With the economic recovery well underway in the UK, firms are looking abroad for opportunities to expand into previously untapped markets
Much of the leg work involved in global expansion and international growth is now being done by corporate treasury departments.
In its 2015 Global Corporate Treasury Survey, professional services firm Deloitte found that more than 70 per cent of corporate treasurers saw enhanced governance and control over domestic and overseas operations as an important part of their role.
Overseas growth can provide UK firms with a new outlet for products and services and increase sales, but can also add to the complexity of the business, providing corporate treasurers with new challenges.
While Deloitte’s survey found that international treasury support was one of the functions most likely to be outsourced, corporate treasurers need to be aware of the issues facing a company with global expansion plans.
The addition of new responsibilities, such as oversight of overseas operations, is part of the evolving role of the corporate treasurer, which has radically changed in recent years.
“The role of corporate treasurer itself is undergoing a bit of a transition, with merged functions and job descriptions increasingly the norm at large organisations,” says Dennis Gannon, senior director at advisory company CEB, which works with more than 10,000 organisations across 110 countries.
“These merged roles allow the organisation to leverage the treasurer’s unique perspective on cash and capital in areas where they can have a greater impact on shareholder value creation.
“It is far more important in the role today to be a finance and business leader, rather than a technical treasury expert.”
John Bloor, head of practice, finance at interim management services firm Alium Partners, says the corporate treasurer’s role has become increasingly sophisticated and multi-faceted more recently, with treasury departments expected to be able to navigate new markets and regulatory landscapes.
An understanding of global treasury operations, and the different fiscal and commercial practices that exist outside the UK, is critical in an international group to ensure the efficient management and pooling of cash
“Since the financial crisis, what we’ve found is that the role of the treasurer, which used to be, to some extent, a back-office function, is now a much more visible role,” he says.
“An understanding of global treasury operations, and the different fiscal and commercial practices that exist outside the UK, is critical in an international group to ensure the efficient management and pooling of cash.”
As well as adapting to a more internationally focused business model, corporate treasurers will also have to deal with more local issues. Indeed, finding corporate treasurers with experience of managing a company’s expansion abroad can often prove difficult for firms with a more global outlook.
“There isn’t a big pool of good quality treasurers that have significant large corporate experience and have worked in a complex global environment, and it can be quite a challenge finding somebody who meets all the requirements,” says Mr Bloor.
According to a 2014 survey by the British Chambers of Commerce, 43 per cent of UK businesses planned to expand overseas, with the European Union the most popular export destination for an overwhelming majority.
But chief executives are looking further afield at the developing economies around the world. Africa, Asia and Latin America have all been regions of interest to expanding UK firms. However, recruiting staff with specific local market knowledge or experience is often difficult.
“As companies become more complex, this leads to more centrally managed ad‐hoc work to support country‐specific issues and satisfy local market needs,” says Paul Dennis, senior director at CEB, highlighting the challenges modern corporate treasurers face in expanding into developing markets and the additional complexity.
Global professional services firm TMF Group’s annual Global Benchmark Complexity Index reveals that South America was the most complex region to operate in last year, while several Asian countries were also near the top of the list. In contrast, the UK emerged as one of the easiest markets in which to operate.
Developing countries with overbearing bureaucracy can often make expansion a much more difficult process. While familiarity with local laws and ways of doing business can make the process more painless, it is an added challenge for UK firms.
Whether expanding to a developing or a developed market, much of the role will remain the same wherever expansion happens. While becoming a more global treasurer will entail many challenges moving to new markets, it also highlights the need to rely on strengths built within a thriving UK-based business. The traditional corporate treasurer role, expanded to include different markets, continues with daily cash management, risk assessment and financing duties.
“A big issue facing treasurers is corporate-to-bank connectivity, making sure the company’s systems sync effectively with the banks,” says Alium’s Mr Bloor. “The challenge facing a lot of treasurers is having to manage different systems that banks use to make sure there is not an impediment to the transfer of funds around the world.”
Knowledge of different tax regimes is a significant issue for treasurers of expanding UK firms, particularly in the current environment where tax issues have become a politically sensitive subject.
“One of the biggest challenges treasurers face when internationalising is ensuring compliance with different VAT regimes,” says Claudio Cassanmagnago, VAT expert at international consulting group Lowendalmasaï. “The time to register and the rules that apply in every jurisdiction can vary significantly, so companies need to take advice when expanding their operations overseas.
“Since non-compliance is a major legal and reputational threat, it’s very important for companies to get this right,” he adds. “It’s worth remembering that VAT rules also apply to those looking to internationalise their business using e-commerce and other distance-selling initiatives.”
With British businesses continuing to look abroad for growth outside of the home market and new revenue streams, the corporate treasury department is likely to play a key role in facilitating expansion