Treasury Today Country Profiles in association with Citi

The reinvention of treasury: part one

Person trying to find a solution whilst playing Jenga

Last week’s ACT Annual Conference pitched a new look for treasurers. Treasury Today headed up to Manchester to examine the main proposals.

To borrow a phrase much in use by a certain political party right now, treasurers are the ‘strong and stable’ element in any organisation. The expectation is that this profession will do what needs to be done without fuss or fanfare.

But when events that change the world, both positively and negatively, keep coming at the sustained pace witnessed today, surely ‘strong and stable’ needs something more?

The theme of this year’s ACT Annual Conference, held last week in Manchester, was ‘opportunity from uncertainty’. The way in which treasurers approach their craft is, or perhaps should be, subject now to a SWOT analysis, the organisers feel. The aim, to bring about change for the better.

Class SWOT

In reviewing relative strengths, weaknesses, opportunities and threats, treasurers should be able to place their organisations in an advanced state of preparation for whatever the world of politics, economics, technology et al cares to throw at them.

Boards have contingency planning firmly embedded in their consciousness, said Peter Goshawk, President, ACT in his introductory speech. With the ACT now working alongside multiple industry acronyms such as BIS, LSE, FCA, and BoE, the work to influence decision-makers has necessarily stepped up a gear or two in recent times. This, he feels, is helping to bring some predictability to the game.

However, with “political uncertainty everywhere”, Lord Michael Dobbs, Parliamentarian and creator of political drama, House of Cards, we are still subject to a “brutal” world. Is the cue to throw the towel in or get angry? Not in the slightest.

Debunking the myth that “the West is in a state of terminal decay”, he argued that this corner of the globe has an “inexhaustible capacity for moving on”. Culturally, scientifically, technologically: the West cannot help but advance.

But what about the rising global power of the East? Aren’t we all about to be swept into obscurity by China? No, says Dobbs. The country has made rapid advances and is now dealing with the political downsides of economic growth. It is as concerned as we are.

Resistance is useless

For those who wish to get things ‘back to normal’, Dobbs’ message is clear. Forget it. The world moves on. “Embrace change”, he advises, “and you will find opportunity in uncertainty”.

Stand still for too long and you start going backwards, eventually becoming history. Remember the British motorcycle industry’s response to the Japanese advance? It was a study in complacency and failure.

Brexit, for example, is not about Fortress Britain and her empire. It has to be better than that, stated Dobbs, railing against those who “insist on clinging to the old ways”. Neither does it have to be a zero-sum game where for one to win the other must lose.

The key is to look for new ways, “choosing evolution over chaos”. Technology too, sometimes accused as a means of making us all the same, should instead be seen as a way of allowing us to share more and find more in common. “Think afresh, be patient and be long term.”

Stats not all right

With a host of statistics at their fingertips, Dr Monique Ebell, Associate Research Director, National Institute of Economic & Social Research and Paul Watters, Head of Corporate Research, S&P Global Ratings, seemingly ignored Dobbs’ advice, looking back at what the world meant on paper (and then seemingly only up to 2015).

With doom-mongering pronouncements for the UK such a “a new free trade agreement is unlikely to make up the short fall in the overall loss of EU trade”, the mood was downcast.

So, where’s the opportunity? For Ebell, the fact that the likes of Google and Dyson have invested billions recently in the UK, show the country is a hotbed of R&D. By playing to its skills, she feels the UK can retain its status as a nation of global importance.

With services such as R&D and marketing creating “unmeasured export value” around the world, the UK can benefit globally without even needing a free trade agreement. But if the UK is to become a global R&D hub, we need the talent to feed it. Herein lies the rub. We need more investment in education and the ability to employ skilled migrants: both political hot potatoes right now. Whether you are strong and stable, for the many not the few, or want to change Britain’s future, you know what you have to do!

Leading advocate

Watts too sees good things ahead for the UK. Having threatened delegates with similarly gloomy numbers, he presented a “cliff edge scenario” as foreign direct investment into the UK shrinks. As the third largest FDI destination in the world, behind the US and China, the UK has much to lose. LSE research predicts as much as 22% over the next decade, even with a decent set of trade agreements.

The UK need not worry about being totally isolated. Watters views the English language and English rule of law as prevailing forces in global business. He also noted that there is nothing in WTO rules to prevent the UK from setting up ‘interim free trade agreements’. Indeed, he felt the UK could become a “leading advocate of free trade”, attracting other countries to sign up if it looks successful. His advice for companies is to “prepare for the worst but expect the likelihood of business as usual”.

Next week, we explore what people at the ACT conference had to say on the impact of technology on the world of treasury and why a diverse workforce is a must.

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