Neil Ainger's exclusive report for Global Finance on the UK Association of Corporate Treasurers' annual conference.
The nexus of technology and cash management dominated the opening day of the Association of Corporate Treasurers (ACT) Conference 2018 in Liverpool, UK, on 15 May against a backdrop of trade wars, debt and wage growth worries, the unwinding of quantitative easing (QE), Brexit, and rising US interest rates.
“Technology is very important to us,” said Graham Taylor, Assistant Treasurer at Vodafone, to Global Finance at the ACT Conference, attended by 1,100 corporate treasurers from across the UK and Europe. “I’m very interested in open banking and application program interfaces (APIs) at the moment, for instance, and what new services, cash monitoring and reporting tools it might deliver to us in the future.”
“The use of financial technology (FinTech) start-up tools in supply chain finance (SCF) and other areas is also of interest, particularly with the second EU Payment Services Directive (PSD2) starting this year,” added Taylor, during a mid-day panel session at the conference that discussed future-proofing corporate’s cash management operations.
PSD2 encourages open APIs and new entrants to the European payment provision marketplace. Many other countries, including the US, are monitoring the regulation. “It could mean possibly getting rid of interchange fees. That could be massive for us and all corporates,” said Taylor.
Catherine Porter, EMEA Treasury Director at CBRE, stressed the need to communicate and collaborate with colleagues to get buy-in and also to run effective cash centralisation and efficiency projects, noting: “Technology is key in the operation of shared service centres (SSCs).” She and Taylor outlined the respective cash and liquidity projects both businesses are undertaking at the moment during the ACT Conference session and their utilisation of technology.
Fellow panelist Nick Haslehurst, Chief Financial Officer (CFO) at Moneycorp, agreed that getting buy-in is important to greenlight projects, explaining that it was necessary “to expose the hidden cost of treasury” to colleagues, especially if cash hasn’t been centralised yet. He brought a service provider’s view to the debate, as Moneycorp mainly caters for small to medium-sized enterprises (SMEs) that want to improve their treasury operations.
“SMEs cannot afford or scale up to SSCs. But they still want to pool money efficiently or hedge foreign exchange (FX) risk as effectively as they can, which is where third parties come in,” Haslehurst explained to Global Finance after the session.
There are many and multiplying tactics that you can use to better your cash management, such as pooling and payment factories (PFs), better use of technology or just better tracking. “The journey never ends and there are always improvements to be made,” said Vodafone’s Taylor in conversation with Global Finance after the ACT Conference session ended.
According to Matt Sielecki, Director Digital Product Development, Deutsche Bank, speaking during the panel debate, “education is important too.” Putting technology on top of a process can help, but you need to align people and processes as well. “Some procedures may be made redundant by new technology if you can reimagine them,” thereby saving the business money, he added.
Macroeconomic conerns were the other major theme of the ACT Conference. The recent warning from the International Monetary Fund (IMF) that global debt levels were too high at $164 trillion, equivalent to 225% of global GDP, struck a chord with attendees and panelists alike. A live poll of the 1,100 atttendees found that one in five audience members agreed that their own companies had too much debt:
- Too much debt: 20.0%.
- Right about of debt: 54.7%.
- Too little debt: 16.5%.
- No debt: 8.8%.
“Fiscal policy needs tightening to reduce debt, but there are risks,” said Michael Sawicki, senior economist, Lloyds Bank, no doubt thinking about Argentina’s recent problems, during a panel debate about the economic risks facing the global economy.
Jim Reid, Global Head of the Fundamental Credit Strategy Group at Deutsche Bank, agreed. “We need a better balance between fiscal and economic policy,” he said, alluding to the ending of QE and the associated debate about when interest rates will rise globally.
Interest rates have already started their upward trajectory in the US. “I expect to see three US rises this year and three in 2019,” said Marilyn Watson, Head of Global Fundamental Fixed Income Strategy, Blackrock, as she outlined what the corporate treasury audience in Liverpool can expect in the years ahead and plan accordingly for their cash management, currency risk and other activities. Among the attendees were senior figures, such as Frances Hinden, VP Treasury Operations, Shell and Joanne Bates, Treasurer at Worldpay, plus the European Group Treasurer at Honda, Kevin Pinnegar.
The panel also agreed that the deflationary pressures that have kept inflation and wages low were likely to come to an end in the near future, as the unique downward pressures of the last deade receeded. Principally, these were:
- China entering the global economy.
- The baby boomer bulge in the Western workforce.
- Technology advances, which have kept costs low.
“The protectionist threat is also a possible threat to investor sentiment in what is a generally good economic picture with growth evident in most markets,” concluded Blackrock’s Watson. She was no doubt thinking of the recent imposition of US steel tariffs and its on-going face-off with China and the sanctions against Russia and now Iran once again and how this might impact the oil price and global trade.