Treasury interview - Mark Hedges, Treasurer and Risk Manager for OneSteel
Interview with One Steel Treasury and Risk Manager, Mark Hedges.
Q.
How does your chief financial officer (CFO) measure the performance of your treasury function?
A.
The CFO measures the performance of the treasury function formally and informally. In a formal sense, I have a performance review six monthly on the key responsibilities in my role. These include:
establishing direction of the treasury function
compliance with board approved treasury policy
development of the skills of the treasury team - particularly the linkages that treasury develops and maintains within the operating businesses
commercial leadership across the entire group in financial risk management, innovative financing, and liquidity management
contribution to cash delivery
financial risk management
Informally, the CFO and I discuss treasury's role and performance as a supplier of financial solutions to business problems at least on a weekly basis.
Q.
If a CFO wanted to keep a good grip on the performance of its treasury function, what one or two questions would they be asking?
A.
I see it as my role to be proactive in keeping my CFO abreast of what treasury is doing. This is generally a weekly or more frequent catch up where I update the CFO on a laundry list of issues - this is a benefit of working in the same office.
I try to split the chat into strategic or development issues, linked to working with our businesses on opportunities, from compliance issues. The latter is on an exception basis, although this is in no way to understate the importance of these issues, as in many instances, treasury policy dictates that the audit and compliance committee of the board be alerted to breaches of the policy. Our culture calls for a no surprises style.
I also produce a formal monthly report which forms part of the CFO report to the board. This deals with an assessment of the various markets we are interested in, performance against a range of metrics and compliance with treasury policy.
Q.
What is the best way for a CFO to support the treasury function?
A.
The best way that the CFO can support the treasury function is by providing early advice of issues which will involve treasury. This will involve a high level of trust for issues which at times are highly sensitive can be discussed with treasury to deliver a timely and well designed outcome.
At all times, it is necessary to play as a team, and I see the treasurer as an integral part of the company's commercial leadership team. A good working relationship is vital in this, as all roles, where there is mutual respect and a confidence to provide honest feedback both ways.
Q.
What will be the features of a high performing treasury function?
A.
The features of a highly performing treasury function include proactively identifying financial risk and proposing strategies for managing them.
Managing risks may include determining whether we have an opportunity to issues and opportunities commercially or using a financial instrument, taking into account the philosophies of the company which are enshrined in the treasury policy. It also involves leadership in the development of that policy. A high performing treasury is well regarded for the soundly reasoned advice that it provides, and for its speedy execution of agreed strategies.
It also involves being sought out and recognised by internal (and external) customers to help propose solutions to their problems which are practical and understandable by non treasury professionals. Credibility and integrity are earned over time. As treasury has little direct authority except in matters of policy, we must use our credibility to influence rather than direct.
Q.
What do you find most frustrating / biggest challenges about your role?
A.
The frustrations and challenges of the role involve keeping abreast of business developments whilst sticking to the knitting. In other words there are a number of must do activities in the role which resources need to be allocated to in order to earn a ticket to the game of being a trusted financial adviser.
These include managing liquidity in a $4 billion turnover company operating in over 150 sites, ensuring compliance with the board approved treasury policy in areas such as FX, interest rate and commodity hedging; managing banking relationships and relentlessly attacking costs. Without the support of a small team of highly skilled staff, this is not possible.
Other challenges which have recently been addressed include the implementation of International Accounting Standards, proposing the best method of structuring debt funding for proposed acquisitions, developing trade finance policies for managing the company's expanding export iron ore business to China, recommending funding techniques for capex for the company's mines in South Australia and due diligence of potential acquisition targets.
Q.
What do you see as the emerging issues for your treasury in the future?
A.
Emerging issues for treasury in the future will be to provide fast solutions to financial opportunities and threats as they emerge, and to stay up to speed with developments in technology, regulation, product development and markets. This will only be done by having good people and systems who are up to date technically and well networked both internally and externally.
As OneSteel grows into new businesses and jurisdictions, treasury will be expected to identify issues and propose ways of addressing them.
Dealing with these challenges in a way that uses the particular skills of treasury (no doubt supplemented with skills acquired to deal with specific new issues) to recognise and manage risk, requiring minimal bureaucracy in an understandable way to key stakeholders will deliver better outcomes for the company.
