresses are on those - look at options to diversify financing beyond the usual.
Strategic leadership in response to disruption
The highlights:
Key challenges for leadership teams:
• Managing people and teams - enabling teams to work from home safely and securely and acting with empathy
• Cashflow - understanding revenues and adapting to working capital accordingly; understand the role of the bank and access to finance; understanding the need for ongoing reviews and to be able to challenge results
• Managing the wider business and stakeholders - trusting business partners, understanding stakeholders and individual circumstances and adapting accordingly
Some useful advice:
• Draw on previous experiences and lessons learnt
• Use information learnt from qualifications
• Do the best with things that you can control
• Think broader than current tasks to understand the bigger picture
• Focus on future outlook - look for future opportunities such as restructuring opportunities
• Take time to reflect on lessons learned
Business Continuity Planning – surviving first contact
The highlights:
The most surprising challenge during the crisis has been the human impact on the team. The distinguishing factor of pandemics is the duration and extent of the effect, so an agile working setup is necessary.
There is a welcome move away from paper, as well as wet signatures, and this is being accelerated by the current situation.
A key risk for BCP paralysis
it is important to have a holistic approach as most issues lead to the same result, i.e. access to people or systems etc. Teams can then adapt to the specifics - respond to the problems not the causes!
Advice for treasurers:
• The ability for remote, effective communication is key - employees need time to get the job done, yet communication is important but vital to vary patterns
• External communication is important, including outreach programmes with customers and other key organisations
• Need to be alert to fraud – it’s more important than ever!
• Mental wellbeing is very important – avoid over burning colleagues, but providing human contact for those that live alone is also key
• Need to have the BCP on another server so if it is encrypted and unavailable, it is still accessible in the event of a crisis
Cash is still the No.1 priority, whether a King or a Queen
The highlights:
Treasury focus over the next three months
• Focus on the basics - ensure there is enough liquidity to operate but no more
• Be active rather than passive in the use of finance
• Keep plugged into the wider business and keep in contact with external stakeholders
• Build a platform for resilience
RCFs
• Draw down when necessary rather than automatically
• Have good scenario planning to demonstrate lack of need when combatting wider business pressure to draw down. Give examples where it might be needed and then monitor - unnecessary draw down can be expensive!
Government schemes
• Do you need it? Does it cut across other finance covenants?
Technological aspects of cash management
• Do you have the right data?
• Is there sufficient connectivity between the business units?
• Do you have the technology to manage it?
FRINGE TALK: A silver lining for Fintechs (Part III) - How multinationals are dealing with national crisis funding
The highlights:
Longer-term liquidity planning and cash forecasting was focused upon less due to time or excess liquidity, but in the current situation, the need for some cash planning or forecasting is a key divider.
Advice to treasurers for both now and going forward:
• Set up basic liquidity planning – anything is better than nothing. Giving insights from cash management will make a difference between getting funding from a bank or not.
• Being prepared doesn’t solve everything but gives a headstart, and means one is not completely blind, allows one to focus on decision making and become more granular in scenarios
• Relationship management helps with better terms and opens wider financing options – but also consider which of your banking partners were the most helpful? Should you consider capital markets more closely going forward?
• Consider both risk appetite and risk capacity
National emergency funding programmes have complex requirements and involvement in one may affect involvement of subsidiary in another – so one needs to fully investigate the options – and consequences.
FRINGE TALK: A silver lining for Fintechs (Part IV) - Fixed term funds: A better alternative to term deposits
The highlights:
Introducing TreasurySpring, a fintech that helps reduce risk on cash investments via investments in fixed term funds. The platform allows all firms to invest their excess cash holdings in the same way as the largest, more sophisticated treasury teams in the world, without any of the financial, operational or risk management infrastructure.
FTFs allow corporates to access Govt, secured bank (reverse repo) and investment grade corporate exposures, yet operate like term deposits, and unlike MMFs, are 100% maturity matched, and each FTF offers exposure to a single counterparty for a fixed term at a fixed rate.
Why should government holdings be a bedrock of a cash investment portfolio?
• Return of capital is the primary driver of their cash investment strategy rather than return on capital
• Never more important than in times of financial markets volatility or distress
• Govt debt closest to risk free investment – no development world
• Govt has defaulted on its debts since WWII.
International Treasury Week took place online on 11-14 May. Current delegates can access recordings from the event until 11 June.
Details of our next online event - The Festival of Treasury Transformation, 13-16 July, will be announced soon.
