It is now clear on each continent that the COVID-19 pandemic has created unparalleled disruption around the world. As a business owner, large or small, our immediate concerns are for our staff safety and to ensure that our cash flow is sound. What are the priority actions we might consider?
Managing and reviewing cash flow and cash flow forecasts is an ongoing exercise that must be monitored on a daily basis. For every treasurer, it is key to do so during challenging times, making sure they are profiling accurate figures. Forecasting and assessing in this period is indeed critical for any businesses survival, and this approach should be clearly documented in the company’s treasury and risk policies. For any business too, a robust treasury policy should be a basic management requirement. A correctly designed policy sets out details of the causes and potential risks around treasury department exposures and the appropriate risk responses for each of them.
In my position as an interim-manager and consultant in treasury, reviewing all aspects of my client businesses includes a close examination of existing policies and procedures, but also assessing whether major changes may be required during these turbulent times. For too many companies a treasury policy is a ‘frozen’ document instead of considering this as an evolutionary exercise.
In the life of a business, the opening of new subsidiaries, approaching new banks, M&A deals, the opening or closing of bank accounts, additional procedures, and also new risk appetite standards agreed by the board of directors, might affect staff behaviour, integrating new risks in the company. The critique approach in reviewing policies must ensure this document is comprehensive and easy to understand. I very often make use of staff feedback in this dedicated process.
Often the encountered risks particularly affect those with a decentralised organisational structure. For these companies, the COVID-19 crisis can be seen as an opportunity to boost their appetite for structural review, and to reconsider centralisation needs. We see many treasuries having achieved a high level of centralisation but, having also considered standardisation and automation, have found it much easier to adapt quickly to new business practices – and be able to feel more secure during the COVID-19 pandemic.
Today it seems highly likely that all these efforts will continue, becoming firmly embedded into organisational working culture. Thanks also to the growing role of technology and innovation, which is equipping treasurers in many business decision-making, greater value is delivered into the organisation, decreasing risks in the meantime. I also often see that companies that have onboarded strong guidelines and policies have seen their treasurers become more responsive, giving them more time to focus on their strategic role and on the needs expressed by the business.
As a conclusion, since the treasury function has risen in prominence, a closer focus on policies will need to become more prevalent, with more frequent updating of these documents.