THE TREASURY HUB Banking and Treasury Markets April 2019 Report · 2019. 4. 11. · Despite the Fed...

THE TREASURY HUB Banking and Treasury Markets

April 2019 Report

1 Banking and Treasury Markets Report April 2019

April 11th, 2019 © THE TREASURY HUB

1. Executive Summary

1.1 Introduction

This is the third Banking and Treasury Report of 2019 which we bring to you as part of THE

TREASURY HUB.

Brexit continues to dominate headlines, interest rates have stalled / eased while equity markets

continue to recover.

1.2 Markets in a Table: what’s up and what’s down?

This is a new feature of the report for 2019 to allow a swift view of key indicators

Table 1. Key Metric Movements: 2019 to date

Heading Metric YTD move From To

Interest 3-m euribor 0.0000% -0.3100% -0.3100%

Interest EUR 3-year 0.0800% -0.1200% -0.0400%

Interest GBP 3-year -0.1764% 1.1564% 0.9800%

Interest USD 3-year -0.2120% 2.5580% 2.3460%

FX EUR/GBP -5.1180% 0.8996 0.8558

FX EUR/USD -1.1595% 1.1342 1.1212

Equities ISEQ 12.9% 5490 6199

Equities FTSE 100 8.7% 6734 7317

Equities Dow

Industrial 12.5% 23346 26258

Gilts IE 10-yr -0.2660% 0.875% 0.609%

Gilts GB 10-yr -0.2010% 1.249% 1.048%

Gilts US 10-yr -0.1890% 2.686% 2.497%

Please note that the % moves are in green if the metric has moved upwards and in red if it has

moved downwards. It is NOT a statement as to whether this is a positive or negative move as

one could be a borrower or depositor, a seller or buyer of currency, etc.

1.3 Monthly Feature

Section 5 is our Monthly feature section and this month we focus on emerging trends.

1.4 Brexit

While Brexit continues to play out, the markets appear to have discounted the possibility of a No

Deal scenario. We have held the view since January that an extension would be required to the

March 29 deadline and this proved to be the case. We did believe (like most others) that some

sort of deal would have been agreed at this point.



We have noticed that Brexit-related work in Q1 undertaken by Irish companies focused on getting

ready for a No Deal with work of customs, tariffs, etc. However, work on currency risk has taken

a back seat as the rate is in or around 86p again. Ironically, if No Deal arises, the currency will

smash through 90p in a few minutes and yet it remains an unhedged risk for many. It is illogical

that one would prepare for a No Deal in some respects (customs, tariffs) but not in others

(currency). But that would appear to be the case. Hopefully some deal will be done.

We still think that, despite a further extension to October, sterling will weaken possibly towards

88p (EUR/GBP0.88) until they sort out the political landscape in the UK. This has the potential for

many possible outcomes including a new Tory leader, a snap election, and/or a split in either/both

of Tory and Labour parties. European outlook not great either (for different reasons) so don’t

expect things to be very settled in the second half of 2019 either on the EUR/GBP front.

1.5 Conclusion

We hope that this report continues to be of both interest and benefit to you. Please let us know

if you have a requirement arising from any of the topics discussed herein.

Chris Ball

Corporate Finance Partner

T: +353 (0)90 6480607

M: +353 (0) 86 6075012

E: [email protected]

W: www.rbk.ie

mailto:[email protected]

http://www.rbk.ie/



Contents

1. Executive Summary 1

2. Interest Rate Review 4

3. Foreign Exchange Review 9

4. Oil and Financial Markets 13

5. Monthly Feature: Emerging trends 18



2. Interest Rate Review

2.1 EUR short-term rates

Background

The Euribor rate that we continue to monitor for the purposes of this bulletin (as it is the most relevant one for variable rate debt) is the 3-month rate.

Key Observations German inflation having peaked at +2.3% in October has eased back considerably in March 2019 to +1.3%. The broader Euro area readings were very similar, peaking at +2.2% in October but back to +1.4% in March. Closer to home, Irish inflation has been in or around +0.6% for the past 4 months and has been under +1.0% for over five years now. The implication of these figures is that potential upward pressure on interest rates arising from inflation has all but disappeared for now. The possibility of the ECB increasing the Base Rate has now been pushed back to 2020. The key trend in 2019 to date is that the EUR 3-year swap rate has been negative for all of 2019 so far. 3-month euribor rate has also stalled. With Irish banks continuing to use a floor of 0% in all loan agreements where the interest rate basis is Euribor, borrowers are encouraged to look at borrowing margins for a reduction in borrowing costs as market rates appear to be going nowhere for now.

THE FLATTENING OF INTEREST RATE CURVES ACROSS THE US, EUROZONE

AND UK CONTINUES THROUGHOUT Q1 2019.

From a Eurozone perspective, current fixed rates continue to merit

consideration as being good value. UK rates have eased again as the

medium-term economic prospects of a harder Brexit or prolonged extension

of the transition period bite. Please contact us if you are considering fixing

rates before you do so.



Graph 1. 3-m Euribor versus ECB Base Rate: 2008 to date

2.2 EUR medium-term rates

Background

We track the 3-year swap rate as a good proxy for medium-term rate trends. Please note that fixings are available for both shorter and longer periods as required under your risk management strategy.

Graph 2. EUR 3-year swaps versus 3-month euribor: ten-year trend

Key Observations The graph of the 3-year swap rate for the past 5 years follows. The key takeaway from this graph

is that the 3-year rate is now back at (or close to) the levels seen in Q3 2016 which is when the

-1.00

0.00

1.00

2.00

3.00

4.00

5.00

6.00

03/03/08 03/03/10 03/03/12 03/03/14 03/03/16 03/03/18

3-m euribor ECB Base Rate

-0.50-0.250.000.250.500.751.001.251.501.752.002.252.502.753.00

1/1/09 1/1/10 1/1/11 1/1/12 1/1/13 1/1/14 1/1/15 1/1/16 1/1/17 1/1/18 1/1/19

3-month 3-year



historic lows were experienced. We continue to point out that the difference between this fixed

rate and Euribor floating rates is small due to the imposition of a floor of 0% by banks on the

latter rate in loan agreements. Get in contact with us prior to undertaking any such fixing of

debt as there are a few pitfalls to be aware of but we believe that this is a possible course of

action that you may now wish to consider.

Graph 3. EUR 3-year swap rates for past five years

2.3 UK and US interest rates While interest rates in the UK and US remain in different parts of the cycle compared to Eurozone rates (as highlighted by the difference between short-term and long-term rates of the various geographies), rates in all three areas have continued to ease over Q1 2019. Please note that the rates below are before borrowing margins and would also be subject to credit spreads if fixed rates were being quoted by banks. Table 2. Comparative Interest Rates

EUR GBP USD

3-m -0.003 0.009 2.600

2-year -0.200 0.950 2.400

3-year -0.140 0.990 2.330

5-year 0.020 1.070 2.310

7-year 0.210 1.130 2.360

10-year 0.700 1.490 2.720 2v10

spread 0.900 0.540 0.320

Daily EURAB6E3Y= 03/04/2014 - 08/07/2019 (GMT)

Line, EURAB6E3Y=, 02/04/2019, -0.1480, -0.0080, (+5.71%) Price

EUR

Auto

-0.2

-0.1

0

0.1

0.2

0.3

0.4

0.5

-0.1480

Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q32014 2015 2016 2017 2018 2019



In the UK, worries about the effect of Brexit have resulted in lower UK interest rates in 2019. The market view that a No Deal is effectively off the table led to a brief spike in March but this has since reversed.

Graph 4. GBP 3-year swap rates over past 24 months

In the US, the yield curve continues to shift downwards (rates have moved lower) more quickly

than we had expected with short-term rates now higher than long-term rates out to 7 years.

Graph 5 below is for 3-year swaps over the past 24 months to show where US rates have come

from since they started to climb in 2017 while Graph 6 highlights the change in the shape of the

yield curve over the past 12 months.

Graph 5. USD 3-year swap rates over the past 24 months

Daily GBPSB6L3Y= 03/04/2017 - 09/05/2019 (GMT)

Line, GBPSB6L3Y=, 02/04/2019, 0.9742, -0.0335, (-3.32%) Price

GBP

0.5

0.6

0.7

0.8

0.9

1

1.1

1.2

1.3

0.9742

A M J J A S O N D J F M A M J J A S O N D J F M A MQ2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018 Q1 2019

Daily USDAM3L3Y= 03/04/2017 - 09/05/2019 (GMT)

Line, USDAM3L3Y=, 02/04/2019, 2.3030-0.0405, (-1.73%) Price

USD

1.6

1.8

2

2.2

2.4

2.6

2.8

3

2.3030

A M J J A S O N D J F M A M J J A S O N D J F M A MQ2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018 Q1 2019



Graph 6. US Yield curve since January 2018

Despite the Fed hiking by 25bp in December, not only is the yield curve negatively sloped i.e.

short-term rates are higher than long-term rates out to 7 years but the curve has also shifted

lower i.e. rates have decreased quite quickly over the past few months. This indicates real

concerns about the US economy possibly slipping into recession by 2020. The outcome to

trade talks with China could have a major bearing on this trend.

2.4 Summary

Eurozone longer-term rates are much lower than would have been expected 12 or even 6 months ago. With falling inflation and an economic outlook that isn’t looking rosy, there is a real risk that Europe is turning into another Japan (a concept that we have mentioned elsewhere in the past few months)

Continuing Brexit uncertainty will hold back UK interest rates. As previously mentioned, it is extremely unlikely that a full trade deal can be executed in less than two years. This should be a restraining factor on UK growth reducing upward pressure on UK interest rates (unless the currency “tanks” (which is likely if No Deal prevails) leading to imported inflation)

The inversion of the US interest rate curve looks like the Fed was too quick implementing the rate rise in December….history is littered with examples of one rate rise too many… so, as mentioned earlier, the outcome to the trade talks with China will be crucial in saving the US from or accelerating it into a slowdown/recession in 2020.

1.50

1.70

1.90

2.10

2.30

2.50

2.70

2.90

3.10

3-m 12-m 2 Year 3 Year 4 Year 5 Year

USD Yield CurvesCurrent

Dec-18

Jan-18



3. Foreign Exchange Review

3.1 EUR/GBP

Background

Brexit continues to dominate EUR/GBP.

Key Observations We previously predicted that they will either (eventually) agree to the Chequers deal or push back the trigger date of Article 50 (March 29th) to buy more time but that the possibility of a hard Brexit, although illogical, was increasing in probability. And here we are with extension to October 2019, no deal, no agreement on any other proposal and a hard Brexit being the current legal outcome in those circumstances. GBP does NOT reflect that risk at all with significant strengthening since the end of 2018 as No Deal was deemed to be ruled out by the market! In fact, as mentioned in Section 1, Irish firms have been making plans for a hard Brexit but, for the most part, have been completely ignoring the currency risk in 2019 due to the strengthening of GBP and it is this risk that will be the first to materialize if No Deal prevails. Graphs 7 and 8 demonstrate the trend in EUR/GBP since Brexit and since Q1 2018. We previously reported that the high/low range in the exchange rate in 2018 was EUR/GBP0.8618 to EUR/GBP0.9099 which at only 5.58% was the narrowest annual range since 2006. We further noted that 2018 was the 4th year in a row that the average rate had weakened and since the inception of the euro, 4 years is the longest such run (arising on two previous occasions). The 2019 year-to-date range is already 7.56% and the average is 1.2p stronger.

The key FX move in EUR/GBP has been the view of the markets that a No Deal

scenario looks unlikely. This drove the exchange rate to levels last seen in Q2 2017.

However, this will be materially impacted upon should they fail to agree a deal or

extension. As the achievement of the latter looks more probable, it will lead to

another quarter of uncertainty with increasing probability of significant political

fallout which, should it arise, will be GBP-negative.

USD is currently treading water, but the average annual high-low move in EUR/USD

has been close to 15% over the past decade and a half so don’t expect this calm to

remain.



If our call on political problems comes to pass, the rate will head back to EUR/GBP0.8800 at least with EUR/GBP0.9000 a possibility. So, the message to exporters is simple: be complacent at your peril. With the average exchange rates of 2017 and 2018 at EUR0.8765 and EUR/GBP0.8869, current spot rates are 3% more favourable than last year (or €35,000 extra profit for every £1m sales), the trend is exporter-friendly….for now. Graph 8 highlights that clearly. Those who hedge forward please note that EUR/GBP 6 months forward points are +0.0060 and 12-months forward points are +0.0120 (which favours importers).

Graph 7. EUR/GBP since Brexit Referendum

Graph 8. EUR/GBP: 01/01/18 to date

Daily EURGBP= 01/06/2016 - 05/04/2019 (GMT)

Line, EURGBP=, 02/04/2019, 0.8583, +0.0025, (+0.29%) Price

GBP

0.76

0.78

0.8

0.82

0.84

0.86

0.88

0.9

0.92

0.8583

J J A S O N D J F M A M J J A S O N D J F M A M J J A S O N D J F M AQ3 16 Q4 16 Q1 17 Q2 17 Q3 17 Q4 17 Q1 18 Q2 18 Q3 18 Q4 18 Q1 19

Daily EURGBP= 01/01/2018 - 05/04/2019 (GMT)

Line, EURGBP=, 02/04/2019, 0.8584, +0.0026, (+0.30%) Price

GBP

0.85

0.855

0.86

0.865

0.87

0.875

0.88

0.885

0.89

0.895

0.9

0.905

0.8584

16 01 16 01 16 02 16 01 16 01 18 02 16 01 16 03 17 01 16 01 16 03 17 01 16 01 18 01 18 01Q1 2018 Q2 2018 Q3 2018 Q4 2018 Q1 2019



Summary While the likelihood of a No Deal outcome has been all but discounted by the markets, it is still the current legal default and UK media indicated last week that a majority of the UK Cabinet was in favour either of a No Deal or against a long-dated extension. In the December report we suggested that “a strengthening to EUR/GBP0.8500 would be a reasonable retreat” which is broadly where it has gone to. So, if there is a hard Brexit, GBP can only go one way. Currency options can be used in scenarios of potential significant downside whilst still giving some upside. We priced two options with Moneycorp to expire on May 23rd for exporters selling GBP. The first is an “at the money” option (EUR/GBP0.8560) with a cost of 1.55%. An alternative (cheaper) option would be to buy protection at EUR/GBP0.8800 for an outlay of 0.66%. In summary you buy a worst-case protection of 85.6p for a cost of 1.55% or 88p for 0.66%. There is no limit on the best case (if the rate moves to 80p by May 23rd, exporter can transact at that rate). We also priced a zero-cost collar from Afex for the same date which has protection at EUR/GBP0.8800 but does NOT allow participation if the rate drops below EUR/GBP0.8500. These give you an idea of what protection may be available and at what price. In summary, for zero cost outlay, you are guaranteed a worst-case rate of 88p but a best-case rate of 85p (if GBP fell below that level you would not benefit on May 23rd. If you are considering using options, please get in touch with us prior to doing so as it is important to understand the implications, risks and benefits of their use.

3.2 EUR/USD

Background

Exposure to USD tends to be of an indirect nature for many Irish companies e.g. energy and fuel prices. EUR/USD is traditionally more volatile than EUR/GBP. Graph 9. EUR/USD: 1/1/18 to date

Daily EUR= 01/01/2018 - 05/04/2019 (GMT)

Line, EUR=, 02/04/2019, 1.1186, -0.0026, (-0.23%) Price

USD

1.12

1.13

1.14

1.15

1.16

1.17

1.18

1.19

1.2

1.21

1.22

1.23

1.24

1.1186

16 01 16 01 16 02 16 01 16 01 18 02 16 01 16 03 17 01 16 01 16 03 17 01 16 01 18 01 18 01Q1 2018 Q2 2018 Q3 2018 Q4 2018 Q1 2019



Looking at Graph 9, the exchange rate range continues to narrow. As previously mentioned, a sustained break up through EUR/USD1.1500 would be significant as would a break through EUR/USD1.1000.

Key Observations EUR/USD has been moving in a narrow (and narrowing) range/“holding pattern” for some time. Normally, the easing back of US interest rates (highlighted in the previous section) would lead to weakening of the currency but the poorer Eurozone outlook coupled with Brexit impact on UK has reduced if not eliminated this potential impact. Any sign of a trade deal with China would be expected to be USD-positive plus President Trump seems to be off the hook on the Mueller front for now… although that, too, may change at any time! EUR/USD forward points for 6 and 12 months are +0.0180 and +0.0355 respectively.

Summary While the economic outlook for the US is, in the opinion of many, deteriorating, the past quarter has seen quite a slowdown in the Eurozone economy with Germany just about avoiding slipping into recession. In the interim, China has also pumped money into the system in order to aid economic growth and that combined with a trade deal with the US would sustain the US again. Accordingly, US outlook is probably less negative than it was 3 months ago.



4. Oil and Financial Markets

4.1 Oil Price Trends

Graph 10. Oil prices: 5-year trend

The swift bounce back in oil prices that was experienced in January (from US$52/barrel) continued over the course of the quarter and ended it just shy of US$70 partially due to decreased supply from Saudi Arabia. Given that prices were at similar levels 12 months ago (and rose in Q2/Q3 2018), the inflationary impact of this rise will be minimal for a lot of 2019. The drive (no pun intended) towards electric cars now has serious momentum and looks like being sustained. Equally, corporates are being asked to focus more on ESG reporting thereby keeping environmental issues to the fore.

Daily LCOc1 03/04/2014 - 11/07/2019 (LON)

BarOHLC, LCOc1, 02/04/2019, 69.22, 69.50, 68.69, 69.35, +0.34, (+0.49%) Price

USD

Bbl

30

40

50

60

70

80

90

100

69.35

Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q32014 2015 2016 2017 2018 2019

Oil price rebound has been strong

Equity markets have also bounced back after weak finish to 2018

But bond yields are bouncing around a little.



4.2 US

4.2.1 US Bond Yields

Graph 11. US 10-year Bond Yields: 12-month trend

This rate declined by 68bp in the last 8 weeks of 2018 and having steadied in January, it fell from 2.75% to 2.35% over the course of March before recovering again over the past week. Bond yields would be expected to fall if the US economy slows but the converse is also true if the outlook was to improve.

4.2.2 US Equity Markets

Graph 12. Dow Jones Industrial Average: 12-month trend

Daily US10YT=RR 03/04/2018 - 22/04/2019 (EST)

Line, US10YT=RR, 02/04/2019, 2.4759 Yield

2.4

2.5

2.6

2.7

2.8

2.9

3

3.1

3.2

2.4759

16 01 16 01 18 02 16 01 16 03 17 01 16 01 16 03 17 02 16 01 19 01 18 01 16Q2 2018 Q3 2018 Q4 2018 Q1 2019

Daily [.DJI List 1 of 31] .DJI 07/03/2018 - 22/03/2019 (EST)

Line, .DJI, 05/03/2019, 25,806.63, -13.02, (-0.05%) Price

USD

22,000

22,500

23,000

23,500

24,000

24,500

25,000

25,500

26,000

26,500

25,806.63

16 02 16 01 16 01 18 02 16 01 16 04 17 01 16 01 16 03 17 02 16 01 19 01 18Q1 18 Q2 2018 Q3 2018 Q4 2018 Q1 2019



The above graph shows that the 9-year bull run has reached some sort of a plateau. One of the key market concerns has been the impact of a reversal of Quantitative Easing (“QE”) on asset prices as the availability of cheap money certainly fueled most asset classes. But with the Fed stalling on interest rates and the Eurozone outlook also poorer than previously, reversal of QE may stall…and this should be positive for various asset classes for a while longer.

4.3 Ireland

Graph 13. ISEQ: 12-month trend

Similar equity market story in Ireland. Strong recovery since the start of December. Even the banks’ shares are up which is a reversal of a negative trend that has persisted for many quarters. Graph 14. Irish 10-year bond yields: 12-month trend

Daily [.ISEQ List 1 of 47] .ISEQ 10/04/2018 - 30/04/2019 (DUB)

Line, .ISEQ, Trade Price(Last), 09/04/2019, 6,258.070, -37.890, (-0.60%) Price

EUR

Auto

5,400

5,500

5,600

5,700

5,800

5,900

6,000

6,100

6,200

6,300

6,400

6,500

6,600

6,700

6,800

6,900

7,000

7,100

6,258.070

16 23 30 08 14 21 28 05 11 18 25 02 09 16 23 30 06 13 20 27 03 10 17 24 01 08 15 22 29 05 12 19 26 03 10 17 24 07 14 21 28 04 11 18 25 04 11 18 25 01 08 15 23 29Apr 18 May 18 Jun 18 Jul 18 Aug 18 Sep 18 Oct 18 Nov 18 Dec 18 Jan 19 Feb 19 Mar 19 Apr 19

Daily IE10YT=RR 10/04/2018 - 26/04/2019 (GMT)

Line, IE10YT=RR, 09/04/2019, 0.563 Yield

0.55

0.6

0.65

0.7

0.75

0.8

0.85

0.9

0.95

1

1.05

1.1

0.563

May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar AprQ2 2018 Q3 2018 Q4 2018 Q1 2019 Q2 19



The easing of this rate continues to be good news for the government in the context of refinancing the EUR14 billion that is due for refinancing in 2019 alone. Current rates are very favourable compared to maturing bonds at 4.4% and 5.9% respectively. Replacing them with 10-year bonds priced at 60bp is a very significant reduction in the annual interest bill. However, we still have a concern about the possible liquidity of bond funds in a crisis. Funds are increasingly being marketed with notice periods of 3 and 4 days rather than 1 day so ensure that you understand same in making such investments.

4.4 UK

Graph 15. FTSE 100: 12-month trend

The FTSE 100 for 2018 was down over 12% in the year but is up 8.7% in 2019 to date. Brexit doesn’t have much effect on the participants as most of them are multinationals with business across the globe. UK 10-year Bond yields were as high as 1.73% in October, dropped to 1.25% at year -end and have further eased to 1.05% at the end of Q1. Brexit implications plus political in-fighting don’t auger well for the UK economy in the coming months. Accordingly, it is difficult to see a bounce in the economy or bond yields in the near-term.

Daily [.FTSE List 1 of 102] .FTSE 03/04/2018 - 23/04/2019 (LON)

Line, .FTSE, 02/04/2019, 7,391.12, +73.74, (+1.01%) Price

GBP

6,600

6,700

6,800

6,900

7,000

7,100

7,200

7,300

7,400

7,500

7,600

7,700

7,800

7,391.12

16 01 16 01 18 02 16 01 16 03 17 01 16 01 16 03 17 02 16 01 18 01 18 01 16Q2 2018 Q3 2018 Q4 2018 Q1 2019



Graph 16. UK 10-year bonds: 12-month trend

4.5. Summary

The outlook from an investment perspective stabilised in Q1. Politics is at the root of a lot of the issues and prospects will ebb and flow with developments in this space: European elections, possible UK elections and the start of the US 2020 presidential election process will all influence financial markets over the course of 2019.

Daily GB10YT=RR 10/04/2018 - 30/04/2019 (GMT)

Line, GB10YT=RR, 09/04/2019, 1.108 Yield

1

1.1

1.2

1.3

1.4

1.5

1.6

1.7

1.108

May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar AprQ2 2018 Q3 2018 Q4 2018 Q1 2019 Q2 19



5. Current Trends

1. Brexit

Continue to monitor and manage UK working capital trends closely, especially Debtor

Days

Understand the impact of tariffs/customs on cashflows also.

2. General Irish and UK Banking trends

Irish banks have lending targets for first time in a number of years. This ought to create some pricing tension if they want to compete

Net Interest Margins are much higher than European competitors, pressure on this front will probably lead to more use of negative deposit rates (especially as Eurozone interest rates are easing again) and fees (current account)

This, in turn, would suggest that now might be a good time to either have a hard look at bank charges and/or put your clearing business out to competitive tender (see www.treasurydelta.com for free means of doing this)

KYC remains a key challenge for corporates and developments in this space are slow but welcome.

3. Technology

Technological developments are moving to challenge funding and transaction banking as a priority for corporates

There is a substantial overlap between it and transaction banking in particular

However, the Irish banks are generally seen as not being very innovative compared to international peers…and these, in turn, are not seen as innovative as they ought to be

As you move down the corporate scale ladder towards SMEs, the problems can be even more pronounced:

o Resistance to digitization o Lack of automation o Slow reconciliation processes (leading to higher potential risks and/or worse

management information) o Higher levels of inaccuracy o All of the above contribute to higher than necessary labour costs and/or poor use

of that time (gathering data rather than producing information)

However, we are beginning to see increased use of outsourcing in The Treasury Hub at the SME level as firms pay for the performance of certain aspects of financial work as a service and concentrate their employment costs and efforts on the value-adding aspects of their business

As a result, we are seeing some automation commencing in this part of the corporate market that we don’t see with medium to large sized entities

And where larger corporates are engaging in such projects, they have a tendency to use large service providers who come with commensurate fees. But there are plenty of smaller providers who can do the job just as well

http://www.treasurydelta.com/



Managing transformative projects. This is a skillset in its own right and proper planning is crucial. The mantra in training carpenters was, “Measure twice, cut once” i.e. better to invest time up front than have to invest it further down the road to rectify matters

ESG (Environment, Social and Governance) reporting is the new trend although its impact on certain activities such as selection of finance providers, etc. seems to be minimal thus far

Finally, on the governance front, while those with Board-approved policies are still in the significant minority, those that have them in place seem to be revisiting them with more frequency – it should be at least every 3 years – thereby extending the gap between them and the rest in this space. Policy is a bit like FX hedging. It’s a good idea in principle but something more urgent almost always comes along! Until there is a crisis.

4. Others

Suggest you may consider looking at your supply chain whether or not impacted upon by Brexit

Anyone that has undertaken an acquisition recently should consider evaluating procurement/purchasing practices as this is an area where we see opportunities and the value of any annual savings identified is that amount times the multiple of profits paid for the acquisition.

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