Treasury Today Country Profiles in association with Citi

January 2012

Previous editions

Editorial

Corporate DIY: do or die?

At this time of year, it’s always tempting to reflect on major events that have shaped the preceding 12 months. But when there have been so many high profile headlines, it is the ‘under the radar’ news that tells of trends closer to home.

Far from floundering, treasury departments have been proactive in translating external pressures into internal drivers of efficiency. We have seen treasurers’ skills and creativity put to good use as corporates think even further outside the box to address challenges in an optimal way, and often, using a minimum of resources.

For many corporates, this has meant aligning themselves with best practice. A lack of readily available credit, in particular for SMEs, for example, prompted a number of larger corporates to embrace best practice supply chain finance (SCF) programmes last year. That trend is expected to persist in 2012 as companies continue to view their supply chain strategically.

Already, a handful of companies have gone one step further though, customising their own supply chain solutions. Certain very large corporates have even cut their banks out of the SCF loop, funding their own supplier finance programmes. Elsewhere, we have seen hybrid solutions created, whereby the company can invest in the programme as and when it wishes, with the bank stepping in if the company’s cash position does not allow.

Adam Smith Awards for Best Practice and Innovation

This trend of corporate treasuries ‘doing their own thing’ is not limited to SCF. Treasury Today’s 2011 Adam Smith Awards for Best Practice and Innovation recognised a number of corporate DIY (do-it-yourself) solutions.

Google for example, has developed its own suite of automated interfaces that allow the treasury a global view of its commercial paper and currency options, as well as connecting the company’s treasury workstation to its bank systems and ERP system. This means far less manual labour for the treasury team in preparing forecasts and overall improved efficiency. Naturally Google has a significant advantage over many smaller, less technically-savvy companies in building its own technology, but the principle still stands that ‘off the shelf’ solutions are not the only, or always the best, option.

Honeywell was another company recognised with an Adam Smith Award for its in-house innovation. In order to capitalise on its position as a strategic business partner within the organisation, the treasury department developed a new operating model, aiming to promote performance, value creation, process excellence and innovation. Dubbed ‘The Honeywell treasury operating system’, areas of focus include lean Six Sigma and maximising employees’ performance. While such an overhaul takes time and buy-in, there is no reason why similar ‘home grown’ projects cannot be initiated by even the smallest of treasury departments.

Of course, this is not to say that key external partnerships no longer add value. Treasury could not function properly without its external relationships (and credit lines). But there too, treasurers are starting to embrace the DIY attitude – setting up independent consultancies, or even creating their own ‘bank’ in the case of the Corporate Funding Association.

So, whatever 2012 may throw at the treasurer, we can be sure to see some innovative responses from the corporate community.

To keep up-to-date with what your peers are doing, sign-up to our Treasury Insights newsletter – a weekly digest of all the latest stories affecting treasury, including commentary and analysis that you won’t find anywhere else. And for those of you with solutions to showcase, remember that nominations for the 2012 Adam Smith Awards open on 31st January.