corporate treasury
TRANSCRIPT
Corporate treasuryYOUR AWARD-WINNING SUPPLEMENT
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The supplementWe are producing a supplement with a special focus on Corporate treasury to be distributed with The Sunday Telegraph and City AM.
What’s it about?Corporate treasury has developed into a profession in its own right, in response to the growing sophistication and volatility of financial markets and the globalisation of business. Tactically they manage cash and foreign exchange, banking and credit facilities and, at a more strategic level, capital and financing structures and more generally financial risk management. What will be the editorial themes?• What a company expects from its treasury department is substantially dependant on
the nature of the company’s activities and the responsibilities that executive management entrust to it. Some corporate treasurers are formally part of executive management, others are not. Further, outside of what may be considered the core universal responsibilities of treasury management, there are always potentially grey areas between what is treasury management and what is financial control, company secretarial, tax, risk management and insurance. We analyse the market.
• It is clear that corporate treasury departments will need to respond as secure banking relationships and sources of financing become more precarious. As banks have retreated, corporate treasurers have needed to be more proactive – executive management now requires more information and reassurance and assumptions about risks and hedging strategies will routinely be more robustly challenged.
• Corporate treasurers around the world want a strong financial services industry capable of supporting the business needs of commercial and industrial companies. Is there an overarching, well-coordinated global regulatory plan? We investigate.
• We look at how companies with a fair amount of cash on their balance sheets can generate returns in times of low interest rates. How can they achieve this without taking undue risks?
• More volatile conditions in the emerging markets puts added pressure on UK-based companies trying to fund their EM subsidiaries. And the recent increase in global M&A activity puts added demands on treasurers who need to help their company maximise their benefits from any merger.
• For treasurers of large companies, we look at how they should manage large banking groups where there is a need to spread a limited “wallet”. And, as many treasurers also head up a company’s tax department, it’s important for them to understand many new tax measures and regulations facing companies.
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2014’s front page
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Direct: +44 (0)20 8439 [email protected]
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TRACKINSIDE
Ind
ust
ryV
IEW
Ind
ustryV
IEW
High hopes for new talent
British concrete and cement producer Hope
Construction Materials has set up its own
apprenticeship academy to recruit and
develop the engineers and technicians
of the future. Pictured left to right are Matt
Richardson, Henry Wilde and Daniel Repton,
the latest apprentices to join Hope’s
900-strong national workforce.
With almost 180 sites across England
Scotland and Wales, the £300million turnover
company is supplying the core products
– cement, ready-mixed concrete, limestone,
sand and gravel – to meet the surge in
demand from UK housebuilders and
construction firms.
Simultaneously, Hope is flying the flag
for British manufacturing, indigenous raw
materials and home-grown talent.
www.hopeconstructionmaterials.com
Setting sights
on another
European record
It’s the taking part that
counts: The demolition
business is looking good
The UK construction
and off-highway
equipment industry
is worth around £11billion
to the UK economy and,
with infrastructure projects
such as Crossrail and HS2,
this figure is set to grow
considerably as the demand
for construction machinery
reaches new levels. Hyundai
Heavy Industries Europe has
been increasing its market
share in the UK year-on-year
since its construction
equipment first arrived in
the UK from South Korea
some 15 years ago.
Hyundai is now the
fastest growing construction
equipment company in the
UK and, last month, Hyundai
reported machines released
to the UK market reached 955
units in one year (to date)
– another European record
broken by the company.
HHIE’s sales director
construction equipment,
Alain Worp, says: “For next
year and beyond, the primary
target remains to further
increase all European market
shares in all
machine
segments we are covering,
especially in the key
countries of the UK, Germany
and France, which at the
moment represent about
70 per cent of the total
European potential.
“Hyundai is a growing
brand all over Europe, but
we have done especially
well in the UK. The challenge
ahead is to continue this
growth path with our existing
Hyundai dealers in the UK
and strengthen and grow our
dealer network throughout
Europe and enhance and
widen our product portfolio.”
Worp concludes:
“Hyundai’s key strengths lie
in the quality of its machines,
our significant investment in
R&D, innovation and a highly
competitive price, which our
competitors are unable to
match.” Hyundai says its
distribution and logistics
chain has been fine-tuned
to meet the demand for its
machines. Once in the UK,
the machines are stored at a
depot in Tilbury – ready for a
speedy distribution to dealers.
www.hyundai.eu
Construction’s
digital future
has technology
at its heart
In contrast to the tough
trading conditions of the
past few years, the advent
of Building Information
Modelling (BIM) has been a
welcome development for the
UK construction industry. The
benefits of the BIM process are
today too numerous, and too
well documented to ignore
– greater productivity,
improved safety and
quality, better collaboration,
enhanced programme
performance, more satisfied
clients, and more.
With the majority of the
world’s current construction
spend and forecast growth
originating in emerging
markets, and increasing
demand there for firms that
“get” BIM, there is also a huge
potential opportunity for the
UK construction industry,
already ahead of many in
terms of BIM expertise, to
secure lucrative export work.
But the digital world isn’t
standing still. Just as the
technology which enables
the BIM process is
transforming the industry
today, a new generation of
digital trends are poised to
do likewise tomorrow.
Increasingly, the success of
individual contractors will
be linked to their ability
to deploy these digital
developments.
Trends like big data,
cloud computing,
3D printing, the
internet of things,
digital reality,
crowdsourcing,
crowdfunding,
or algorithmic
design, will change the way
in which the industry plans,
finances, designs, builds and
manages tomorrow’s built
environment.
In particular they will
open the door to radically new
ways of tackling the really big
issues of urbanisation, energy,
skills and sustainability.
If today the industry
uses digital models for
individual projects, then
tomorrow expect it to model
whole cities as integrated
ecosystems – letting
technology take the strain of
matching population patterns
to transport infrastructure,
projected workloads to digital
apprenticeships, CO2 levels
to green-space offsetting,
and the urban aspirations of
communities to crowd funded
investors. Exciting times lie
ahead for the UK construction
industry, and technology
will be at its heart.
Dominic Thasarathar,
construction thought
leader, Autodesk
www.autodesk.com
In a global business as competitive
as construction, a competent
and skilled workforce gives you
a competitive edge.
Construction companies ask me why
it is so important to have a workforce
that is trained to the highest safety
standards. Silly health and safety rules
are often the butt of tabloid news stories.
Health and safety is often thought of
as restrictive and just an added cost.
The best construction companies
understand that staff trained in health
and safety improve site efficiency –
and also make their companies more
attractive to work for from an employee’s
point of view. For the employer there
is the comfort of knowing that an
employee has essential awareness
of working safely on site. On-site
competence also avoids potentially
ruinous court cases – which reassures
investors.
IOSH is the chartered body
for health and safety
professionals. With more than
44,000 members in 120
countries, we’re the world’s
biggest professional health and
safety organisation. Around one
third of our members are in the
construction industry.
We know from our
own research that manufacturing and
construction are still the biggest areas
for demand – generic training for
non-health and safety professionals or
specific training for the profession is
what we do.
Skills and capability lead to a safer
workforce and those skills become
internationally portable. Certificated
training is something that people can
carry with them wherever they work.
This is an advantage, especially with
growth in the Gulf states, India, Nigeria,
Turkey and Russia, which are showing
huge demand supporting housing
infrastructure.
We believe that training is relevant
to everyone. Last year alone, more
than 150,000 people were trained to
our standards. Forward thinking
organisations know that investing
in a culture of care brings advanced
performance through reputation,
resilience and results. Some of the
biggest construction companies
in the world follow these
developments – all of the top 20
construction companies in the
UK and more than half of the top
30 global construction
companies have members
of IOSH working
within them at
senior level. These organisations are
quite clearly taking health and safety
to the heart of their organisation.
As an organisation, our vision is a
world of work that is safe, healthy and
sustainable – to achieve this we work
with a network of training partners who
operate through the world to ensure our
UK framework continues to be one of the
most sought after and trusted.
Our training network extends across
84 countries. The network has 1,850
training centres including construction
companies such as Balfour Beatty and
Bovis Homes.
Earlier this month, the Construction
Skills Certification Scheme (CSCS)
recognised our one-day Working
safely course as an equivalent to a
Level 1 Award in health and safety in a
construction environment. This means
anybody who completes Working Safely
can apply for a CSCS green labourer card
– the card site managers check to ensure
labourer competence on site.
Our UK framework provides
opportunities for UK building firms who
carry these standards, and UK health
and safety standards remain the envy
of the world.
Jan Chmiel (left) is CEO of IOSH
www.iosh.co.uk
Building
for success:
Investing
in a culture
of care
Business Reporter · October 2014 · 13
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12 · Business Reporter · October 2014
The demolition business,
probably more than
any other sector of
British industry, has made
enormous strides in efficiency,
innovation, safety and
sustainability in recent years.
This is largely due to the efforts
of the people who work at the
centre of the industry, and who
have taken up the challenges
that modern-day demolition
projects now demand.
It used to be that perhaps
just 5 per cent of construction
costs were earmarked for
demolition. In many cases
this has now at least doubled,
as the upper tier of demolition
contractors expand their
scope and take on more of the
builders’ work. For a company
like John F Hunt, the average
cost per contract was between
£2-3million just three years
ago, but today, post-recession,
that has doubled, as larger
and more extensive schemes
have hit the market and the
company’s compass of
operation has increased.
Established in 1982, John
F Hunt Demolition has grown
to become one of the UK’s
largest demolition companies.
It works with developers,
industrialists, contractors and
local authorities throughout
the private and public sectors,
and is at the forefront of new
thinking within the industry.
Increasingly, companies
are being asked not only to
demolish buildings but to
prepare the ground before
construction can commence.
John F Hunt offers a broad
spectrum of services including
ground remediation, piling,
infrastructure and deep-
basement construction
works. Andy Salter, Managing
Director of John F Hunt
Demolition, explains: “Clients
are continually looking for
best value from us. We have
addressed this by focusing on
innovation in engineering and
in the methodology we adopt.
Also, increasing the sphere of
our operations and becoming
more construction-orientated
has allowed us to offer clients
significant cost and
programme advantages.”
Demolition, along with
the rest of UK construction
plc, faces stiff competition
to recruit the best talent;
good people are scarce in
this booming market.
From machine operators to
supervisors, project managers
and surveyors, quality people
are in short supply. Salter
continues: “Some years ago
we took a conscious decision
to improve the calibre of
people we recruit. John F
Hunt is now offer engineering
apprenticeships in its
workshops, and sponsors
talented young people through
university. We also embarked
on an extensive scheme to
expand the knowledge of
our existing staff in related
fields, especially that of Health,
Safety and Quality Systems
management.” This has
obviously paid dividends,
as the company now boasts
one of the best staff retention
rates in its sector.
John Hall, John F
Hunt Group CEO, taking an
overview on the business adds:
“Customers in the plant-hire
sector are no longer willing
to tolerate noisy, out-of-date
and inefficient equipment.
Accordingly, we decided
to initiate a structured
replacement policy, taking
advantage of the exceptionally
low interest rates, and invested
heavily in the most silent,
security assured and
environmentally friendly plant
on the market.” He says: “Now,
with the recession well behind
us we are running exceptional
utilisation rates, as demand
for this new generation
of machine increases.”
Another change Hall
has noticed is a growing
preference for robotics. “In
the demolition sector we have
seen an increasing demand
for robotic machines. This has
been brought about not only
by pressure from health and
safety, but a general desire of
the industry to become more
cost-efficient and improve
working practice in general.
However, our hire business
has seen an excellent upturn
from the specialist tunnelling
sector off the back of Crossrail,
where zero emissions are
so critical. Therefore as
a consequence, we have
virtually doubled our fleet of
robotic demolition machines
over the last 18 months.”
The company currently
employs more than 450
people across its Demolition,
Plant Hire and Asbestos
Consultancy operations. It is at
the heart of the London
construction boom, and is one
of many businesses to be
benefiting from the insatiable
appetite of Far East investors
for London Real Estate.
Hall concludes: “I am often
asked, if as a business we are
now ‘hiking up our rates’ and
the answer is always a
resounding ‘No’. Our current
working margin is exactly
what it was during the
recession. However what we
are trying to do is work in a
more planned and efficient
manner, not taking the
unnecessary risks that have
traditionally seen so many
Demolition and Plant Hire
Contractors fail in the past”
www.johnfhunt.co.uk
Business Reporter · June 2014 · 15
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A diverse boardroom is reflective of the real world, harbouring different skills, competencies, philosophies and life experiences. It levels the playing field and ultimately improves business decisions.As a big believer in meritocracy in the boardroom, I find it surprising that the increasing rate of women on boards is still very low. In my experience, women are insightful. Given that the information presented at a board meeting is often at a high level and very polished, women show strength in spotting discrep-ancies or planning weaknesses. They drive to understand its underpinnings and inherent value.Additionally, in the technology world, I’ve found women typically think about things in more useable, real-life ways than men do. They put themselves in the shoes of the end-user and think more about how the software may be used to help people in the future. This almost always translates into better, more user-friendly software in the end.
020 3514 5391 www.blackline.com
Women now account for just over 20 per cent of FTSE 100 board positions and it looks like Lord Davies’ target of 25 per cent may well be achieved next year, but the glass ceiling remains firmly intact. Most of these positions are non-executive with limited influence – and the situation in the FTSE 250 is much worse.This is important because diversity of talent is strongly associated with diversity of thought. Research by McKinsey & Co and others has proven the business case: having women in the boardroom drives better business results. More fundamentally, there is a 28 million female customer base in the UK that businesses need to understand and reflect.Recruitment firms can play an important role in helping female talent rise to the top. APSCo (Associa-tion of Professional Staffing Compa-nies) encourages its members to sign a commitment to diversity, and many have developed strategic partnerships with employers to help them take this important agenda forward.
www.apsco.org/why
We need to broaden traditional business values in order to keep women engaged, to draw on their skills and strengths and recognise their contribution to business. We must create and build businesses which are healthier, more fulfilling workplaces that conduct ethical, sustainable and responsible practice. Diversity, in all its forms, matters. This is because the commercial challenges we face often arise from multiple, complex causes and so require multiple points of view to generate solutions. Over the past 15 years, Ashridge Business School has delivered the Masters in Sustainability and Responsibility, which is designed for people who are committed to responsible and ethical leadership to create a more sustainable future. I am delighted that so many of our graduates have been women, and many have gone on to play creative and innovative leadership roles. We all need this kind of responsible, values-aware and imaginative leadership.
www.ashridge.org.uk
Diversity and the benefits it can bring starts at the top of an organisa-tion. A diverse board is more likely to ensure that employees reflect their customer set. Research now suggests that diversity is proven to bring benefits to an organisation, includ-ing increased profits, better share prices and greater innovation.To achieve this, though, we need to break down barriers to create a more diverse leadership. It is common knowledge that we are hard-wired to prefer people who look like us, sound like us and share our interests. Yet hiring in one’s own image is to be avoided, since it can lead to a workforce which doesn’t fully represent our customers or society. Subconsciously, success has a certain shape in our minds, thus, when assessing staff or peers, this shape can dictate how favour-ably (or not) we value someone. These unconscious biases can lead to us making poor decisions, particularly around recruitment, assessment and retention.
[email protected] [email protected]
Despite recent improvements in boardroom gender diversity, the ratio of women to men at executive level remains lamentably low. The talent pipeline in organisations continues to leak women and other forms of diversity struggle to get attention.Boards that recognise the benefits of diversity highlight the fact that different views and thinking leads to better decision-making, and that tackling issues in different ways achieves greater innovation – a diverse board better represents its customers, community and people. These boards are also keen to address the broader issues that cause talented women to leave before they become eligible for appointment. Fairness as a rationale for diversity, and voicing the hope of a trickle-down effect is more prevalent in these companies. Importantly, boardroom behaviour has to change if we are to reap the full benefits of diversity. This requires chairs to get the most from the board by maximising the contribution of every team member.0845 261 0600 [email protected]
The debate Why is boardroom diversity important?
Exp
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Young, enthusiastic and successful…
W omen in physics are rare. However, relatively large numbers of young women start the nanoscience study programme at the Swiss Nanoscience Institute (SNI) at the University of Basel.
One of these is Heidi Potts (far right). In 2008, the 25-year old German citizen started her studies in nanoscience. She successfully completed the numerous lectures and practical projects in physics, chemistry, biology and mathematics that allow an excellent insight into the diverse topics of nanoscale sciences and their applications.
When the time approached to select a topic for the master’s thesis, Heidi did not take the easy route. Instead of applying to one of the numerous research groups at
the SNI in Basel, she pursued her goal to combine a thesis about solar cells with her wish to stay in Canada for a while. Dedicatedly, she scanned publications and the internet and was finally successful at the University of Toronto with Professor Nazir Kherani. He was looking for a candidate who studied ultra-thin silicon solar cells that are more cost-efficient than standard products.
Heidi successfully examined problems related to the subsequent minimisation of the solar cells and suggested ways to prevent them. Not only was her supervising professor impressed by her work but also the SNI, as she was awarded the prize for the best master’s thesis in nanoscale science at the University of Basel in 2013.
In the meantime, Heidi has started her PhD at the EPFL in Lausanne under the supervision of Professor Anna Fontcuberta i Morral. For her thesis, she produces and examines nanowires with novel physical properties. “I feel well prepared for this topic, which is
classically investigated by physicists through my nanoscience studies in Basel and the expertise that I have received during my education,” Heidi said when asked about her work.
[email protected] www.nanoscience.ch
Heidi shows how determination can pay offINDUSTRY VIEW
Therese TuckerCEO and founder BlackLine SystemsAnn Swain
CEO APSCo
Gill ColemanDirector, Ashridge Masters in Sustainability and Responsibility
Gillian ArnoldDirector of Tectre and chair of BCSWomen, part of BCS
Joëlle WarrenExecutive chairmanWarren Partners
Bu
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Zo
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Wo
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in b
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Three top tips
G overnment attention has been a key factor in the rise in the number of female executives who hold board-level positions in FTSE companies. But has this been the only significant factor driving change, and if so is it cause for concern?A recent Harvard Business Review highlights that companies have three different approaches to diversity. Some take the view that it is fair and therefore the right thing to do. For others the motivation is more commercial, especially in markets that have a high proportion of female customers such as retail. In these cases a greater proportion of female executives at board-level provides better insight and access to their customer base. Finally there are those organisations who embrace diversity because they have found it improves decision-making, drives innovation and generates genuine commercial advantage.
If these are the reasons for the positive shift in the number of female executives at board level, then we are making real progress. On the other hand, if the primary reason for the shift is government pressure then the underlying behaviours and barriers that prevent greater diversity at board level remain largely unchanged. This would mean that diversity is little more than window dressing and companies will not reap the benefits that genuine diversity provides.Chairs play a pivotal role in ensuring that female board executives’ views and recommendations are heard and given due consideration. Indeed, culture and behaviours can really change when boards contain three or more women. Chairs need to ensure that the benefits of diversity manifest themselves in the board’s motivations, decisions and business outcomes.
Successful boards have a balanced
and broad perspective that brings customers, staff and investors with them. As boards come under increasing customer, regulatory and investor scrutiny, how and why boards do things is important, not just what they do, starkly illustrated by the recent company tax debate.Speaking at the recent CISI annual conference and listening to the views of politicians such as Dr Vince Cable, business leaders such as Sir Richard Lambert, academics such as Sir Andrew Likierman and investors such as Stephen Cohen led me to conclude that women could contribute so much more if boards more readily recognised that they can add value because of their gender rather than in spite of it.
Joëlle Warren is executive chairman of Warren Partners 0845 261 0600 www.warrenpartners.co.ukIn focus: Creating a level playing field
A t Hermes our people strategy focuses on delivering the leadership and talent our business needs to achieve planned business growth and success.
A third of the main board positions are held by women at Hermes, as are a third of
all senior management positions. In addition, more than 60 per cent
of our field team leaders are women. While there is still work to be done, women are extremely well represented in our business, well above the industry norm.We have achieved
this by trying to create a level playing field for everyone by having an
environment whereby employees of both genders can flourish. We
recognise diversity across the business, resulting in a workforce made up of experienced career people, new entrants, diverse ethnicity, women in leadership roles and those with disability status.
We are positively working to develop our women leaders through our Women’s Network, promoting specific development, community involvement and strengthening the different contributions that gender can play in our business and the areas in which we work. Our network is open to all genders and forms part of our wider agenda on diversity in the workplace.
We also try to offer flexible and part-time working whenever feasible, but this is designed to benefit both male and female employees. Government legislation is also moving in this direction, recognising that the traditional male/female family roles are no longer always the norm.At Hermes we like to create champions who can help inspire others and yes, some of our best examples are women.
Carole Woodhead (inset, left) is CEO at Hermes
communication@ hermes-europe.co.uk
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14 · Business Reporter · June 2014
How can talented women accelerate their progress through the organisational pipeline? Since 2008 my executive coaching
company has run Women’s Impact Programmes for senior and high-potential women.
These are the top three behaviours we help them develop: • Set boundaries. Most
women work incredibly hard and struggle to say no. Many are simply too accommodating, often feeling like the ‘squashed filling’ in a sandwich of demands from above and below. We help them focus on doing what only they can do. This means
learning to handle difficult conversations assertively, and better delegation.
• Develop leadership presence. Women tend to under-value themselves – fewer apply for promo-tion or pay rises. In
meetings, self-deprecating language conveys a lack of confidence. We help women articulate their ‘leadership brand’ and transform their communi-cation skills without losing their authenticity.
• Manage upwards. Women often keep a low profile, not sharing achievements or aspirations. We help women engage and impress senior decision-makers and turn them into powerful career sponsors.
As unconscious gender bias is addressed, more busi-nesses will recognise the value women bring. Helping capable women maximise their self-assurance, impact and skill is an equally vital part of achieving change.
Dr Catherine Sandler runs Sandler Consulting +44 (0)20 7723 5525 www.sandlerconsulting.
co.uk
“ Sheryl Sandberg In the future, there will be no female leaders. There will just be leaders.
Representing women above the standard
The future Statistics don’t tell the whole story...
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Exit strategiesBusiness Reporter · June 2014
Find us online: business-reporter.co.uk Follow us on twitter: @biznessreporter4
Exp
ertInsight
Planning should start at least a year before
an exit in order to get the best tax breaks
and maximum value from a deal when a
business is sold. Ann-Maree Dunn, tax partner at
accounting fi rm WMT, says: “One of the key tax
issues for exit strategies in family businesses is
accessing entrepreneur’s relief.
“Entrepreneur’s relief is a generous rate of tax
for people that sell their businesses. Maximising
this means sellers can pay 10 per cent tax on their
gains, instead of the standard capital gains tax rate
of 28 per cent.” For larger businesses, planning may
include making sure several directors are able to
benefi t from this relief.
What planning the business undertakes to
get the best tax break in an exit strategy entirely
depends on the owners and what they want to sell.
Andrew Williamson, corporate fi nance partner at
WMT, says: “The way the exit is structured always
varies, depending on circumstances. But there are
some generic strategies you have to think about to
see whether they are applicable. These include: how
the shares are held, how the business is structured,
where the trade is, what buyers
are interested in, and what the
key assets in the business are.”
Dunn explains that many
people who own their own
company are looking to sell
only parts of it. They may have
property tied up in the business
that they want to keep, or
shareholdings that are spread fairly widely across
family members. She explains that it is important
to get the ownership structure of a business correct,
so the assets they want to keep can be held as
separate entities outside the sale process. This will
ensure they will not impact on the full value for sale.
Dunn adds that this process can be lengthy.
“The earlier business owners start planning their
exit the better,” she says. “Five years ahead of the
planned exit is a good benchmark.” The minimum
she recommends is 12 to 24 months, which “will
prevent business owners falling into bear traps
or having problems that could have been fi xed if
they had time, but are impossible to resolve closer
to sale”. If a business does not plan, it risks missing
out on tax relief and not getting the best price.
It is also important to keep your options open.
Buyers can appear unexpectedly before a planned
exit date, and often the best deals can be within the
existing management team. Management can also
create tax breaks for the company when exiting by
o� ering share option schemes. “Your existing
management team knows the business inside and
out,” Dunn says. “A lot of people have a strong sense
of loyalty to their own team that will help them take
the business forward.”
According to Williamson, a plan for an exit
strategy requires ingenuity, and businesses should
“make sure they are working with advisers who
look at the situation from every direction to fi nd the
right route for both the owner and the business”.
So, if you are thinking of your exit strategy, plan
early, plan well and be prepared to fl ex your strategy
to make sure you and your business benefi t from
tax breaks and obtain the maximum value in a sale.
0800 158 5829
www.wmtlllp.com
Don’t miss out on entrepreneur’s reliefINDUSTRY VIEW
Planning ahead to getmaximum value
Exp
ertInsight
The term “exit strategy” has
long created images most
entrepreneurs will identify with
– a lump sum, heading o� into the sun
and putting their feet up after a hard slog
in the rat race.
For many SME directors, this leads
to a process which involves
getting their house in order.
However, simply ensuring
the books are in a healthy
state and legalities have been
considered is not enough.
What many SME
owners fail to consider
are their own personal
fi nancial needs – what
they will need to fund
either a lifestyle with
existing commitments, or
alternatively, what they may
need in order to embark on a
new venture, or just retire.
For most, it is failing to consider this
ahead of time that can result in not
achieving the right price for the business.
It’s important to remember that it’s not
always about keeping hold of the business
until it reaches an ideal value. To reach
that point, many business owners could
work signifi cantly longer than they might
otherwise want to. Instead, they should
recognise the amount of money they
need to enjoy the lifestyle they want, and
work specifi cally to achieve that goal.
Owner-managers for the most part are
so involved in the day-to-day running of
the business that planning ahead isn’t
always at the forefront of their minds.
But with an exit strategy it is important
they view their business much like an
employee will view a pension – ensuring
they understand what it is they need from
the sale as a means of living when they
hand over the keys.
This foresight also helps identify
where the business is currently at
fi nancially, and where it needs to be in
the future to achieve this required value.
Working with a corporate fi nance team,
business owners can then assess whether
the sale value they require is realistic.
If the answer to that is no, taking
professional advice on how to build
their business through acquisitions or
investment will be key to ensuring that,
when the time is right, the business
will stand a fi ghting chance of being
ripe for sale.
During this time of planning, it is
also important to take a step back and
analyse the strengths and weaknesses
of the business in order to be prepared for
the negotiation phase. Business owners
should put themselves in the mindset
of the buyer and look to accentuate the
positives, but also identify where there is
room for improvement. Failure to prepare
all the relevant information about the
company will give the buyer leverage to
reduce the value of the business – and no
one wants to haggle over their nest egg.
Je� Barber (left) is a partner at BTG
Corporate Finance
0845 678 2902
je� .barber@btg-corporatefi nance.com
INDUSTRY VIEW
to a process which involves
getting their house in order.
However, simply ensuring
the books are in a healthy
state and legalities have been
considered is not enough.
either a lifestyle with
existing commitments, or
alternatively, what they may
need in order to embark on a
new venture, or just retire.
SME owners must consider what they’ll need to fund ‘life after business’ before heading for the exit
AN INDEPENDENT REPORT FROM LYONSDOWN, DISTRIBUTED WITH THE SUNDAY TELEGRAPH
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Business Reporter · September 2014
4 Business Turnaround & Transformation
Exp
ertInsight
Admit it, you looked at this
article’s title and – unless you’re
a practitioner in turnaround –
are going to turn the page or stop reading.
You expect a homily about coping with
adversity in business and quite frankly, you
wouldn’t want to be in the same room with
companies “in trouble”. That’s a perfectly
understandable reaction, given some
interpretations of the “t-word”. Instead,
let’s talk about people, because they, in a
nutshell, are what true turnaround is about.
In 2013, there were 4.9 million
businesses in the UK; more than 99 per
cent small or medium-sized businesses
employing up to 249 people. Calling these
companies SMEs somehow diminishes
their economic and social importance,
relative to the charmed circle of publicly
quoted companies. It is the people who run
these SME companies – and the people
working in them – who have a major stake
and role in bringing about the sustained
economic recovery, and one that can
benefi t the majority of people in the UK.
Recessionary hangoverSome features of our recessionary hangover
concern policymakers such as the Bank
of England and su� ciently to restrain any
sudden or material hike in interest rates.
First, there are changed employment
patterns, as there are more in work but on
short-term contacts or working part time.
There is a large, puzzling shortfall in
productivity, which underpins estimates
of the economy’s ability to grow without
generating too much infl ation. Some
analysts attribute the lack of real growth
in wages to the UK’s low productivity. Low
wages mean less discretionary spending
and more hardship. Overall, British
workers now produce about a fi fth less for
every hour worked than any other leading
G7 nation. There is also the inequality
between regional share and the City and
the London faster bounce back
from 2008.
As sharp as the north-
south divide is the relative
fi scal and fi nancial
treatment of SMEs and
tradeable stocks. IFT
research has shown that
even back in 2012, large
companies thought lending
conditions were improving.
Smaller ones faced steeper
fees, shorter term lengths
and higher interest rates.
Then there’s reward in proportion
to value. The average FTSE 100 chief
executive’s pay increased from £4.1million
to £4.7million in 2013, said a July report
from the non-partisan High Pay Centre.
With executive pay in FTSE companies
almost 180 times more than the average
worker’s, is it really any wonder big business
has failed to re-establish trust in the wake of
recession? In the face of a rapidly widening
inequality gap, in which the “squeezed
middle” has become the disa¢ ected new
working class, are we kidding ourselves that
this situation is sustainable? The High Pay
Centre says: “A maximum pay ratio would
recognise the important principle that all
workers should share in a company’s
success and that gaps between those at the
top and low and middle earners cannot just
get wider and wider.”
Ignorance inhibits growthSMEs have the potential to change this
unappealing economic and social
landscape. According to the FT, “the
biggest bar to growth remains ignorance”.
A recent study of 300 SMEs, commissioned
by Money & Co. claimed UK SMEs had an
annual unmet need for fi nance of £4.3bn.
Whether for growing or turning around
companies, it’s never an issue for FTSE
businesses. But SMEs have found it
especially tough to get access to a¢ ordable
capital and a level playing fi eld on which to
invest. Yet the SME survivors, who have
ducked, dived and adapted through the
lean years, are well placed to deliver the
economic boost and inclusivity we need in
the UK. SMEs are culturally signifi cant too.
Of SME employers, according to The
Department for Business, Innovation and
Skills (BIS), 19 per cent were led by women
in 2012, fi ve points up on 2010. A further 23
per cent of SME employers were equally led
by men and women, meaning that 42 per
cent were part-led by women. In other
words, it is a more balanced mix of talents,
often refl ecting family ownership.
SMEs boost the wider economySMEs are geographically essential to
spreading the benefi ts of growth and
prosperity. It is clear that they could do so
faster and less riskily by harnessing
the skills and experience of
accredited turnaround
professionals. Turnaround is
like an advanced driving test
of business, and it’s only a
success if it’s sustainable.
Parachuting in for six months,
while a company is in crisis to do
a fi nancial fi x should not be
the end-game, because
at best it creates a
watershed moment
during which turnaround can be
completed. A short, sharp turnaround can
fi x a company so it survives – but for how
long? Insolvency has long been recognised
as value-destructive, and the jobs it creates
are not necessarily long term. So how will
latent but stagnating value be reclaimed?
True turnaround is, in IFT’s defi nition,
“the sustainable return to viability of an
underperforming organisation”.
Underperforming could just as easily be an
organisation needing to scale up, or grasp
the opportunity of internationalising, or
integrating an acquisition, or adapting to
new distribution channels and technologies.
It’s a step-change that needs to be executed
at speed and with simplicity and focus.
Accreditation countsAt the Institute for Turnaround (IFT) we
have always been committed to insisting
that our members prove their credentials
to do this stretching work, not only by virtue
of paper-based qualifi cations, but by an
assessment of performance across 40 core
competencies. There are three independently
validated case studies, the testimony of
two appropriate sponsors who reference
the applicant’s longer career, and a testing
interview that justifi es our application
process as being described as robust,
transparent and consistent. You cannot just
join IFT by paying a subscription, you have
to prove worthy of the brand. After all, you
wouldn’t entrust your company’s brand to
an unproven quantity. Year-on-year, each
member is required to complete an annual
declaration and to satisfy the institute
that relevant Continuing Professional
Development (CPD) has been completed.
IFT established the world’s fi rst Practising
Certifi cate for Turnaround Professionals
and this carries extra requirement in terms
of CPD, professional indemnity insurance,
independent auditing and so on.
There are benefits too, for the turnaround
professionals who use the transformative
aspects of their skills. Diversifying their
application away from only stressed and
distressed situations, broadens their
options at di¢ erent times in the
economy’s and companies’ existence.
Academic Dr Andy Bass and I believe
that a portfolio of engagements at various
phases in the business lifecycle increases
the impact of the work the accredited
practitioners are doing because:
• You transfer learning and experience
• You work in a broader range of sectors
and facilitate cross-pollination of ideas
• You are likely to empower management
in a way you cannot when you are the
focus of a single deep engagement
Business is peopleThose in the turnaround community are
uniquely placed to lead the necessary shift
in British business: the exciting thought is
that it’s a perspective-only shift. The skills
of turnaround professionals can add great
value in a broad range of phases, and it can
be personally and professionally rewarding
for accredited professionals to apply them
more broadly. Ensuring the survival of an
enterprise is a crucial goal if it is potentially
viable. However, open up your thinking
and get ahead of the competition by getting
the right turnaround practitioner alongside.
He or she should have the knowledge and
experience to make your company
go further and help it to thrive.
Ultimately, UK plc is not going to recover
through fi nancial restructurings alone.
We need people to focus, operate and
grow real businesses. The only way to
drive sustainable turnaround is by winning
hearts and minds and by changing
behaviours and culture. That is why
regulators in the fi nancial services sector
are so fixated on principles-based regulation
– because rulebooks document obstacles
that can be navigated around, whereas
principles deal with high-level behaviours,
cultural norms and standards. Turnaround,
from whatever starting position, sets
out a road map towards better business
and economic success. In a nutshell,
turnaround is about one thing: people.
So let’s hear it for specially magnifi cent
enterprises, the SMEs that can enrich the
UK economically, socially and culturally.
The savvy ones know that with turnaround
knowledge and resources, they can
do it faster, cheaper and smarter.
Christine Elliott (left) is the chief
executive for the Institute for Turnaround
+44 20 3102 7710
www.instituteforturnaround.com
SMEs lead the way to restructuring our economyINDUSTRY VIEW
business-reporter.co.uk | Follow us on Twitter: @biznessreporter
executive’s pay increased from £4.1million
worker’s, is it really any wonder big business
has failed to re-establish trust in the wake of
recession? In the face of a rapidly widening watershed moment
during which turnaround can be the impact of the work the accredited
Turnaround in a nutshell
the London faster bounce back
As sharp as the north-
south divide is the relative
treatment of SMEs and
research has shown that
even back in 2012, large
companies thought lending
conditions were improving.
Smaller ones faced steeper
fees, shorter term lengths
prosperity. It is clear that they could do so
faster and less riskily by harnessing
the skills and experience of
accredited turnaround
professionals. Turnaround is
like an advanced driving test
of business, and it’s only a
success if it’s sustainable.
Parachuting in for six months,
while a company is in crisis to do
a fi nancial fi x should not be
the end-game, because
17Risk & fraudBusiness Reporter · August 2014AN INDEPENDENT REPORT FROM LYONSDOWN, DISTRIBUTED WITH THE SUNDAY TELEGRAPH
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Exp
ertInsight
Chase Paymentech Europe Limited, trading as Chase Paymentech, is a subsidiary of JPMorgan Chase Bank, N.A. and is regulated by the Central Bank of Ireland. ©2014, Chase Paymentech Europe Limited. All rights reserved. The information herein does not take into account individual client circumstances, objectives or needs and is not intended as a recommendation of a particular product or strategy to particular clients and any recipient of this document shall make its own independent decision. This document and the information provided herein may not be copied, published, or used, in whole or in part, for any purpose other than expressly authorised by Chase Paymentech Europe Limited.
Chase Paymentech Europe Limited, trading as Chase Paymentech, is a subsidiary of JPMorgan Chase Bank, N.A. and is regulated by the Central Bank of Ireland. ©2014, Chase Paymentech Europe Limited. All rights reserved. The information herein does not take into account individual client circumstances, objectives or needs and is not intended as a recommendation of a particular product or strategy to particular clients and any recipient of this document shall make its own independent decision. This document and the information provided herein may not be copied, published, or used, in whole or in part, for any purpose other than expressly authorised by Chase Paymentech Europe Limited.
Fraud is continually evolving. It can hamper prospects
for growth, restrict profi tability and increase
overheads. While there is no simple solution to this
threat, there are some strategies to help mitigate fraud.
1 Unmask even the most determined fraudsters Proxy piercing and device fi ngerprinting can help
pinpoint a customer’s true location, enabling retailers
to establish automated rules to fi lter and block suspected
transactions.
2 Manage risks country-by-country IP geo-location tools o� er retailers the ability to identify
threats and block transactions from high-risk countries.
3 Monitor and review multiple channels Analysis of payment data can help identify fraud patterns
per sales channels.
4 Use your data to detect “clean fraud”Reviewing fraud-related chargebacks across criteria such
as country, product and channel may help to spot trends
and identify patterns.
5 Track potential friendly fraud An order history based on chargeback analysis can be used
to help prevent further fraudulent attempts from the same
customer, card number or shipping address.
Finding the right balance between fraud prevention and
a seamless shopping experience is key for success. Your
payment acquirer can analyse your fraud and payment
data to help identify patterns and highlight potential
improvements.
0845 399 1120
chasepaymentech.co.uk
INDUSTRY VIEW
Five strategies to combat online fraud
COMPANIES face new challenges as kidnapping becomes “ugly and organised” in certain parts of the world, an expert warns. Nick Powis, a crisis consultancy manager at Marsh, an insurer that covers kidnapping, says that firms have good practices in the more established economies but that the greatest potential – and some of the biggest risks – can be found in the newer, “frontier” markets.
“We know about places like Pakistan, Iraq and Syria,” he says. “People really do dig in and spend a lot of money on their front-line mitigation. In Iraq there’s a lot of depth to people’s security layers. People do very often have good housekeeping in these territories. But you have less research in emerging territories like Mozambique.”
He warns that in areas such as these, the threat of kidnapping is becoming more of a concern. “There’s kidnapping that’s getting ugly and organised,” he says. “That could expand into the oil and gas sector. It can be quite challenging.”
He notes that kidnapping in newer markets can have a variety of forms and causes. “The spectrum of kidnapping is quite wide,” he says. “It could come for a number of reasons. It can come as a result of blackmail and extortion or be more spontaneous, or it can be totally targeted and the kidnappers could go after a key person in the business.”
And he claims that while certain industries such as the oil and gas sector have significant experience in dealing with kidnapping, some companies can leave their preparations “far too late”.
He says: “You should always map out your business and key relationships. But firms think it’s always a cost and never a benefit, so that layer tends to be added on far too late. Often it’s an incident or a near miss that causes them to take action.”
A number of the “frontier” markets – which are seen as having potential for huge growth but not being as stable as more developed options such as the BRICs – have been tainted by kidnapping.
Mozambique may have had a number of incidents in recent years, but it is not alone. Nigeria’s economic potential is attracting attention, but Boko Haram, a militant Islamist group, has made waves with a series of abductions, as well as bombings and murders.
Earlier this year more than 200 schoolgirls were abducted, with Boko Haram claiming responsibility. Bring Back Our Girls, a global campaign, has been calling for their return since then.
A number of the frontier markets are attracting businesses because of their abundant natural resources and the wealth rapidly generated from these. But Powis warns that this can attract “trouble”.
“The mining industry, the prospecting industry and oil and gas, they have got a lot of experience,” he says. “Historically it’s a bit of a pantomime. Wherever you find oil, you find trouble.”
He says some less experienced industries may need to learn quickly if they want to avoid problems in unpredictable countries – and that individuals can sometimes create risks through “ad hoc” travel. “These industries are quite strategic and they do drive that and they are willing to pay for it,” he says. “But you also get the financial
services sector and they get a portfolio and it might involve these markets.
“I have also dealt with a couple of cases where businessmen and women may go to one territory on a task and then to another territory in an unplanned move. It can be somewhat ad hoc. They go from a somewhat benign area to deeper water. That sort of thing happens a lot, though it doesn’t always end up causing problems.”
Some industries seem to be taking kidnapping, and broader geopolitical risk, into account. A recent report, “Emerging and frontier markets: assessing risk and opportunity”, published by Cushman and Wakefield, a real estate firm, warns about the threats in newer markets.
It reads: “Recent political unrest in the Middle East and across the world has increased the security risks related to both corporate assets and also employees, especially in the emerging and frontier markets.
“Existing political systems in many countries are under pressure and states with poor governance and cultural tensions are susceptible to terrorism and other crimes, such as piracy, kidnapping and bombing. Operators of property must redesign and continually review their approach to many of these markets.”
For other industries, risks such as kidnapping are becoming more prominent. But Howis believes that some of these sectors are more experienced than people realise. “There are issues around deployment in a supply chain,” he says. “Supply chain management has probably got deeper and wider, but the industry has dealt with issues like these for a long time.”
Kidnapping: the next big riskBy Dave BaxterCorporate kidnapping is
already a danger in the extractive industries
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