Arriving amid a host of other impactful geopolitical trends and events, the pandemic laid down a gauntlet to not just experienced treasury professionals, but their younger counterparts, too.
To find out how those in the latter camp have fared, we spoke to four rising talents from the Association of Corporate Treasurers’ (ACT’s) Future Leaders in Treasury group.
Treasury and marketing analyst, the Housing Finance Corporation
“The Housing Finance Corporation issues bonds to on-lend proceeds to housing associations, and in my role, I manage our deposit portfolio of client funds – from the execution of deposits to weekly and quarterly reporting and ongoing monitoring of those activities against our treasury policies.
“I’m also working on the implementation of a new treasury management system and some new ESG-related projects. The marketing side to my role includes responsibility for the website and producing content and briefings.
“In a world of specialisation, it’s been invaluable to complement my work in treasury with a broader understanding of the sector.
“Housing associations have performed well compared to other sectors in the face of the pandemic, helped massively by strong levels of liquidity and high standards of governance.
“However, the prospect of increased rent arrears, falling unit sales and increased hardship among their tenants could put pressure on their financial profile.
“Some have had to slow development programmes, and so the possibility of a reduced appetite for long-term funding could pose a challenge to us in terms of generating new business in the future.
“Meanwhile, the downgrade to the UK’s sovereign credit rating may still have implications for the housing association sector, even though the risk of an across-the-board credit rating downgrade seems to have subsided. That said, the sector remains remarkably resilient and well placed to manage these risks.
The pandemic has served as a reminder of the importance of planning
“We’ve always had a very prudent attitude to risk and it’s an approach that’s been vindicated by the experience of the past few months. The pandemic has served as a reminder of the importance of planning for black swan events. It’s not so much business as usual from a risk perspective, but it’s about tightening up those procedures. The ‘preparation is key’ mantra is as relevant as ever.
“Recent talk of the possibility of negative interest rates on the horizon raises new questions for organisations that are active depositors. The flip side is the positive risk, as low interest rates allow us to continue to deliver competitive funding costs for our borrowers.
“Also, the operational risks of remote working cannot be underestimated. For the housing association sector, the prospect of a period of economic distress brings with it a level of credit risk that will challenge business plans and strategy.
“The importance of organisational culture in managing risk cannot be overstated. Embedding organisational risk perspectives into workplace culture is vital, and although building a culture where people identify personally with your brand and values is not an easy thing to do – if you succeed, the rewards are inestimable.”
Treasury professional in fashion retail
“I have been fortunate to develop my career in treasury management and operations across the technology, travel and leisure sectors, and I currently work in fashion retail.
“The fashion industry has been severely impacted by the pandemic – lockdowns in Europe and the US have disrupted the supply chain, operations and customer engagement. Interim reporting by luxury retailers and fashion brands clearly show signs of distress, with well-established labels declaring insolvency or filing for bankruptcy.
“In response, retailers have shifted focus to managing the supply chain. This important relationship requires new ad hoc strategies that can be defined only by joining forces with different departments such as procurement, commercial and finance.
“The pandemic has forced me to rethink and redefine our approach to managing risk. In fact, it has been a good time to look at different industries and market players.
“It’s always a good exercise to research how others manage risk in order to expand your knowledge and reflect on potential improvements to inform open discussion with managers and the team.
“In my opinion, risk management shouldn’t be a static strategy, but should be constantly discussed and tested. Cash and liquidity risks might be the most obvious risk areas right now. However, other major risks lie within operations and controls.
“The stress placed on operations and supply-chain management has affected our ability to build accurate and reliable cash forecasts at a time when precise insights into whether cash would be available in the right place at the right time was essential – to the detriment of efficient cash management.
Cash and liquidity risks might be the most obvious risk areas right now
“To mitigate such risks, we need to be innovative, looking at automated solutions and more agile processes, for example, but without losing sight of internal controls.
“Having the right systems in place supports much quicker identification of opportunities and areas for improvement, which is helpful when cash is not deployed optimally in the business when it comes to supporting the forecasting of outflows in periods of high uncertainty around the inflows.
“My advice for other treasurers is to never stop engaging with your stakeholders internally and externally, even if it’s just for a virtual coffee break or a quick phone catch-up.
“As treasury professionals, you need to know your business and your industry to manage risks and build your response. You will also learn something new about your company around new projects and fresh growth opportunities from your colleagues in different departments.
“Your external financial partners are also an invaluable resource: they are there to support you with their insights on trends in financial markets and new products or trade ideas that might provide an important element within the risk-response strategy you are looking to build.”
Relationship manager, MUFG
“I work as a relationship manager at MUFG where I am responsible for corporate clients in the industrials portfolio, which are headquartered in the UK and Ireland.
“I mobilise MUFG’s product teams to help corporates manage risk within their businesses. We work with corporate treasury functions across our product suite with a focus on funding, hedging and transaction banking in more than 50 core geographies.
“The past six months have seen the team double down on supporting clients through the pandemic, working with treasury teams to help corporates navigate their way through this period of instability.
“When the lockdown was first announced, conversations quickly turned to assessing the expected cash burn in our clients’ businesses versus the liquidity currently available to them.
“These discussions were granular – bankers were looking to fully understand what percentage of revenue was potentially at risk and what costs could be managed over the short and medium term, using different assumptions for various scenarios of severity.
“The overall response that we have observed is a flight to liquidity. The bank market, the debt and equity capital markets and various government support initiatives, such as the COVID Corporate Financing Facility, have all functioned really well throughout, allowing many corporate treasurers to proactively raise additional capital.
The overall response that we have observed is a flight to liquidity
“The past few months have heightened our focus on risk, but we haven’t fundamentally changed our own risk appetite or approach. MUFG’s objective is to be the world’s most trusted bank, and today that means being able to put into practice the assurances we’ve given to clients that we will support them in the long term.
“The level of due diligence associated with signing up to new exposures has become more detailed and granular to fully assess the uncertainties our clients are facing, but we have been successful in extending additional support across our core markets.
“Treasury teams across the board have been focused on helping their banks assess the risk to try to reach a productive outcome.
“The best advice I can give to treasury professionals today is to encourage early active engagement with your banks and investors. Having frank conversations early and furnishing lenders with comprehensive information packs identifying the risks at play means banks can move quickly with offering support through periods of instability.”
Senior manager, PwC
“My career in treasury started with an internship in the treasury at Nationwide Building Society, learning mainly about interest rate risk management.
“After graduating, I joined PwC and qualified as a chartered accountant. When an opportunity came up to join the treasury accounting and advisory team, I thought that it was a great chance to combine two areas I find really interesting. Since then, I have worked with a wide range of clients to help them manage their treasury risks.
“The pandemic has really emphasised the strategic importance of the treasury function and the role it can play in decision-making processes across the business.
“When the switch to remote working came, many were concerned that an inability to communicate effectively could be a big challenge. The improvements we have seen in videoconferencing and file-sharing platforms have enhanced the ability of treasury teams to communicate between themselves and with key stakeholders.
“The benefits of investing in technology, either specific to treasury or applicable to the wider business, have been highlighted during the past few months.
“For most, the pandemic won’t have significantly impacted the nature of treasury-related risk, although it has likely brought those risks into much sharper focus, given their importance and potential impact.
“Many companies are starting to revisit whether their methods to measure risk and associated limits remain reflective of the level of exposures they are willing to accept.
“Additionally, while liquidity will continue to be the key focus for many, it has been important to consider knock-on impacts on other financial risks. Managing FX risk has become more complex due to changes in the nature, timing and volume of underlying business performance.
The pandemic has really emphasised the strategic importance of the treasury function
“Recently, we have seen increased demands placed on treasury teams, heightening focus around health and wellbeing. With the near-term future still very uncertain, our treasury community needs to be supported by business leaders, whether through investment in people, processes or technology.
“Treasury remains fundamentally people-driven, so the wellbeing of teams should be a priority – and this is a risk that can often be overlooked.
“Based on what we’ve seen over the past six months, my key advice is to make sure you’ve got the basics right. Fundamental processes that support the management of key risks need to produce reliable and useful information that enables you to act quickly and with confidence.
“For example, companies with a tried-and-tested forecasting process and good visibility of cash around the group have found it much easier to react and address any problems as they arise. Managing risks becomes much harder, if not impossible, if the true exposures of a business aren’t adequately understood.”
Thank you to our Future Leaders in Treasury for taking part in this piece.
For more on the ACT’s Future Leaders in Treasury programme, click here
This article was taken from the December 2020/January 2021 issue of The Treasurer magazine.
