FXBeacon: Giving Back
This article is written by GPS Capital Markets Years ago, I read the book Rich Dad Poor Dad by Robert Kiyosaki. In the book, Kiyosaki teaches the concept called the “Law of Reciprocity,” where you reap the rewards both tangible and intangible by helping others. This is a concept I firmly believe in and rely on to guide my life. The company I’ve worked at for 22 years and helped build, GPS Capital Markets gives each employee one day a year to give back to the communities where we live. Last week I took advantage of this to deliver almost 19,000 pounds of food to the Utah Food Bank. Over the years I have learned that for me, giving back to others pays much better than anything else I do. Although I love giving to charity, I also believe very highly in education and helping other people succeed in their careers. To this extent, I’d like to point out a few ways to give back that can be invaluable. Influencing beyond the screen Several times a year I guest lecture at the local universities. A few weeks ago, one of my connections on LinkedIn started a new job at PWC and I happened to like his post on LinkedIn. I got this unexpected response back from him, “Thanks, David! I shifted away from core audit to treasury and foreign exchange due in part to your presentation at BYU. Looking forward to the journey!” For me personally, it made my day to see I was influential in someone’s life, to the point that they modified their career trajectory. One of the most recognizable things I do is appear on TV shows like CNBC discussing the markets and what is going on globally. I think this is very uncomfortable, and stressful. But, having spent many years in the FX field, I feel like my knowledge can help others. I’m not so sure that I get much back from this, but I feel obligated to share what I know with others. Today, it’s easier than ever to connect, collaborate, and share parts of ourselves with others. Yet, the challenge lies in how we contribute authentically and meaningfully, especially when sharing our knowledge and resources. Whether we’re mentoring, teaching, or offering guidance, our actions often have a more profound impact than we realize. For example, one LinkedIn connection recently reached out to thank me for influencing his career shift from core audit to treasury and foreign exchange after attending one of my presentations at BYU. Moments like these are a reminder that what we do matters more than we think. However, stepping into the spotlight, such as appearing on shows like CNBC, brings its own set of challenges. Many may perceive this visibility as glamorous, but for me, it often feels stressful and uncomfortable. Despite the discomfort and stress, I continue to participate because I believe my years of experience in the FX field can genuinely help others. It’s not about what I get in return, but rather a sense of responsibility to share what I’ve learned, knowing that even in a public forum, my insights might make a difference. Giving at the heart of GPS When GPS Capital Markets was founded 22 years ago, the goal was to approach business differently. Our mission was to use our knowledge to help treasury clients improve—analyzing, predicting, and responding to markets with precision and agility. My primary focus was ensuring our team had the training needed to guide clients in making informed decisions about managing global exposures. Over time, this evolved into developing tools that provided clients with greater visibility and oversight of their exposures, enabling them to make strategic decisions. It’s remarkable that, even with all the technology available today, achieving this level of clarity remains a challenge. GPS Capital Markets has developed a full suite of International Treasury management tools. These tools help make very complex tasks easy. For instance, our intercompany netting tool allows clients to look at all of their global intercompany invoices, and rather than pay them one wire at a time, they can now send one transfer for their netted total and make book entries for the remainder. Our Balance Sheet hedging tool looks at global FX exposure, and again nets exposures at the parent company, while allowing hedging at the Subsidiary. We don’t charge for these tools; they are designed to make life better for our clients. Then once clients can identify accurately what their exposures are to put together a program to hedge those exposures that suit their specific company’s needs. With most companies, I spend a lot of time getting to know how their business works, and what type of concerns they have. All companies are not equal and can have varying needs depending on their industry and even competitors. From there, I usually put together 3-4 different ideas on ways to implement and manage their currency exposure. Going through these ideas in detail with the client allows them to see that there are many ways to manage exposure and choose the correct one for their situation. So, how does this education and training both internally and externally help me? My clients are loyal and tend to bring business to me even when they move companies. Additionally, if you look at GPS compared to other FX businesses you will see that our client turnover is significantly lower. If we help clients make good decisions, they will pay us back with their loyalty. Want to be more successful and happier in life? Look at what you can do for others first; the Law of Reciprocity will bring you much more reward than what you spent in giving back. Also Read Join our Treasury Community Treasury Masterminds is a community of professionals working in treasury management or those interested in learning more about various topics related to treasury management, including cash management, foreign exchange management, and payments. To register and connect with Treasury professionals, click [HERE] or fill out the form below to get more information….
Franklin
Leading through change: Essential leadership skills for Treasurers
Treasurers are more than just the custodians of cash, they’re leaders who guide their teams and companies through times of change. Over the years, having led numerous treasury projects across the globe, I’ve seen that the most successful treasurers are those who adapt, think strategically, and inspire others. Treasury leadership is about more than just technical expertise; it’s about how we manage change and help our teams grow in a constantly evolving financial clime. Here are some of the key leadership skills I’ve found essential for treasurers when navigating change. 1. Adaptability: Embracing and leading change Change is constant in the Treasury, whether it’s shifts in regulation, the rise of new technologies, or market volatility. A great Treasurer not only keeps up with these changes but also leads the way. For example, I worked on a project in West Africa where new regulations forced us to pivot from traditional investment instruments to alternative options. Rather than resist, we embraced the change, learning about new instruments and adapting our strategy quickly. This shift allowed us to continue meeting our goals while staying compliant, ultimately leading to a stronger, more resilient portfolio. Adaptability isn’t just about being reactive to change, though; it’s about leading your team with confidence when things shift unexpectedly. It’s about creating a culture where change is seen as an opportunity, not a threat. 2. Strategic thinking: Looking beyond the numbers For Treasurers, strategic thinking is about aligning financial strategies with the company’s broader business goals, especially during shifts in economic conditions. I led treasury operations for a beverage manufacturing company during a period of rising interest rates. This environment posed challenges, as increased borrowing costs impacted our cash flow, given the significant capital requirements for production, equipment, and raw materials. Rather than passing costs on to customers, we took a strategic approach by adjusting our financial structure to navigate this rising rate clime. We renegotiated terms with our suppliers to extend payment windows, helping us free up cash and reduce immediate financing needs. We also prioritized early repayments on variable-rate loans to minimize exposure to rising interest costs and secured fixed-rate 7-year loans, locking in predictable costs for future expansion. Additionally, we revisited our hedging strategy to mitigate the potential impact of currency fluctuations on our imported raw materials, which could further strain cash flow under high rates. By proactively managing both financing and operational strategies, we were able to protect our margins and continue growth initiatives, even in a high-rate environment. Strategic thinking in treasury means seeing beyond short-term adjustments and making decisions that support long-term resilience and growth. 3. Effective communication: Making complexity simple Treasury can be a complex and technical field, and often, as a Treasurer, you need to explain complicated ideas to people who don’t speak “finance.” Being able to communicate clearly is essential. I once had to explain the nuances of currency hedging to a team of non-financial stakeholders. Instead of speaking the jargon, I focused on real-world examples: how hedging would protect us from price increases in raw materials and help stabilize costs. Clear communication builds trust and alignment across teams. As a Treasurer, you need to make sure that your team, executives, and other departments understand the treasury strategy and how it ties into the company’s overall vision. When everyone is on the same page, decisions are easier to make and execute. 4. Resilience: Staying strong in the face of adversity Treasurers often find themselves at the center of high-pressure situations, particularly during times of financial uncertainty, like during the COVID 19 pandemic. Whether it’s a market downturn or an unforeseen crisis, resilience is key to maintaining control. I remember during the 2020 financial crisis, when liquidity was tight, I was managing treasury for a large multinational. We had to make quick decisions to protect the company’s cash flow. It wasn’t easy, but by staying calm and focused on our long-term objectives, we managed to weather the storm and came out of it in a stronger position. Resilience is about staying steady and making informed decisions, even when things are tough. It’s also about keeping the team motivated and confident in the face of adversity. As a treasury leader, you set the tone for your team in times of crisis, and your resilience will be felt throughout the organization. 5. Technological savvy: Harnessing the power of tech Technology is transforming the treasury function, and as a leader, staying on top of fintech trends is crucial. I recall implementing a new ERP and TMS for a large beverage manufacturing company as the Head of Treasury, I experienced great resistance. We had to raise project champions within the resistance which infiltrated and spread the benefits of the technology. This eventually dismantled the resistance, and people quickly adopted the technology, which led to increased efficiency. Treasurers today need to be open to new tools and systems but should anticipate internal resistance and proactively develop mitigation strategies. Whether it’s leveraging AI for better cash forecasting or using data analytics for smarter decision-making, embracing technology can dramatically improve efficiency and performance. Staying tech-savvy means looking at how new tools can enhance treasury operations and make the business more competitive. 6. Mentorship and team development: Growing future leaders Leading a treasury team means more than just managing processes, it’s about developing people. As treasury leaders, we have the responsibility to mentor and nurture the next generation. I once helped create a mentorship program within my team, where we paired senior team members with junior colleagues to guide them in both technical skills and leadership development. The result? A more engaged, capable, and motivated team that could handle more complex tasks with confidence. Mentoring is one of the most rewarding aspects of leadership. By investing in your team’s growth, you’re not only ensuring the long-term success of the department but also building a culture of leadership that can thrive beyond your tenure. 7. Visionary Leadership: Inspiring the future A great Treasurer doesn’t just manage today’s treasury needs;…
Jessica
Setting up a tech company’s new foreign office
This article is a contribution from one of our content partners, Bound Expanding a tech company to a new country In 2017 I was working for Paxos in New York City. After some back-and-forth with our CEO over the course of 6 months, I agreed to move to London to set up an office and build a team there. Paxos had an office in Singapore, so this wasn’t the first time it had opened a foreign office, but it was the second. 😉 We were working on a big project with some UK partners and I was traveling to London for one week each month anyway–YOLO. There were a million things to figure out when opening up a foreign office. Set up the legal entity. Find a payroll provider. Find and rent office space. Get new employment contracts. Learn the local laws. Get a visa for you and others. There is a lot. One thing that I didn’t think much about personally and the company didn’t think much about either, was how volatile exchange rates could potentially impact salaries. Not thinking about currencies For me, of course, the Post-brexit era wasn’t great on my newly negotiated USD-converted-to-GBP salary. I was negotiating a cross-currency compensation package around this time. I negotiated hard. At first, I was feelin’ good. I paid rent and food in GBP, but all my savings and investments were going back to USD. Then this happened. Feelin’ less good. I took roughly a 15% pay cut in my disposable income. From the job perspective, on the other hand, I was hiring UK staff. UK salaries were looking better and better for our USD-funded startup accustomed to NYC salary demands. We built the headcount up from 1, to 3, to about 25. Talent in the UK looked like a bargain. Then this happened. Now, personally I was feeling a bit redeemed, but our payroll budgets were getting blown out and it looked like the UK-office was overpaying for talent. Felt like I couldn’t win. My personal takeaway Well, that was the lesson. I’m a product manager. I’m not a currency trader. Should I really be surprised that it felt like I was always bleeding from exchange rate movements? If you’re not a currency trader but find yourself trading currencies, reach out to explore how you can use Bound’s app to minimise such losses and risk. Recommended Reading Join our Treasury Community Treasury Masterminds is a community of professionals working in treasury management or those interested in learning more about various topics related to treasury management, including cash management, foreign exchange management, and payments. To register and connect with Treasury professionals, click [HERE] or fill out the form below. Notice: JavaScript is required for this content.
An Interview with Patrick Kunz, Founder of Treasury Masterminds
At Treasury Masterminds, we’re all about fostering meaningful conversations that inspire growth and innovation in the Treasury space. Recently, we hosted an insightful dialogue between our founder and board member, Patrick Kunz, and an ambitious junior professional, Prakhar Sinha, stepping into the world of treasury. What started as a straightforward interview quickly turned into a dynamic exchange, with Patrick offering seasoned perspectives on the Treasury landscape while also reflecting on the fresh inquiries brought by our guest. In this blog, Patrick shares highlights from their discussion, touching on everything from treasury fundamentals to cutting-edge topics like AI, sustainable finance, and the evolving role of ESG. Readers will gain a behind-the-scenes look at the strategies he uses in assessing treasury processes, aligning with C-suite expectations, and navigating regulatory changes—all essential for a resilient treasury function in today’s complex financial world. We invite you to dive into this conversation and discover practical insights that can benefit Treasury professionals at every level. At Treasury Masterminds, we’re dedicated to connecting and empowering the Treasury community, encouraging discussions that help treasurers adapt, evolve, and succeed. Q.1 Could you please describe your professional experience and progression in the field of treasury management? I have been in Treasury all my professional life. Starting as a cash and Treasury manager for a German multinational. A relatively small Treasury team of 10 and a wider team of 30 Treasury is great to learn fast about a company’s cash flow, financing, and risk exposures. Q.2 Could you elaborate on the framework and methodology you use for conducting treasury assessments? Specifically, how do you evaluate the effectiveness of treasury processes, identify potential inefficiencies, and quantify cost savings through your treasury scan? There is some adaptation to the client i do the scan for but basically a scan focussed on the 3 (potentially 4) pillars of treasury. 1) cash management. QUestions like how many bank accoutns do you have, do you have fill cash visibility. But also what are your cash management costs and are their benchmarked. 2) risk management. What is your FX and IR exposure. And do you understand the dynamics around it. How do you hedge and why ? Risk apetite But also cost of hedging (often a quick saver in a company). 3 financing: does your financing strategy align with comany goals. Does the financing provide enough flexbility? what if market dynamics or company cash flow changes. Derivatives. But also: benchmarking financing costs. Pillar 4 is about technology and automation: what tools can you use to help automate repetitive tasks or what tools can help you increase your treasury information. Q.3 Given your experience with an online FX trading and payment platform, what is your perspective on the current state of the FX market? What key drivers do you believe are influencing FX risk today, and how can organizations effectively manage these risks in such a dynamic environment? The FX market is one of the biggest in the world. Buying and selling currency daily, relating to world trade. If your company has FX risk it is important to manage it. It all starts with determining your risk apetite. Do i want to elimate my FX risk for 100% or is there some room for speculation e.g. hedging only 80%. Not only for speculation but for changes in exposure. Next key question is the hedging horizon. How far into the future do i want to hedge (or do I have relevant information to make a hedging decision). All this can lead to a FX policy which should be applied to in a company with FX risk. Q.4 What are some of the key challenges you encounter when setting up treasury departments and acting as an independent advisor for treasurers? It depends on the company. I always start with asking a CFO; where is your pain in your treasury. Is it acces to capital or is it global cash visibilitiy? it might be FX exposures or changing market conditions. Depending on where the biggest gap is that is the starting point of treasury focus. Build from there. Q.5 What is your approach and mindset when persuading C-suite executives on treasury strategies? How do you ensure your recommendations resonate at their level? A treasury that is in control means that the company has visibility of their current AND FUTURE cash flow. They have back up facilities with their banks if cash flows are lower then expected or when working capital is low. The treasury manages the FX and IR risk and makes sure cash is at the right time and the right place. A good treasury makes sure the CFO can sleep at night and doesnt have to worry about cash and financial risk. Q.6 How do you ensure a strong synergy between the client and interim treasurer, making sure both parties’ expectations align for a successful partnership? align the goals of the asignment up front and keep updating each other during the asignment. Agree on smaller key milestones and keep reporting on them. Create a culture of telling each other if you are not satisfied to keep each other honest. Q.7 Can you share the journey behind TreasuryMastermind.com and how it has evolved? What has been its impact so far? The idea of Treasury Masterminds is an online community and forum where treasurers can come to discuss and talk to each other. Via the forum to post questions (and get answers) and the blogs, webinars and podcasts to get information. Correct information that is independent. Even if it is from content partners it went though a selection process of our team to make sure it is not sales focussed but it is informational or educational. TM is for all treasury levels, both junior and senior. It started as a hobby project but after only 9 months we reach thousands of people a month and added a team of 14 treasurers around us that support the mindset. SO we are here to stay and grow further. Q.8 In a recent conversation with Dominic Lynch, sir, he highlighted a…
Creating an Impactful Professional Value Proposition
Constructing and refining an elevator pitch are about as much fun as writing a resume, but the risk of not having and delivering one can keep your career on ice. I have always found it challenging to create and manage my own elevator pitch, so I began to ponder how I could help all professionals create and manage an elevator pitch. This blog shares the “secret sauce” for anyone to create an impactful value proposition in 15 minutes or less. I have come up with five questions that people can ask themselves to discover the ingredients to craft an impactful professional value proposition: The following are 5 steps anyone can use to create a quality elevator pitch (professional value proposition): Here are the three pillars of my current professional value proposition: An impactful value proposition is an asset to any treasury career. It speaks to what you have accomplished, how you do it, and the value of working with you and investing in building a relationship with you. Stay tuned for the next blog in Managing Your Professional Brand in Treasury series! Also Read Join our Treasury Community Treasury Masterminds is a community of professionals working in treasury management or those interested in learning more about various topics related to treasury management, including cash management, foreign exchange management, and payments. To register and connect with Treasury professionals, click [HERE] or fill out the form below. Notice: JavaScript is required for this content.
Ernie Humphrey
Designing a Robust and Scalable Treasury Policy for an International Business
This article is a contribution from our content partner, Salmon Software Key objectives of the new treasury policy Dechra Pharmaceuticals is a global leader in the veterinary healthcare market, with a presence in over 50 countries worldwide. Founded in the UK in 1997, Dechra has expanded rapidly over the past two decades, both organically and through acquisitions, to become a major player in the animal healthcare industry. As the company has grown, so too has its need for a robust and scalable treasury policy that can support its global operations. Before 2014, Dechra’s Treasury operations were decentralised, with each subsidiary managing its own cash and treasury functions. This approach led to a lack of visibility into the company’s consolidated cash positions and foreign exchange (FX) exposure, making it difficult to manage risk and optimize cash usage. To address these challenges, Dechra implemented a central group treasury and adopted a netting system in Europe. The cash pool became a zero balancing cash pool and also expanded into the USA when the company implemented a Treasury Management System (TMS) from Salmon Software, known as Salmon Treasurer, to support its treasury operations. The primary objectives of the TMS were to provide better transparency into Dechra’s consolidated cash positions and FX exposure, as well as to enable the company to hold intercompany positions and capture zero balancing and netting movements. To achieve these objectives, Dechra established a close relationship with Salmon Software and implemented MT-940 reporting of bank account balances and transactions. This allowed the company to account for daily interest and taxes arising from those balances and transactions. “Dechra manages risk in its treasury operations by centralising FX risk in the UK at group treasury”, explains Steve Card, group treasurer at the pharma specialist. “For acquisitions, Dechra matches the currency of the acquisition price with borrowings in the same currency. For transactions, we use a daily zero-balancing cash pool for the majority of our operating subsidiaries to centralise FX risk.” FX position is monitored throughout the month, with actions taken to reduce the impact of currency movements on the group P&L. “No transaction hedging is undertaken at subsidiary level, nor is there any other translation hedging undertaken by the group. Dechra relies on the Salmon Software TMS for the processes, information, and reporting needed to execute this strategy efficiently,” Card further clarifies. “Dechra’s approach to liquidity management and funding is reactive, using a combination of cash, committed RCF facilities, private placements, and equity funding. The company’s treasury policy requires that group leverage (total group borrowings/EBITDA) be maintained at a ratio of 2:1 or below. If the ratio rises above this, it must be returned to 2:1 or below within a 12-month period.” Dechra’s investment strategy to date has been conservative, holding deposit funds only on a short-term basis because of the opportunistic nature of acquisitions and the desire of both the group and its rating agency to minimize outstanding debt. Dechra does not currently have any treasury KPIs in place. A conservative approach to tech infrastructure Card is a strong proponent of a policy-led treasury tech stack, rather than having software guide decision-making. “Dechra is not an early adopter of new technology, and its treasury technology is based around proven technologies such as intercompany netting, TMS from Salmon Software, fed by MT-940 feeds from participating banks, and centralized daily zero-balancing cash pools,” he states. “Dechra has tailored these technologies to its particular requirements, especially in the areas of intercompany accounts, transfer pricing, FX exposure reporting, and dividend management.” Dechra approaches capital structure management and debt management primarily at the time of assessing the funding structure of an acquisition. There are no hard and set rules, other than the leverage requirement to be 2:1 or below, which is a key element of the company’s treasury policy. Also Read Join our Treasury Community Treasury Masterminds is a community of professionals working in treasury management or those interested in learning more about various topics related to treasury management, including cash management, foreign exchange management, and payments. To register and connect with Treasury professionals, click [HERE] or fill out the form below.
The Changing Face of Corporate Treasury: Why Adapting Matters
Let’s face it—corporate treasury isn’t what it used to be. Gone are the days when we were just number crunchers tucked away in the back office, counting beans and managing cash. Now? We’re right in the thick of it, helping shape company strategy and making big decisions. It’s been quite a ride, and it’s all thanks to a perfect storm of globalization, tech advances, new regulations, and a laser focus on managing risk. But here’s the thing: with all this change, we’ve got to be nimble. That’s where change management comes in. It’s not just a buzzword; it’s our ticket to staying relevant and thriving in this fast-changing world. And don’t get me started on generational differences; that would be a whole separate article. Out with the Old, In with the New Remember when our biggest concerns were making sure there was enough cash in the bank and we weren’t breaking any rules? Those were simpler times. Now, we’re juggling a whole new set of balls: Why Change Management is Our New Best Friend So, how do we keep up with all this change? That’s where change management comes in. Here’s why it’s so crucial: 1. Getting Everyone on the Same Page Treasury doesn’t operate in a vacuum. We’re part of a bigger picture, and our goals need to align with the company’s overall strategy. Change management isn’t just about updating our own processes; it’s about making sure we’re moving in lockstep with the rest of the organization. For example, if the company’s pushing for aggressive growth in new markets, we need to be ready with strategies for managing increased foreign exchange risk and setting up efficient cash management systems in those regions. Change management helps us stay tuned in to these big-picture goals and adapt our approach accordingly. 2. Embracing the Chaos If you’re not changing, you’re falling behind. Building a culture of agility in treasury means fostering an environment where people aren’t just okay with change—they’re excited by it. This might look like encouraging your team to experiment with new fintech solutions, even if they sometimes fail. Or it could mean setting up regular brainstorming sessions to reimagine how we approach traditional treasury functions. The key is to make change feel like an opportunity, not a threat. And it is ok to fail! 3. Leveling Up Our Skills As Treasury becomes more strategic, we need a whole new skillset. Gone are the days when Excel prowess was enough. Now we need people who can analyze big data, understand complex financial instruments, and communicate effectively with stakeholders across the business. Change management helps us identify these skill gaps and address them proactively. This might involve setting up training programs, hiring new talent with different backgrounds, or partnering with other departments to share knowledge. The goal is to build a team that’s always learning and growing. As a manager, be open to hiring different skillsets, not only technical but also soft skills. 4. Playing Nice with Others Effective treasury management today requires collaboration across the entire organization. We need to work closely with IT on cybersecurity and system integration, with legal on regulatory compliance, with sales on customer payment terms, and so on. Change management gives us the tools to build these relationships effectively. It’s about creating open lines of communication, understanding other departments’ needs and constraints, and finding ways to align our goals. When we’re implementing a new treasury management system, for instance, change management helps us bring all these stakeholders on board from the start. Working together in cross functional teams is the key to success. 5. Keeping Score How do we know if our changes are actually making things better? That’s where measurement comes in. Change management isn’t just about implementing new ideas – it’s about tracking their impact and being ready to pivot if needed. This might involve setting up key performance indicators (KPIs) for new initiatives, like measuring the reduction in cash conversion cycle after implementing a new working capital strategy. Or it could mean conducting regular surveys to gauge how well the Treasury team is adapting to new technologies or processes. The point is, we need to be data-driven in our approach to change. It’s not enough to have a gut feeling that things are improving—we need hard numbers to back it up and guide our next steps. The KPI’s are not the goal but the tool. The Bottom Line Look, the world of corporate treasury is changing faster than we can keep up. It’s exciting, it’s challenging, and sometimes it’s downright scary. But here’s the thing – with the right approach to change management, we can do more than just survive. We can thrive. By focusing on these five aspects of change management, we can transform Treasury from a reactive function into a proactive, strategic partner for the business. It’s not always easy, but in today’s fast-paced business environment, it’s absolutely essential. In this wild new world, it’s not the strongest or the smartest who come out on top. It’s those who can adapt. So let’s embrace the change, roll with the punches, and show everyone what modern treasury can do. Trust me, it’s going to be one hell of a ride. This article is the first of a series of 9. A zoom in on essential soft skills for treasures. Enjoy the weekly read and let us know what you think of them. We appreciate every feedback and compliment. info@treasurymastermind.com Also Read Join our Treasury Community Treasury Masterminds is a community of professionals working in treasury management or those interested in learning more about various topics related to treasury management, including cash management, foreign exchange management, and payments. To register and connect with Treasury professionals, click [HERE] or fill out the form below.
Patrick Kunz
Charting new paths in FX risk management across Latin American markets
This article is written by EuroFinance Latin America’s economic environment, with its unique challenges and opportunities, demands a tailored approach to FX risk management. Companies like Roche Finanz AG and Holcim are not just adapting to these changes—they’re driving them. The strategies employed by treasurers today are more crucial than ever, requiring an acute awareness of both the global financial landscape and the intricacies of regional markets. Latin America’s economic environment, with its unique challenges and opportunities, demands a tailored approach to FX risk management. By leveraging strong banking relationships, staying adaptable to shifts in U.S. monetary policy, and exploring innovative financial instruments like cryptocurrency, companies can position themselves to navigate these complexities successfully. Companies like Roche Finanz AG and Holcim are not just adapting to these changes—they’re driving them. By centralising operations, establishing in-house banks, and enhancing cross-border connectivity, these organisations are setting new standards in treasury management. At the 2024 EuroFinance Global Treasury Americas Miami conference Jesus Portillo, Senior cash manager at Roche Finanz AG a biotechnology company, and Carmelo Mendoza, Regional treasury manager at Holcim a Swiss multinational company that manufactures building materials, shared insights into the strategic approaches their teams have implemented. From optimising liquidity management to navigating the intricacies of foreign exchange risk, they reveal how their forward-thinking strategies are enabling their organisations to stay ahead in a complex and volatile market. Centralisation and efficiency at Roche Finanz AG Roche Finanz AG has adopted a highly centralised approach to its treasury operations, a strategy that has proven effective across its global and regional operations. Portillo highlighted that the company’s treasury functions, including front office, back office, and cash management, are all managed centrally. This setup ensures that processes are streamlined, efficient, and transparent, with the entire operation managed through a single ERP system. “Everything is centralised,” Portillo emphasised, noting that the team, comprising over 25 members, oversees 450 affiliates worldwide, with a particular focus on Latin America where Roche works with two core banks. Despite the efficiency of this centralised model, Portillo acknowledged that the region is not without challenges, particularly in terms of connectivity and regulatory limitations. These challenges require constant engagement with banks to ensure that the solutions provided meet Roche’s stringent requirements for accuracy and efficiency. Portillo also discussed Roche’s strategy of disintermediating banks through its in-house banking structure. While the company leverages its internal capabilities, it still relies on core banks for certain functions, particularly in Latin America. He noted that the company stresses connectivity and efficiency in its dealings with these banks, pushing them to meet the demands of the region’s dynamic environment. Holcim’s approach to financial solutions and connectivity Holcim, on the other hand, faces different challenges due to its diverse operations across various segments, including retail, roofing, and construction products. Mendoza explained that Holcim has had to adapt its treasury operations to support its broader business goals, particularly in providing financing solutions to customers. “Our main role as a company is to generate progress for people and the planet,” Mendoza said, underscoring the company’s commitment to supporting customers through tailored financial solutions. Holcim’s approach requires close collaboration with banks to develop customised solutions that meet the needs of its diverse operations. However, Mendoza pointed out that working with banks in Latin America, especially in Central America, is not without its difficulties. The region’s banking systems are often complex and fragmented, making it challenging to establish the necessary connections for seamless financial operations. To overcome these challenges, Holcim has been moving towards identifying and partnering with core banks that can handle the majority of their treasury processes across the region. Managing regional specificities: Argentina as a case study Both Portillo and Mendoza touched on the complexities unique to certain countries in Latin America. Giving the example of Argentina, Mendoza pointed to the high levels of trapped cash and the restrictive regulatory environment. He noted that companies operating in Argentina need to be highly creative in managing their cash and navigating the regulatory landscape. Portillo echoed these sentiments, sharing how Roche has to come up with solutions, such as utilising real bonds, to free up funds. Collaboration and innovation: the path forward Despite the complexities, both treasury managers see significant opportunities in the region, particularly through collaboration with banks and leveraging technology. Portillo emphasised the importance of maintaining frequent, straightforward communication with banks to address limitations and explore new opportunities. He highlighted Roche’s ongoing efforts to standardise and automate processes across the region to improve efficiency and transparency. Mendoza, meanwhile, stressed the importance of building strong, flexible partnerships with banks. He shared an example of how Holcim collaborated with a bank in Mexico to develop a financing environment tailored to the needs of their franchise network. This collaborative approach allowed Holcim to offer its customers better financial solutions, ultimately benefiting both the company and its clients. Conclusion The insights from Portillo and Mendoza underscore the complexity and dynamism of managing treasury operations in Latin America. The resilience of the U.S. economy and the Federal Reserve’s ongoing policy decisions will undoubtedly continue to influence Latin American markets, making it imperative for companies to stay ahead of the curve. Through careful planning and strategic foresight, treasurers can mitigate risks and capitalise on opportunities, ensuring their organisations remain stable and poised for growth in an increasingly interconnected world. 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Junior Treasurers Interview: A Session with Prakhar Sinha
In the latest series of our Junior Treasurers Interview session, we sit down with Prakhar Sinha, a junior treasurer making strides in the world of treasury management. Prakhar shares his journey into this dynamic field, offering insights into the core aspects of treasury that inspire him—from managing liquidity and risk to optimizing financial resources in a rapidly shifting landscape. Throughout this interview, Prakhar sheds light on the challenges, learning experiences, and key skills he’s developed along the way, providing valuable advice for aspiring treasurers. Whether you’re new to treasury management or looking to deepen your understanding, this conversation with Prakhar offers a firsthand look into the rewarding and impactful work of a junior treasurer. Join us as we dive into Prakhar’s experiences and find out what makes a career in treasury both rewarding and challenging. Q.1: What attracted you to a career in Treasury management? What attracted me to a career in treasury management is its dynamic and central role within an organization. Treasury operates at the intersection of financial markets, risk management, and strategic decision-making, which creates a constantly evolving environment. The complexity of managing liquidity, capital, and funding needs requires a balance of quantitative analysis, strategic foresight, and sound judgment. The opportunity to contribute to key financial decisions while navigating challenges on a daily basis is both stimulating and rewarding. I am particularly drawn to the multifaceted nature of the role, as it requires wearing many hats and addressing diverse issues, from risk mitigation to optimizing financial resources. Q.2 Which aspects of treasury management do you find most appealing, and why? For example, do you enjoy cash management, risk assessment, or investment strategies? What I find most appealing about Treasury management is the focus on liquidity and asset-liability management (ALM). Liquidity risk, while critical, has not received as much quantitative research attention, yet it is one of the most pivotal risks for financial institutions. As Professor Moorad Choudhry emphasized, mismanaging liquidity risk can cause a bank to collapse in a single day, as evidenced by the failure of SVB. ALM itself presents an optimization challenge, which I find intellectually stimulating. It aligns well with my natural inclination to seek optimal solutions, whether in professional tasks like managing financial resources or in personal aspects such as optimizing daily routines. This combination of strategic thinking and problem-solving in treasury makes it a highly appealing area for me. Q.3: How do you see your project management skills transferring to a career in Treasury management? What specific skills or experiences from project management do you think will be beneficial in your role as a treasurer? My experience in project finance closely aligns with many core functions of treasury management, making the transition seamless. In project finance, I’ve dealt extensively with key elements such as credit risk and liquidity risk, both of which are critical to Treasury operations. The ability to conduct sensitivity and scenario analysis, which I’ve frequently utilized to assess project viability under different market conditions, is directly transferable to managing liquidity and financial risks in a treasury context. Financial modeling, another essential aspect of project finance, is a valuable skill I bring to treasury management, especially for forecasting cash flows, optimizing capital structure, and evaluating funding strategies. I have also developed expertise in hedging project-specific risks, a skill that is highly relevant to managing interest rate, currency, and liquidity risks within a Treasury role. My experience in assessing complex financial structures, coupled with risk mitigation strategies, equips me with the analytical and strategic approach necessary for Treasury management. Q.4 How do your studies in financial risk management and bank treasury risk management enhance your understanding of treasury operations? Do you recommend these programs to your fellow budding treasurers? My studies in Financial Risk Management (FRM) and Bank Treasury Risk Management (BTRM) have greatly enhanced my understanding of Treasury operations, particularly in asset-liability management (ALM), liquidity, and capital risk. The BTRM program’s strong emphasis on ALM governance has been invaluable for learning best practices in bank treasury management. In today’s regulatory environment, with Basel III mandating conservative capital and liquidity management, BTRM has provided practical, practitioner-led insights that are essential for safeguarding a bank’s stability. I highly recommend this program to anyone serious about building a career in Treasury. The FRM certification, on the other hand, offers a broader risk management perspective. It underscores the interconnectedness of various risks, a crucial lesson highlighted by the 2008 financial crisis. Understanding how one risk affects another is critical for effective Treasury and risk management, and FRM equips professionals with the skills to manage risks holistically. Both programs complement each other and are excellent for aspiring treasurers. Q. 5: What is the biggest challenge you currently face in your role as a junior treasurer, and how do you approach overcoming it? What I find most rewarding about Treasury is also my biggest challenge—its dynamic nature. With so many moving parts and interrelated risk types, it can be challenging to maintain a clear understanding of how each action, whether internal or external, impacts overall operations. This complexity requires a constant mental map of how various financial risks and decisions intertwine. To overcome this, I’ve adopted a highly structured approach, formalizing my thought process through mind maps and categorizing key ideas wherever possible. This structured method acts like Theseus’s string in navigating the labyrinth, helping me trace my steps back when needed to identify gaps or understand what might have gone wrong. It provides a clearer framework to monitor interdependencies, allowing me to manage complexity more effectively and ensure nothing is overlooked. This approach helps me stay organized in an ever-changing environment, making the challenges more manageable. Q.6. What advice would you give to someone looking to transition into a career in Treasury Management? What steps or strategies do you recommend for gaining the necessary skills and experiences? For anyone looking to transition into a career in Treasury Management, I recommend several key strategies. First, pursuing relevant certifications, such as Financial Risk Management (FRM) or…