Guardians of the Corporate Cash

by Robin Page, Chief Executive, TMI

“Job number one for the corporate Treasurer is to serve as custodian of the company’s cash.” So says David Robertson of Treasury Strategies in this Guide to US Cash Management, and few would be likely to disagree with him as the teeth of the credit crunch bite deeper and banks whose names just the other day were household words on both sides of the Atlantic are nationalised, broken up or taken over. The Treasurer is on the front line when it comes to keeping the company solvent, and for all the recent expansion of Treasury horizons and a range of new functions enthusiastically embraced, when push comes to shove it is liquidity which must be at the forefront of his mind. This Guide describes some of the coping strategies that American corporates are using.

Robertson, a Partner in the Financial Institutions Practice of Treasury Strategies, sums up what he calls the ‘New Look’ of liquidity management in the U.S. in a succinct phrase: ‘Chastened by Risk, Shaped by Globalization, Enabled by Technology’. His article, based on the findings of Treasury Strategies’ 2008 Global Corporate Treasury Research Program, provides an excellent overview of just how the current market turbulence is affecting Treasurers as the creditworthiness of many commercial banks and brokerages is called into question, often resulting in a major scrutiny of the underlying instruments of a company’s investments and a flight to quality. “Firms are revisiting their investment policies in an effort to ‘bulletproof’ their Treasury operations and safeguard every dollar,” notes Robertson.

The introduction of the Single Euro Payments Area (SEPA) was the catalyst for Canada-based Bombardier’s major overhaul of its cash management business in Europe, spearheaded by the Treasury Center which the transportation company established in Zurich nine years ago. It was the Zurich back office which was most affected by SEPA, and the company began a search for a more efficient way to operate its cash management business in Europe. The article by Debra Hinds, Global Cash Management, Bombardier Inc. and Ali Agha, Corporate Cash Management Sales Manager and Americas Head of Asia Desk, Global Transaction Banking, Deutsche Bank, shows how this was achieved by a partnership between company and bank which created an ‘end-to-end scalable solution’ not only for Europe but also for the seven countries in Asia where Bombardier’s transportation franchise has legal entities - China, India, Korea, Malaysia, Singapore, Thailand and Taiwan.

The right outsourcing partner

Outsourcing Treasury operations is the subject of the article written by Adolfo Jiminez, Manager - International Finance, Treasury, for Campbell Soup Company, which has its headquarters in New Jersey. Jiminez describes how, prompted by a change in the company’s European cash management bank, they took the opportunity to review its outsourcing arrangements and as a result changed their provider. Bank of America proved to be the right outsourcing partner for Campbell - a bank which “can be proactive and help us to run our treasury more effectively, a business partner more than simply a repository of our routine functions.”

Two years ago, in 2006, TMI presented a case study of Microsoft Corporation and how the company had started its implementation of SWIFT. This year, our Editor Helen Sanders asked Ed Barrie, the company’s Group Manager for Treasury, about how the initiative had progressed. Barrie confirmed that Microsoft has made “significant progress” in its use of SWIFTNet in the past couple of years, with the primary benefit of “having a single communication channel leveraging industry standard data formats that can be used to communicate with new and existing banking partners”.

Our Editor also provides a useful summary of the various ways in which Treasurers can substantially improve their liquidity and working capital with rapid return on investment. The key, she notes “ is not just to throw more money and more resources at a problem, but to think creatively about addressing challenges”, with the watchwords of Centralization, Optimization, Leverage and Protection - on each of which she expands in turn.