What the pandemic has highlighted for organisations of all kinds is the importance of cash. Treasurers have, of course, always been keenly aware of this; however, the speed and urgency with which they have had to make decisions during the past year have reinforced that message and made visibility of cash vital.
Business continuity, risk assessment and securing operational funding became an immediate focus for treasurers when the first lockdowns hit in March 2020, as senior management teams scrambled to ensure staff could work safely and effectively from home.
But as treasurers told the ACT Cash Management Conference, it was the granular work required on cash management that really challenged treasury functions. Watch the replay of the session here.
James Marshall, head of treasury at Virgin Media, sets the scene on key issues at the media and telecoms group: “We operate in a large complex industry, with many moving parts and big payments to make, be they suppliers, interest or VAT bills. We had to keep a really good grasp of all of that and maintain our visibility of systems,” he says.
In this new and high-pressure situation, Marshall says he had expected to see difficulties in some areas. In the event, few materialised – a result he puts down to the calibre of the team and a collective desire to perform well even under extreme conditions. “Great teamwork and nobody wanted their area to be the one shown to struggle. That was very important to them.
“My message to the team was to concentrate on systems security and cash visibility. My treasury background and Association of Corporate Treasurers [ACT] education certainly helped in setting
a platform for us to work to.”
For Hailey Laverty, group treasurer at InterContinental Hotels Group (IHG), which owns the brands Holiday Inn and Crowne Plaza, being in an industry particularly hard hit due to the global lockdown meant she had to consider funding and cash flow in each territory.
“Assessing things operationally from a treasury perspective, we had to think in terms of funding some of our subsidiaries, which historically didn’t need a lot of regular funding. We had to think in a very individual country-by-country way. Could we anticipate what the cash-flow impact of the crisis might be, for instance? Obviously, we knew that as a hotel company we were going to see a significant impact. We had to do a lot more granular work on some of those countries than was needed previously,” says Laverty.
The onset of COVID-19 accelerated the move towards digitisation in treasury, with the notable need to analyse data and capture trends to provide real-time answers on cash flow. The period has also highlighted how clearer cash visibility will be progressively vital to manage future unknowns. Experts suggest the speed of digitisation will continue to increase as treasury functions require access to real-time information.
Nicolas Christiaen, global CEO of cash and working capital forecasting fintech Cashforce, adds that during the crisis it became apparent that additional focus around cash visibility is far from a short-lived fad. “In the future, it will remain vital to keep a good grip on cash for potential unknowns. The COVID-19 crisis introduced new risks for the future into the system, leading to more questions being asked by different stakeholders that required faster answers,” he says.
The complexity of cash management has increased with organisations at different stages of their digitisation journeys. Few corporates have perfect, clean data to analyse, but the growing adoption of machine learning and artificial intelligence treasury tools have shown that they can speed up these processes to provide treasurers with quicker answers and solutions – a realisation that can be expected to pay performance dividends in the future.
Assessing things operationally from a treasury perspective, we had to think in terms of funding some of our subsidiaries
For instance, one aspect of treasury technology brought into focus is how very Excel-dependent treasuries are when collating information to make decisions. The message around future-proofing has now been heard loud and clear.
“Cash forecasting and putting together statements, making better use of some technology is something that we’re going to be doing with more rigour in the future,” says Marshall. “I think that more future-proofing is needed.”
Despite the economic turmoil, treasurers found their bankers were supportive, positive and vital. In the future, treasurers said they anticipate that the emphasis on the two-way relationship with banks would be key, as well as perhaps a broader church of banks for more specialist areas.
Marshall comments: “The ability to talk freely with bankers about operational issues was very helpful.”
Laverty agrees: “Right at the start of the crisis, all our banks were interested to try to understand the impact on the operational side, and whether we needed any additional support with any potential cash-flow impacts. It was useful to have those conversations with our bankers just to set the scene in terms of where we are practically.”
Laverty adds that her group’s banks were very supportive in helping the team negotiate covenant waivers and amendments, as well as discussing the business model and always thinking about what the picture looked like going forwards.
Having underscored the need for detailed cash forecasts and a deep understanding of working capital, the pandemic crisis will – it is to be hoped – clear a path for new technology in treasury functions.
Visit the ACT Cash Management Hub.
Michelle Perry is a freelance writer and editor specialising in business and finance
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