How the World Cup makes me think of treasury

By Bob Stark June 20, 2014

The soccer (or football, depending on where you reside) World Cup is upon us, and 32 of the best national soccer teams in the world descend upon the beaches and jungles of Brazil in an effort to be named as the top footballing nation in the world.

As this first round of the World Cup continues, I could not help but wonder “what if my company did business in each of the 32 countries vying for the trophy?” Since the match I was watching featured a relatively slow build up in play during the first half (and try as I may, I can’t get treasury out of my head), I had time to contemplate what I would do to perfect visibility, maintain control, and optimize treasury decisions – if I had business operations in each of the countries playing in the World Cup.  Given that North Korea failed to qualify this time around, it’s a fair assumption that there are a number of multinationals with a presence in each country in the World Cup tournament.

Bank Connectivity

First, I want connectivity to my banks to achieve visibility into cash. While I may not have 32 banks across my 32 countries (I expect some common relationships across Europe, for example) it is quite likely that I will have around 20 banks globally, possibly more in larger countries like the U.S. Fortunately, I have multiple connectivity methods at my disposal and I’m likely to leverage all of them (FTP, EBICS, SWIFT) to automate connectivity. I may not use just one (e.g. SWIFT) because I want to minimize bank fees in the process – so a combination of methods will be best for me.

Bank Account Management

As many of the 32 countries are further afield and have local signatories ‘on the ground’ in those regions, it is imperative for me to have complete visibility into my bank accounts – where they are, what types of accounts we are holding, which entity owns the account, who are the signatories, and related contact information in case changes need to be made centrally. I want all of this information centralized so that no bank account can exist without me knowing about its existence at head office – even if all the signatories on those accounts are decentralized in Honduras or Ghana, for example.

Cash forecasting

I likely have a small treasury team, so I am relying upon regional controllers within the finance team in places such as Uruguay, South Korea, and Belgium to help with functions such as cash forecasting. By giving them a standardized tool – ideally over the web so that I can control what they see and deliver to me – I make it easy for them to provide timely forecast inputs. In addition, I also want to implement a feedback loop, so I can provide measurement of forecast accuracy. With any luck, like a speedy winger making incisive runs to the box, they can adjust tactics on the fly with just a little bit of feedback to make an even better forecast next time.

FX hedging

Even with a considerable number of eurozone countries participating (France, Spain, Italy, Portugal, Greece, Netherlands and Belgium), currency risk remains a huge issue. This is compounded by the fact several of the economies of competing countries – Iran and Russia, for example – have somewhat unstable economies. It’s therefore critical that I have an effective FX hedging process in place.

In fact, risk management and the World Cup do go together quite well. Research by the London School of Economics showed that a nation’s stock markets have a tendency to fall by an average of 0.5 percent the day after the country is eliminated from the World Cup.1

So, it is therefore critical for me to know my cash flow and balance sheet exposures for each currency pair – so that I can then take action to hedge against currency risks per my FX policy (presuming I have one – and if not, I should create one). I am happy to have a dashboard, then, that shows me exposures vs. hedging policy so that I always know my score and if I’m winning or losing!

Treasury automation

On the West Coast of North America, where I live, the first round’s games start at 9 a.m., noon and 3 p.m., with later rounds’ games having similar start times. As I have a keen interest in all of my countries performances, I need to keep track of them. So, with six hours of soccer to watch each day (hypothetically, of course!!), I can’t spend several hours of my day manually entering, rekeying, and editing data in spreadsheets, or I may end up missing something important.

So I can free up some vital time, I need to implement a treasury management system, which will automate a wide variety of treasury processes. This will enable me to free up valuable time to focus on far more… important tasks.

In order to keep costs down, I should also look at a SaaS platform, which can be implemented in multiple markets without the need for an expensive software impementation. Also, as my team in, say, Costa Rica probably doesn’t have any local IT support, a cloud-based solution which can be supported by the vendor will also save me huge headaches (and expense) down the line.

With that, it’s time to get back to the game. Whoever you are supporting, I hope that they don’t cause you too much heartbreak over the next few days or weeks.

Reference: 

1World Cup fever: Why an England loss will wipe billions off the stock market

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