Adjusting to changing regulation, digital disruption and increased strategic importance within businesses: today’s treasuries face a raft of new hurdles and opportunities. GTNews asks four leading treasurers what they believe the biggest challenges will be in the year ahead.
Tim de Knegt is the manager for strategic finance and treasurer for the Port of Rotterdam – the largest port in Europe.
“The importance of integrated decision-making is becoming much more important with the geopolitical tensions, the effects of Brexit looming and the potential economic impact of the unwind of the quantitative easing programs by European and US central banks. In my opinion, the biggest challenge for treasury teams next year is to further strengthen its role as a strategic business partner to ensure they can give their invaluable input. Furthermore, innovation is changing the life of corporate treasuries on a daily basis, it is important to keep on track with this to ensure that there are no unnecessary (cyber) risks taken.”
Alistair Cotton is the treasury manager at Clearsettle – a global payment gateway that connects payment service providers to hundreds of payment methods used worldwide.
“Looking ahead to 2018 we see two key drivers of changing market conditions that treasurers will find challenging. Firstly, developments in the US. Throughout 2018 the Federal Reserve will be unwinding its huge portfolio of bonds it bought since the financial crisis. Interest rates across the yield curve will rise at a pace dictated by the Fed’s sale of securities, so paying attention to central bank announcements in 2018 will be crucial to anticipate how funding costs will change. The US dollar should also begin to rise as interest rates drift higher but the pace of appreciation will be more linked to Donald Trump’s proposed tax reform and if US corporations, currently holding huge USD balances offshore, decide to begin to repatriate funds.
“The second key theme treasurers should be paying attention to in 2018 is the ongoing Brexit talks between the UK and Europe and the associated volatility in the pound that accompanies the negotiations. It is still far from clear what sort of deal the UK will get, and what deal is finally agreed will have huge ramifications for other European countries who might also have desires to leave the currency union. Foreign exchange (FX) hedging will become even more important for treasurers as overall volatility climbs as negotiations move towards a climax in autumn 2018.”
Steve Card is the group treasurer at Dechra Group – an international specialist veterinary pharmaceuticals and related products business. The UK-based company has offices across 21 countries in Europe and North America, we export to over 40 countries worldwide and have three manufacturing sites. Dechra employs over one thousand people with its 2015 annual revenue 2015 reported at £203.5m.
“For Dechra, the challenges of 2018 are the same as 2017 – uncertainty. What is happening with Brexit? What will Donald do next? Will Italy, Greece and Germany continue their dance of a thousand deceptions? Which way will the Central Banks of Europe, UK and America go – and when? Risk management –and therefore treasury strategy – is the process of identifying, assessing and controlling threats to an organisation’s cash, capital and earnings. Absent the ability to identify those risks with any degree of certainty, that treasury strategy must attempt to manage a wide range of (known and unknown) unknowns, leading to a strategy that is fundamentally defensive in nature. Beneficial opportunities will arise, but mainly of a tactical nature. In a Dechra world where the risks range from acquisitions to Armageddon, retaining flexibility to react to change remains, again, the biggest challenge.”
Manny Sandhu is the financial accounts and treasury manager at British fashion label Ted Baker.
“The biggest challenge to corporate treasuries in 2018 will continue to be the management of foreign exchange risk. Uncertainty over Brexit implications, global geopolitical tension and a changing US political climate continues to drive volatility in exchange rates and putting pressure on margins. It is hard to imagine exchange rates stabilising in 2018 so corporate treasuries will need to identify rates they are comfortable with and to be opportunistic with hedge trading when these rates are achievable.”