The third and final day of EuroFinance Copenhagen 2015 concluded with a motivational speech from ex-Nike staffer Dr Erez Morag on how to use sport science principles to enhance your business, while treasurers from Levi Strauss and Starbucks shared tips on how to get fighting fit for the future with sustainable tax and treasury operations. Bank sustainability and funding in the era of Basel III was then discussed, and treasury opinion gathered via live polls.
Nike was the Greek goddess of victory, before she sashayed into selling trainers. One of her latter-day adherents Dr Erez Morag, CEO & Founder of Acceler8 Performance, used to be a senior sports scientist at Nike, the company, and he is a firm believer that companies can learn important high performance lessons from elite athletes. In his opinion sports science principles are applicable to business. He has worked with footballers Ronaldo & Rooney and the tennis player Roger Federer.
Dr Morag believes understanding the details of the ‘game’ – the processes, moving parts, connections – whatever the ‘game’ is: in this case, treasury – can deliver continuous performance. For instance, Barcelona FC cherish the ‘ball’ in order to win at football because they’ve recognised possession is the key to winning. “If you’re a business the ‘ball’ could be big data – cherish it.”
Morag studied biomechanics and joined the famous Nike Oregon sports science campus in 1998. He helped the sportswear firm break into ‘soccer’ – aka football.
“Nike grew every year from 2000-2014 due to the 1999 Maxim strategy that encouraged innovation & sustainability,” said Morag, as he showed off the golden boot that Ronaldo used to score a goal in the World Cup finals. The Dr’s new traction system cut the weight of a footballer’s boot down to 200g, adding an extra 30cm advantage over a 10m sprint. “The lesson to be learnt is ‘be prepared to adapt, innovate & learn’, so that you can succeed.”
Treasury Panel: Sustainable Tax & Treasury
A panel of treasurers took to the stage for the next plenary on the third and final day of the EuroFinance 2015 trade show in Copenhagen. Representatives from Givaudan, Levi Strauss & Starbucks debated how to ensure your treasury has a sustainable tax and operational foundation.
“Sustainability is key at Levi’s,” said the jean-wearing Johan Nystedt, VP Finance & Global Corporate Treasurer at Levi Strauss. “It’s not only right thing to do, it returns dollars.”
Drew Wolff, Treasurer at Starbucks has a tough job here, what with recent tax controversies surrounding Starbucks in the UK where it was hauled in front of Parliament for its structures, but he maintained that the company has done a lot of good work in Fair Trade certification. “We’re always seeking to do the right thing. Sometimes when you put yourself on a pedestal you get knocked back,” he said.
“All the coffee in our supply chain is sustainable and traceable, which isn’t easy to do,” continued Wolff. Starbucks also voluntarily paid more tax in the UK after the tax furore there.
“Corporate tax rates differ from country-to country too,” said Wolff. “Starbucks’ pays a lot of tax worldwide. Overall 3-4% of revenue, but transfers in and out don’t make a good story.”
A warning was sounded by Stewart Harris, Group Head of Treasury Tax & Insurance at Givaudan in Switzerland, when he said: “The tax environment is going to change dramatically for corporates over the next five years.”
Citing the post-crash OECD governmental programme to increase tax transparency and take, Harris believes reform is now well underway and companies need to prepare for more scrutiny in regard to their tax affairs. “You have to be committed to being a good corporate citizen wherever you operate, but it takes time,” he said, before concluding: “You’ve got to balance people, planet and profit.”
Givaudan’s Harris, perhaps tongue in cheek, also added: “I believe tax is an exciting area.” Certainly, a lot of OECD-inspired change and new risks to running a sustainable business are evident. Treasuries would be well advised to study this area closely.
“One should expect OECD tax reforms will place a burden on corporates. Hopefully there will be some tech levers to help us with country-by-country reporting and other new demands,” concluded Harris during the Q&A phrase of the session at the Bella Centre, in Copenhagen.
Live Polling: Basel III Treasury Impacts
The final two sessions at EuroFinance 2015 looked at Basel III and its impact on banking, liquidity and ultimately treasuries. Daniel Blumen, CTP, Partner, Treasury Alliance Group, encouraged attendees to consider if their bank was sustainable for the future? It’s a good question considering that Shell recently lost its cash management bank when RBS exited the sector – a topic that their treasurer addressed in the next session.
Blumen first ran some interesting live polls with the treasury audience in the third plenary session on Day 3 of EuroFinance 2015.
Selected findings of the 2015 live treasury polling in Copenhagen follow:
Q. In the last 6 months have your banks done (any of the following)…?
- 74% Withdrawn services in a country
- 13% Refused to accept a deposit
- 8% Refused or amended a service
- 5% Declined to respond to a cash management Request for Proposal (RFP).
Q. Do you feel that the market for treasury services is becoming a buyers’ or a sellers’ market (in the light of Basel III)?
- 48% Buyers
- 33% Sellers
- 19% Depends.
“I disagree with that result,” said the session presenter Daniel Blumen, a partner at the Treasury Alliance Group. “Banks are reducing capacity.”
Blumen added that: “Bank sustainability is under threat from Politics; Technology & Regulation.” Those were the 3 key themes for the session with Basel III, in the latter category, to the fore.
Final Plenary: How to Function When Your Bank Doesn’t
Treasurers from Vinci Finance International, Shell and the Belgium treasury trade body ATEB took part in the final plenary at EuroFinance 2015. This addressed the real-world treasury impacts of the Basel III capital adequacy regime that is being imposed on banks, and ultimately their cash management clients.
Frances Hinden, Vice President, Treasury Operations, Shell International naturally went first and talked about how RBS’ exit from the cash management field earlier this year impacted Shell. It resulted in them having to do an RFP to find a new bank.
“We first employed ABN Amro back in 2002 to be our cash management bank and stuck with RBS after the takeover,” said Shell’s Hinden. “It was an enormous shock when RBS told us of their exit from the cash management arena.”
“The new RFP we’re doing is an opportunity for us, however, to ask new questions of our future bank partners. We’re asking about banks’ strategies; what countries they’re in/if they’re staying; their technology outlook; resiliency and so forth.”
“How much a bank will charge us accounts for only about a third of the questions in our RFP now. Whereas in the past price was the primary focus, bank sustainability now dominates.”
“By next year Shell will have a new West European cash management bank,” revealed Hinden. “Citibank got the mandate.”
Another panel member, Jean-Michel Harlepin, Treasurer at Vinci Finance International, was worried about more regular reviews by banks and the impact of Basel III on notional pooling. The lack of hunger for deposits in some cases was also a concern for his corporation.
According to Jef van Osta, chairman of the ATEB treasury trade body in Belgium, there is so much pressure on the financial sector at the moment it’s bound to have an impact. “There are extra costs for banks and numerous new responsibilities,” he said.
That is certainly true. The Basel III capital adequacy regime will continue to impact banks, and treasuries, for many years to come. As Blumen said in the preceding plenary session: “There is a 15.5% capital requirement for some systemically important banks …so of course banks have less money to lend.”
It was a sober thought for attendees to take away as they departed EuroFinance 2015.
See you next year in Vienna, 12-14 October 2016