Several sessions at the Group Treasurers’ Exchange innovative virtual conference showed that corporate treasury departments have been and still are (mostly) in survival mode. Still, there are signs that corporate treasury departments are starting to look at new projects and new efficiency gains. 

Sessions such as “Business Continuity & Covid-19: Building A Resilient Treasury Strategy To Survive And Thrive After A Crisis” showed that corporate treasury departments and corporate treasurers have been focusing on first: being effective – doing the right things first, i.e. surviving, e.g. having a big enough credit line – and then second:  being efficient – doing things right, e.g. improving payment efficiency or getting FX costs down.

Working capital is still the key to survival. 

When the COVID-19 crisis hit in March/April we wrote on 22 April that their CFOs these basic questions were asking corporate treasury departments:

• Liquidity, e.g. how much cash do we have and where is it, but also:
  • What is our liquidity in the future:
    • What are the DSO and DPO trends?
  • Build me ‘what happens’ scenarios:
    • If this goes on for 1 month? 2 months? 3 months? 
    • If DSO gets 50% bigger?
    • If we extend DPO by 50% will that give us enough liquidity?
    • Etc.
• Core working capital drivers, CFOs are asking:
  • Accounts receivables:
    • How might DSO dynamics change, and how it might increase? What other changes can we expect?
  • Accounts payables:
    • DPO dynamics and what is it sensitive to? 
    • Does the sensitivity change if the crisis extends for 3, 4, 6 and 12 months?
  • Inventory: 
    • How tightly can we manage this?
    • Where are the quick wins?

These questions have not gone away, at GT’s virtual conference, they were repeated in various ways. Most corporate treasurers stressed how they were still in survival mode:

• Be sure you have a big enough credit line to ensure you can survive at all times.
• I need to be sure that we have at least six months of liquidity buffer.
• Check your credit line really is there, and take note of which banks really were there “to help us.”
• Communication with your banks and your board is vital, e.g. one corporate treasurer said “Comms is key and when something happens: Tell them:
  • Report to your board  regularly
  • Meet with your bankers frequently.”
• Have the right people in the right job; you cannot just rely on systems.
• Understand what are risks in your aggregated demand 
• Minimize your idle and trapped cash
• Be prepared for the unthinkable and emphasize flexibility at all times.

Efficiency opportunities re-opening

Although many corporate treasurers talked about having to ‘postpone’ projects, several were also saying they were starting to resurrect some ‘improving efficiency’ projects:

• Using FX hedging to cut costs and generate extra revenues
• Improving payment processing and payment security
• Improving CAPEX investment allocation processes and criteria
• New TMS now being re-considered.
• Etc. 

Lessons from COVID-19 crisis

In the “The Many Hats of a Treasurer: Exploring the Different Ways Treasury Can Contribute Towards Company Strategy in Times Of Crisis” session the participants were asked what the lessons for them from the crisis were. What is vital is:

• Cash and cashflow
• Accuracy of cash flow forecasting
• Effective allocation of capital
• Focussing on the drivers of cashflow
• Good people who are leaders.
• AND SURVIVING.

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• CTMfile take: Corporate treasury’s primary role is about helping the company/the group survive, and then, and only then, are the efficiency of processes, FX, payments, etc. relevant. But that is what it has always been, we just forgot. COVID-19 has reminded us big time. Working capital is king.