Treasury Today Country Profiles in association with Citi

I don’t have tech budget…what’s the alternative?

The benefits of technology in the treasury space have been widely acknowledged by the industry yet there is still some distance to go before players across the board can fully embrace the rising trend. One reason for reticence, despite potential high return on investment (ROI), is the initial funding required for such a project. So how else can a corporate compete?

Growth and cost savings are among the top priorities for businesses according to the 2012 Gartner CIO Survey. While technology may play a crucial role in the drive towards enterprise growth and innovation, according to the survey, IT budgets are expected to be more or less non-existent for the year ahead. In light of this, Treasury Today goes back to basics with HSBC’s Head of Commercial Banking in Continental Europe, John Casey, to recommend five other areas of priority for businesses looking for growth in 2012.

1. Get ready for RMB

UK chancellor George Osborne’s recent confirmation of his commitment to establish London as an offshore trading centre for the renminbi (RMB) reinforced, yet again, the currency’s growing global importance. Certain corporates have remained somewhat wary of adopting RMB thus far as the rate of change regarding RMB regulation has been too quick for some. However, with RMB offshore centres planned worldwide, John Casey advises that businesses should consider whether adoption of the currency within their treasury and finance departments could place them in a competitive position.

2. Look internationally for opportunities

As the Eurozone crisis rages on, corporates are well advised to do some groundwork on other regions in which their businesses may prosper. Now is the perfect opportunity to tap into international talent pools and gain trade access to overseas markets, especially with the recent spurt of rapidly emerging markets. “With many businesses feeling the impact of domestic recessions, diversifying internationally allows a business to both spread its risk while also boosting its competitiveness on a global scale,” recommends Casey. Taking the time to garner local knowledge by partnering with existing companies in a particular area will lay the groundwork for future success, he says.

3. Reconsider your cash flow

Determining the peaks and troughs of the company’s cash flow cycle early in the year and allocating funds to cope with the ‘lag’ times is standard practice. However, treasurers may do well to review their existing process, compare and analyse historical data in order to improve on previous results. “By strengthening processes and information to provide insight, regularly evaluating its finance function against its objectives and working in partnership with its bank, a business can consider new ways of managing debt and equity in order to bolster their financial plans and realise their growth ambitions,” says Casey. Furthermore, having a contingency plan for those unforeseen slumps can be effective, as can securing an alternative source of funding in the event of a ‘dry’ spell.

4. Review your supply chain

If international expansion is not for you, even addressing the existing supply chain can reap rewards for a corporate. Establishing your business as a leading industry competitor requires rigorous assessment of your suppliers – consider supplier scorecards if these are not already in place. Also, conducting or commissioning research into regions that show strength/interest in your sector can prove lucrative. The main goal is to grow and strengthen the supply chain whilst also establishing a ‘Plan B’ network. Forming alternative supplier networks outside one particular region can aid business continuity in terms of national holidays, unforeseen natural disasters or political events.

5. Prepare for SEPA

Treasury Insights reported in late December 2011 that the SEPA deadline has been announced by the European Council as 1st February 2014 (subject to final endorsement). SEPA will introduce standardised and automated payments and receivables processes across Europe, with the aim of achieving a generic harmonised system for cross-border payments. According to Casey: “Introducing governance around SEPA that is appropriate for each individual business model will be crucial, as will a roadmap for migration to help businesses meet the 2014 deadline and ensure timely compliance.”

So, while the technology space may continue to evolve throughout 2012, there are many other avenues corporates can take to ensure that their business is competitive. With the right balance of internal reviews and forward thinking, not to mention early compliance with global regulations, corporates can optimise their business growth without breaking the budget.