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EXPECTATIONS VS REALITY
Technology promises many things – in the financial world, the rapid adoption of AI and data analytics has shown how many processes can be automated and augmented to deliver improved productivity and greater insights. As many treasurers will know, however, expectations and reality can sometimes diverge.
I mention this in the context of this issue’s cover feature article. The ACT’s BusinessofTreasury2024 survey found that expectations of the amount of time treasurers would spend in the future on technology were set to increase. Which makes sense, until a deeper dive into the figures reveals that this is what treasurers have been saying for a little while and this change in time allocation has yet to materialise. Maybe this time, expectations and reality really will be in alignment, but to find out why this is not always the case, we asked Rebecca Brace to investigate the apparent mismatch. You can read about her findings on p9.
what an appropriate fitness regime would look like. His article, which starts on p14, features comments from one of the great Olympian athletes, British hurdler Colin Jackson, who spoke eloquently on the subject at this year’s ACT Annual Conference.
Speaking of conferences, many ACT members will be coming together for this year’s Middle East Treasury Summit in Dubai later in September. To coincide with the event, we look at the state of play in the treasury profession in the region – and James Adams, chair of the ACT’s Middle East Advisory Panel, wraps up this issue with comments on his experiences in the region (p50). I hope you enjoy them.
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The growing use of generative AI in the business world is, however, most definitely taking up treasurers’ thoughts, and probably a good deal of time, at the moment. Members of the ACT’s Future Leaders in Treasury group set out what they think on the subject on p26 – and I am assured that ChatGPT (other generative programmes are available) was not used in the process. Or was it?
As the summer of global sport – Olympics, Paralympics, European football and international cricket, to name but a few –draws to a close, Lawrie Holmes asks whether treasury teams are fully fit, and, if they are not,
Photography and illustration: iStockphoto.com Cover: gettyimages.co.uk
Rebecca Brace writes about the expectations gap in technology implementation PAGE 9
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As treasurers pick their way through new technologies, early promise can result in later disappointment 14
AIMING HIGH
How do you ensure your treasury team is fully fit and able to perform at the highest levels?
BALANCING DEBT AND EQUITY
Tax shields, global profit-shifting agreements and interest rates interact in capital structure optimisation
DIGITAL DELAYS
Amid hype, hallucinations and holistic solutions, treasurers are slowly picking their way through the maze of new technologies. But early promise can result in later disappointment, warns Rebecca Brace
Technology has long been a powerful enabler to treasury – but the benefits of cutting-edge developments can sometimes be overstated. As one UKbased treasury leader commented in the ACT’s recent BusinessofTreasury survey: “We are constantly being told that technology will change our world. If I look back 10 years, I was told that the payments landscape was changing –nothing has changed!”
It’s no secret that adopting new systems doesn’t necessarily result in the expected gains. Paul Bramwell, enterprise treasury lead at Trovata, says there is a common misconception that simply implementing finance and treasury technology will enable companies to perform at optimal levels. In practice, he says, technology is a tool that can create efficiencies and process improvements, “but only when the right system is chosen, and the project goals and outcomes are adequately scoped and planned for”.
Artificial intelligence (AI), meanwhile, continues to be a significant focus for industry experts. According to Bramwell: “AI/generative AI will live up to expectations as the principles will be built into, and become a core component of, systems used by treasurers.” In particular, he says this could benefit tasks that are reliant on significant volumes of data, such as forecasting, fraud prevention and risk management.
Indeed, cash forecasting is one area that has long been a challenge for treasury teams. James Kelly, SVP treasury, risk management and insurance at Pearson, observes that, recently, a handful of cash forecasting solutions have made progress as standalone systems, “but these still require significant upfront investment. The key challenge is that the work keeps coming and systems are not making meaningful productivity improvements”. Kelly argues that this leads to stressed employees –and, notably, the 2024 BusinessofTreasury survey again identified mental health and wellbeing as the leading internal concern for treasury professionals.
Meeting needs
Carl Sharman, a partner at Deloitte, notes that treasury teams are not always successful in
ensuring that their needs are fully met by a new system. He says system-led implementations tend to be template driven: “These can be very masterdata focused. This approach can be frustrating, as it doesn’t necessarily feel like a prioritisation of the treasury function and an improvement of end-to-end processes enhanced by technology. Rather, it can feel like a deployment of the technology itself, without the focus on how the team will use the system.”
As such, Sharman advocates working with a third party to help pin down treasury needs and support the implementation process. “Companies may not want to involve a third party in their technology implementations because of the cost,” he says. “But that can result in an expectation gap that may not be visible until later on, when it becomes clear that the system deployment delivers functionality, but fails to integrate with and improve the surrounding processes and systems, and misses the opportunity for real change.” He adds: “Implementation quality is a greater risk than system failure.”
Inflated expectations
Where new and emerging technologies are concerned, there is a heightened risk that early promise may not result in concrete benefits. Bramwell argues that history “is replete with technologies that seemed to be solutions for problems that were relatively intractable”, adding that recent examples include blockchain, robotic process automation (RPA), the metaverse, and many others.
“All seemed to have a compelling value proposition, but ultimately failed to be adopted by the mainstream,” he adds. “The Gartner Hype Cycle illustrates the lifecycle of emerging technologies and blockchain, RPA and the metaverse all reached a peak of inflated expectations before descending into the trough of disillusionment.”
Enrico Camerinelli, strategic advisor at Datos Insights, likewise cites blockchain and RPA as examples of technologies that have not fulfilled their early promise. There are a number of reasons for this: blockchain networks, for example, need to handle a large number of transactions efficiently,
“The key challenge is that the work keeps coming and systems are not making meaningful productivity improvements”
but achieving scalability without compromising security remains a challenge.
“The regulatory landscape for blockchain and cryptocurrencies is still evolving, forcing treasurers to navigate rules and compliance requirements across different jurisdictions,” Camerinelli adds. “Lastly, integrating blockchain technology into existing systems can be complex.”
He also notes that some treasuries struggle with integrating RPA into existing systems, especially when it comes to ensuring data quality: “Corporate treasurers face the challenge of ensuring data quality when accessing relevant and reliable data for ingestion into data analytics applications.”
Innovator or fast follower?
When it comes to embracing technological
advances, Sharman observes that most corporates prefer to be “fast followers”, rather than leading innovators. “People love talking about innovation and learning about what the future might look like, but there’s a reluctance to be first off the block –mainly, they want to be able to stand in front of their board and be credible,” he adds.
This is unsurprising given the high-value transactions handled by treasury teams, and the potential ramifications of making a mistake. “And that mistake is not a question of paying someone twice for a £10 item – it could mean making a £10m settlement to the wrong person at the wrong time, and not being able to get that money back,” Sharman warns. “What people really want is reliable, tried and trusted technology and processes.”
Alongside concerns about the risk associated with new technology, treasurers have to consider how much time they can devote to harnessing innovation. Notably, the BusinessofTreasury survey found that the time spent by treasurers on technological advances has declined since 2022. It also found that the time spent on technological advances was lower than previous surveys had predicted.
For treasurers, there are a number of reasons why recent years have made it harder than expected to spend time on technological advances. Bramwell notes that the COVID-19 pandemic and other ‘black swan’ events have meant that treasurers had to focus on cash flow, liquidity planning, remote working, economic contraction and the fallout of post-pandemic inflation.
“This has meant treasurers have been focused on core principles of managing the treasury function with a smaller and more distributed
“Treasurers have been focused on core principles of managing the treasury function with a smaller and more distributed workforce, rather than focusing on luxury projects such as technology”
workforce, rather than focusing on luxury projects such as technology,” he says. Nevertheless, “as companies are now starting to find their feet and the economy levels off, treasurers will start to be able to address technology as a value add, with considerably fewer concerns over headcount and cost constraints”.
Aside from the impact of black swan events, treasurers are also having to grapple with numerous challenges that are not necessarily specific to treasury, from the adoption of AI to ESG. As Camerinelli notes, they have to strike a balance between adopting new tools and maintaining stability. “Prioritising day-to-day operations, risk management and strategic decision-making often leaves limited time for exploring cutting-edge technologies,” he points out.
Which innovations are here to stay?
While some innovations may have failed to live up to their hype, that’s not to say technology does not deliver real improvements for treasury teams. For one thing, Bramwell predicts that APIs will become more prevalent as the “interconnectedness of things” becomes more important. He adds: “APIs enable companies to buy best-of-breed solutions that talk to each other, rather than having to dumb down requirements to get a single solution that may not be best in class.”
AI tools, Kelly argues, offer treasurers an opportunity to solve many challenges more quickly, creating bespoke solutions to treasury issues. “But to really make the most of the opportunity, appropriate infrastructure is needed – connections to systems, a database to search, and tools that are highly secure.” With these in place, he predicts that innovation, and success stories, will be delivered, with treasurers able to realise the potential benefits.
“In treasury, it is likely to be large language models [LLMs], plus tools such as Python, that are needed to achieve high levels of automation, as LLMs alone are not strong mathematically and the risk of hallucinations make them unsuitable to handle high-value processes alone,” Kelly
continues, adding that using an LLM to make requests in SQL or Python “allows a calculation
AI AND JOB SECURITY
Much has been said about the threat that AI could present to the labour market – so could this threat extend to treasurers? A 2024 report by the Institute for Public Policy Research found that 11% of tasks in the UK are exposed to ‘here and now’ generative AI, while 59% of hours worked could be exposed to more integrated AI systems. The report also notes that generative AI has outperformed humans in the US Bar exam and medical competency exams.
Nevertheless, Trovata’s Paul Bramwell believes that treasurers “are pretty immune” from insecurity related to technologies. “The adage that ‘ChatGPT will take my job’ is incredibly overplayed and stems from a misunderstanding of its capabilities,” he adds. “No-one will trust a large language model to build a hedging portfolio or a capital markets strategy –
The ACT has partnered with CFTE on a new training course, Generative AI in Corporate Treasury. Scan the QR code to learn more.
To read more results from the ACT’s Business of Treasury 2024 survey, scan the QR code.
“Implementation quality is a greater risk than system failure”
While spending on cybersecurity and automation is increasing, it is decreasing for new TMSs and AI/machine learning (Source: ACT Business of Treasury 2024)
How do you ensure your treasury function is fully fit and able to perform at the optimum level, even when jumping the highest hurdles?
Aiming high
More than anyone, sportspeople understand the need for mental resilience to rise to the top, despite the continual knocks that come from competition. The ability to cope under pressure and succeed was witnessed across the summer of sport – in the Paris Olympics, UEFA Euro 2024, the T20 Cricket World Cup, and countless other major competitions.
Unlike athletes, treasurers don’t have the pressure of having to perform in the public eye, but there are similarities. They need to be fit and able to get the most out of themselves and their teams, especially when things change quickly.
Hurdler Colin Jackson, a former world record holder and Olympic gold medallist, explained to an audience at the ACT Annual Conference in May how he developed a mindset for addressing the continual highs and lows of competition.
Talking to Carla Floyd, managing director, head of debt and financing solutions, at NatWest, which sponsored Team GB at the Paris Olympics, Jackson revealed that, despite being the best sprint hurdler for a decade, he still only won 55% of competitions. “That meant dealing with failure 45% of the time; that’s a lot to come back from constantly.”
His mindset “was always all about making sure goals are realistic”, even when building for the Olympics, using annual rather than four-year targets. “I’ve always had a sense that it is the small steps that will make you successful.”
Jackson explained the importance of the team behind an athlete’s performance and how mentoring and support can deliver continued success. “When you have the conversations along the way with people who understand you and believe in what you can achieve, it makes a huge difference to your mindset,” he revealed.
Harnessing individual strengths and competencies that align with an overall aim is key to ensuring a treasury team is performing at its best, says Tariq Kazi, group treasurer of housing association Peabody Group. As well as technical and soft skills, personal effectiveness in prioritising workload, relationship-building, self-learning and development, and judgement can all determine a team’s effectiveness.
But a treasury function can be at the top of its game when working flexibly, says Kazi. “Team members should be versatile enough to not just deliver reoccurring tasks and projects, but also to have spare capacity for problem solving and responding to events as they arise,” he says.
The ability to react in an agile fashion can be enhanced by having a diverse team, says Jessica Timelin, senior operating director, corporate services and finance, at recruiter Michael Page. “It is often tempting to recruit in one’s own image and
“Team members should be versatile enough to have spare capacity for problem solving and responding to events as they arise”
succumb to unconscious bias, but being able to bring a team together that has diversity in terms of work flows, mental agility and problem solving can create a much richer environment for challenges that come up,” she says.
Ability to juggle
Angel Cheung, who became treasury director at tech group IFS after a stint as interim head of treasury at retail giant John Lewis Partnership, says a flexible approach is vital, “given pretty much everyone on the team is juggling a few projects”.
As well as finalising IFS’s bank rationalisation project, Cheung’s team is, among other things, reviewing risk management solutions, optimising its funding strategy, and evaluating its in-house bank setup. “So, we really need our team to be agile,” says Cheung. “It is very important for the team to have good technical skills and mental resilience for us to deliver on all these projects.”
Cheung is keen to have staff who have good knowledge of key treasury areas, are comfortable with numbers, and can demonstrate an interest in the markets and the right attitude to take on new information challenges. But how do you ensure team members are developing effectively?
“There are regular team meetings where we will talk about what everyone is doing and what their priorities are. We also speak to team members regularly, to identify any knowledge gaps and discuss what they are interested in getting involved with,” says Cheung.
“When not in the office, I take the initiative to reach out to a team member to check in, to ensure they feel supported. Sometimes, you can jump on a call or chat with someone, or people will call me to talk through their thought process and bounce ideas.
“Being match fit is also about keeping up with what is going on in the treasury world.”
Aside from supporting team members to gain the ACT qualification, as well as attending the association’s events, technical knowledge can be enhanced through interaction with banking partners and advisers on learning about what is happening in the market and what new products or technology are worth exploring, says Cheung.
She also recommends talking with fellow treasurers to understand what other teams are doing. “That’s useful for us to stay connected and be match fit,” says Cheung, who believes mental resilience is vital to achieving goals, especially if that means driving transformational projects across an organisation.
“It is very important to encourage people to focus on the ‘why’ and ‘how’, rather than just ‘what’ they are doing. If we ourselves
Tariq Kazi, group treasurer Peabody Group
“I’ve always had a sense that it is the small steps that will make you successful”
Mike Richards, CEO and founder of the Treasury Recruitment Company
NO ACCIDENT
Treasury leaders must have the right training to deal with the mental pressures that come with leadership, says Mike Richards, CEO and founder of the Treasury Recruitment Company. “Often, as treasurers have grown in their careers they have become accidental managers, but, these days, you wouldn’t expect managers of a football or rugby team to leap on to the pitch without the right amount of training. The same is required of those leading the treasury function,” he says.
Olympian Colin Jackson talks to NatWest’s Carla Floyd at the recent ACT Annual Conference
do not even understand why we are doing something, or what we are trying to achieve, how would we be able to convince or influence others?”
Cheung is keen to lead by example when it comes to dealing with challenges. “I’m generally a positive person, for example, when facing pushback from other people. I trust that everyone is working towards the common good and I do not take it personally. I will empathise and put myself in other people’s position to understand their rationale. This could mean refining our ways of working, or more influencing, to ensure everyone is on board. This is one of the thinking processes that demonstrates mental resilience.”
Global team ethic
For Judy Massa, group treasurer at Japan’s NSG Pilkington, which acquired glassmaker Pilkington in 2006, having a game-fit approach involves having a team ethic, both within her team and the global business.
She believes that’s essential for a flexible approach when meeting the demands of regular tasks, projects, and work for other subsidiaries of the group, such as rolling out a payment factory or commodity hedging. “Given that the UK makes up a tenth of the group, we handle quite a lot of work for the 90% across the world,” Massa says. “It wouldn’t be cost-effective for a department such as ours just to work for our UK business; we have to try to implement solutions that help multiple countries.”
With a continually changing agenda, Massa says her preference is for team members who are able to adapt to change and complexity. “You need people with an enquiring mind, because things are changing all the time. And you need people with perseverance, because we’re not going to get the answer straight away; maybe you have to look at it in different ways,” she says.
“For the team ethos, communication is very important. They need to speak to banks, and they need to communicate with people, to tease out information.”
Bringing in and developing team members to think in this way is a continually evolving process, building on ACT training and previous experience in accountancy roles, says Massa. “Everybody has coaching and on-the-job training, and everybody’s learning, including me, even though I’ve been a treasurer since 1994,” she adds.
That’s partly a result of the impact of digitalisation on treasury, but also because of the international aspects of her team’s work, keeping up to date on changing regulations around the world.
“Sometimes, the regulations change against us,” says Massa. “For example, we may not be able to get money out of a subsidiary
“If we ourselves do not even understand what we are trying to achieve, how would we be able to convince others?”
as its stuck because of a regulatory issue in that country.”
To ensure everyone is on the same page, Massa tries to ensure that all the UK treasury team is in the office on the same days, usually Wednesdays and Thursdays. To be doubly sure nothing is missed, a key innovation has been the implementation of a strategy to make sure that more than one person can do every job.
When most teams are running lean, with a very long to-do list, making sure that there is adequate cover for holidays and sickness and anything unexpected is crucial, says Michael Page’s Timelin. She says building a team that feels positively stretched and challenged is a great thing, but if an extra project or assignment comes up – with perhaps a team member being away or moving on – suddenly that positive environment can turn tough very quickly.
“Making sure that team members are trained across different responsibilities, and seeking extra resource internally or externally, can be vital in keeping the balance right,” says Timelin.
It helps that many of her team are sportspeople, says NSG Pilkington’s Massa. “We have an ex-rugby player and quite a few footballers. They understand the value of a team ethic, and why it’s important to cooperate with each other,” she adds.
Lawrie Holmes is a freelance business and finance journalist
Angel Cheung, IFS treasury director
Judy Massa, group treasurer at NSG Pilkington
Time to rethink equity and debt balance
The interaction of tax shields, global profitshifting agreements and interest rates provides an opportunity to review classical approaches to optimal capital structures, Alex Ashby explains
In recent times, there has been a noticeable drift away from high A or even AAA credit ratings among governments, banks and related financial institutions. Over the past decade, banks have advised many companies to target BBB credit ratings as a sweet spot.
The rationale was simple: the cost of debt was significantly lower than equity financing; getting into the A credit ratings only offered marginal reductions in credit spreads to borrow; and BBB gave at least a one notch of credit rating capacity for movements in creditworthiness or M&A activity above ‘junk’ or BB+. With interest rates on the rise, this conventional wisdom is now under scrutiny.
Several other factors are complicating the decision-making process for treasury and corporate finance teams:
•Shifting geopolitical landscape: with conflicts in Europe and the Middle East, as well as a huge increase in global tariffs through ‘economic war’, companies must now reconsider their risk environment.
Modigliani-Miller Theorem and the tax shield
Why does this matter? The Modigliani-Miller (M&M) Theorem, a fundamental concept in corporate finance, suggests that a company’s value is not impacted by the amount of debt it holds.
The extended theorem, which includes tax, acknowledges the savings arising from tax relief on debt interest. The benefit of the tax shield outweighs the increased cost of equity because of gearing risk and, as a result, claims that the weighted average cost of capital (WACC) would continue to fall, up to gearing of approximately 100%, at which point debt costs start to increase.
This is interpreted to mean that the capital structure for nearly all companies should include debt where possible, to lower a company’s WACC and thereby increase its market value. But how much debt?
Despite the efficiency of tax shields and the theoretical upper end of having a tax shield on all its profitability, once a company accumulates a certain amount of leverage or gearing, and becomes ‘highly leveraged’ in the eyes of investors, debt and equity costs can increase materially.
The optimum level of debt can be calculated using various scenarios where WACC is at its lowest before the increased gearing pushes up the cost of debt and equity.
BEPS forces update
This theorem now needs updating because of tax regulation. Tax shields play a crucial role in financing decisions and, with a near global cap on the tax deductibility of interest, these shields have become a finite resource.
To learn more about the
• IFRS 16 leases: while reported as debt, lease liabilities under IFRS 16 are more structured than traditional debt instruments. Companies need to account for these nuances when assessing their creditworthiness.
• Pension deficits: with interest rates increasing from all-time lows, many corporates have seen their pension deficits reduce or disappear entirely. Lower pension deficits have eased the pressure on credit ratings and, with many DB pension funds de-risking at the same time, they may not be as relevant in future to capital structure.
Base Erosion and Profit Shifting (BEPS) refers to strategies used by multinational companies to shift profits from high-tax jurisdictions to low-tax ones, often exploiting gaps and mismatches in tax rules. The Organisation for Economic Co-operation and Development has been working on combating BEPS through coordinated efforts among countries, focusing on a global minimum corporate tax rate (15%) and interest deductibility thresholds (10% to 30%).
A new approach
So, what can treasurers do to ensure their companies have an optimised capital structure?
Modigliani-Miller (M&M) Theorem, head to the ACT’s Treasurer’s Wiki by scanning the code.
1. Business modelling
Create a comprehensive model, built off a company’s strategic plan or long-term cash forecast, that considers all funding and refinancing needs across core funding markets (e.g., for some GBP and EUR, or USD) for the company, as well as key outgoings, such as the amount and currency of dividends or share buybacks. Compare the resulting net interest expense by currency against PBIT and consider tax capacity.
2. Consider synthetic debt
‘Synthetic debt’ is a term for when debt in a target currency is raised through derivatives, such as cross-currency swaps or long-dated foreign exchange forwards. For example, swapping issued GBP debt to EUR to achieve a lower funding coupon.
Considering this as a part of the capital structure allows companies to expand their funding options into markets that are unattractive, from a cost or scale perspective, to fund directly, and can potentially have a positive benefit of ‘carry’ to their base funding or reporting currencies.
3. Net assets as a limit
Net assets by currency are a natural funding limit and allow companies to maintain financial flexibility while managing risk. The volatility of net assets should also be considered, as it is optimal for any new debt raised to match net assets, or even be part of a ‘net investment hedge’ where permitted under hedge rules, to minimise P&L volatility from currency rate revaluations – i.e., it is not advisable to borrow directly or synthetically outside your base reporting currency without a matching net asset, or if the net assets disappear that funding may need to be reconsidered.
4. Interest and tax optimisation
Evaluate the costs and risks associated with different funding methods, including positive and negative carry from direct and synthetic debt issuance. Consider the impact on overall WACC – maximising your tax shield within the constraints of global tax regulation while keeping interest optimally low leads to a new and composite understanding of WACC and funding costs that requires debt capital markets, derivatives, tax and corporate strategy to all work together.
Adapt and thrive
Companies must adapt their capital structures to thrive in the new environment. By embracing innovative approaches and rethinking conventional theories, they can potentially save interest and tax, and make their companies worth more.
Many corporates already maximise their euro borrowing capacity, matching their operating net assets to take advantage of the historically lower interest expense in EUR markets vs GBP or USD.
Another aspect of this is that many companies, such as those in the FTSE 100 that report in GBP, struggle with large cash commitments in their country of listing that are serviced by earnings in other international markets. The cost of a London headquarters and the commitment of cash
flow to support dividends and buybacks can easily impact the GBP tax base, leading to a necessary diversification in funding markets. In another example, various auto manufacturers have this year been swapping debt to JPY or CNY, reducing interest expense vs EUR borrowing by between 1% and 3%, and diversifying borrowing, matching local manufacturing assets and car demand. With interest and tax rates increasing in importance to both companies and shareholders, the ability to reduce one or potentially both with an optimisation of capital structure should be a priority for treasurers of international businesses, saving cash flow and increasing a company’s theoretical value.
Alex Ashby is group treasurer for WPP
Solving the puzzle
Optimising operational and commercial processes are key pieces of the working capital jigsaw, argues Mansour Davarian
Over the past 18 months, I have experienced a significant change in the narrative from our corporate customers. Recent geopolitical events and market conditions – especially in the context of higher interest rates – have not only increased the level of working capital requirements, but also the cost of holding working capital. In addition, the switch from a ‘just in time’ to a ‘just in case’ approach to inventory means that treasurers are facing an extended working capital cycle while, at the same time, being required to release cash to grow the business.
excellence in these areas, and how can this be achieved to benefit working capital?
Operational route to optimisation
“The treasurer should become integral to all aspects of the business… the bridge between the physical and financial supply chains”
As a result, the conversations I have had with our clients have broadened from focusing on direct solutions to working capital challenges to looking beyond single-product discussions. Now, the pendulum has swung more towards implementing operational and commercial excellence; that is, putting in place solutions that will drive the business forward, increase margins and reduce costs. These conversations extend well beyond trade and working capital, and now delve into the operational aspects of cash management and foreign exchange (FX).
I therefore find myself increasingly engaged with the operational and commercial sides of our customers’ businesses before addressing financial solutions – but what do we mean by implementing
Recently, I chaired a panel session at the Association of Corporate Treasurers’ Annual Conference. I was joined by several corporate treasury experts who had overseen the process of optimisation and taken steps – small and large – to simplify and centralise processes. Alex Spencer, director at Baringa, was one of the experts who shared his experiences in this field: “I remember looking at one company that had 172 combinations of payment terms, and we got that down to six. It had a really dramatic impact,” he said. “The procurement and finance teams managed the payables, and you needed fewer people to manage that process. You had fewer errors, and you had a better opportunity to optimise the process because you had a better idea of what your flow looked like.” Today, there is more urgency than ever to optimise such processes, especially in the context of a volatile business environment. When interest rates and inflation were lower, businesses that held higher levels of working capital had little incentive to create improvements within procure-to-pay processes, customer-to-cash processes, or inventory management. Today, this represents a significant cost and taking action – such as reducing the time it takes to approve invoices or centralising payment terms – can deliver real value to an organisation
before a financial solution has been overlaid.
Innovation and the drive towards digitalisation have provided further opportunity for optimisation. Banks and corportate are working with clients and UK government bodies to create digital iterations of traditional trade instruments, such as promissory notes, to reduce transaction times from days to a matter of hours. This has helped engineer faster, smoother and more cost-efficient operational experiences, and create further opportunities to optimise transactional processes.
Parallel chains
Treasurers are key to implementing these processes of improvement, and are able to do this by embedding themselves in strategic conversations among different business functions. As the custodian of cash within an organisation, it’s critical that the treasurer is able to gain a complete and holistic view of the operational and commercial running of the business, and this can be achieved by managing the physical and financial supply chains in tandem.
Abel Martins Alexandre is a former group treasurer of mining company Rio Tinto and is now head of infrastructure, energy and industrials at Lloyds Bank. He has experience not only as a treasurer, but also in running working capital optimisation projects, as well as a number of divestments where the valuation of working capital featured prominently.
“The role of the treasurer becomes one of sitting down with procurement, sales and marketing, operations, sustainability and IT, and explaining the value of cash, why there is value in optimising working capital, and why it should be everyone’s responsibility – from the bottom up,” Alexandre says. “Within an optimal and integrated approach, operational efficiency, health and safety, sustainability, and working capital are all part of the same dynamic. Managed together, they form a fundamental tenet of a culture of excellence.”
Alexandre’s argument is clear – the treasurer should not work in isolation, but instead become integral to all aspects of the business, being the bridge between the physical and financial supply chains, and acting as a trigger to drive forward operational and commercial optimisation. They should also use their role as a catalyst to create a culture of excellence in which the business thinks of working capital as a process of continuous improvement.
Driven by data
Access to high-quality data also plays an important role in this process. Gathering data at three levels
SOURCING OPERATIONAL SOLUTIONS
What tangible actions can be taken to manage the physical and financial supply chains in parallel?
Examples include:
• Simplifying payment and credit terms, which can result in a better understanding of what the inflows, outflows and net balance look like
• Simplifying and reducing the number of payment methods and gateways
• Clearly laying out inventory delivery dates
• Identifying the lead time in terms of transforming products or services into the final product or service
• Digitalising payment processes, which means that not only can cash
reach the bank account faster, but reconciliation becomes smoother, easier and more efficient
• Increasing FX visibility and improving the business’ ability to manage risk
• Improving access to environmental, social and governance (ESG) information to potentially unlock lending options that have ESG criteria.
Large corporates are increasingly supporting their suppliers by using ESG-focused solutions to provide immediate access to funds, avoiding late-payment terms, supporting ESGrelated issues, and further building resilience into their supply chains.
– operational, commercial and financial – can provide the treasurer with clear reasons why potentially expensive financing solutions should not be used as a standard default and before the business is operating at an optimal level. Gaining access to such data needs understanding and investment from across the business.
Operational excellence stems from a culture of continuous improvement, and once the business begins operating at an optimal level, financial solutions – such as supplier finance, dynamic discounting and receivables financing – can further support process improvement. With the foundations in place, they can become truly effective, not only benefiting the business, but also improving the resilience of the business’ supply chain.
Ultimately, by shifting the initial focus away from financial solutions and towards operational and commercial efficiency, treasurers can gain a more accurate understanding of the true efficiency of the business, including its working capital cycle. This allows them to then choose the most appropriate financial solution to provide effective support. Alexandre underlined the importance of the ‘loop effect’, “where you start with an operational excellence mindset and then apply a commercial excellence mindset, in which you simplify and standardise payment terms and payment methods, among other measures,” he explained. “Then you overlay the financing tools that support process improvement – that’s the winning formula, and that’s where our clients see value.”
“By shifting the initial focus away from financial solutions and towards operational and commercial efficiency, treasurers can gain a more accurate understanding of the business’ working capital cycle”
Mansour
Spot the difference
Improving
diversity not only
helps business, but also benefits society, argues Robert Searle
Corporates of all sizes continue to strive for better diversity – but what actually is diversity and how has it evolved recently? Most importantly, what do corporates want to accomplish over the coming years so that greater diversity not only benefits society, but also the fundamental performance of their businesses?
The word diversity is commonplace within all companies, but to understand how we want to move forward it is important to be able to define it. The Oxford English Dictionary defines diversity as “a range of many people or things that are very different from each other”. This is a helpful, but quite broad definition that is worth delving into a bit more.
Within a corporate setting, McKinsey suggests looking at it across the spectrum of gender, age, ethnicity, and physical ability and neurodiversity.
While the concept of a diversity agenda is not new to corporates, it has come into much greater focus in recent years. To put this into context, common acceptance is that diversity was first reviewed by corporations in the 1960s. Statistics are everywhere, and can be
used to suit many agendas, and we have to be cognisant that it varies greatly across sectors. Nonetheless, I am of the view that the best way to understand how well we are doing is by looking at the top of companies – and that is where the issue of diversity, or lack of, is most noticeable.
From a Forbes review, as of 2023, 10.2% of all Fortune 500 companies have women as their CEO. According to Women in the Workplace, a study by McKinsey, only 23% of C-Suite positions are made up of women. These numbers are a noticeable improvement on recent years, but there is clearly a long way to go.
The topic of why diversity is so important is being discussed from boardrooms to the water cooler. The data is very compelling –put simply, a diverse workplace is just better. Not only is it better for business, but business also has a moral duty to behave in the correct way. A study by McKinsey states that global GDP could increase by 26% by equally diversifying the workforce.
Company policies are nice, but will they actually mean a future where businesses implement what we know is required? Rather refreshingly, data from Deloitte shows
“The data is very compelling – put simply, a diverse workplace is just better”
that future ‘millennial’ leaders are 83% more likely to be engaged when working in an inclusive company.
Finally, as it relates to treasury teams that seek corporate finance from banks, the concept of a diversity KPI is a genuine possibility within the ESG-linked loans that are becoming more commonplace. As a result, a greater understanding and appreciation of diversity is something of which management will need to be fully aware.
With the knowledge that diversity is not just an if, but an absolute must, for corporations, you will be hard pressed to find a company that would not state diversity as a key agenda point for its business.
Of course, no two companies will have the same targets, but it is something that the ACT is addressing. Through its guiding principles, which clearly state how important this area is for its members, we should all take this topic seriously and see it as an opportunity to do our part to strive for improvements.
Robert Searle is a director at MUFG and chair of the ACT’s Future Leaders in Treasury group
Read the ACT’s Guiding Principles for Diversity and Inclusion, and learn more about the ACT’s work on EDI treasurers.org/about/edi
Celebrate the work of treasury community at the ACT Diversity and Sustainability Awards on 16 October in London treasurers.org/edi-awards
IN DETAIL:
US PRESIDENTIAL ELECTION IN FOCUS AS MIDDLE EAST CONCERNS FALL
Risk survey reveals businesses are worried about the impact of the race to the White House on the global economy
The top downside global economic risks for the next two years
Full-blown financial crisis
A marked tightening in credit supply
Eurozone crisis (e.g., amid rise of populism)
China slowdown amid property market crash
Sticky inflation keeps interest rates higher for longer
Trump presidency (e.g., as trade tensions escalate)
Businesses are increasingly focused on the potential fallout from the forthcoming US presidential election. According to the latest Oxford Economics quarterly global risk survey in July 2024 (www.oxfordeconomics.org), around half of the respondents cite a Trump presidency as one of the top two near-term threats to the global economy. However, the survey was carried out before Kamala Harris replaced Joe Biden as the Democrats’ presidential candidate.
At the same time, businesses remain cautious over the likely pace of central bank monetary policy easing. A majority expect the first Federal Reserve rate cut to be delayed to the fourth quarter or beyond. Presciently, the Bank of England was generally
expected by respondents to follow the European Central Bank in cutting rates sooner than in the US. The BoE has since cut its Bank rate by 0.25 percentage points.
Meanwhile, geopolitical worries have shifted markedly over the past three months. Concerns over Russia-NATO relations have increased, while Middle East worries have fallen to their lowest level since the start of the Israel-Hamas war.
On the positive side, very few respondents cite a full-blown financial crisis as their top risk, with a majority predicting that global economic growth in 2024 and 2025 will sit between 2% and 3%. However, a small percentage of respondents did express a concern over the rise of populism in Europe.
FUTURE TRENDS
What lies ahead for the treasury professional?
ARTIFICIAL FRIENDS
Generative AI is raising as many questions as answers, but what will it mean for the treasury world?
MIDDLE EAST VISIONS MATURE
Corporate
British American Tobacco’s treasury team helped lead a group-wide SAP implementation
friends Artificial
AI, especially in its generative form, is raising as many questions as it answers – but what will it mean for the treasury world? Will it be a friend or foe? We asked three members of ACT’s Future Leaders in Treasury group what they thought, and this is what they said…
Nick Pedersen
Head of digital, NatWest Markets
I look after product and business development for our fully automated and electronic products in our investment bank, across all asset classes, including FX, international payments, rates and credit.
Technology can be hugely impactful for businesses when used to deliver products that meaningfully change how services or processes are run, so we monitor emerging and innovative technologies to improve our products, reduce risk and cost, or generate additional revenues for our clients. Right now, blockchain and generative artificial intelligence (AI) are the two big technologies that show promise in improving financial markets – but both also come with risks and considerations.
First, it’s worth noting that AI, in its broadest sense, is not new in financial services. There appears to be a growing consensus that it’s useful to split definitions of AI into two: predictive AI and generative AI.
Predictive AI describes the use of machinelearning techniques across large datasets to detect patterns in prior events that inform predictions about future events. Applications of this technology have been used in banking for many years, in places such as fraud detection, credit risk management and electronic trading. Algorithmic and electronic trading in asset classes such as foreign exchange is now a very well-established business.
Generative AI refers to the use of more advanced machine-learning models that can generate content – text, code, images, sounds, video or other forms of data in content form. The fundamentals are quite similar, in that a generative AI model is still ‘predicting’ what will be the next best piece of text, code, colour or sound – but the output is a piece of content that would traditionally have been done with human input. And, as most people who have interacted with generative AI tools know, the outputs can be shockingly impressive.
To that end, the near-term impact of generative AI on our business has been quite light. However, we have been actively experimenting with generative AI this year, from trialling chatbots that can summarise economic research reports or suggest trade ideas, to using co-pilot tools to build pitch decks or generate call reports. In our retail bank, some of these tools are supplementing our core services – such as our virtual assistant, Cora – but, in the investment bank, we are still in
test mode, for reasons that I’ll come on to now.
Our own daily interaction with treasurers hasn’t changed much – yet. There are currently two major challenges with generative AI – the first of which is the reliability of the outputs. ‘Hallucinations’, as they are commonly known, mean that generative AI models might produce incorrect, often factually inaccurate, outputs. ChatGPT-like tools cannot be reliably used to make trade recommendations.
The second challenge is that the models are not easy to explain. Sticking with the example of the ChatGPT-like trade recommendation tool, it becomes very hard – or often impossible – to trace back to the original justification for why the tool recommended that specific trade, for that specific client. This issue is compounded when thinking about how to implement such tools in a regulated industry such as financial services.
That doesn’t mean there is no opportunity: generative AI will absolutely change how we work. But the immediate applications of generative AI, for us and for treasurers, will need to be on areas, processes or tasks that are non-critical and easily validated. Automating a multi-jurisdictional balance-sheet hedging programme is not one for right now. But summarising a series of call notes from 20-plus meetings at a conference and suggesting some follow-up actions certainly is. The opportunity here, then, is to make human portions of tasks wildly more productive.
Automation, in general, has freed bankers and treasurers to spend time on higher-leverage activities. Taking a series of manual payments processed throughout a morning and automating them, means a banker and treasurer have four extra hours in the day to work on that strategic problem that slipped down the to-do list because payments needed to get out the door to suppliers.
There is something to be said for performing the ‘hard labour’ in a junior role, though. The essence and mechanics of a treasury or banking job are often learnt by doing. I started my career in FX sales and trading, and senior traders bemoaned the fact that we had Excel spreadsheets to help us calculate prices on forward rate curves. They themselves learned by punching numbers into calculators – but you do need to understand the underlying dynamics and fundamental equations to build a working spreadsheet. If a co-pilot or ChatGPT-like assistant could do all that for you, without you needing to know the detail, does that pose a risk to the next generation of bankers and treasurers not being able to learn on the job? Possibly. Do they need to learn these mechanics? Definitely.
“Generative AI will absolutely change how we work. But the immediate applications, for us and for treasurers, will need to be on areas, processes or tasks that are non-critical and easily validated”
NICK PEDERSEN, NATWEST MARKETS
One final thought on impact relates to how generative AI will enable the use of predictive AI more broadly. Predictive AI informs risk management and pricing decisions, which – as mentioned earlier – is the core of how treasury and banks interact. Without vast standardised datasets, however, it’s nearly impossible to apply predictive AI. Data transformation projects have historically been long and expensive. Replatforming to allow subsidiaries to input cashflow forecasts into a central database is something that most organisations have been through at some point. Generative AI tools are showing a lot of promise in making that process easier. Taking unstructured data (an invoice in a PDF form, for example) and transposing that into the fields and inputs that a treasury management system or ERP might need, is now done easily with inexpensive, off-the-shelf tools. This, in turn, enables a much wider range of predictive AI applications as the datasets become deeper and richer.
In the past decade, the group has expanded from 14 businesses in Europe and one in the US, to 39 in 24 countries. For treasury, we control centrally everything to do with cash management and debt management, but we don’t handle dayto-day transactions. These are done by shared service centres in Europe, North America, South America, Australia and New Zealand.
In recent times, I have seen the rapid adoption of artificial intelligence, including generative AI, in a number of areas in the organisation, such as marketing and research. It is having an immediate presence, but not so much in the treasury world. What we are seeing, however, is an incredible increase in processing speed, which is enabling much better interfaces and rapid responses. You can have a verbal interface and get fast answers. You don’t need to know how to write the code.
In the not-too-distant future, I fully expect treasurers to be serviced by bankers who use generative AI tools to summarise their meetings, suggest actions, propose products and services, and manage vast amounts of the non-critical, easily validated tasks that we carry out daily. The organisations and individuals who do this well will become vastly superior in the quality and personalisation of the service levels they offer their clients – and probably for a fraction of the cost to serve that we have today.
Steve Card
Group treasurer, Dechra
After 12 years in banking, I turned from gamekeeper to poacher and joined a corporate, moving into treasury in the early 1990s. I joined Dechra, the animal pharma group, about 10 years ago. Through a number of acquisitions and growth it became a member of the FTSE 100, before being bought out by private equity earlier this year.
As a small example, one of my banks is now giving me a small AI helper – so, instead of going to a help box and typing in a question or various search terms, I can ask it what I want and it comes back with an immediate answer.
The flip side to this computer power, speed and ability to mimic human speech is that there is an increased risk of fraud. The phishing will be more sophisticated than before. Automated frauds can be pumped out at greater volume. That said, you will equally have greater power and speed to detect fraud. It is going to be quite a battleground.
For treasury, data analysis will become faster and more accurate, and the analyses will arrive in real time. Combined with an easier interface, this will become very powerful – and you won’t need to write the code; you can just ask the programme what you want. What will disappear is the basic data inputting – systems can talk to each other and pull data from wherever it is required, with little or no human intervention.
We will still need people who are able to analyse what comes out of those programmes, who are able to better query those systems, and who can better report the results. As people, as qualified treasurers, we have sentient intelligence – it is not artificial. Computers are not intelligent at
Steve Card, group treasurer, Dechra
Nick Pedersen, head of digital, NatWest Markets
the moment. They are quick. They have a good interface, but they are not intelligent, which is why it is called artificial intelligence.
We will need to adapt and learn new skills, and will probably have to do that quickly to keep up with the pace of the computers. But I am confident we will still be needed.
Nishchay Nagpal
Manager, Corporate Treasury Advisory, PwC
As a key member of PwC UK’s treasury and commodity consulting practice, I collaborate with leading corporate and financial services clients. With more than nine years’ experience in treasury advisory and technology consulting, I specialise in cash and liquidity management, financial risk management, treasury target operating models, and enhancing control frameworks.
Generative AI leverages deep machine-learning models, trained on vast datasets, to generate human-like natural language responses. Even though the underlying technology behind generative AI is not new, the rollout of ChatGPT has democratised the technology and made it accessible to non-technical users.
PwC was one of the early adopters of generative AI, which started with the rollout of a generative AI-powered large language model called ChatPwC, accessible only to PwC employees. Given that it’s a recent rollout, I think of generative AI as a personal assistant that can be trained to manage our daily work, such as writing emails, documenting meeting minutes, summarising huge documents, brainstorming ideas for a client presentation, and creating an outline for internal and external deliverables.
While ChatPwC is a powerful tool, however, it cannot fully replace the PwC consultants. Instead, it will continue to complement and enhance our skills.
Before generative AI’s wider rollout, clients focused on traditional AI and machine-learning use cases such as predictive analytics for cash-flow forecasts, cash positioning, and trend analysis on FX exposure and market rate movements. Generative AI, however, offers more accurate and faster insights for better decision-making.
I categorise generative AI’s use cases into two parts: operational use cases for enhancing daily operations and strategic use cases for improved
“The technology behind generative AI is not new, but the rollout of ChatGPT has democratised it”
NISHCHAY NAGPAL, P w C
decision-making. A key operational use case is creating an internal knowledge management system for treasury and risk management. This involves training the AI on relevant treasury data and developing a natural language chatbot, enabling users to ask questions in plain English and receive precise answers. Other operational use cases save time and provide accurate insights, such as performing attribution analysis and writing commentary on cash-forecast variance
For clients with existing treasury management systems and suitable data capabilities, generative AI offers multiple strategic use cases, including dynamic and insightful management reporting dashboards, by automatically integrating and updating data from various sources, analysing it for trends and anomalies, and generating clear narrative insights. They can be customised for different stakeholders and allow interaction through natural language queries.
Despite generative AI’s exciting potential, challenges remain, such as suboptimal treasury data quality, disparate data sources, and limited understanding of generative AI itself.
A resurgence in bond issuance, plus the growth in fintechs are among the emerging trends in the African financial landscape, report Theresa Henshaw and Olawale Hamed
At the macro-economic level, Africa’s financial landscape takes root from its resourcerich history. Over the years, the continent has largely depended on commodity exports as its main source of foreign revenue and economic finance. However, because of myriad factors, including population explosion, political instability, endemic corruption and public resource mismanagement, most of the proceeds of commodity exports have not been sufficient to fund the economies.
Furthermore, because of relatively low per capita GDP, high unemployment and inadequate infrastructure among other things, the impact of internal borrowing through domestic bond sales and taxation on government finance has not been able to breach the yawning finance gap.
As a result, African sovereigns have also had to consider external sources of finance to adequately fund their national budgets that ultimately feeds the economy. These external sources come via international
finance products such as Eurobonds, bilateral and multilateral loans, and repurchase agreements.
Over the past decade, Eurobonds have become more popular as a foreign debt instrument for many African countries. In 2006, Seychelles became the first country in sub-Saharan Africa (other than South Africa, which issued its first Eurobond in 1995), to issue Eurobonds. A year later, Ghana followed, raising $750m in Eurobonds. Since then, they have been joined by Gabon, Senegal, Côte d’Ivoire, the Democratic Republic of Congo, Nigeria, Namibia and Zambia.
The sudden interest in Eurobonds issuance by African countries was largely driven by favourable global financing conditions, a decline in
commodity prices since 2014 and large fiscal financing needs on the continent.
Furthermore, African economies were not adequately connected to the global financial system because of economic and political issues bordering on governance and economic infrastructure among others.
However, the global financial landscape has witnessed a significant revolution over the past decade, thanks in large part to global technological advances that have cut through all spheres of human existence, including finance, thus enabling African sovereigns to significantly close the gap in financial expertise because of easier access to financial infrastructure.
Consequently, African countries have increasingly sought credit ratings
“Interest in African Eurobonds has been attributed to high yields that both foreign and local investors find attractive, despite the current high inflation environment”
Market vendor in Nairobi: Kenya has one of the highest penetration in fintech in the world
over the past decade, thus enabling them to access international capital markets with credit ratings assigned by some of the top international credit-rating agencies.
Current outstanding Eurobonds issued by African sovereigns as of the end of 2021 stands at around $147bn across 21 African countries. Only Nigeria, Angola and South Africa issued Eurobonds in 2022, while no African country issued them in 2023. About $6bn of Eurobonds are due for redemption in 2024 and 2025.
However, after more than a year of inactivity, the Eurobond market in Sub-Saharan Africa has been revived by three countries: Côte d’Ivoire, Benin and Kenya. These countries, whose recent Eurobonds issuance were overwhelmingly oversubscribed in a show of pent-up investor demand, have raised around $4.8bn in total. The large interest in African Eurobonds has been attributed to the high yields that both foreign and local investors find attractive, despite the current high inflation environment.
Micro-economic considerations
On a micro level, Africa is also fast emerging as a magnet for fintechs, mainly because of its proportionately large, unbanked and young population coupled with technological advances
and cheaper access to online financial solutions via mobile and internetbased applications.
According to a recent report by McKinsey, fintech has been named as fastest-growing startup industry on the continent, raising more than US$1.3bn in 2021.
The consultancy found that the industry is being supported by several trends, including smartphone ownership, declining internet costs, expanded network coverage, and a young, fast-growing, and rapidly urbanising population. Furthermore, the COVID-19 pandemic has also accelerated existing trends toward digitalisation and created a fertile environment for new technology players.
Despite a slowdown in funding in line with global trends, there is a widespread expectation that the fintech industry will continue to grow and create wealth on the continent. With Africa predominantly remaining a cash-based economy (low reliance on credit compared with advanced economies) the fintech industry, which is largely retail based, is expected to remain a significant source of growth for the continent.
According to Statista, Kenya has been identified as one of the countries with the highest level of fintech
penetration in the world (ranked 1st in Africa and 31st globally). Many other African countries, such as South Africa, Nigeria with its teeming young population, and Seychelles, are not far behind.
Given the fast pace of growth in this industry, McKinsey estimates the continent’s financial services market could grow at about 10% per annum, reaching about $230bn in revenues by 2025 ($150bn excluding South Africa, which is the largest and most mature market on the continent).
McKinsey said its analysis showed fintech players deliver significant value to their customers, with their transactional solutions estimated at up to 80% cheaper than traditional solutions.
Overall, McKinsey said it anticipates the growth opportunity in fintech is likely to be concentrated in 11 key markets, namely Cameroon, Côte d’Ivoire, Egypt, Ghana, Kenya, Morocco, Nigeria, Senegal, South Africa, Tanzania, and Uganda, which together account for 70% of Africa’s GDP and half its population.
We are in broad agreement with McKinsey’s findings because of our direct involvement with key financial institutions in the region. Our view is further buttressed by a recent report published by the World Bank highlighting personal home remittance (see table on left).
According to the World Bank, remittances to low- and middleincome countries grew an estimated 3.8% in 2023. The emergence of fintech and mobile applications is challenging the bricks-and-mortar banks and helping to shape the way people send money around the world, especially to regions like Africa where a huge portion of the population are still unable to access full banking services. Still of concern regarding this trend is the risk of decline in real income for migrants in 2024 in the face of global inflation and low growth prospects.
Theresa Henshaw is CEO and Olawale Hamed is head of treasury at United Bank for Africa (UK)
Middle East visions mature
The role of corporate treasury departments will take centre stage in the Middle East amid global and regional volatility, technological change and sustainability goals
Like many regions, the Middle East continues to grapple with tough macroeconomic challenges of sluggish growth and poor productivity. But there are also more intense political concerns, such as the ongoing war in the region.
Indeed, the Levant and much of North Africa contend with conflict and political turmoil. And while Gulf Cooperation Council (GCC) countries have remained largely immune to such crises, oil price volatility must be reckoned with, being central to government budgets and diversification plans, while logistics have been impacted by ongoing attacks on shipping lanes in the Red Sea.
“The geopolitical unrest is quite a concern across different industries, in Oman and throughout the region, in addition to the business volatility and high interest rates environment,” says Muhsin Al Rustom, GCFO of ASYAD, a stateowned integrated logistic provider in Muscat, Oman. “If there is a time for treasurers to earn their seat at the decision-making table, it is now. Treasury has always been key, but the recent events have shown that importance even more.”
consideration, but now companies are setting up tax departments, and having a lot of discussions on the issue,” says James Adams, Vice President Treasury at Chalhoub Group in Dubai and chair of the ACT Middle East Advisory Panel.
Global hub
Global dynamics have been a boon for the GCC, with more companies setting up in the region, particularly in the United Arab Emirates (UAE), to take advantage of its geographic positioning between east and west, and as headquarters for Africa and the Middle East: “We’re now seeing global treasury centres set up out of the Middle East due to the strategic location and benefits it can offer,” says Adams.
This burgeoning business environment has driven MENA demand for treasurers, in addition to the overall maturing of the profession in the region. “Ten years ago, the concepts of treasury weren’t mature at all, with the conversation on what it is, and how to set it up. Today, it has moved on, with the discussion on what is best practice, what is the best technology, and what talent is needed, now and for future leaders,” says Adams.
The required skill sets still vary across jurisdictions, particularly in terms of banking infrastructure, tax regimes and other dynamics, such as trapped cash. “We have fewer issues with foreign exchange volatility in the GCC because the UAE, Saudi Arabia and others enjoy a currency peg [to the US dollar], but there are challenges around how to implement regional cash pooling and overcome some of the local nuances that you might not have in other regions such as Europe,” he says.
National visions and sustainability
The ACT’s Middle East Treasury Summit will take place 24-25 September at the Grand Hyatt in Dubai. Scan the QR code for more information.
It is a sentiment observed by the World Economic Forum’s (WEF) annual survey of chief economists worldwide, with 61% agreeing that geopolitical factors will be important in affecting corporate decision-making for the rest of 2024, while 45% consider the overall health of the global economy will be as important in driving decision-making.
Needless to say, the two factors are linked, and a Middle East and North Africa (MENA) slowdown is expected, due in part to oil prices not expected to reach the highs of 2022. The World Bank has revised down its growth rate for MENA from 3.5% to 2.8% for 2024, as a result.
Depending on whether governments have surpluses or deficits, reforms may be ahead, particularly in taxation: “Tax was not a primary
The diversification of the region’s economies away from hydrocarbons and the role of treasury departments in making that happen is on the radar, with target dates of some of the GCC’s national visions looming closer than others, such as the UAE’s, Qatar’s and Saudi Arabia’s in 2030, compared with Oman’s Vision 2040. This is galvanising treasurers to ensure projects continue, and new ones get under way, while also considering the transition towards sustainability, such as the development of sustainable cities and public transport networks, including Saudi Arabia’s NEOM project.
“The role of finance and treasury in unlocking all these opportunities is key, from raising finance including green and sustainability-linked bonds or loans, to being in the forefront in roadshows for various types of investors and rating agencies, as well as developing, safeguarding, and reviewing
ESG policies and frameworks, and how conducting our business may affect our ESG scores,” says Al Rustom.
Saudi Arabia has one of the most ambitious visions, and it is full steam ahead for treasury departments, says Daniel Tromans, VP Treasury at Riyadh Air in Riyadh, Saudi Arabia.
“There is a lot of focus and interest to do more business in the kingdom. From the treasury perspective, that means a lot of vendors, a lot of providers, a lot of leasing companies, and a lot more international institutions doing more business in Saudi Arabia. It is very much on people’s radars and gives us more choice as there’s more competition in the market, and more opportunities to work with local, regional and international players,” he says.
Sustainable finance has also become a top agenda item following two UN climate change conferences (COP27 and COP28) in the region, in Egypt and the UAE, over the past two years.
“For many large corporates, sustainable financing is becoming a core part of their funding strategies”
“Many companies have been working closely with their banking partners and announcing new initiatives, initially in the UAE, but now moving across the region into Saudi Arabia and other markets. This is a positive trend that will help drive best practice and it is increasingly becoming ‘business as usual’, mirroring the trends we have seen in the UK,” says Adams.
Tromans has observed sustainable financing moving into the mainstream in Saudi Arabia.
“A number of green bonds were issued last year, and for many large corporates, sustainable financing is becoming a core part of their funding strategies,” he says.
Future outlook
While treasury departments are focused on myriad issues across the board, from adopting AI and how best to automate certain functions, to balancing diversification and ESG requirements, financing issues will remain a core focus in the current interest rate environment.
“Debt is not as cheap as it was, so there will be a lot of focus on debt forecasts, whether to fix rates, and what yield expectations will be. Treasuries need to help their companies prioritise investments and ration them for the best returns so higher hurdle rates are achieved,” says Adams.
Paul Cochrane is a freelance journalist specialising in the Middle East
Riyadh: Saudi Arabia’s Vision 2030 is attracting international business
Anatomy of an ERP implementation: British American Tobacco
Visibility and control were the driving forces behind BAT’s treasury department’s decision to help lead a group-wide SAP implementation
Recognising the scale of the implementation transformation, BAT’s group treasurer Neil Wadey acknowledged the importance of being at the forefront of the move while accepting trade-offs that would realise the full potential of the integrated system.
Speaking at the ACT Annual Conference in May, Wadey said he was happy for his department to be a pilot for the SAP implementation, as it would “allow us to shape treasury and to shape SAP usage in the company”. He added that it would allow his team to “sell a vision of control, visibility, efficiency and macro impact”.
Visibility benefits
To put it into context, he said implementation was not about saving “a few heads” but about how the group could execute “hundreds of billions” worth of financing flows with greater visibility. “We wanted to be at the front of the bus, and then driving it,” he explained.
Mila Harger, BAT’s head of digital treasury and banking, said using the treasury function as a pilot for the implementation presented “a very attractive business case” due not only to the numbers involved, but also because of what it would deliver for other functions that interacted with treasury around the group. Wadey agreed, saying: “We wanted to be really at one with the business, helping it to deliver, but also being able to deliver on the
corporate side. So, it was very much about enabling visibility and business partnering across the globe, but also using the same infrastructure to drive really efficient financing structures, be it in the capital and banking markets, or internally through house cash.”
He said increased visibility and efficiency would enable treasury to position itself with the board and other stakeholders as “part of the dialogue and an equal partner”.
“I wanted to move us from quite a passive policy-led corporate treasury to an integrated commercial and corporate treasury with real business impact.”
Integration benefits
It has been a 10-year journey since initial implementation, and one that is set to continue as the group moves from SAP ECC to SAP S/4HANA, an enterprise resource planning (ERP) software for large enterprises. While SAP does not offer everything that advanced treasury management systems might be able to do, Wadey explained that treasury got on board with its groupwide implementation so that it could have influence within the bigger project, and benefit from the higher levels of integration.
He added that moving to S/4HANA in the future would give treasury greater flexibility in terms of the additional products it would be able to add on. “We’ll have more choices,” he said. “There’s a wide range of fintechs, some of which have great solutions for us.
From left, BAT’s Mila Harger and Neil Wadey speak at the ACT Annual Conference in May 2024
BAT’s brand portfolio includes smokeless product Vuse
So, the next phase will be picking the right ones to provide us with either technology or services to supplement what is actually a very integrated, but perhaps rigid, core.”
Harger added that treasury was not alone –other functions also needed to be in lockstep with what was agreed globally. But during the process of satisfying all parties, Harger said that treasury gained greater insights about how other parts of the business operated.
Diversity benefits
A side-effect of the implementation was that the treasury function found it was having to source its talent from non-traditional routes. “I think that was changing anyway in treasury,” said Harger, “but it’s a tight market and so we had a discussion around diversity and inclusion, not just on sex but background, the way that you think, and prior experience. And I think that can only be a good thing.”
Wadey agreed, saying: “The teams used to be very male dominated. Now, actually 75% of treasury is female, 50% of all grades are female. So, it’s well diversified, with people coming from more varied backgrounds.” This also served to help integrate treasury into the wider business, with the need for a common language or common understanding.
Geographically, the treasury team also shifted. Having once been fragmented, there is now a central team in London, with further teams in Romania and Singapore. “It’s a much richer environment with multiple
locations,” Wadey said, while hinting at future plans. “I think the next thing might be breaking down from the three-location shared services model, which probably will stay the core, but will be much more flexible on location, more modular.”
He added that there was the possibility of pivoting from specialisms to end-to-end processes. “We haven’t gone in that direction, but I can see different handoffs in the future. And my job is really to find the curious staff with the different skills who can handle that end to end.”
Relationship benefits
Wadey and Harger highlighted lessons from the implementation, not least that it is an ongoing process and that the team needed to continue to secure buy-in from other parts of the business. “I had great relationships with the finance directors, they all bought into treasury’s position and what it was doing for the business,” Wadey explained. “I think that it is key that you had that dialogue, which was very open.”
Ultimately, it is about demonstrating leadership. As Wadey said: “You have to show leadership, you have to show a vision and you have to be confident in it. We were all nervous, but we have good people in our team, and great advisers… But you have to be bold. There’s no point being timid in this space.”
Philip Smith is editor of The Treasurer
Revenue: £27.3bn (2023) Profit: £12.5bn (2023)
Employees:
46,000 (2023) Non-combustible products consumers: 26.4m (H1 2024) % of revenue delivered by non-combustibles: 17.9% (H1 2024)
Locations: BAT operates across three regions: Americas and Europe (AME), Asia Pacific, Middle East and Africa (APMEA) and the US
Middle East evolving into role as a global financial hub
Historically dominated by oil-based economies, the Middle East is rapidly shedding its resource-dependent image, placing financial innovation at the core of its economic strategy
Regulatory innovation has become a cornerstone of the Middle East’s financial transformation, creating a platform for growth and positioning the region as a leader in balancing innovation with oversight.
At the forefront of this are open-banking initiatives. Countries such as Bahrain have introduced comprehensive open-banking regulations, enabling fintechs to access banking data securely to develop innovative financial products that put customers at the heart of the financial services sector.
Another crucial regulatory tool that has emerged is the fintech sandbox. For instance, the Abu Dhabi Global Market’s RegLab – a first in the region and the world’s second most active fintech sandbox – allows fintech start-ups to test products in a controlled environment, while contributing to the positioning of the United Arab Emirates (UAE) as a leader in fintech innovation.
In addition, the region is taking bold steps in regulating digital assets and cryptocurrencies. Bahrain’s comprehensive crypto-asset framework and the UAE’s virtual asset regulations demonstrate the Middle East’s commitment to embracing blockchain technology while mitigating risks.
Digital transformation
Driven by forward-thinking policies and accelerated by the pandemic, digital transformation is also modernising the Middle East’s financial landscape.
Blockchain technology sits at the heart of this activity. Dubai’s 2016 blockchain strategy
aimed to use the technology to enhance government efficiency and transform it into a blockchain-powered city.
The Strategy, launched shortly afterwards, sought to execute 50% of government transactions via blockchain.
Digital payment innovations have also seen exponential growth across the region. Bahrain, for instance, has experienced a substantial increase in digital payment transactions. In 2022, point of sale transaction volumes rose nearly 50%, with the transaction value reaching $8.5bn. Digital wallet transactions surged even more, with volumes increasing by 196% and values by 111%.
Hiba Chamas, director of business development, RTGS.global
These initiatives are transforming the Middle East into a hub for financial innovation, attracting venture capital and talent from around the world.
Fintech centre
The Bahrain FinTech Bay (BFB) is a prime example of a force in the Middle East’s rise as a financial hub. Established as a fintech centre, the BFB was designed to nurture and accelerate innovation across the region.
At its core, BFB offers co-working spaces and innovation labs, providing fertile ground for start-ups to develop and test financial technologies. Its impact extends far beyond infrastructure, however. BFB’s strength lies
“Driven by forward-thinking policies and accelerated by the pandemic, digital transformation is modernising the Middle East’s financial landscape”
in its collaborative approach, fostering partnerships between start-ups, established financial institutions, government bodies and educational institutions from across the globe. The hub’s advisory services also play a role in helping fintech companies navigate an unfamiliar foreign corporate and compliance landscape. Such support has been instrumental in attracting local and international talent to the region.
BFB’s initiatives, expanding to include acceleration programmes and educational opportunities, have significantly contributed to Bahrain’s position as a fintech leader. By facilitating knowledge exchange and providing access to funding and mentorship, BFB has become a launch pad for more than 40 fintech ventures, ranging from large, traditional financial services firms that are developing the fintech side of their business – American Express, for example – to smaller start-ups, such as tech developer Beehive.
Beyond diversification
The Middle East’s evolution into a progressive financial hub goes beyond just economic diversification; it signifies a fundamental shift of the region’s role in the global economy. Its approach to regulation, coupled with substantial investments in digital infrastructure, has created an environment ripe for innovation.
As traditional financial centres grapple with disruption and regulatory inertia, the Middle East’s approach and ambitious initiatives are establishing it as a contender in shaping the future of finance.
Hiba Chamas is director of business development, RTGS.global
Keeping ESG credentials credible
Mid-market businesses must be alert to the status of their sustainability strategy, as this remains a vital factor in access to capital, both now and in the future, argues Jon Bramwell
LEADERSHIP & CAREER
Sustainable finance is not currently the hot topic it was a couple of years ago. Challenging economic conditions have led firms to prioritise other issues, and there have been concerns around greenwashing. But businesses should not be lulled into a false sense of security. The forces driven by environmental, social and governance (ESG) issues that influence lenders to become increasingly selective over which borrowers they support, and at what price, are not going away and will only ramp up over time.
The sustainability footprint and emissions profile of a borrower directly impacts on a lender’s own sustainability credentials. Businesses need to ensure they develop a sustainability strategy backed by good quality data and clearly communicate it to their lenders – or, over time, risk a lender withdrawing their support.
More friction, same direction
Earlier this year, Grant Thornton surveyed nearly 50 UK-based lenders to understand their attitude and strategy towards ESG and sustainable finance for mid-sized firms. When we last conducted this survey, in 2022, momentum around the ESG agenda was building for the mid-market, driven by lenders’ own sustainability targets and disclosures, and their desire to reduce the emissions produced by their mid-market borrowers.
Since then, against a backdrop of inflation,
73% of lenders have an ESG lending strategy in place (2022: 57%)
84% of lenders believe that demand for ESG-related lending in the mid-market will increase in the next 3-5 years
93% think regulators may introduce a requirement to integrate sustainability considerations into a bank’s internal capital allocation models for loans
Source: Grant Thornton
higher interest rates and geopolitical instability, there has been a hiatus in this momentum across the board. Global sustainability linked loan (SLL) issuance fell 55% in 2023, amid concerns about greenwashing and regulatory uncertainty. Many businesses also have concerns around the availability of reliable data and the cost of setting up SLLs. This is coupled with more scrutiny from lenders (around the ESG credentials of the borrower, as well as the parameters of any ESG-based loan) as they seek to demonstrate that the sustainable finance they issue is robust and credible. Nevertheless, our 2024 survey results show that demand is on the rise: 84% of lenders believe that demand for ESG-related lending in the mid-market will increase in the next three to five years.
Sustainable finance products act as facilitators to change the behaviour and sustainability credentials of borrowers. They’re also inextricably linked with a lender’s own sustainability ambitions. Businesses that don’t have a roadmap in place to improve their ESG credentials may find it negatively impacts their options as soon as their next financing round.
ESG remains a factor
A mid-market borrower’s ESG status continues to be an important part of a lender’s due diligence: 54% of lenders said that a business’s ESG status and/or its ability to transition to net
For more on ESG for treasurers, book your place at the ACT ESG Conference on 28 November in London, UK treasurers.org/esg24
zero influenced their credit risk assessment always or most of the time. And 71% said that (all other things being equal) they are more likely to agree a loan for a business with strong sustainability credentials.
Virtually every large bank has made a commitment for their balance sheet to be net zero by 2050. Some have gone further and have ambitious targets for reducing the carbon emissions they finance by 2030.
The pressure on lenders globally to publish their transition plans and greenhouse gas emissions is steadily increasing. Many UK lenders already voluntarily publish this information, but this may soon become mandatory. The FCA is expected to consult in 2025 on proposals for listed companies in the UK to report in line with the ISSB’s global sustainability disclosure standards (published in June 2023). Final rules on mandatory disclosures for listed issuers may be in place by the end of 2025, potentially taking effect as early as 1 January 2026.
It’s vital that mid-market borrowers understand that their ESG credentials feed into a lender’s credit decision-making. While no-one is expecting overnight change, firms need to develop their sustainability journey, and be able to effectively communicate that with stakeholders.
Nearly all of our survey respondents (93%) believe regulators may introduce a requirement to integrate sustainability
considerations into a bank’s internal capital allocation models for loans.
This is a crucial point for borrowers to understand. As soon as lenders are required to allocate a greater amount of capital for a loan to a mid-market firm with poor ESG credentials, lenders are likely to have to charge more for such loans or may choose not to make the loan at all.
Greater transparency
In June 2023, the FCA conducted a review of the SLL market amid concerns that it wasn’t working as intended. It found issues of credibility, where sustainability performance targets (SPTs) aren’t robust enough and don’t stretch the borrower to enact meaningful changes in behaviour. Key performance indicators (KPIs), which track performance against the targets, can also be too weak.
Our survey responses illustrate how the market is responding to these concerns:
71%
say that they are more likely to agree a loan for a business with strong sustainability credentials
57% expect levels of pricing discounts to increase over the next three years
54% of lenders say that a business’ ESG status and/ or its ability to transition to net zero influenced their credit risk assessment always or most of the time
Source: Grant Thornton
• 62% of lenders said that the level of rigour in setting SPTs and KPIs had increased over the past year, and 75% said they expected this to increase over the next three years
• 57% expect levels of pricing discounts to increase over the next three years.
ESG assurance throughout the life of the transaction is also becoming an important part of the market, with 67% of lenders requiring, or sometimes requiring third-party validation of performance to SPTs/KPIs.
Wide variety of lenders
There are a wide variety of lenders who serve the mid-market, from big retail banks and challenger banks to debt funds and asset-based loans. Each lender will be at a different stage of their own sustainability journey, with the large retail banks leading the way in terms of transition planning and emissions disclosures.
Many non-bank lenders currently place less emphasis on sustainability, although some limited partners (LPs) will be driving change in the private credit market, particularly as many LPs are also shareholders in major banks across the world.
Despite the headwinds around ESG over the past couple of years, the direction of travel remains the same. Lenders are increasingly looking for mid-market firms to commit to ESG targets. Access to capital and the cost of that capital is likely to become increasingly dependent on this.
Jon Bramwell is a debt advisory director at Grant Thornton
The imperative of proactive pension management
As funding levels improve and regulatory environments evolve, treasurers now face a multitude of options to manage and mitigate defined benefit pension risk
RISK MANAGEMENT & STRATEGY
The landscape of defined benefit (DB) pension schemes in the UK is undergoing a seismic transformation – but what are the practical considerations that will help treasurers take advantage of opportunities and make informed decisions that will enable their organisations’ longterm financial goals to be met, while continuing to protect the scheme members’ pension benefits?
Turning a challenge into an opportunity
DB pension schemes guarantee to pay retirees a predetermined amount based on salary history and years of service. Once the cornerstone of retirement planning, DB pension schemes can now present considerable challenges for companies because of their significant long-term financial obligations in combination with uncertain and volatile geopolitical and investment markets. Therefore, despite their decline in new membership, DB pension schemes remain a material concern for many organisations.
For treasurers, managing DB pension schemes might not always be at the top of their priority list. However, not proactively engaging can result in missed opportunities.
A key point to remember is that pension schemes are operated by independent trusts, not corporates. Success is therefore achieved when corporates
“Despite their decline in membership, DB pension schemes remain a material concern for many organisations”
and trustees collaborate to protect the security of members’ benefits.
Collaboration enables treasurers to act swiftly when favourable market conditions arise to turn challenge into opportunity. In what follows, we provide three no-regret actions that treasurers can take now to add value to the pension scheme and the organisation.
Action 1: Define risk appetite
As the stewards of their companies’ financial health, treasurers must calibrate valuation methods, corporate contributions and investment strategies to ensure pension schemes are managed in alignment with the corporate financial objectives:
• Valuation methods: understanding the different ways to value a DB pension scheme is essential. Treasurers need to be aware of how actuarial assumptions, accounting standards and market conditions can impact the valuation and, consequently, the company’s profitability and balance-sheet strength.
• Corporate contributions: determining the level of cash contributions that the company can sustainably make to the pension scheme is the second step. This involves balancing the goal of achieving sufficient funding to reach self-sufficiency or buy-out, while also managing the impact of funding volatility on the scheme. Treasurers must weigh the desire to maintain investment returns that help close any remaining funding gap with the need to manage the scheme’s financial stability.
• Investment strategies and illiquid assets: the uncertainty around the valuation of illiquid assets increases the overall uncertainty of the scheme’s valuation. Treasurers should seek independent advice on the valuation of illiquid assets and regularly review the strategy for managing those assets in the context of the scheme’s journey-plan timeframes.
Practically, defining risk appetite means setting measurable levels of risk across these three areas. Subsequently, treasurers should regularly assess and adjust these levels to ensure they remain appropriate as market conditions change.
Action 2: Have a clear strategic direction on the endgame
As funding levels of DB pension schemes improve, companies are increasingly exploring endgame options. There are a range of internal and external stakeholders with competing priorities, and treasury is the obvious place to steer engagement.
Below are the primary endgame options, along with their respective advantages and challenges.
• Insurance buy-in/buy-out: this strategy involves purchasing an insurance policy that guarantees the pension payments, effectively transferring the risk to an insurer. If insurance is the preferred route, treasurers should be ready for meticulous planning to achieve the best price from the transaction.
• Run-on: the company and trustees could be aligned in running-on the scheme where there is a strong funding buffer, a de-risked investment strategy and a strong employer covenant. Additionally, running-on need not be indefinite; it can be a temporary strategy to improve insurer pricing or capture further upside for the company. The recent UK Department for Work and Pensions consultation aims to facilitate surplus extraction, potentially enhancing the appeal for schemes to run-on. However, the timeline and specifics of these changes remain uncertain.
• Alternative solutions: in between risk transfer to an insurer and running-on, options such as raising first loss capital, captives and superfunds offer new avenues for managing pension risk.
In summary, treasurers should conduct a comprehensive evaluation of all available endgame strategies to determine which is the most suitable, and seek expert advice to validate the chosen strategy.
Action 3: Develop an effective communication strategy
In our recent webinars with the ACT, we emphasised the importance of having an effective communication strategy. Treasurers need to ensure that all stakeholders, including trustees, scheme members, shareholders and corporate leadership, are wellinformed and aligned on strategy. Here are two steps to developing a robust communication strategy:
• Form a joint working group: consists of
“As funding levels improve and new regulatory frameworks emerge, treasurers have a chance to turn challenge into opportunity”
representatives from key stakeholder groups, including trustees. This group should meet regularly to discuss the scheme’s performance, funding status and strategic decisions. A joint working group can ensure that strategic decisions are made with a comprehensive understanding of all stakeholder perspectives.
• Use stakeholder engagement as a platform for communication during M&A: the pension scheme remains an important stakeholder during M&A, even for well-funded schemes. Proactive communication during M&A can minimise disruption to the wider deal process and reduce the risk of value dilution for the company – for example, by finding the optimal non-cash solution. It is also more important than ever that sponsors use an M&A deal as an opportunity to retest and formalise the scheme strategy with the trustees, post-deal.
Conclusion
The evolving DB pension scheme market in the UK presents challenges and opportunities for treasurers. As funding levels improve and new regulatory frameworks emerge, treasurers have a chance to turn challenge into opportunity. By defining their risk appetite, establishing a clear endgame strategy and developing an effective communication strategy, treasurers can proactively manage pension risk. Embracing a proactive approach delivers longterm value for all stakeholders.
Andreas Vermeiren is a director at Cardano
Moving on up
How does the role of a treasury manager change when progressing to assistant treasurer level, and what skill set should you develop? Sam Roberts explains
LEADERSHIP & CAREER
In any career, there is a requirement to change skill set as you become more senior. The more ‘in-detail’ element of the role is left behind, as the senior members of the team need to have a more holistic mindset, as well as get used to delegation and team management. This is no different in treasury.
Throughout a treasurer’s career there is a natural evolution of day-to-day responsibilities. Take a typical medium-sized core treasury team, for example. Analysts will most likely need to be more in the detail, being the ‘doers’ in the everyday running of treasury. This can involve a broad range of cash management activities, including bank account reconciliations, settlements, FX management and payments execution. Similarly, at manager level, there will also be a lot of ‘doing’ – most likely the role of the manager will differ from the analyst mainly in the complexity of work. While the analyst will be working on routine cash management and back-office treasury, the manager might be responsible for the execution of the hedging strategy, inter-company funding and cash pooling, as well as any operational improvement work. The manager may also have elements of management and delegation responsibilities if there is a treasury analyst in the team – however, the role still tends to be a ‘doing’ role.
the day-to-day responsibilities to the analysts and managers in the team. The assistant treasurer role is also the position that can often be the ’face’ of treasury, both internally and externally, representing the team when working with banking partners, as well as when business partnering internally with other teams.
Assistant treasurer skills
Often the feedback that we receive from clients when looking to employ someone at the assistant treasurer level can be reduced to two key points: people/team management and ‘big-picture thinking’. It is imperative to get both points across in interview.
“Management is about a lot more than just delegation”
First, when wanting to display management skills, examples are key. If you haven’t had the opportunity to manage multiple individuals, then it is important to refer to times where you have needed to delegate work as part of a project or similar situation, or even when you have acted as a mentor for more junior members of the team. However, management is about a lot more than just delegation, so it can also be useful to refer to the management styles to which you respond well to get an idea of the type of manager you would like to be.
Arguably, the biggest shift in the focus of a role comes in the progression from manager or senior manager to assistant treasurer. While the treasurer role will always be the most strategic position in the function, the assistant treasurer role is also required to hold a more holistic view of treasury. It is at this point that the individual becomes more connected to the overall strategy of not just the treasury team, but the business as a whole. This means that the role is no longer predominantly a ‘doing’ role, but has much more responsibility around oversight and delegation, leaving
Second, a very common theme when interviewing for roles at this level is focusing too much on the detail. When progressing to a more senior role, there needs to be a transition in mindset to demonstrate that you can have high-level conversations with internal and external stakeholders and be able to summarise without going into forensic detail.
The role of assistant treasurer is a crucial one within medium-sized teams and is a great stepping stone if you have aspirations to one day run a treasury function.
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
Joining the dots with in-company training
When Oman’s ASYAD wanted to extend treasury knowledge deeper into its teams, the ACT and Zanders stepped up with a bespoke programme
Earlier this year, Oman-based global integrated logistics group ASYAD asked the ACT to design a bespoke training programme based on its popular A-Z of Corporate Treasury (AZCT) course. This was the second time that the ACT had partnered with the group to provide incompany treasury training, having previously done so in 2019.
The programme, delivered in-person over three days, was designed to cater for the needs of the company, while also focusing on the needs of the logistics and shipping sectors. In particular, it reached further into the wider finance teams as well as other subsidiary groups.
reports on cash management, forecasting, and investments. The AZCT aligned closely with the certification requirements and provided a solid foundation that deepened my understanding of key treasury concepts.”
ASYAD also wanted a training course that would meet a number of objectives, such as equipping participants with practical skills, including FX exposure and risk mitigation. It wanted the course to reinforce adherence to industry standards and best practice in treasury management as well as support career development through the exploration of treasury paths and ACT certification. The results, it says, created a positive impact on team performance. The teams were “empowered with practical knowledge and skills”, with “enhanced understanding of industry processes”.
Al Suqri continues: “The materials were comprehensive, relevant, and effectively structured to cover key aspects of treasury. The content was up to date, with industry standards, tailored to the specific needs of our roles within ASYAD’s finance team. The delivery of the course was engaging and interactive, facilitated by knowledgeable instructors who brought real-world experience and practical insights into the sessions.”
Al Suqri adds that the approach not only enhanced understanding but also encouraged active participation and discussion.
“Participants gained practical strategies that directly contribute to improving efficiency in cash management, risk mitigation, and financial operations, armed with a deeper understanding of FX management strategies,” Al Suqri says.
“This enhances the team’s ability to make informed decisions and perform their roles effectively”
Within the group, the finance functions are integrated under a centralised structure to ensure consistency, efficiency and standardised processes across the teams. This enables the finance team to provide cohesive financial services and strategic support to various business units, which in turn fosters better financial management and decision-making.
The AZCT training course was identified as the most suitable course to help build a common level of understanding within the teams. As Nawras Al Suqri, executive assistant in ASYAD’s CFO office, says: “I am currently pursuing the ACT Certificate in Treasury. I took this qualification to enhance my understanding of treasury operations, to optimise financial performance and produce treasury-specific
“This enhances the team’s ability to make informed decisions and perform their roles effectively within ASYAD.”
The training, which was delivered by treasury consultancy firm Zanders, allowed for the opportunity to provide feedback to ASYAD on its own treasury operations and policy, as well as on the implementation and use of its treasury management system.
“The trainer praised ASYAD’s treasury policy and procedures for their sound management of the company’s risk appetite, practicality, and alignment with ACT standards,” Al Suqri says.
LEADERSHIP & CAREER
DIARY DATES -
ACT EVENTS
16 OCTOBER | LONDON, UK
ACT DIVERSITY & SUSTAINABILITY AWARDS
Book your tables or tickets for the awards presentation at a celebratory dinner and join the treasury community to honour our award winners, their remarkable impact, and their progress across EDI and sustainable finance initiatives. treasurers.org/edi-awards
13 NOVEMBER | LONDON, UK
ACT ANNUAL DINNER
Join us for an unforgettable evening at the ACT’s flagship social event. The dinner is a great chance to catch up with friends and colleagues and grow your network while raising money for our charity partner, Hand in Hand International. treasurers.org/andin24
28 NOVEMBER | LONDON, UK
ACT ESG CONFERENCE
Book your place for the only event dedicated to ESG and the role of a treasurer. Discover insights into the current direction of ESG, important new issues and practical and strategic takeaways to navigate challenges and opportunities. This event is free of charge for corporate treasurers and ACT members. treasurers.org/esg24
The ACT’s Annual Dinner is one of the highlights of the year
ACT TRAINING COURSES
Preferential rates for ACT members and group discounts available. For more information, visit learning.treasurers.org/ training or email learning@treasurers.org.
15 OCTOBER 2024
TREASURY IN A DAY
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-ina-day
17 OCTOBER 2024
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/cashmanagement
22-23 OCTOBER 2024
BLOCKCHAIN FOR CORPORATE TREASURY
Book your place for the ACT’s ESG Conference
Develop an understanding of how blockchain technology works and how these technological developments will impact treasurers. This course is delivered in partnership with Zanders over two halfday sessions. learning.treasurers.org/training/blockchainfor-corporate-treasury
4-7 NOVEMBER 2024
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/corporatetreasury
Helping shape the future
Looking back at her time as president at the ACT, Joanna Bonnett takes stock of the many rewards of working with the organisation
Two months ago, I had the rewarding task of helping the ACT judge the winners of our inaugural Diversity and Sustainability Awards – and, in October, I am looking forward to helping these winners celebrate their success at the awards ceremony. Those who know me will certainly not be surprised to hear about my ongoing commitment to the sustainability cause after completing my term of office as president of the ACT. Given my background as a former head of treasury and sustainability at a listed company, PageGroup, and ongoing roles within the ACT (chair of the appointments, remuneration and audit committee) and on the UK government’s Transition Finance Market Review taskforce, sustainability – in all its forms – remains close to my heart. As does the ACT itself.
It was a privilege to serve as president of the ACT from 2023 to 2024, and it remains a privilege to continue working with the organisation. Yes, the work didn’t stop when I passed the badge of office to my successor, Malcolm Cooper, as I remain a member of Council. But I would like to pause and take stock of my year in office, reflect on what the ACT’s incredible team has achieved, and look forward to what I believe will be a period of further growth for the organisation.
Whirlwind
I have often been asked what a year as president looks like. For me, it was a whirlwind of learning, growth and collaboration. From navigating the complexities of hiring and onboarding a new chief executive – the fabulous Annette Spencer –to supporting our interim CEO, launching a governance review of the association with our friends at Linklaters, and spearheading the ACT’s three-year strategic review, including consideration of Chartered recognition for our highest qualified members, every moment has been a testament to the importance of our treasury community. It is a community that has weathered many storms amid geopolitical and economic uncertainty – and it is a community that has weathered these storms remarkably well, demonstrating resilience.
Of course, my roles with the ACT didn’t start when I became president last year. I had already served a two-year apprenticeship, first as vice-president and then deputy president, having previously been a member of the ACT Council since spring 2020. This included the dark days of the pandemic and the international crisis after Russia’s invasion of Ukraine, where our members faced the challenge of dealing with sanctions and disrupted supply chains.
But these years have all been deeply rewarding. As a Council member, I learned early on that it is not about just turning up on the day; it is about canvassing opinions, scanning horizons, and contemplating current positions. Above all, it is about thinking differently –taking the tough decisions, but also forging a path for all those linked to the treasury profession, including bankers, lawyers, fintechs and regulators.
If you have ever thought about what you might learn by putting yourself forward as a prospective member of Council, then please take my word for it when I say it will be an awful lot.
Participation
Many of you are doing just that. This year, we had a strong field of candidates from diverse backgrounds in the election for Council places, and the highest number of members voting in the last 10 years. This continuing participation in the workings of the ACT will help ensure its long-term sustainability and ongoing ability to reflect and be the voice of the profession. It helps give us a clear direction. So, if you feel you would like to contribute towards the success of your association, while, at the same time, learning new skills and acquiring knowledge, please get in touch; you won’t regret it. You could be playing a vital role in the future direction of the ACT.
This direction has been encapsulated in the three-year strategic review, mentioned earlier. The review will help guide us towards the second half of the 2020s, a time that I fully anticipate will be as eventful as the years we
have just witnessed. Again, as president, it was an honour to help guide the creation of the new strategy, and I know that my successors – Malcolm Cooper, Tariq Kazi and Stuart Case – are looking forward, with some relish, to ensuring that we deliver against this strategy. It does not deflect from the things that we have always done for our members – learning, networking and hosting the numerous conferences and webinars that help members develop their own careers – but it seeks to focus on changes that will keep the ACT and you, our members, relevant to our wider business communities (see the panel, right, for the areas in which we will be focusing over the next three years).
Even the process of formulating this strategy has been insightful, giving me the opportunity to collaborate with the ACT’s office holders and the many treasury experts and dedicated support team members that we are lucky to have with us at the ACT. Their unwavering support, dedication and insights have been the driving force behind our collective achievements. Together, we have tackled challenges head-on, embraced new opportunities, and made meaningful strides forward.
New roles
As I begin my new role as group treasurer for Straumann, the largest global dental medtech company, I can look back on my time working with the ACT with satisfaction, pride, and gratitude for the many opportunities I have had to learn and pursue my passions –not only for sustainability, but for the wider financial impact that I know the treasury community can have in their organisations.
I hope this article will inspire members to join this team effort and help celebrate the success of our community through initiatives such as the Diversity and Sustainability Awards I mentioned at the beginning. Who knows, maybe in the near future it will be you who will have the privilege of wearing the president’s badge with pride.
Joanna Bonnett is global head of treasury at Straumann Group and immediate past president of the ACT. She was speaking to Philip Smith, editor of The Treasurer
To get involved in ACT activities please email the membership team at membership@treasurers.org. FCT and AMCT members can register their interest in standing for Council by emailing Ria Robinson at rrobinson@treasurers.org
TREASURY FOR THE 21ST CENTURY – THE ACT’S STRATEGY FOR THE 2020s
The new strategy, published in May 2024, will give the ACT a clear direction and a focus on changes that will keep the association and its members relevant well into the future: It will help the ACT deliver:
● A membership structure that reflects how its members are working today – enabling anyone in the wider treasury community to contribute through affiliate membership, as well as considering Chartered recognition for its highest-qualified members.
● Up-to-date and evolving qualifications and training content, available in a modern format (stackable micro credentials) and to a wider range of people and organisations.
● Support for its members wherever they are, and clarity about the regions where a larger concentration of members means we should focus our activity. Combined with an annual commitment to review this, the ACT should be making best use of its resources for its members.
● On being the confident and open voice of treasurers to the wider environment, from regulators and policy-makers to other professional bodies and groups.
You can read the full strategy document on the ACT website
Joanna Bonnett (left) with Malcolm Cooper, the current president of the ACT
A day in the life: Heathrow
As millions of travellers pass through its terminals every year, the treasury funding team at one of the world’s busiest airports is working hard to help drive carbon out of flying
For most of us, a trip to Heathrow usually means we are going somewhere else. In fact, more than 268,000 customers passed through the airport on just one day, 30 June, capping a month where Heathrow welcomed a total of 7.4m passengers.
But behind the scenes, the treasury funding team at Heathrow plc is working hard on a daily basis to ensure that it has the finance to stay exactly where it is, as one of the leading, and busiest, air transport hubs in the world.
doing this, we can encourage other airports to follow our standard, creating a ‘domino effect chain reaction’.”
The SLB tracks Heathrow’s carbon reduction goals: reducing carbon emissions by 15% ‘in the air’ and by 46.2% ‘on the ground’ by 2030, using 2019 as its baseline year and reference point for peak carbon going forward. This mechanism is particularly progressive as it incorporates Scope 3 emissions from aircraft – including emissions in the air that represent more than 95% of the carbon footprint at the airport and are largely outside of their direct operational control.
As the first airport to include a KPI that covers Scope 3 emissions from aircraft, Heathrow says it is setting a new industry standard and taking its ability to influence seriously. Working with its partners, it is committed to addressing the complete carbon footprint associated with its airport activities, including that of airlines.
Good position
As one would expect, there is no such thing as a typical day in the life of the treasury team. However, one constant is the desire to help “drive carbon out of flying”, according to Alastair Woolf, Heathrow’s head of treasury markets and liquidity. Backing its words with its wallet, the treasury team has therefore had a couple of years building a sustainabilitylinked bond (SLB) framework and raising sustainability-linked financing. The first of these, a 10-year €650m deal that was the first issuance by an airport to include validation from the Science Based Targets initiative (SBTi), was recognised earlier this year at the ACT’s Deals of the Year Awards.
“We don’t see flying as the problem, we see carbon as the problem,” Woolf continues. “Flying brings tremendous societal benefits from tourism and cultural exchange to trade and investment, and we need to push forward decarbonising the aviation sector to protect these benefits for future generations. As one of the world’s major hub airports, we can be an advocate and generate incentives for that, and push the sector in the right direction with our behaviours. We also think by that by
Samantha Boyd, Heathrow’s treasury markets and liquidity manager, agrees that Heathrow is in a good position to influence the global aviation sector. “We have schemes in place such as the sustainable aviation fuel (SAF) incentive, so the more polluting aircraft pay a slightly higher fee, and that increase creates an incentive pot that we then rebate the airlines bringing in SAF into our fuel supply,” she explains. “And the rebate is equivalent to halving the gap between standard kerosene fuel versus sustainable aviation fuel.”
It is clear that Heathrow does not see the SLB as solely a financial instrument. It is a strategic move to weave sustainability into the very fabric of how it finances its operations and holds itself accountable.
Since its first, award-winning, sustainabilitylinked bond, the team has also been busy completing more deals – including the conversion of a revolving credit facility (RCF) into a sustainability-linked loan.
“We also now target a percentage of our cash deposits to be in green deposits and anticipate moving the threshold higher in time,” says Woolf. “And the reason it’s not high to begin with is because of the quantity of available sustainability-linked or green deposits out there. So, we’re trying to use both sides of our balance sheet.”
Heathrow has since returned to the Sterling Class B market, printing a £350m eight-
The Heathrow treasury team at this year’s Deals of the Year Awards
year class B sustainability-linked bond with an annual coupon of 6%. “It was our debut GBP SLB and the first SLB in the sterling market that includes all scopes of emissions, irrespective of sector,” says Boyd.
The team also recently completed an Heathrow Finance (HFIN) bond. After being absent from the high yield market for five years, the team successfully printed a £400m seven-year Holdco bond with a yield of 6.625%. Timing was a challenge as the team needed to navigate key economic data points, but it was able to take swift action to get ready for a favourable market window, marketing over day one and pricing on day two. The book was oversubscribed by four times. It was the largest Holdco bond Heathrow has completed.
Framework
Looking ahead, Woolf adds that the organisation would be looking to include other metrics in its fundraising. “We want, in the future, to have a framework that factors in other things; whether it’s diversity and inclusion or biodiversity, we want to demonstrate we’re not just focused on decarbonising,” he says. “But that was obviously the thing that we needed to do first, and we’ve got a very defined agenda
that outlines the projects we are going through to drive forward carbon reduction, aligned with the profile that we anticipate achieving.”
Teamwork
There were many different departments at Heathrow with whom the team needed to liaise – the carbon and sustainability teams, the legal teams, operations teams, accounting and tax teams, corporate finance and corporate communications. And the board, who initially bought into the process in 2021.
“We spent a lot of time engaging with leadership and attending various team meetings and different committees internally, making sure that everyone was comfortable and on board with what we were trying to achieve as well,” recalls Boyd. “If it’s going to be the corporate strategy, we want to be able to demonstrate that this is not something that we just talk about,” adds Woolf. “This is something we live, and that kind of messaging I think had very strong executive buy-in.”
So, while millions of travellers pass through the terminals, they can be reassured there are teams behind the scenes that are working daily to help reduce their carbon footprint.
Philip Smith is editor of The Treasurer
79.2m passengers in 2023 £3.4bn
155,000
Air traffic control: Heathrow is in the forefront of reducing aircraft carbon emissions
Future fit
James Adams is VP Treasury at Chalhoub Group and chair of the ACT’s Middle East Advisory Panel in Dubai, UAE. Adams was speaking with Philip Smith, editor of The Treasurer
When I first arrived in the United Arab Emirates (UAE) more than a decade ago, the treasury profession here was in its infancy. Indeed, the first assignment I had as a consultant with Deloitte was to set up a new treasury function from scratch.
However, I should add that even then the ACT had a small but thriving presence. The association has since grown throughout the Middle East, building a 5,000-strong network of professionals, and I look forward to welcoming many of them at the Middle East Treasury Summit in September. We will also be taking the opportunity to celebrate their successes during an awards dinner after the first day of the summit.
Of course, this growth and development has not happened in isolation. It reflects how the region itself has developed over the past 10 years. The need for economic diversity has driven several countries in the region to implement significant investments and reform packages to meet their long-term goals. We have seen new infrastructure and development of key non-oil sectors, such as hospitality and tourism, technology and education.
The UAE has specifically aimed to harmonise more closely with international norms and attract more inward investment by, for example, aligning the weekend from Friday/Saturday to Saturday/ Sunday, implementing 10-year golden visas to give more security to expats, and providing a whole range of other visa options.
from local talent. There are pros and cons if you are thinking of relocating to the UAE. First, there is more to life as an expat in the region than the sun, sea and sand! It is harder to relocate if you have family, and there are fewer safety nets, although the employment legislation is improving – for example, redundancy insurance is now mandatory (up to a limit), and there are plans to develop a pensions system that will build on the current endof-service exit payment. Relocation packages may not be as generous as they once were.
On the plus side, there is no personal income tax, and there are wonderful opportunities to travel and experience other cultures. At a professional level, you will be able to add value by bringing best practice to the region from your home country. And almost all the conveniences that you are used to at home are now available in Dubai and the wider UAE. Staying connected with family and friends is easier with new technology, and this is perhaps why many now see the UAE as a long-term option where they can settle rather than a short assignment.
“Many companies are now looking to recruit treasurers that have ‘futurefit’ attributes”
Financial regulation has also been a focus, with enhancements to anti-money laundering rules, debt restructuring and bankruptcy regulations, and new tax legislation, notably in VAT and corporate tax.
Abu Dhabi Global Markets (ADGM) has also been established as a new financial freezone, which specifically recognises a corporate treasury holding company.
This has all led to an increase in demand for treasury skills – not only from overseas but also
In terms of in-demand skills, professional qualifications and technical abilities reamin the core foundation for treasury roles. But on top of that, many companies are now looking to recruit treasury professionals that have ‘futurefit’ attributes such as curiosity, an innovative approach, critical thinking and problem-solving abilities. Such attributes will show high potential –employers are looking not only to fill their current roles but also have an eye on the future.
These attributes are increasingly important in a world of AI and new technology. For example, at Chalhoub Group, we have set up a treasury technology consultant role that requires skills in systems, AI and data analysis.
Treasurers will increasingly need to be able to understand where the data sits in their companies and how to access it to give them the best insights in real time, wherever they are in the world.
