World Café: A Shared Experience 

By Helen Sanders, Editor

The World Café sessions at the EACT Summit were an excellent opportunity for participants to engage with their peers to discuss informally some of the key issues facing treasurers today. 

Regulation – Is it Necessary, or Necessarily Bad?

Participants agreed that it was important for corporate treasurers to manage their risk, and stringent regulations provided reassurance that they have strong, reliable banking partners. However, while there may previously have been too much power centred on the banks that were ‘too big to fail’, has this been transferred to the regulators instead: what is the impact of this, and who is regulating the regulators? Where is the mechanism to assess how effectively they're achieving the objectives they have set out, and how can over-regulation be avoided?

Participants also discussed the problem of ‘indirect consequences’, where corporate treasurers are impacted by regulations that are not intended specifically for them, and do not take into account the broader industrial context. Regulators are not necessarily aware of the impact on systems and processes for industrial (i.e., non-financial) corporations and the effect on the wider business. While financial institutions can make commercial decisions that balance the cost of compliance with their business activities, this is far more difficult for corporate treasurers to achieve.

 While there can be negative consequences of regulation, these may also be positive – for example, treasurers have become better at producing data that is required for regulatory purposes, which also offers wider value to the organisation. However, some participants noted that with such a large amount of data sent to the regulators, there was not always clarity over the use of this data, and how it was stored or secured. 

In conclusion, these sessions emphasised the importance of engaging with regulators, banks and technology companies to keep corporate treasury interests on the regulatory agenda, and that they have the tools available to achieve compliance. The EACT plays an essential role in representing the voice of corporate treasury with regulators and other organisations, a role that was universally welcomed and supported by participants. 

Tax Rules: a Substantial Change 

The second World Café session focused more specifically on tax regulations, such as BEPS (base erosion and profit sharing), and the impact on treasurers’ role, activities and decision-making. For example, participants noted that treasury is now far more involved in intercompany transactions, including transfer pricing documentation and contracts, which are becoming more complex. Business models that were tax efficient in the past are becoming less sustainable, and entities need to demonstrate substance, not only in the number of people employed, but also the role these people are fulfilling. Under BEPS rules, companies will be subject to ‘country by country’ reporting, and will need to prove their operations in each case. In some cases, this will impact on regional or group treasury centres.

As a result, many companies are introducing new organisational structures and business models which create new invoicing flows. This affects cash flow and liquidity, so treasurers need to determine how best to access and ideally centralise cash. Cash management techniques such as payments on behalf of (POBO) and collections on behalf of (COBO) are playing a growing role in this.

Participants also discussed the interest predictability rules. Authorities are becoming harsher in deduction of interest, which affects the effective tax rate and ultimately shareholder value. While in the past, corporations often generated interest in locations in which they did not have taxable operations, the opportunities to do this are more limited both for intercompany and external interest.

One of the main takeaways from these discussions was the increasing importance of the interaction between treasury and tax departments. In some cases, these departments are now part of the same overall business function to ensure that treasury and tax decisions are closely aligned.

Fintechs: Technology for the New Generation?

The first point of discussion during the fintech World Café sessions was how to define ‘fintechs’. While most participants considered fintechs to be the new, typically small companies that are developing new technologies that challenge or ‘disrupt’ existing business models or ways of thinking, others noted that there has always been new technology in treasury, from treasury management systems through to dealing portals and bank connectivity; in this respect, new players are no different from existing technology companies. Overall, the conclusion was that it was less the company and more the solution or idea that marks a fintech today, and in particular the ability to tackle an existing problem or opportunity in a new way. 

Participants agreed that it is important to understand and be ready to react to new technology opportunities. Some said, for example, that they regularly invite fintechs to present their solutions, in order to understand these opportunities better. However, this interest and responsiveness is not yet translating into adoption in most cases. The exception is hi-tech industries that are more likely to have the infrastructure and appetite to integrate newer solutions.

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There are various reasons for this: first, many fintechs are focused on the B2C space where it is easier to build critical mass. Second, for large corporations where the risk and cost of change can be high, the business case may not be sufficiently compelling. Third is the issue of trust, as treasurers need to be assured of the credibility and long- term viability of a vendor, which is more difficult for small, companies with a limited track record. As a result, it may prove that fintech solutions are most effective when delivered through partnerships with banks or established technology companies.

There are some areas, however where fintech solutions are likely to have a more immediate impact in the corporate space. For example, we are seeing innovations in cross-border payments, both by existing players such as SWIFT (e.g., SWIFT’s global payments innovation (gpi) initiative) which has already been warmly welcomed by corporate treasurers, as well as newer fintechs (e.g., Ripple). 

For fintech solutions to be attractive to corporate treasurers, and therefore successful in the future, participants emphasised the importance of interoperability, ideally ‘plug and play’ to make adoption easier and quicker. Second is the need to be bank agnostic, so that treasurers are not dependent on a single bank to deliver core elements of their payments and treasury infrastructure. 

Technology innovation is an area where participants recognised the role of the EACT as a ‘sounding board’ both to understand and contribute to technology innovation, to ensure that fintech solutions, whether delivered by established or new players, and/ or in partnership with others, have a strong, viable business case for the corporate treasury community.

People: Fostering Treasury Talent

While the human dimension of treasury occupies much of treasurers’ time, it is often insufficiently covered at industry events. Participants first discussed the relative value of rotating employees from finance or even the wider business through treasury compared with treasury ‘lifers’, concluding that a mixture of both depth of skills and breadth of insight/ experience was valuable. What was important in both scenarios was the importance of a career path that makes sense both for the organisation and the individual. These discussions led to the question of whether the treasury talent pool has become illiquid, and the importance of attracting young professionals, potentially straight from university, into treasury.

The second topic of discussion was around training and talent development: how do you ensure your people have the skills they need in an ever-changing environment? There was a consensus that ‘on the job’ learning is the key means of developing talent, but external training including professional qualifications, also plays a valuable role. 

Third, participants discussed team-building and communication. In particular, how do you make sure communication works smoothly across your team and that people are aligned and are working towards a common objective? There is a clear need to co-create a vision for treasury that is aligned with the company's overall strategy. Asking for feedback is important, as is constant review and realignment, as opposed to a once-a-year or even once-a-quarter exercise. 

These key questions led to further discussion around issues such as diversity. Participants recognised that diverse teams that harness the strengths, perspectives and insights from each member will outperform a non-diverse team, but any team will underperform if not managed correctly. A related issue was the importance of values: how can corporate values be translated into treasury, what do they mean in practice, and most important of all, what behaviours do we expect as a way of articulating these values? 

What was clear throughout these sessions was the importance of these issues for treasury leaders. Treasurers need to demonstrate the values and behaviours they want from their team, build well-managed teams that embrace the value that each individual offers, and co-create career paths that benefit both the organisation and individuals, whether they spend their entire career in treasury, or just a part of it.