Treasurers, consequences & a 2020 to remember

The COVID-19 crisis has had a profound impact across economies, markets and societies. ANZ and KangaNews, in association with Women in Banking and Finance, recently hosted business and market leaders to talk through the response so far and the wide-reaching nature of future changes.

Participating in the discussion were Jacqueline Chow, Senior Adviser at McKinsey and Nonexecutive Director at Coles, NIB, and the Australia-Israel Chamber of Commerce; Jen Dalitz, Chief Executive at Women in Banking and Finance; Jen Driscoll Chief Executive, Australia and New Zealand at AllianceBernstein; Jacki Johnson, Adviser at IAG, non-executive Director at Community First Credit Union, co-chair United Nations Environment Programme Finance Initiative and The Australian Sustainable Finance Initiative; and  Carol Lydford, Treasurer Toyota Finance Australia, Board Member at Lifeline Northern Beaches and Nonexecutive Director at Toyota Super.

Participants from ANZ included Karen Brown Director, Diversified Industrials; Felicity Emmett, Senior Economist; Gwen Greenberg, Head of Corporate Debt Capital Markets Australia; Katharine Tapley, Head of Sustainable Finance and Christina Tonkin, Managing Director, Corporate Finance. The discussion was moderated by Helen Craig, Head of Operations at Kanagnews.

In part one of a multi-part discussion, we started by asking about the biggest issues over the months of the COVID-19 crisis, related to the nature of work or business.

GG: The biggest challenge I have faced is ensuring the younger members of my team, who may not be privy to all the conversations taking place, are moving up the learning curve and getting enough exposure and experience.

From a debt capital markets perspective and, more specifically, transactions and execution, what was really challenging at first was day-to-day communications. For example, determining what required wet signatures and what was okay to sign electronically, and then properly inserting that electronic signature into a document when we did not have technical support standing by. It can be quite frustrating.

CL: Some of the market issues we saw at the height of the crisis are continuing, at least to a certain extent. Issuers and investors did not know how long the crisis was going to last and for how long markets were going to be affected.

The commercial paper (CP) market in Australia came to a grinding halt. Given the short tenor of CP, it runs off the book faster and, as such, we had to source additional funds to replace this debt in other ways. The same thing happened in the United States and Europe.

The uncertainty and rapidly evolving nature of the crisis led to some unintended consequences in the capital markets from decisions that were made to support the broader economy. By this I mean decisions like allowing individuals to access up to $A10,000 of their superannuation if they are in distress.

This is a great initiative that I fully support. However, one of the consequences was that funds started liquidating assets. They were not investing in shorter-dated paper and everyone wanted to hold cash in reserve.

This had a broader impact on the functioning of capital markets. Investors did not want to lock money away in either short- or longer-dated bonds. This is a lesson learned for the future.

The other thing, from a treasurer’s perspective, is that one is always reflecting on decisions being made to support the company’s liquidity. I need to think whether what I am doing is a two- or six-month decision, and to consider potential transactions from every angle – maturity profiles, liquidity needs and profitability.

There is substantial education undertaken to ensure management is on board with decisions and understands the rationale for recommendations. Having the confidence to make these decisions and act on them is critical.

JJ: The crisis is teaching about short- and long-term decision-making, which we often only do in disaster situations. It reminds me of the recovery from the earthquake in Christchurch, where the long-term decisions were made very early on.

The current situation is not only testing our employers and leaders but it is also testing directors. We cannot just show up every month to board meetings. It is more important than ever to be across the topics and information that we may not have had as much access to in the past – not to mention there is no symmetry of information right now.

This event is hitting everyone globally. It challenges how we all think about the way we were and are working, but also the way roles and accountability are structured. We all have to pitch in.

The strength of the banking sector is helping us through. Financially we are very strong, which means we have more liquidity in the system. But we must be prudent in how we lend.

From a responsible lending point of view, we need to be very conscious of how we evaluate people's needs. I echo Carol Lydford’s point about the short- and long-term balance of our decisions being more critical now than ever.

JD: We too are fully supportive of the superannuation access the federal government granted. However, in the context of our business and the impact on the superannuation industry – and when you look at it in combination with the coming recession, the rise in unemployment and reduced population growth – there will be consequences. Rainmaker expects the superannuation industry will no longer grow to the forecast $A10 trillion by 2040, but to $A7 trillion.

Superannuation funds in their role as investors have a significant impact on Australia’s economy. As a fund manager that is part of the overall value chain, I see this as a shared issue and challenge we will have to address as it will have a long-term effect.

The technology impact has been significant in the past six months – both our dependency on it and in the efficiencies it can create. Assessing our ability to leverage technology to continue to operate effectively has been a critical focus and an issue we explored with our peers.

Equally, though, we recognise other organisations have not been able to embrace this as effectively and we are trying to figure out what it means for us as we engage with the marketplace.

Picking up on the workplace comments, a lot of elements of flexible work are very important. I would also add to this the importance of employee wellness and mental health. This is an issue that the crisis has brought to the fore given the challenges presented by working from home. It also tests management skills and leadership abilities.

JC: It has been interesting hearing the perspective from debt capital markets and fund managers. As users of markets, our preoccupation is the structural shifts occurring on the demand and supply sides.

There were some big geopolitical and social events before the pandemic hit, and now of course they are gathering momentum. The shifts were towards populism and protectionism, exemplified by Brexit and US President Donald Trump’s America.

On my side, in the supply world, we have always espoused diversification for managing risk and for good commercial sense. But we are now seeing some organisations’ behaviour, across all sectors, changing.

Some are questioning whether they should be outsourcing to offshore, whether they should be importing and exporting, and whether we should be more self-reliant.

On the demand side, of course, consumer behaviour has changed. Customers want the most frictionless experience and it is not risk aversion that is compelling them but fear. We have been preoccupied with the permanence of these shifts.

FE: After the global financial crisis, with the dislocation that happened and some of the stimulus measures introduced, we saw a big increase in inequality. It was not so much the case in Australia, but certainly in the US and United Kingdom we saw this disparity of outcome – specifically around intergenerational inequality.

Over time we have seen the repercussions of this with Brexit and the election of populist governments in the UK and US.

We are seeing the economic consequences play out now alongside the social consequences, and I think this is one of the more permanent changes that will need to be considered.

This crisis has hit everyone but, while jobs have been hit and wages have declined across all industries, younger people and women have suffered much more.

Unless there are very determined efforts to address these issues around inequality, this problem will worsen over an extended period. The consequences are difficult to foresee, too. I think this will be a very big issue for policymakers going forward.

JD: We kicked off an initiative at Women in Banking and Finance (WiBF) to invite representatives of our member firms to speak on a range of topics – the first one being flexibility.

I should preface what I am about to say by pointing out that being forced to work from home is not necessarily flexibility. But we have seen some roles performed remotely for the first time.

One of the discussion points was that, post COVID-19, it may be beneficial to work with regulators on a model flexibility policy that would determine what aspects of roles can be done remotely, how we deal with security of information, and any potential conflicts – perceived or otherwise – of working in markets roles remotely. This has been a hurdle in the past.

This is an edited version of a piece that originally appeared on KangaNews