Press release - The International Review Connecting with Business Units Brings Key Theme to the 16th International EuroFinance's conference in Vienna – our 16th annual International Cash and Treasury Management Event of the Year – underlined the increasing need for corporate treasurers to connect more closely with business units in their companies, and their growing appetite to do so. Both traditional focus areas like working capital management and more recent priorities like supply chain finance provide important opportunities for collaboration. Other key themes at the conference, which attracted a record-breaking 2,000-plus delegates to Vienna’s Austria Center between September 18 and 20, were found across all of the major areas of treasury activity: cash, liquidity and FX; payments and connectivity; financing and capital structure; risk management; tax, accounting and regulation; technology; and strategy. The risks of Ronaldinho Indeed, it was one of these (risk management) that gave rise to what for many delegates was arguably the conference’s most memorable and even jaw-dropping moment. A top-class plenary debate on ‘What Do CFOs Want from Treasurers?’ saw FC Barcelona’s Francisco Lopez, one of two Spanish CFOs who participated, disclose a particularly unexpected source of risk  - success! So high are top-flight footballers’ wages and bonuses that the world-famous football club, winner of both Spain’s La Liga and the UEFA Champions’ League in 2005, has had to put mechanisms in place to manage the risk that it will be successful on the pitch. According to Lopez, FC Barcelona’s treasury department has worked with insurance companies to lay off its exposure to higher player payments in the event of winning titles. He estimates the risk at EUR20 to 30 million in cash flow. Similar deals also address the club’s exposure to the risk of players being injured and requiring expensive replacements. These revelations led the session’s moderator, Martin Giles (Managing Director, The Economist Group USA), to exclaim – on behalf of much of the audience, no doubt – that he would long treasure the thought of Lopez telling Ronaldinho, the Brazilian World Cup-winner, not to win in order to save money! Passion for the business The discussion between Lopez, Daniel Lozano of security company Prosegur and Janet Kersnar, Editor in Chief of CFO Europe, also related to the theme of treasury’s connection with the operating business. Lopez argued that it is easier for controllers to become CFOs than treasurers, due to their greater closeness. He termed it a “must” for ambitious treasurers to achieve in-depth understanding of where cash is generated in the business, while Lozano prescribed “passion for the business”. He identified the supply chain and risk management as two areas offering scope for greater treasury involvement.  The conference revealed many opportunities for treasury to connect with the operating business. A host of other speakers in the three-day event’s 11 plenary sessions and seven focused streams identified them both in technical areas such as working capital and purchasing/supply chain and in even more fundamental contexts, like risk, efficiency, profitability, and corporate activity including acquisitions, buy-backs and investor relations. A key presentation in this context came from McGraw-Hill SVP and Corporate Treasurer John Weisenseel. His ‘Getting Inside the Business Units’ (part of the Building the Treasury Brand stream) emphasised looking at treasury from the outside in, venturing inside business units and positioning treasury strategically within the organisation. While technical skills may be sufficient to achieve seniority in treasury, getting to the next level requires business skills, foresight and common sense, Weisenseel argued. Responsible for insurance, investor relations and retirement plans in addition to traditional treasury, he highlighted being a team player – viewing treasury as one of the leaders of the finance team (along with controlling, tax, shared services and financial analysis) and needing to “get off your [treasury’s] island”. In this, he contrasted treasury’s skill in dealing with its external counterparties against its shortcomings with internal customers. One antidote could be spending a day with internal customers, he suggested. Extending treasury’s reach In addition, he argued for partnering rather than owning processes and projects. Examples at McGraw-Hill have included a project to release cash trapped in a country hostile to the US that led to the group reconsidering its presence there; another to fund a wholly-owned foreign enterprise (WOFE) in China efficiently that led to capital being recycled among several entities; achieving cash settlement of inter-company receivable/payable netting balances, which highlighted the need to recapitalise some cash-poor entities; and involvement in the UK pension plan. This last issue followed Weisenseel’s decision to invite himself to a meeting of the EVP of human resources, the US and UK actuaries and UK lawyer. Set against the background of sharply rising UK pension expenses, this led to Weisenseel being named a trustee of the UK plan and getting a global retirement plan mandate (“the next thing I know, I’m in Frankfurt and looking at things in Mexico,” he recalled). In this way, and others such as contributing to return on invested capital analysis and lease versus buy analysis with other finance units, “treasury has extended its reach beyond its historical reach in the organisation”. For example, historically it had no involvement with non-US retirement plans. As a result, new opportunities for partnering have emerged subsequently. While these are large issues, they depend on small initiatives, Weisenseel emphasised – inviting yourself to meetings, inviting non-finance colleagues you would like to meet to lunch, and generally being pro-active rather than reactive. A way to go However, despite great enthusiasm for building bridges to business units, an exclusive EuroFinance survey released at the conference (and published in our second annual Treasury Perspectives report) suggests that there is still far to go. While 77% of treasury professionals at 312 companies polled expressed the desire operating colleagues to see them as a partner in making business decisions, only 16% of non-treasury colleagues view them in this way (the vast majority see treasury instead as a support or service function). Dr. Mark Kirkland, Global Head of Financial Services at Philips International, highlighted this disappointing gap in a fascinating plenary session on ‘The Business Units: How Treasury and Its Internal Customers Measure Performance’. Ahead of the session, EuroFinance arranged a second survey. This measured how business units at eight major multinational corporates view treasury. Included in the panel discussion were Carrefour and Unilever (represented in the session by Treasury Project Co-ordinator Paul Jonchkeere and Head of Treasury Operations Hans Van Den Bosch, respectively). Echoing comments by McGraw-Hill’s Weisenseel, this highlighted the business units’ respect for the value for money and technical expertise displayed by treasury. But it scored treasury practitioners lower for their communication. An audience poll departed from Weisenseel’s choice of his CFO (to whom he expects to be available “24/7”) as treasury’s key customer. Again highlighting the strong appetite for collaboration with the operating business, two-thirds of corporates characterised the business units as their main customer (and only 30% the CFO). Still, to be welcomed to the cross-disciplinary collaborations it seeks, treasury has to demonstrate the value it can add, Kirkland concluded. “If you show you can help improve EBITA, they will definitely buy in.” Cash flow challenge On a lighter note, day three of the conference saw the launch of a unique treasury board game. In addition, three teams of corporate treasurers and bankers battled for public glory in a live version of the game; their peers in the audience also got to vote on the likeliest winners and to compete to answer various treasury and geo political questions. Produced by EuroFinance and sponsored by HSBC, Cash Flow at Risk puts players in the challenging shoes of a global conglomerate’s treasurer. They must unlock cash in countries around the world, with the winner the first to collect a target amount from each continent by answering challenging liquidity, risk and other general knowledge questions. The winner of the live version of the game, chaired with great wit and enthusiasm by Tim Westcott, Director of Treasury, EMEA, Motorola Limited was not decided until the final question. By knowing that it was Indonesia that saw interest rates rise by 425bp in 1998, Eric Mueller, Director, Head of Country Sales – Western Europe, Cash Management Corporates, Global Transaction Banking, Deutsche Bank AG snatched victory for Team C, which also included John Gleason, Regional Treasurer – EMEA, Dell Inc. and Damien McMahon, Senior Director, PricewaterhouseCoopers. The audience’s top pick, Team C beat Team B (Jan-Martin Nufer, Director Tax & Treasury, Borealis A/S, Adrian Rodgers, EuroFinance Senior Tutor, Director, Arc Solutions and Robin K. Terry, Deputy Head of Corporate Sales, Europe, HSBC Bank plc) by only the narrowest of margins; Team A (Alex Harris, Group Treasurer, Virgin Atlantic Airways Ltd. Ruud W.M. Nijs, EVP Financial Logistics, Rabobank International and Richard Parkinson, Managing Director, Treasury Today, UK) ended the game a little further behind after a strong start.  The single highest scorer in the game was HSBC's Robin Terry. Some questions were also thrown open to the Austria Center audience for fun. While a few participants failed to cover themselves in glory (the trio of delegates who twice voted for Helsinki as the headquarters location of the Organisation of the Petroleum Exporting Countries (OPEC) must remain anonymous!), others were highly competitive. Of those who answered correctly, a lucky few walked away with their own Cash Flow at Risk games.  Email us at conferences@eurofinance.com to find out how you can get your hands on a copy of Cash Flow at Risk.