The undercurrent of the recent T30-2 meeting was to position treasury as a provider of capital management and financial flexibility to enable large-cap MNCs to pursue real growth and not just remain stable cash distributors for investors.
The Treasurers’ Group of Thirty 2 met this week at Citi’s Sanford I. Weill Center for Strategy & Executive Development to discuss a range of topics including the need for financial flexibility in capital management, alternative approaches to supply chain and related financing, and a comparative review of member treasury organizations. The session on capital management, led by Citi advisors and with contributions from Standard & Poor’s, established the undercurrent for the meeting: treasurers should seek to maximize financial flexibility for large-cap multinationals to pursue bolder growth initiatives. Otherwise, they will continue on the current path of being stable cash distributors for investors. Activist targeting, which most participants expect will continue, may tend to reward distribution and financially engineered boosts to share price, but eventually shareholders (including activists) will demand real growth.
This undercurrent was seen in some of the meetings key takeaways, including:
- TMS and transformation to better scale. Most members are in some phase of improving their treasury management systems and reviewing treasury org structure, particularly treasury and SSC alignment, to better scale and support global expansion.
- Leveraging working capital for financial optionality. An area of growing attention by treasury is involvement in improving working capital for both their own firm and key suppliers and customers. New methods of pooling and securitizing trade payables (and receivables), moreover, offer risk mitigation and asset-backed financing alternatives. These financing methods also can compete with bank credit facilities on a cost of funds basis (as traditional facilities generate higher capital charges under new bank regulation) and serve as a contingent financing options for scenarios where CP, bond or bank market access gets restricted.
- Continued attention to risk management. While the outlook for growth is improving and the ability to fund it in capital markets continues to be robust, a dispersion in views on rates and a return to volatility in FX markets (in part, in reaction to geopolitical tensions) will continue to link effective risk management to valuation benefits. Outsiders evaluating firms, from rating analyst to activist investors, will eventually come around to penalizing those that don’t have a capital plan that is attuned to both risk and reward. By enhancing flexibility, treasurers offer the plan better capabilities to respond to both.
We thank all the T30-2 members for their active discussion and Citi for their contributions and sponsorship of the meeting.
The Treasurers’ Group of Thirty 2 is the second of three cross-industry executive treasurer-level groups in The NeuGroup Network. Launched in 2011, the T30-2 assists treasurers with current projects and priorities using leading peer knowledge and benchmarking supported by face-to-face discussion.