RISK MANAGEMENT | 20 September 2023

Corporate Treasury
through Crisis

Chris-Paizis-author

Chris Paizis

Head of Client FX
and International
Banking at Absa Group

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Why banks and corporate treasurers are forging new relationships based on co-creation and true business partnership

Recent years have seen businesses – and corporate treasurers – across the world roll from one crisis into the next. The Covid-19 pandemic was followed by supply chain disruptions, which continued because of the conflict in Ukraine. Inflation. Interest rate hikes. Recession. The list goes on, as the hits to local and global economies keep on coming.

“It’s been one crisis after another,” says Chris Paizis, Head of Client FX and International Banking at Absa Corporate and Investment Banking, “and all these things have an impact on corporations’ bottom lines. Corporate treasurers are now having to deal with the normal challenges of their work – like managing foreign exchange, interest rate and commodities exposure, and managing cash flow – as well as significantly growing cost base and lower consumer demand.”

These factors make the role of treasury pivotal in any organisation. “We said this during the Covid crisis, and it’s even more so now,” says Paizis. “And in this environment, it is impossible for corporate treasurers to manage without the appropriate banking partner.”

That business/bank partnership is based on a clear understanding of the corporate treasurer’s needs, he says. “It manifests in deep discussions and understanding our clients’ cash flow profiles and funding needs into the future. It’s about making sure that the solutions we co-create are appropriate – not only from a balance sheet and an income statement hedging perspective but also from a technological perspective.”

Digital technology has developed at an explosive pace over the past few years, bringing solutions to many problems (including, most obviously, the enablement of a widespread work-from-home setup during the Covid-19 lockdowns). However, new tech is by nature disruptive – which also adds to the confusion many corporate treasurers have been feeling.

“Technology is growing in huge leaps and bounds, to the extent that one of the biggest debates globally now is how we manage the role of artificial intelligence (AI),” says Paizis. When it comes to the relationship between banks and clients, he says, disruptive digital tech is both enabling and demanding deeper systems integration. “Along with that,” he adds, “security efficiency is top of mind. That’s certainly an area that Absa as a bank is investing in heavily and looking to partner on with our clients – not just in South Africa but across Africa.”

Treasury management

In this environment, treasurers still need to get their day jobs done. “You have to separate the transactional treasury management from the more strategic treasury management,” says Paizis. “I dare say that the strategic perspective – What is the long-term funding situation? How can banks help with that? – is now the easier of the two. The short-term piece – by which I mean managing day-to-day liquidity amid enormous currency volatility, spiking interest rates and uncertain cash flows – demands that you have the right platforms and the right facilities with regard to trade finance, overdrafts, foreign currency accounts, foreign exchange management, et cetera.”

Here, banks are playing an enabling role with their corporate clients – even as the demands from corporate treasurers increase. “As you manage from one crisis through to the next, you need better support to do so,” Paizis says. “Banks have come to the party in this regard.”

And despite high-profile bank failures in the United States (along with similar noise in Europe), he believes that banks in South Africa and generally in Africa have been quite resilient. “If I focus on the South African market, the partnership model between banks and their clients is as strong as ever,” he says.

Banks as partners

This shift towards banks and corporates working as partners is relatively new, and it’s driven largely by an understanding – on both sides – of the bigger business picture. “We’re all in the same boat,” says Paizis. “That’s a concept that I think many clients have struggled with over the years. When we had the financial crisis in 2007/08, banks were not seen as partners. They were seen as the bad guys who caused the problem.”

Now, amid the post-pandemic global recovery, the situation is quite different. “Given how technology is rolling out globally, with cloud-based tech, Application Programming Interfaces (APIs) and so on, we’re really dealing with one financial system now,” he explains. “We’re in a very different position from where we were 20 or 30 years ago, where it sometimes felt like ‘Us versus Them’ in terms of banks and clients. Today banks and clients are equal partners and co-creators in a single global financial technological system.”

The co-creation aspect is particularly important for corporate treasurers, who rely on banking systems to maintain liquidity in their organisations. “It’s not just about FX or rates any more,” says Paizis. “It’s about maintaining cash flow integrity, making sure you’re partnered with the correct bank, and having the correct facilities and the correct risk management in place.”

Those banking systems are expensive to build and often difficult to operate. In today’s environment, they require seamless integration between bank and business, and between bank, business and the cloud. As new systems come online, new possibilities emerge and new opportunities are being identified. Banks cannot create those systems in isolation, says Paizis.

“There’s a lot more inclusion in the financial system, and that has made these conversations a lot more fluid,” he says. “Absa works to a model of co-creation and complete partnership. We take client feedback very seriously as we develop our systems. One has to appreciate that banks spend a lot of money on systems development. If we’re not doing that with our clients’ voices front and centre, then we’re bound to fail.”

Built on trust

From Absa’s perspective, Paizis says, the equation is very simple. “If our clients do not succeed, we do not succeed,” he says. “And as the recent failings of certain banks have shown us, if banks don’t succeed our clients won’t succeed either. We are integrally tied together, not just from a standard facility perspective (for example overdrafts, lending, deposit taking, et cetera), but also in terms of systems integration. We are all key participants in the financial system. As banks, we enable our clients’ businesses, while our clients allow us to carry on with our business.”

That relationship is based on trust, which is cemented by initiatives like the FX Global Code, a set of principles of good practice in the foreign exchange (forex, or FX) market. While the Code does not impose legal or regulatory obligations, it does aim to promote a robust, fair, liquid, open and appropriately transparent market for all participants.

“Through the Code, the FX market now has well-established ethical pillars that have been rolled out by banks across many markets,” says Paizis. “Absa’s corporate clients have certainly embraced its principles. This is another example of how the development of our systems has been done with our clients in mind, with fairness in mind, and with the goal of easy and transparent execution. And this concept is not just limited to FX. It applies across every element of our clients’ business.”

That, he concludes, is what true partnership is about.

This article was originally published by the Association of Corporate Treasurers of Southern Africa (ACTSA) on www.actsa.org.za in partnership with Treasury Management International (TMI). It is reproduced here with their permission.

Chris-Paizis-author
Chris Paizis

Head of Client FX and International Banking at Absa Group

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