Treasurer Spotlight10 Minutes With The Treasury10 minutes with treasury: CBRE’s Catherine Porter

10 minutes with treasury: CBRE’s Catherine Porter

GTNews speaks to Catherine Porter, CBRE's EMEA treasury director, about how some of the top industry trends are influencing the nature of managing and forecasting cash flow.

While much of a treasurer’s role is in a state of flux with the likes of digital disruption and growing strategic importance, cash management remains just as important today as it was a decade ago.

Catherine Porter is the Europe, Middle East and Africa (EMEA) treasury director at CBRE – the world’s largest real estate services and investment firm. the GLobal Treasurer speaks to Porter about how some of the top industry trends are influencing the nature of managing and forecasting cash flow.

How has technology, risk and global expansion changed cash flow management?

Successful cash flow management requires a business forecast, understanding of predictability in historic cash flow trends and dialogue with the remitting or funded entities. Managing the longer-term cash or net funding isn’t technology dependent and probably hasn’t altered all that much over the years.

However, today, central treasury teams can actively manage short term liquidity supported by technology which links bank data, payment software and the treasury management system. This

reduces or removes entirely the need for local teams to be involved in short-term liquidity management.

Most treasurers will argue that implementation of technology improves the control environment and hence mitigates risk. i.e. cash visibility is a given, controls over who can access cash are improved and a central strategy around the group’s funding and cash management can be realised because the tools are in place to support.

On the other hand, understanding how the technology works, once set up, can be confusing. The mitigation of this potential risk, is to employ suitably experienced treasury teams who also think about continuous improvement and “best- fit” cash processes for the company.

Given the constraints in some jurisdictions, not all operations can be transitioned to the latest payments and cash management structures. However, treasury departments should put effort into maximising their usage and making global processes as streamlined as possible.

How can treasurers be more strategic when managing and forecasting cash flow?

Corporate treasury is constantly evolving to be more strategic (and hence less operational) but this is only possible when operational elements are streamlined and made efficient. In cash management, treasurers can increase their contribution at a strategic level by first ensuring that data access is quick. Projects must be undertaken to make possible the relevant visibility and connectivity. Rapid access to cash data can help shift treasury’s role to a more strategic level. Treasurers make excellent business partners because they are used to talking to multiple parties outside the company and should be in their comfort zone partnering internally.

What will the strategic input likely include? The overall cash trends can be aligned to monthly financial reporting and even with operational complexity, treasury should ‘have a nose for the cash’. Treasury should also be able to provide more timely cash insight and begin engaging with the businesses to debate and support overall working capital management and maximising cash flow.

In longer term forecasting, treasury is always involved strategically because the treasurer arranges the credit facilities. In a well-run company, it would be unthinkable that arranging facilities in advance of their possible use could not occur and net debt or net cash position is always laid out in the company forecasts and published reports.

What are the biggest challenges when it comes to managing CBRE’s cash flow?

As we are implementing standardised processes at CBRE we will be able to manage all the cash flows to and from our global notional pool centrally. These arrangements put us in a very good position for the future. There will be some locations where conventional funding via intercompany loan is needed as well as consideration of currency controls and a detailed grasp of local business issues and the impact on cash. We also dialogue with other teams so that we are ready to fund an acquisition or provide other funding as needed. Overall, we are building a world class structure to manage cash.

This year foreign exchange (FX) markets have seen plenty of volatility. How has this impacted CBRE’s managing and forecasting of its cash flow?

Like other global companies, CBRE operates in many jurisdictions and transacts in a range of non-USD currencies. The company monitors the risks of business activities across all countries where it does business including performing sensitivity tests. CBRE used forward contracts to mitigate FX risk over the last few years. At the end of 2016, our global CFO decided to discontinue our use of forward contracts to mitigate FX risk in 2017. He noted two reasons for the decision. The first was that the use of forward contracts added complexity to our reporting. The second was that CBRE benefited from the use of such forward contracts over a few years as the dollar strengthened materially, but that on the theory that such trades rarely continue to go in one direction forever, it was a good time to change our approach. Thus in 2017, no hedging of foreign currency denominated earnings before interest, tax depreciation and amortization (EBITDA) is planned.

Do you believe in centralising the cash management process? What are the pros and cons of doing this?

Technology facilitates centralised cash management. Provided any time zone differences are not impacting the operation then cash can be managed centrally. It is perhaps a leap of faith for traditional finance teams where this approach has not been used before but many treasurers rely on their highly automated and often very centralised processes. CBRE’s cash management team is currently realising our version of this model. Centralising cash management does impact the way a local entity approaches financial management. This can be positive and provide new impetus to focus more closely on the supplier and customer relationships rather than bank accounts and cash.

What advice would you give yourself ten years ago when it comes to cash flow management?

Regarding short term cash management (assuming a manual element to the process) I would advise myself that businesses will almost always report the cash position more conservatively than it will turn out. Also, as an accountant many years ago, I had no idea how important bank relationships are so I would also advise getting to know your banks well. They are there to help.

In terms of longer term cash management, I would suggest that understanding cash trends is a basic. Mature businesses usually have distinct cash trends and using pictures helps to communicate. It is much easier to present the data today than it was years ago!

Where are you seeing the most innovation with regards to the automation of cash flow management?

The desktop tools which today’s treasurers use, whether for netting [offsetting the value of multiple positions or payments due to be exchanged between two or more parties], providing supply chain solutions or for standardised payments have all come from the fintech sector (rather than the banks). Innovative, yes, but I think these companies are now beyond disruptive – it’s the new norm to seek out the right cash management technology for your business. In the meantime, the new disrupters and innovators are the companies who want to use distributed ledger technology and cryptocurrencies and no central financial hubs. Given my knowledge, I am not convinced that in the near-term the central banking systems will be bypassed or undermined, but having a head in the sand regarding new fintech tools is not productive either.

Do you see any potential uses for blockchain technology in cash flow management?

Yes, but not until there is more certainty around the value of cryptocurrencies, higher uptake and regulation. The business case for managing cash on a large scale in a non-conventional way needs to be fully understood. Corporates will also want to evaluate risk before making substantial changes to existing cash management structures. Watch this space.

Would you consider using cryptocurrencies to manage FX risks?

No. It’s still very early days for cryptocurrencies. I do not yet see certainty in value at the current time. However, the developments are interesting and I’ve seen that several corporates and financial institutions are working on “proof of concepts” or pilots. Treasurers should have an interest in blockchain and cryptocurrency developments. Seeing how quickly technology can change our world, it pays to be up to date and thinking ahead.

Hear more from Catherine Porter on maximising cash flow and managing liquidity by attending the Treasury Leaders Summit in London this December where she is hosting a seminar which will be a case study about recent projects at CBRE.

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