Canadian Treasurer Magazine Fall 2014

Canada’s magazine of Corporate Finance

Financial Technology Report: A look at financial planning and analysis, risk exposure, and big data

Fall 2014 • www.canadiantreasurer.com

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Back to Front How treasurers can shine in their new roles

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What finance needs to know about employee benefits Dealing with a broken business Five ways to inspire innovation

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Canada’s magazine of Corporate Finance

Table of Contents Departments & Columns

Fall 2014 • www.canadiantreasurer.com

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Industry Watch

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Governance

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Events

24

Compliance

Special Report A look at financial planning and analysis, risk exposure and big data

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Effective Risk Management: Gaining a Holistic View of Risk Exposures Implementing a more responsive and flexible solution has become paramount

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Big Data for the Middle Market How mid-sized companies can make better business decisions by squeezing more insight from their own data

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Financial Planning and Analysis: The Need for Technology Traditional systems and spreadsheet programs have teams searching for better technology

Features

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In the next issue: A look at how companies are dealing with risk across the corporation, including insurance issues, borrowing, investments, money markets. Contributors provide a global, national, and local picture of the strategy, tactics, and processes impacting today’s treasurer

Fall 2014

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Trendwatch Fast and the Furious: Mid-Scale Treasury Organizations Gaining Speed in 2015

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HR Management Employee Benefits - What Finance Needs to Know

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Your Team Five ways to inspire innovation

CANADIAN TREASURER

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Industry Watch

Trade with Europe easier than trade within Canada With Canada recently opening up international markets with historic trade agreements, it is time to drop trade barriers between our own provinces.

As Canada’s premiers come together in Charlottetown, PEI, this week, the Canadian Federation of Independent Business (CFIB) is urging them to use international agreements like the Canada-EU free trade agreement as a model for modernizing trade within Canada’s borders.

In advance of the Council of the Federation meeting in Prince Edward Island, CFIB sent a letter to every premier, bringing attention to a number of small business issues and calling on provincial leaders to: ◉◉ put pressure on the federal government to restore access to the Temporary Foreign Worker Program (TFWP); ◉◉ take a strong stand against any mandatory increase to payroll taxes in the form of increases to the Canada Pension Plan (CPP) or the creation of new provincial plans like the Ontario Retirement Pension Plan (ORPP); and, ◉◉ improve inter-provincial trade by empowering their trade ministers to move forward on negotiating a more open market within Canada.

“Doing business with someone in Halifax should be at least as easy for a business in Burnaby as one in Budapest,” says CFIB president Dan Kelly. “We have a restaurant member in Toronto that would love to showcase Canadian beer and wine from other provinces, but finds it much easier to carry foreign beverages than to get these products across provincial borders.”

The current Agreement on Internal Trade (AIT) is out-of-date, and does not go far enough in addressing key trade barriers, including the failure to recognize other provinces’ professional credentials and food safety certifications, inconsistent standards for food packaging and truck safety, provincial business registration requirements, and the rather puzzling restrictions on selling alcoholic beverages from one province to the next.

“There is a lot of red tape involved in dealing with other provinces, and that’s a big disincentive to growth,” adds CFIB executive vice-president Laura Jones. “With international trade barriers coming down, our internal trade agreements need to keep up. This is a relatively easy way to boost the economy, and should be a top priority for every province.”

Fall 2014 Volume 25 Number 12 President Steve Lloyd steve@canadiantreasurer.com Editor Karen Treml karen@canadiantreasurer.com Contributors Wes Gill, Executive Lead, Enterprise Risk Management, SAS Canada Joseph Howell, Co-Founder and Managing Director, Workiva John Hughes, Managing Partner of Growth Enterprises, Deloitte

Greg Ibbott, CPA, CA, CIRP, Trustee, Vice-president, Insolvency & Corporate Recovery, MNP John Landry, Head of Treasury and Trade Solutions, CITI Mike Pugh, Vice-president Global Business Deposit Products, Scotiabank

Creative Direction / Production Jennifer O’Neill jennifer@canadiantreasurer.com Photographer Gary Tannyan Corporate Sales Manager Mark Henry mark@canadiantreasurer.com Senior Account Managers Brent White brent@canadiantreasurer.com Chantal Goudreau chantal@canadiantreasurer.com For subscription, circulation and change of address information, contact subscriptions@canadiantreasurer.com Publications Mail Agreement No. 40050803 Return undeliverable Canadian addresses to:

WSIB premiums too high Following on today’s premium rate announcement, the Construction Employers Council on WSIB, Health and Safety, and Prevention [CEC] would like to congratulate WSIB chair Elizabeth Witmer and CEO David Marshall for the strong improvements that have been made to the WSIB’s financial position under their stewardship. Given this rapidly improving financial situation, the time is fast approaching to reduce WSIB premium rates to bring them into line with employer performance on lost-time injury (LTI) rates in the province.

“A rate freeze is not the good news story it once was,” says CEC interim-chair Richard Lyall. “Employers in Ontario are begin overtaxed, as premium rates remain much higher than is necessary, given the significant decline in LTI rates over the last decade. While we are encouraged by the board’s improved finances, let me be

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FALL 2014

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Industry Watch

clear – this largely came about by employer actions to reduce injuries and accept high premium rates. Following today’s announcement, WSIB premium rates need to more reasonably reflect employer performance and WSIB funding needs.”

Lyall points out that since 2004, construction injuries have declined by 36 per cent, and yet, over the same time period, the average maximum construction premium per worker has increased by 41 per cent. Employers are continually investing in health and safety training and technologies to improve their LTI performance, but they have not seen a return for this investment (through decreasing premium rates) in over a decade.

These fees are putting a considerable strain on Ontario construction employers and add significant costs to the price of infrastructure development. By way of comparison, a residential construction worker (home builder) in Alberta pays $1,698 to insure a worker earning $100,000. The same employer in Ontario would pay 4-1/2 times this amount to cover the same amount of risk.

The CEC has been working very closely with the WSIB since 2010 to improve funding levels and this work is paying off. While it is recognized that the Board’s recovery is not complete, WSIB tax rates must be more realistically set moving forward.

Lyall explains that since 2010, the WSIB has had a policy in place to not allow rates to decrease and to keep the required rate (target rate) a secret. “We know that the Board faced a financial crisis that needed to be addressed, and in the spirit of partnership we supported this policy. But the time has come for employer premium rates to more accurately reflect our risk.

Today, they do not.”

CBI expands forensics, dispute resolution group Creative Breakthroughs, Inc., one of the fastest growing IT Risk Management companies in the world, announced today the expansion of its Forensics and Dispute Resolution Services group, focused on defending and preparing organizations facing a multitude of issues, such as: fraud investigation, financial crimes and accounting irregularities, eDiscovery, litigation support readiness, and allegations of compliance breaches.

“Complex processes and technologies are reasons global consulting, accounting and legal firms, corporate clients and the Public Sector, call CBI,” said Steve Barone, CEO, CBI. “Their reasons to engage with us vary but

our experts dive-in and help them navigate the legal requirements, cases, the massive volumes and variety of data, and train them on the procedures and technologies that impact their organizations.

“We’re now growing this important facet of our business. We’ve appointed a new vice president to lead this group and have been selected as an authorized Big 4 contractor to deliver forensics and dispute resolution services.

Our local offices across North America, and our certifications and expertise of U.S. and Canadian laws and procedures, certainly helped in the selection process.”

CBI’s Forensics and Dispute Resolution group provides:

Alberta small and mid-sized businesses take big hit from fraud

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One in four Alberta small and mid-sized businesses (SMEs) were hit or targeted by fraud artists last year, says ATB’s latest Business Beat survey.

“For every honest, hardworking Alberta business owner, there seems to be someone who wants to siphon off her or his earnings, and they’re getting pretty sophisticated at it,” says Wellington Holbrook, executive vicepresident, ATB business & agriculture.

“It’s credit card fraud. It’s email phishing. It’s theft of equipment. It means there’s now another set of skills needed to protect the bottom line.”

Consider last year’s numbers:

◉◉ What more than a quarter of victimized SMEs lost due to fraud: $10,000+ ◉◉ Per cent of retail SMEs reporting a fraud incident: 49 ◉◉ Rank of retail among sectors reporting a fraud incident: 1 ◉◉ Per cent of energy and construction SMEs reporting a fraud incident: 26 ◉◉ Rank of energy and construction among sectors reporting a fraud incident: 2 ◉◉ Per cent of fraud aimed at credit, debit cards: 29 ◉◉ Per cent using phishing, email schemes: 27 ◉◉ Per cent involving theft of equipment, inventory, other physical property: 27

◉◉ Average cost to an SME hit by fraud: $24,000

And here’s one more number: 16 per cent

CANADIAN TREASURER

of fraud was uncovered by a customer’s financial institution.

“And that was the leading category when it comes to how fraud comes to light,” says Holbrook.

“A reminder that we take fraud as seriously as the bad guys.”

Here are some other things to keep businesses safe: ◉◉ Ensure firewalls are secure ◉◉ Use anti-spyware and anti-virus software ◉◉ Never share your password; change it often ◉◉ Never give out your banking information over the phone or email ◉◉ If you sense anything suspicious, call your financial institution immediately

FALL 2014

industry Watch

◉◉ Expertise in all forms of Electronically Stored Information (ESI) methods, procedures and defensible processes ◉◉ Both project management and Subject Matter Expert proficiency in all areas of the Electronic Discovery Reference Model (EDRM) ◉◉ Services that include financial crimes (fraud detection and prevention), data management (forensic and discovery) ◉◉ Outsourced document review in multiple languages, and specialized content review such as accounting or vendor fraud

“It’s about performance, trust and credibility,” said Scott Goodwin, partner at Goodwin & Scieszka, PC, and President of Michigan Association for Justice. “I trust CBI to bring experts to the table that understand how to communicate with the trier of fact.”

Founded in 1991, Troy, Mich.based, CBI is a leader and trusted IT Risk Management advisor to many of the world’s leading organizations. No matter the industry, CBI’s Subject Matter Experts, tailored assessments, and custom solutions help ensure data is secure, compliant, and available, safeguarding its customers’ information and helping them navigate issues that can damage their business and reputation

Great-West Life now provides VRSPs for businesses in Quebec Great-West Life has introduced a simple solution for Quebec’s voluntary retirement savings plan (VRSP). The province has mandated that businesses located in Quebec with five or more eligible employees will be required to offer a VRSP unless they already have another group retirement savings plan in place – such as a group registered retirement savings plan, a registered pension plan, or a tax-free savings account – that allows members to make contributions through payroll deduction. For employers who prefer to take this approach, these solutions are also available through Great-West Life.

While VRSP legislation took effect July 1, 2014, the requirement for employers to offer a VRSP will be phased in over several years depending on the size of the company.

The introduction of the VRSP coincides with recent survey data from the Autorité des marchés financiers (AMF) that indicates about half of Quebeckers are not properly planning for retirement. 1 “The AMF survey reinforces the need for this legislated product because it offers key mechanisms to enable retirement reform in Canada without disturbing existing employer-sponsored retirement plans – key mechanisms like universal access, early enrolment, age-adjusted investment options, locked-in employer contributions for retirement, and portability,” says Anthony Cardone, regional vice-president of group retirement services for Great-West Life. “Our experience as a leading provider of group retirement services for Canadians will provide employers with a VRSP that’s simple to implement and administer – freeing them to focus on their day-to-day business.”

Employers are invited to watch this video to see how Great-West Life will put to work its experience as a leading administrator of group retirement plans as Quebec phases in the requirement for businesses in Quebec to offer the VRSP. Great-West Life’s VRSP lets employees choose from clearly defined, understandable investment options. If they don’t make an investment choice, their contributions will be directed into a target date fund that automatically diversifies and rebalances as employees approach their anticipated retirement dates.

Employees choose their contribution rates and for those who don’t, contributions are set at a default rate that automatically increases over time. Staff will be automatically enrolled in the plan but may choose to opt out.

Great-West Life’s VRSPs provide access to well-managed, comprehensive Harmonized Asset Class Funds that are multi-manager, multi-investment style and well-diversified among specific asset classes, allowing for a higher potential for investment growth and success.

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Financial Technology

Effective Risk Management: Gaining a Holistic View of Risk Exposures Implementing a more responsive and flexible solution has become paramount

By Wes Gill

“There’s a lot of talk about adopting an enterprise risk management strategy, but often little understanding about what that really means …”

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ne of the principal goals of any financial institution is to generate revenue, and every business decision made and action taken in support of that goal comes with associated risks. While financial institutions have always engaged in various forms of risk management, there is growing pressure on risk management departments to continue to progress in light of ongoing economic volatility, more stringent regulations, and continued innovations in financial engineering.

Technology, business, and the world in general have evolved over the years, and so has risk management. There’s a lot of talk about adopting an enterprise risk management strategy, but often little understanding about what that really means. Sophisticated risk management is about more than balancing risk and reward, and it goes beyond regulatory compliance. It entails embedding risk

management into everyday processes, business strategies, products, and services at all levels of the organization.

The good news is that, increasingly, risk management is considered a necessity, not a ‘nice-to-have’ line item. Organizations, especially financial services firms, are making real investments into risk management programs dedicated to creating solid risk frameworks, with treasury now playing an even more prominent role.

Risk management is viewed as integral to the management decision process, providing a range of benefits: ◉◉ Enabling a holistic view of risk exposures and promoting a unified approach to and understanding of risk by distributing risk and compliance information – based on common data – to users and stakeholders across the organization. ◉◉ Ensuring executives have access to timely, accurate, and complete risk information at the level of detail they require, from high-level

Fall 2014

Financial Technology

information on overall exposures to granular, drill-down details. ◉◉ Getting early warnings about issues and threats via key indicators, micro and macro trending, critical control testing and self-examination. ◉◉ Identifying problems prior to control failures and having a plan of action for risk mitigation. ◉◉ Seizing opportunities to enhance revenue and achieve or exceed financial performance targets. ◉◉ Cutting operating expenses by eliminating redundancy and fostering collaboration across business units. ◉◉ Delivering auditable data and results, validated processes and models, and endto-end operational transparency to key audiences.

Fall 2014

Effective risk management starts with data quality For the past decade, many risk management practitioners have focused on establishing the foundations of their risk management programs. However, many organizations are still unprepared for major risks, or have risk management programs that aren’t designed to handle the demands of today’s volatile and uncertain business environment.

Implementing a more responsive and flexible solution has become paramount for financial institutions. And, that begins with a mindset that perceives data management as a valuable corporate asset, not just a utility centre. Good data management truly sets the basis for effective risk management.

Within the financial services industry, improvements in the area of data quality are being driven by a variety of factors: ◉◉ Evolving regulatory framework conditions, such as Basel II/III,

Solvency II, or BCBS239. ◉◉ Needing to meet data quality standards for management and regulatory audits. ◉◉ Increasing profits, reducing costs, and generating new business, all of which require trusted data for planning and decision-making. ◉◉ Growing management demand for faster, more accurate analysis. ◉◉ Evolving developments in technology focused on improving data management

The bottom line, given the increasing regulatory pressures facing organizations today, is that data quality is a top priority. The Basel Committee on Banking Supervision Working Paper 239: The Principles of Effective Risk Data Aggregation and Risk Reporting (‘BCBS 239’) make this clear. It puts forth

CANADIAN TREASURER

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Financial Technology the requirements for an established, standardized data quality process that is monitored, measured, and continuously improved. This approach is not only essential to meeting regulatory requirements, but also for effectively and efficiently running your entire organization. With known data quality, organizations are more comfortable in generating reliable information and reports for better insight, control, and decision-making.

Stress testing gaining traction More and more organizations are using stress testing as a powerful risk management tool to help executives gain oversight of the enterprise, business units, geographic counterparties, product risk types, among others. Ever since the release of Basel II, which set the guidelines for how much capital banks must hold to guard against financial and operational risks, stress testing has been frequently and hotly debated, yet inadequately implemented. For instance, during bank wide simulations of stress situations, many banks still use outdated processes and methods that result in inefficient results that are not able to deliver information at discrete enough levels to provide the insight required to make sound decisions in times of rapidly moving or stressed markets.

Today, more executives want to use comprehensive stress testing not only in the context of Basel II/III, but also as a modern management tool for everything from business planning to capital optimization. Using stress tests, organizations are able to simulate different environmental conditions, scenarios, or sensitivities to gain a better understanding of their effects on the financial position of their organization.

By adjusting various risk parameters used to simulate negative and/or positive economic developments, executives gain insights as well as a better understanding of the effects on their portfolios.

One of the primary goals of stress testing is early detection of serious changes in the risk structure of the organization and insight into its stability, especially in periods of crisis. This allows executives to plan and enact timely

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One of the primary goals of stress testing is early detection of serious changes in the risk structure of the organization and insight into its stability, especially in periods of crisis …” measures and counter measures to leverage or mitigate future scenarios. To use stress tests continuously and regularly as a management tool, a process must transparently document the assumptions, models, and results for current use and future review. The risk process must also be established across departments so that the entire organization’s risk can be determined, which influences the calculation of the risk-bearing capacity.

A successful stress testing program must cover a number of key areas: ◉◉ Efficiency: Integrating existing risk models and data hierarchies into a streamlined data infrastructure for firmwide stress testing. Data, computations, and reporting must all be part of a unified platform. ◉◉ Performance: Efficiently aggregating results for all major risk models across the organization with the ability to run complex, forward-looking stress tests with multiple parameters. ◉◉ Enterprise view: Insight into economic capital and pro forma financials at the enterprise level with a view of market, credit and liquidity risk. ◉◉ Transparency: The ability to understand and document model assumptions, design and structure so they are readily apparent to management and regulators with the elimination of the “black box” characteristics of some models.

Risk management: No time like the present No organization is immune to risk and risk management is quickly becoming an essential and standard management practice. Unfortunately, many organizations think they are implementing effective risk management, but they really aren’t. What we see in practice often demonstrates a limited view of risk management that falls short of the demands and risks of a very dynamic and volatile economic climate. Today’s everchanging economic environment calls for sophisticated tools for implementing risk management that not only address the downside but that also adds to the bottom-line, and is perceived as adding value by the boardroom – a solution that drives an organization forward while avoiding hazards and shocks along the way. It entails more than balancing risk and reward and it goes beyond regulatory compliance. It’s about embedding risk management into everyday processes at all levels of the organization in order to truly drive business evolution. That’s why effective risk management is no longer a nice-to-have line item, but a necessity.

It makes good business sense and offers value far beyond compliance.

Wes Gill is Executive Lead, Enterprise Risk Management at SAS Canada. In this role he is responsible for executive relations and initiatives with SAS customers and partners in the areas of governance, risk (ERM), and compliance. As a professional engineer and Certified Management

◉◉ Compliance: The capability to address major regulatory stress testing issues as they evolve with the ability to integrate them into the risk decision-making process.

Accountant, he has spent more than twenty-five years in risk management, focusing on policy, methodology, and infrastructure.

Fall 2014

Regulatory Financial Technology news

Big Data for the Middle Market How mid-sized companies can make better business decisions by squeezing more insight from their own data

By John Hughes

I

“Businesses and organizations have come to recognize the full potential of data: the potential to create insights about customers, vendor contracts, supply chain, major projects, even workplace safety …”

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gnoring ‘Big Data’ is a big mistake that no company – big or small – can afford to make and many companies are keeping a watchful eye on trailblazers for lessons in how to utilize analytics to build their businesses. For example, when a major Canadian retailer sought an edge in its extremely competitive marketplace, it turned to Big Data to create a new loyalty initiative. The result is a highly segmented rewards program that provides up to 35 million personally tailored offer recommendations to one third of Canadian households each week.

The public sector is also embracing the power of Big Data – from reducing burglaries in cities to increasing hand-washing compliance in hospitals to thwarting tax fraud. Indeed, governments, businesses, and non-profit organizations are increasingly unlocking value from their data by turning everyday information into actionable insights.

Businesses and organizations have come to recognize the full potential of data: the potential to create insights about customers, vendor contracts, supply chain, major projects, even workplace safety, and the ability of these insights to help make better, fact-based business decisions.

But too many mid-sized companies – defined as those with annual revenues from $50 million to $1 billion – are still sitting on the sidelines.

They often fixate on the ‘big’ in Big Data and

leave the number crunching to Fortune 500 companies. In fact, for mid-sized companies, data analytics can be a great equalizer – an accessible technology that can make an impact at almost any scale and help mid-sized companies level the playing field.

With the right approach and the right questions data analytics can help mid-market businesses create a clear and comprehensive picture of their organization. What’s more, being nimble allows smaller firms to act on shrewd analysis more quickly and effectively.

What’s missing? Ironically, it’s information.

So, let’s dispel some myths and reveal the potential of data analytics for small and medium-sized companies, as well as industry giants.

What is data analytics?

The world is creating a lot more data. Today, the world generates more data in two days than it did in all the years before 2003. Analytics works by gleaning useful knowledge from this everexpanding pool of data. Organizations then use this information to optimize their processes.

At its simplest, analytics brings together information that hasn’t been correlated in the past. It lets business leaders make decisions based purely on facts, without all of the time and investment you might expect. It is an extremely useful tool, but it is just that – a tool.

Big data can’t run your organization for you and it won’t come up with business strategy. What it can do is help you understand where your

Fall 2014

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REIMAGINE WHAT’S POSSIBLE WITH THE NEWEST TECHNOLOGY Experience first-hand the technologies that are reshaping retail banking with 200-plus leading solutions providers in the world’s largest retail banking Expo, where the FinTech Forward Pavilion will shine a spotlight on the new forces and influences that are impacting the industry from the ground up. The BAI Innovation Showcase will feature rapid-fire demos and, be inspired by the year’s most trailblazing banks, recognized as recipients of the BAI-Finacle Global Banking Innovation Awards.

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Regulatory Financial Technology news business is winning and losing – and why.

All this requires asking the right questions, which means that analytics should be a top priority for company leaders and not just those who lead IT departments. Is the business looking to optimize pricing or get to the bottom of customer attrition? Is fraud detection on the company radar, or is the organization looking to use predictive analytics to mitigate risk heading into a project?

Business leaders have to take a company-wide, holistic approach to the processes and challenges their organizations are facing in order to root out pain points. Desired outcomes must be linked to larger business strategy to thereby zero in on useful insights.

We’ve seen how major players like a leading grocery chain use data to their advantage. So, what’s holding mid-market companies back and why aren’t they also benefitting from analytics? Let’s look at four common myths.

We don’t produce enough data Every business generates data. Data, after all, is just a fancy word for information, and all companies have information – even mom ’n’ pop shops. It may or may not be in a customized database, but the fact remains that for every business process, there are data sets. The function of analytics is to bring these data sets together to find new patterns that reveal business insights. And you can do that with even a sliver of data.

Analytics can also provide insights into a business based on comparisons with publicly available benchmark data from other firms and sectors facing similar challenges. The result is insight into everything from manufacturing process to customer retention.

We need to organize our data first Many organizations worry that their data isn’t organized enough to provide insight.

The data might be in too many places and too many formats to seem accessible. But this is all part of the process. The reality is, unstructured data is the norm for many businesses. For example, information from Excel, Word, CMS, video, voice, or PowerPoint all has value no matter how or where it’s stored. That’s why each analytics

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project starts by organizing raw business information into defined structures.

Emerging technologies like optical character recognition can identify writing in scanned or photographed documents and turn it into usable digital text. Well-equipped data consultants can use technologies like this to collect information from across a business in a process known as ‘data-wrangling’. This process is part of what distinguishes analytics from traditional business intelligence. Once organized, this otherwise daunting flood of bits and bytes allows analysts to identify nearly imperceptible patterns with far-reaching consequences.

We’re overloaded with information already Traditional business intelligence tells you what happened in your business. Analytics explains why things happen and helps you predict what’s going to happen next. It’s not about adding more information. It’s about making sense of the information you already have.

One of the ways data analytics is helping midmarket businesses improve their processes is through the visualization of data. Visualization tools let business leaders explore, understand, and interact with their information through a simple, touch-screen interface – no PhD required.

In this instance, a picture can be worth far more than a thousand words.

Consider a hypothetical midmarket company in Canada. It sells its product to 50 countries, it has bases of operation in 10 of those countries, and it does business in seven different currencies. It has contracts and contract managers across the globe, not to mention tax obligations in more than 100 jurisdictions. Answering questions about an organization like this requires a lot of data and some precise analysis.

Let’s suppose that it wants to improve its margins. By starting with a business issue, it is approaching the problem with the right questions. The set of relevant data is enormous and stored in different formats across different systems.

Analytics can help to ‘wrangle’ this data, bringing it together so that it can be turned into an interactive visualization.

Business leaders can then manipulate aspects of the data to visualize the impact of minor changes to the overall business.

We don’t have the right experts for analytics Of course, it is certainly tempting to think that the path to technical knowledge begins in the IT department. While this might have been true a few years ago, the advent and development of cloud computing has changed the game.

Businesses no longer need to worry about bringing specialized talent on board in a permanent role in order to address data collection and analysis.

Cloud technologies and cloud-based offerings allow companies to consider analytics-as-a-service, which allows quick insights without a major investment in infrastructure.

The ability to collect and connect information, identify patterns, and personalize interactions has reached a level of sophistication that makes analytics accessible across sectors and business models. And it’s a good thing, too. By some estimates, the U.S. economy loses as much as $3.1 trillion as the result of messy or underutilized data.

Big Data isn’t just for big, complex companies. Wherever there is data, in whatever form it happens to take, analytics can generate insight. Grocery stores and police departments have proven that analytics can be easily applied to everything from cutting coupons to catching crooks. The advice to all companies is this: no matter what size the business is, it needs to understand how analytics can be useful to that specific business. There is no one-size-fits-all solution. Because it’s not necessarily about profitability, it’s about building a better business, one byte at a time.

John Hughes is Managing Partner of Growth Enterprises at Deloitte and the national leader of Canada’s Best Managed Companies, which is the country’s leading business awards program, recognizing excellence in Canadian owned and managed companies. Involved with the program since its inception in 1993, John is also the coauthor of Building the Best: Lessons from Inside Canada’s Best Managed Companies (2006) and The Power of the Best (2012).

Fall 2014

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Financial Technology

Financial Planning and Analysis: The Need for Technology Traditional systems and spreadsheet programs have teams searching for better technology

By Joseph Howell

T

he role of financial planning and analysis (FP&A) is continually evolving in response to the growing demand for supporting organizational goals and growth objectives through data. The FP&A function is becoming more strategic in nature and it needs to possess a great amount of flexibility to support and advise management decisions. However, this emerging role is often difficult for FP&A teams due to lack of skills and insufficient technology.

Management teams, as well as boards, are looking at the technology used throughout their organizations. They’re asking if they need to make the extra investment to improve their reporting processes and, above all, they need to know what the ideal system would look like.

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CANADIAN TREASURER

Fall 2014

Financial Technology These issues, and more, are explored in the ‘2014 gtnews FP&A Technology Survey’. The survey assesses: ◉◉ The state of FP&A technology around the world today ◉◉ The challenges these systems create in the planning and reporting process ◉◉ What features companies should look for when choosing a new technology system

The analysis is based on a survey of 224 gtnews corporate practitioner FP&A subscribers, conducted in the first quarter of 2014.

General findings The survey found that 53 per cent of organizations do not currently use a specific FP&A technology system. Instead, respondents rely primarily on Microsoft® Excel® or other spreadsheet programs.

There are no overwhelming trends that predict what type of organization is more likely to adopt such a system, and no strong traits shared among those that do.

However, the size of the organization and number of drivers behind the decision are thought to have an impact.

Of the organizations that have implemented a specific FP&A system, 53 per cent consider them to be effective, indicating there is room for improvement in the development of stand-alone FP&A software.

Most organizations that currently use an FP&A system are dependent on traditional Tier 1 systems, such as IBM Cognos®, Oracle Hyperion® and SAP® – complex systems that need dedicated IT support and specialized programming skills to run efficiently. These systems can also be very difficult to maintain.

Advancements in technology have brought Tier 2 systems, which are typically cloud-based, to the forefront in popularity. These cloud systems are flexible and dynamic and don’t require special programming, IT support, or costly upgrades.

Limitations of Excel Seventy-three per cent of respondents report that Excel is used for most of the analytical work at their organization.

Fall 2014

However, only 38 per cent consider it effective at sorting and interpreting large amounts of data, indicating much room for improvement. Attributes that attract organizations to Excel include the low cost, convenience, and familiar interface.

Reporting challenges According to the survey, FP&A teams are facing a considerable number of challenges when collecting, consolidating, and reporting key business information.

These highly-skilled professionals are spending the majority of their time dealing with simple tasks such as: ◉◉ Identifying and correcting errors (64 per cent) ◉◉ Manually updating information for review (63 per cent) ◉◉ Verifying accuracy of data (61 per cent) ◉◉ Manually collecting and aggregating unstructured data (60 per cent) ◉◉ Spending time proofing numbers (55 per cent) ◉◉ Keeping track of multiple report versions (54 per cent)

Desired functionality The limitations of traditional Tier 1 systems and spreadsheet programs have FP&A teams searching for better technology. According to the survey, an ideal support system would enable collaboration, flexibility, adaptability, speed, and planning functionality.

Nine out of ten survey respondents cited accurate reporting as an important attribute in any organization’s FP&A support system. A similar amount, 92 per cent, indicate they want tools that promote efficient reporting.

Additional valuable attributes include: ◉◉ Automatic updates for real-time results (89 per cent)

◉◉ Speed (80 per cent)

What to look for FP&A teams can overcome current planning and reporting challenges by adopting technology systems that offer several key functions. First it must promote collaboration among teams and enable version control with a common working environment for creating reports.

This encourages the flow of information, reduces the risk of inaccuracies, and improves the quality of planning and forecasting.

The system should also have a mechanism that helps ensure the accuracy of data shared across documents, spreadsheets, and presentations. Such a mechanism will not only streamline workflows but will also eliminate the need to manually copy and paste data when collecting, aggregating, or reporting data.

High-quality FP&A technology should be able to automate routine tasks, which would increase overall efficiency and reduce risks of inaccurate plans and reports.

Finally, the system needs to be able to present accurate, up-to-the-minute data and offer secure access to the data at anytime, from any location.

FP&A leaders need to select technology solutions wisely. They must insist that the solutions they adopt are flexible and user-friendly. They must chose systems that allow their teams the freedom to respond quickly to changes and to develop strategic recommendations based on accurate data.

Joseph Howell is co-founder and managing director at Workiva. Workiva, formerly WebFilings, is a leading provider of complex business reporting solutions and is used by more than 60 per cent of Fortune 500 companies. The company’s Wdesk cloud-based product platform brings ease and control to compliance, management, risk, and sustainability reporting. See what it can do for you at workiva.com.

◉◉ Intuitive interface for easy updates (85 per cent) ◉◉ Ability to drill down data (83 per cent)

Word, Excel, and PowerPoint are registered trademarks of Microsoft Corporation in the United States and/or other countries.

Reference: “2014 gtnews FP&A Technology Survey.” (2014).

Association for Financial Professionals. Retrieved from https:// www.workiva.com/resources/2014-gtnews-fpa-technology-survey

◉◉ Collaboration among teams (81 per cent)

CANADIAN TREASURER

17

GOVERNANCE

Back to Front: How Treasurers Can Shine in Their New Roles Many treasurers now have an enhanced focus and at a more strategic level

By Mike Pugh, VP, Global Business Deposit Products, Scotiabank

L

“Certainly, the treasury function is bigger, more complex, and arguably juicier than ever before…”

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egendary ‘Rock and Roll Hall of Famer’, Peter Gabriel, called his recent concert tour ‘Back to Front’. It may also be an apt catch phrase for today’s corporate treasurers, whose roles have changed drastically over the last few years.

With this shift, many treasury departments have moved from the back office to the front, from processing unit to strategic division. The ‘new’ treasurer is significantly more visible and engaged in developing organizational strategies, often with a seat at the leadership table.

The above musical reference isn’t random. The financial literature is painting treasurers as the emerging breed of corporate rock star, joining the likes of investment bankers and corporate lawyers in the organizational spotlight. Is the hype justifiable?

More strategic roles Certainly, the treasury function is bigger, more complex, and arguably juicier than ever before.

Piled on top of traditional, ‘asset guardian’ duties for managing cash, foreign exchange, banking, and credit facilities, many treasurers now have an enhanced focus – and at a more strategic level – on capital preservation and risk management, including counterparty risk,

as well as investment management, corporate finance, and mergers and acquisitions.

Through my experience in global transaction banking at Scotiabank, I have witnessed this transformation first-hand working with corporate and commercial treasurers as customers of the bank. The financial crisis, new regulations, changing accounting rules, globalization, and the growing sophistication of financial markets are among the drivers of change that have added ‘muscle’ to the role and boosted treasury’s value to the executive suites.

Treasurers as drivers of change In my view, to capitalize and build on this momentum treasurers now need to be drivers of change themselves.

According to the survey results of the 2014 Association of Financial Professionals (AFP) ‘Strategic Role of Treasury Report’, “In spite of the closer scrutiny on the department and the greater visibility, nearly half of financial professionals do not believe their organizations use the full potential of treasury’s skills and talent to optimize financial performance.”

The report found that 46 per cent of treasury departments are acting as internal consultants to other business units in their organizations, and 37 per cent of treasurers are members of their company’s executive committee or C-suite.

These findings suggest that while their roles have expanded and evolved, treasurers can do more to help their companies tap treasury’s

Fall 2014

Governance deep capabilities, especially in the vital area of enterprise risk management.

To achieve that, today’s professionals require more than their treasury experience and technical competence, fundamental as those qualifications may be.

Treasurers must also leverage partnerships and ‘a full range of skills’ to best position, promote, and maximize treasury’s value-add, which will give their careers even greater strategic importance.

Partnerships are key While treasurers today typically have more to do, they don’t have greater resources and are expected to do more with less. And to do that, they need to rely more on partnerships to help manage the ever-changing regulatory world, technology, FX expertise, and so on.

Banking relationships are a prime example. Treasurers can take greater advantage of their bank to help them with their increasingly challenging needs.

Meanwhile, as true partners, banks must step up their game by offering products and services that help treasury clients succeed in their more strategic role. That means, for instance, providing them with real-time data and reporting, advising them on local and global regulations, and having experts available to answer questions like ‘tell me about this issue in country XYZ’.

Data storytelling: communicating in a relevant and clear manner Communication skills are table stakes for any career path today. It’s the ability to clearly pitch one’s work, relevance, and worth to an organization’s

Fall 2014

executives, boards, business units, and clients. By developing strong data storytelling skills, treasurers can advance their insights in a coherent, compelling way that inspires action. Effective communication can help ensure, for example, everyone is fully aware of various business risk exposures.

A consultative mindset Cultivate a consultative approach. Similar to a consultancy, the modern corporate treasury team should be viewed as a ‘centre of excellence’; a strategic internal advisor to the executive team and to business units on key activities like enterprise risk management and capital allocation. Don’t wait for your internal clients to approach you. Spark ideas. Initiate conversations. Reach out with forward-looking opportunities that create value – for example, how to improve a department’s processes to gain efficiencies.

Leadership skills Great leaders are big-picture visionaries who are able to connect the dots. Increasingly expected to drive solutions across many departments, treasurers must be able to think holistically, in terms of integrated, interconnected processes, plans, and outcomes. That means, for example, ensuring holistic risk management and the appropriate alignment of corporate and financial strategies.

Seizing the lighted stage Driven by the new set of demands and expectations, we are seeing as a best practice, treasurers hone their skill-set, promote their role, and take a

partnership approach, making them incredibly valuable performers in high demand.

It’s an electrifying time to be in the treasury profession.

Treasury has always played a crucial role, but it was often an invisible one with backstage status. Today’s treasurers are moving to front-of-house – no longer ‘roadies’ but leading stars in the financial amphitheatre – and attaining the much-deserved limelight.

and technical expertise to maximize growth and market share. Mike has more than 30 years of financial services experience including holding progressively more senior roles in retail banking, commercial banking, global banking & markets , and global transaction banking. In addition to his experience and foundational knowledge of business customers and, in particular knowledge of transaction banking, including cash management, payment services, and trade finance, he is a proven leader and is consistently focused on the

Mike Pugh is Vice-president of

end customer and delivering on

Global Business Deposit Products

Scotiabank’s value proposition. Mike

with Scotiabank. In this role, he is

holds an FCIB and Certified Treasury

responsible for the profitability,

designation and completed the Ivey

oversight, and strategic management

Executive Development Program from

of Scotiabank’s portfolio of global

the Richard Ivey School of Business

business deposit products. In addition,

at the University of Western Ontario

he is responsible for the full cycle

in Canada.

product management, field support,

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19

TrendWatch

Fast and the Furious:

Mid-Scale Treasury Organizations Gaining Speed in 2015

With increasing sophistication, the next tier of organizations is gearing up. How are they doing it and what do they still have to learn?

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CANADIAN TREASURER

Fall 2014

TRENDWATCH

By John Landry

T

he Global Treasury landscape is undergoing a dynamic evolution with the very nature of organizations’ mandates and approaches shifting at a rapid pace. From the increasing scope of teams to tighter integration into the strategic goals of the companies in which they’re housed, large-scale treasury organizations are no doubt undergoing significant changes now and into 2015.

However, alongside the shifts taking place at the largest of treasury organizations, there is a trend with smaller firms increasingly adopting the same or similar tools and practices and, in some instances, surging ahead of their larger counterparts as a result.

These ‘emerging champions’ with annual turnover less than $10 billion are undergoing remarkable development of their scope and approach. How are they accomplishing this? Here’s a look at the tools and approaches that are playing a crucial role in helping growing firms and their treasury teams become more efficient and impactful, as well as a view of opportunities still waiting to be seized.

The need for speed Quicker and more regular access to balance and flow information is critical for treasury organizations. Citi’s treasury diagnostics research shows more than 80 per cent of firms of all sizes report daily visibility into operating balances and 85 per cent with daily visibility into their short-term placements. Remarkably, this is a very consistent figure when compared across firm sizes and, clearly, the next tier of treasury organizations is closing the gap to their big brothers.

With that said, deeper investigation into how this visibility is achieved and what is done with the information reveals significant differences and highlights how treasury teams in growing firms might plan for their development. Treasury

Fall 2014

workstation infrastructure remains a strong trend amongst the largest firms (85 per cent), with Excel spreadsheets continuing to play a prevalent role within the smaller companies, even those with several billion in turnover. Two of the most time-sensitive treasury functions show an enormous divergence in how this information is actioned. We have seen the rate of daily cash forecasting more than double in the last four years. We have witnessed the rate of cash concentration structures similarly develop, but showing a vast discrepancy between large and mid-size firms with the former almost 35 per cent more likely to employ such structures.

So what does this mean for growing firms’ treasury organizations? While the trend of implementing enterprisescale treasury workstations and related systems continues, the timing, cost, and complexity of many of those systems keep them in the domain of the largest firms. The next tier of treasury teams is increasingly using interim tools such as web-based balance reporting, cash forecasting, and concentration tools.

Automated balance reporting, position forecasting, and both domestic and crossborder pooling structures are increasingly prevalent amongst all sizes of firms. If you are running a treasury function within a growing firm, you need not wait for an enterprise-scale treasury workstation and automation project. Your peers are taking up interim solutions and a sophisticated bank partner can help you pinpoint and implement the most impactful options.

Treasury’s growing scope We regularly survey the degree of our clients’ involvement in 15 functions commonly within the span of control for treasury teams and have witnessed a significant set of developments. It is not a surprise that of the small-to-mid size respondents representing approximately 500 firms, they indicate a continued enhancement of their input and oversight across all of these activities. There are

CANADIAN TREASURER

21

Trendwatch three areas of responsibility that showed substantial change in treasury’s role over the past few years: Credit and counterparty risk management, supplier payments (including discounting) and customer receivables management all showed up to 60 per cent growth in the number of treasury teams providing direct oversight or involvement in decision making.

Not only are treasurers more active in a wider array of topics; they have made progress in consolidating that control.

Treasurers reporting exclusive control over operating accounts have doubled over the past four years and their involvement in working capital decisions, such as the aforementioned supplier payments and customer receivables management, has driven a significant uptake in supplier and buyer finance programs.

These trends support the position that treasurers – especially those in growing firms – need to be thinking about their scope and role in the organization differently than in the past. Treasurers at mid-size and large firms below the $10 billion turnover hurdle should be actively involved in decisions around buyer and supplier risk management, integrating those considerations with working capital positions and driving implementation and management of these solutions.

Centralization and control Not only are treasurers continuing to play a role in more diverse decisions, but their strength in consolidating working capital functions domestically and internationally has moved forward. This is especially highlighted when observing the change over the past four years amongst firms under $10 billion in turnover. In Citi’s initial treasury diagnostics research in 2009, the segment of smaller-scale organizations reported zero per cent had implemented global cash concentration structures. That segment grew 20 per cent, and we observed strong steps forward in all other segments as well. A look at the use of shared service centers and inhouse banks over time across segments is also informative. For firms well under $10 billion in turnover, both of these best practices represented significant milestones in their firm’s path to growth.

Treasurers at firms of all sizes should

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be assessing their level of control and implementation of centralization/ efficiency functions such as shared service centers and in-house banks, receivables- and payables-on-behalf-of.

These tools are no longer the sole domain of the largest of firms; they have become accessible and impactful for companies of emerging leadership as well. Seek out a bank partner who has the capabilities and expertise in this arena and utilize them as your strategic partner in ensuring you have the appropriate level of control and centralization.

Internal and external accountability For years, the largest of Canadian and international firms have seen the level of treasury’s integration into their broader firm’s goals increase in alignment and in scrutiny. Over the past four years we have seen the rate of treasurers reporting direct KPIs and annual objectives aligned to their company’s plans increase by about 70 per cent. That represents a fundamental shift in treasury’s alignment within their firm, and one that while stronger in the largest of firms, is a trend very much aligned with our expectations of the next tier of companies. The shift in accountability isn’t just inward-facing either: Corporations reporting regularized reviews of their banking arrangements have nearly doubled in the last four years. And, this trend has been particularly strong amongst clients under $10 billion in turnover.

For emerging clients, these trends again underline opportunities to adapt large-firm practices for use within their treasury teams. Ensuring explicit, regular, and transparent alignment to their firm’s goals enhances treasury’s ability to gather support and demonstrate significant value. Instituting regular reviews of their key bank partners ensures a level of shared expectations, rapport, and leverage that should not be the sole domain of the largest global firms.

Treasury’s management of risks Treasury organizations are increasingly taking a proactive role in a broader set of risks than they have traditionally; scope has indeed expanded beyond the standard interpretation of “treasury risk management.” Interest rate, FX, and

liquidity risk remain critical practices across client scale measures. Large corporations have largely moved beyond simple rating agency’s views on their banks as their key risk to monitor. They have developed more sophisticated views regarding bank risk, and, additionally, have significantly increased the scope of counterparties they monitor. Treasury best practices now include monitoring of their buyers, suppliers and distributors.

There is also a movement to become more inclusive in assessing the risks from partners, such as settlement risk. It is interesting to note that although the relative risk to a smaller firm from a failed settlement is roughly the same or greater than at a large firm, the latter are 2-3x more likely to be monitoring that risk, according to Citi’s Treasury Diagnostics research.

The broader universe of considered risks, the more direct accountability for oversight and the development of more sophisticated tools to manage these risks have resulted in marked changes in how Treasury organizations address their task. For smaller organizations, the sale of receivables, supplier finance programs, and other trade tools such as letters of credit and insurance have increased dramatically. As the relative criticality of these measures can increase as the Firm’s size decreases, it is advisable to look to larger firms who have experience with these approaches, learn their best practices and utilize them as appropriate.

Even as the largest-scale Treasury organizations continue to develop and evolve best practices, the next tiers of Treasury teams continue to accelerate their pace of innovation. Experience gained at the top tiers and investment in Treasury tools by Banks has made leading-edge approaches accessible to smaller corporations while still delivering significant value in terms of efficiency, control, speed, transparency and risk management.

John Landry is the Head of Citi’s Treasury and Trade Solutions business in Canada and oversees traditional transaction banking capabilities as well as a new generation of innovative solutions for clients.

Citi Canada has offices in Toronto, Mississauga, London, Montreal, Calgary and Vancouver.

Fall 2014

September 14-16 IFO Canada 4th Annual Canadian Financial Operations Symposium Toronto, ON www.financialops.org September 21-23 CUMA CUMA Ontario Annual Conference Collingwood, ON www.cuma.ca September 23 Women in Payments Symposium & Payments Business Magazine Awards Night Toronto, ON www.womeninpayments.ca September 29 – October 2 Sibos - Sibos Annual Conference 2014 Boston, MA www.sibos.com September 30-Oct 2 National Retail Federation Shop.org Annual Summit Chicago, IL www.shop.org October 2-4 Canadian Automatic Merchandising Association CAMA Expo 2014 Quebec City, QC www.vending-cama.com October 7-9 Celero Solutions Celero Client Conference Kelowna, BC www.celero.ca October 7-9 American Bankers Association Marketing Conference 2014

Orlando, FL www.aba.com October 14-17 RIMS Canada Horizons--Annual Conference Winnipeg, MB www.rimscanadaconference.ca October 19-21 American Bankers Association ABA Annual Convention, Business Expo & Directors’ Forum 2014 Dallas, TX www.aba.com

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Fall 2014

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23

COMPLIANCE

Dealing with a Broken Business: Three Options for Insolvent Companies Struggling companies need to know and understand insolvency and the available options

By Greg Ibbott

I

Directors of insolvent companies are strongly recommended to contact their advisors to minimize the risk of resulting personal liability.

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CANADIAN TREASURER

t is said that the only an egg is better when it is broken.

When a material financial crisis results in a company being broken, its ongoing viability needs to be immediately assessed to determine if it is insolvent. While no company has a corporate goal of achieving insolvency, once it is insolvent the company (or its creditors) may seek protection and remedies available under the Bankruptcy and Insolvency Act (BIA) or other legislation. However, the issues that cause insolvency and the regulations that then apply can be complex. So where do you start?

Insolvency The first step is to understand what insolvency means. The BIA is the primary legislation regulating insolvencies in Canada. An insolvent person (or company) is defined within the BIA as someone who: ◉◉ Is unable to meet obligations as they generally become due; ◉◉ Who has ceased paying obligations in the ordinary course as they become due; or, ◉◉ Whose assets are not sufficient to pay all of its obligations.

Once a company comes into the vicinity of insolvency, legal and accounting advisors

should be consulted to consider how insolvency legislation applies to the specific situation. The BIA requires the appointment of a Trustee in Bankruptcy (Trustee) to independently assist companies through the formal insolvency processes and protect certain rights on behalf of creditors. A Trustee is often the go to contact for companies and their creditors to discuss insolvency options or for creditors to contact regarding an existing insolvency proceeding.

The directors of an insolvent company need to be aware that they may be held personally liable for certain unpaid or unremitted amounts related to employees, taxes, and other actions that may cause or further the insolvent state of the company. The director’s actions once a company is insolvent may be judged harshly by creditors who end up unpaid by the company. Directors of insolvent companies are strongly recommended to contact their advisors to minimize the risk of resulting personal liability.

The main insolvency proceedings that available to insolvent companies or their creditors are restructuring, bankruptcy, or Receivership. The benefit or impact of these proceedings depends on where you sit in relation to the insolvent company.

Restructuring Where an insolvent company can avoid bankruptcy by restructuring or through an orderly liquidation, a proposal to its creditors under the BIA or the Companies Creditors Arrangement Act (CCAA, used for more complex

Fall 2014

Compliance matters) should be considered.

Management of companies entering a proposal process benefit from the breathing room provided by a ‘stay of proceedings’ which generally stops all interested parties from taking action against the insolvent company. In addition, management does not need to obtain agreement from all creditors as the terms of an approved proposal are binding on all creditors regardless of how each individual creditor voted.

Creditors need to contact the Trustee and their advisors to fully understand the implications of the stay in place, any requirements to continue providing goods and services and how their claim is treated under the proposal.

Accordingly, the period leading up to the vote on the proposal is a key time for creditors to try and negotiate improvements to the proposal made by the insolvent company.

Bankruptcy A bankruptcy will be considered when a company is no longer viable. Companies become bankrupt by assigning themselves into bankruptcy to ‘stop the bleeding’ and minimize director liabilities or by creditors petitioning for a court order declaring the insolvent company bankrupt.

A Trustee is engaged to realize on the corporate assets and then pay out the resulting funds to creditors according to legal priority. Generally, employees and the Canada Revenue Agency are at the top of the priority list for certain amounts owing to them, followed by creditors who have valid security registered against the company assets.

The rest of the creditors are then typically put into one

Fall 2014

pool of unsecured creditors that share rateably on any remaining funds.

Creditors of bankrupt companies should ensure the Trustee provides them with: ◉◉ Notice of the First Meeting of Creditors - the Trustee must hold a meeting of creditors where an update on the bankruptcy will be provided and votes held. Creditors are not required to attend the First Meeting of Creditors and an update on the bankruptcy process can be obtained by requesting a copy of the Trustee’s report; and, ◉◉ Proof of Claim – All creditors must file a proof of claim with the Trustee to confirm the amounts owing from the bankrupt company, regardless of any amounts showing on the original bankruptcy documents. Creditors will not share in any payout from the bankruptcy unless they have filed a proof of claim and it has been accepted by the Trustee.

Any creditor with unique rights such as liens, security, or other concerns should contact the Trustee to discuss how they intend on dealing with these issues.

Receiverships Receiverships are the primary realization option for secured creditors of insolvent companies. Secured creditors must give the insolvent company 10 days’ notice of their intention to enforce their security prior to appointing a Receiver. The insolvent company then has that notice period to negotiate an alternative with the secured creditor, agree to the appointment of the Receiver or initiate a restructuring

process which would then stay the secured creditor from proceeding with the Receivership appointment.

A Receiver takes control of the assets and operations charged by the security agreement (or as directed in the appointing court order).

While the Receiver has a general duty to all interested parties, their primary duty is to the appointing secured creditor.

Creditors of companies in Receivership should contact the Receiver to discuss how the company is being dealt with, as well as payment expectations. Creditors should note that a company in Receivership is often also assigned into bankruptcy, resulting in their claim being dealt with in accordance to the

bankruptcy process.

Every corporate insolvency situation is unique. To determine which of these options will work best for your business, start by speaking with a corporate insolvency professional.

Greg Ibbott, CPA, CA, CIRP, Trustee, is a Vice-President with MNP’s Insolvency & Corporate Recovery group. Working out of the Vancouver office, Greg works with entrepreneurial companies and their creditors to manage complex engagements arising from insolvency or shareholder conflict issues.

Drawing on 15 years of experience, Greg consults with and advises clients on their options and helps tailor effective solutions. His services include monitoring, bankruptcy and receivership, business reviews, negotiation and liquidation support.

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25

HR Management

Employee Benefits – What Finance Needs to Know

By Karen Treml

I

ncreasingly, the implementation of new or renewal of existing employee benefit plans is a collaborative effort between both human resources and finance. As the recruitment and retention of top talent becomes more and more competitive, compensation packages that include comprehensive employee benefits become more important.

“Today, benefit plans are of interest to both HR and finance,” says Abigail O’Neill, a consultant at Mosey & Mosey Benefit Consultants. “They need to work together. The benefit plan is important for recruitment and retention, so it interests HR in that regard.

However, there is a financial aspect that falls to finance, so they do end up working together. The benefit needs to align with both the HR and the corporate philosophies.

Similarly, Robert Crowder, president of The Benefits Trust, says that CFOs are understanding that they have to deal with benefits. But, while they have to know what they are spending their money on, when looking at it from the HR perspective, they need to determine how to get value on the dollar – not just the cheapest price.”

Two factors that are at the forefront are – benefit plan sustainability; and benefit plans that accommodate the increasingly multigenerational workforce.

Sustainability A substantial element that affects the sustainability of a benefit plan is cost, and the major drivers of cost primarily revolve around drug and health-related expenses. In recent years, the drug costs within benefit plans have been somewhat level, which, as Valerie Travis, senior consultant, health and benefits at Aon Hewitt, says, has made for interesting discussions within organizations on whether this is the new normal. “Unfortunately it is not,” she says. “We are starting to see, and we

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will continue to see, healthcare costs returning to high singledigit annual increases; and may reach the double-digit increases we’ve seen in the past.”

Over the Abigail O’Neill, Mosey & Mosey Benefit past several Consultants. years, costs have remained stable as a result of patent expiries and the availability of generic drugs.

However, with the increasing shift towards the new – and much more costly – biologic and specialty medications that are coming into the marketplace, drug costs will be major contributor toward significant annual cost increases, says Travis.

Similarly, Mike Biskey, CEO of Express Scripts, says that drug benefits pretty much double every ten years. He adds that although the costs flattened out for a couple of years as a result of government pricing reform and an uptick in generics, the extensive research his company has undertaken indicates that the costs will continue to rise at roughly double every ten years.

Because of these rising costs, Tim Witchell, president, wealth management and employee benefits at HKMB Hub International, says that in cases where brand new programs are being put into place, companies need to determine what type of benefit arrangement they want and must decide whether their plan will include biologics. These types of decisions need to include a balance between therapeutic value and the value to the work environment the employer wants to provide. He adds that overall risk management choices can include such things as determining maximums payable or stop-loss scenarios whereby companies can

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HR Management pay separate premiums allowing for pooling of annual claims over a predetermined amount.

In addition to capping or stop-loss Mike Biskey, CEO of Express Scripts strategies, engaging and educating employees can also help in mitigating costs. O’Neill points out that it is key to engage employees when discussing costs. “Costs are going to continue to be a challenge and employees are a huge stakeholder in the challenge. Employees need to be provided information. Without the conversation and information, the engagement piece is not going to be there and it becomes harder to plant some seeds to effect some change. It doesn’t mean that they are going to walk away and be willing to make

sweeping changes, but it does open up the communication and if nothing else, their understanding and appreciation for the investment go up. Employees value their benefit plans, so if they are properly engaged, they are willing to play a role in looking after them in the long term.

Ross Cristiano of Towers Watson also believes that employee education is very effective – if it is done right. Employers need to communicate the cost of the program first and foremost, he says, adding that many employees believe the insurance company pays the claims and that there is little cost to the employer.

Employees need to know how expensive and valuable their benefits are. The second phase of the conversation, says Cristiano, is the cost control dialogue so employees understand what cost sharing is and how they can shop around to lower costs.

Karen Taylor Smith, senior manager with The Benefits Trust, adds that meetings with employees must convey that the cost of benefits is directly related

to costs of use. They need to understand that the benefit plan is not a magic box that spits out money but that there is a very real cost to the employer. Presenting it as a matter of being a smart shopper will go further than just dialoguing that the costs must be held down.

And certainly the philosophy of Express Scripts is one of education and engagement. But Biskey adds that traditional ways of educating employees do not work. “Express Scripts wants to influence patients to make informed decisions through things like active choice. We provide health decision science – which combines clinical information and patient information with behavioural psychology – to engage people to make informed decisions so that they make better decisions. The choices can include a choice of pharmacy or choice of drugs, or the choice of how often to refill prescriptions. We advocate for the patient to help them make decisions in all of those areas and work with the patient, the

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HR Management physician, and the employer to facilitate the patient making those decisions.

When you provide the patient with all the information possible, you can help them make the best decisions which, in turn, will impact on the benefit plan.

When developing cost-management strategies, Travis suggests it’s important to remember that employees and their families rely on the benefit plan as protection against catastrophic costs.

Eliminating coverage for high-cost drugs and services can reduce company costs, but shifts a great financial risk to the employee. An effective sustainability strategy maintains the critical insurance aspects of the program, and focuses on the most effective use of limited budget.

Differing populations, different needs Today’s workplace is very multigenerational and the differing populations present with different needs. “The multigenerational workforce is a challenge when it comes to establishing benefit

plans,” says O’Neill. “Right now, despite the diverse demographics – and obviously we do have an aging workforce – benefit plans are still very Valerie Travis, senior consultant, much the same health & benefits at Aon Hewitt despite the changes in provincial health systems and the changing demographics, and you don’t see a lot of uptake for some of the things that are available such as hybridizing defined benefit with defined contribution. Employers need to have an understanding of what they want out their plan and they need to have an understanding of what their employees want to see out of their plan.

Travis also cites the multi-generational workforce as being an area requiring attention.

“We have older generations – longer tenured employees in many cases – who rely on coverage for their families and medications for chronic illnesses. At the same time we have younger populations who may not need the benefit coverage as much, and may not value it the same way.

We hear from our clients that they realize the plan can’t meet 100 per cent of every employee’s needs, while operating within a budget for future sustainability. Employers need to find the right balance between a program that offers value to younger generations, but is still comprehensive enough and cost effective to be there for older generations.”

Many companies that Aon Hewitt works with are managing the multi-generational workforce through offering more flexibility within the program, says Travis.

For example, they will offer different options within the health plan that employees can choose from. “Often what we see is that the younger employees value dental benefits but they may not place as much value on the health benefits, for

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HR Management example; and the reverse may be true for older generations. With flexible programs, employees have the opportunity to choose from the benefits offered and tailor the plan to meet their needs. This is one area where we are seeing clients being more innovative.”

Rather than building flexibility into standard plans, hybrid plans are becoming more popular due to the variance in multi-generational needs, says Crowder.

He points out that healthcare spending accounts (HSAs) are gaining popularity.

“They provide for more flexibility and result in greater ownership of the account because the employees are deciding how they are spending the available dollars in their HSA. Susan Bird, president of the McAteer Group, says that some organizations are going entirely to HSAs. “These came from the flex models and are in part an answer to the needs of the multi-generational workforce. When we survey plan members on what is important, those that are 45 and older often say life insurance and

disability, whereas 20-year-olds say vision care and dental. So there has to be some attention paid to this when designing the plan Susan Bird, president of the – especially when McAteer Group looking at issues of recruitment and retention. And benefits truly are a strong determiner when people are deciding between companies.”

A strong argument for HSAs, says Cristiano, is that they tend to fix the cost for the employer, which can be important.

The focus, he says, is really on how to deliver the same program, more or less, without increased costs – and HSAs can do that.”

Collaboration is key In looking ahead, with the combination of rising costs and the increasing complexity of benefit plans, particularly in response to the multi-generational workforce, as

well as the need to be well positioned for the optimal recruitment and retention of top talent, there is a strong need for collaborative focus and effort.

There is a positive shift toward HR, finance, labour relations, disability, health, workers’ safety and insurance, and management all coming together at the table to share information, and to ensure their priorities are aligned in managing costs and designing effective programs, says Travis. “Getting finance into the conversation early is a key factor in successfully managing costs. That way finance has a good understanding of what is driving costs today and what will drive costs tomorrow. They can then partner with HR to align on what needs to be done differently, what needs to be anticipated, and where an investment in improving employee health can generate savings tomorrow.”

In the next issue of Canadian Treasurer, we will look at wellness programs, employee assistance programs, and the postretirement benefits space.

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Your team

Five Ways To Inspire Innovation Making creativity a collaborative effort can truly inspire new ideas and lead to an improved bottom line

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avvy businesses are always looking for ways to inspire innovation at work. Good leaders know that success comes from unconventional thinking and visionary ideas. And creativity is not just for computer companies, artists, or ad agencies. In accounting and finance jobs, novel approaches can streamline operations and improve the bottom line. What’s more, when employees feel that management listens to their ideas and implements their plans, morale improves and retention rates go up.

How can you inspire innovation at work in your team? Here are five ways.

1. Revamp the corporate culture In a recent Robert Half survey, more than a third (35 per cent) of interviewed CFOs said a lack of new ideas is the greatest hindrance to innovation in their organizations. This response ranked first – higher than dealing with bureaucracy (24 per cent) and being bogged down by daily tasks (20 per cent).

You can start to turn things around by holding regular brainstorming sessions to generate fresh ideas, but that’s only one part of the solution. You also have to act on those ideas while they’re hot and the team’s energy level is high. The shorter the lag time between proposal and action, the more your staff is encouraged to think big.

The third leg of inspiring creativity at work is to not punish failure. No plan works 100 per cent of the time. When you dress down, demote, or fire someone for a fizzled plan that management approved and implemented, you’re sending the message that employees are safer keeping their heads down, mouths closed, and ideas to themselves.

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2. Emphasize collaboration There’s more than just power in numbers; there is also innovation. That’s why crowdsourcing has taken off as one of the biggest trends of the year, if not the past decade, according to two separate reports from Accenture and Deloitte. And the wisdom of the crowd is not just for writing online encyclopedia entries or finding the best pizza parlors. It’s also starting to have an impact on governments and large corporations, according to the two consulting firms.

Team brainstorming is certainly one way to crowdsource, but don’t stop there.

Open it up to the entire company. Good ideas can come from any employee, and those who aren’t engaged in accounting can often see problems from a different perspective. To truly encourage innovation at work, make idea generation a collaborative process. Instead of dropping suggestions in a locked box, put up a large whiteboard or bulletin board in a public place, and encourage all staff to contribute ideas and build on the ideas of others.

3. Remove yourself No matter how you view yourself and your relationship with your team, you’re still the boss, and your direct reports may be hesitant to speak up around management. By taking a more peripheral position during brainstorming sessions, you may get more interesting and diverse suggestions. In practice, this may mean taking on the role of a facilitator, encourager or note taker rather than full participant.

work, so take the lead and model what a proper work-life balance looks like. Some suggestions: ◉◉ Leave the office at a decent hour, and don’t expect staff to stay late or work on weekends unless a big deadline looms. ◉◉ Don’t make a habit of sending or responding to late-night emails. ◉◉ Use your vacation days instead of rolling them over or losing them. ◉◉ Take weeklong holidays instead of just a series of three-day weekends, which may not be enough to recharge your mental batteries.

5. Avoid red-tape rash The same survey mentioned above found bureaucracy to be the second-greatest inhibitor of innovation at work. It’s dispiriting for any team to conceive and lovingly craft a brilliant idea, only to have upper management shoot it down. As their manager, you can help by identifying any potential land mines early on so you and your team can work around them. Also be your employees’ greatest advocate. If you believe in an idea, take it upon yourself to push it through and make it happen.

Innovation at work is like a seed.

With the right environment and proper nurturing, it can grow, thrive and give rise to more great ideas. Otherwise the seedling will soon wither and die. Be the gardener of creativity in your department.

This article is provided courtesy of Robert Half Canada, parent company of Accountemps, Robert Half Finance & Accounting and Robert Half Management Resources. Robert Half is the world’s first and largest specialized staffing firm placing accounting and finance professionals on a

4. Be a role model

temporary, full-time and project basis. Follow Robert

Regular time off does wonders for boosting productivity and creativity at

Half Management Resources at http://www.twitter. com/RobertHalf_CAN for workplace news.

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