Corporate Treasury Blog by Magnus Lind

In addition, it has clarified that regulators will...

2012-01-31T09:05:37.032+01:00

In addition, it has clarified that regulators will retain the ability to require adjustments to current value beyond those required by financial reporting standards, in particular where there is uncertainty around the current realizable value of a position due to illiquidity.

Dear Vincent Thanks for your very interesting refl...

2011-12-07T07:53:06.790+01:00

Dear Vincent
Thanks for your very interesting reflections.
Kind regards, Magnus

It is true notation agencies often have good and r...

2011-12-07T06:17:14.827+01:00

It is true notation agencies often have good and rational analysis on the paper.
But maybe we should ask ourselves what is their role.
When Europeans try to progress towards a debt crisis solution like this Monday, is it normal that S&P immediately light new fires threatening to downgrade 6 new European countries ? And this is not the first time such announces are made before a just after a European summit.
Do we need pyromaniac actions or firemen ?
Many other questions surge :
- who is behind these notation agencies ?
- do we really need these good or bad points ?
- are they really the voice of the Market ?
- information and economy “war” is launched for years on a geopolitical scale ; why Europeans are so bad at this game ?
- are European economic interests well promoted by our Leaders ?
- etc…

You say “it’s time for a radical re-think”.
Don’t we need radically new behaviors and actors ?
- If banks do not lend any more, yes a “corporates funding institution” is a good idea.
- If we are not happy with the marks given by notation agencies, shouldn’t we change of teachers and masters ? We must remind that just before the crisis of 2007 notations were very good for subprime packages. We know what followed…
Let us open the eyes.
Europe is economically strong and has more advantages than weaknesses, and a good ‘track-record’ proven throughout history. But we are stuck with old paradigms. Collectively, politicians and economic & business actors should start thinking differently. It starts with individual self-questionning.
It’s time for a radical rethink…

2011-11-21T19:50:35.548+01:00

This comment has been removed by a blog administrator.

Magnus, I agree entirely with your comments. One ...

2011-11-15T22:57:09.708+01:00

Magnus,

I agree entirely with your comments. One clear way of demonstrating your openness with banks is to invite them once a year together and to present and share information about your company with them. That way they feel that they are being treated equally and this helps build trust.

It is also quite amusing to see them at first eye each other suspiciously and and the end of the session watch them chatting quite happily and exchanging business cards.

Hi Magnus, you are right that DONG are not alone. ...

2011-11-08T09:13:27.587+01:00

Hi Magnus, you are right that DONG are not alone. At a Pwc quarterly treasury meeting in the UK (Birmingham) I remember a large and well known international company stating that they would present 2 sets of numbers at their analyst meetings - one in line with IFRS and what they described as a "proper" one which ignored IFRS. This was seen as a better solution than having to implement hedge accounting and see wild swings in the P&L from remeasurement impacts (principally due to shifts in forward rates) which in the end would not have any bearing on the real state of affairs. This was in 2005!

The second point I want to make is why a company would want to be called DONG. Just type it in Google and read the first 3 answers!

Being in (treasurer) recruitment for 18 years now,...

2011-10-28T23:37:07.900+02:00

Being in (treasurer) recruitment for 18 years now, I see a gradual increase in the number of treasurers grasping the concept ‘business leader’. Over the years the number of treasurers with a master degree rises, as does their impact. At the same time I was astonished to see that 80% of the visitors of a D(utch)ACT event considered themselves CFO material. Knowing most of them, I would say their strongpoint lies often in more traditional treasury tasks. Not in their thorough analysis of or sincere interest in what is happening out there.
Pieter de Kiewit
www.treasurersearch.com

This is so correct. We need banks to focus on comp...

2011-10-23T11:09:02.326+02:00

This is so correct. We need banks to focus on company lending.

I like your writing style. Keep sharing this type ...

2011-10-22T14:06:04.348+02:00

I like your writing style. Keep sharing this type of great post. Thanks.....

ENTB

http://www.pennyplayersclub.com/

Shoot the messenger!!

2011-10-22T13:41:21.362+02:00

Shoot the messenger!!

Who do they think they'll fool? We would only ...

2011-10-22T13:39:48.413+02:00

Who do they think they'll fool? We would only invest in countries we believe are good credits. If ratings are too high, we will anyway not invest.

Precisely,the price at which demand meets supply. ...

2011-09-13T13:23:43.608+02:00

Precisely,the price at which demand meets supply. Yet I wouldn't call a required yield of 82% on 2 Years Greek Government Bonds a right price.

You can only split the Euro when orderly market conditions have returned,only after some sort of Greek event of default, which will be painful but shall restore financial market confidence in the end.

You'll always find buyers if the price is righ...

2011-09-12T12:30:36.464+02:00

You'll always find buyers if the price is right :)

Absolutely an original thought this split EUR curr...

2011-09-12T11:50:43.009+02:00

Absolutely an original thought this split EUR currency regime. It'll allow those PIIGS economies to benefit again from the virtue of economic theory which says that those countries currency will depreciate, hence their competitiveness will improve and recovery will follow. An automated mechanism through currency depreciation. But who would want to have those PIIGS EURO's? Where are the buyers?

Magnus, I really enjoyed reading this blog post an...

2011-09-08T07:22:43.120+02:00

Magnus, I really enjoyed reading this blog post and it provides a lot of insight. We offer a solution that serves this very market and our customers are large Fortune 500 companies as customers and are enabling their entire supply base to use our Dynamic Discounting solutions.

Based on our experience, I have a few comments on some of the points you made:

Attractive financing terms for the Suppliers
Our experience is quite the opposite! Factoring goes as high as 20% annual interest rates, but that’s not even the biggest challenge for Suppliers. The bureaucracy and contractual requirements are difficult and many suppliers are right out excluded from many programs (e.g. if revenue requirements aren’t met, supplier hasn’t been in business long enough). And with factoring typically only 80% or less of the invoice amount can be sold to the factor.
Dynamic Discounting eliminates ALL of the above cons of factoring!

Time and Date secure collection
Our solution goes even further, puts suppliers in full control if and when they want to accelerate payments, automate the acceleration of all payments or use our comprehensive Cash Planner tool to find the best matching invoices for receiving the amount of cash they need, when they need it.

On- or off balance sheet treatment, i.e. decrease of working capital for the Buyer
Generally speaking you are right. But technology solutions such as our Dynamic Discounting Optimizer open the door for hybrids

Decrease working capital for Buyer, that is removing payables from the balance sheet (decreasing DPO)
Same as previous item: Generally speaking you are right. But technology solutions such as our Dynamic Discounting Optimizer open the door for hybrids

Full automation of P2P (purchase to pay) process
No longer a requirement. It makes it more attractive, but a deep and seamless integration with the Buyer’s ERP system can drive savings even pre-automation.

Supplier on-boarding
It really pays to offer real value to the supplier and not just from the buyer’s perspective! Next, a deep and seamless integration with the Buyer’s ERP system can overcome mitigate challenges and risks on the IT side and facilitate supplier adoption much above what has been seen in the past. In fact, during the supplier enablement phase with some of our recent Fortune 500 clients we’ve seen fantastic supplier adoption rates on the first day!

Changes in lending capacity of the Buyer affecting the financial strength of the supply chain and Suppliers’ funding may be jeopardized
Very accurate comments and concerns. Technology can be the answer, by offering a hybrid approach.

Suppliers acquire new behavior
See my previous comment.

Banks’ involvement
Banks could get left out in indeed:) But I would see this as a positive opportunity for the Buyer and Supplier

Payment method
Our solution addresses this point by providing full transparency for both parties and compliance with the contract that is in place. It’s really an opportunity to re-establish the trust in that relationship.

Applicability to local legislation
Even for DD there are regulatory requirements that need to be addressed. Mainly from an accounting point of view. E.g. should the invoice be modified, a credit note be issued or G/L entry created? Our solution is in full compliance with local regulatory requirements.

Thanks SNB. It is now clear the export went to.......

2011-09-07T17:11:40.030+02:00

Thanks SNB. It is now clear the export went to..... Sweden (where I live!). Sweden must have been number one on unemployment export since the 1970-ties and our constant devaluations. but guess we lost the touch ;) /Magnus Lind

I believe you are perfectly correct, dear Frits. W...

2011-08-25T20:51:14.944+02:00

I believe you are perfectly correct, dear Frits. We can not build up our treasury operations from relying on a support network from the state and central banks. But my point is that the society and the government bodies must be corporate centric to a much higher degree than they are today in many European countries. That includes decreasing the cost and extent of bureacracy, eradicate the adminstrative burden forced on corporates, decrease unproductive taxes etc. The central banks can also force the payment system to zero float since the banks have unlimited access to funding and should not be funded for free by their customers. The central banks can also assist the corporate sector with regulation to increase the opportunities for funding and decrease the costs for hedging. I think they many times are too slow and do too little, if anything at all.

I mean that we need seriously to build a global competitive platform for the corporate sector in Europe. That is the responsibility of the government bodies, but honestly many may not seem too very serious about it.

You represent large corporations, whose problem, especially if investment graded, can be solved in the international financial markets. But what shall the sub investment grade and the SME go to solve the financing problems during market stress? To the banks? Already now that is rarely a valid option and soon we have Basel III...

Regards
Magnus

Yes. The Central Bank is "lender of the last ...

2011-08-25T20:09:04.912+02:00

Yes. The Central Bank is "lender of the last resort" for it's customers, the banks. Big task, I agree.
However not the main responsibility, which is protecting the purchasing power of the local currency or to put it differently: fighting inflation. The FED has an even broader mandate though, protecting and stimulating economic growth, which we do not see in the ECB environment. Of course it is helpful that the BOE jumps in to support struggling corporates but should we really want or count on this? I think Corporate Treasurers should strive to become less dependent on bank credit, i.e. seeking alternative sources of financing, such as private placements or bonds. As for the importance of the bank sector to the economy as a whole, that's a matter of location as well. Here in Switzerland it is the key GDP contributor. I reckon the IMF should have some interesting statistics on this. Whatever the outcome, the ECB is in the end bound by the power it gets from European politicians. Unfortunately not a strong unified force these days.

I agree with what you are saying. We need to accep...

2011-08-06T20:25:09.015+02:00

I agree with what you are saying. We need to accept that no one as indebted as us in the US has the flexibility we have been used to in the past. We are in the hands of the international capital markets. We are in the hands of the international capital markets with no room for maneuver.
It is very refreshing with honest opinions.

The only examples we have in the articel and the f...

2011-08-05T16:04:28.961+02:00

The only examples we have in the articel and the first comments for secured funding is only applicable in the US. Anyone who knows any options for Europe?

In addition to FICA and CDARS, Structural (www.str...

2011-08-02T22:06:33.932+02:00

In addition to FICA and CDARS, Structural (www.structuralinvest.com) offers a platform to manage portfolios of CDs and other FDIC-insured deposits with coverage up to $50-100 million per individual or entity

Great to have you back blogging again. I really en...

2011-07-22T11:23:27.195+02:00

Great to have you back blogging again. I really enjoy your insights into Corporate Treasury.

I recently came across your post and have been rea...

2010-06-24T19:05:14.049+02:00

I recently came across your post and have been reading along. I thought I would leave my first comment. I don't know what to say except that it caught my interest and you've provided informative points. I will visit this blog often.

Thank you,

Business Loans

Rather interesting place you've got here. Than...

2010-01-25T16:47:15.173+01:00

Rather interesting place you've got here. Thanx for it. I like such themes and anything connected to this matter. I definitely want to read more on that blog soon.

Hi Magnus, I have been enjoying reading your blog...

2009-07-22T10:08:49.138+02:00

Hi Magnus,

I have been enjoying reading your blogs. Inspired by you, I have started a Finance Blogspot of my own. I have posted some articles there. You could read them at http://sandeep-rastogi-fin.blogspot.com/

Hope they will interest you.

Regards
Sandeep