Head2Head: Spice up Your (Treasury) Life

Bruce Meuli, Global Transaction Services Advisory executive, and Jonathon Traer-Clark, Head of Strategy, Global Transaction Services, Bank of America Merrill Lynch

BM So, Jonathon – another year has passed. And whilst the world has changed in many ways, tell me what you really, really want for the next 12 months… and don’t go wasting my precious time.

JTC Oh dear… I can see you’re still in holiday mode! But new year, fresh perspectives, so let’s get serious. For me, there are two things that make treasury interesting and rewarding. Firstly, relationships – be they with your tax and legal team, the finance organisation at large, the business, clients or your external service providers such as banks, software or other providers. Secondly, change. It’s a constant theme driven by the dynamics of the business and operating environment, acquisitions, and changes in corporate structure due to market impacts, politics, tax laws and legal changes. This semi-chaotic nature is one of the reasons I work in finance – so personally I’d like to see more rather than less change! It forces us all to be adaptable, have a point of view, and act with confidence.

BM Are you bailing on the answer? I think that’s too philosophical a response – I was looking for your thoughts on the future. Let’s start with your first theme. Throughout 2016, we’ve heard a lot of noise about distributed ledgers or blockchain – we covered it in an earlier column. It’s been hyped as a disruptor, but to my mind, it’s no more revolutionary than the spreadsheet was to the abacus, except in one critical area. It looks to create trusted digital relationships between parties. So my wish is to have a concerted industry view on what this all means, and why it’s valuable for corporates and banks.

JTC I like that – but it’s a pretty advanced concept. I’d prefer to go back to basics – relationships bring knowledge and experience. Banks and corporates between them have vast reserves of knowledge around treasury, so one of my wishes would be for this to be made more widely accessible. An incredible baseline exists within the work done by industry bodies and the numerous certifications – but truth is nothing beats the ‘mile in your shoes’ argument – and not everyone gets to hear a conference speaker. 

BM I think banks owe it to their clients to listen more to their needs, and to use the knowledge they’ve gleaned to tailor their solutions rather than offer off-the-shelf generic tools. Conversely, treasurers can also derive significant value from the thousands of hours of experience banks have developed by working with a wide spectrum of clients. Consequently, bank-corporate relationships can bring mutual benefits. 

JTC I would also love to see more simplification. Recently I heard KYC (Know Your Client) referred to as ‘Kill Your Client’. Whilst the reference is harsh – and, I might add, one that you and I certainly don’t agree with – I do understand the sentiment. Paperwork and processes which are being executed for legal and compliance reasons. The irony for me is that all organisations have to undertake some form of client validation. For example you wouldn’t send company money on a whim and a message from the CEO would you? So we perhaps all need to step back and try to simplify the way it currently works.

BM Remove paperwork and friction? Great idea! I think we’d all benefit from some focus in that space. Equally, we could pool our collective knowledge – perhaps using a trusted digital relationship.

JTC You’re not letting that go, are you! What else would you like to see?

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BM Well as you know, I’m a huge fan of working capital improvements. I’ve occasionally seen great processes and approaches knocked back for trivial reasons – silo-based thinking, or simply because it’s ‘too hard’. At year end, we typically set goals for the next year – I’d like to see a longer-term view: some rollover of prior year goals, as many programmes would benefit hugely by being multi-year in nature. 

JTC So install a continuous process of improvement by embedding multi-year stretch goals rather than annual quick fixes? Given the strategic nature and long-term approach of treasury, that’s an excellent idea. After all, many core metrics have a long duration: for example, you don’t assess a capital investment on the basis of a single year. Although it can be annualised for accounting purposes, the idea is to simplify decision-making. Look at investments too: some bonds are perpetual and never mature.

BM So our new year’s resolution should include a focus on simplification and sharing of best practice; driving year-on-year improvements in our businesses via longer-term goals; and getting our act together so that we listen more attentively to each other? 

JTC Zigazig ah!

TMI Comment - by Helen Sanders, Editor

Jonathon and Bruce cover a huge range of issues in this edition’s Head 2 Head, but apart from their questionable music taste, definitely seem to be looking in the right direction. Firstly, Bruce mentions that distributed ledger, or blockchain technologies, represent no bigger step than the spreadsheet from the abacus – or perhaps the slide rule. While clearly a tongue in cheek comment, this was in reality an enormous technological step, effectively representing the emergence of electronic computing and dissemination into households and businesses. The potential of distributed technologies to achieve a similar technological revolution is as yet unknown but as new initiatives move from proof of concept to pilot projects, this is likely to become clearer. It will take time, however, not only to develop solutions but to drive adoption. 

The point about the role of new technologies in creating and strengthening digital relationships is also a significant one. Again, it is difficult to quantify and characterise exactly what these will mean, but in an era where uncertainty and lack of trust can significantly complicate and delay transactions, new ways of validating identity, building trust and removing time risk from commercial and financial transactions would be welcomed.

Jonathon and Bruce are right not to assume that new technologies offer a panacea for corporate treasury challenges. Improvements to the way that requirements such as KYC are addressed, and a longer-term approach to treasury achievements would be welcomed by many, but these are as much an issue of mind-set, process and data handling as new technologies. 

Bruce’s final words echo many people’s New Year’s resolutions: strive to do better, and listen more. Great job.