Managing Growth by Adding Value
by Michal Kawski, Head of Treasury, Gazprom Marketing & Trading Ltd
Gazprom Marketing & Trading (GM&T) has experienced considerable growth in recent years, necessitating the creation of a new treasury function in 2008. Since then, the new department has actively supported the rapid growth of the group adding to the scale and complexity of treasury’s activities. In this article, Michal Kawski, Head of Treasury, describes some of the ways in which the department has managed business growth over this challenging period, and established a framework to facilitate future expansion.
Our Global Treasury team was established in July 2008 in London, UK. Before this time, a limited number of treasury tasks were distributed across the company and liquidity management challenges were limited due to standard gas transaction settlement terms. As the scale and diversity of the group’s activities continued to increase, however, senior management recognised the need for a dedicated, specialist treasury function. The timing was very fortunate, as the global financial crisis had a significant impact on GM&T, with substantial volatility in gas prices, so treasury had an immediate job to do in managing the liquidity of exchanged-traded contracts. Cash flow forecasting and working capital management became a priority during a period when bank financing was hardly available for market newcomers.
The crisis emphasised the importance of a strategic treasury function, which has developed considerably since it was first established. Treasury has a broad remit to support group subsidiaries across funding, cash investments, cash, liquidity and working capital management, bank relationships, corporate foreign exchange and interest rate risk management. We also monitor incoming funds, manage margined positions and produce treasury performance reporting.
As an indication of the growth that GM&T has experienced, since 2008 we have increased our trading presence from 13 to 45 locations. The group has grown from fewer than 200 employees to over 900, with a 298% increase in cash assets. We now maintain around 175 bank accounts compared with around 25 in 2008 with an 11-fold increase in payment volumes and 90% increase in the number of trading documents managed.
An agile treasury approach
To support the needs of a rapidly growing, dynamic business, treasury needed a highly flexible, responsive approach. As we were building our treasury from scratch, we had the ability to implement best practice processes and methodologies, such as cash flow forecasting and cash flow at risk. This also included agreeing working capital budgets for business units which helped to identify the funding gap accurately. Our approach is based on five key pillars: a detailed understanding of the business; a clear understanding of our underlying business risks and the market environment in which we operate; strategic planning; use of IT tools; and recruiting and retaining high quality personnel. By addressing each of these elements, we have been able to enhance the service we deliver to business units and protect the liquidity and risk position of the group.