The Innovative Treasurer - Always Looking For Ways To Drive Value Creation
Anders Liu-Lindberg
Leading advisor to senior Finance and FP&A leaders on creating impact through business partnering | Interim | VP Finance | Business Finance
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Treasury can be a highly theoretical business function. Many Treasurers will agree that, while it occupies a fundamental position within every business, it can be difficult to translate the importance of Treasury into practical activity or applications - and even more difficult to explain its value-creating capacity to other stakeholders.
In this series, we're looking at ways in which organizations can broaden the horizons of Treasury. Here, we're going to look at four case studies in Treasury value-creation, all delivered by one professional.
The Treasury professional
Bruno Massera is the Regional CFO at a large multinational food company. He is based in Dubai and has worked in Finance and Treasury positions for more than a decade.
His Treasury career began with a focus on risk management. He then moved to corporate finance, before joining a global business development program in Singapore. This took him to Turkey and Egypt where he ran market entry projects from a business development perspective.
Mitigating exposure
In the early 2010s, Bruno was looking at ways to mitigate exposure for the multinational for which he was working, tying together Treasury and risk management. The company bought live cattle from multiple suppliers, generally fixing the price a few months in advance. This meant that they had exposure to price fluctuations bringing risks to the profitability and cash flow of the company..
Bruno looked for a way to minimize this exposure, designing a system whereby the company bought the live cattle at a fixed price but mitigating this risk using options, futures, and other derivatives either by the future exchange or over-the-counter transactions. Doing that he ensured that the commercial team was able to offer competitive prices while at the same time securing the supply and mitigating the price risk.
Working capital
Later, around 2013 and 2014, Bruno was tasked with a new set of challenges revolving around working capital. He benchmarked the business against comparable companies, looking at the three main pillars of working capital: inventory, receivables, and payables. It quickly became clear from Bruno's research that there were several major opportunities on the payables side.
Bruno's then-CFO wanted to establish a target for cash flow generation, and a payables target for the procurement team - a separate function within the business. He participated in extensive talks with the procurement function, including spending several months in the south of Brazil where the team is based. He was tasked with increasing payment terms to suppliers - but he and the business understood that this must be handled in a sensitive and fair way in order to also support those suppliers (who are often very small operators).
Bruno surmised that some suppliers were already often seeking working capital finance from banks in order to tide them over between order and invoice settlement, which at the time occurred at an average of 45 days. Those suppliers were paying a high interest rate in great part because they were small firms with limited credit capacity.
So Bruno designed a new system. In partnership with procurement and suppliers, payment terms increased from 45 to 90 days. But, at the same time, Bruno facilitated finance through banks, at a much lower rate. The banks, in turn, agreed to an arrangement similar to invoice factoring, but with a twist: it was a 'true sale' arrangement, in which the banks did not have recourse to the supplier and the bank was taking the risk of the company - which, because it was much larger and more established, was much lower. In this way, canny Treasury management generated new value for suppliers, banks, and for the company - to the tune of around $500 million in cash, money that could be used to fund acquisitions around the world.
Business development
In 2017, Bruno was tasked with creating a Treasury function for the Middle East operation based in the UAE, and he immediately saw a quick opportunity to improve cash management. In the Gulf, the company was moving and holding large sums of money in different entities, in different countries, with different banks. He invited 12 banks to meet him and the company, bringing them all to their factory in the UAE. This was important, he says, because while the company was large and well-known in its home territory, it was still a relatively new player in the Middle East for the banks.
He then sent out an RFP seeking solutions for better cash management in the region. Collaborating with one of the banks, he then designed and launched a notional cash pooling system that optimized cash management and interest rates, reduced bank fees, and mitigated the company's FX position. It was a quick but substantial win, securing savings in the millions of dollars within a very short period.
Pandemic operations
Then, last year, the pandemic hit. This presented one key challenge amongst many: as much as 20% of the business's receivables were in cash, and collecting that cash during a pandemic was not safe. The business's commercial manager asked Bruno to find a solution to reduce the company's cash handling and safeguard its employees.
To achieve this, Bruno partnered with a local bank and one of the region's largest telcos to launch a pilot of an electronic payment system - something that was new to many of the small independent grocery stores that make up a substantial part of their customer base.
The pilot was launched in just a couple of months, leveraging a business need and a potential customer behavior change. In this way, Treasury has driven real-world value not only restricted to balance sheets but also as a way of protecting stakeholders in a very real and immediate way.
Bruno is an excellent example of a Treasury professional who is constantly innovating. He has developed and launched multiple projects that have delivered real, measurable value for suppliers, customers, other stakeholders, and the organization itself.
Get started now
You can take action today to expand the horizons of your Treasury function. First, subscribe to my newsletter in order to receive the rest of the series on Treasury, along with my other resources. Then, identify three challenges that your business faces right now. Think about ways in which Treasury has a role to play in those challenges, trying to think beyond the traditional parameters of the Treasury function. As Bruno has shown, the problem-solving and value-creating potential of Treasury is vast - from improving the cash flow generation to protecting stakeholders' health.
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This was the second article on my series about Treasury. You can read the previous article(s) below. If you would like to be involved in this series and share insights about the latest developments in Treasury then don't hesitate to reach out!
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If you want to know more about what is happening in the wider Finance Function you can read my latest series "Finance Function 4.0". You can read all the articles in the series below.
You can read a lot more articles about FP&A, Business Partnering, and Finance Transformation below. It all start's with “Introducing The Finance Transformation Nine Box”?where you set the ambition for your transformation. You should join the?Finance Business Partner Forum?which is part of the Business Partnering Institute's online community where we will continue to discuss this topic and you can click here to follow me on?Twitter.
All Successful Business Partners Are "Leaders"?(the last article in the series about our new capability model)
Should We Keep Talking About Business Partnering??(part of a 17-article series where we deep-dive on the WHY, WHAT, and HOW of business partnering by putting it on a formula)
Everyone Can Adopt A Business Partnering Mindset?(part of a six-article series about FP&A Business Partnering)
From Business Partner To Working Within The Business?(part of an article series where I interview finance professionals about their careers in FP&A and Business Partnering)
Is Your Product Optimized For Value Creation??(part of a toolbox series where we look at what tools FP&A professionals should leverage to drive value creation)
How Business Partners Turn Analysis To Insight?(part of case study series where I interview business partners about how they drive value creation using real cases)
Anders Liu-Lindberg?is the co-founder, COO (Chief Operating Officer), and CMO (Chief Marketing Officer) at the?Business Partnering Institute?and owner of the largest?group dedicated to Finance Business Partnering?on LinkedIn with more than 9,500 members. I have ten years of experience as a business partner at the global transport and logistics company?Maersk. I am the co-author of the book “Create Value as a Finance Business Partner” and a?long-time Finance Blogger?on LinkedIn with 60.000+ followers.
Professor of Business Management at Curry College
3 年Another great post! Will definitely be using this in my classes! Thanks!
Improving how healthcare interacts with the financial services sector - i.e., treasury management
3 年This is great work, Anders! Thanks for your continued interest and exposure you're bringing to treasury teams.
Finance | Strategic Business Partner | Venture Capital | Angel Investor | Startup Advisor & Mentor
3 年Thanks Anders Liu-Lindberg to give me the opportunity to share a few treasury cases of value creation and business partnering.
CEO @ TreasuryPros | Treasury Management Consulting, Financial Literacy
3 年Another excellent article Anders.