Financial strategists

At the ACT Middle East Conference 2014, speakers explored how treasurers can help their businesses to become more successful. Peter Matza reports

The old expression that ‘if something is worth doing, it’s worth doing well’ is one the ACT takes to heart. The growth and development of the ACTME and by extension, the Middle East Conference, is evidence of that. It’s not an accident and it isn’t luck. Given that more than 400 delegates from 17 countries attended the ACTME’s fifth annual conference held in Dubai last October, it seems that treasurers in the region would agree.

Last year (see the Middle East Treasurer, spring 2014, page 4), I wrote that there was a newfound maturity for treasury in the region. That theme was reinforced this year, but in some subtle and nuanced ways. In particular, the penetration of treasury thinking suggests that there is increased recognition of the influence of the principles of treasury on business strategy and practice.

This is reinforced not only by the increasing range of senior positions held by treasurers across all business sectors, but also by the views of younger aspiring individuals – the treasurers of tomorrow. More encouraging still is the presence of young men and women from national communities across the region seeing treasury as an exciting and modern approach to financial management. Rising student numbers and interest in ACT qualifications bears out that observation to the point it clearly shows that treasurers themselves are gaining traction as a body of professionals.

Common ground

The conference opened with Matthew Hurn, executive director – finance, emerging sectors, at government-owned investment vehicle Mubadala Development Company, and ACT CEO Colin Tyler. They discussed the common ground that exists between treasurers all over the world. Tyler talked about increased levels of professional cooperation between treasury bodies, especially those in the EU, following the financial crisis. Sadly, the need for continued interaction to manage the continuing waves of regulation means there is no let-up. This is compounded by the inability or unwillingness of regulators to coordinate policy globally. Hurn emphasised the need for regional legal and financial infrastructures to develop, but was wary both of over-regulation and conflict with other international structures.

 In the risk discussion, much was made of the need for treasurers to appreciate how risk is about matching quantitative information with organisational appetite 

Keynote speaker Carole Berndt, global head of transaction services at RBS, carried on the theme of change in finance. She focused on the ‘disruptive innovation’ currently being felt in all areas of the financial services industry. In her view, treasurers should seek to take advantage of their position as sophisticated users of services, both to drive change, but also to shape it. Berndt offered words of caution, however. Treasurers should be careful what they wish for when comparing local, regional and international banking, especially in their choices of partners and relationships. Berndt suggested that banks may form airline-style business-sharing groups – not necessarily an idea that would appeal to all treasurers, but food for thought in any event. (To read more of Berndt’s views, see the Middle East Treasurer, winter 2014, page 11.)

Break-out sessions

At the very first ACTME conference that we held, we ran just two breakout sessions: one for operational practice and one for strategic treasury. At our most recent event, we ran six different sessions and could probably have run more had time permitted. The mixture of expert presentations and panel dissection, particularly from corporate treasurers, proved the old adage: ‘Seen it, done it, got the T-shirt!’

On the first morning, delegates chose between risk and liquidity management. In the risk discussion, much was made of the need for treasurers to appreciate how risk is about matching quantitative information with organisational appetite. Having said that, the practical advice for treasurers was to work hard at understanding how reliable that information is, how relevant it is, and thus how important to the board and stakeholders the analysis needs to be.

The liquidity discussion quickly became a crash course in growth. What do treasurers need to worry about as their businesses go cross-border, not just in the Gulf Cooperation Council (GCC) or even in the Middle East and North Africa, but also further afield?

 From a cultural viewpoint, discretion is often the better part of valour 

Well, it seems that self-funding, FX management, visibility and controls will all appear in the treasury in-tray. Balaji Subramanian, senior finance manager at Landmark Retail, an operator of shopping malls and commercial property, warned that regulatory regimes regarding FX and cash movement are not consistent everywhere. He was a keen advocate of using technology, especially SWIFT messaging, to get access to his information and his cash.

An afternoon strategy session looked at how active and reactive risk management differ. In particular, the challenge is about being clear on the scope of treasury policy. So it is the difference between treasurers doing the job effectively and interfering, negatively, in business operations. Having the right voice, at the right time, is a difficult path to tread for many. From a cultural viewpoint, therefore, discretion is often the better part of valour.

A funding panel took a practical view on the ‘how to’ questions. How and when should organisations fund, what options do treasurers have and who needs to know what the outcomes might be? Declan Sawey, group treasurer at investment holding company KIPCO Kuwait, had arguably the simplest, yet most prescient, advice of the whole conference: plan, plan and plan some more. In Sawey’s view, treasurers must know their business, which should inform them of the funding they need, and they should be ready with a variety of options for the board. It may be that some solutions are specific to given problems, for example, joint venture investment or having the right kind of unencumbered assets to allow for Islamic finance.

Interestingly, Sawey suggested that some solutions could easily be non-external, for example, paying attention to accounts payable/accounts receivable solutions or even improving value dates for bank transfers. Set-piece solutions, such as capital markets issues, can be trickier for GCC organisations. This is because they involve more players and making choices between underdeveloped regional markets and international markets, which can expect higher standards of governance and information flows than many regional boards are used to giving. Plan, plan and plan indeed.

Technology and regulation

The principle that technology plays a crucial part in delivering effective treasury management is not an argument anywhere, any more. But treasurers in the Middle East have to struggle with a wide range of barriers to get their organisations up to speed.

A discussion concluded that a treasury must have its ground rules and culture in place before committing to system investment. In addition, the frequently made error of thinking systems will do something they are not built for needs to be avoided. Information in itself is not risk management.

 What no one wants is regional gold-plating of regulations 

System providers who contributed to the discussion argued that the customer pull on features and outputs was driving development in the industry, and that was beginning to permeate banking as much as support systems.

Almost inevitably, regulation crept into every conversation and discussion at the conference – whether that was in the sessions or during networking. To a certain extent, the region is only feeling the impact indirectly through the behaviour of the financial services industry. This especially applies to Basel III and its impact on lending, capital management and hedging. Changes in accounting are also being felt. It means that tactical and strategic risk approaches are forcing some corporates to look for natural hedges or increasing their tolerance for more volatile financial outcomes. What no one wants, however, is regional gold-plating of regulations, however popular that might be in the Dubai gold souk!

There are upsides to some of the changes, though, since both new entrants and current providers are competing on innovation and service, rather than just on pricing. Regional treasurers are adopting something of a ‘wait and see’ approach because some markets are yet to fully adopt new international standards. This is true, for example, for banks in Saudi Arabia, which are still 18 months away from full Basel III implementation.

Speaking up

The rising profile of treasurers in the Middle East was emphasised in the comprehensive discussion that closed the conference. Firstly, three treasurers with different experience and backgrounds – Shrimati Damal, group treasurer of shopping mall operator Majid Al Futtaim, Rachel Pether, financial risk manager at commercial finance provider Mubadala GE Capital, and Gary Slawther, treasurer at petrochemicals company OCTAL, talked about the challenges that treasurers face in general and particularly in the region.

They were followed by Werner Flaig, CFO of building materials supplier Easa Saleh Al Gurg, who gave his view on the treasurer-CFO relationship. Flaig’s perspective is especially interesting given that his team won the ACT Middle East small/medium sized team of the year award in 2013. See www.treasurers.org/node/9681

The treasurers who spoke were clear that it’s their job to set and manage financial strategy so that it connects with the overall business strategy. On top of this, treasurers need to communicate this ‘coming together’ to the various stakeholders they work with. These include investors, lenders, executive management, subsidiaries and even rating or credit analysts.

 Speakers were clear that treasurers should set a standard for business behaviour and management 

In the context of the Middle East as a region, this is doubly important since some of these relationships are being opened up for the first time – for publicly owned bodies as well as private or family-held businesses. Business as a whole carries uncertainty and risk, and is not a series of discrete projects. Therefore, treasury should sit at the centre of this integrated approach.

In addition, speakers were adamant that treasurers should set a standard for business behaviour and management. Having clear policies – for example, a treasury charter or service level agreement – and operating practices are key for all businesses, irrespective of the geographic dimensions involved. Also, this more obviously identifies treasury as a value-add partner to the business, not a risk-averse overhead.

When talking about the relationship between treasurers and the CFO and the board, Flaig was clear what he wanted: treasury teams with the right mix of expertise. A capable team consists of individuals who are knowledgeable about the company and have the business acumen to analyse what needs to be challenged and – if necessary – changed. Organisations also need fresh input through the hiring of new talent as well as professional experience. Flaig suggested that the ability to talk to operating companies on their terms would help to give the treasury function prominence within the organisation. A sensible approach to identifying and managing risk in its various forms, rather than being too prescriptive, is also sensible.

Looking ahead

The conference offered a tantalising glimpse of what the next few years hold for treasury in the Middle East. When asked about their primary concerns for the next two to three years, 34% cited risk management. Meanwhile, 30% said treasury technology, and 25% indicated that they would look at their cash and liquidity management.

This even split suggests that there is plenty of broad-ranging activity for treasurers to get their teeth into. Having said how busy they will be, more than 70% of the audience said they were either confident or very confident about business prospects in the Middle East over the next three years. This perhaps contradicts the nervousness that exists over some of the region’s political instabilities.

Recognising success

At the conference, we were delighted to celebrate the success of those individuals who have shown commitment, determination and excellence in passing the ACT exams.

A key role of the ACT as a Chartered, professional body is to support the treasury profession to meet the technical issues and challenges it faces, and to enhance the position, influence and standing of professional treasurers within their companies and the broader business community. Education and professional development are fundamental to this objective.

The United Arab Emirates is the ACT’s fifth-biggest qualifications market. At present, 136 individuals are studying for ACT qualifications and more than 100 have already qualified. This is testament to the continuing drive for professionalism within treasury in the Middle East.

The 2014 prize winners were:

  • Certificate in Risk Management Prize 2014 – Robby Zahr, group treasurer, Al Jaber.
  • Certificate in International Cash Management Prize 2014 – Edward de Courcy-Ireland, senior manager, regional product management, HSBC.
  • Certificate in International Treasury Management Prize 2014 – Vineet Gupta, assistant treasurer, OCTAL Petrochemicals.

Congratulations to all our winners. We’re very proud of you and your excellent achievements.

About the author

Peter Matza is engagement director at the ACT

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