Corporate treasurers find opportunity amid regulation
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Corporate treasurers find opportunity amid regulation

Corporate treasurers are looking for the simple life, and having more efficient systems in place can bring its own financial rewards – but despite some advances, there is still a long way to go.

Squeezed budgets, tangled systems and regulations are still holding back corporate treasurers as they search for ways to make their operations easier and cost effective.

 There used to be the need to have a separate account in each country. The single payments system makes life easier

Michelle Price

Michelle Price, associate policy and technical director at the Association for Corporate Treasurers (ACT), says the group’s members are largely looking to find ways to make their operations more streamlined.

“It’s a mature market, but now treasurers are looking to standardize and simplify their operations,” she says. “There is a desire to move cash to a single location and to automate services, as this will increase efficiency.”

The implementation of the Single Euro Payments Area (Sepa) has provided one large-scale opportunity for treasurers to streamline their offerings in euro payments.

Speaking to Euromoney last month, Bank of America Merrill Lynch’s Ad van der Poel, head of product management for payments and receivables, EMEA, says the implementation of Sepa could have a marked impact, as it would allow for the consolidation of bank accounts within countries and across borders for the first time.

Although it was at first seen as more regulation and therefore an increased burden, Sepa is now being looked at as a way to reduce operations.

“Regulation such as Sepa helped to simplify the landscape,” says Price. “There used to be the need to have a separate account in each country. The single payments system makes life easier.”

Messaging standard

The system requires the usage of the ISO 20022 messaging standard, which, for the first time, will see all corporates – regardless of size or location in the region – sending and receiving information in the same format.

The streamlining impact of Sepa will potentially have easily quantifiable results for the corporates. PwC research for the European Commission showed the single payment method could potentially result in an overall saving of €13.2 billion ($17.6 billion) for corporates from reduced fees and the simplification of payment structures.

Also, it could see the freeing up of €179.5 billion in trapped cash that is left idle across the continent.

A move to efficiency also creates its own financial benefits, with up to €115 billion forecast to be gained across the region through streamlined processes and the opportunities lost through cash being trapped in the payments process.

And Price points out that when less time is being spent working on relatively simple processes, more time and investment can be made into addressing other challenges, such as accurate test forecasting and working on ways to reduce the much wider issue of trapped cash internationally.

However, problems still remain.

Earlier this year, Toyota Financial Services’ (TFS) treasury team adopted Bloomberg’s multi-asset risk solution to assist with managing exposures and automate risk management. 

Finer line

A representative from TFS told Euromoney that, in the current climate, the greatest difficulties are coming from the need to meet the numerous regulatory requirements imposed across the jurisdictions, adding: “A very competitive marketplace combined with a fluid and increasingly exacting regulatory environment is placing high demands on the treasurer to balance cost and risk.

“While walking a finer line between cost and risk, the operational, legal, compliance and external reporting challenges continue to grow. Treasury teams need to continue lifting capacity and building nimble and capable teams supported by robust and functional systems.”

While Sepa might help in the long term, regulations are not considered to have been a favourable move for the business.

In the Contemporary Treasurer 2014 report compiled by ACT among its members, it found 75% across Europe considered new regulation to be a negative thing. The main reason given was the increased workload and the amount of time that had to be spent to manage and report on regulation, and the lack of obvious benefit to the business.

The TFS representative adds: “Regulation is having a broad impact on both Toyota Finance and our counterparties. Within Toyota Finance, considerable time and effort must be dedicated to respond to regulations – planning and dedicated resources are required to ensure that a prudent and robust response is delivered to regulators.”

Sepa has helped to streamline payments, but there is not a system that will help treasurers to further pull together their processes. The difficulty in accurate test forecasting was noted by Price, and risk exposure transparency was named by 36% of respondents to the Deloitte treasury strategy and operations survey as being the biggest issue for them.

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