The Treasurer 2025 Issue 2

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KEEPING A COOL HEAD

It has been an eventful few weeks, and there doesn’t seem to be any let-up in the merry-go-round that is the tariff storm. But initial feedback from corporate treasurers appears to be phlegmatic – once the tariff regime has been agreed, then the certainty that this will afford will allow treasurers to help guide their businesses to calmer waters.

With this in mind, we have devoted space in the magazine to some of the areas where treasurers can help their organisations navigate the rapids to find those calmer waters. From what the board might ask to the impact on working capital and interest rates, we have asked experts to share their considered opinion.

The key message appears to be that cool heads are required, while this is also the time to ensure your treasury policies are robust and able to give the necessary assurances during these turbulent times.

Of course, business carries on. We have regular features on working capital, return on capital employed, and the National Payments Vision. Technology is never far from our thoughts either, so we have articles on how tech can be employed in your investment strategies, as well as how to implement an artificial intelligence project – from the decision up to deployment.

We also look at the role of mentoring, and hear from a mentor and mentee, who explain why they have become involved with the ACT’s programme, which is an important aspect of passing on, and gaining, professional insight.

Photography and illustration: iStockphoto.com Cover: iStockphoto.com

in

of

Talking of professional insight, there is still time to sign up to this year’s ACT Annual Conference in Newport, Wales, which runs from 20-21 May (and if you are reading this at the conference, welcome!).

Tariffs might well figure high on the agenda, but there will also be valuable insights on funding availability, investment confidence, resources, sustainable finance and technology – the eagle-eyed among you will have spotted that this spells out FIRST, which feels appropriate, as thoughts often turn first to treasury at times of financial stress.

Continuing with the conference theme, we have a round-up of some of the key learnings from the ACT’s Cash Management Conference – these range from the evolving payment landscape through to interest rate and FX volatility. And you can see more at treasurers. org/thetreasurer

Finally, please take time to read the article from Tariq Kazi, the new president of the ACT – he has been a proud advocate of the treasury profession over many years and has seen that the value of treasury is recognised during good and difficult times. To echo his words: “If ever there was a time for calm, professional treasury expertise that understands and engages with the business, it is now.”

Anurag Chaudhary on the working capital options for treasurers and procurement as tariffs take hold PAGE 12

phil.smith@cplone.co.uk Nish Nagpal on how to take your artificial intelligence project from decision to deployment PAGE 40

Lisa Dukes on the next steps for the Global Foreign Exchange Code and how it will affect treasurers PAGE 43

Keith

Clear

Deborah

Permjit

Ben Walters continues his dive into ROCE and introduces a

European

James

Ritu

Success

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LONG VIEW

20

RIDING

THE RAPIDS

How treasurers can keep the finance flowing in turbulent times, including an analysis on the impact on working capital

Analysis of long-term trends

BETTER RETURNS

Ben Walters introduces a concept that transforms ROCE into a more useful, transparent and explainable metric

WHEN DEBT RESTRUCTURING GETS NASTY Liability management exercises could instigate conflict between lenders in Europe, but will they reach US levels?

Fog of trade war

Treasurers should prepare for poor visibility and long-term uncertainty in a world of rapidly changing tariff policies and retaliatory action

Uncertainty is bad for business, so corporate treasury departments are facing a future of intense challenges with US President Donald Trump’s declaration of tariff wars on America’s key trading partners. Indeed, the International Monetary Fund (IMF) has argued “one standard deviation increase in global uncertainty is associated with a decline in bilateral trade by 4.5%, with fuel and industrial products trade being the most impacted”.

President Trump’s so-called ‘Liberation Day’ impositions of tariffs on US trading partners, subsequently reduced to 10% near-universal tariff following a 90-day pause in additional charges, with the exception of China, certainly proffer that baseline standard deviation in uncertainty. And that is before retaliatory measures by American trading partners are considered.

The potential losses in foreign currency income are vast. US goods exports to Canada in 2024 were worth $349.4bn, with US goods imports from Canada worth $412.7bn. For Mexico, the 2024 figures were $334bn in US exports and $505.9bn in imports. China saw $438.95bn imports and $143.55bn exports. The EU exported €531.6bn in goods to the US and imported €333.4bn last year, said the European Commission. Of the key trading partners, only the UK imports more US goods than it exports –$79.9bn, compared with $68.1bn in 2024.

For all goods traded worldwide, the US runs a $1tn deficit – $3.19tn exports, compared with $4.11tn imports in 2024. Trump thinks this makes the US vulnerable, rather than being a sign of American wealth (its overall economy is worth $30tn), so he wants to inflate exports and deflate imports using goods tariffs. Whether that makes sense or not, treasurers are left picking up the pieces.

Naresh Aggarwal, associate director of policy and technical at the Association of Corporate Treasurers (ACT), says, while tariffs are not new, with Trumpian protection “the difference is the speed in which they’ve come on and the imprecision by which they’ve been applied. It’s the uncertainty that is the biggest change”.

Indeed, even before 2 April 2025, Trump imposed 25% duties on Canadian and Mexican imports, then suspended them; he imposed 10% and then 20% tariffs on Chinese exports; and then 25% on all steel and aluminium imports. With so-called global ‘reciprocal’ tariffs, where the US imposes duties on trading partners to match what it regards as their protection against American exports (including nontariff barriers and VAT), revealed on 2 April, more disruption will follow.

To prepare, says Aggarwal, treasury teams are considering impacts on their businesses in a short, medium and longer term. In the short term, companies may have to build up more inventory, requiring more short-term facilities with flexibility and availability.

He stressed that treasurers need to deal with potential short-term cash-flow challenges caused by a swift application of tariffs on imported goods that need to be settled earlier than the 15-, 30- or

60-day terms of sales invoices for finished products: “It takes a while for you to collect that from higher prices; prices are going up; businesses already had to pay for that cost; so there might be a cash-flow impact that needs financing,” explains Aggarwal.

Better cash forecasting may be required: “There is going to be disruption to working capital. Treasurers need to know where the cash is being tied up. They may need to look at new supply chains and financing instruments,” he says. Also, foreign exchange risks may need reviewing if tariffs push companies to diversify their markets and supply chains, with less reliance maybe on the US or Canada: “My supply chains may be different, which may have a currency impact.”

Moreover, at present, there is no real clarity on how long these tariffs may remain, so treasurers must consider good future access to data, cash and foreign exchange, “for whatever the business needs”. Timing depends on the Trump administration’s “end game”, Aggarwal says: “If it’s all posturing for enforced US domination of various markets, tariffs

“If it’s all posturing for enforced US domination of various markets, tariffs may come off very quickly or last a few months or six months”

may come off very quickly or last a few months or six months.” But if this is a long-term play, forcing manufacturing investment into the US, “we may see an increased premium for dealing with the US, as it is no longer the reliable trading partner it was, especially for European businesses”.

Aggarwal says boards and treasury teams may also need to build risk premiums into US trades, even of untariffed goods, “to take account of the fact tariffs may be applied”, such as making “more inventory available; more intermediaries; more wholesalers; more cost in the supply chain than they had before”.

There is plenty of advice available as the tariff wars ramp up. Accounting network PwC has advised that, for companies based or active in the US, the cost of tariff measures could increase from $76bn annually to nearly $697bn, ignoring retaliatory tariffs from trading partners: “The key sectors that will be impacted include: industrial products; consumer products; automotive/aerospace; pharmaceutical, life science, and medical device; technology; media and telecommunications; energy, utilities and resources; and private equity,” warns a PwC note.

In Canada, possibly the country most at risk from US tariffs, business advisory company Raymond Chabot Grant Thornton has advised Canadian firms to consider establishing American subsidiaries or moving certain functions to the US, to reduce their tariff exposure: “Companies that already have a footprint in the US could restructure their operations by converting sales offices to distributors, for example, and assigning more responsibilities to their subsidiaries,” says an advisory paper. Canadian companies should review sales ledgers and examine key clients with US contracts, evaluating financial terms and risks (sales, gross margin and cash flow). Supplier lists should also be assessed, with companies exploring “local or international alternatives to reduce your dependence on the US”.

Will these problems persist? It is clear President Trump believes trade deficits – despite the US’s low 4.1% unemployment rate and its $82,700 per capita GDP – are a menace, whatever economists say. A White House statement on tariffs said: “The trade deficit of the United States threatens our economic and national security, has hollowed out our industrial base, has reduced our overall national competitiveness, and has made our nation dependent on other countries to meet our key security needs.”

While treasurers might hope for the best, they had better prepare for the worst.

Keith Nuthall is a business and finance journalist specialising in regulatory matters

(Source:

Riding the rapids: keeping finance flowing

Quick, clear and confident – the hallmarks of treasury professionals are being tested as they help guide their organisations to calmer waters amid the strong currents of business uncertainty

Philip Smith is editor of The Treasurer Gavin Hinks is a freelance business and finance journalist

It has been quite a ride in the financial markets since US President Donald Trump presented his country-by-country list of tariffs on 2 April. And it was only a few days later, following pressure caused by a downward-trending US treasuries market, that a 90-day moratorium would come into force, which reduced all country tariffs to a uniform 10%, with the exception of China.

The uncertain situation was best summed up by SMBC’s global macro/rate strategist Hank Calenti, who told The Treasurer at the time: “President Joe Biden kept things relatively sleepy in the markets, but it’s harder to sleep well at night now that we are a tweet away from volatility. Treasurers will be hearing a lot of noise in the near term, but not a lot of signals.

and will existing debt markets be available to the business, post-modelling out the potential impact of global tariffs, or do alternative options need to be explored to maximise liquidity?

However, Stevenson adds that funding should still be available: “While the US tariffs have undoubtedly caused volatility in markets, we would anticipate each lending request to be considered on a caseby-case basis, and in our early experience, lender support has endured, but a well-prepared, detailed and transparent articulation of the financial impact of tariffs is essential.”

There isn’t a market that hasn’t oscillated wildly [since 2 April], says Chris King, cofounder of Dukes & King, the corporate finance and risk management consultancy. “In short, Trump is seeking to change the status quo of the international system, and this is likely to have large structural changes in financial markets.”

“Be dynamic to the new regime, as it is likely to last for some time, like it or not!”

“This will create uncertainty on whether to hedge/invest or not, as well as how and when. Corporates are going to think twice about what they were planning to do, and they will need to make sure they have a plan B, which will become more important with all this noise.”

Carl Stevenson, a partner in Deloitte’s UK debt advisory service, suggests three actions that corporate borrowers should consider as they evaluate the impact of market instability on their operations and capital structure:

•Shore up liquidity: refresh cash flows in the short term and understand any immediate liquidity pressures on the business.

•Re-forecast financial covenants: does the new trading environment show potential covenant pressure and confirm whether you need to engage with lenders.

•Review refinancing plans: has sufficient time been factored into ensure a successful refinancing

King advises that, as the status quo has changed, a review of the treasury policy is essential. “Be proactive and assess wider risks.” he says. “If EUR/ USD can move 10 cents in just over a month – a typical annual range – then one should consider the base case and downside sensitivities and push the boundary of downsides. This should help keep the focus on what is an appropriate mitigation.”

Treasurers should be active on risk management, King says. “Accepting the status quo floating/fixed interest ratio is questionable given the potential volatility. Assess what is a worst case for the business and seek to protect against this. This doesn’t necessarily mean having to lock in a ‘worst rate’ entirely. Use of optionality is essential in these markets to manage and cap downside risks, that seem to be thrown at us by the day and the tweet!”

He suggests considering pre-hedging, whether for M&A or forthcoming refinancing needs within the next three years. “Again, this need not be a 0/100 decision,” he says. “If you are European or non-US based, how should you think about capital needs? If the world is being forced to isolationist policies on trades, it may be prudent to assess the strategy on capital raising for the long term in terms of access, particularly in tough times, and accompanying pricing and sustainability, noting a lot of banks have removed or diluted their previous zero carbon initiatives.

“Be dynamic to the new regime, as it is likely to

last for some time, like it or not!”

Nigel Owen, head of corporate origination at TreasurySpring, advises treasurers to “keep calm and trust your treasury policy”. As he says, treasury policies tend to not matter too much when the world is great, everything is going well and there are no problems. “It is for times like this that you have your treasury policies in place –and that should be reassuring for you in terms of your cash management, but also for other stakeholders in your business, such as the board to whom you need to report. You will be able to say where your risks are and that you are comfortable with those risk positions.

“With the 90-day pause, if you have found that there are any gaps in your policies, now is the time to review those policies to make sure you have adequate room to manoeuvre, while making sure you are covering off any of the risks that we have seen [since 2 April]. It is, unfortunately, those unforeseen risks that are the ones that catch you out.”

It’s not clear yet how inflation is going to affect the EU and the UK, and therefore how central banks are going to react. “How is that going to affect a treasurer who has a refinancing to come in?” Owen asks. “If you’ve got a bond that’s refinancing in the next three to six months, I’m sure there’ll be debt and capital markets advisers running around saying you should get it done before the end of this 90-day period.”

Sourabh Verma, head of treasury product marketing at ION Treasury, agrees. “This is also the time when you should be asking for additional credit lines from your banks – having those extra funds in your pocket will help you,” he says. “Who knows what will happen after the 90-day period is up? This could last for another two years.”

But he also advises corporates to look internally for additional funds. “If you have excess cash, you should be looking at in-house banking. If any of your internal entities need some funding, why do you want to go externally?”

Verma argues that recent events have served to underline the importance of having a good riskmanagement team in place, one that can evaluate potential impacts of tariffs by consulting with internal stakeholders – such as the executive team, procurement, legal and tax departments – as well as external sources, such as management consulting firms.

“Corporates need to think about the entire ecosystem so that everyone can survive until predictability returns. You should be looking at supply chain finance to secure your supply chains, and make sure you have a good relationship with suppliers that are existential to your business.”

Chris King

Riding the rapids: new agile working capital era

In a post-tariff business environment, corporate treasurers have the opportunity to leverage working capital finance solutions and ensure greater resilience

The announcements, and pauses, of new tariff regimes by US President Trump’s administration have created havoc for world leaders and any corporate business that trades with the US. However, while most people are still trying to determine the overall social and economic impact on countries and organisations, many manufacturing corporates must very quickly adapt to the new regime.

While corporates are working around the clock to reconfigure their supply chains and ensure availability of their goods to their end consumers in a timely and cost-effective manner, there are new challenges faced by CFOs and group treasurers that need to be resolved at the earliest opportunity.

Corporates not only need to consider the direct financial impact on gross margin and how much they can pass on to their customers; they

Corporate sales and procurement teams

also need to build up higher inventory levels as contingency planning. This can lead to working capital constraints. In the longer run, CFOs and treasurers will need to balance CAPEX/OPEX while continuing to report financially healthy results to their shareholders.

Physical supply chain

The table below shows the three scenarios under which they are operating – now, next and the future. Based on these assumptions, some of the potential scenarios that corporate sales and procurement teams might consider in the coming weeks are:

1. Reconfigure supply chain – corporates will need to review their existing supply chains on an endto-end basis, from procurement of raw materials, manufacturing, shipments and sale to final products to end consumers.

2. Contract manufacturers – these rapidly changing economic and market scenarios can potentially create new opportunities for smaller entrepreneurs to set up agile manufacturing facilities. These facilities can be used for multinational companies to move their production bases in line with supply chains,

NOW NEXT FUTURE

• Maintain sufficient inventory (raw materials and finished goods) to ensure no impact on manufacturing and sales

• Ability to deliver finished goods to their customers across geographies in a timely manner

• Minimise increase in sale price because of supply chain disruptions and retain end customers

• Reconfigure existing supply chains in line with new tariffs, changes in customer behaviours and sales patterns

• Explore ‘near-shoring’ their own manufacturing capabilities in line with reconfigured supply chains

• Explore using contract manufacturers while ‘nearshoring’ to be quick to market and retain market share

• Create resilient manufacturing capabilities across geographies to meet customer requirements at competitive price

• Localisation – limit cross-border movement of goods and benefit from FX rates, tariffs and just-in-time delivery and reduced inventory

• Explore setting up regional and/ or local manufacturing hubs to minimise impact of geopolitical issues/tariff trade wars

Anurag Chaudhary is founder and CEO of Pinnacle Trade Finance

Anurag Chaudhary

tariffs and final sale of goods, to optimise costs and minimise CAPEX.

3. New manufacturing facilities – numerous corporates are considering near-shoring their manufacturing bases in more tariff-friendly jurisdictions, and this will need incremental corporate finance requirements from their banks and institutional investors.

4. Specialist product manufacturing – for certain components within supply chains, there might be a need to explore centralised new production sites to help reach economies-ofscale for specific parts/components, which will feed into contract manufacturers and/or new manufacturing facilities.

5. M&A opportunities – as corporates reconfigure supply chains, some of their existing

CFOs/group treasurers

• Need incremental working capital finance for building up inventory of raw materials and finished goods

• Sustainable sales of goods while managing counterparty risk on buyers because of credit deterioration

• Ensuring sufficient liquidity to safeguard business in case of any emergencies

manufacturing bases might not be cost-effective and may, potentially, be up for sale, while the same corporates might look at quickly acquiring new manufacturing bases, potentially leading to M&A activity and incremental corporate finance requirements.

Financial supply chains

While corporate sales and procurement teams work on making their manufacturing capabilities and supply chains resilient, the CFO and group treasurer roles become more difficult, as they need to ensure sufficient capital and liquidity is available at all times, as well as continue to protect the firm’s profitability and ensure sustainable growth in the longer run.

The table below shows the three scenarios under which they are operating – now, next and the future. Based on these assumptions, some of the potential scenarios that CFOs and group treasurers might need to consider in the coming weeks are:

1. Financing the inventory – corporates will immediately need incremental liquidity for new invoice amounts (base price + tariffs) and longer tenors, plus build higher inventory levels. Pre-shipment via purchase order financing or inventory finance, and post-shipment via unaccepted invoice discounting solutions and supply chain finance programme of the final buyer.

2. Counterparty risk management – these rapidly changing economic and market scenarios might lead to a deterioration of counterparties’ and/or buyers’ credit risks, lower consumer spending, with a limited amount of credit insurance availability (albeit

• Corporate finance solutions for CAPEX (new manufacturing facilities) as well as financing third parties – i.e. contract manufacturers

• Set up supply chain finance and receivables discounting facilities for new manufacturing/ production arms

• Purchase order (PO) financing and other working capital finance solutions for contract manufacturers

• Corporate finance solutions for CAPEX – i.e. upgrade and/ or setting up of regional and/ or local manufacturing hubs

• Create ‘localised’ working capital solutions in local currencies, working with regional and/or local banks

• Manage group P&L and balance-sheet because of FX fluctuations as corporate explores localisation options

higher cost of credit insurance).

3. Balance-sheet management – there will be a need to constantly monitor and optimise the corporate’s balance sheet because of the higher amount of assets (i.e. raw materials, inventories, account receivables, etc.), as well as CAPEX for new manufacturing facilities – thus, a need to manage and optimise liquidity. Also, CFOs and treasurers might need to explore off-balance sheet or alternate financing solutions with different types of lenders.

“All this turmoil might actually be a blessing in disguise. It could drive corporates to transform into more flexible and agile organisations”

4. Holistic corporate funding solutions –treasurers can work with existing and new groups of lenders to create corporate finance solutions covering both long-term and short-term facilities to set up alternative manufacturing facilities in tariff-friendly jurisdictions, as well as finance contract manufacturers to be able to meet their production and manufacturing requirements.

5. Localised network – as there is a potential for localisation of manufacturing and sales, CFOs and treasurers will need to explore setting up local or regional supply chain finance and receivables discounting facilities in local currencies with regional or local banks.

Potential way forward

The corporate sales and procurement teams can work with strategic business consultants to reconfigure their supply chains in line with procurement, tariffs and final sale of goods to optimise manufacturing costs and minimise CAPEX. Meanwhile, CFOs and treasurers can engage specialised debt advisers to explore holistic corporate finance solutions covering both longterm and short-term facilities. It will be important for CFOs and group treasurers to leverage the expertise of an independent syndication team to get independent advice. These consultants can help corporates to access the right alternate lenders and regional/local banks across geographies to partner with, in addition to corporates’ existing relationship banks. The right investors will need to be a balance between a corporate’s funding requirements, underlying structures, facility sizes, availability of local currencies and acceptability with smaller suppliers.

While the corporate might be able to work all of the above, however, the last mile is very critical – i.e. how to automate end-to-end processing and delivery. Therefore, it is CFOs and group treasurers who could explore one-stop digital platforms with the ability to deliver multi-bank and multi-channel solutions across multiple countries and geographies.

If one takes a step back, all this geopolitical, economic and market turmoil might actually be a blessing in disguise. It could drive corporates to transform into more flexible and agile organisations, and the ones that can adapt quickly will have an opportunity to increase their market share, attract new clients and become more profitable. As per Charles Darwin’s theory of evolution, the fittest ones will win.

Riding the rapids: 10 key boardroom questions

1.What are the priorities for treasury both now, during the period of uncertainty, and subsequently, once a clearer picture of US tariffs and retaliatory tariffs emerges?

While treasurers will work closely with other teams across the organisation – in particular, procurement – their priority should be to identify and model the impact of disruption of those items directly under the control of the treasury team. Priorities will be continuing access to liquidity, adjustment of hedging to reflect changes in supply chains, and identification of changes to key financial risks.

2.Could the financial impact of tariffs put us at risk of breaching banking covenants?

Boards will expect clarity on how tariff-related cost increases or revenue declines could affect the financial ratios tied to the company’s loan agreements. Even if the actual risk of a breach is low, the board will want to know if there’s reduced headroom.

3.What’s the expected impact on our cash flow and working capital?

Tariffs may lead to increased upfront costs, longer procurement cycles and pressure on working capital. Treasurers should identify whether the business has sufficient liquidity buffers or if existing credit facilities need to be accessed or renegotiated.

4.Do we have adequate hedging strategies to manage currency and price volatility?

As we have seen, the currency markets have reacted to the tariff announcements. This has meant that commodity prices have also fluctuated. Treasurers should assess whether their current hedging positions – FX, commodities and interest rates –remain aligned with the new risk environment.

5.Have we identified alternative suppliers or sourcing strategies to mitigate exposure?

Boards may ask whether the company is overly reliant on specific countries or vendors. While procurement teams lead sourcing, treasury can assess the financial implications of supplier transitions, including cost differentials, payment terms and potential penalties.

6.Do we need to reassess our country risk exposure and banking relationships?

Tariffs are just one part of today’s broader geopolitical shifts – we are already witnessing increasing interest in near-shoring, even ‘friendshoring’, in response to disrupted supply chains. We know that boards are already asking about the company’s exposure to certain countries – not only through suppliers but also through cash holdings, intercompany flows or banking partners.

7.What are the implications for our counterparty risks, current contracts and pricing agreements?

Legal and commercial teams will be looking at whether current contracts include provisions for passing through tariff-related costs. Treasurers, meanwhile, can consider the cash-flow timing and financial liability implications of these changes.

8.How do the tariffs affect our capital allocation strategy, including share buybacks, dividends, and debt repayments?

Tariff-related costs may impact profitability and free cash flow, which in turn could affect decisions around capital returns to shareholders. Boards will want to understand whether any planned buybacks or dividend increases need to be revised in light of additional financial strain – and whether debt repayment schedules are still optimal.

9.What scenario analyses have we done, and what are the worst-case and bestcase outcomes?

Treasurers should move quickly to model different tariff durations, escalation scenarios or exemptions and their impact in funding requirements and interest costs. These models should feed into broader risk frameworks and help drive strategic decisions on sourcing, pricing and inventory.

10.How are we communicating these risks to external stakeholders (banks, investors, lenders and regulators)?

Boards will be aware of the need for transparent and accurate communication. Treasurers should coordinate with investor relations and finance to ensure consistent disclosures.

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What the interest rate outlook means for cash management

Deborah Cunningham explores the outlook for interest rate cuts, their impact on treasurers’ cash management priorities, and why money market funds remain a popular, cost-effective option in a ‘higher for longer’ environment

Corporate treasurers have benefited from higher interest rates since 2022, but with central banks initiating their cutting cycles last September, they will be closely monitoring rate movements over the next 12 months. The interest rate outlook has shifted significantly since September 2024, when the US Federal Reserve surprised many in the market by cutting rates by 50 basis points.

Since then, following November’s US election and the January inauguration, the Trump administration’s early months have seen the introduction of new policies on immigration, tariffs, and possible regulatory changes, all of which are seen as potentially inflationary. This has lowered the threshold for the Fed’s easing measures. At the same time, consumer spending and employment, which have been key drivers of US GDP, continue to show resilience.

the strongest GDP growth, followed by the UK and Europe at the lower end. None of these economies are currently facing recession or stagflation and, as a result, compared with six months ago, all three currencies are projected to experience higher rates for a longer duration. As a result, treasurers are preparing to navigate persistently higher rates.

Proactive cash management

For treasurers, maintaining liquidity in this ‘higher for longer’ environment is crucial. Higher interest rates will continue to inflate the cost of borrowing, so treasurers must ensure they have enough liquid assets to meet short-term cash obligations without relying too heavily on credit lines. Against this backdrop, money market funds (MMFs) continue to be a crucial tool for treasury professionals. The tariff-related market upheaval of recent weeks highlights the necessity for treasurers to consider carefully an allocation to money market funds as part of their cash management strategy. With same day liquidity, these products provide treasurers with the ability to access and deploy their cash during periods of considerable market volatility.

Predictions for the cadence of the Fed’s rate-cutting programme vary widely. At both extremes of the spectrum, some market participants expect one or two hikes by year end, while others anticipate three or four cuts in 2025. The most likely scenario is one or two rate cuts by the end of this year, with the first potentially occurring around May and a second, if necessary, in the latter half of the year.

By contrast, the UK and Europe are expected to follow a faster easing cycle. Economic indicators across the dollar, sterling and euro regions show the US with

Unlike bank deposits, which have administered rates that lag behind central bank moves, MMFs provide transparency and market-based returns. As a result, globally, MMFs – whether sterling, euro or dollardenominated – continue to gain sizeable inflows, with US MMFs reaching an all-time high of more than US$7tn in late 2024. European MMFs are experiencing the same growth, hitting a record high of $1.463tn recently, according to Crane Data.

With central banks slowing their rate-cut programmes in the year ahead, the current interest rate environment requires treasurers to be proactive and strategic in managing their cash. By leveraging tools such as MMFs, and staying attuned to monetary policy shifts, they can optimise returns while safeguarding liquidity and managing risk.

Cunningham is CIO, Global Liquidity Markets, at Federated Hermes

Deborah Cunningham

Deborah

Mind the gap

Permjit Singh reviews the interrelationships of working capital and cashconversion cycles, how gaps in these arise and affect a company’s financial performance and solvency, and how companies have plugged them

Auto-parts manufacturer Marelli hit the headlines in February this year after it said it was looking for money to fill its “temporary working capital gap”. Last year, The Body Shop’s owners “concluded that the company had insufficient working capital”, so decided to put it into administration just weeks after acquiring it.

Fortum, the Nordic energy producer, experienced “a short-term working capital squeeze” because it had to pay additional margin on its commodity derivative hedges after market prices for electricity shot up 400% in a year.

Casino operator Star had to meet preconditions, including raising A$150m in working capital, before it could tap A$150m of other funds to resolve its liquidity problems. It admitted “a number of these conditions remain challenging to meet given the group’s current circumstances”.

Harland & Wolff’s working capital funding gap had to be filled before it could fulfil its £1.6bn contract to build ships. And a fall in sales (plus high levels of short-term liabilities and gearing) meant private jet operator VistaJet’s cash dropped to its lowest level in five years, raising concerns over its viability and causing its accounts to be qualified.

These are just a few reports of working capital difficulties faced by companies in recent times.

A company might say its working capital gap is “temporary”, quickly filled either by debtors paying in the near future or by a temporary drawdown of credit facilities until they pay.

Travel companies, such as Tui and Jet2, experience big swings in working capital levels because of seasonality, ballooning with preseason prepayments from holiday bookings and then deflating during the holiday season as trade creditors (such as hotels) are paid.

However, working capital swings might also reflect a change in the working capital strategy or policy. An FT Alphaville analysis of retailer The Hut Group found “in every financial year back to 2009, the company reported a cash inflow from its payables. In other words, its payment terms have been continuously favourable to the company”.

During the COVID-19 pandemic, supermarket giant Tesco paid its small suppliers two weeks earlier than normal. Its generosity didn’t dent its own liquidity because, like other FMCG retailers, it has an enviable cash-conversion cycle: receiving cash from sales immediately and paying suppliers a month later (except during the pandemic), thereby creating a positive cash float.

External funding

Funding gaps not plugged by working assets internally might be plugged using quick, flexible and reliable lines of credit, such as revolving credit facilities or commercial paper programmes, complemented by trade finance such as invoice finance, factoring, or supply chain finance.

Where external sources are unavailable, the company might need drastic action to generate urgent cash: Marelli, mentioned above, sold – then leased back – its headquarters. Just Eat’s sale of Grubhub improved its capital structure and liquidity, but that was based on net proceeds of “up to $50m” for a business it acquired in 2021 for $7.3bn.

Bank lines of credit that plug working capital gaps that morph from being “temporary” to permanent gaps will reduce funding needed elsewhere in the business, such as capital expenditure. The delay might hint at deeper systemic problems in the company.

Marelli’s funding gap might take longer to plug if its mountain of debt has to be restructured, again; existing creditors will resist being subordinated to circling distressed debt investors demanding seniority before they inject capital, and demand for its products has fallen and unlikely to recover soon.

The above cases illustrate that working capital management is sensitive not only to cash flow, but also to a company’s capital structure and to the nature of its sales.

Causes of working capital rises

Credit sales, lax debtor management, and drawn bank lines to compensate for bad debtors all cause working capital to rise. So will needlessly accumulating stock, and the company will suffer a financial loss if some of that stock (or debtors) is written-off against income.

Chief executives parachuted in, or incumbents trying to avoid getting sacked by dissatisfied creditors, often point to improving working capital to turn around their ailing companies.

To turnaround the ailing handbag maker Mulberry, its new chief executive said: “In response to current market conditions, we have taken decisive steps to streamline operations, improve margins, reduce working capital and strengthen our cash position.” Car maker Stellantis resolved to “slash inventories” to restore its negative free cash flow of €5bn-10bn that was caused, in part, by falling operating margins and sales, while aircraft manufacturer Boeing’s working capital was elevated by “high inventory”, “advance payments to suppliers to support higher future production”, and timing mismatches that “continue to weigh on near-term cash flow”. And diamond miner De Beers reduced its “production to manage our working capital and preserve cash” after realising its customers’ stock levels were bloated and consumer demand was unlikely to recover in the near term.

Active working capital management has its rewards: software developer Sage’s share price rose 19% on news of its 30% rise in free cash flow, cash conversion of 123% (defined as underlying cash flow from operations divided by underlying operating profit), and “good working capital management” that included a lower net working capital balance.

Meltdown risk

Unresolved working capital (liquidity) problems can trigger a chain reaction that ends in a financial

“Bank lines of credit that plug working capital gaps that morph from being ‘temporary’ to permanent gaps will reduce funding needed elsewhere”

meltdown: bad debtors are an opportunity cost to the company, not only because the capital invested in them could be used to pay off expensive debt or invested in earning assets, but also because increased interest costs on debt used to plug the gap they create lowers profits and worsens performance measures.

Reduced cash flow and profits or elevated debt levels might trigger performance covenants or a rating downgrade, which reduces sources of capital and raises its cost.

Elevated gearing might breach gearing or interest cover covenants that trigger immediate debt repayments. If repayable debt cannot be refinanced, or corresponding assets it funded cannot be quickly liquidated at a fair price, then the company will be insolvent.

Fearing insolvency, impatient suppliers might demand earlier payment for supplies, which will accelerate the drain on the company’s cash to the point where it is unable to meet its liabilities as they fall due and becomes insolvent. To raise cash, it might have to sell assets at firesale prices. Shareholders will lose faith and sell their shares, causing the market capitalisation to fall and the company’s cost of capital and gearing to rise further.

Lenders have the upper hand and can demand stricter covenants, higher interest, more security and higher fees, which will reduce operational flexibility and increase compliance costs.

Treasurers tasked with managing working capital will do well to remember the butterfly effect: a series of seemingly trivial and unrelated events can collectively have a disastrous impact later.

Permjit Singh FCT PhD

Cash-conversion cycle

Better returns

In the second of two articles, Ben Walters introduces a concept that transforms return on capital employed into a more useful, transparent and explainable metric

Ben Walters FCT is the former deputy treasurer of Compass Group

Measuring return on capital is equivalent to measuring the value created or destroyed by a firm’s operations. If that return exceeds a certain rate, the firm has ‘created’ value; if it misses the target, value has been ‘destroyed’. In my previous article (The Treasurer, Issue 1 2025, p20-21), I looked at a very common metric, return on capital employed (ROCE), and concluded that it has some serious failings as a measure of value. In certain situations, it can decrease year on year, even when the firm is creating value.

The foundation of value creation lies with the strategy the firm adopts and the quality of management. Figure 1 illustrates a ‘hierarchy’ of value creation.

The second layer of the hierarchy is growth, which evidences demand, and return on capital. Return on capital is a function of how much more the output is worth compared with the input: in essence, the value-add from the activity. It is essential that growth is linked to return on capital: history is littered with the debris of firms ‘buying growth’ and destroying value.

bottom level of the value hierarchy, ie the simpler metrics that fall out of the layers above.

But there is a simple and easy way to measure returns on capital. To get to it, let’s go back to absolute first principles, the first thing we are taught when we learn about measuring value. The inputs into any discounted cash-flow model are simply these:

1. The incremental change in cash return generated

2. The capital invested.

Theory says you can discount the cash flows at a target cost (or return) of capital to get either a positive value creative or negative, value destructive result. Alternatively you can work out the discount rate that produces a neutral result and this is known as the internal rate of return. This technique is embedded in financial theory and universally accepted.

Ideas about how to directly measure value within the firm were first touted in the academic world by Alfred Rappaport in 1981 but his approach never quite fully addressed the challenge and never took off. Having read his work I feel that his concept, along with those such as EVA, ROCE and their derivatives, all suffer from a reliance on too much complexity or faith in traditional accounting whose conventions differ from the economic approach we have walked through above. So, let’s have a go ourselves at sourcing those two inputs required to measure value from a standard set of financial statements:

Theincrementalchangeincash: the year-on-year change in cash generated by the firm or business unit, net of tax and before capital. This is EBITDA net tax.

“iRoCE can be determined at practically any level within the firm”

The last layer of the hierarchy gets into the metrics and KPIs we all recognise and focus on, such as profit, free cash flow and earnings per share (EPS). These are really easy metrics to measure and are reported on consistently. But they reflect the hierarchy above them: value cascades down from the strategy and quality of management, which determines growth and higher returns on capital, and these are then reflected in better reported profit, EPS and cash flow.

No-one to date has developed a way of measuring return on capital effectively. The most common metric, ROCE, is not up to the job, as we discussed in the previous article. Convoluted processes such as ‘economic value added’ exist, but these are highly judgemental, complicated, and expensive to implement and explain. In addition, these alternatives don’t quite do the job – and this means the focus of the financial world is stuck on the

Thecapitalinvested: the total CAPEX, working capital and net M&A spend from the previous period. This is identified from the cashflow statement.

We have now defined the numerator (change in EBITDA less tax) and denominator (capital invested) for our own KPI from first principles. I have called this KPI incremental ROCE, or ‘iRoCE’.

Effectively, this KPI is a snapshot of the most recent incremental return on capital the firm or business unit has produced. It is the internal rate of return (IRR) for a discrete period and the trend when calculated on a rolling basis builds up a true picture of value performance. Let’s examine how this KPI stacks up against ROCE.

Figure 2 illustrates how our new iRoCE KPI is derived from some readily available financial information. iRoce returns a value of 11% by taking the incremental change in cash profit (effectively EBITDA less tax) of 110, and the actual capital spent of 1,000. This value is close to the true IRR from the investment.

ROCE, however, under these inputs, shows a deterioration of 1 percentage point, moving from 15% to 14%. This is not particularly informative, but worse than that, the results are highly contingent on several elements that are completely unrelated to the actual economics.

Table 1 demonstrates how dependent ROCE is on historic accounting treatments. The firm’s history, the extent to which it has built its business through substantial M&A, or grown organically, and even depreciation policies impact the output.

iRoCE, however, returns a consistent 11% value, because it is sourced from the changes to cash profit and the capital spent. These inputs into the iRoCE KPI are independent of accounting judgements, historic transactions and the effects of inflation.

I described iRoCE as ‘a game-changer’ and I’d like to finish by explaining why. iRoCE can be determined at practically any level within the firm, be that

strategic business units, products, geographies – in fact, wherever incremental profit and the capital invested are known. The implication of this is that the firm can work out ‘true’ returns on capital being generated from all these areas of its business. This incredibly powerful insight can be used to set management targets and allocate capital strategically over time to maximise the value of the firm. But more than this, I hope you can appreciate iRoCE’s simplicity, its basis in theory that gives it true strength, the ease with which it can be implemented, and lastly the power of its applications. iRoCE is part of a strategic value performance framework I have developed called CPInsight™ (Capital Performance Insight). Empirical testing shows performance under the framework correlates more strongly to changes in Enterprise Value than traditional accounting metrics such as earning per share.

Please contact the author via LinkedIn if you are interested in exploring how to implement the CPInsight framework into your business and transforming the way you identify and optimise value.

1: ROCE depends on the BV of historic operating assets; how can this measure value being created by the business now?

Table

Figure 2: iRoCE is easily calculated from readily available accounting data

When debt restructuring turns nasty

European corporate borrowers could instigate conflict between lenders if they ratchet up liability management exercises, but this may not reach levels seen in US markets

Altice France opened the door last spring to more aggressive liability management exercises (LMEs) in Europe when it shifted €2.3bn in assets away from existing creditors’ reach. The move quickly prompted most of its lenders to enter a cooperation agreement, forming a unified front to negotiate their interests in ongoing capital restructuring and, whether intended or not, to prevent the lender-on-lender violence so prevalent in the US market.

At least one other European borrower, Sweden’s Oriflame, a provider of beauty and personal care products, has used capacity under its bond documentation to similarly shift assets outside of its bondholders’ reach. Another, Victoria plc, which manufactures and distributes a wide range of floor coverings, is reportedly considering a similar move.

So far, European deals have yet to engage in the aggressive LMEs now common in the US, where a bare majority of creditors works with the borrower to improve its capital structure, at the expense, economically, of the remaining lenders. However, shifting assets can preface more aggressive LMEs that provide potential solutions as well as risks to leveraged companies facing debt-payment challenges.

Victoria, for example, is said to be talking to investors about putting new money into the group, potentially indicating that a ‘down-drop’ LME is in the works. That type of transaction, by now common in the US, involves a subset of funds that provides additional financing collateralised by the assets that were shifted away from existing lenders.

“We have not yet seen the ‘divide and conquer’ approach in Europe,” says Jennifer Pence, a senior credit officer at Moody’s Ratings.

Down-drops and uptiers

Down-drops are one of several types of LME, also referred to as out-of-court restructurings. In an early instance of aggressive LMEs in the US, Serta Simmons Bedding requested solutions from lenders to address its debt challenges. One group proposed a down-drop and another an uptier LME, in which a portion of the existing senior debt is given seniority to the advantage of some lenders.

“Those presenting the down-drop lost out,” Pence says, noting that conversations with only certain investors could indicate that a company is considering a more aggressive LME approach. “To what extent are those [conversations] first actions?” she asks.

Several factors have facilitated the use of LMEs. They include investor protections weakening over recent decades and a multitude of institutional investors replacing banks as lenders to riskier companies, increasing demand for leveraged loans and making covenant-triggered negotiations difficult. Serta’s transaction in 2020 was in the first major wave of aggressive LMEs that occurred in response to pandemic lockdowns, when highly leveraged companies sought liquidity to weather the market

“We have not yet seen the ‘divide and conquer’ approach in Europe”

volatility. LME use plummeted in 2021, then began to climb again in 2022, along with inflation, and it has increased ever since as risky borrowers face stubbornly high rates.

In fact, during 2024 in the US, LMEs became significantly more common than traditional loan-payment defaults.

PitchBook/LCD records LMEs reaching an all-time high of 37 in October’s trailing 12-month calculation, up from 17 a year earlier and only seven in October 2022.

Temporary relief

The relief provided by aggressive LMEs, however, appears to be temporary. S&P Global Ratings found that of 32 such transactions, including 20 completed since 2022, 12 have filed for bankruptcy and 15 have either redefaulted or are likely to.

Rachelle Kakouris, director, LCD research at PitchBook, notes that Wheel Pros, a New Jersey-based designer and marketer of tyres, filed for bankruptcy in September after conducting an LME the year before.

“Despite the short timeframe, 14% of companies that conducted LMEs in 2023 have already returned with a payment or bankruptcy default,” she says.

Still, LMEs offer a potential solution for liquiditystrapped borrowers. Surbhi Gupta, managing director in Houlihan Lokey’s financial restructuring group, says her firm anticipates the number of LMEs in the US continuing to increase alongside more traditional incourt restructurings. She adds that, as interest rates have yet to fall, many companies that have engaged in LMEs in the past 12 to 18 months will return to the table – and because lenders probably mitigated the loopholes in loans’ contractual language that permitted the initial LMEs, borrowers are likely to require a more holistic solution.

“Whether that’s in court or out of court remains a question, but there will be a need for some of them to go through a second round of restructuring,” Gupta says.

To avoid LMEs creating creditor disparities, lenders have sought to include ‘blockers’ in loan agreements, such as the J Crew blocker that makes down-drop LMEs more difficult to pursue. Moody’s currently recognises six named blockers, up from three just a few years ago. Creditors have also joined broad cooperation agreements, to avoid ending up on the wrong side of LMEs.

Cudgel, not violence

In Europe, rather than pitting lenders against one another, companies have so far used LMEs more as a cudgel to bring creditors to the table to hammer out restructurings that reduce their debt burdens. Billionaire Patrick Drahi’s Altice, for example, reportedly asked all of its creditors last March to accept losses and reduce its €25bn debt burden.

“The investors were all in the same boat,” Pence says. “The company simply moved the media and data-centre assets away from the bondholders and indicated they would have to participate in a discounted transaction.”

In mid-October, Bloomberg reported that creditors holding upwards of 90% of Altice’s secured debt extended the cooperation agreement that binds them in negotiations until February 2026. An earlier proposal that lenders take a 20% haircut on the debt was rejected and, according to Bloomberg, the current proposal would offer them an equity stake in exchange for writing off principal, extend maturities, and lower the interest rate on existing debt.

Pence calls the Altice transaction “seminal”, as the first purely European LME – also the case for Victoria and Oriflame. In March this year, Altice announced it had achieved “significant” support among its creditors for its refinancing package that had been put forward a month earlier. Pence adds that creditor cooperation agreements, such as the ones in Altice and Oriflame, make leaving some investors in the cold unlikely in the short term.

Should Victoria, majority owned by a mix of hedge funds and individuals, seek new financing collateralised by assets it shifted away from its current senior lenders, it would be a step towards the US market. Factors such as lingering high interest rates could push more European borrowers in that direction.

European corporates’ different approach

However, several differences between the US and European markets make it likely that the latter will continue to see

“[LMEs] will continue to be a technique that will be considered and, in certain cases, acted upon”

fewer LMEs, particularly the aggressive variety. Those in the US tend to be in companies with larger capital structures, and they’re usually pushed by private equity sponsors, factors that are less prevalent in Europe.

Paul Richards, senior director at debt-advisory firm Alvarez & Marsal, says that LMEs in the US are also driven by the high cost of Chapter 11 bankruptcy proceedings compared with Europe’s less expensive options. The UK Corporate Insolvency and Governance Act 2020, for example, introduced the UK Restructuring Plan, a courtsupervised procedure enabling debtors to pursue capital restructurings efficiently, outside of an insolvency process. The Dutch Private Composition Act, known as WHOA, provides similar benefits.

In addition, there are fewer lenders with the expertise to engage in in-court or out-of-court restructurings in Europe compared with the US, in which there are literally hundreds. Gupta adds that Europe’s more intimate financing environment inhibits borrowers from pursuing LMEs that could result in aggrieved lenders and jeopardise future financings.

Nevertheless, syndicated loan and private-debt activity is increasing, particularly in Europe’s leveraged finance market, and that could prompt borrowers to opt at times for LMEs over other capital-restructuring options.

“I think it will continue to be a technique that will be considered and, in certain cases, actually acted upon,” Richards says.

In particular, when a corporate borrower has concerns about liquidity or its balance sheet structure, such as impending maturities, then LMEs can provide an efficient solution, he adds.

There are a number of risks to consider as well. Aggrieved lenders may choose to pursue litigation, an issue in the US as courts currently grapple with the legality of ever more aggressive LME structures and lender defences, such as cooperation agreements that Europe’s court-supervised restructuring procedures abate.

Borrowers must ensure an LME’s relief is sufficient, Gupta says, as lenders are likely to tighten up loan loopholes, making a second LME more difficult. In addition, LMEs can leave borrowers with significant leverage, requiring greater conviction in the prospects of the underlying business and macroeconomic trends that enable the company to “grow into the capital structure”, she adds.

John Hintze is a US-based financial writer covering corporate finance and Wall Street

FUTURE TRENDS

What lies ahead for the treasury professional?

DEBT CAPITAL MARKET REFORM

What’s next for reform in the UK, will it encourage a return of retail investors?

The

VISIBILITY AND CONTROL

How technology can support the twin pillars of cash management during periods of uncertainty

Visionary treasury is reshaping the Middle East

Treasury transformation in the Middle East goes beyond a momentary shift – it’s part of a trajectory towards a forward-looking economy. Here, JP Morgan explores the region’s visionary changes, economic reforms and technological advancements

Corporate treasury in the Middle East is undergoing a significant evolution driven by innovative visions and economic reform. Strategic initiatives such as Saudi Vision 2030 (www.vision2030.gov.sa/en/) and We the UAE 2031 (wetheuae.ae/en) are paving the way for economic diversification and the adoption of advanced technologies.

in-house bank infrastructure. These advancements and their respective industry awards underline the importance of corporate treasury moving beyond transactional tasks.

Diversification and development

The region is on the cusp of a new stage defined by rapid change. National visions in the region are fundamental drivers of a significant shift in the economic landscape as the region charts its course towards economic diversification.

“National visions in the region are fundamental drivers of a significant shift in the economic landscape”

This shift, coupled with economic reforms such as the introduction of corporate income tax and the region’s ever-increasing connectivity between Europe, Africa and Asia, has led to the establishment of regional treasury centres. Simultaneously, corporate treasurers have adopted sophisticated technologies, creating a dynamic and resilient treasury landscape. In this rapidly evolving business environment, corporate treasury in the region is moving beyond transactional tasks and focusing on financial strategy, risk mitigation and value creation.

Corporates evolve in the region, as does treasury Corporate treasurers in the Middle East are investing in sophisticated treasury management systems (TMSs) to streamline processes, enhance liquidity management and optimise financial decisionmaking – and earning accolades for their success. For example, in-house banking has helped treasurers scale. ADNOC Group, of the UAE, won the Treasury Project of the Year award at the ACT Middle East Treasury Awards in 2022, underscoring in-house banking’s strength in cash management, working capital and systems implementation. In another case, ACWA Power, of Saudi Arabia, won the Adam Smith Awards in 2021 for treasury transformation project. This included a new TMS that enabled increased automation and created an

Emergence of the automotive sector in Saudi Arabia introduces a host of new challenges, from managing the financial aspects of manufacturing and supply chain operations to handling the complexities of global partnerships. Corporate treasurers must adapt to an entirely new set of treasury realities, including initial investments, ongoing operational treasury, trade and risk management.

Additionally, the metals and mining sector is emerging as a key player, capitalising on the surge in worldwide demand for low-carbon steel. The Middle East has inherent production and export advantages, including low-cost energy from natural gas and the relatively easier production of green hydrogen. Saudi Arabia’s merger of Al Rajhi Steel and Hadeed reflects this commitment, while Emirates Steel Arkan’s investments show the sector’s shift towards sustainability. With international players seeking partnership, the metals and mining sector becomes a catalyst for economic expansion and diversification. In this evolving industrial frontier, corporate treasurers are now tasked with harmonising treasury operations on an international scale.

While these ambitious initiatives bring real changes to trade to and from the region, corporate treasury teams play a crucial role in aligning treasury strategies with these visionary goals. They can do so by ensuring treasury fundamentals such as:

• Instilling a cash mentality at onset

• Gaining a clear view of business liquidity

• Navigating interest rates environment

• Maximising internal liquidity to future-orient treasury

The rise of regional treasury centres

As national visions set the pace for the economic developments in the Middle East, regional economies

Semih Ozkan is head of corporate payments sales MENA at JP Morgan

“Technological advancements are central to transforming treasury operations across the region”

have modernised tax structures and positioned the region as a global financial hub.

Several countries in the Middle East have introduced or are considering corporate income tax and value added tax (VAT) as part of economic reforms. This reflects the region’s commitment to align with international financial standards. Implications for corporate treasurers may be significant, ranging from tax compliance and documentation to transfer pricing considerations and cross-border transactions. As a result, corporate treasurers will likely need to adapt their processes, systems and strategies to ensure compliance and optimise the businesses’ overall financial position.

Simultaneously, with Dubai International Financial Centre (DIFC) and Abu Dhabi Global Market (ADGM), where JP Morgan is expanding its presence, and King Abdullah Financial District (KAFD) in Saudi Arabia, key financial hubs have attracted international businesses. The hubs’ financial infrastructure, regulatory framework and environment have empowered the rise of regional treasury centres across diversified industries.

This rise has catalysed a change in views towards the treasury function in the region. Corporate treasurers now operate as a strategic partner, steering businesses through the complexities of evolving tax structures as well as treasury, trade and risk management, while leveraging the advantages offered by these financial hubs for further trade, export and growth.

Treasury technology transformation

The journey from cheques and physical signatures to cutting-edge financial technologies represents a seismic shift in treasury management in the Middle East. Digital transformation rapidly evolved from a narrative to an action following the pandemic. Businesses have become increasingly engaged in challenging banks and fintechs for more digital, connected and intuitive solutions, while expecting further control, transparency and improved efficiency across operations.

Technological advancements are central to transforming treasury operations across the region. As new sectors open up new ways of trade, export and growth, treasuries are no longer confined to traditional operational models. Instead, they are embracing advanced functions such as regional treasury structures, real-time treasury, artificial intelligence and machine learning, payment factories and in-house banks. As a result, cybersecurity is increasingly important to ensure robust measures to protect sensitive financial data.

Looking to the future

In the midst of change, where visionary initiatives, economic reforms and technological innovations converge, the Middle East’s treasury landscape is rapidly evolving. Corporate treasurers are looking to future-proof the treasury function of tomorrow across treasury, trade and risk management.

JP Morgan is the sponsor of this year’s ACT Middle East Treasury Summit. For more details go to: treasurers.org/events/ conferences/middle-eastsummit-25

What next for UK debt capital market reform?

Following the Financial Conduct Authority’s launch of detailed proposals, including retail inclusion, James Leather provides an update and looks ahead at what this might mean for the issue of lower denomination bonds

James Leather MCT is director at Corium Treasury Limited

Following on from our mid-December summary of UK debt capital market reform and retail inclusion (scan the QR code left to link to The Treasurer), we can report that the FCA released its latest consultation covering this subject on 31 January in the form of CP25/2 (scan the QR code bottom left to link to the FCA webpage).

The key proposals relating to retail inclusion in bonds reside in chapter 3 (Proposals for nonequity securities) and are as follows:

assessment, but to use a simplified process.

°To amend the Disclosure Guidance and Transparency Rules (DTR) so financing subsidiaries that issue these bond types in low denominations, will be exempt from the annual and half-yearly financial reporting requirements in the same way as those that use high denominations.

°To clarify that most securities admitted to trading on a regulated market will constitute readily realisable securities and thus not be subject to marketing restrictions or bans under the Financial Promotion rules, with these bond types generally making them

UK Debt Capital Market Reform & Retail Inclusion –where are we now?

CP25/2: Consultation on further changes to the public offers and admissions to trading regime and the UK Listing Rules

•A single disclosure standard for all denominations based on the current rules for wholesale

•A new concept for the FCA glossary of “non-complex listed corporate bonds”, defined as:

°issued (or guaranteed) by an organisation with listed UK equity °unsecured, unsubordinated and not subject to bail-in °not convertible or asset-backed or derivative linked securities.

•To amend other regulations that have discouraged or prevented issuers from using low denominations and making their bonds available to “retail investors” – or to enable those regulations to be interpreted in a way that does not do this (partly through the use of this concept). So:

°To amend PROD 3 (from MIFID II) to include guidance on its application to these bond types, saying that they are likely to be suitable for the mass retail market via a range of channels, with manufacturers therefore not expected to undertake a detailed target market

readily realisable securities.

°To provide guidance that Consumer Duty rules do not apply to issuers and that a carve out would apply to certain activities, including underwriting activities, involving these bond types seeking admission to trading on a regulated market.

Chapter 3 also reminds readers that the FCA proposes (in CP24-30, published on 19 December last year) carrying across PRIIPs debt security scope clarifications to the new CCI regime, with an amendment making it clear that typical ‘make whole’ clauses do not cause corporate bonds to fall within scope of the CCI regime (previously PRIIPs).

CP25/2 covers not just non-equity securities and retail inclusion, but also: changes to the UK Listing and Prospectus Rules (including the removal of the further issuance listing application process); Listing Particulars; and consequential handbook changes and transitional provisions. The consultation should be viewed together with the FCA’s consultation published in July 2024, CP24/12.

Debt and equity market impact

Both consultations build on engagement papers released by the FCA in 2023. Together they form the proposed details of the Public Offers and Admissions to Trading Regulations (the framework which was made by parliament in January 2024) that will come into force later this year, replacing the UK’s Prospectus Regulation. The proposals dovetail with recent reforms to the Listing Regime and impact both the UK’s debt and equity capital markets, aiming to reduce the cost of listing, to make capital raising easier and to remove barriers to retail participation.

What next?

The next steps are:

•feedback for CP24-12 was due on 18 October 2024 and for CP25/2 on 14 March 2025

•a policy statement to be published by the FCA in “summer 2025”

•implementation at the end of 2025/ early 2026.

“Overall, we are positive on the proposals,” says Michael Smith, head of debt capital markets at Winterflood Securities. “The FCA should be commended for having gone as far as

“It speaks volumes that the conversation has moved from whether retail inclusion will happen, to how it will happen”

they have, to understand and address the wide range of factors that are preventing issuers from using low denomination bonds. There is still some work to be done, but it speaks volumes that the conversation has moved from whether retail inclusion will happen, to how it will happen. Qualifying bond issuers will soon have a material and viable source of additional capital, that also diversifies their investor base.”

ACT RESPONSE TO THE CONSULTATION

From the perspective of many corporate bond issuers, the current regulations (largely implemented since the turn of the millennium) have acted as a material disincentive to issuing lower denominated bonds and this has been reflected in the effective cessation of the retail bond market in the UK.

Looking across markets internationally where there are no such regulations, the application of a lower denomination to an issue is far more common practice, and feedback from large multinationals who issue both in the UK and globally is that, if the disincentives were removed from the UK market, they would be indifferent to issuing lower denomination bonds, something they already do in other jurisdictions.

For those less frequent issuers, or those who would choose to issue in the UK for commercial or strategic reasons, the ability to offer their bonds to a retail audience without the current barriers, and thus broaden their pool of providers of capital, is attractive.

However, there are challenges with the current proposals that will need addressing. For example:

• existing product governance rules (e.g. the circumstances under which production of a key investor information document (KIID) is a prerequisite) would need to be amended.

• the proposed definition of ‘noncomplex listed corporate bonds’ may be too narrow, excluding many who currently issue under the existing regime. For example, many of the bonds on the London Stock Exchange (LSE) Main Market are not issued by entities with a UK equity listing (or guaranteed by such an entity) – and the proposed definition would also exclude those issued by a variety of otherwise potentially highly desirable issuers (e.g. housing associations, or partnership organisations such as John Lewis).

From the perspective of the issuer, anything that streamlines/simplifies requirements to be consistent across asset classes, will be favourably received. This is an area to watch, offering potential opportunity to broaden the investor pool. The ACT will continue to work with the FCA and others to ensure that the opportunity is delivered. Sarah Boyce, policy & technical director, ACT

•Conference update: Dominic Holland, director of market oversight at the FCA will be speaking on this and many other topics at the ACT’s Annual Conference. Scan the code to find out more.

A strategic blueprint for the future National Payments Vision:

As the payments landscape shifts, treasurers need to take action. NatWest’s Ritu Sehgal and Simon Eacott highlight the next steps

In an era when the dynamics of economic activity are being reshaped, governments worldwide are acknowledging the pivotal role payment systems play in safeguarding the commerce ecosystem. The Bank of England and UK financial authorities are implementing a National Payments Vision (NPV) to enhance the efficiency and security of the UK’s payment infrastructures. While the daily management of payments rests with regulators and financial firms, the vision outlined by HM Treasury marks a significant departure in the UK’s approach to its payment systems, laying the groundwork for future advancements.

Last November, building on a consensus that the payments landscape is ‘congested’ and in need of direction, the UK published its inaugural NPV, a long-term strategic plan, characterised by key initiatives such as:

• Establishing a Payments Vision Delivery Committee to drive secure, speedy and cost-effective upgrades to retail payment infrastructures

• Assigning to the Financial Conduct

Authority the responsibility for driving forward Open Banking, streamlining oversight and reducing regulatory redundancies with the Payment Systems Regulator

• Creating robust frameworks to mitigate risks related to fraud and cyber threats

• Enhancing international payment capabilities

• Expanding access to payment services for underserved populations

• Adopting emerging technologies, including blockchain, to spur innovation. These priorities could unlock new features for treasurers. As the responsibilities of treasurers evolve, so too could the capabilities they have at their disposal, heralded by the NPV’s priorities.

Enhanced cash management

Effective cash management is paramount for successful businesses. The anticipated advent of real-time payment solutions under the NPV promises to improve cash-flow management

significantly by offering immediate transaction confirmations, thereby narrowing the window between payment initiation and fund availability. Actionable insights for treasurers include:

• Adopt real-time payment systems: urgently assess current paymentprocessing methods and forge partnerships with banks or payment service providers who offer instantaneous transaction capabilities

• Optimise cash positioning: use real-time data to inform the strategic positioning of cash reserves, enhancing decision-making regarding settlement risks and liquidity.

Liquidity management improvement

The vision is poised to enhance liquidity management, affording treasurers better visibility over payment flows. Accelerated and predictable payment cycles will enable more precise forecasting of liquidity needs. Actionable insights for treasurers include:

• Use predictive analytics: implement tools

that align historical cash-flow trends with real-time data to refine liquidity forecasts

• Collaborate with financial institutions: partner with banks equipped with advanced cash management tools for critical insights into cash flow and liquidity

• Responsive management: with the capabilities of real-time payments, more responsive and ‘just in time’ approaches to liquidity management are possible, reducing the cost of liquidity for growing businesses.

Cybersecurity

and risk management

As the digital economy expands, so too must the robustness of cybersecurity measures. The NPV emphasises the need for treasurers to recalibrate their risk-management frameworks accordingly. Actionable insights for treasurers include:

• Develop a cybersecurity strategy: collaborate with IT and compliance teams to construct a comprehensive strategy that encompasses risk assessments, employee training and incident-response protocols

• Invest in secure payment technologies: prioritise solutions that incorporate encryption, tokenisation and frauddetection capabilities to mitigate risks effectively

• Manage the impact of real-time payments and account data: with realtime payments, greater risks to payment processes are exposed. Treasurers need to balance the benefits of real-time technologies with processes that ensure appropriate approvals.

Regulatory

compliance and governance

The NPV will probably introduce new regulations and standards to refine payment operations. Treasurers must ensure their organisations adhere to evolving compliance frameworks. Actionable insights for treasurers include:

• Monitor regulatory changes: maintain vigilance regarding shifts in regulations from governing bodies concerning payment systems through active participation in industry forums and seminars

• Enhance governance frameworks: implement robust governance

mechanisms to oversee compliance audits, risk assessments and adherence to best practices in treasury management.

Innovation and technology adoption

At the heart of the NPV is a dedication to fostering innovation through partnerships among incumbent financial institutions, fintechs and additional stakeholders. Actionable insights for treasurers include:

• Allocate resources for technology investment: budget for advancements in payment capabilities, possibly exploring blockchain solutions to ensure secure transactions

• Cultivate an innovative culture: encourage an organisational ethos that embraces experimentation with novel payment technologies and solutions.

Inclusivity and accessibility

The NPV aims to ensure that payment systems remain accessible to all demographics, particularly underserved communities. Actionable insights for treasurers include:

• Support financial inclusion: examine how payment solutions can amplify financial access for small enterprises and individuals lacking traditional banking options.

Open Banking and API integration

The vision highlights the growth of Open Banking and application programming interfaces (APIs) as means to enhance payment experiences. Actionable insights for treasurers include:

• Integrate Open Banking solutions: explore opportunities to incorporate Open Banking into treasury management systems to bolster cash visibility, automate payment processes, and enhance liquidity management

• Evaluate improvements in crossborder payments: assess potential benefits from enhanced cross-border payment capabilities, including reduced transaction costs and expedited settlement processes.

Customer experience

The vision underscores the importance of elevating the end-user experience in payments by leveraging data for informed decision-making. Actionable insights for treasurers include:

• Streamline payment experiences: analyse how payment processes influence customer satisfaction across B2C and B2B transactions, and identify pathways for refinement

• Use payment data: deploy analytics tools to extract insights concerning cashflow patterns, customer behaviour and operational efficiencies.

Preparing for future trends

Staying attuned to emerging trends is vital. Actionable insights for treasurers include:

• Monitor sector developments: be vigilant about advancements such as embedded finance, buy-now-pay-later models, and mobile payment adoption

• Anticipate long-term trends: keep abreast of trends that could reshape payment landscapes, such as Central Bank Digital Currencies and stablecoins.

Conclusion

The NPV represents a landmark opportunity for the evolution of payment systems, carrying profound implications for treasurers. By embracing these changes, financial leaders can refine their strategies in cash and liquidity management, regulatory compliance, and technological advancement.

To remain competitive and ensure financial stability as the government articulates its blueprint to rejuvenate growth, treasurers must proactively engage with the shifting payment landscape through innovative solutions, strategic partnerships and robust investments in cybersecurity – a collective responsibility that will underpin the efficacy of digital payments. The NPV stands as a framework for growth and adaptation, presenting challenges and opportunities for treasurers to enhance their organisations’ financial strategies in an increasingly digitalcentric economy, driven by innovation and competition within a resilient (but fastchanging) payments ecosystem. Through vigilant adaptation and collaboration, treasurers can elevate operational efficiencies, manage emerging risks, and foster broader objectives of financial inclusion and innovation. Realising the potential of this digital landscape begins now.

Ritu Sehgal is head of transaction services and trade, commercial and institutional banking, and Simon Eacott is head of payments, both at NatWest

Visibility and control: the twin pillars of cash management

Businesses are looking for technology to support real-time intelligence on their cash positions, but a step-by-step approach could be more effective than a big-bang solution

Kevin Grant

Kevin Grant is managing director, treasury management, at Bottomline

Fast-paced. Unpredictable. Evolving. Whatever term you use to describe today’s business environment, it all comes down to the same thing: companies need greater agility than ever before to accommodate economic uncertainty and shifting market dynamics. A core component of that agility is expertly managing working capital.

Successful cash management relies on two fundamental pillars: visibility and control. The visibility component dictates that organisations must have 100% real-time data on their cash positions across all accounts. This is crucial for informed decision-making.

Control is the necessary counterpart to visibility. For effective control, companies need a centralised and structured approach to managing cash, regardless of the number of bank accounts they operate.

By ensuring complete visibility and control, businesses can optimise liquidity, enhance forecasting accuracy, and turn challenges into opportunities for growth.

Stepped approach to transformation Though fundamental to cash management, visibility and control are not easy to attain. Companies are hampered by manual processes, fragmented and disparate technologies, integration gaps between systems, and business silos.

And when companies do decide to take on a cash management-focused digital transformation project, they sometimes bite off more than they can chew. In the ensuing frustration, it is common to fall back on the old and familiar – even if it is ineffective.

The key to overcoming these obstacles lies in focusing on immediate priorities rather than attempting to ‘boil the ocean’ in an overwhelming, large-scale transformation. By addressing pressing financial inefficiencies one at a time, organisations can gradually move towards fully integrated financial operations. Taking an incremental approach ensures greater success and avoids the pitfalls of stalled projects that consume excessive time and resources.

Decrease risk, increase opportunity Organisations that fail to adopt modern cashmanagement solutions expose themselves to significant risks, including ineffective cash-flow management, compliance issues, challenges with liquidity, and delayed decision-making.

Effective cash management begins with asking the right questions about an organisation’s liquidity and operational needs. Do we have enough working capital to cover current and future obligations? How can we ensure we can ‘keep the lights on’ during periods of financial uncertainty or downturns?

These are critical questions that every organisation must address to assess its cash health and operational agility. Understanding the obligations tied to a company’s cash is essential, whether it involves ensuring funds are available for payroll, capital expenditures or supply chain needs.

While each business case is unique and requires tailored solutions, many organisations face common challenges: inefficient cash-flow cycles, difficulties in managing payments across borders, and a lack of centralised visibility over cash positions.

To navigate these challenges, it’s important to consider key metrics such as the cash conversion cycle, days sales outstanding (DSO), and working capital ratios.

These metrics provide insights into how efficiently cash is being used and highlight opportunities for optimisation. When managing cash across international borders, businesses must address the complexities of cross-border payments and foreign exchange risk.

With increased globalisation, minimising these risks while seizing global opportunities is a critical part of any comprehensive cash-management strategy. How can we reduce the costs and risks associated with cross-border payments while maintaining liquidity across various regions? Strategies such as multilateral netting and cash pooling can play a vital role here, as can centralised liquidity and FX management via an in-house bank.

By centralising global liquidity and offsetting intercompany payments, businesses can streamline operations, reduce transaction costs, and decrease exposure to currency fluctuations. In this way, not only do companies mitigate risk, but they also increase opportunities by creating more efficient, flexible and robust cashmanagement strategies that support global operations and local needs.

10 PLACES TO START TRANSFORMING CASH MANAGEMENT:

1. Adopt a cash-management system that provides a single point of access for tracking and managing all cashrelated activities.

2. Enhance bank connectivity by establishing integrations that provide real-time cash visibility and automated reconciliation.

3. Incorporate automation that will streamline payments, receivables and liquidity management to improve efficiency and reduce manual workloads.

4. Improve risk management via realtime access to financial data to identify and address liquidity risks before they escalate.

5. Automate forecasting through advanced tools that integrate realtime data from accounts payable and receivable.

6. Embed artificial intelligence that can enhance payment operations, streamline cash collection, and automate exception handling.

7. Embrace advanced payment connectivity and choice, optimising how you connect to banks and internal systems with APIs, managed bank host-to-host and outsourced Swift. Connectivity-as-a-service providers are in the market today.

8. Implement a treasury management system to augment the above cashmanagement system capabilities, including currency denomination changes (FX deals), reducing debt cost, and maximising return on surplus cash (interest rate deals), to optimise liquidity and streamline treasury processes.

9. Leverage cloud-based solutions to improve scalability, flexibility and collaboration across departments while ensuring data security.

10. Integrate data analytics and business intelligence tools to offer actionable insights, allowing decision-makers to make informed choices about working capital.

Leverage AI for enhanced cash management AI is transforming cash management by providing real-time insights and predictive analytics to optimise cash flow and working capital. It can automate routine tasks such as forecasting, reducing errors and saving time.

However, while AI enhances efficiency, the human element remains critical. Human judgement is necessary to interpret AI findings and make strategic decisions. By combining AI with human expertise, businesses can build more agile and effective cash-management strategies. Businesses that embrace advanced cashmanagement solutions will not only protect their financial stability, but also position themselves for greater efficiency, resilience and growth. The journey does not require a massive overhaul: just a commitment to steady, strategic improvements. By focusing on achieving real-time visibility and control, organisations can gain the financial agility needed to navigate uncertainty and seize new opportunities.

“Effective cash management begins with asking the right questions about an organisation’s liquidity and operational needs”

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The A-Z of Corporate Treasury | 16-20 June Two

The Nuts & Bolts of Cash Management | 10 July Three

BEST PRACTICE

Eyes on the cash prize

Against a background of market uncertainty, interest rate volatility and macroeconomic headwinds, the ACT Cash Management Conference 2025 offered delegates valuable solutions. Here are just seven winning insights

1. Technology levels the playing field on payments innovation

The UK’s track record on payments over the past half-century has been one of constant innovation, David Shinkins, global head of specialist sales at Barclays, told the conference. This has been driven and enabled primarily by technology – but now the spread and availability of technology has levelled the playing field in terms of payments innovation. He highlighted how other countries, particularly in South East Asia and India, were now driving innovation to meet consumer demands and using technology to “leapfrog, effectively, over other countries that had relatively archaic legacy payments infrastructure”. Shinkins highlighted examples of other microfinancing and micropayment innovations, such as the proliferation of ‘buy now, pay later’ solutions and the adoption of national ID cards for verification in retail journeys.

He said the UK needed to remain an attractive investment location: “With the renewed efforts to accelerate payments in the UK and innovation – whether that’s through Pay UK or the National Payments Vision – it’s about how we think about all of those payment systems in the UK coming together to effectively create a better architecture for the future for the UK economy.”

2. Positive friction is still required to fight fraud

With the pace of fintech and payments innovation increasing to meet the demand from consumers for fast, frictionless, convenient payments, Shinkins also posed questions around ensuring sufficient safeguards against increasingly sophisticated fraud – and how to get that balance right. “The fraudsters themselves innovate on how they access the payment systems and effectively try to clearly drive up financial crime,” Shinkins said. “So how do you

make sure that you still have positive friction in client and payment journeys? How do you make sure you stop fraud happening, but still enable frictionless payments?”

3. Interest rate volatility is reaching 2008 levels

“This is probably one of the most volatile interest rate and bond market environments that we have ever found ourselves in,” warned Craig Inches, head of rates and cash at Royal London Asset Management, as he reflected on the possible effects of interest rate uncertainty on cash management strategies. “If you look at various metrics around US treasury markets, the daily volatility now is as volatile, if not more volatile, than what we saw during the [2008] financial crisis.” With central banks facing the dichotomy of the need to curb inflationary pressures while protecting growth, it is a challenging environment for cash management strategies. Despite the negative global environment, however, this uncertainty means “there are a lot of securities available at the moment that are attractive for the treasury market” offering security and liquidity while giving treasurers a better yield than lending on an unsecured basis. “That’s a really nice environment to be in.”

4. It’s vital to understand what’s really driving FX fluctuation

Foreign exchange risk is pretty much unavoidable in a global business. While it may be clear that the ‘Trump effect’ is causing considerable turbulence in FX markets, it’s crucially important for treasurers to understand the underlying causes of FX volatility and their implications for robust cash management.

William Hassan, managing director of corporate FX sales at Barclays, and James O’Connell, director of corporate FX sales at Barclays, took delegates through the complex interaction of currencies to economic data and the central banks’ response to that data. Currency is the share price of a country, O’Connell said, and as it’s a relative value equation “you might be looking at the right things, but if you interpret them the wrong way, then you can miss the picture”. From a cash management perspective, he added: “If we’re trying to look forward and

David Shinkins, Barclays

Aminah Samad, UK Finance

see what our risks are, we need to be looking at the right things.”

5. AI shouldn’t be a solution looking for a problem

AI was a recurring theme at the conference, though AI-based tools have been with us for a while, including machine learning and deep learning models. Can the next generation of AI solutions do cash management or forecasting fundamentally better than existing systems?

“Sometimes, it feels that, for some, AI is more of a solution looking for a problem than otherwise,”

Nish Nagpal, corporate treasury adviser at PwC, said. “It’s very important for people to understand the applications of different branches of AI and that’s the only way you can implement it properly.”

He continued: “If you can combine generative AI capabilities on top of machine learning, that creates a very important, powerful combination.”

However, he advised: “You have to be very mindful that AI is not a solution; it’s a tool towards a solution, just like anything else.”

6. Monitor the changing sanctions and money laundering landscape

Keeping up with evolving anti-money laundering (AML) regulations and sanctions obligations is vital to ensure regulatory compliance.

Horizon scanning – particularly on the global sanctions landscape – is becoming increasingly important, as sanctions regimes diverge and their application to individuals and businesses across territories becomes more complex to manage. This may be further exacerbated by the new

US administration’s geopolitical policy agenda.

“The challenge at the moment is that it’s very difficult to predict,” Aminah Samad, director of financial crime at UK Finance, said: “Essentially, it’s about monitoring the situation and trying to stay on top of political developments.”

That means analysing the respective sanctions regimes for potential changes or refinements, and ensuring your policies comply with those. That is particularly important if divergence occurs on how sanctions are implemented – for example, potentially between US and Europe over Russia.

7. Upskilling is essential in a competitive environment

In the current environment, with a fast-changing cash management landscape, ensuring you have the right skill sets is vital. According to David Brook, managing director of Oxygen Consultancy and the new ACT tutor for the Award and Certificate in International Cash Management: “The importance of doing the qualification is around credibility.” It enables corporate bankers and treasurers to gain key insights and a thorough understanding of the very complex environment in which they’re operating, while developing a broader appreciation of the issues and challenges faced by other finance professionals within the sector.

“With a cash management qualification, they’ll have a thorough understanding of the environment in which they’re operating, be it bank or treasurer or assistant,” Brook explained.

An ACT cash management qualification also enhances a finance professional’s career prospects.

Phil Lattimore is a freelance business journalist

Scan the QR code to find out more about the ACT Award and Certificate in International Cash Management

Nish Nagpal, PwC (second from right), talked on the theme of AI

A packed hall of conference delegates

Surfing the wave

As the new CFO at Redwood Bank, Sérgio Cruz combines his experience in treasury and risk roles with finance knowledge to help guide the challenger bank towards future growth

LEADERSHIP & CAREER

Back in his home country of Portugal, Sérgio Cruz would enjoy taking time out to surf the waves coming in from the Atlantic. Now, as he begins his new role as CFO of Redwood Bank, he finds himself surfing a different sort of wave, admittedly one that still has its origins on the other side of the Atlantic. But nevertheless, he is able to draw on his treasury and risk management expertise to help navigate the current ocean of business uncertainty.

“With all the changes we see in the market, we always look at them and ask how they will impact the bank,” Cruz explains. “We continually monitor the situation, comparing where we are with where we expected to be, stress testing those positions, and asking what range of scenarios we could face. And all the time, we take a very prudent approach to growth, that’s something that we’ve always done.”

Redwood Bank specialises in providing banking services, including lending and savings, to the SME market, a market that it considers to have been underserved in the past. “The market goes all the way from sole traders to medium-sized companies, plus clubs, charities and other associations,” he says, adding that the bank is still able to treat clients as “names rather than numbers”.

Cruz began his career in finance when he joined PwC in 2004 after graduating with an economics degree from the Universidade Nova de Lisboa. While working with the Big Four firm, he learnt

about financial services, including the use of derivatives, valuations and structured products. Then, despite seeing a clear career path ahead of him, he decided he wanted to stop “reviewing what other people were doing and actually do it for myself”. So, he joined a Portuguese bank, where he worked in the middle office, in the assets and liabilities management (ALM) function. “They were developing a treasury function as well, so I had a lot of exposure to all things treasury and all things ALM.”

This was just before the start of the global financial crisis in 2007. “All of a sudden, it was something completely different. The value of securities just completely changed; structured products that once were considered to be very safe, no longer had any value. So, it was another steep learning curve and, as a consequence, the industry changed its views around prudential risk – treasury-related risk, capital management, liquidity management, interest rate risk; everything that until then was not, quite frankly, seen as important – they suddenly became huge.”

Having weathered that storm, Cruz moved to the UK to join what was to become One Savings Bank as its market, treasury and liquidity manager. “This was my first risk role, so I had moved from third line [of defence] at PwC to first line at the Portuguese bank to second line at One Savings,” Cruz explains. “There’s a view that the second line needs to have

Sérgio Cruz

a good understanding and practical knowledge of what happens in the first line in order to do its job properly, and that was certainly the view at One Savings, so I was happy to take the job.”

Then, after working at Amicus Finance as head of treasury and ALM for two years, he joined Redwood Bank in 2018, not long after its formation the previous year, once more in a risk role. “And the rest,” he says, “is history.”

Having been first asked to help build the risk function, he moved back to a treasury role that eventually evolved into him becoming the chief treasury and strategy officer. In September 2024, he took on the deputy CFO role, a position he held for just six months before becoming CFO when his predecessor, Ashraf Piranie, retired.

Growing with the bank

Now, he has a high-level view of “everything”, from financial and regulatory reporting, treasury, ALM, financial strategy, FP&A, and any capital-raising initiatives, alongside his CEO, Gary Wilkinson.

Looking back at the early days of Redwood Bank, Cruz recalls how the bank helped its clients through some difficult times – notably the COVID-19 pandemic – and how that will now help them navigate the current disrupted environment. “To be honest, that was one of the things I’m most proud of, how we continued to support our customers through the COVID times,” he recalls. “A lot of banks retrenched from the market, but we didn’t. We continued to support lending and we continued to be active on the deposit side as well. We had the operational capability, having been ‘born in the cloud’, and we had enough capital to continue to support lending activity. This reinforced our position and allowed us to continue to grow.”

But looking ahead, how does he see the current uncertainty in the global economy playing out?

“We continuously review market expectations [on interest rates], and that feeds into our own forecasts, our budgets and our stress testing. I still think that inflationary pressures are preventing sharp declines in base rates. But we are also considering scenarios where there’s a wider recession, and what that could mean for base rate.”

ACT qualification

Cruz is quick to point out the importance of one qualification that he took a number of years ago that has helped his career journey. He was among the very first cohort to study for the ACT and Asset & Liability Management Association’s CertBALM qualification. “I had attended a number of ALMA workshops and conferences, so knew they were

“When I look back at the challenges, I don’t see them in a negative way, because the outcome has more than compensated for the difficulties”

planning a certification on treasury and asset management with the support of the ACT. I was really honoured to be part of the pilot, which took around six months to complete, and it was so successful that they now run two cohorts a year.

“It’s brilliant now that I have people in my team that I can incentivise to take these qualifications as well. It was an opportunity to go back to basics and not take things for granted just because I had been doing them a certain way.”

According to Cruz, these types of qualifications are helping people to evolve within finance. “The boundaries between financial reporting, ALM and treasury are breaking down, and there’s now a path for all those disciplines to put people on to the CFO trajectory. I think it is more exciting now for people starting in finance; they have much more of an ability to move across functions without feeling that they need to take a step back in their career to do so.”

Challenge of change

Change has always been part of Cruz’s career, whether it be leaving a Big Four firm, or even leaving his home country, but he sees it as a natural part of his career. “I think change has given me more than it has taken,” he says. “When I look back at all the challenges – the financial crash, Brexit, COVID – I don’t see them in a negative way, because the outcome has more than compensated for the difficulties.”

And what would he say to his younger self as he considered moving jobs and countries? “Back in Lisbon, I was always surfing and body boarding. So, I think there’s one thing I’ve learned – when you are on a wave, you ride that wave. If you get knocked off, you get back on the board and get back on the next wave that comes. But once you are riding that wave, you make the best of it that you can.”

Philip Smith is editor of The Treasurer

7,400

From decision to deployment

Identify

use cases, leverage AI capabilities and starting small to build a portfolio of quick wins are just some of the ways to drive the confidence needed to scale AI in treasury operations

The treasury world is teeming with interest in AI, a technology that promises to redefine how companies manage cash and liquidity, mitigate risks, and automate processes. Yet, for many treasurers, the transition from interest to implementation presents a challenge, with the biggest hurdle being how to unlock AI’s full potential in a practical and impactful way. To tackle this challenge and bring clarity to the decision-making process, it is important to decide the right AI use cases for their functions. As a starting point, it can be helpful to use a structured framework that examines AI adoption through two critical lenses: the potential for the greatest impact and the ease of implementation. Using such a framework will allow organisations to identify and prioritise relevant use cases that will deliver the most value for them.

Looking at the first lens, the impact of AI on treasury operations can be assessed effectively by focusing on two key areas for potential improvement: the effort required for current operations and the accuracy of data outputs. For example, if a treasury team spends excessive time on preparing management reports, integrating AI can enhance and automate these tasks, freeing the team’s time to focus on more strategic initiatives. Similarly, organisations struggling with data accuracy, such as in cash-flow forecasting, can leverage AI tools to enhance precision by analysing historical patterns and continuously refining predictions. By identifying these concerns, treasurers can pinpoint which AI applications will deliver the

most significant benefits to their operations. The second lens helps treasurers assess how easily AI can be integrated into their operations. This requires not just a deep understanding of their business, but also a basic knowledge of AI’s application –i.e., how it functions and how to deploy it effectively. AI deployment becomes much easier when key enablers are in place, specifically, high-quality data and the necessary infrastructure and tools to train, integrate and operate AI effectively.

Data remains key

Building on this, treasurers must evaluate their organisation’s maturity and readiness for AI adoption. High-quality data is essential, requiring consistency, structure and controls to ensure accuracy and reliability.

A treasury management system can support this by automating processes and maintaining structured data. Beyond data, factors such as AI expertise, proprietary models and infrastructure play a key role. However, many of these can be outsourced or developed progressively as part of the AI deployment process.

Treasurers can also look to proven AI use cases from other organisations to guide their own implementation decisions. High-feasibility applications include cashflow forecasting and fraud detection, both of which have shown success in treasury. Learning from these established cases helps anticipate challenges and avoid roadblocks, whereas implementing something entirely new may be more complex and difficult to execute.

The matrix opposite offers a helpful starting point for treasurers to identify and prioritise relevant use cases, providing an illustrative perspective to support their assessment. The use cases and their placement may vary depending on the organisation’s needs, treasury processes and existing IT/data infrastructure.

“Choosing the right AI models tailored to the specific use case is important”

Ultimately, treasurers must decide whether to introduce AI as a small-scale innovation or a full-scale transformation. Whatever the approach, it must strike the right balance between impact and feasibility while aligning with the organisation’s short- and long-term goals. Treasurers understand their operations best, but bringing in experts who bridge treasury and technology can help ensure AI is

implemented in a way that is feasible, effective and aligned with their organisation’s needs.

Achieving readiness

After exploring the framework and selecting the right AI solution, the next steps involve preparing to deploy AI. Achieving AI readiness involves many facets, the most important of which is ensuring availability of appropriate data for the selected use cases. An AI model is only as good as the

data on which it is trained. High-quality, relevant data ensures the model can identify meaningful patterns, generate accurate insights and provide the desired outcome. Inaccurate data leads to flawed outputs, undermining the model’s effectiveness and business value. For example, when AI models perform cash-flow predictions, they rely on accurate invoice data and customer databases, typically sourced from the finance department, accounts receivable and customer relationship management systems.

But data selection is just the start, as strong data governance is also crucial. This includes defining data sources, ownership and controls, to maintain accuracy, consistency and continuous reliability.

The data-preparation process starts with collecting and cleansing data to make it suitable for training the AI model. This step is a collaborative effort, requiring the expertise of IT and data experts to prepare and transform the data, while the business and treasury teams ensure the objectives of AI enablement can be met from the transformed dataset.

Choosing the right AI models tailored to the specific use case is equally important. For instance, machine-learning models typically excel at tasks involving structured and data-intensive activities, such as prediction, classification and trend analysis. Conversely, generative AI and large language models are better suited for tasks that require human-like reasoning and creativity. Beyond ensuring the availability of the correct data and AI models, assembling the right team and having the right infrastructure is essential. A cross-functional team

consisting of treasury, business users, IT and data experts, along with reliable technology, scalable platforms and seamless data access, help ensure AI initiatives are properly planned and aligned with business goals.

Gradual approach

Given the complexity of AI implementation and the early stage of adoption in treasury operations, a gradual approach is key. Starting with a proof of concept using a limited dataset or data from a limited number of entities allows for controlled testing, refinement and a clearer path to scaling AI effectively. This measured approach lowers risk by limiting exposure and reducing the impact of potential setbacks. A successful proof of concept builds confidence, strengthens the business case and paves the way for broader adoption.

Treasurers can also look beyond their function and leverage insights from other departments already using AI. For instance, if another division within finance has implemented a similar use case, it will be easier to adapt their existing models to a new dataset rather than starting from scratch. Engaging with teams within the organisation that have undertaken similar initiatives can provide valuable guidance and accelerate the implementation process.

Breaking down success

For treasurers deploying AI for the first time, the journey is full of unknowns. Defining success and setting clear stopgaps is essential to knowing when to pivot. A proven approach is to break success into trackable milestones aligned with objectives, budgets and efforts spent. If the desired outcomes are not met, it is crucial to recognise the limitations, take the lessons learned, and move on to a use case with greater potential value.

The aforementioned steps are effective for initial AI deployments on a smaller scale, but long-term success requires a strategic approach. To maximise AI’s impact, treasurers should look beyond individual use cases and define a broader strategy that aligns with the organisation’s long-term goals. This ensures AI adoption remains sustainable and scalable, and delivers lasting value.

Nandini Soondram is

The importance of networking

Meeting up with other treasury professionals can be a valuable investment. Sam Roberts, of Brewer Morris, explains why

LEADERSHIP & CAREER

Treasury often comprises a small team within the finance function, so it can be very easy for treasury professionals to become isolated in their views and perspectives. That can impact on knowledge of industry developments and best practice and, consequently, affect the performance of the treasury team. With that in mind, whenever Brewer Morris runs networking events aimed at treasury professionals, we believe it is vital that those attending are able to share ideas and build relationships. This is important for a variety of reasons:

Building professional networks

Developing professional networks is beneficial for everyone involved in the networking process. It provides opportunities to exchange ideas with fellow finance professionals who may have faced similar experiences and challenges, but who have perhaps approached them from fresh perspectives or addressed them with different solutions. Getting the viewpoint of someone who understands the issues you face can be an invaluable resource; you never know when you need to leverage a relationship. At Brewer Morris, we speak with plenty of treasurers who keep in touch with their peers and use one another as sounding boards when it comes to addressing common issues they are facing. This is particularly important in the current environment, especially if that treasurer doesn’t have the luxury of a large team to support them.

treasurers’ experiences, consider different perspectives and explore how other professionals would approach similar issues. This could range from the latest industry best-practice methods, strategies or processes to the adoption of technology solutions or AI implementation.

Stay competitive

“Developing relationships with other treasurers is a valuable investment”

With the rapid and accelerating development of tools and technologies, as well as an extremely volatile and uncertain geopolitical climate, it is becoming very challenging to stay up to date with both the treasury technology space and the macroeconomic environment. A room full of your peers may be the perfect occasion to compare notes on how your function is operating in comparison with others in your sector. In addition, it could provide valuable information around what your competitors are doing and an important insight into the approaches they are adopting (or considering). This can help to ensure your organisation doesn’t fall behind and remains competitive.

Career progression

Establishing relationships with professionals in similar positions could mean reaching out to treasurers within businesses from a similar sector, those with the same ownership model, or firms that use the same vendors or banking partners.

Diverse ways of thinking

More and more, we are seeing how a diverse approach to ideas fosters better results. Being primarily a problemsolving function in which no individual scenario is the same – and for which there are often multiple potential solutions to consider – treasury requires a diverse range of thinking when it comes to approaching often complex situations. This means it is important to use other

How you’re perceived by your peers is very important and can open doors to fresh opportunities. Treasury is a small world, and the likelihood of mutual connections is very high, so making a good impression on members of the community can be valuable. Being regarded as someone with whom others want to work won’t just help you succeed in your role – it could also be a key factor in securing your dream job down the line. A networking event won’t necessarily lead directly to multiple job offers, but being connected to a network of professionals with similar positions can support your career in multiple ways.

Whether it is to help you succeed in your current role, or establish relationships for future career opportunities, developing relationships with other treasury professionals is a valuable investment.

Sam Roberts is senior consultant – treasury at Brewer Morris. Please contact him on samroberts@brewermorris.com for a confidential chat about your career or any hiring needs you have

Understanding the FX Global Code of Conduct

Lisa Dukes sets out recent amendments and the practical implications for treasurers

REGULATORY & ACCOUNTING

Lisa Dukes is co-founder of Dukes & King

The FX Global Code of Conduct is a set of global principles of best practice developed to deliver a common set of guidelines to promote the integrity and effective functioning of the wholesale foreign exchange market. The Code is not a regulatory requirement but serves as a benchmark of best practices, providing a flexible yet comprehensive framework that allows a wide range of market participants to adopt and adapt the principles to their operations.

Earlier this year, the Global Foreign Exchange Committee (GFXC) completed its most recent three-year review of the FX Global Code, resulting in amendments aimed at strengthening the Code’s guidance on FX settlement risk and increasing transparency around certain types of transactions, and the use of client-generated data on electronic trading platforms.

Key amendments

“The amendments emphasise the responsibility of all market participants to reduce FX settlement risk, highlighting the importance of staff training and awareness”

Published in January 2025, the amendments focus on five of the Code’s 55 principles, specifically addressing FX settlement risk and the use of FX data.

The revised Code introduces a risk waterfall approach, whereby market participants should consider a specified hierarchy of methods for reducing Herstatt risk – where one party in a financial transaction suffers a loss because the counterparty fails to fulfil its obligations – protecting liquidity with a mind to counterparty risk.

The risk waterfall approach suggests that settlement methods that eliminate FX settlement risk, such as payment versus payment (PVP) and bilateral or multilateral netting, are prioritised where possible. Additionally, the amendments emphasise the responsibility of all market participants to reduce FX settlement risk, highlighting the importance of staff training and awareness. This serves as a helpful reminder to

review and potentially revisit internal policies and procedures, considering available and new technology and approaches where appropriate and proportionate. It is essential to refresh the team on the types of risks and how best to manage them, and to collaborate with counterparties to ensure consistent use of agreed settlement methods.

Disclosure Cover Sheets (DCS) for liquidity providers and platforms were also extended with the aim of enhancing transparency and comparability between the providers on the use of FX data.

The enhanced transparency measures introduced through the DCS mean that treasurers will have more information readily available when carrying out diligence and interacting with existing and potential liquidity providers and platforms. By reviewing the DCS, treasurers can gain a better understanding of how their FX data is being used and ensure that it is within their expectations – helping treasurers make more informed decisions, improve their risk management strategies, and foster greater trust and collaboration with their counterparties.

Continuous improvement

Treasurers are no stranger to regularly reviewing risk management policies and practices – by using the FX Code as a framework to guide the standards and policies they hold themselves to, they not only demonstrate a commitment to best practice but also ensure that they remain aligned with the evolving standards of the FX market.

The GFXC is encouraging market participants to review the amendments and either submit or renew their Statements of Commitment (SoC) to the Code to demonstrate that the company is committed to best practice and understands the importance of acting professionally with integrity in the FX market.

Operational

Operational

Managerial

Managerial

DIARY DATES -

ACT EVENTS

20-21 MAY |

WALES, UK

ACT ANNUAL CONFERENCE

Explore the five core pillars of treasury at our flagship conference with 1,000+ members of the treasury and finance community in 35+ sessions from 100+ specialist speakers, gaining strategic and practical insights to navigate uncertainty in unparalleled times of change.

treasurers.org/actac25

23-24 SEPTEMBER | DUBAI, UAE

ACT MIDDLE EAST TREASURY SUMMIT

Join 800+ members of the treasury and finance community for two full days of practical content, unrivalled networking opportunities, and to connect with the region’s leading suppliers. treasurers.org/mets25

12 NOVEMBER | LONDON, UK

ACT ANNUAL DINNER

Join us at our flagship networking event of the year. Attended by more than 1,300 guests representing 417 organisations, the ACT Annual Dinner is the longest-standing and largest social gathering of the treasury and finance community in the UK. treasurers.org/annualdinner25

The ACT’s Annual Conference is one of the highlights of the year

ACT TRAINING COURSES

Join one of our virtual training courses and expand your treasury knowledge in a week or less.

16-20 JUNE

THE A-Z OF CORPORATE TREASURY

Gain an in-depth introduction to the corporate treasury function in international markets. This course is delivered in partnership with Zanders over two sessions per day for five consecutive days. learning.treasurers.org/training/ corporate-treasury

1 JULY

TREASURY IN A DAY

Meet 1,300+ guests at the ACT Annual Dinner

Gain the perfect introduction to corporate treasury in just one day. Follow the lifecycle of a new business and what key treasury questions arise throughout. learning.treasurers.org/training/ treasury-in-a-day

10 JULY

THE NUTS AND BOLTS OF CASH MANAGEMENT

Explore the principles and practices of cash and liquidity management and its importance to the business and treasury function in this one-day course. learning.treasurers.org/training/ cash-management

The value of mentoring

Mentoring provides a forum for the exchange of ideas and best practice, and for open discussion. Here, Louise Tatham talks to a mentor and mentee about their recent experiences using the ACT Mentor Me scheme

In its simplest form, mentoring provides a learning relationship where two people listen, share and challenge each other. Mark Cox, treasury accountant at Sovereign Network Group, signed up to the ACT Mentor Me scheme last year. Bob Williams, finance director at Fairview New Homes, has been an in-company mentor as well as a mentor for the ACT scheme.

The mentee: Mark Cox

Since graduating from university, I have gained experience working in finance across a variety of industries, including education, broadcasting and retail trade associations, in management accountancy and treasury roles.

I have been in my current role for the past seven years, during which time I have broadened and accumulated my expertise in treasury management. Two years ago, I took on the added responsibility of managing the banking team when it was integrated into the treasury remit, further expanding my role and scope within the company.

I work in social housing, and when I joined the mentoring scheme I wanted to find a mentor who worked in the housing sector. I was delighted to match with someone who works for a housing developer, making him a great fit, as he has both treasury expertise and knowledge of the sector.

The areas in which I sought mentoring were:

• Managing team members who were originally of equal status: I wanted guidance on how to ensure a smooth transition into leadership within a team with which I had collaborated on an equally level basis.

• Managing team members in different office locations:

One of my team members was based at a different office location; I needed advice on how to maintain effective communication, foster collaboration, and ensure that everyone felt included and engaged, regardless of their physical location.

• Managing through organisational change: Sovereign was in the process of merging with Network, a London-

based housing association, which introduced a period of uncertainty for some staff. Roles were at risk, and many employees were understandably anxious about the changes. I needed guidance on how to manage through this transition, maintain morale, and keep the team focused and motivated during a time of ambiguity.

• Improving presentation skills: As I began presenting papers to the treasury committee, I realised I needed to refine my presentation skills to communicate effectively and engage senior stakeholders. I sought mentorship on how to present confidently and distinctly, ensuring my points were clear.

My mentor was incredibly helpful in addressing these four areas. He shared his experiences and provided practical advice that helped me navigate each challenge. We would meet in person every two months. I would ensure that I sent an agenda, with background information, to my mentor before our meeting; having well-defined topics and development questions to review during the meeting really helped us to focus on key issues.

My top three tips for getting the most out of a mentoring relationship are:

LEADERSHIP & CAREER

The mentee: Mark Cox The mentor: Bob Williams

• Prepare in advance for each meeting, clearly outlining what you aim to accomplish during the session

• Pay close attention, take notes, and make sure to write down key takeaways shortly after the meeting. Refer to these notes to help embed the guidance

• Occasionally, your mentor may provide advice or perspectives that challenge your current way of thinking. Stay open to new ideas and consider how they could positively impact your growth.

There is a lot to be gained from discussing challenges with someone who has faced similar issues and can offer guidance. I have found my mentor’s honest approach, openness to sharing his experience and constructive advice to be invaluable.

The mentor: Bob Williams

I have worked in treasury for more than 35 years and, in that time, I have been an in-company mentor, as well as a mentor for the ACT scheme. Whereas my company mentorship focuses on business coaching, the ACT scheme is treasurer to treasurer, thereby enabling me to provide support and insight into my treasury experience, as well as my commercial background.

I enjoy mentoring, and really like to see individuals who are energised and passionate about a career in treasury asking questions and seeking advice. I chose to become a mentor on the ACT scheme because I wanted to give something back to the profession.

Treasury teams can be small, and it’s good to go outside your immediate environment and get advice and guidance from someone who works in a similar area, but not your company. The ACT scheme enables you to do that.

My role as a mentor is to be transparent and honest, and to ensure that my mentees are aware that anything they say is confidential. I look to challenge them, but I really believe that it is for them to think around issues we discuss, and to talk through and finesse their thinking, as opposed to me just providing the answers.

I get a lot out of it, too. My mentees are from different industries and often approach things from a different perspective to me, and speaking to them helps with rounding my thinking.

Whenever I approach a mentoring discussion, I try to put myself in my mentee’s shoes – applying my own experience and understanding to their specific career stage is essential. This requires different approaches and it’s so important to tailor your discussions to the right part of their career journey.

My advice to anyone who wants to be a mentor is to:

• Tailor your discussions to the individual in terms of their career journey – someone who is only just taking their first management role will have a different need to someone who is taking on a group treasurer role

• Think about the mentee’s personality and character, and

how they like to work – some will want more structure in their discussions with you, while others will get more out of an informal chat

• Enjoy it! You are talking to like-minded people with similar careers who work in different industries and may have different perspectives. I often find it remarkable how similar the issues we all encounter are and how useful it is to talk things through.

My final thought is that it’s really great when an individual recognises they want to pursue a treasury career and looks for advice – anyone signing up to the ACT scheme is clearly serious about their career. It’s so important to seek advice, support and direction from others, and this will undoubtedly help your career.

Louise Tatham is head of professional development at the ACT

HOW THE ACT SCHEME WORKS

The ACT mentoring scheme is a member-to-member benefit that matches members and students with each other. Our online platform will help make the initial match, based on the following parameters:

• Self-management and accountability

• Influencing

• Working effectively with others

• Team management

• Career progression

• Strategic thinking

• Leadership skills

• Motivation

• Networking skills

• Managing up in your organisation

• Handling conflict

When you join the mentoring scheme, either as a mentor or mentee, you will be asked to specify the areas you would like to discuss. As a mentor, you would then provide a career outline and a profile, while, as a mentee, you would provide a profile and proposal, outlining what you would like to get support in. When a mentor and mentee are matched, their profile and proposal are exchanged.

There are many resources available via the learning and development toolkit on the ACT Mentor Me website, which includes guides to support you through the mentoring process, advice to ensure that your relationship stays on track, and materials to help you establish clear and achievable goals.

For more, visit treasurers.org/mentoring

A day in the life: International Workplace Group

From a full refinance to an inaugural rating and bond issuance, it has been a busy year for group treasury director Sarah Saxby and her team at IWG, winners of this year’s ACT medium-sized treasury team award LEADERSHIP &

It was a good day, or more precisely a good evening, in March this year, when Sarah Saxby and her colleagues were named medium-sized treasury team of the year at the annual ACT

Deals of the Year awards. Saxby, who is group treasury director at International Workplace Group (IWG), has seen the team grow over the past year after she joined the office and workspace provider at the end of 2023. In fact, 2024 has been a standout year given that most of the team were new to the group during that time.

IWG’s roots can be traced back more than 30 years to when founder Mark Dixon launched Regus, offering flexible workspace solutions for the short and long term. Regus became IWG in 2011 and now provides workspace on every continent, in more than 120 countries, and across every time zone around the world. The group counts millions of workers among its customers.

The group treasury team started in 2024 with three members (the group treasury director and two treasury managers based in Switzerland and the US) and grew to seven after the addition of a deputy group treasury director, two further managers and an analyst in London.

Even though the team members were new, they had to hit the ground running – IWG is a complex organisation located in more than 120 countries, with thousands of legal entities and, hence, bank accounts. It runs an in-house banking structure with an active intercompany netting system. On top of this, the group was due to do a full

refinancing that included an inaugural rating and bond issuance.

“This required us to make great hires with complementary skill sets to build a team that is adaptable, quick to learn and keen to add value to the organisation instantly,” Saxby says. “All team members played a key role in the delivery of our successes. The team is allocated to projects with key responsibilities, but because we are a small team, we must be able to flip into different roles to ensure delivery continues. All team members are prepared to work on whatever project or tasks we need to deliver on, irrespective of their titles, to ensure the team is successful.”

The list of achievements in the past 12 months is impressive:

1. Debt

The team delivered a full refinancing that included incorporating a new US debt issuance company, achieving its first public IG rating. This included an inaugural €500m 6.5% six-year senior unsecured bond issuance, which was subsequently increased to €625m via two taps. The team also refinanced IWG’s core syndicated revolving credit facility (which was due in 2025) resulting in a new $720m five-year revolving credit facility.

In addition, the team rebased IWG’s revolving credit facility from GBP to USD. This was to support the group’s change of reporting currency

Philip Smith is editor of The Treasurer

No 18, one of the IWG brands, in Stockholm

Sarah Saxby, second left, and the IWG team

and ensure headroom was not eroded by foreign exchange movements. It also supported the partial repurchase of £192m of the group’s existing £350m convertible bond (2025 put).

In addition, it established ancillary guarantee facilities to support ongoing issuance of a portfolio of more than 700 bank rental guarantees of $350m while managing the complex migration of more than 200 bank guarantees due to the changing mix of credit providing banks because of the group’s refinancing. This all required strong process management and good collaboration with banks exiting the group relationship, along with the challenges that come with that.

2. Risk management

During the year, the team executed £350m of FX forward hedging on its pending convertible bond settlement for December 2025. This was a result of the change in the group’s reporting currency. At the same time, they executed €525m in crosscurrency interest rate swaps – and they unwound the associated hedging on the partial convertible settlement of £192m of the existing £350m convertible bond.

3. Treasury operations and cash management

The team has established a new transactional banker for Europe, implementing a mostly virtual account structure to reduce physical

“All team members are prepared to work on whatever project or tasks we need to deliver on, irrespective of their titles, to ensure the team is successful”

bank accounts across the group by around 550. The first wave is live. It also implemented a cloud platform to automate all group payments via SWIFT and established reporting on approximately 6,000 bank accounts, and is in the process of automating the group’s cash forecasting.

In addition, it carried out a comprehensive review of treasury policies, reporting and controls, including documenting a new treasury policy for implementation, introducing additional controls and streamlining reporting. Finally, the team worked with one of its core banks to migrate 550 physical accounts to virtual accounts, thereby reducing cost and ongoing KYC requirements.

Saxby says: “The team has come together as a new team, with differing experiences. They are focused on what they need to deliver and all team members demonstrate persistence, flexibility and agility to fill gaps where required and collaborate internally and externally.”

The team works closely with the CFO, global shared service centre, group finance, tax, legal, company secretarial and investor relations. “In a very busy environment, it is a constant challenge to ensure this is balanced and we try to involve the right teams as early as possible,” Saxby says.

IWG’s CFO, Charlie Steel, is happy to acknowledge the team’s successes: “The treasury team has been highly impressive. Not only has it been built from foundations, but it also executed a succession of complex transactions that put the company on to solid capital structure foundations for the next half decade.”

As one banking partner says: “This [level of work was] a huge lift for any medium-sized team, but considering the nascence of the team was achieved with a high degree of skill and flexibility.”

It was quite a year for Saxby and her team, and 2025 promises to be just as busy – more of a life in a day than a day in the life.

IWG IN NUMBERS

$4,231m System-wide revenue (2024)

$557m Adjusted EBITDA (2024)

$712m Net financial debt (2024)

120 Countries where IWG is present (2024)

3,989 Workplace locations globally (2024)

14

Workplace brands, including Regus, No 18, Spaces, HQ and Signature

624 New openings in 2024

Clear and calm

Tariq Kazi is group treasurer for the Peabody Group and president of the

The Association of Corporate Treasurers was formed in 1979, during a time of economic volatility. The founding members recognised that treasury had become a strategically important job in its own right, not merely an extension of a wider finance department role.

Since then, the profession has grown, proving its worth during economic ups and downs, including the financial crash of 2008, Brexit and COVID-19, and now during the current wave of global economic uncertainty.

Throughout these times, the job of the treasurer has been about optimising growth opportunities and helping organisations make tough choices during challenging times.

Over the decades, treasury has become more professionalised – for instance, through the qualifications that the ACT offers. This professionalisation allows treasurers to be strategic and operational at the same time. Strategic choices are made, put into operation and executed successfully – and, today, we find that the whole discipline of financial decision-making is at more of a premium than it has been for a long time.

voice for the profession. As the new ACT president, I am proud to be an advocate for treasurers, wherever they work. As one of the first presidents to come from the notfor-profit sector – I am currently the group treasurer for Peabody, one of the oldest housing associations in the UK – I am proud of the work my sector does in promoting responsible and sustainable business practices, bringing economic participation and social inclusion to as many people as possible. Equally, I am fiercely keen on promoting the treasury profession across all sectors.

There is more to do. We are constantly looking at how to reinvigorate what we can do for our members, and, of course, welcome any feedback and other contributions.

“I am proud to be an advocate for treasurers, wherever they work”

As a profession, however, we must never stand still. This is why the association is introducing its micro credentials; training modules that focus on specific areas of treasury practice, delivered in a flexible, ‘stackable’ format, so that learners choose a pace that suits their own needs.

At the same time, we are introducing affiliate membership, which will grant access to many of the ACT’s resources. At a time of great uncertainty, such resources are in demand as never before.

We will also continue to be a clear

There are many ways in which treasurers can become involved with the association. There are positions on the ACT’s Council, and a number of panels and other groups that welcome new members – there is always space for a wide range of talents and backgrounds, no matter at what stage you are in your treasury career. Thinking about my own experience, I have been able to learn and contribute in equal measure through my work with the ACT.

Together, we can maintain and build on the relevance of the treasury profession to the wider business community.

Over nearly five decades, we have striven to demonstrate the value of treasury, and as we enter yet another ‘new’ era of economic uncertainty, that value will become increasingly important. If ever there was a time for calm, professional treasury expertise that understands and engages with the business, it is now.

LEADERSHIP & CAREER

ACT

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