A treasury-led plan

With the Brexit deadline closing in, certainty remains elusive. In the face of the unknown, our webcast provided treasurers with words of encouragement.

"Be on the front foot, take the lead, and show direction for the Board." The words of Eddie Norton (Regional Head of Global Liquidity and Cash Management Europe) place treasurers firmly on the frontline when it comes to building a response to the challenges and opportunities of Brexit.

It is a huge responsibility, but then sitting as it does at the "nexus" of many commercial functions, the task of assessing the corporate response falls naturally to treasury. Realising this, treasurers should neither "panic nor be complacent", urges Norton.

Assess and plan

Whether it's a hard, soft or creative outcome, all corporates should now be preparing for Brexit. Extended working capital cycles may be seen, for example, where supply chains in either direction are unsettled by new customs and border controls and the lack of expertise in dealing with tariff and non-tariff barriers.

SEPA (Single Euro Payment Area) access for UK Banks is another particular concern for corporates. Firms that use UK-based euro accounts "may see increased cycle times and additional costs", warns Deborah Mur (Country Head of Global Liquidity and Cash Management, HSBC France). It may be necessary for corporates to consider opening up a euro account in the EU or in the EEA, as a contingency arrangement.

Of course, for every payable there is a receivable. "We need to be equally focused on the readiness side of it from a collection perspective," says Emanuele Vignoli (Managing Director, Head of Global Liquidity and Cash Management, International Europe). "It is paramount that clients engage with their buyers, making sure they update data on the invoice, post-Brexit, to ensure that they avoid any downstream issues in their accounting systems."

In the wide-ranging melee, bankers and treasury teams need to engage with each other "as early as possible" to understand the effect in their respective sectors to get a grasp on optionality, says Vignoli. In certain sectors there could be a significant and necessary overhaul of existing business models. For Alan Duffy (CEO & Head of Banking, HSBC Ireland), this highlights the importance for treasurers to take inputs from right across the organisation, responding to the impacts that the various scenarios might have on them.

Opportunity knocks

Well-prepared businesses are forming crossfunctional 'Brexit working groups', notes Eddie Norton. Analysis of every impacted element – people, trade, supply chain, liquidity and cash management et al – can deliver the requisite oversight. But it is still the treasurer that sits "at the nexus of all these points". This, he feels, presents a "great opportunity for treasurers to step forward and to take the strategic lead".

'Brexit as an opportunity' is an idea espoused by Deborah Mur. Many treasurers are already "unearthing the benefits of getting Brexit-ready", reviewing, perhaps for the first time, their long-established euro liquidity management structures. Taking time out to look at the process end to end can be beneficial and additional efficiencies may arise, says Mur.

Talking service

Treasurers remain hungry for information, notes Duffy. Accordingly, they should expect their banks "to be absolutely on top of the game". Certainly, they are being judged on their strength as a counterparty in a post-Brexit world. They are being evaluated on their presence in Europe, balance-sheet positioning, and their ability to maintain service delivery even if passporting rights are lost.

Vignoli urges treasurers to question whether their banks are talking to them seriously about contingency arrangements. "They should be reassuring you that they'll be able to support you in a variety of Brexit scenarios. If they're not, then be demanding."

Planning ahead

At HSBC, it's "business as usual", says Norton. Coupled with "a very deep and extensive cash management proposition on the continent", HSBC will leverage our European network and our main European hubs in France and Germany to ensure continuity of service. Also, with a significant corporate and retail bank in France, this, adds Mur, gives the bank direct access to the high- and low-value euro clearing system "enabling us to continue providing the same continuity of service as we do today".

Of course, deep planning really starts within the business. As the one true business nexus, planning driven by the treasury function is likely to present the most insightful Brexit contingency. Treasurers should not wait to be forced into action by the deadline. They should use the coming months as an opportunity to review, plan and optimise, making sure to exploit their banks' expertise wherever possible.

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