Trésorier/Treasurer magazine - N°99 - Nov/Dec/Jan 2018 - 12

ones,	
  past	
  to	
  future,	
  short  term  to  long  term	
  and	
  base--‐case	
  to	
  best--‐case	
  projections.	
  It	
  is	
  far	
  from	
  being	
  
easy.	
  
Formulas  of  the  EVA  and  MVA
EVA

=

(ROIC  --‐  WACC)  *  Invested  Capital  

Market  Value  Added  (MVA)   = discounted  sum  of  all  expected  EVA's

=

NOPAT  --‐  Capital  Charge

=

NPV  of  the  company

+

LE MAGAZINE DU TRESORIER / TREASURER MAGAZINE

-

N°99

- NOV /

DEC / JAN 2018

invested	
  capital
+	
  	
  	
  MVA

12

=

= Enterprise	
  Value

	
  

There	
  is	
  no  one--‐fits--‐all  solution  or  recipe.	
  What	
  can	
  be	
  noticed,	
  is	
  some	
  lessons	
  or	
  best	
  practices	
  which	
  
could	
  be	
  considered.	
  Growth	
  can	
  destroy	
  value	
  and	
  is	
  not	
  an	
  absolute	
  quest.	
  While	
  focusing	
  on	
  organic	
  
growth	
  and	
  on	
  acquisitions	
  is	
  vital,	
  it	
  doesn't	
  mean	
  always	
  value	
  creation	
  and	
  doesn't	
  guarantee	
  it.	
  The	
  
risk	
  
element	
  
must	
  be	
  
into	
  performance
consideration	
  in	
  M&A.	
  
There	
  
are	
  limits	
  to	
  
iversification	
  
of	
  needs
assets.	
  
A	
  risk	
  
A good
management
ofdworking
capital
helps
the firm
The best and
optimum
measure
oftaken	
  
financial
to build
value, pas
well as
thegoptimization
remains themitigating	
  
most important
Companies
factor	
  quest
which	
  for
is	
  "CFO's.
classic"	
  
is	
  the	
  diversification.	
  
However,	
  
roduct	
  
and	
  
eographical	
   of the Finance Supoften focused
on book values
andaaccounting
(arecipe	
  fply
There is also
capital
(e.g. leases
diversification	
  
aren't	
  
lways	
  the	
  ameasures
ppropriate	
  
or	
  vChain.
alue	
  generation.	
  
Woff-B/S
ith	
  more	
  
correlation	
  
than	
   and penposteriori) e.g.
ROA,
ROE,
EPS
growth
and
profit
margins.
On
sions,
which
are
now
revisited
by
IFRS
and
accounted
for by
ever,	
  it	
  doesn't	
  bring	
  security	
  and	
  protection	
  when	
  a	
  line	
  of	
  business	
  is	
  facing	
  difficulties.	
  They	
  are	
  
the other side, some firms focus on market-based measures,
rating agencies in economic debt assessment). The ultimate
tempted	
  to	
  invest	
  excess	
  cash	
  with	
  current	
  negative	
  interest	
  rates.	
  The	
  forecasting	
  of	
  financial	
  
e.g. long term stock performance (more a prospective view).
goal is to invest in sustainable assets which provide returns
performance	
  is	
  tough	
  as	
  it	
  often	
  doesn't	
  include	
  downside	
  scenarios.	
  The	
  base	
  case	
  scenarios	
  aren't	
  
At the end of the day, the solution may be median, hybrid and
in excess of cost of capital. The problem is in the price to pay
expected	
  cSome
ash--‐flows.	
  
The	
  evaluation	
  
f	
  passet,
otential	
  
acquisitions	
  
is	
  often	
  
overestimated	
  
a mix of theunfortunately	
  
different typesthe	
  
of measures.
measures
foroan
which
should remain
reasonable
in order not to
and	
  do
could	
  
destroy	
  the
value	
  
mid--‐run.	
  W
hen	
  do
you	
  
your	
  capital,	
  it	
  future
is	
  recommended	
  
to	
  allocate	
  
all	
   costs.
(booking ones)
not include
riskin	
  
dimension.
They
notallocate	
  
disproportionate
earnings compared
to capital
of	
  associated
capital.	
  For	
  
xample,	
  
the	
  working	
  
capital	
  which	
  
is	
  a	
  kwhen
ey	
  focus	
  
for	
  treasurers.	
  
With	
  
urrent	
  
account forforms	
  
the risk
toean
investment.
The EconoThe risk
potential
acquisitions
arecso
highly valued lays
goodwill impairment
risk. It isethe
killer
factor
mic Value Added
and iMarket
are market
values.could	
  inbthe
negative	
  
nterest	
  Value
rates,	
  Added
a	
  distribution	
  
company	
  
e	
  interested	
  
in	
  paying	
  suppliers	
  
arlier	
  
with	
  
ad   in lot of
aborted
deals.
The dilemma
is to
oppose booking
to market ones,
hoc	
  
discounting.	
  
The	
  dmeasures
ynamic	
  discounting	
  
helps	
  firms	
  
to	
  better	
  
manage	
  the	
  WorkCap.	
  A	
  good	
  
past to future,
short term o
tof	
  long
termcand
base-case
to bestmanagement	
  
working	
  
apital	
  
needs	
  helps	
  
the	
  firm	
  to	
  build	
  value,	
  as	
  well	
  as	
  the	
  optimization	
  of	
  the	
  
Furthermore, the hurdle rate should be reduced, as global
case projections. It is far from being easy.
Finance  Supply  Chain.	
  There	
  is	
  also	
  off--‐B/S	
  capital	
  (e.g.	
  leases	
  and	
  pensions,	
  which	
  are	
  now	
  revisited	
  by	
  
interest rates remain at historic lows (i.e. Hurdle rate = WACC
IFRS	
  and	
  accounted	
  for	
  by	
  rating	
  agencies	
  in	
  economic	
  debt	
  assessment).	
  	
  The	
  ultimate	
  goal	
  is	
  to	
  invest	
  
+ hurdle rate delta). The rate used by MNC's to evaluate an
There is no one-fits-all solution or recipe. What can be
in	
  sustainable	
  
which	
  provide	
  
eturns	
  
of	
  cost	
  of	
  cis
apital.	
  
The	
  
problem	
  
is	
  in	
  the	
  
price	
  
to	
  pay	
  rate
far too
high.
Corporations
look
at hurdle
noticed, is some
lessons orassets	
  
best practices
whichrcould
bein	
  excess	
  acquisition
for	
  
a
n	
  
a
sset,	
  
w
hich	
  
s
hould	
  
r
emain	
  
r
easonable	
  
i
n	
  
o
rder	
  
n
ot	
  
t
o	
  
d
isproportionate	
  
f
uture	
  
e
arnings	
  
c
ompared	
  
rather than at real cost of capital. The hurdle rate deltas are
considered. Growth can destroy value and is not an absolute
capital	
  con
osts.	
  
The	
  rgrowth
isk	
  when	
  
potential	
  
acquisitions	
  increasing
are	
  so	
  highly	
  
valued	
  
lays	
  in	
  thas
he	
  gdecreased
oodwill	
  impairment	
  
as cost
of capital
over time. But
quest. Whileto	
  
focusing
organic
and
on acquisitions
risk.	
  It	
  mean
is	
  the	
  always
killer	
  fvalue
actor	
  creation
in	
  lot	
  of	
  aand
borted	
  
deals.	
  
with a long period of low interest rates, time has come to
is vital, it doesn't
doesn't
adjust rates used.
guarantee it. The risk element must be taken into consideFurthermore,	
  
the	
  hto
urdle  rate  should  be  reduced,	
  
ration in M&A.
There are limits
diversification of assets. A as	
  global	
  interest	
  rates	
  remain	
  at	
  historic	
  lows	
  (i.e.	
  
Hurdle	
  
rate	
  
=	
  Wis
ACC	
  
+	
  hurdle	
  
rate	
  
delta).	
  The	
  rate	
  used	
  by	
  MNC's	
  to	
  evaluate	
  an	
  acquisition	
  is	
  far	
  too	
  
risk mitigating
factor
which
"classic"
is the
diversification.
high.	
  Cand
orporations	
  
look	
  diversification
at	
  hurdle	
  rate	
  aren't
rather	
  than	
  at	
  real	
  cost	
  of	
  capital.	
  The	
  hurdle	
  rate	
  deltas	
  are	
  
However, product
geographical
always the appropriate
Withomore
increasing	
  arecipe
s	
  cost	
  ofor
f	
  cvalue
apital	
  generation.
has	
  decreased	
  
ver	
  time.	
  But	
  with	
  a	
  long	
  period	
  of	
  low	
  interest	
  rates,	
  time	
  
correlation has	
  
thancever,
security
ome	
  tito	
  doesn't
adjust	
  rbring
ates	
  u
sed.	
  	
   and protection
when a line of business is facing difficulties. They are tempted to investSustainable  excess  returns  in  the  long  run  
excess cash with current negative interest rates.
The forecasting of financial performance is tough as it often
The	
  downside
objective	
  scenarios.
must	
  be	
  to	
  The
rethink	
  
and	
  to	
  allocate	
  capital	
  in	
  order	
  to	
  maintain	
  competitive	
  
doesn't include
baseinvestments	
  
case scenarios
advantages	
  
hile	
  ensuring	
  
sustainable	
  
excess	
  returns.	
  It	
  is	
  of	
  course	
  easier	
  to	
  say	
  than	
  to	
  achieve...	
  The	
  
aren't unfortunately
thew
expected
cash-flows.
The evaluation
of potentialhighest	
  
acquisitions
is often
overestimated
possible	
  
ROIC	
  
should	
  not	
  be	
  and
the	
  could
target.	
  It	
  could	
  lead	
  to	
  over--‐allocating	
  assets	
  to	
  a	
  business	
  line	
  
destroy value
When
allocate
it isA	
  portfolio	
  of	
  assets	
  must	
  be	
  well	
  balanced.	
  Conversely,	
  
or	
  in
to	
  mid-run.
only	
  focus	
  
on	
  ryou
iskier	
  
assets	
  your
and	
  capital,
ventures.	
  
recommended
to allocate all forms
of capital.
For example,
under--‐allocation	
  
of	
  capital	
  
to	
  a	
  business	
  
line	
  could	
  also	
  have	
  negative	
  impacts.	
  It	
  is	
  advised	
  not	
  to	
  focus	
  
the workingtoo	
  
capital
which
a key
focus
for treasurers.
With
much	
  
on	
  RisOIC	
  
level	
  
neither	
  
to	
  search  for  highest  average  ROIC  to  create  maximum  value.	
  
Of	
  course	
  
current negative interest rates, a distribution company could
be interested in paying suppliers earlier with ad hoc discounting. The dynamic discounting helps firms to better manage
the WorkCap.

As for working capital management, capital
allocation is an alchemy requiring a precise
weighting of components to succeed and
generate expected added-value.



Table des matières de la publication Trésorier/Treasurer magazine - N°99 - Nov/Dec/Jan 2018

COUVERTURE
SOMMAIRE
EDITORIAL
FINANCIAL HIGHLIGHTS Luxembourg Tax News
INTERVIEW with Dick Oskam, Head of Sales for Transaction at ING
FOCUS
Value generation - How to create (more) value for the company with a better capital allocation
Managing bank accounts, the Cinderella of treasury management
Treasury on the Digital Front Line
FORUM
Implementation of EU Tax Rules
Innovative payments solution
Construction de portefeuille : combiner gestion active et passive
Decision Time: Investing in Money Funds after EU Reforms
Payments as a Strategy
Are asia’s corporates ready to repo?
The evolving role of treasurers
THE FINANCIAL RISK OBSERVATORY
NEWS
LIFE BEYOND NUMBERS
Trésorier/Treasurer magazine - N°99 - Nov/Dec/Jan 2018 - COUVERTURE
Trésorier/Treasurer magazine - N°99 - Nov/Dec/Jan 2018 - 2
Trésorier/Treasurer magazine - N°99 - Nov/Dec/Jan 2018 - SOMMAIRE
Trésorier/Treasurer magazine - N°99 - Nov/Dec/Jan 2018 - 4
Trésorier/Treasurer magazine - N°99 - Nov/Dec/Jan 2018 - EDITORIAL
Trésorier/Treasurer magazine - N°99 - Nov/Dec/Jan 2018 - FINANCIAL HIGHLIGHTS Luxembourg Tax News
Trésorier/Treasurer magazine - N°99 - Nov/Dec/Jan 2018 - 7
Trésorier/Treasurer magazine - N°99 - Nov/Dec/Jan 2018 - INTERVIEW with Dick Oskam, Head of Sales for Transaction at ING
Trésorier/Treasurer magazine - N°99 - Nov/Dec/Jan 2018 - 9
Trésorier/Treasurer magazine - N°99 - Nov/Dec/Jan 2018 - Value generation - How to create (more) value for the company with a better capital allocation
Trésorier/Treasurer magazine - N°99 - Nov/Dec/Jan 2018 - 11
Trésorier/Treasurer magazine - N°99 - Nov/Dec/Jan 2018 - 12
Trésorier/Treasurer magazine - N°99 - Nov/Dec/Jan 2018 - 13
Trésorier/Treasurer magazine - N°99 - Nov/Dec/Jan 2018 - Managing bank accounts, the Cinderella of treasury management
Trésorier/Treasurer magazine - N°99 - Nov/Dec/Jan 2018 - 15
Trésorier/Treasurer magazine - N°99 - Nov/Dec/Jan 2018 - 16
Trésorier/Treasurer magazine - N°99 - Nov/Dec/Jan 2018 - 17
Trésorier/Treasurer magazine - N°99 - Nov/Dec/Jan 2018 - 18
Trésorier/Treasurer magazine - N°99 - Nov/Dec/Jan 2018 - Treasury on the Digital Front Line
Trésorier/Treasurer magazine - N°99 - Nov/Dec/Jan 2018 - 20
Trésorier/Treasurer magazine - N°99 - Nov/Dec/Jan 2018 - 21
Trésorier/Treasurer magazine - N°99 - Nov/Dec/Jan 2018 - Implementation of EU Tax Rules
Trésorier/Treasurer magazine - N°99 - Nov/Dec/Jan 2018 - 23
Trésorier/Treasurer magazine - N°99 - Nov/Dec/Jan 2018 - Innovative payments solution
Trésorier/Treasurer magazine - N°99 - Nov/Dec/Jan 2018 - 25
Trésorier/Treasurer magazine - N°99 - Nov/Dec/Jan 2018 - Construction de portefeuille : combiner gestion active et passive
Trésorier/Treasurer magazine - N°99 - Nov/Dec/Jan 2018 - 27
Trésorier/Treasurer magazine - N°99 - Nov/Dec/Jan 2018 - Decision Time: Investing in Money Funds after EU Reforms
Trésorier/Treasurer magazine - N°99 - Nov/Dec/Jan 2018 - 29
Trésorier/Treasurer magazine - N°99 - Nov/Dec/Jan 2018 - Payments as a Strategy
Trésorier/Treasurer magazine - N°99 - Nov/Dec/Jan 2018 - 31
Trésorier/Treasurer magazine - N°99 - Nov/Dec/Jan 2018 - Are asia’s corporates ready to repo?
Trésorier/Treasurer magazine - N°99 - Nov/Dec/Jan 2018 - 33
Trésorier/Treasurer magazine - N°99 - Nov/Dec/Jan 2018 - The evolving role of treasurers
Trésorier/Treasurer magazine - N°99 - Nov/Dec/Jan 2018 - 35
Trésorier/Treasurer magazine - N°99 - Nov/Dec/Jan 2018 - 36
Trésorier/Treasurer magazine - N°99 - Nov/Dec/Jan 2018 - THE FINANCIAL RISK OBSERVATORY
Trésorier/Treasurer magazine - N°99 - Nov/Dec/Jan 2018 - 38
Trésorier/Treasurer magazine - N°99 - Nov/Dec/Jan 2018 - 39
Trésorier/Treasurer magazine - N°99 - Nov/Dec/Jan 2018 - 40
Trésorier/Treasurer magazine - N°99 - Nov/Dec/Jan 2018 - NEWS
Trésorier/Treasurer magazine - N°99 - Nov/Dec/Jan 2018 - 42
Trésorier/Treasurer magazine - N°99 - Nov/Dec/Jan 2018 - 43
Trésorier/Treasurer magazine - N°99 - Nov/Dec/Jan 2018 - 44
Trésorier/Treasurer magazine - N°99 - Nov/Dec/Jan 2018 - 45
Trésorier/Treasurer magazine - N°99 - Nov/Dec/Jan 2018 - 46
Trésorier/Treasurer magazine - N°99 - Nov/Dec/Jan 2018 - 47
Trésorier/Treasurer magazine - N°99 - Nov/Dec/Jan 2018 - 48
Trésorier/Treasurer magazine - N°99 - Nov/Dec/Jan 2018 - 49
Trésorier/Treasurer magazine - N°99 - Nov/Dec/Jan 2018 - 50
Trésorier/Treasurer magazine - N°99 - Nov/Dec/Jan 2018 - 51
Trésorier/Treasurer magazine - N°99 - Nov/Dec/Jan 2018 - 52
Trésorier/Treasurer magazine - N°99 - Nov/Dec/Jan 2018 - LIFE BEYOND NUMBERS
Trésorier/Treasurer magazine - N°99 - Nov/Dec/Jan 2018 - 54
Trésorier/Treasurer magazine - N°99 - Nov/Dec/Jan 2018 - 55
Trésorier/Treasurer magazine - N°99 - Nov/Dec/Jan 2018 - 56
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