The second day of the EuroFinance 2015 was dedicated to achieving best practice via strength & speed. Presentations from author Michael Raynor’s on ‘How Exceptional Companies Think’, based on data from 25,000 firms, and the Tignum consultancy on optimising human performance were mixed with an award-winning case study from Roche and the experience of treasurers from Colgate Palmolive, Cognizant and Wrigley.
Creating the high performance treasurer
“It’s important to know what’s happening in your brain when your inbox is overflowing, you’re travelling, tired, or under stress,” said the opening plenary speaker, Jogi Rippel, on Day 2 of the EuroFinance 2015 conference. Rippel is the founder & CEO of the Tignum consultancy, which concentrates on encouraging high human performance.
“You need to know you can cope and perform (whatever the circumstances),” added Rippel, before going on to detail the 4 pillars that go into making a high performance treasurer:
- Mindset – i.e. be positive, engaged, etc
- Nutrition –i.e. eat well to ensure your energy levels are high
- Movement – i.e. don’t sit at a desk all day: move around
- Recovery –i.e. sleep is important, but so too is leaving mental recovery time between meetings. This is especially important if you’re expected to be proactive and aggressive in one meeting, and adopt a listening approach in a different one.
Michael Raynor is the author of ‘How Exceptional Companies Think’. For five years, he and his partner analysed data on more than 25,000 companies, spanning 45 years, to see why some companies perform exceptionally over the long-term, and some don’t.
“The bad news is that not everyone can be above average – it doesn’t mean you shouldn’t aspire to improve,” said Raynor, who works for Deloitte in his day job. His key advice was to set “realistic goals that are achievable, which stimulate creativity, trigger rewards and so on.” Thereby creating a virtuous circle.
Raynor showed a series of slides at EuroFinance 2015 on Profitability v Growth, showing real world examples where have had to decide if they are at full capacity, or if there is further room for growth / where?. “You should know if you’ve got over-aggressive or realistic goals, as this can (de)motivate staff to perform.”
Treasury Panel: Strength & Agility
A treasury panel was up next, focused on turning this morning’s high performance theory into best practice. David Nelson, Treasurer at Cognizant; Mayela Stuparitz, Global Treasury Director at WM Wrigley Jr; & Henning Jakobsen, VP & GM, Nordic Group, Colgate Palmolive in Denmark, all shared their real-world experiences.
Wrigley’s treasurer, Stuparitz, presented on a new foreign exchange (FX) management solution they’ve implemented. “Wrigley’s is owned by Mars & manufactures gum. We have a presence in 40 countries and distribute to 180, so handle a lot of currencies,” she explained. “From the RFP stage through to the FX tool deployment took less than a year.”
Colgate Palmolive’s Henning presented on his firm’s Greek contingency plans, commenting that the company belatedly realised: “We needed extra strategic capability for some regions and countries (like Greece). We’re a cash rich organisation. What was a safe home for cash 10 years ago wasn’t anymore (in the wake of the 2008 crash and as the Greek eurozone crisis escalated).”
That is why Colgate Palmolive “had daily calls to place our excess cash” during the height of the Greek crisis and ensured there was enough local knowledge and resource to do this.
Cognizant does IT services/BPO & consultancy work, explained their treasurer, David Nelson. He talked about how the firm has coped with fluctuating demand due to 2008 crash and the subsequent uptick in business they’ve seen due to the rise in demand for Software-as-a-Service (SaaS) solutions. Outsourcing has seen a rise in the wake of increased regulatory demands, less RoE and IT efficiency and flexibility drives.
Internally SaaS has helped Cognizant too. “We’ve built a centralised treasury to manage cash, FX, investments and so on, but use technology resources wherever we have them internally – for example, in India,” said Cognizant’s Nelson, hinting at a grid-type technology solution.
“We want to know how much cash we’ve got; invested where; what our FX and counterparty exposures are, and so forth,” continued Nelson. “Technology can help us with this.”
Nelson has automated formerly manual treasury processes to achieve his desired overhaul and put in place one consolidated tech platform, allied to straight-through processing (STP) procedures and structures.
All of the treasurers have devolved power to people or technology without losing control in order to advance their businesses. They are truly high performing treasurers.
“Stay focused and only do the things that are important to reach your goal,” advised Colgate Palmolive’s Henning in his session ‘take away’, while Wrigley’s Stuparitz said high performing treasurers should: “Figure out what works for you and for your organisation.”
One of the chairs of the session – Dennis Tosh, ex-Ford Treasury Director – made a great point about why such expertise is necessary during the Q&A session, when he commented that: “The role of the treasurer is changing. It’s becoming more risk-focused and diverse. For example, how do you deal with negative interest rates? In that situation you have to be concerned with return OF cash, not ON cash.” It’s certainly one of the challenges that requires a high performing treasurer that can response with strength and speed to unusual scenarios.
2015 EuroFinance Award for Treasury Excellence: Roche
The final morning plenary of Day 2 at the Bella Centre in Copenhagen, Denmark, involved the presentations for the 2015 EuroFinance Award for Treasury Excellence. This year it was won by global healthcare company, F. Hoffmann-La Roche.
Collecting the award were Dr. Andreas Knierzinger, Group Treasurer, who said the win was “an honour” and down to “good teamwork”, and Martin Schlageter, Head of Treasury Operations. Both men are based in Roche’s Swiss treasury HQ in Basel. They shared the details of their treasury transformation and centralisation project with the audience at the trade show.
The project was carried out over a 10-year period at F. Hoffmann-La Roche. It has been recognised for its gradual introduction of an in-house bank (IHB), payments-on-behalf-of (POBO) structure, virtual accounts using SWIFT connectivity and internal e-banking tools – not to mention, among much else, a cash management pool that 200 group companies contribute to in 45 currencies. This allows foreign exchange (FX) exposures to be centrally managed and hedged daily.
98% of Roche’s intercompany payments are now settled internally without recourse to bank payment instructions. An internal compliance filter also screens payments against international embargo lists, while integrated trading platforms allow asset, interest rate and liability management to all be centrally managed.
The entire system, gradually introduced bit by bit over the last decade to ensure strength and sustainability – if not speed – is consolidated on Roche’s group treasury in Basel, Switzerland, where a team of 23 professionals, plus a dedicated IT support team, run the entire operation.
The centralised treasury serves well over 200 companies around the world delivering benefits such as lower staff costs, higher process efficiencies, better compliance, data, cyber-security and resiliency. The operation relies on a single enterprise resource planning (ERP) solution, with appropriate backup, which is linked to all the other subsidiary ERP systems in the group, enabling true centralisation and corporate ownership.
The project was recognised by the judges for the “best practice” treasury unit and operation developed at F. Hoffmann-La Roche via slow incremental but thorough improvements, which avoided silos, and has delivered enhanced treasury and business performance. “Continuous excellence rather than monolithic upgrades … has been key to the impressive global treasury process now in place”, said the citation, which also praised the team for “constant hard work and adaptation” and for “rejecting easy solutions and making hard choices about people, money and strategy”, which ultimately delivered a best practice operation.
- You can read the project CASE STUDY on page 50 of the 2015/6 ‘Treasury Perspectives’ magazine and discover more about the Treasury Excellence Award here.
The highly commended entries in the 2015 EuroFinance Award for Treasury Excellence were as follows:
• Baxter International for its BaxAlta treasury structure and project.
• Toyota Financial Services for its innovative investor analytics suite of tools. The award was collected at EuroFinance 2015 by Matthew Venardi, Corporate Manager, Treasury Systems and Operations, Toyota Financial Services.
• Volvo Car Corporation for its impressive journey from a profit centre in Ford to a standalone corporate with a state-of-the art payment factory, treasury management system (TMS) and in-house bank (IHB). The award was collected at the show by Elisabeth Mosseen, Group Treasurer, Volvo Cars, Sweden.
EuroFinance 2015 Day 2: Afternoon – Technology & the ‘Great Fall of China’
The conference split into streams in the afternoon. The daily show report followed the Technology & China-focused Liquidity streams. John Colleemallay, a director of Group Treasury at Dassault Systèmes discussed the move to cloud computing, while a panel of treasurers from Corning, Yum! Brands and others debated how best to integrate the newly volatile and devalued renminbi (RMB) into your global operation after this summer’s ‘Great Fall of China’.
“We’ve got 15,000 employees worldwide across 140 countries and are a $3bn company that will be a $5bn company in the next 5 years,” said John Colleemallay, Senior Director, Group Treasury & Financing at Dassault Systèmes, during his technology presentation at EuroFinance 2015.
The French headquartered company has been an enthusiastic adopter of cloud computing in order to cope with its growth and to add new functionality. Colleemallay explained how Dassault has introduced a full payment factory (PF) and adopted SWIFT’s 3SKey security solution for its payments. “We’ve also been using standardised XML messaging – which has integration, speed & efficiency benefits – since our 2010 SEPA compliance effort,” he added.
The groundwork for this technology upgrade was laid with some organisational and structural changes last decade. “Our project started 7 years ago,” explained Colleemallay. “It begun with a bank rationalisation and cash concentration programme. This resulted in us cutting the number of banks we had in EMEA from 36 down to 2. In the US we cut the number or banks from 18 down to 1 and in Asia we went from 20 banks down to 1.”
Each region has its own pool as well. “60% of cash was centralised in the past; it’s 97% now,” said Colleemallay, touching on the benefits of the project. Subsequent technology upgrades were built on the back of this organisational overhaul.
Project benefits include:
• Real-time cash positioning.
• Cheaper running costs via the use of Software-as-a-Service (SaaS) cloud-based solutions. ““We use Kyriba,” said Colleemallay.
• Scalability, so that new mobile, security or other functionality – even compliance tools – can be added later on as required, with no fear of technology silos. Newly acquired entities can also be added to the cloud-based technology systems that Dassault uses.
• Easy, quick & cheap to install cloud-based solutions, instead of maintaining in-house technology.
The perennial treasury complaint in regard to technology is about underfunding from boardrooms but the low Capex of moving to cloud-based solutions make migrations eminently possible. However, there will be on-going Opex costs to consider – although Colleemallay maintains that these can be offset by the ability to do away with expensive internal IT staff.
The Great Fall of China
In a liquidity-focused 8-person panel debate at 4pm in stream 2 of the EuroFinance 2015 event, treasurers from Corning; Yum! Brands; LM Ericsson; Philips International; and Roche gathered to discuss how best to integrate the newly volatile and devalued renminbi (RMB) into your global treasury operation. FX hedging was the key focus of the interactive session. The treasury panel was helped by Hans De Haan, Director, Client Coverage, ICBC Standard Bank; Emil Græsholm, CEO, Global Risk Insights; and Ian Farrar, Partner, PwC Hong Kong.
Chinese connectivity, local laws, FX protocols, practices and norms was a pertinent topic after this summer’s dramatic ‘Great Fall of China’ on 24th August 2015. What has been dubbed the Asian ‘Black Monday’ saw a 8.5% fall in the Chinese stock market, with a culminative loss of 40% since June. The ‘Great Fall’ has wiped billions off the domestic and international stock markets, prompting a devaluation of the yuan and 25 basis point cut in the Chinese 1 year benchmark lending rate to 4.6%.
The volatility impacts the global renminbi (RMB) currency outside of China and many trade finance deals which now rely on it – not to mention the FX hedging and operational practices of treasurers at multinational corporations (MNCs), which necessarily have Chinese operations.
Fears of a ‘hard landing’ for the Chinese economy as it shifts from an export-focused economy to a more consumption-led model lie at the root of the ‘Great Fall’ but what exactly where the treasury impacts?
Treasurers’ Share Their China Experiences
According to Martin Schlageter, Head of Treasury Operations at F. Hoffmann-La Roche: “Our concern is more about long-term growth rates in China falling.”
The currency hedging problem and domestic stock market falls are less of a concern to Roche as they import product into china and sell it. “We’ve not got big production facilities in China, although there is some local treasury expertise in the handling of CNY,” said Schlageter.
Erol Mahmutogullari, Treasury Operations Manager at Philips International was similarly unconcerned about the ‘Great Fall of China’: “We were hedged …so our board didn’t lose any sleep.”
LM Ericsson’s cash management manager, Katinka Elfström, joked: “You wait for years for liberalisation and then you get shocks like this!” Her company has been in China since 1982, so it certainly knows the ropes.
Angel Yang’S company was badly hit by the ‘Great Fall’. She is the Chinese-born Director of Global Treasury Operations at Yum! Brands, which owns Pizza Hut, KFC and Taco Bell. “The currency has been appreciating for a while – like the stock market – so I guess it was time for payback,” she said. “We’re now looking at hedging RMB and are currently analysing our options.”
It is not surprising that Yum! Brands was impacted as China accounts for a large proportion of its $13bn global revenue. It is building 700 stores a year in China – almost two a day – and still plans to expand. “I’m still bullish about China. Yes, it’ll slow down a little economically but there is still good growth,” said Yang. “Also, the Chinese stock market is very immature (80% is retail/consumer investors) so it doesn’t reflect the true economic picture.”
Bengt Elvinsson, Assistant Treasurer at Corning, works at a company that “doesn’t do cross-border pooling” but it was impacted by CNY appreciation which it also didn’t hedge against because it’s been strengthening for a while.
The manufacturer of gorilla glass for mobile phones, fibre-optics and so forth does have a Chinese footprint. “We hired a lady in China to help our Chinese activities as I believe you need a person on the ground to help navigate their local laws and customs,” said Elvinsson. “Despite this, regulations in China can change like that tomorrow.”
The fluctuating FX and hedging picture in China after the ‘Great Fall’ was not the only topic at the wide-ranging concluding session of Day 2 at EuroFinance 2015. Debate flared about when the RMB might become a reserve currency; if its liberalisation programme will continue; the importance or otherwise of free trade zone entities and so on before the audience broke for the end of the day.