In 1977, the late former budget director under US President Carter, Bert Lance, popularized the saying: “if it ain’t broke, don’t fix it”. If treasurers and CFOs followed that mantra in 2019 and maintained the status quo in their treasury operation, they probably would be feeling a tinge of regret today.
Indeed, the emergence of Covid-19 upended plenty. According to Fitch Ratings’ Richard Hunter, global head of corporate ratings, “the pandemic-related lockdown and its aftermath will erase more than US$5 trillion in revenue from the [agency’s global] corporate portfolio in 2020” and a further US$3 trillion in 2021 compared with the trajectory Fitch expected in December 2019.
The unprecedented collapse of the topline is forcing companies to switch out of the growth mode into, in some cases, a survival mode. Ample liquidity is paramount, visibility is key, and treasury efficiency matters more than ever.
This is why this year’s The Asset Triple A Best Treasurers and CFOs are possibly walking with a spring in their step even as they remain vigilant. Over the past several months The Asset’s board of editors heard from them remarkable stories of transformation in 2019 that now are helping their companies to manage better. As drivers of change, treasurers and CFOs are not always the most popular. But with Covid-19, their constant obsession to drive efficiency is proving their worth.
Here are the winners:
In Malaysia, Shafiq Abdul Jabbar, CFO of Astro Malaysia, a media and entertainment company, adopted an in-house bank concept to improve coordination of treasury activities such as payments-on-behalf-of and receivables-on-behalf-of. It was a similar story at multinational consumer food company General Mills, where Asia regional treasurer Christopher Emslie resolved fragmented banking relationships and a lack of account visibility across his entities in Asia.
With additional visibility and rationalization of accounts comes the potential to free up capital to be reinvested into the business. That was the goal of Novax Mao, Asia-Pacific finance director at auto parts manufacturer Linamar, who over the past year consolidated accounts and activated a supply chain finance programme to free up cash to support the group’s investments in electric cars.
Ensuring liquidity similar to corporates like Linamar is also a must for financial institutions. This year, The Asset recognized the efforts of Haitong International’s treasury team who were able to withstand gyrations in financial markets last year. The firm coordinated with its debt capital markets team completing two bond transactions in 2019 to fund its business operations, maintain its liquidity level, and optimize its financing cost.
Connectivity was another accomplishment by The Asset’s award-winning entities last year. In China, Shangwen Zhao, funding controller at Kerry Logistics (China) Investment wanted a more efficient treasury management framework, crafting a cross-border cash pool to provide a key financing link between mainland China and Hong Kong. For Kohler (Kohler China Investment Co., Ltd.) connectivity was key in managing their shared service centre in China, supporting growth from 8,000 transactions completed per month 5 years ago to 18,000 transactions recorded in 2019.
Automation continues to play a part in supporting business treasury departments, with several teams moving ahead of the curve. In Hong Kong, The Hong Kong and Shanghai Hotels’ treasury team automated cash concentration and formed a multi-currency notional pool to release the team from the pressures of manual processing. In Thailand, the treasury team of Thai Union went further on its transformation path, deploying an in-house setup from a global treasury centre to increase automation.
Carlsberg India’s treasury team was able to automate inventory management alerts and allow the printing of pre-signed blank cheques, eliminating manual pain points. The Trade Finance team of PETRONAS, led by Natrah M Tahir, general manager, group financial services, has taken automation to the next level by reshaping the way they handled letters of credit to be able to receive such documents digitally rather than by courier.
While the concept of treasury transformation may appear time consuming and costly at times, businesses should pay more attention to it as no one can say when the next crisis will be. The winning individuals and teams this year proves that adopting best practice is the insurance to power through good times and bad.
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