Head2Head: Succeeding in International Treasury

by Bruce Meuli and Jonathon Traer-Clark, Global Business Solutions executives, Global Transaction Services, Bank of America Merrill Lynch

In the second instalment of the TMI Head2Head series, we rejoin Bruce Meuli & Jonathon Traer-Clark, Bank of America Merrill Lynch, who share their insights on how treasury makes the leap from domestic to international - or indeed international to global. Not only do treasurers need the technical skills to manage cash, financing, investment and risk requirements in each country into which the corporation expands, but they also need to be aware of local practices and regulations, and build these into their treasury strategy.

JTC The issue of ‘going global’ is at the heart of treasury today as corporations of all sizes increasingly sell to, and buy from an expanding range of customers and suppliers. This is resulting in companies becoming more international in their strategy and operations, with significant implications for treasury. While you might be aware that your company is open to making acquisitions, it could still come as a surprise to wake up next month or next quarter as the owner of overseas assets, and be tasked with managing and integrating them.

BM I think we need to deal with some definitions first. The terms ‘international’ and ‘global’ aren’t interchangeable. There are few truly global companies or institutions: more often, firms are international, with a focus on certain regions. Job titles can give you an insight into how global a firm’s operations are. Are roles divided by geography, such as EMEA, Eurasia etc., or by function? Do they have global centres of excellence? For instance, it is common for US companies to split their business across domestic North America and international activities: that is, the rest of the world.

JTC Another assumption people make is that this topic is only about US companies going overseas. Sure, American firms face a degree of complexity when they leave their home turf, but this issue isn’t limited to them. You need to remember that while US companies deal with 50 states and billions in revenue, this is in one currency and a broadly consistent regulatory regime, with perhaps some additional complications for those active in Latin America, Canada and Mexico. Talk to your typical EMEA or Asia treasurer and they may oversee 50 or more countries and as many languages and currencies, plus complex tax and regulatory frameworks. Every day, these treasurers deal with national idiosyncrasies such as difficulties in unlocking cash from regulated economies like China, India or South Africa, and the variety of rules for local director registrations.

BM Wherever your HQ is, what’s important is how you react and adapt to the differences you encounter when operating in other countries and regions. For me, getting the culture and human aspect right is crucial. These are not often talked about because many of us are ‘numbers people’ first. You can’t expect to acquire or set up an operation in another country, apply the model you’ve always used and expect it to work equally well. You have to be aware of the local business culture, listen, and understand how people think and work. Only then can you make an informed decision about how best to integrate the business as part of your global network. Do you have the right mix of international experience, skills and knowledge to manage a multinational company?

JTC When I was an EMEA treasurer, we had a shared service centre in Poland. The workforce was highly skilled in efficiently executing tasks to set objectives, and also in providing observations and feedback that improved processes. There were different pockets of excellence in other countries too. Global or regional treasurers need to understand and embrace cultural differences, and to find and use the best elements that each workforce offers, rather than imposing one set way of doing things from the centre.

BM So we agree! But I wouldn’t want to downplay the importance of operations and technology set-ups. Anyone who says you can successfully operate a single, standard process globally, without exception, is misguided. You might have global core design principles and a common technology platform, but you have to allow for local variations. One tax authority might require you to produce a physical document in a certain way and on a particular date each quarter. You can capture that as a valid variant to the overall global process. What I’ve seen work well is having processes that are designed globally but executed locally with built-in capability for justified variation.

JTC To play devil’s advocate for a moment, there is another solution: sourcing. Why not consider running international subsidiaries via a third party? You might have been a national or regional firm until this point; so perhaps now is the time to leverage international capabilities that you might not have in-house?

BM Sure, but even if you hand over those operations, you still have to set the policies and standards by which they will run, and be responsible for performance. You can’t just ‘throw it over the fence’. You also risk missing out on the benefits treasury can achieve through collectively redesigning processes and systems in-house. Why would you give away the opportunity to realise value? Sourcing is more than just ‘lift and shift’. Your working day might get longer, and more complex, but you might also learn and develop in a way that improves the entire function. Perhaps a better approach is to consider selectively sourcing capabilities, seeking an optimum balance of operational efficiency and flexibility. For example, leveraging bank technology and operations to manage your global liquidity structure – essentially outsourcing liquidity execution within your policy and business rules.

The TMI Verdict - by Helen Sanders, Editor

This conversation between Bruce and Jonathon illustrates some significant points. Firstly, managing the needs of an international business is no longer restricted to the largest enterprises, which has an impact on how banks need to adapt their offerings to meet the needs of smaller businesses that lack the resources of their larger peers.

Secondly, while treasury is typically seen as a technical function – and indeed it requires a range of specialist financial skills – the ability to work with both internal and external counterparties, including regulators and tax authorities as well as subsidiaries across the company’s footprint, has become an essential skill set. Today, training and education for treasurers tend to focus predominantly on the traditional technical skills, which need to evolve to take into account treasurers’ changing role.

Finally, the question of the optimum operating model arises. Treasury and shared service centres (SSCs) both play an essential role in achieving operational and financial efficiency but it is not always easy to establish what the scope of their relative responsibilities should be. Treasurers and finance managers therefore need to work together to establish how these two functions interact, where different functions are best located and who takes responsibility for policy and execution.