Current conditions – the lockdowns precipitated by the COVID-19 pandemic, reduced commercial activity and the squeeze on liquidity – are all features of today’s working world that represent steep challenges for treasurers, the starkest many have of them will have faced.
Since the onset of the lockdowns, The Association of Corporate Treasurers’ (ACT’s) chief executive, Caroline Stockmann, has been taking soundings from members about their lives under COVID-19. “Everyone agrees this is the busiest time they’ve seen – and the most challenging, most finding it far more so than the global financial crisis. Treasury is right in the middle of things. Cash is king (or queen!), and that places a huge responsibility on treasurers,” she says.
There are healthy challenges within that picture, she notes, but there are also deep frustrations. Existing bank relationships are coming under pressure at times. Navigating the various government schemes can also be complex.
Some weeks into lockdown and many treasurers are still very much embroiled in liquidity issues, while others are looking further down the line at what their businesses will need in the medium to longer term. Conditions are volatile and demands are intense and shifting frequently.
“It has to be remembered also that this is more than just a technical challenge,” Stockmann continues. “Mental health and wellbeing are paramount, and treasurers must ensure they’re looking after their and their team’s needs, in those respects. That’s easier said than done, of course.
“Parents of very young children are finding these times difficult. And there are intense pressures on the work front, such as having to respond to boards that want more cash drawn down than is needed. The pressures are particularly acute in businesses that are struggling. We have heard of 100-hour working weeks,” she says.
Naresh Aggarwal, associate director of policy and technical at the ACT, says supply chains represent an area of considerable concern. “That’s where the biggest companies are experiencing the most risk,” he says. “There are examples of good and bad behaviour out there. There are organisations that are paying bills on time and those that are holding on to cash because that’s the most secure thing to do. The velocity of money has really slowed in global supply chains and cash forecasting has become almost impossible for some.”
Many businesses are inevitably struggling with the slump in demand caused by widespread lockdowns – travel and hospitality being an obvious case in point. However, the high and unpredictable demand seen in food retail, production and distribution has also caused issues, as businesses struggle to scale up and keep up with demand. “Christmas you can provide for,” one treasurer commented. “Sudden spikes are more difficult.”
Some bigger businesses in the food sector are attracting praise for paying their service providers early – wise to the fact that the entire business ecosystem needs protecting, not merely sections of it. Not all are so enlightened, however.
While financial markets are undeniably volatile, the fundraising situation is not unfavourable. Low-risk businesses with strong balance sheets have been able to return to the market since the onset of the pandemic, taking advantage of benign interest rate conditions.
The key, one treasurer told us, will be preparation and a solid understanding of the organisation and the CFO’s pricing preferences. “What all treasurers will have to do is put themselves in a position where they can issue debt at the right time and for the right price.”
Here again, good relationships will be paramount. “If you look back at the past 10 years, you haven’t necessarily always needed strong advisory relationships at banks to get deals away. Now, strong relationships and good skills are more in need than ever.”
The situation for all remains hard to predict. “The initial focus has been on the immediate business needs and cash forecasting,” a Singapore-based treasurer said. “We are aiming for higher accuracy as things progress – and we are able to function quite well. But it’s not a stable environment any more. We are transitioning into the unknown.”
The challenge remains the level of uncertainty and how long businesses can continue under the constraints. “The clock is ticking for many companies,” says Aggarwal. “If you have been working under these conditions for a while now, you’ll be feeling the pressure. Some companies can keep going, but not all can keep on extending. There’s a desperate need to turn the corner.”
Liz Loxton is editor of The Treasurer