Meet our Experts – Interview Olivier Werlingshoff

23-06-2020 | Olivier Werlingshoff | treasuryXL

Our Expert Olivier Werlingshoff specializes in the following fields:

His focus is to help the business improve their working capital and cash management processes to release trapped cash, to reduce costs and to be “in control”. Get to know him better:

We asked him 9 questions, let’s go!

1. How did your Treasury journey start?

After working at banks as cash management consultant for several years I was asked to set up a treasury department at a corporate.  The company was a combination of retail, real estate and development and active in the whole of Europe. Besides the set up of a new department they also wanted to optimize different working capital processes and increase the cash awareness. Coming from banks this was a total different environment. Instead of telling companies how to optimize their working capital, I had to do it myself together with different departments. My sales experience helped me to increase the internal cash awareness and to promote optimization of working capital processes.

2. What do you like about working in Treasury?

Treasury is the oil in organizations where all cash related departments comes together. By optimizing those processes you can get a grip on your cash, decrease risks and release trapped cash.

3. What is your Treasury Expertise?

Operational cash management, liquidity forecast (direct- indirect), risk management, (international) bank account structure,  cash pooling, working capital optimization.

4. Do you have examples of risk mitigation, creation of opportunities and/or cost savings?

Yes, a lot of cost savings examples and also release of trapped cash. Decrease bank transfer pricing, introduction of new payment methods to increase the turnover, implementation of cash pools and optimize working capital processes to release trapped cash to mention a few.

5. What has been your best experience in your treasury career until today?

By showing the benefits of treasury to colleagues by increasing the cash awareness. By doing so, new ideas comes out of the organizations itself and are more easy to implement.

6. What has been your biggest challenge in treasury?

The implementation of a new payment system in a complex organization. You have to focus on stakeholder management and get the operational department behind you with support of the board members.

7. What’s the most important lesson that you’ve learned as a treasurer?

Treasury is a supporting function. You have to help other departments and the CFO to achieve their targets.

8. The coronavirus is undoubtedly an unprecedented crisis. In general, can you elaborate on the impact this virus has on treasury from your perspective?

In a lot of sectors the sales dropped due to the Corona lock-down. Companies need to have a clear view on their cash and be able to pay their invoices on time. Forecasting is more than ever very important and key to be able to forecast funding needs on time.

9. What is your best advice for businesses without a Treasurer?

Not all companies need a dedicated treasurer. Controllers need to have more focus on cash related items and risks (liquidity, FX, Interest and audit). Furthermore it will be good for controllers to focus more on forecasts instead of the reporting of past activities.

 

 

Olivier Werlingshoff

Owner at WERFIAD | Working Capital | Cash Management |

 

 

 

 


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Meet our Experts – Interview Michael Ringeling

16-06-2020 | Michael Ringeling | treasuryXL

Meet our Expert Micheal Ringeling, an experienced Treasurer with a unique combination of corporate treasury, corporate control and banking expertise. A solid base in finance (Stork, TenneT) and banking (ABN AMRO Bank) contributed to his specialisation in treasury. Being hands on, trustworthy and creative with a can-do mentality, Michael worked as independent interim treasurer in the past nine years for various companies like TNT, Vion, TomTom and Unit4.

Knowing all the ins and outs in the world of treasury, he will hit the ground running and provide efficient and effective solutions on every operational and strategic level in the following areas:

Treasury and Cash Management

  • Cross border cross currency cash pooling, efficient banking infrastructure
  • Finance agreements
  • Intercompany loans, in house bank and intercompany netting
  • Interest rate and foreign exchange (FX) risk management and deal execution (hedging)
  • Treasury policies
  • Cash flow forecasting
  • Establish an optimal relationship between organisation and financial institutions

Treasury Control

  • IFRS, financial instruments and disclosures in the annual report
  • Alignment between Treasury and Control.

We asked him 11 questions, let’s go!

1. How did your treasury journey start?

I started my career in controlling and worked as a corporate controller for the national high voltage grid operator in the Netherlands (TenneT) when the finance director asked me if I would be interested in arranging a bridge loan facility for the acquisition of a company. The answer was obviously yes and that is how my treasury journey started.

2. What do you like about working in Treasury?

The interaction with various people in the business, managing liquidity and funding, finding smart solutions to optimise payment processes, deal with foreign exchange risks. In short, all different aspects of treasury that contribute to the company’s success.  

3. What is your Treasury Expertise?

I am an experienced treasurer with a unique combination of corporate treasury, corporate control and banking expertise.
Finance agreements, Liquidity management, Cash pooling, Efficient banking infrastructure, Intercompany loans, In house bank and intercompany netting, Interest rate and FX risk management, Deal execution, Treasury policies, Cash flow forecasting, IFRS, Financial instruments and disclosures in the annual report and establishing an optimal relationship between organisation and financial institutions are the core of my expertise.

4. Do you have examples of risk mitigation, creation of opportunities and/or cost savings?

For multiple companies, I have advised and executed numerous FX, interest rate and commodity hedges, mitigating the underlying business risks. I have arranged finance agreements enabling companies to pursue new business growth opportunities and implemented cash pools, optimising the cash positions and reducing finance costs.

5. What has been your best experience in your treasury career until today?

I would say the entire journey is one big experience.

6. What has been your biggest challenge in treasury?

Being an interim treasurer, every assignment has its challenges that need 100% attention. The biggest one was a time critical refinance to safeguard business continuity.

7. What’s the most important lesson that you’ve learned as a treasurer?

As a treasurer you are responsible for safeguarding one of the most valuable assets: cash. So be trustworthy at all times, communicate and make sure to always have access to sufficient liquidity.

8. How have you seen the role of Corporate Treasury evolve over the years?

Yes and no. The most important role of a treasurer is safeguarding liquidity. That has not changed much since the concept of money was invented in ancient history. What did change is that we no longer need well armored knights to physically protect the cash. Today’s defense mechanisms are more and more about automation, digital security and regulatory frameworks.

9. The coronavirus is undoubtedly an unprecedented crisis. In general, can you elaborate on the impact this virus has on treasury from your perspective?

Disruptive events like the COViD-19 crisis increase focus on business continuity. Protect your people and your liquidity! Many companies obtained additional (stand-by) credit facilities to make sure sufficient liquidity is available should the business be negatively impacted by the COVID-19 crisis. Cash is king again.

10. What developments do you expect in corporate treasury in the near and further future?

Increasing importance of automation, digitalisation and regulatory frameworks to safely operate corporate treasuries.

11. What is your best advice for businesses without a Treasurer?

Contact treasuryXL and call me.
Most small and mid-size companies will not have a full-time treasurer on board. That does not mean they don’t have treasury risks. Think about finance agreements and their terms and conditions, interest rate risk, foreign exchange risk, payment processes, electronic banking, bank guarantees and bank relationships. Some of these can be efficiently managed by the controller or finance director. However, some treasury topics can be handled better by a specialist. Ad interim, part-time, on a project basis or in an advisory role to support the finance director. Interested in how I can support? Please contact me, I’m just one phone call or email away.

 

 

 

Michael Ringeling

Treasurer

 

 

 


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My ethics are better than yours

| 12-06-2020 | treasuryXL | Pieter de Kiewit

In these corona times I work just as hard as before. Regretfully we have fewer assignments (Treasurer Search), but as a team, we prepare for better times. Especially not traveling results in extra time in which I am finally able to structurally read Het Financieele Dagblad (the Dutch Financial Times) and contemplate what is happening and what people have to say. Inspired by a column of Matthijs Bouman I connected a number of articles. Bouman writes about “foute bedrijven” (wrong companies). People condemn Booking.com for asking for government support because they made a huge profit and bought their own shares and still ask for support. So, Bouman states, we should punish their employees. The same way we should punish companies that would not survive anyways, supermarkets that sell wrong products or aviation companies that pollute the air. I like the way he shows us how arbitrary our thinking is.

So what do you think about the following?

  • Flow Traders had an excellent quarter because they thrive on market volatility;
  • FX traders of Citibank, BoA and Goldman recently made huge profits.

Is their business model legit? Or are they the proverbial lawyers that chase the ambulance? At the end of the day I make a living finding staff for companies. Also death, sickness and crisis results in searches for new treasurers and I do not lose sleep over picking up these assignments. Demand and supply, simple as that.

We constantly see how the banking industry struggles with what is good and what is right. A string of scandals over the last years led to new legislation and a lot of work in solving derivatives contracts between banks and their clients (UHK). A new support industry rose and fell. Currently a new one is being built to fight money laundering and other dubious transactions, that will be a KYC industry. Bankers already knew what is wrong and ignored the rules so new control mechanisms had to be build. The one thing I learn from this is that external legislation is not a way to improve morality of bankers. Is the solution hidden in their reward system or their upbringing?

For the opponents of tax evasion, a topic that is in the heart of business ethics, there is good news. The number of entities in The Netherlands that are founded for this purpose is quickly getting smaller. This after extensive public discussion and potential policy changes. I like to think that the powers that be started thinking about the purpose of their companies and these entities, and decided that there are better ways. And not solely money driven, but also because it is the better way. I prefer being hopeful & positive over being cynical.

Listening skills and wanting to compete in the championship of ethics are rarely combined in one person. Being sure and loud regretfully often are. I will make a reminder to follow up on this blog in five years or so.

 

 

Pieter de Kiewit

Owner at Treasurer Search

Meet our Experts – Interview Aastha Tomar

09-06-2020 | Aastha Tomar | treasuryXL

Aastha Tomar has joined treasuryXL at the beginning of 2020 as expert and already published 3 great blogs:

Aastha has been responsible for setting up of Treasury teams for her organizations from scratch and has been a founder member of FX Treasury in a Bank. Being in front office role throughout her career has made her indispensable for her organizations due to her business development and stakeholder management skills. She has single handed led transactions to the tune of USD 5Bn.
Aastha is an Electrical Engineer and master’s in finance, both from premier institutes in India. Her inquisitiveness to learn something new and accept challenging work is responsible for her stints in Software development, Investment banking, Banking and Entrepreneurship.
In her free time Aastha loves to write blogs/ articles on various topic ranging from leadership, life experiences and sustainability, her latest love.

 

We asked her 9 questions, let’s go!

1. How did your treasury journey start?

My first exposure to how Treasury actually works was quite early during my internship in my MBA. I was lucky enough to do internship in one of India’s largest Corporate Treasury. It was then I decided that I want to make my career in Treasury. Therefore my career choices after MBA were always made while keeping in mind that I have to move towards being a corporate Treasurer.

2. What do you like about working in Treasury?

Treasury is a very fascinating department, there doesn’t goes even a single day where you don’t learn something new. Every day brings a new aspect to the profile. You have to be on your toes always to be up the curve which is the best part. You are always on top of what is happening in the world and how it is impacting the business. You can always make a positive impact on organisation’s bottom line by being always ready with action of any kind of impact.

3. What is your Treasury Expertise?

I have worked in Corporate finance, fixed income financing through loans and capital markets and have worked in FX Treasury which included risk management, interest rate risk management and FX risk management.

4. Do you have examples of risk mitigation, creation of opportunities and/or cost savings?

I was responsible for ISDA negotiations where we always made sure that default covenants for the counter party are strict and always made sure that the covenants are adhered to and did frequent monitoring for the same. This always kept us informed and saved us from any shocks from covenants default which in turn would have led to default in the derivatives done with the counter party.

5. What has been your best experience in your treasury career until today?

I was the founder member of Treasury in my previous organisation. I joined the organisation before the bank was formed. The initial few months were very demanding as it involved infrastructure set up, documentation, informing corporations about our bank.  After much hard work and after few months I cracked one of the biggest deal for that year for my bank. It was such a nice experience where all your efforts which you put in finally bore fruit.

6. What’s the most important lesson that you’ve learned as a treasurer?

Time is for essence for a Treasurer, we have to take actions swiftly and seamlessly. Each day is different and bring new challenges therefore a Treasurer should be ready to face them  . Always think out of the box- what new products can be used, how to make most use of technology, how make a team which is self motivated and work towards a common goal.

7. The coronavirus is undoubtedly an unprecedented crisis. In general, can you elaborate on the impact this virus has on treasury from your perspective?

The corporations with strong risk management approach, with clear understanding potential risk on business through risk evaluation tools, such as sensitivity analysis, shall be the best place during the current scenario. They would have their foreign currency exposure hedged to an optimum limit, sufficient cash to work with and therefore, during these times, would be able to direct their efforts to improve operational efficiency, carry out M&A evaluations  rather than trying to learn swimming after being thrown in the waters. Business Continuity Management came into play and the organisations which has BSM only in theory in their policy books took lot of time to adjust to the new normal. Thus, COVID 19 brings additional responsibility of treasury towards ensuring corporations not only survive but thrive during the new normal.

8. What developments do you expect in corporate treasury in the near and further future?

One thing has been proved that there is no running away from the Technology. You may be in finance field but you got to know the technology as well. The major development which now will take place will be to reduce as much human intervention as possible in the working of Treasury which will make sure that if at all any such scenario is faced in future work can go on without much impact.

9. How have you seen the role of Corporate Treasury evolve over the years?

I answered this question in my article “The Missing Part of a Treasury Job Description“:

” Gone are the days when a Treasurer was just involved in risk management and ensuring liquidity. In current scenario of news going viral each action creates a ripple effect. As famous Jane Goodall once said : “You cannot get through a single day without having an impact on the world around you. What you do makes a difference, and you have to decide what kind of difference you want to make”. A Treasurer has to take an active role in policy making and lead her organization towards sustainability and protecting consumers  ”

 

Aastha Tomar

FX & Derivatives | Debt Capital Markets | MBA Finance |
Electrical Engineer | Sustainability

 

 



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Meet our Experts – Interview Wim Kok

02-06-2020 | Wim Kok | treasuryXL

This week you will meet Wim Kok, a Trade Finance Specialist with decades of experience.

Wim started his financial advisory company recently after a long career in the banking industry (> 40 years). During his banking career his interest and focus was always connected to the commodity & trade finance industry both in sales and product innovation. Activities in various senior roles, including relationship management, head of department, change management and start up business (internationally).

Nowadays Wim is involved as independent advisory in supply chain management and digitalisation of the logistic industry. Building bridges, simplifying (trade) finance and logistics. Closing the gap between procurement and finance (treasury).

We asked him 11 questions, let’s go!

1. How did your treasury journey start?

I started working in Treasury (assistant treasurer) during the late 70 ties i.e. my 1st job was with Continental Grain  a New York based grain trading company with a strong foothold in Europe.

The Rotterdam Harbour, at that time, was the physical entry point for US grain coming to Europe.

I worked with 3 merchant banks (Slavenburg, Bank Mees & Hope & Albert de Bary) pooling and netting bank accounts (manually) to optimise currency and debit/credit interest positions for the Rotterdam company.

2.  What do you like about working in Treasury?

I see the treasury operations as a pivotal function within an organisation meaning that you have to know the cash generating mechanics of the company inside out. Seamless use and coordination of cash contributes to a seamless treasury function and an added value for the company.

3,  What is your Treasury Expertise?

I started my career in the late 70ties as assistant treasurer with an American global grain trading company in the Netherlands – My main task was to streamline and optimise the money flows in 8 different main currencies between 3 banks. This was the early start of the cash management development. Later on I moved into the trade and commodity structured finance direction.

4.  Do you have examples of risk mitigation, creation of opportunities and/or cost savings?

Very simple netting and pooling arrangements (interest risks). Discounting receivables, Bills of Exchange, Documentary L/C’s or insurance arrangements, making use of swaps and FX derivatives (currency risks) etc. on the payable side – supplier finance structures making use of the rating of the corporates.

5.  What has been your best experience in your treasury career until today?

That’s difficult to mention as my treasurer career was rather short, but I have seen the position and function grow over the years bridging the silo’s within a company (especially within the bigger corporates).

6.  What has been your biggest challenge in treasury?

At my time with Continental Grain is was the perception of the people. Hugh silo’s between booking /audit and sales / marketing we started to change the perception and managed to bridge the different worlds of finance and commerce by showing that a good treasury function earned additional income.

7.  What’s the most important lesson that you’ve learned as a treasurer?

My most important lesson learnt (and that seems a bit odd having worked within banks for almost 40 years) is: as a larger corporate always make sure you keep your independence in other words select more providers to support you.

8.  How have you seen the role of Corporate Treasury evolve over the years?

Very much in such way that in the bigger Corporates you see nowadays a lot of inhouse banks and for mid & large corporates a treasury function is more or less the standard.

9.  The coronavirus is undoubtedly an unprecedented crisis. In general, can you elaborate on the impact this virus has on treasury from your perspective?

In this respect I would like to refer to the article I recently wrote for TreasuryXL: ”How to simplify procurement and finance in the supply chain” – I think a lot of companies will have to reconsider their current (disrupted) supply chains and financial systems. Companies going into 2021 will have to adopt to the fast changing pace in any discipline or a combination be it digitalisation, IoT, Blockchain, AI, robotics or the Cloud

10.  What developments do you expect in corporate treasury in the near and further future?

Definitely transparency, efficiency and speed will improve dramatically due to interconnectivity of systems and transactions, data protection (and use) and cybersecurity will become a more important factor.

11.  What is your best advice for businesses without a Treasurer?

Try one because a good treasurer will always earn (at least) himself back for the company.

 

Wim Kok

International Business Consultant

Trade Finance Specialist

 

 

 


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Are we entering an unprecedented economic situation?

| 28-02-2020 | treasuryXL | Pieter de Kiewit

One of my favourite professional pastimes as a corporate treasury recruiter is digesting treasury technical content and bridging it to the “rest of the world”. Or see what is happening in the global news and projecting it on the field of corporate treasury.

Currently there is a constant flow of news about too much money in the market. One would say this is a good thing. Let me give you some positive and negative examples of the effects:

But also:

  • Pension funds are not able to invest in a future-proof way;
  • We have to pay for our savings (if you have a lot);
  • Hedge fund managers use external funding, instead of the funding of their investors, to safeguard their bonuses.

We enter an unprecedented economic situation only encountered by Japan and there is no obvious path to take. I will not try to clarify macro economics, it is not my field of expertise, but do know that changing demographics contribute. Us getting older and people retiring rich, most likely richer than their kids, has to do with this. What do I see as effects on corporate treasury? Let’s focus on three main tasks of a corporate treasurer.

In cash & liquidity management there are many exciting initiatives in the improvement of cash flow forecasting. Payments can technically be done smoother, safer and quicker. Cash visibility can be increased and liquidity is centralized. Most corporate treasurers want to implement these new solutions. As liquidity is high, many CFOs do not feel the urgency to invest in these initiatives. Doing nothing will not result in higher cost, so what is the ROI?

In risk & investment management the obvious focus is on interest developments. The general opinion is that interest will be low for a very long time. Getting long term funding for (almost) 0% is doable. So why bother matching long and short term funding options? This results in a situation that the use of hedging instruments is less important. Investing excess cash or helping the company pension fund with their strategy currently requires analysis and choices.

Corporate Finance has the fun task of optimizing the balance sheet and lowering funding costs to an extreme. I recently met the group treasurer of a real estate company who is able to make money attract funding for his company! The more challenging task of corporate finance is participation in business development and M&A. The willingness of entrepreneurs, shareholders and boards to invest in adventurous ways is high. The corporate treasurer has to hold on to his role of risk manager and hit the brake. This does often not increase his popularity…

A lot more can be said about the topic, that will be for other blogs. Back to a non-corporate mindset and not pretending to be a socialist, I hope all this money will be used to improve the world: better the environment, lowering the income gaps, makes us all happier. The real philosophical approach I leave to Notorious B.I.G.

Enjoy your money,

 

 

Pieter de Kiewit

Owner at Treasurer Search

Corporate Governance and Treasury | Embrace the Corporate Treasury Policy

| 18-02-2020 | François de Witte | treasuryXL |


Corporate Governance

Corporate Governance is a mechanism through which boards and directors can direct, monitor and supervise the conduct and operation of the corporation and its management in a way that ensures appropriate levels of authority, accountability, stewardship, leadership, direction and control.

The ultimate responsibility for Treasury management within an organization lies with the board of directors. Due to the practicalities and technical aspects involved in corporate treasury, the board typically delegates the daily management of risk to responsible individuals in each department. In the case of financial risks, many of these are delegated to the treasurer.

Whilst, due to its specific activities, the corporate treasurer needs to take a lot of actions and decisions independently, it is important that he does this within a framework and Governance. Quite a lot of corporates have formalized this in a “Corporate Treasury Policy”.

Corporate Treasury Policy

The Corporate Treasury Policy is the mechanisms by which the board, or risk management committee (RMC), can delegate financial decisions in a controlled manner. This document should be a summary of all the principles approved by the Board or the Financial Committee of the Board as a mandate of the Board to the treasurer (the Treasury Mandate).

The Corporate Treasury Policy is a framework document, which covers the following areas:

Organization of the Treasury Function

In most of the companies, the Corporate Treasury Reports to the CFO. The CFO is usually himself a Member of the Executive Committee, which itself reports directly to the Board of Directors. (Treasurer – CFO – Treasury Committee – Audit Committee – Board):

A policy should set out clearly which decisions are delegated to the treasurer and when the treasurer should refer a decision back to the board or other person within the organization. Within several corporate, the Board of Directors have delegated the decision process to dedicated committee, like the Risk Committee, and the Liquidity and Funding Committee.

Treasury Control Framework (including the Code of Conduct)

Procedures and controls to manage the risk should be put in place to provide an overall framework for decision-making by the treasury team.

Ideally, this should also include a code of conduct. The Corporate Treasurer should act as a Corporate Custodian. In other words, he is Protector of the company’s assets, and should act according to a strict Code of Conduct and Ethics. There exist examples of codes developed by professional organizations such as IGTA, ATEB, AFTE, ACT and ATEL.

Liquidity and funding

The board should be informed about funding possibilities to put currency, maturity, cost and equity/debt character into a wider context. The board should decide on the strategy but can delegate fund raising decisions and actions to treasury. However, I recommend that Treasury asks the final board approval for strategic decisions (e.g. major syndicated loans, bond issues, etc.).

The board should have an overall view on the liquidity risk of the company. The Board should also define the financial policy, covering the gearing and maturity issues, fixed and variable interest rate obligations, dividend policy and covenants.

Banking Relationship

Banks chosen by the treasurer must be able to meet the needs of the organization, both domestically and internationally. I recommend that the Board approves annually criteria for selecting the banks with whom it will work.

Risk Management

The Treasurer must identify the various risks to which the company is exposed, quantify the impact, and should inform the Board thereof. He should estimate the size of these exposure risks and their impact on the he overall operations and financial performance of the company, and make recommendations in these areas

The board must approve the hedging policy, the company’s foreign exchange, interest rate and commodity risk management policy and its attitude to risk. It should define which part of the risks must be hedged and the hedging horizon. I recommend that the Treasurer submits at regular intervals to the Board the list of authorized instruments, the amount per instrument and their term

Investment Policy – Counterparty Credit Risk

The board should approve the treasury’s Investment policy including the choice of instruments, the list of counterparties used + the maximum amount/counterparty & maturity. It is recommended that the Board provides guidelines and limits per instrument.

It is recommended that the Board approves the guidelines for fixing counterparty limits, and maximum exposure per counterparty.

Authorized instruments and Arrangements – Authorized Approvers

The Treasurer should make sure that the board must understands and approve the strategies and instruments used and sets guidelines for the appropriate limits for their use. These guidelines need to ensure that treasury has not sacrificed long-term flexibility or

survival for short-term gain, especially in view of the volatile financial market’s situation.

Treasury Operational Risk

The treasurer should make the Board aware of the operational risks to which the company is exposed. He should provide recommendations in this area. Furthermore, the treasurer should also submit recommendations to the board on the treasury organization and the ways to reduce the operational risks.

Monitoring

A Corporate Treasury Policy has only sense, if there is a regular follow up and control framework; Hence procedures and controls to manage the risk should be put in place to provide an overall framework for decision-making by the treasury team.

It is also important to provide to the Board a regular update on the way the treasurer complies with the policy. The policy should also be regularly reviewed.

Treasury must alert the board to external changes and internal strategic developments, which may have long-term implications for the organization and make proposals for managing them.

The policy needs also to be reviewed at regular intervals each “Policy” in function of the market and of other internal or external developments. I recommend having treasury on the Board’s agenda on a quarterly basis.

Conclusion

Treasury is not an island in the company. It is closely linked to the corporate governance. Hence it is important to define the right framework.

I recommend to corporates to put in place a treasury policy validated by the Board of Directors and reviewed regularly. It is important to update the Board at regular intervals about strategic topics, such as strategic financing topics and risk management.

The treasurer has also an important educational role, as he must be able to make complex treasury topics understandable for the board members.

Hence there must be a good interaction between the treasurer, the CFO and the Board is key, where the Treasurer is the linking pin.

 

François de Witte
Founder & Senior Consultant at FDW Consult
Managing Director and CFO at SafeTrade Holding S.A.
treasuryXL ambassador

Top 5 most common pain points in Treasury

14-02-2020 | treasuryXL | Michael Ringeling

The purpose of Treasury is to manage a company’s funding, liquidity and to mitigate its financial and other risk. Made up of three sub-disciplines, Treasury’s overall objective is to safeguard the company’s holdings and to follow the long-term strategy set forth by Corporate Finance (and strategy). Cash Management, on the other hand, is primarily focused on operational, short-term, efficiency and process optimisation, whereas Risk Management is oriented towards financial research and operational controls.

Michael Ringeling, corporate treasury expert,  made a top 5 of the most common pain points he encounters in Treasury, including consequences and a solution.

Top 5 of the most common pain points in Treasury

 

  1. Too many bank accounts at too many banks

Consequence:
Complex to manage, poor control, higher risk of fraud, higher costs, more KYC/AML requirements

Solution:
Less bank accounts at fewer banks, all via one or two electronic banking systems or multibank platform to manage payments and cash flows. The result will be more efficient, more secure and more cost-effective payment transactions, reporting and reconciliation into the ERP system.

  1. No reliable cash flow forecast

Consequence:
Poor liquidity management. Insecure about the required short and long term funding and poor management information.

Solution:
A good cash flow forecast, providing adequate insight in the organisation’s short and long term cash flows, will contribute to an efficient funding strategy and lower cost of funds.

  1. FX results, (negatively) impacting the company’s P&L

Consequence:
The company’s financial results are impacted by unforeseen and unknown FX results

Solution:
FX risk management analyses, create a FX policy and perform deal execution (hedging) to control FX results

  1. New Loan Agreement needed – negotiations

Consequence:
Difficulties in assessing if the loan terms and conditions are fair. Risk of overpriced loans and/or unfavorable terms and conditions required by the bank(s).

Solution:
Assist the company when negotiating with the bank(s) to get a fair deal with terms and conditions that will not unnecessary limit the company’s flexibility.

  1. Cash is trapped on too many stand alone bankaccounts around the world

Consequence:
Company cannot effectively use a significant amount of cash, resulting in higher (short term) loans and higher interest costs.

Solution:
Implementation of a cross border cross currency cash pool to centralise the company’s cash balances. As a result the amount of local trapped cash will be reduced and that cash can be used for general corporate purposes. Less short term loans and lower interest costs.

Sounds familiar?

Do you recognize the pain points that we mention above in your business? Or are you experiencing other critical treasury pain points in your business?

In our active network there are several treasury experts who can offer treasury support. They can be hired for specific projects or on a regular basis. Check Rent a Treasurer and let us help you.

 

Michael Ringeling

Corporate Treasurer Expert