Setting up a Treasury in Romania for Skanska
By Maciej Müldner, Finance Director, Skanska Property Poland and Risk Manager, Skanska Commercial Development Europe
In 2011, after more than nine years running treasury and risk management in one of the largest construction companies in Poland, Skanska SA, I was invited to start the company’s operations in Romania, which would be concerned with construction and office development. The idea was to establish and finance an organisation that could support a medium-sized business with a turnover of EUR 50-100m and approximately 150 employees.
By early 2012 there were six of us who were to start this venture for Skanska. It was the company’s first greenfield entry in a new country in over 20 years, so we had to make our plans as we went along. Finance had to cover all three of the main activities: accounting (and reporting), management and treasury.
The starting point was very simple: we had bank accounts with one international bank and a small accountancy firm looking after the accounts. IFRS compliance was carried out manually in Excel.
When establishing finance and treasury I always had in mind where and how finance is established in an organisation: are we back office, front office? But I strongly believe that this question is no longer relevant. A modern organisation cannot function without finance. In order to describe the finance function, I like to use the ‘pit stop’ concept, imagining that our company is a Formula One team, competing against all the other teams. The most visible person is the driver – he/she is driving to win. This could be our sales people or project managers. But the driver will never win the race without her/his team. You need someone to prepare everything – the car, the fuel, the tyres, and you will have people like those in the pit stop who are visible plus the rest of the crew who are hidden but essential. The same is true of your company: do you actually see treasury performing? Most of the time you don’t, but if proper cash management is not in place, your company will go bankrupt very quickly.
So when I started designing the financial enabling function I looked at the expected set-up, current and future processes and available resources. And, as always, resources were limited.
The three main roles in a finance team are accounting – they record and report the past; treasury – they make sure that the present is handled in a proper way; and analysis – they assess the past and estimate what the future will be.
First, I made a list of all the processes:
Accounting: registration of invoices, booking of bank statements, coding of costs, scanning of invoices, etc.
Tax: tax authorisation, preparation of tax settlements. Reporting: group and statutory reports.
Treasury: analysis of currency exposures, forex transactions, reporting transactions, setting up and managing cash management – including payment processes, cash handling and arranging finance.
Management: cost analysis, budget reviews (forecast meetings), managerial support for business decisions (e.g., pricing of offers).
Next, I separated the processes into simple and complicated ones and decided who should perform them, either juniors or seniors. Another separation was between ‘visible’ (pit stop) and ‘hidden’ or ‘invisible’ (crew) processes. The final grouping was done based on the criterion of whether the processes were needed for either statutory or group (company) requirements.
The analysis of available resources was simple – there was just me and Excel. But then I started exploring where to find resources at a reasonable and optimal cost. I came to the following conclusions:
Accounting and Tax: most processes fall into the hidden group, and should neither involve nor be visible to the business (our Formula One driver). But part of their function was required because of Skanska’s group rules and part because of local Romanian regulations. Back home in Poland I had a trusted group of excellent and open-minded colleagues who could support me, but we knew that in Romania we would need to tender for local statutory accounting services.
Treasury: although my heart and soul belong to treasury, I knew that it would be impossible to run everything myself. I grouped the processes again into visible (analysis of currency exposures) and invisible (forex deals, cash management).
Management: most visible to the business. I knew I had to recruit, induct and train an excellent local person.
Finally I had to pick an accounting and treasury management (TMS) system. We decided to adjust one of the group systems used in Poland to the Romanian operations.
Summary of preparatory stage
The analysis revealed the optimum set-up: statutory tax and accounting – outsourced to an external provider; group accounting and reporting – use in-house resources.
Treasury: visible parts to be done by management in co-operation with treasury, the rest to be done by in-house treasury resources. Administration should be done locally.
I first contacted the managers of treasury and accounting in my previous organisation. They were very eager to start this adventure as they saw it as a great opportunity to broaden their team’s experience. In order to have approval from the Skanska HQ we prepared a business case comparing the implementation of a completely local team vs the combination of local and regional resources.
The implementation stage was both easy and hard. The Polish team was great and very engaged in the establishment of the new set-up. The implementation of systems, new banking arrangements and relationships went very smoothly.
We established new relationships with banks with which the Skanska group was already familiar in other markets. As FX transactions accounted for a large chunk of our wallet we decided to have a two-bank strategy in order to provide an element of competition. Responsibilities were split so that a newly hired manager first spent some time in the Polish treasury on a ‘training on the job’ exercise. She then analysed the cash flows and identified forex exposure. The transactions were done by the Polish treasury team, mostly with local Romanian banks. We also implemented the Skanska Group’s currency exposure reports. Treasury was responsible for them, but in close co-operation with reporting.
Cash management was done with one main bank. After looking at various possible solutions, we decided to use the group’s available cash to finance the local venture via a cash pooling arrangement. For this we chose a bank that offered us a banking system that we could use in both Poland and Romania.