With a little help from my friends

Published: Oct 2013

Ireland’s economy has been through the mill in the past few years but its corporate sector has learnt how to tackle the destructive effects of the financial crisis. Treasury Today talks to the Group Treasurer of the country’s largest company about prospects for recovery and the power of knowledge.

Anthony Fitzpatrick

Group Treasurer

Ireland’s largest company, CRH Group, has navigated its way through some treacherous waters in recent times. But it is now on a more promising heading, not least because of the efforts of its own dedicated treasury team, led by Group Treasurer, Anthony Fitzgerald, and through the support of professional bodies such as the Irish Association of Corporate Treasurers (IACT).

CRH operates across Europe, the US, China and India and Fitzgerald has responsibility for both the formulation and implementation of CRH’s worldwide treasury strategy and policies. From this perspective he observes an Irish corporate sector that is “trying to be as upbeat about the economy as possible”. He notes that purchasing managers index (PMI) and gross domestic product (GDP) numbers over the past few weeks “are pointing towards green shoots of recovery”. But, he adds, these shoots have been “threatening to bud” for the last three years, so it remains to be seen if that thread of optimism is misplaced: if definite growth is not yet apparent, the economy is not sliding backwards either which in itself is a positive that Fitzgerald sees as heralding a fundamental change in direction.

Beyond the general macro-economic concerns, Fitzgerald lines up three main treasury challenges. Many banks are still deleveraging, he notes, and the availability of credit is still tight and the SME sector has felt the lack of availability most. Even if a business overcomes this hurdle, cost of credit has also jumped significantly, he notes. “Up to 2008, bank credit was perceived to be a bottomless pit of cheap money that would always be available; that’s no longer the case.”

The impact of Basel III and the way banks manage risk is amplified by the fact that they can’t tap the bond market as before, comments Fitzgerald. It is more expensive for a bank to fund itself and that cost is passed back into the corporate sector. Most strategic funding in Ireland (and much of Europe) has been sourced through the bank markets, with a smaller proportion of capital market or term-type funding, whereas in the US the focus is on longer-term funding. It is, notes Fitzgerald, another recent and significant change that more corporates are switching to the US model to gain stability.

In dealing with the issues that impact upon CRH’s treasury, Fitzgerald quotes Sir Francis Bacon who wrote in 1597, “Knowledge is power”. “Getting that knowledge by collecting relevant and timely information helps me to manage the treasury function within the business,” he says. However, given the flood of information available today, a revision of Bacon’s statement by 20th century American sociologist, Robert Staughton Lynd, is more apt: “knowledge is power only if man knows what facts not to bother with”. For Fitzgerald, this is the art of treasury in the modern world. “There is a huge body of information available so it how you distil that down to what’s relevant is the key.”

Fitzgerald, who will be contributing to the end-of-day round-up panel of the IACT’s (Irish Association of Corporate Treasurers) annual one-day Corporate Treasury & Cash Management Conference in Dublin on 20th November, is appreciative of the association’s activities and initiatives over the years that have helped guide the profession in the most appropriate direction. “Many of these had been in place before the crisis started, but they have really come to the fore in the last few years,” he notes.

Possibly the most pertinent for Irish corporates has been the regular seminars run around the country by IACT that touch on areas such as regulatory and accounting changes, investment and cash management strategies, benchmarking activities and even re-financing case studies. “They have all been very relevant,” he states, adding that as well as “hitting the hot topics in Ireland” the events, which attract many of Ireland’s treasury professionals, are a great place to “have a chat about the current issues we are tackling”.

Green shoots or not, Fitzgerald says he is personally feeling more comfortable with the recovery in and beyond Ireland. “A lot of research I’ve read over the last couple of weeks suggests 2014 is going to be a good year and that we can draw a line under the last few years,” he says. The Eurozone crisis is still a concern and, he adds, “we need to be able to draw a line under that too because it has dragged down consumer sentiment”. However, he is looking to “a positive outcome” from the elections in Germany this month. This, he feels, will be important not just for Germany but for all Europe, “establishing the foundations for a more positive 2014 and beyond”.

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