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CTMpulse: BACK TO BASICS: Turning point for corporate treasury?

TODAY one of the common features of corporate treasury departments around the world is that CFOs are now visiting their department regularly and even CEOs are now seen there too. As well as drawing down credit facilities at a record pace, CFOs/CEOs are asking corporate treasury departments all sorts of basic questions around their company’s future:

  • 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?

A turning point for corporate treasury?

These questions about cash flow and liquidity are very basic about the future of the company and whether it will survive. No longer is the corporate treasury department expected to know and understand how much cash/liquidity is available and where, but also, as Bruce Lynn from The Financial Executives Consulting Group puts it, “Is it enough for the company to survive?” Indeed Lynn believes that corporate treasury departments should be judged on a new set of criteria. (More to follow.)

Also Colin Evans, at Elite Treasury Services Ltd, believes that the role of the corporate treasury department is becoming much more important:

  1. Non-corporate treasury staff are now much aware of and appreciative of the role of corporate treasury and what it can do
  2. Corporate treasury departments are now actively looking for new business opportunities in what they do and they are now being listened to much more.

CTMpulse: Delusional thinking?

  1. The Financial Times has an article today on how restaurants, hotels and gyms are facing up to the need for their business models to change drastically before they can reopen once lockdowns are lifted. Yet football is doing no such thinking (publically at least), they are assuming they will just re-open. Yet talking to a Spurs annual season ticket holder today, he said, “There is no way I am going to be clambering through to my seat. I would have no idea what I would catch. Dying is even worse than watching Spurs.” Many supporters will just not go to games.
  2. Boris Johnson thought he could get away with missing the first five COBRA meetings on the developing COVID-19 crisis and no-one would notice or think it mattered. Thanks to The Sunday Times and The Guardian, his lack of leadership is being noticed, just like Trump’s.


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