Treasury Today Country Profiles in association with Citi

Your operating model could be your worst enemy

A business plan is important, but reviewing and adapting it is essential. Today, corporates are obliged to re-evaluate existing processes and shake off operational ‘norms’ in order to survive. But are they willing?

The protracted aftermath of the financial crisis has opened up the possibility of global power shifts (from West to East) and dynamic development across business functions and systems. The question is whether companies, and treasury departments, are keeping up and whether they are updating their business and operational models accordingly.

Jordan Lawrence, Manager EU & APAC, Global Markets at Future in Finance, maintains that avoiding business and operational model redundancy may be difficult but is essential nonetheless. “Companies can become complacent if not careful and they need to constantly review their models and policies. This may involve complex, strategic roll outs but these analyses can really help to stop churn issues and can assist the business in adapting to the market situation,” he says.

According to an Ernst & Young survey released this week, corporate treasurers worldwide need to change their operating model to sustain business growth. Just over 100 treasurers were interviewed from large firms across 14 countries and the consensus was that unless corporates are prepared to address the fact that their existing processes may be out of date, they will not be able to conquer prevailing issues effectively.

No time, no money

Relevance and innovation is not always easy to achieve though. Budgets are restrictive and workers are already overstretched. But are some treasurers simply being stubborn and inflexible or even afraid to embrace change? Almost half of respondents in the survey believe improvements in the usage of technology are vital but confessed that their own practices are far from adequate.

Dimos Dimitriadis, Director, Treasury Advisory, Ernst & Young, comments, “The technology options available to treasurers are highly sophisticated, but our experience has demonstrated that, despite acknowledging their technology limitations, steps are rarely taken by treasurers to improve this area.”

Furthermore, fewer than 30% of treasurers rate their talent management programmes as developed and 60% of respondents cite difficulty in recruitment over the last two years. New approaches for attracting and retaining talent are called for, and corporates need to react quickly, considering ‘new’ methods such as hiring through LinkedIn are already a thing of the past, according to Lawrence. “Managers simply do not have the time to fend off hoards of mails from irrelevant applicants let alone sift through profile after profile trying to find a good one in the hope they will be interested. The ship has sailed on LinkedIn recruitment in favour of personal networks and candidate pools that dedicated industry professionals have built up over time,” he says.

Re-education

The initial investment and associated upheaval of a system change can add to the reticence of the corporate treasurer when embarking on a new business or operational model. However, coupled with a meticulously drafted business case, the leap can ensure returns in the medium to long term. Here are a few ideas of how corporates can take the plunge:

  • The right strategic plan and performance measurement system is needed.

    The importance of key performance indicators (KPIs) for financial risk is widely acknowledged in the treasury space, but operational KPIs are still largely unused. This needs to be re-addressed.

  • Management should be involved in the entire process.

    “Management are your soldiers on the front line, playing a key role in the direction of the business and providing support and constant advice on changing trends and legislation,” says Lawrence.

  • Culture and psychology.

    Does the company view itself as international (ie one home market with many foreign markets) or global (all markets are home markets)? Has the executive level become too comfortable with age old trends?

  • Employee engagement.

    Has management communicated appropriately with the shareholders/staff and incentivised them through rewards and recognition? Has each department had some input into the new model?

  • Technology alignment and innovation.

    Lawrence maintains that it is very important to have a grasp on new technology and trends to ensure that the company is being viewed by “Gen Y” as an attractive, forward thinking work place. This will also assist in searching for and attracting new talent.

Dimitriadis concludes, “Without a clearly defined, targeted operating model, significant progress for treasury and broader business is unlikely to be realised.”

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