Top-Priorities-for-2020

Treasury and Trade Solutions 4 Re-architect treasury structures A combination of one-off and recurring themes calls for companies to revisit established treasury operating principles and centralization structures. To start, regulators are sticking to their guns on the demise of LIBOR and transition to Alternative Risk Free Rates. With LIBOR referenced in myriad external and internal contracts and documentation — including loans, bonds, derivatives, supplier finance programs, transfer prices, and intercompany loans — many companies face enterprise-wide financial, accounting, and tax considerations. The preparation needed to ensure a successful transition should not be underestimated and will consume treasury capacity in working with cross-company stakeholders to address the changes. BEPS has taken time to gain momentum, however, the principles, with variations, are being enacted in laws around the world. More generally, tax authorities are scrutinizing intellectual property transfers, intercompany transactions, and the basis for arms-length pricing more than ever. Another trend is for services to become taxed where consumed, rather than where created. All of this is driving changes in legal entity and tax structures — impacting treasury’s management of currency exposures, payment and collection patterns, and cash concentration and intercompany funding needs. We believe treasurers cannot afford to wait for tax and legal teams to make decisions and then react. They must build partnerships across the organization and ensure they have a seat at the table from the planning phase onwards. Treasurers can also expect to continue spending more time and resources on compliance. Indeed, with an alphabet soup of rules from FATCA to the GDPR, compliance management is becoming part of the daily routine, with treasury often having default responsibility. The overall consequence is that established treasury centralization structures and operating models — treasury centers, in-house banks, the domicile of cash pools, etc., — may no longer be fit for purpose at many companies, even before a likely further onslaught of change. Treasurers should plan for treasury re-engineering as a continuous process — a regular checkup of the existing setup to diagnose, and then make necessary changes to ensure they remain fit for purpose.