François Masquelier

March 19th, 2015 - London

Payments International - Conference

What Is At The Top Of The Agenda For Corporate Treasurers?

Treasury Transformation

• On-going TRANSFORMATION of treasury

• Treasury function has entered a new era of its developments… Treasury V.4.0

• We can talk about DISRUPTIVE innovations…

• Many changes (e.g. e-payments, new financial regulations, IT technology evolution, new IFRS accounting standards, market volatility, low and even negative IR, ERM, focus on IC’s, further centralization, BI reporting, etc…)

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Treasury Transformation... Evolution or Revolution?

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Treasury enters into a new version

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A more strategic role for treasurers

An evolving role:

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Drivers of this evolution

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Treasury Evolution… or Revolution?

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Changing Regulatory Environment…

• Abrupt changes in REGULATORY ENVIRONMENT with new rules delivered concurrently and not always well-coordinated

• Inherently COMPLEX taming the « regulatory wolf »

• Calls for fundamental system changes without impacting « business as usual » activities

• However COSTS of compliance > BENEFITS that could be generated

• Some consequences of financial regulations are not yet identified although they could fundamentally impact some industries

• Never ending story (« Groundhog day »)

• However, technology is evolving extremely fast too… Technology can help being compliant and producing newly required reports and disclosures

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Can Reg’s be disruptive?

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Regulations or… DEregulation?

• REG’s = 2nd highest risk (according to the Economist Survey 2008)

• EU regulations remain a building without architect and clear plans

• Juxtaposition of rules without assessment of potential consequences for “real economy” and lack of harmonization across the world

• The “real economy” is always assimilated to FC’s meaning no exemptions

• Making distinction between “bad luck” and “mismanagement” remains a difficult task for regulators

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PRO’s and CON’s of Regulations

+ Better discipline - Admin burden/red tape

+ Stronger banks - More costs

+ Less systemic risks - Complexity

+ Counterparty risk - Liquidity risk increased

+ Revisit of processes - Banks niches approach

+ Improved IC’s - Cost of hedging

+ Easier « sale » of IT projects - Time consuming

+ Special focus on treasury - Tough to « sell » projects

+ Enhancement of GT role - Negative ROI

+ Rationalization of banks - IT systems not ready/XL

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The « real economy » supports regulations but not over-regulation

Questionnaire from EU Parliament – Public Consultation on how to enhance financial services legislation (April 2014)

• EACT favors regulations for a stable financial system but… better calibrated

• Financial Regulations have direct or indirect impacts on Corp’s (end-users always pay for it)

• EACT recommends (Sept 2014 letter):

1. Sustained dialogue with NFC’s

2. NFC’s are different from FC’s exceptions required in some cases

3. Better pre-assessments of impacts in order not to be a brake on economy

4. Better staffing of ESMA

5. To be consulted prior to regulate

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Key Issues for Treasurers

• Regulations or… « REGUVOLUTION »? (e.g. EMIR2, SEPA, B3/ CRD IV, BEPS,

MiFID2, Bank Separation, Capital Market Union, CRA, …) how to ride the wave

to stay afloat?

• Treasury transformation with evolving role

• IT evolution to be integrated (e.g. e-, new IT tech, BI, dash boarding, TiRMS…)

• Centralization, Payment factories (COBO/POBO), SWIFT connectivity and eBAM

• Enhancement of Internal Controls

• Current economic environment with high market volatility and low to negative IR

• How to improve cash visibility, CFF and Financial Supply Chain? Paradoxical…

• Banking disintermediation is continuing… Fintech’s new competitors of banks?

• Political issues having financial impacts (e.g. Russia/Ukraine, Iran, commodity

prices, Grexit and €, EU stability pact, environmental questions, fragility of

emerged and emerging countries, etc…)

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What keeps treasurers awake at night?

Source survey from GTNews and JPM 2014

• #1 Optimize cash-flow globally

• #2 Improve treasury productivity

• #3 Keeping up with technology

• #4 Keeping up with regulatory changes

• #5 Protecting my company from fraud

It can be summarized with the 3 R’s principle: Risk – Returns - Regulations

Treasury is increasingly a round-the-clock role and you never know when the next regulatory change, market movement or M&A transaction will disturb your sleep. Even if you do sleep like a baby, remember that babies often wake up every two hours screaming!

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What are Treasury Priorities for coming years?

• Moving towards integrated Financial Risk Management model to better « fight » market turmoil and high volatility, as well as to better monitor correlation factors

• Frameworks to create value (TVA) and to measure performances (i.e. KPI’s and KRI’s)

• Alignment of People, Processes and Technology in support of evolving needs of the corporate growth (rationalization, efficiency, productivity)

• Keeping up with on-going over-regulation wave. Need for adapting processes to be compliant

• Managing increasing treasury impact of emerging markets, which requires more attention than ever

• Closer integration between treasury and businesses (e.g. hedging, financial supply chain, WorkCap optimization, services to alternative-payments, etc..)

• Further centralization, standardization and automation of treasury hubs

• Ultimate IT goals remain full STP processing and enhancement of Internal Controls to mitigate risks of fraud

• How to best use “Big Data” in treasury ?

• Dialogue in order to better align Know Your Company (KYC) and Know Your Bank (KYB) and to better define evolving Bank Relationship Management Strategies to be applied

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Conclusion

« The success lies in the rapid responses to changing situations »

(Sun Tzu -« The art of war »)

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Follow me on Twitter, myTreasury and ATEL LinkedIn group

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Twitter myTreasurer

LinkedIn

ATEL Group

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Thank you for your attention!

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François Masquelier, Twitter:

Chairman of ATEL @FrancoiMasquel

@ : president@atel.lu Blog:

: + 352 42142 4875 http://mytreasurerwordpress.com

www.atel.lu