A summary of the sessions from day 1:
The changing economic and fiscal landscape in 2020 - a global macroeconomic overview
The highlights:
• The UK perspective:
4/10 businesses had to completely close operations through necessity. Organisations now need to work out how to re-open safely. UK job retention schemes have helped to safeguard 6m jobs and financial aid has included bounce back loans, medium-sized business loans and CCFF. However, there are concerns over what level of debt businesses are willing to take (especially at mid-market and SME level).
• The Asia perspective:
Hong Kong, Taiwan, Vietnam and South Korea are good examples of containment and testing of the virus come. Their populations seem confident with the outcome as restrictions are eased. On the other hand, there is confusion around inconsistent messaging in other countries which has meant that the population is unwilling to return to normal.
• The Middle East perspective:
Challenges remain within the region, especially as most businesses are outward-facing, especially with hydrocarbons but also the diversification agenda. The financial outlook is not universal within the GCC, with some countries needing to take action, as can be seen from the recent Saudi austerity programme.
Surviving uncertainty: Key issues faced by treasurers
The highlights:
• Key issues were discussed around liquidity risk and the need for contingency planning to investigate a wide range of scenarios - these will be tough times for inexperienced teams.
• Companies need to be sensitive to the use of liquidity and whether to draw down on RCFs - "just because you can doesn’t mean you should".
• Understand AR concerns and the need for effective working capital management - This opens up the potential to help SMEs within the supply chain with financial support – payment terms, etc.
• Things to focus on for the future: Forecast and performance; upcoming maturity of loans; working capital; how to bring people back to the office; cash repatriation - This is an opportunity for treasurers to shape the new normal with the need for self-reflection.
• "Any treasurer who hasn't had a chance to speak to CEO or CFO during this time has missed a chance to show how important Treasury is during times like this" - Matthew Hurn - Mubadala
Stormy seas: Corporate risk management
The highlights:
• OECD impact of COVID-19 on G7: 25% of normal activities are not able to take place; a huge amount of financial stimuli has been offered - G7 fiscal packages range up to 30% of GDP, providing low stable interest rates.
• Policies will look to limit financial scarring and get as close to pre-crisis as quickly as possible. A ‘V’ shaped recovery seems optimistic and uneven global recovery could affect supply chains.
• Corporate action plan: understand exposure and potential outcomes; review hedging strategies and the potential for pre-hedging; build flexibility and adaptability, if possible; develop a relationship with banking groups - they will be looking for ways to assist.
A liquidity action plan for treasurers
The highlights:
• There has been a shift in what the C Suite is looking for from treasurers, including current exposure and liquidity, tools for survival and recovery.
• When it comes to liquidity, there is a desire for better transparency and visibility of cash flow; a need for covenant testing and headroom from covenants
• Survival Tools: work with suppliers linked to core areas; have a softer approach to customer management re payments; look to loosen leverage covenants - the need for clear cash projections to demonstrate effective planning.
• Recovery tools: treasurers need to be more proactive where they'll have the opportunity to expand the breadth of the landscape they can operate in.
• Immediate/near term time horizon: 3-9 months
FRINGE TALK: A silver lining for Fintechs (Part I) - Commercial paper negotiation, issuance and resell
The highlights:
• Introducing Onbrane, a user-friendly multi-currency OTC platform available to three different users: issuers, dealers/brokers and investors.
• Issuers can express need via yield curve, specific maturity and choose intermediaries to deal with.
• Intermediaries can then negotiate, make an offer (with some variation).
• The issuer can then: refuse, negotiate or accept, once accept double validation takes place
FRINGE TALK: A silver lining for Fintechs (Part II) - Cash forecasting
The highlights:
• Introducing TIP, a web-based solution for cash visibility/cash flow forecasting (and others) providing smart digital solutions. Easy to create fast clear reports.
• The core approach is using existing data as much as possible via automatic connectors to external data sources e.g. TMS, 1 or more ERP systems, trading platforms, market data partners. TIPCO serves130+ MNC.
• What makes or breaks a timely cash flow forecast? The solution needs to address the basis: i.e. address a flexible forecast horizon; flexible time intervals; flexible .structure/categories; different forecast views e.g. for different business units/divisions; integrated with cash position and credit facilities; effortless forecast by FX.
• Businesses need to make efficient use of data source: for short-term - automated connectors to AP/AR ledgers; for medium-term - with sales and purchase orders; and for longer-term: connect with P&L forecasts and budgets.
• Smart assistants: plausibility checks, making use of mapping and distribution rules, historical distributions; also predictive analysis; flexible cash flow simulation.
International Treasury Week took place online on 11-14 May. Current delegates can access recordings from the event until 11 June.
Details of our next online event - The Festival of Treasury Transformation, 13-16 July, will be announced soon.
