EuroFinance

Taking real-time actions has been a key strategy for finance and treasury leaders to tackle the impact of unabated macroeconomic, geopolitical and supply chain volatility on businesses, in the last three years. In order to quickly implement the right decisions, it is critical for treasurers to have information that is up to date and available as quickly as possible.

Anticipate and act

For the UK-based metallurgical plant solutions and steel engineering company, Primetals Technologies, data lies at the heart of decision making. Speaking at the 2022 EuroFinance International Treasury Management in September, Jeremy Hamon, head of group finance and CFO of the financial entities of the Group told delegates that during the financial crisis of 2008, his team took a fortnight to gather data and quantify risk exposure before taking any actions to mitigate the macroeconomic upheaval.

Facing another crisis more than a decade later in 2020, the situation was different, as it took Hamon’s team less than an hour to calculate its risk exposure.

By leveraging the data from its systems, the company built an analytics tool which congregated data under a single window, thereby providing treasurers with the necessary risk exposures at the tip of their fingers. This has helped the treasury team to focus on actions to mitigate challenges instead of spending their time to gather data from multiple sources.

“A really big added value was to get everything in one tool to be able to quantify and weigh risk quickly so we can spend more time working out your options rather than analysing where we stand and getting the data.” Hamon told delegates at the conference.

Strategic partner

The use of this platform is not limited to making quick decisions but also in planning for any anticipated future disruptions in order to provide strategic advice to business partners internally.

For instance, if a geopolitical risk were to materialise in the future in light of the Taiwanese situation, a strong dependency on China to procure raw materials including mechanical, electrical and automation equipment, could not only hamper access to suppliers but also drastically slow down revenue growth.

With exposure data already available, it provides the treasury team an opportunity to not just react but also anticipate & plan in terms of FX vulnerability and supply chain diversification for such a potential scenario in the future.

“We are pushing brainstorming to a different level because there are a lot more inputs from Finance that will help drive such decisions in the future… We are planning such a task force and support potential supplier diversification, topics that no one ever from a Treasury side would have looked at before.” Hamon continued.

Furthermore, given the incessant supply chain disruptions in the last couple of years, procurement time for some electronic equipment went up to months as compared to only days in a normal scenario. Primetals is not yet able to assess these insights in one tool, which poses transparency risk. Hence, the treasury team is planning to further broaden the use of data and analytics to incorporate such issues and execute necessary action at the right time.

“The objective is to make sure we get this information as quickly as possible… that is definitely the key.” Hamon further said.

Going forward, the treasury term anticipates climate change and sustainability as key drivers in the steel business and will continue developing its R&D aiming at delivering solutions that would support the transition of the steel industry.