Round up of day 4 - ACT International Treasury Week

A summary of the sessions from day 4:

(Re)building your business resilience
The highlights:
•    The crisis has pushed treasury from a largely operational and functional role to more strategic one as it has become the buffer between the company and what’s happening in the market
•    The crisis has helped to highlight priorities and what matters to treasurers and senior management alike
•     Cash is a key focus, as all investment in the short term will be on end-to-end cash collection
•    The impact of the crisis has been two-fold: on colleagues and on the business
•    Investments in tech for example, is not between companies but between depts for investment. As a business cost centre, treasury also struggles
•    The crisis is the end of non-cloud based tech applications – the cloud is at the forefront
•    Bespoke software residing internally isn’t a supportable solution going forward – there is the need for integrated tech
•    Being remote will draw one to 'what’s missing in my tech/treasury' 
Treasury is seeing the crisis more intensely than anyone else, even perhaps the CEO
•    However, there is a need to recognise what we can and cannot do in this situation. Treasury is not responsible if a business is under pressure, but the treasurer can help with problems.
•    Technological capabilities to solve key problems exist, yet not necessarily in TMS/ERP systems - it’s a connectivity/solution problem, as multiple fintechs that can do this
•    If treasury wants to provide a solution for the company and get investment, it needs to be the right system and one needs to understand the business to achieve this


The future of international trade - A treasurer’s perspective
The highlights:
COVID-19 has seen geo-politics play out as normal:
•    Weaponisation of the pandemic: the US is using the crisis to further challenge China and Donald Trump is playing to a national rather than international audience
•    State aid considerations have lessened
•    Shifting spheres of influence - dominance of the $ vs new technological capacity
•    Potential for a new techno-nationalism
•    Impact for UK in interplay of dealing with US & China in trade deals
COVID-19 has acted as an accelerant in how supply chains develop:
•    Change from reliance on just-in-time supply chains and reliance on one supplier
•    There are more nodes around the world but globalisation will still exist
•    Varied supply chain networks will have advantages
Practical advice for treasurers:
•    Work with procurement directors
•    Ensure funding requirements are implemented into any planning
•    Utilise flexible payment methods
•    Business continuity - preserve liquidity, work through options and recommend
•    Board of Directors are more involved in cash flow forecasting - think of the cash flow ‘norm’ and build various assumptions on changes to trade due to the pandemic
•    Develop cash flow scenarios against these assumptions on changes to trade due to the pandemic - Develop cash flow scenarios against these assumptions
Trade finance
•    There is pressure on SMEs to provide financing needed for trade
•    The focus is on credit insurance and supply chain finance - large corporates need to support
•    SMEs provide a niche but critical role within the supply chain
•    UKEF have stepped in to work to rectify
UK & Brexit
•    Major issues are not technically difficult but are politically
•    Everyone distracted by pandemic followed by recession
•    No current planning for an extension but many reasons to do so it's likely service providers will need to set up EU subsidiaries

Top tips for treasury teams - Implementing a sustainable finance framework
The highlights:
Prior to current crisis, there had been an increase in the uptake of sustainable finance and more demand for information. Since the crisis however, a range of sectors have been impacted, and those that had started implementation are continuing to embed. There is more of a requirement now to focus on the short term, and as a result we've seen companies working hard as they've been focussing on the social aspects of ESG.
In order to build back better, there needs to be an understanding that social and environmental elements are interconnected, which means building resilience within the supply chain.
•    Green finance: green bonds - differential pricing available on RCFs
•    Treasurers are best placed to put a green finance framework in place
•    Taking advantage of the current interest – 20% of recent issuance focus on ESG
•    Opportunity to drive the dialogue within the organisation - act as a change agent
Tips for treasurers:
•    Look to the experience of others
•    Leverage international best practice
•    Look to test and then implement – start small, and then build momentum
•    Aim to eventually cover all finance within a sustainable finance framework
Get started - the market appetite is there.

What is the future of ESG and sustainability?
The highlights:
•    There the ability to do the right thing event without any altruism - ESG is affecting investor performance 
•    Once controlled for systematic risk, there is a significant positive relationship between ESG performance and financial returns – this has changed considerably over the last few years when it was seen as a trade-off
•    ESG performance crisis criteria as being linked to lending is being discussed
•    There is a consideration to involve ESG criteria in both the issuance of debt and in the facilities on offer, e.g. RCFs. Creating jobs and creating resilience can be a key benefit of this
•    The regulatory role is key – we can’t underestimate it. If a goal is to reduce the impact of a carbon intensive industry, the threat is of the voting against or divesting
A regulator could impose a drastic carbon tax. It’s the regulator that carries a bigger stick.
•    EU Taxonomy: it is a very important factor for consistent definitions.
•    Regarding reporting standards, there is a huge amount of convergence with a big step towards international standards over the next twelve months. Whether it is businesses reporting, investors using these reports, or regulators getting a push from the market, it is important for everyone to engage and assist with the convergence.
•    Disclosure and transparency efforts have led to awareness but there is still much discretion on how companies present themselves, which makes it difficult to compare. 
•    As ESG becomes more and more important, consider greenwashing. Demand the proof points or you’ll be leaving proof points on the table.
•    You can’t split the E and S – consider where your organisation can make an impact. 
Climate has to have a role, but it isn’t the only one. Think through what you can do. The key step is getting started and taking action now. Don’t ignore it, get on the bandwagon. It's a positive for you, your investments, and the whole planet.



Getting ready to restart business
The highlights:
•    Longer term cash forecasting (3-6 months ahead) is proving quite challenging, particularly now that people are returning to work but at different times, in different industries and in different geographies
•    An increase is expected in business interruption insurance even though most claims aren’t eligible. Treasurers build scenarios all of the time and would typically have scenarios in their files to prepare. 
•    The COVID-19 crisis reminds us more of 9/11 rather than the financial crisis, as this is fundamentally not a financial crisis
•    It’s the business that is impacted and has been changed radically. 
•    The treasury function has managed to continue as BAU and even the banks have managed despite expectations that remote working wouldn’t work
•    If a company was close to bankruptcy before the COVID-19 crisis, they would be unlikely to survive. But if you were a viable business, then you should survive but there are extreme cases and industries, e.g. restaurants. 
•    The longer the crisis continues, the more of these businesses that will close
We are more efficient now as less time is spent on commuting, but working in virtual teams has negative effects too, as you miss the friendly team interaction. It’s also in the casual moments where the new ideas come together.
•    The help of governments has its consequences e.g. share purchases and dividend restrictions. Debt-to-GDP ratios of countries is going to increase considerably, and it’s not a zero sum game – there will be consequences.
•    Large corporates are looking at and supporting their wider supply chains – more favourable payment terms, paying suppliers faster.
There will always be a need to establish a personal relationship so business travel will still continue. Zoom and others are good substitutes but coming together physically is still important.


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. 

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