A Local Approach to Treasury Efficiency
by Ludovic A. Pech, Chief Financial Officer, Orange Romania S.A.
While many companies have sought to centralise their cash and treasury operations in recent years, companies such as France Télécom have adopted a more bespoke approach according to the specific needs of the business. Local and regional/global treasury centres collaborate closely to leverage the strength of a centralised treasury technology, advisory and policy framework, whilst maintaining some operations and expertise at a local level to respond quickly and effectively to local market conditions and manage specific cash and treasury management activities. In this article, Ludovic Pech, CFO at Orange Romania, outlines the experiences of a major local finance centre in the France Télécom group.
The France Télécom group, which owns the Orange brand, has a highly collaborative approach to finance and treasury.
Our Group Treasury function is based in Paris. It determines group treasury policy and performs a wide range of activities on behalf of the group and for its subsidiaries globally. It provides us with financing and liquidity and gives access to more sophisticated treasury management tools and financing instruments than we would be in a position to acquire locally. As telecoms is a very capital-intensive industry, with operators having to invest heavily in licences and networks before they make profits, it is critical to our business to be able to count on the expertise of this central team and benefit from the high rating of our group.
In addition to Group Treasury, in-country finance teams are in charge of local cash optimisation and daily treasury management activities. They play an essential role in steering local cash performance and risk management. While these issues are not new, they are now at the very top of the CFO’s agenda, and with even more intensity, after three years of crisis.
A collaborative approach
Treasury in Orange Romania is a critical function. After Poland, Romania is the second largest country in the group in continental Europe that is not part of the Eurozone. As such, we deal with local currency risk and hedging
We therefore conduct a variety of cash and treasury management operations locally and perform business functions that require depth of local insight beyond the plain vanilla cash flow forecasting and reporting activities common to every company. This includes more complex risk analysis and hedging operations than is required for other group affiliates in the Eurozone.
In an environment with high currency volatility in recent times, increasing credit default risk and more restrictive access to financing, the role of treasury becomes even more important to the business. In that respect, the combination of central treasury expertise in Paris with local operations in Romania is a very positive one.
We also co-ordinate with Group Treasury to determine appropriate short-term financing strategies. In some cases, local borrowing conditions in Romania may be very competitive, but we need to balance the premium rating of Orange Romania on the local market and relatively higher country risk (lower medium grade for Romania compared to high/premium grade for France).
Furthermore, Orange is one of the most significant businesses in Romania, so it is important both for us and our banking partners that we maintain strong links with the business and banking community locally. As market leader, Orange serves over 10 million mobile customers out of a total of 19 million inhabitants. It is the third largest company in Romania in profit terms and one of the main foreign investors, reinvesting approximately two-thirds of its profits every year to upgrade its network and bring more innovation to the market.