Don't be afraid to challenge the status quo

52 Pages·2016·34.35 MB·English

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20 THE MAGAZINE OF THE ASSOCIATION OF CORPORATE TREASURERS MARCH 2016
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“Don’t be afraid
to challenge
the status quo”
Alison Wilson, head of treasury
and governance at innocent
drinks, on purpose and vision
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.tre THE TASK AHEAD
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Rachael Crocker
Alex Hyde
Associate Director, Industry & Commerce
Head of Practice Treasury
E: [email protected] E: [email protected]
Amy Goldthorpe Joe Rudkin
Senior Consultant, Industry Senior Consultant, Industry
and Commerce – Permanent and Commerce – Interim
E: [email protected] E: [email protected]
Guy Middleton
Associate Director, Financial Services and Banking
E: [email protected]
002_ACT_Mar2016.indd 2 25/02/2016 15:57
INSIDE TRACK
The Treasurer
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Editor’s letter Michelle Price
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indices plunge downwards, rally to a degree, but fail to recover ground overall. or Dan Gallagher
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European bank stocks have not fared well since the start of 2016, but they are far from the only
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In an increasingly interconnected environment, February’s mid-month incident wasn’t the only THE TREASURER ©2016
notable event – far from it. China reported falls in its import and export figures, Japan’s economy Published on behalf of the ACT by
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the world’s largest economy. Central banks that now resort to negative interest rates, meanwhile,
Managing editor Rica Dearman
increased in number, and any notion about oil prices rallying seems further off than ever. Art editor Finn Lewis
As ever, our message is that treasurers are better placed than most to put across clear, Cover Louise Haywood-Schiefer
Group account directors Ruth Lake and
independent analysis of the situation and to suggest ways for their organisations to tread
Jackie Scully
steadfastly forward. Managing director Polly Arnold
For instance, award-winning journalist and author Ian Fraser takes us through the challenges SUBSCRIPTIONS
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Elsewhere in the issue, we talk to Alison Wilson, innocent drinks’ head of treasury and
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governance, about how those two disciplines fit together, and the joys of getting involved with any [Self-certified members of national treasury
and all aspects of life at the high-profile UK smoothie brand, on page 22. associations, including the AFP in the US]
We also take a look at trends in treasury for 2016, the intricacies of the petrochemical supply 1 year £135 – UK and Europe (MUKEU)
1 year £175 – rest of world (MRoW)
and value chain, and the advent of IFRS 16, Leases, which has been billed as the biggest change For information, visit www.treasurers.org/
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Something for all finance professionals to take on board.
Importantly, we also celebrate our winners of The Treasurer’s Deals of the Year Awards on
page 12, in a visual round-up of the celebratory dinner held last month.
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THIS MONTH’S CONTRIBUTORS interested in participating in the EPF,
please contact [email protected]
Vanessa Harwood- Rebecca Brace has Nick Hood is a
Whitcher is the ACT’s been writing about chartered accountant
director of education. the issues affecting and former
She has worked corporate treasurers licensed insolvency
in education for for more than 10 years. practitioner. He is the The copyright of all editorial in this magazine is reserved
20 years, and has Her areas of expertise business risk adviser to the publishers. None of the articles published may be
a deep-rooted belief in the include cash management, at restructuring and business copied, duplicated or reproduced in any form without the
prior consent of The Association of Corporate Treasurers.
principle of lifelong learning liquidity, technology, working services group Opus and The Association of Corporate Treasurers, the publisher and
as an important and proven capital and regulation. Her appears regularly in the media editor cannot accept responsibility for any claim which may
means of furthering professional profile of Alison Wilson, head as a business commentator. His be made against a contributor arising out of the publication
of any article or letter. The views and opinions expressed
development. Her piece on of treasury and governance at feature on what to expect when a in this magazine are not necessarily those of the Council
learning styles is on page 21 innocent drinks, is on page 22 bank loan goes bad is on page 34 of The Association of Corporate Treasurers.
www.treasurers.org/thetreasurer March 2016 The Treasurer 03
ACT ANNUAL DINNER
The premier networking event in the corporate finance calendar
9 NOVEMBER 2016 OPEN FOR BOOKINGS AT
Grosvenor House Hotel, London treasurers.org/annualdinner
DRESS CODE: BLACK TIE
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CONTENTS
BRIEFING 12“Treasurers are SKILL SET
08 Agenda enjoying greater FINANCIAL RISK
Small and mid- interaction with boardrooms” MANAGEMENT
cap fund performance; risk Lesley Flowerdew, group tax and 31De-risking defined benefit
managing a potential Brexit; treasury director at Atkins, and pension schemes
outgoing chair of the Deals of
ACT Annual Conference 32Managing currency
the Year Awards judging panel
speakers announced; launch market volatility
of directory to facilitate
CONTEXT OF TREASURY
cross-border SEPA payments;
34What to expect when
corporates’ worldwide struggle
a piece of bank lending
to retain women bosses; lack
goes bad
of data visibility hampers FX
management; the negative
interest-rate club grows; HSBC
34
remains headquartered in
London; banking stocks suffer
torrid week; Deals of the Year
Awards dinner; Technical
Briefing; ACT diary dates
COMMENT
19 Jeremy Warner
Have technological
advances brought us
to the point of a new 36The risk environment
industrial revolution? may change, but the
challenges for treasurers stay
20Treasury Insider
fairly constant
Sharing expertise with
R 38The digital revolution
colleagues can be hard to do OI
OL M is disrupting banking
AR and there’s more to come
C
40The petrochemical
20 21Vanessa INSIGHT supply chain
42IFRS 16: big changes in
Harwood-Whitcher 22Profile: Alison Wilson
lease reporting ahead
ACT courses and tutors innocent drinks’ head
are here to help you of treasury and governance BEHAVIOURAL SKILLS
succeed, whatever your on living and working the 44Negotiation:
learning style good life in business don’t overlook this
important skill
50 Month End 26The task ahead
46 Your social media
Procurement for Europe
profile is a chance to 
and treasury should speak Treasurers and policymakers
22 shine, so make the most of it
the same language, may face turbulent
but watch out for times, but treasurers BUSINESS SKILLS
messages that have the skills 48Qualifications:
are wilfully and outlook Yields and
misinterpreted to handle them discount rates
www.treasurers.org/thetreasurer March 2016 The Treasurer 05
COMMERCIAL BANKING
TTOOGGEETTHHEERR
SUPPORTING SUCCESS IN TREASURY
Lloyds Bank is committed to supporting excellence in treasury together
with The Treasurer’s Deals of the Year Awards.
The awards provide a great opportunity to celebrate the achievements
of corporate treasurers and are judged on the basis of demonstrating
innovation and excellence in treasury.
We remain dedicated to helping our customers achieve their funding
requirements and would like to congratulate all of the winners.
lloydsbank.com/commercial
Authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority under Registration
Number 119278. Lloyds Bank plc. Registered Office: 25 Gresham Street, London EC2V 7HN. Registered in England and Wales no. 2065. Telephone: [phone].
006_007_ACT_Mar2016.indd 6 25/02/2016 12:54
COMMERCIAL BANKING
TTOOGGEETTHHEERR
SUPPORTING SUCCESS IN TREASURY
Lloyds Bank is committed to supporting excellence in treasury together
with The Treasurer’s Deals of the Year Awards.
The awards provide a great opportunity to celebrate the achievements
of corporate treasurers and are judged on the basis of demonstrating
innovation and excellence in treasury.
We remain dedicated to helping our customers achieve their funding
requirements and would like to congratulate all of the winners.
lloydsbank.com/commercial
Authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority under Registration
Number 119278. Lloyds Bank plc. Registered Office: 25 Gresham Street, London EC2V 7HN. Registered in England and Wales no. 2065. Telephone: [phone].
006_007_ACT_Mar2016.indd 7 25/02/2016 12:54
BRIEFING
Agenda
For the latest news and comment in the treasury world, follow us on Twitter @thetreasurermag
WORDS
{ CONTEXT OF TREASURY }
GES SMALL TO MID-SIZED CORPORATES FARE
A
M
GETTY I WELL IN THE FACE OF TURBULENCE
N/
RIFFI A survey of investor sentiment stocks, as they were perceived as improved in this market segment,
G G into small and mid-cap company less vulnerable to global turbulence, small and mid-cap companies
U
O performance has suggested that this such as exposure to China, and need to pay more attention to
D
sector has been relatively sheltered more likely to benefit from corporate governance and reporting
“Endowed with
over 2015 from the economic and a strengthening UK economy. quality, and that the appearance
an exceptionally political turbulence afflicting the The ensuing volatility in 2015 and substance of some corporate
brilliant mind, bigger companies’ market. has been seen as a factor providing websites were lacking.
However, the fund managers’ opportunities for small and mid- The survey also found M&A
but also an
respondents to the third annual cap fund managers. activity to have increased over the
eagerness to see
Quoted Companies Alliance While earnings and dividends past year, leading to a reallocation
his ideas applied RSM Small and Mid-Cap Investors are now felt to be under pressure of investor funds. There is
in the real world, Survey argued that companies as profitability becomes more mounting concern about increasing
in this sector need to up critical in this sector, in general, regulation for equity markets and
he turned Lloyds
their game when it comes the negative sentiment that dogs the impact it could have on market
into the most to investor communications. the large-cap company markets liquidity affecting this sector.
admired UK According to the survey, the has yet to filter down to the smaller Specific concerns include aspects
oil-price collapse at the end of 2014 end of the market. of MiFID II, particularly the ban
clearing bank
drove money into the relatively Respondents said that, while the on the use of dealing commissions
of the time.”
safe haven of small and mid-cap quality of corporate reporting has to pay for investment research.
David Lascelles (pictured
above), journalist and author,
pays tribute to Sir Jeremy
Morse, former chairman of { QUESTIONS YOUR FD IS LIKELY TO ASK THIS MONTH }
Lloyds Bank and a former
EUROPE & BREXIT RISK
executive director of the
Bank of England, who died
How will we be affected by Brexit? How can we manage all these risks?
last month.
When one political announcement Currency and input cost-hedging
SOURCE: THE FINANCIAL TIMES,
4 FEBRUARY 2016 can move sterling by 1.6%, currency strategies will remain a key element;
volatility is the most obvious concern. but even more important is knowledge.
“This is highly Trading risk is equally worrying, both We must identify our counterparty
unusual. in the short term until the British risks in the UK and right across Europe,
EU referendum outcome is known, so we are able to focus on those
Call it the oil
and even more so if the UK votes to most critical to our business as the
correlation leave. The threat or the reality of new from luxury goods to speciality situation unfolds.
conundrum.” bilateral trade deals with EU states manufacturing. The worldwide collapse Will it really be that bad?
will inevitably inhibit investment and of energy and commodity prices is Nobody knows how the current Brexit
Torsten Slok, chief
commercial activity in general. Labour another threat. Trade with and within drama will play out, how chaotic it will
international economist,
supply and costs could be another Europe is already feeling the impact, be if the UK leaves Europe and how
Deutsche Bank, commenting
to clients on the new worry; free movement of EU workers diminishing export prospects and long disengagement might then take.
and unusually close may be affected and heightened escalating counterparty risk. Lastly, We need to keep all related risks under
relationship between falling immigration controls are a probability. the global migrant crisis has already constant review and be prepared to be
oil prices and plunging Is Brexit our only issue in Europe? destabilised Europe politically and as flexible as possible.
stock-market performance Far from it. The China slowdown is culturally; it will surely also significantly For an ACT perspective, go to
in early February. affecting a broad range of sectors affect business. blogs.treasurers.org/?p=313877
SOURCE: BLOOMBERG BUSINESS WEEK,
11 FEBRUARY 2016
08 The Treasurer March 2016 www.treasurers.org/thetreasurer
{ FINDINGS FROM THE FOURTH MOORHOUSE BAROMETER ON CHANGE 2015-16 } 69%
97% 66% report an increase in
the pace and pressure
of board members and their need these new capabilities of change in 2015
direct reports say they need to a great or fair extent
new or additional skills to 80%
deliver their strategies 30%
expect that increase
feel very or extremely confident to accelerate over
they can access those skills the next three years
WHAT
TSHAEIDY GES { ACT NEWS }
A
M
GETTY I Treasury expertise and influence on
What do you say? BERG/ show at this year’s ACT Conference
Tweet us M
O
@thetreasurermag BLO ACT members can and broadcaster Mishal professionals taking part,
“I see the other banks playing the same old look forward to Husain, senior Financial participants will debate
game in the UK. When you think about things a packed programme Times columnist Tim what sustainability means
we’re doing in the marketplace… my view is at this year’s Annual Harford and Peter to business leaders and
the challenger bank is RBS and Natwest.” Conference to be held on Montagnon, associate their teams.
18-20 May in Liverpool, director of the Institute The role of treasurers
Ross McEwan (pictured above), CEO of the Royal Bank
of Scotland Group, marks out new territory for the bank. featuring sessions on of Business Ethics. in strategy and financial
SOURCE: THE TELEGRAPH, 13 FEBRUARY 2016 fintech, innovation The ACT Annual leadership will be
and forecasting. Conference attracts more explored on day two of
Headline speakers than 1,000 attendees, the conference. Attendees
{ TREASURY OPERATIONS } include Lady Barbara who will this year hear will also be able to hear
Payments UK launches Judge, chair of the case studies and panel debates on the impact of
Institute of Directors and discussions around Brexit and how treasurers
directory to facilitate cross- chair emeritus of the UK the theme ‘Financing can guide geopolitical,
Atomic Energy Authority, tomorrow: integrity, digital and ethical
border SEPA payments
who will speak on energy influence, innovation’. road maps within
supply and the future Sustainability will be a their organisations.
With article 5 (7) of SEPA Regulation (EU) No for nuclear fuel. She will key issue for speakers
260/2012 now in force, eurozone banks and Payment be joined by economist and panelists. Harford If you have yet to register
Service Providers (PSPs) can process Single Euro John Kay, vice president will talk on the issue of for this year’s conference,
Payments Area (SEPA) payments using only a customer’s of financial markets at forecasts, and during an go to www.treasurers.org/
International Bank Account Number (IBAN). Royal Dutch Shell Ian ideas plenary on the final annualconference or email
As the UK is not a eurozone country, the regulation Chisholm, journalist day, with senior treasury [email protected]
will not apply to UK PSPs until October this year.
However, UK customers, particularly businesses that
tend to be the recipients of these payments, will benefit
3.1% 151,000
with immediate effect, since they will be required to
give less information to a payer overseas if they want NUMBERS The yield of Cardiff The number of jobs
to receive a SEPA payment from a eurozone country. University’s £300m 40- added to the US
Previously, customers were required to also provide year higher education economy in January,
the Business Identifier Code (BIC) of the PSP they bond, the lowest yield a contrary economic
were intending to pay, in order for their PSP to
in the UK’s history for indicator in the face of
process payment. €670m
higher education bonds continued turbulence
To coincide with the regulation coming into effect,
The potential Greek tax
Payments UK, working with the Financial Conduct 102 37%
revenue lost to illicit
Authority and the Bank of England, has released a
untaxed cigarettes, The number of The jump in share-based
SEPA IBAN-only directory. The directory, which can
according to Bloomberg ships berthed with compensation at Chinese
be accessed via SWIFT, provides PSPs with a means of
Business Week International Shipcare, e-commerce giant
finding the BIC from the IBAN and will, says Payments
off the Malaysian island Alibaba, which outpaces
UK, help to ensure the change is seamless for recipients £7.7bn
of Labuan – twice the its revenue increase
of SEPA payments in the UK, as well as ensuring that
all eurozone PSPs (such as banks and large corporates The size of Nigeria’s number this time last for last year of 31%,
initiating payments) have the necessary information budget deficit, worsened year, says Bloomberg according to Bloomberg
to route a SEPA payment correctly to UK beneficiaries. by collapsing oil prices Business Week Business Week
www.treasurers.org/thetreasurer March 2016 The Treasurer 09
INTERNATIONAL BRIEFING
{ KEY FINDINGS FROM DELOITTE’S CONTINUED EVOLUTION: { FINANCIAL RISK MANAGEMENT }
2016 GLOBAL FOREIGN EXCHANGE SURVEY }
LACK OF
56% 70%
put lack of visibility on FX of respondents report
VISIBILITY ON
exposure and reliability of forecasts as only fairly basic metrics to the THE
DATA HAMPERS
one of their top three concerns for 2016 board, such as quantum of FX STATS
exposure, hedged positions FX MANAGEMENT
68%
said inaccurate forecasts were a and FX gains/losses
FX is set to dominate treasury
major source of ineffective management
operations during 2016,
62%
of FX risk said lack of automation, such according to a global treasury
as the prevalence of manual FX forecasts survey carried out by Deloitte.
37%
said boards did not receive from business units, contributed The report, titled Continued
adequate information on FX exposure to difficulties around identifying Evolution: 2016 Global Foreign
Exchange Survey – a response to
and risk management exposure levels
the increasing profile of foreign-
currency exposure among corporates
– found a lack of clear sight on
risk among many respondents,
along with poor forecasting
{ AROUND THE WORLD IN 30 DAYS } and processing.
Lack of visibility of FX exposures
NEGATIVE INTEREST RATES,
and of reliable forecasts was a
SHARE PRICES AND CRUDE OIL challenge for 56% of respondents,
while 49% put emerging-market and
restricted-currency-market volatility
Negative interest-rate club Stock indexes fell Crude oil at the top of their list of woes.
The number of central dramatically at times; the Gloom over major economic Manual exposure identification
banks in negative interest- FTSE 100 fell by 2.7% in indicators continued with and capture processes were a
rate territory rose when the one day, and the Hang Seng a renewed weakness in concern for 48%.
Bank of Japan unexpectedly index fell by 5%. Individual oil prices affecting major Investment in automated FX
announced that it would European bank stocks gave stock markets. The global processes has not kept pace with
impose an interest rate of investors a roller-coaster oil market is reckoned to increasing exposure to a wider
-0.1% on some commercial experience. Deutsche Bank be oversupplied by some range of currencies, and the lack of
bank deposits. The measure shares fell 9.5%, prompting 1.8 million barrels per day. visibility in this complex area means
is intended to bring down its CEO to issue an open However, a plan to freeze that companies need to focus on
interest rates generally, letter of encouragement to output worldwide may have achieving real-time integration of
particularly on long-term employees, and Germany’s little impact on pricing different systems, data quality and
consumer home loans. finance minister, Wolfgang given the glut of oil that consistency, if they are to make gains
Sweden, the first country Schaeuble, to publicly state already exists in the market. in visibility and reduce inaccuracies.
to take its benchmark repo that he had “no concerns” Stockpiles are at record FX complexity increases as
rate below zero last year, cut about the bank. European levels. Oil has shed 70% companies expand their footprints
its rate further to -0.5% last stock markets rebounded of its value since a market globally – 50% of the report’s
month, prompting worries and made partial recoveries high of over $100 per barrel respondents operate in more than
that the European Central by the middle of February. in June 2014. 20 countries. Inaccurate forecasts,
Bank will follow with a rate poor communication and non-
cut. Switzerland’s main transparent exposures constitute the
bank interest rate stands top three sources of ineffectiveness
at -0.75%. Twelve central in managing FX risk. “FX risk cannot
banks worldwide have now be managed effectively if it cannot
imposed negative interest be quantified in the first place,” said
rates and, since the financial the report’s authors.
crisis, monetary policymakers The survey looked at 133
at central banks have cut corporations worldwide, with 64%
interest rates 637 times, of them in the $1-10bn in annual
according to The Telegraph. revenue range, 28% with $10-50bn in
revenues and 8% of them with more
Banking woes than $50bn in revenues. Of these,
Share prices of leading organisations had an average of 6.3
banks worldwide plunged people managing FX risk in front,
last month in the face of middle or back offices (excluding
GES mounting concern about The Bank of Japan is to people supporting FX management
A
GETTY IM global growth prospects. impose a -0.1% interest rate imn atxhiem oupmer aotfi n55g ienndtiivtiiedsu)a, lws.ith a
10 The Treasurer March 2016 www.treasurers.org/thetreasurer