Security, liquidity and technology were among the key themes to emerge at the ACT Cash Management Conference 2024, as the audience of treasury professionals listened to a line-up of industry experts outlining challenges and solutions.
Ongoing economic and geopolitical turbulence have been a catalyst for treasurers to reconsider their approaches to cash management and cash forecasting.
Reflecting on his organisation’s recent experiences, Mark Tebbett, Head of Treasury, Finance, at travel firm TUI UK & Ireland, described how multiple disruptive events have focused its treasury function, which has heavy exposure to FX fluctuations. “The challenge is the robustness of forecasts, validating cash-flow forecasts, and getting the businesses to understand this and how we look at the data. We have made progress since the pandemic brought that into focus. Getting an integrated cash-flow model is essential.”
He continued: “It’s just being able to be nimble… and have people who know how things work. And, although it’s something of a cliché, expect the unexpected.”
Utilising the experience and knowledge of experts is key to finding the optimum solutions to improve cash management systems in a cost-effective way. The conference highlighted the wealth and breadth of expertise available, whether enhancing existing systems or implementing new systems from scratch.
Andrew Hutchinson, Head of Treasury at Diploma, a group that’s grown rapidly through acquisitions, said: “The ability to operate in an ever-growing group means technology is going to be key. But even before that is implemented, it is important to define processes and then layer technology over the top of that.”
While there is much discussion about AI and machine-learning technology, the reality for most treasurers is likely to be more about using proven tools to enhance processes. The development of APIs will often allow capabilities to be bolted onto existing systems.
However, Tebbett said: “There is no substitute for knowledge about your business. Systems need data and this has to be reliable to indicate what is likely to come in the future. Getting data from people who understand the business is key, which can then be analysed for relevant forecasts.”
ESG and sustainability is continuing to play an important role in cash management, yet it is still to be fully reflected in investment management. Cash management policy alignment is presenting challenges for fund managers seeking to place surplus cash, raising questions around prioritising ESG-compliant financial assets/instruments, particularly in short-term markets.
Ido Eisenberg, Head of Investment Management and Wealth ESG Risk Advisory Team at Deloitte, characterised the cash management industry as still a nascent area, where there is inconsistency on ethical investment. A lot of impetus must come from regulators to encourage a minimum threshold for sustainable investment, he suggested.
Craig Inches, Head of Rates and Cash at Royal London Asset Management, explained the contrast between long-term investment in bonds with approaches to shorter-term cash investment that prioritised security and liquidity for clients’ assets over longer-term returns. “It’s about trying to construct a portfolio in such a way that you can have a high quantity of good banks and to lower risk exposure to poorer ones.” Managers can provide influence over institutions to improve ESG practices and sustainability credentials. However, treasurers also needed to provide a voice to drive demand.
The challenges of cash management in the pre- and post-acquisition phase were discussed by Bente Salt, Group Treasurer at Rentokil Initial. She explained how policies and procedures of companies coming together must be reviewed. Salt discussed using deal-contingent hedges to de-risk and facilitate deals, and reassessing cash needs at close of acquisition to ensure liquidity for the acquired company, as well as working closely with banks to ensure funds for the transaction were in place, on time. “It’s vital to have a check-list of everything that needs to be done to ensure nothing is held up and following up if there are any issues,” she said.
The themes of resilience, security and technology converged again in an update on continuing and emerging threats around online fraud and cybersecurity. Emma Wilkinson, Fraud Risk Director for Corporate Banking at Barclays, outlined what treasurers should be doing to ensure organisations are prepared. “You need to have the right processes and security in place ahead of an event – and keep it updated – to prevent becoming a victim.” Education around threats and robust disaster-recovery planning were vital to protect businesses. And the phone numbers of relationship managers and bank fraud teams need to be kept on speed-dial.
While acknowledging that generative AI would be a future concern, Wilkinson warned against complacency: “Current threats may appear fairly simple in comparison, but as long as they keep working and fraudsters are making money, there is no reason for them to change their approach.”
Technology is also enabling more efficient and cost-effective transactional FX solutions to support global supply chains. Christof Nelischer, Group Treasurer of S4 Capital, described his firm’s approach for an inter-company FX netting system, using a standalone application to deal with a high volume of inter-company transactions happening at a rapid pace. “This has been immensely effective in dealing with FX risk. It is cutting through the gordian knot [of managing FX exposure complexity].”
Independent treasury consultant Simon Jones pointed to trends in banks and fintech firms starting to provide APIs and netting solutions that provide visibility to those transactional FX flows so treasurers can start to see where they are, give control and good giving good pricing, providing opportunities for FX hedging. “There has been a huge amount of advancement in the industry on [APIs] – banks providing transactional FX APIs,” Jones said. “This allows very small FX transactions to be made at very competitive prices.”
Barclays Bank PLC is registered in England (Company No. 1026167) with its registered office at 1 Churchill Place, London E14 5HP. Barclays Bank PLC is authorised by the Prudential Regulation Authority, and regulated by the Financial Conduct Authority (Financial Services Register No.122702) and the Prudential Regulation Authority. Barclays is a trading name and trade mark of Barclays PLC and its subsidiaries. Find out about the Financial Services Register.