Strategic Treasury

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Agenda 2018: What’s Keeping Treasurers Awake at Night? It’s that time of year when a crystal ball would be incredibly useful. As we navigate through the first quarter of 2018, Eleanor Hill, Editor, asks five leading treasurers what is top of their ‘to do’ lists for the year ahead – and discovers the pitfalls they will be actively trying to avoid.

Agenda 2018: What’s Keeping Treasurers Awake at Night?

Agenda 2018: What’s Keeping Treasurers Awake at Night? 

By Eleanor Hill, Editor

It’s that time of year when a crystal ball would be incredibly useful. As we navigate through the first quarter of 2018, Eleanor Hill, Editor, asks five leading treasurers what is top of their ‘to do’ lists for the year ahead – and discovers what pitfalls they will be actively trying to avoid.

Turn the clock back ten years and the world was a very different place. 2008 was the year that Obama first won the US Presidential race and China hosted the summer Olympics in Beijing. It was also the year that SEPA Credit Transfers were officially introduced, changing the payments landscape across the Eurozone. 

But of course, 2008 is most remembered among the treasury community for one thing: the collapse of Lehman Brothers. No-one needs to be reminded of the aftermath, and in many ways, it feels as though we have moved on significantly from those dark days. But the crisis cast a long shadow, and even in 2018 treasurers are still dealing with the consequences. 

Regulation is a clear, albeit rather tedious, example of this. Thankfully, as well as the ongoing burden, there are now interesting treasury agenda items (alright, challenges) spinning off from regulatory obligations too. One of those ‘to dos’ for Jan-Martin Nufer, Director of Treasury & Funding, Borealis is further improving the automation of regulatory reporting.

Regulatory terrors

“From a regulatory point of view, IFRS 16 and IFRS 9 are the main challenges we are facing in 2018,” he says. “These aren’t new topics, but there is a lot of ‘housekeeping’ still to do around these accounting standards, and we continue to look for greater efficiencies in the reporting process. That said, it’s a challenge to find the right balance between wanting to have the reporting as automated as possible and the cost of achieving that,” he explains.

Nufer goes on to say that the new transfer pricing regulations are also adding to treasury’s workload, since his team now has to work with individual credit ratings for all the entities and additional documentation requirements are emerging. As an example, he says that “the cost for automatically importing the CDS information required for the probability of default calculation is disproportionate to the value of that information to the organisation. But taking a manual approach goes against our overall aim to become even more automated and to report in real-time. It’s a Catch 22.”

François Masquelier, Head of Corporate Finance and Treasury, RTL Group could not agree more. “As regulations change, so do regulatory reporting requirements – and this leads to a paradox of systems sophistication. Take IFRS 9, for example. To comply with this new accounting standard, we have to produce a couple of new reports which TMSs are not capable of generating. As such, we generate the reports outside of the TMS, but that just adds another layer of unwanted complexity to our reporting.”

He adds that “BEPS reporting is also a headache, not so much the country-by-country reporting, but the level of documentation that is required to explain the process used to calculate the margin you take. Demonstrating the required level of ‘substance’ could be challenging for some treasury centres which exist more for tax reasons, and this could well be a hurdle during the year ahead.”

In addition to the difficulties around reporting, Masquelier believes that the expected credit loss (ECL) calculation part of IFRS 9 could be a challenge for some corporates this year. As he explains, most companies currently do not collect the credit information required by IFRS 9. They need to modify their current credit and information systems in order to collect required data. Management have to build new models to determine 12-month and lifetime ECLs. “This will require complex judgments and a significant time investment – and my impression is that many corporates are not quite there yet.” 

And whilst the majority of post-crisis regulatory reforms have worked their way through the system over the last decade, regulation continues to evolve – as it must to keep pace with the world. The issue here, as Marie-Astrid Dubois, Assistant Treasurer EMEA, Honeywell, rightly points out, is that the unintended consequences of regulation still aren’t fully understood, and that is a concern. 

She believes that, in 2018, corporates need to be more forthcoming in their views on new regulatory initiatives, and this is certainly something that Honeywell will be doing. “In the past, we have worked with various regulators to explain how corporates will be impacted, and we feel that is definitely a dialogue worth continuing this year,” she notes.

Rethinking the status quo

Unfortunately, there are other changes going on in the world that corporates have less sway over. US tax reform is just one example, but it is something that will be a significant priority for Honeywell this year, and “is certainly high on our CFO’s to-do list,” confirms Dubois. “As a US-headquartered company, we’ll likely be looking to bring cash back to the US to fund business development and capital deployment. But that will require some legal and tax work, especially since we have more than 1,000 legal entities across the globe,” she explains.

For Honeywell, and many other US multinationals, tax reform is also a trigger to revisit and potentially rethink treasury structures. “Should we consider one global USD cash pool? Or is an EMEA-based in-house bank still the optimal option, for instance? How can we achieve further automation? These questions will be front of mind as we head further into 2018 – and will require treasury to anticipate scenarios and be proactive within the organisation about communicating with departments such as tax and legal and our banking partners,” she says.

And for Dubois, as for many treasurers, keeping bank relationships in the best shape possible will be a key agenda item for this year. “For acquisitive organisations like Honeywell, it’s very important to be aligned with your banking partners. What we’ve been doing over the last few years, and will continue to do in 2018, is to let them know what we want to achieve, what we expect from them, which includes having a dedicated implementation manager,” she comments. 


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