About Me

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I am deputy editor at The Banker, a Financial Times publication. I joined the magazine in August 2015 as transaction banking and technology editor, which remain the beats I cover. Previously I was features editor at Profit & Loss, an FX and derivatives publication and events company. Before that I was editorial director of Treasury Today following a period as editor of gtnews.com. I also worked on Banking Technology, Computer Weekly, and IBM Computer Today. I have a BSc from the University of Victoria, Canada.

Monday, 8 October 2012

EuroFinance 2012: Risk Management: Touching the Void

27 Sep 2012

Joe Simpson, mountaineer and author of ‘Touching the Void’, gave the participants at EuroFinance 2012 in Monaco a taste of what it means to be a diehard risk taker. What risks to look out for and how to manage them were two issues discussed during the second day of the conference operating under the theme of stability.

The highlight of day two of EuroFinance 2012 was ‘Touching the Void’ author and mountaineer Joe Simpson, the ultimate risk taker. He recounted his and Simon Yates's disastrous and nearly fatal climb of Siula Grande in the Peruvian Andes in 1985.

Despite meticulously planning the climb for more than two years, the unpredictable weather conditions and unstable mountain terrain during their descent led to a bad fall by Simpson, shattering his leg. Yates and Simpson continued down the North Ridge face as night fell, dehydrated and frostbit, but unable to stop because they “had not brought an extra canister of gas for the stove”. Simpson indicated this was the one piece of kit that could have been a game changer during their descent.

Tragically as Yates lowered Simpson down the mountain, the latter fell off a cliff. Because of the bad weather conditions, neither could hear nor see the other. Yates had little choice but to cut the rope in order to save his own life and Simpson fell down a crevice. However, he survived the fall and managed to crawl back to base camp alive.

Simpson’s harrowing account highlighted the fact that in these volatile times, you cannot plan for the unpredictable event. Yet risk management, which has become increasingly part of the treasurer’s remit, must encompass more than just the immediate risks faced by a company today. The strategic treasurer is now identifying key risk indicators (KRIs) and how they are interconnected in order to get a true picture of the risks.

In the plenary session entitled “It’s the Chequered Flag: The End of the World as We Know It?”, Alyson Warhurst, chief executive officer (CEO) and founder of Maplecroft, outlined the changes in the global economy, specifically the growth of emerging economies.

Although businesses need to be in these geographies, there are a number of risks outside operational and business that corporates need to consider:
  • Legal and regulatory.
  • Conflict and terrorism.
  • Corruption and lack of corporate governance.
  • Human rights.
These risks can conflate with exacerbaters, such as natural disasters, climate change and risk of hydro-meterological disasters, emergence of infectious diseases and food security.

“Many corporates do not look at the interrelation between these risks, which is a very important dimension,” said Warhurst. “For example, Egypt was a fast growing economy, but suddenly [during the political protests] corporate supply chains fell apart.”

James Lam, president, James Lam and Associates and author of ‘Enterprise Risk Management’ (ERM), outlined how corporate could minimise unforeseen risk factors by integrating ERM and business strategy. He said that corporate needed to:
  1. Define their business strategy.
  2. Establish key performance indicators (KPIs).
  3. Identify risks.
  4. Establish KRIs.
  5. Provide integrated monitoring with regards to points one to four.
Lam said that it was important for corporates to identify the few scenarios that would ‘break the bank’ and set up an early warning system. He also warned against not just black swan events, but the “grey swans”, or events that are now just part of a faster-changing and more uncertain world.

Developing Risk Policies for New Markets


Iain Wetherall, head of corporate finance at Wizz Air, presented a workshop outlining the characteristics that define risk in new markets. The Hungarian low-cost airline, which will celebrate 10 years in operation in October, has 16 operating bases in nine central and eastern European countries. It has experienced a 10%-15% growth year-on-year and has just opened up another route to Geneva with 50 new routes planned for next year.

The main characteristics of new markets include:
  1. Growth rates: high top line growth, but inflation may be an issue.
  2. Culture: different market policies and mentality.
  3. Workforce: young versus old generation.
  4. Technology: various levels of penetration.
  5. Distribution channels: medium to weak; fragmented regional markets.
  6. Infrastructure: medium to weak.
  7. Social networks: varying degrees of emigration/immigration.
  8. Regulations: stability of governments; regulatory and fiscal changes.
  9. Exchange controls: varying degrees of money flow in and out, and this can change quickly.
  10. Pace of change: rapid.
Wetherall was quick to point out that with risk policies, “one size does not fit all”. He listed a number of traditional risk concerns that is normally associated with emerging markets, such as foreign exchange (FX), convertibility and liquidity, devaluation, payments and collections, and corporate governance, including bribes and taxation.

“Operating in new markets is really a mixture of the good, the bad and the ugly,” said Wetherall. “The good includes exciting growth, operating a profitable business model and strong corporate governance. My advice is that slow and careful planning is key to success.

“The extreme bureaucratism is the bad. But it is important to remember that in many cases there is a reason behind the madness. The ugly is the cultural differences. These can result in sudden and unexpected changes which may turn a business model on its head.”

This blog was first published on www.gtnews.com.

EuroFinance 2012: A Greek Treasurer Outlines Contingency Plans

26 Sep 2012

EuroFinance 2012 in Monaco kicked off its first day on the theme of volatility. In these turbulent times, risk management is never far down a corporate treasurer’s agenda.

The first day of Eurofinance 2012 in Monaco began by looking at the crisis in the eurozone and posed the question of whether governments can end the crisis cycle. Corporate treasurers are taking a hard look at their global operations and putting in place contingency plans in case the unthinkable happens. It is unsurprising then that the content stream looking at risk management attracted more than 50 participants.

There is no one is closer to the coalface than the Greek treasurer. Marianna Polykrati, group treasurer at Vivartia, a major food conglomerate in Greece, sketched out the emergency plans the company has put in place since the crisis began in the session entitled "Euro Contingency Planning: Lessons Learned Along the Way". She revealed that Vivartia had not obtained a bank credit facility since the end of 2008, but had to manage this matter internally.

Not only has Vivartia, which has the majority of its production and distribution in Greece, faced a decline in food prices by 30%, problems with production in the country and also foreign suppliers that are now asking for pre-payments before delivering raw materials. In November 2011, the company decided to take action to prepare for a unilateral succession from the eurozone or a country debt default.

Treasury identified possible events, prioritised for action, developed plans and made a presentation to top management. “The presentation was definitely not a ‘walk through the park’,” said Polykrati. “This approach was viewed as pessimistic by many, but the plan was taken up by senior management.”

Vivartia set up a task force in April 2012, which included the chief executive officer (CEO) and chief financial officer (CFO) as leads, with HR, legal, treasury, production, IT, procurement and logistics all have a representative. It created two control rooms in northern and southern Greece, which operated as headquarters. These give a “bird’s nest view” of operations, said Polykrati. The task force meets every 15 days and assigns the company’s alertness level, i.e. green, yellow or red.

In May 2012, when there was no clear victor in the elections, there was a change in market sentiment and three possible scenarios emerged:
  1. Greece defaults on its debt and exits the eurozone.
  2. Exits the eurozone without defaulting.
  3. Parallel use of two currencies: euro and Greek drachma.
The company looked at extreme scenarios, particularly the possibility of a switch to the drachma overnight. There were rumours flying around that the Greek government was printing money ready for immediate use.

In June 2012, the company was facing a worsening of its working capital management. It had to frequently review client portfolios and also provide discounts for earlier payments.

To secure and manage cash is a priority for Vivartia. In case redenomination does happens, Vivartia decided to keep cash pools outside of Greece. It sweeps 50%-55% of its cash to its London accounts and pays its bills from there, while keeping the other 50% in-country in order to hedge its risk. Keeping cash in local banks opens the company up to risks concerning devaluation, frozen accounts, cross-border payment issues and bank defaults. Keeping cash in small in-house banks (IHBs) at a few of its large factories opened it up to security risks. And keeping cash in the company’s London accounts left it open to exchange controls, problems in cash repatriation and internet disruptions, as all of these accounts are accessed through e-banking.

Polykrati outlined how Vivartia planned out a three-step approach to making payments in a stressed environment. The prioritised payments are: salaries, suppliers and government, in that order. The three steps are:
  1. Barter.
  2. Promissory notes.
  3. Cash.
She said that companies were already operating a barter system in Crete because customers do not have the money to pay.

Polykrati also covered more risk areas, such as interest rate, credit, counterparty, debt and derivative risks, as well as other commercial and business risks, such as IT, security, legal, sales and procurement.

Conclusion

Vivartia has developed a two to three year contingency plan, which it hopes will keep it afloat as the political machinations play out. It is selling off parts of the business that do add to the profitability of the company.

It is not just sitting around waiting for things to happen but has entered into joint ventures, one with an Abu Dhabi company and one with an American company. It is stabilising its foundations and looking for a growth opportunity.

“There is no political will in Greece or the EU [to solve the crisis] - each level of government is waiting for the other to act first,” said Polykrati. “The Greeks are a resilient people, but we need a solution.”

This blog was first published on www.gtnews,com.

 

John Keells Streamlines Payment Processes in Sri Lanka

12 Sep 2012


Sri Lanka-based John Keells Holdings (JKH), a company that specialises in numerous sectors including food and beverage, transport, IT, business process outsourcing (BPO), and plantation and investor services, has implemented a hybrid payment solution from Deutsche Bank, which will streamline the company’s payment processes managed by its shared service centre (SSC), InfoMate.

InfoMate, a wholly-owned subsidiary of JKH, handles supplier invoice processing and payment processing for companies of the John Keells Group, as well as third party clients in Sri Lanka and Europe.

Due to its complex and diverse payment and collection requirements, the company's process workflow for its supplier payments was previously run separately from other payment workflows. In an interview with gtnews, Jehan Perinpanayagam, chief executive officer (CEO) of InfoMate, says: “With the previous process, once the payment run in SAP was executed, the agent was required to log into Deutsche Bank’s internet gateway and upload the payment file. This was a separate task that could take additional time depending on internet speed. Given the number of payment runs executed by multiple agents and multiply this by the number of clients, the time taken was considerable.”

JKH has now implemented a hybrid payment solution, which connects Deutsche Bank’s electronic banking (e-banking) and supplier finance platforms to JKH’s enterprise resource planning (ERP) interface, resulting in greater operational efficiencies within its SSC, as well as cost reductions. The company’s payment files are automatically uploaded from JKH’s SSC to Deutsche Bank’s platforms, thereby creating an efficient payment process.

Perinpanayagam says: “It has completely eliminated a task. It has also reduced the number of internet licences required, as agents are not required to log in. This has reinforced our belief that further automation is possible in other banking functions as well.”

Background

InfoMate serves as a SSC for JKH and its businesses. The group set up the SSC mid-2005 in order to improve efficiencies in finance and accounting. Standardisation was also one of the main objectives in the first phase. The second phase focused on enhancing service levels, segregation of duties and reducing software licensing costs.

In the third phase, InfoMate drove process re-engineering, elimination of non-value adding tasks and productivity enhancements through automation. This resulted in process-driven uniformity, fewer errors and accurate information. InfoMate has now graduated to handling accounting and payroll work for third party clients in Sri Lanka and Europe.

This news focus was first published on www.gtnews.com.