‘We advise our clients to focus on the objective of the business’

Part of the reason why we are here is developmental because it is always important to get the package to a global level to ensure that the financial services in the country can actually deliver a part of the solution to the economic issues in the country.

When we at Citi had an interaction with some of our customers before the conference began, we were talking to them about supply chain. Why are we doing that? Because, there are Small and Medium scale Enterprises that supply to the big companies.

The big companies have access to capital and therefore they can always get funding if they want. They can go to the Stock Exchange if they want.

But the people that actually supply them do not have such easy access, so what we are trying to do is to link them to the Small and Medium Scale Enterprises so that the SMEs can get financing based on their link to the big companies.

What that does for the economy is that it provides capital to the SMEs. And as you know that is the base of economy where growth actually happens. And the major constraints of the SMEs is access to capital and if they get that you are also making sure that these SMEs can be able to scale up over time.

If you look at those sectors, Aviation, transport, logistics and shipping, these are the key parts of the industrial sector and Petrochemical/energy both upstream and downstream as we know is critical part of the Nigerian Economy. So for me, we here to learn and understand a bit more what our clients want, to understand what will be relevant to our clients. We want to help whether it is capital solutions, to supply finance or visibility and control of cash.

What we are saying, across those sectors consistently is really about visibility and control of cash, getting more efficiency out of their systems. Without a doubt, our clients, whether in the Mid

 

Interview

dle East, Africa or Western Europe-they are all looking to get efficiency out of their systems because of the credit crisis, counter party risks, working capital management, managing the flows of your business-all ought to be very efficient and maximised systems.

So, what we are trying to do is work with our clients to tell them it is not difficult. A lot of people think it is a major project. But I think technology is moving on that enables clients to make small changes with great benefits.

Energy, chemical and industrial sectors- what are the treasury trends across these diverse sectors and what does it mean for companies?

One of the big trends that our clients are heavily involved in- sector by sector- is infrastructure-be it core infrastructure for shipping industry or upstream infrastructure for energy projects-what our clients are asking for is help for very important strategic project. The help could be from the trade angle, supply, finance, traditional trade related issues-import/export guarantees.

Each country has its own particular regulation, its own particular aspects of its cash management but there are systems, quick solutions that we can provide. At this point we want the clients experience working with Citi to be as proficient/consistent as possible. And that is what we are looking to do across EMEA region.

A good example is in the aviation industry, shipping industry and also the energy industry, we are working with clients as a regional bank for them across the EMEA region by having local people on the ground in each country, like in Nigeria. This is very important because sitting in London, I can’t pretend to be on top of all the local issues on ground in Nigeria or South Africa or Kenya or Dubai or even Czech Republic. So what we do is look to leverage our local expertise, our local investment products, our technology infrastructure and tie it up with our global systems.

What are treasures looking out for specifically when managing liquidity?

The first thing is the big question. Where is the cash? Again as you know, technology is an enabler, it enables you see your regional and global positions. So clients are looking to get that one system to know where their cash is and then to make their decision around that cash. So we help them move that cash to a sector, where local regulation allows.

So essentially we are the fundamental building block of treasury. To know where the cash is and then help move that cash. We are also looking at the payables, what treasury payments need to be made that is crucial to the business and then extending that to the commercial payments as well and that is where treasury are getting involved around supply and finance and other working capital initiatives.

The other bit is where we are increasingly working with clients now on receiving-account receiving- It is a lot more challenging. There are different methods of collecting cash in different countries and we are working with our clients in each country to work out the most efficient method of collection in each country and in a cost effective way.

Can you share your perspective on convergence of treasury and trade?

Let me say something quickly on trade. Within corporations, you have treasury and commercial divisions which look out for trade elements and you have procurement. We’ve seen a convergence. Why? Because of working capital and counter party risks. It’s important. We have seen a lot of team work between those two separate divisions within the company.

So we as a bank are getting used to talking to treasurers and cash managers and commercial directors that are responsible for the terms of trade as well as procurement directors. They all cut back to working capital and counter party risks.

So our dialogue with them is to try to demonstrate where the value can be derived. The treasury director may understand but commercial director may not understand it given their different objectives and targets for their business. The treasuries are increasingly held accountable for not only managing cash positions but also for counter party and working capital.

When you advise your clients do you also help them clear the distinction between treasury functions and accounting functions?

We advise our customers to focus on the objective of the business, to maximise the profit and to minimise the risk. We also focus on the best ways to get there. This is always opportunity for good things in separation of power but there is no separation of functions. To the extent that we can achieve accountability without diluting control, it is fine. So, when we talk to our customers-who have the focus, the organisational structure, the information must be available to everybody, to be able to flow and begin to focus on the objectives of the firm.

Quite often when we focus on transaction we have to give our clients the information. We have so much information our clients gives us and we want also be able to give back that information to our clients to be able to make the right decision.

In Europe, treasury managers are increasingly recommending use of stress testing and contingency planning techniques to protect businesses against possible Euro break up. What is involved and can it really help?

Yes. We as a bank is fully committed to Europe and Euro. We have a very large banking transaction business across Western Europe. We have ourselves, in the past 18-24 months, been running a whole series of scenarios around what could potentially happen to the Euro and it is so important that we did that because we want to be there for our clients.

Our advice to our clients is that there is a lot more they could be doing themselves, particularly around the commercial contracts that they have within the Euro Zone. They need to look out, if for instance, on the event of re-denomination of a particular currency from a particular country in withdrawing from the Euro-how would that affect their contracts, how would that affect their working capital, their settlements and payment terms-that could have a big impact.

What we have done is to ensure that from the system perspective-through looking at various different scenarios, at Citibank, we will be able to support our clients should there be re-introduction of another currency. So from the Citi Bank perspective, we have stress tested, we’ve done series of contingency scenario planning exercises to ensure that we are ready for that and for our clients, we are also asking them to look at how they will be able to manage it from resourcing point of view, within treasury to wade off the pressure on the corporation and that can be done with base level technology. What contingency plan they do have in place to ensure that they continue with their liquidity and payment procedures respectively.

Again, it comes down to the same point, the treasury working with the commercial department, working with procurement to really understand what contracts they have. Once they know, they will be able to understand the risks they have. We have to plan in case of contingency. I would say the global transaction banks are committed to helping their clients and will continue to test and evaluate our structure.

David Aldred

Ade Ayeyemi