Editor’s Choice: TMI Corporate Awards for Innovation and Excellence 2013
by Helen Sanders, Editor
This is my very favourite time of year, not only because of the excess of Christmas spirit which fills our house, but I also have the privilege of announcing the TMI Corporate Awards for 2013. With so much of the media dominated by headlines that are tragic (or trivial) it is so rewarding to be able to recognise achievement. We have an unprecedented eleven awards for 2013, reflecting the high quality of corporate articles that we have been privileged to feature in TMI this year, and the diverse nature of projects and initiatives in which treasurers have been engaged.
First of all, I would personally like to acknowledge and offer my warmest thanks to François Masquelier. Head of Corporate Finance and Treasury, RTL Group, and Honorary Chairman, EACT, to whom we would like to make a Special Award once again. TMI would be a poorer place to go without François’ regular insights, advice and knowledge that he shares. You can read all François’ articles by clicking here.
The remaining ten award-winning articles are summarised below (in no particular order), all of which are can be accessed by clicking the corresponding thumbnail. We would like to offer our thanks and congratulations to all our award winners on their achievement, and we look forward to sharing further insights and experiences from them in future editions.
Ever since hedge accounting regulations in both Europe (IAS 39) and the United States (FAS 133) were introduced more than a decade ago, treasurers have had to balance the need to manage risk effectively whilst complying with hedge accounting requirements. This has often proved a challenge, and many companies adjusted, and typically simplified, their hedging approach for accounting reasons. This was the experience of DONG Energy as Morton Buchgreitz, SVP and Group Treasurer explained,
“Over time, however, we have adopted a more integrated approach to risk management, and we now evaluate our risks on a portfolio basis. As a result, we started to hedge our positions on a net basis as opposed to hedging individual exposures, which made it more difficult to apply hedge accounting treatment. In addition, some markets are less liquid than others, which affected efficiency testing. We realised that we were making our hedging decisions in order to achieve hedge accounting treatment, as opposed to managing our risk in the best way possible, which could be detrimental to be business. We therefore needed to re-examine our hedging and hedge accounting strategy to realign it with our business needs.”
DONG Energy therefore took the bold decision to change its financial reporting methodology to increase transparency and better reflect actual business performance,
“We stopped applying hedge accounting treatment, and instead accounted for mark-to-market movements from hedges and some physical deliveries directly in the profit & loss account. This increases volatility in the IFRS result, but only affects the timing of the accounting impact, without a real economic or cash flow effect.”
Following a structured approach to migration, as Morton Buchgreitz, DONG Energy concludes,
“The change to our risk management strategy and the new reporting approach that we adopted as a result has been a major success for DONG. While we anticipated negative pushback to start with, the opposite was the case, and we have received considerable support and increased stakeholder confidence…. Transparency in financial reporting is essential for every company, and aligning external reporting with the way that the business is managed ensures greater visibility and credibility.”
TDIC prides itself on being a leader in the Middle East, identifying and driving best practices across all aspects of its business. Recently, TDIC became the first company in the United Arab Emirates (UAE) to implement a customised, automated procure-to-pay process. With a large number of accounts and the need to demonstrate a high degree of accountability for cash held for each project, TDIC recognised that improvements needed to be made to its existing, manual payment processes. The company made the decision to build a bank-agnostic solution based on its ERP to maintain bank-independence and avoid additional cost and resource requirements. As a result, TDIC has achieved considerable efficiencies and both direct and indirect cost savings amounting to around $5m each year.
Harish Pai explains the wider relevance of the project,
“TDIC is uniquely positioned as an economic lynchpin in Abu Dhabi and is an important role model more widely in UAE and the Middle East. Not only has TDIC been the first company to create a customised, automated payment process in the region, but our experiences provide a blueprint for other government departments and commercial organisations in the region. This is particularly timely bearing in mind the Abu Dhabi government’s focus on enhancing standards of financial responsibility, accountability and transparency across both government and private organisations.”
Like Ferragamo, Bonduelle’s treasury took the opportunity that SEPA presented to optimise its financial processes, including expanding the payment services that it provided to group companies. This resulted in a payments factory operating on a POBO basis. Process control, automation and integration have been major priorities for Bonduelle, as Alexis Wattinne describes,
“We use a standardised format across all entities, currencies and regions, and combine multiple files into a single payment process, enhancing efficiency and automation. Payments are validated by two signatories from the relevant entity and then passed to the bank via SWIFT using 3SKey.”
Enhancing payments and cash management is just one of the ways in which Bonduelle’s treasury is adding value to the group. Risk management, financing (including a revolving credit facility and euro private placement) and liquidity management have also been major treasury priorities as part of a process to identify and deliver new ways to add value on a continuous basis. Looking ahead, issues such as SEPA direct debits and working capital management will be priorities, expanding treasury’s influence further within the group. Alexis Wattinne concludes,
“Although Bonduelle is smaller than some of the corporations that regularly appear in the treasury media, we have been able to achieve comparable levels of efficiency, control and automation, and therefore enhance the value we are able to deliver to the business. Technology has a major enabling role to play, but this can only add value when the underlying business organisation and processes are aligned with the needs of the business. In our case, centralisation both of treasury and payments has been a vital catalyst for delivering value across the 18 countries in which we have a presence, enabling business managers to focus on developing new business channels and increasing customer satisfaction.”