Warren Buffet famously explained his management strategy with the University of Maryland students in November 2013 saying: “Cash at that time (of crisis) is like oxygen. When you don't need it, you don't notice it. When you do need it, it's the only thing you need.”
Having an experienced succession of crises since the beginning of 2020, FutureCFO asked two finance leaders their views on the challenges facing treasury and cash management during the pandemic and coming out of it.
What is the biggest change to the Treasury and Cash Management (TCM) function brought about by the pandemic?
“The need to manage working capital was critical. The Group had to institute a daily cash burn monitoring and control mechanism to conserve cash and ensure operations can continue,” she elaborated.
She revealed that the pandemic brought about a change in the way cash was managed in the Group:
- Teams from Accounts Payable, Receivables, Business and Treasury came together to accelerate billing and manage payments and costs to conserve cash
- Finance worked closely with commercial and operations to dynamically manage operations to manage cost and mitigate cash burn
- Implementing weekly treasury dashboard
Rafael D. Consing, Jr, who was formerly with International Container Terminal Services, Inc. (ICTSI) as senior vice president, chief financial officer and compliance officer says the company’s digitisation agenda was fast-tracked considering state lockdowns during the pandemic.
“We onboarded with Docusign to facilitate more secure digital signatures for transactional and legal documents. We also started to utilise Power BI for the creation of consolidated reporting materials that are easy to digest instead of referring to heavy excel sheets for the numbers.
“We migrated from 90% onsite teller payment at our flagship terminal in Manila to 100% online billing and payment to eliminate person-to-person interaction,” he elaborated.
Cite the biggest challenges in 2022 and how do you overcome these challenges?
According to Boo ensuring the business has sufficient cash to operate was a key challenge. “This was addressed through the institution of daily cash monitoring and management. The Group also completed a successful restructuring which helped to strengthen its financial and cash position,” she added.
She also cited regaining financial institutions’ confidence in the Group post-restructuring as another challenge. This was achieved by being transparent and engaging closely with the financial institutions.
Another challenge for MAG was the lack of resources to handle additional workloads due to the criticality of managing payments and reporting cash. “This was addressed through strong collaborative teamwork from the staff and stakeholders,” said Boo.
Consing said ICTSI faced the challenge of repatriating monies from offshore cash-rich operating subsidiaries. This was solved by implementing the global cash pool program.
He also noted the rising interest rates as posing another challenge. This was solved by keeping liabilities short-term and fixed interest rates through swaps.
“In addition, as ICTSI was able to access liquidity from its subsidiaries through the solutions mentioned above, it was able to redeem and repay maturing perpetual securities and medium-term notes without the need to borrow at the current high-interest rate environment and push through with its deleveraging program,” he said.
Consing noted that as an organisation with a large global footprint, this meant many different teams handling our ports all around the world.
“Being based in the Philippines with no capacity to always visit the terminals it’s essential that constant communication is done through the monthly meetings with the CFOs and Treasurers of the local subsidiaries as well as utilising Microsoft Teams and Power BI to collaborate and create reports,” he revealed.
Any best practice that is clearly influenced by the pandemic?
“Timely reporting of treasury dashboard that includes cash position, cash burn/generation and related Treasury exposures,” revealed Boo.
Consing recommends migrating to fully online transactions whenever feasible. He also suggested using digital signature platforms to make transactional work more efficient and sustainable for signing bank documents. In this regard, he added the importance of continuing to lobby with banking counterparties to accept these digital signatures.
During the pandemic, what one lesson stands out from your experience?
“For us to remain strong and resilient on the back of global headwinds from the pandemic, it’s important to keep our focus on cash preservation, cost controls, and finding the optimal capital structure,” said Consign.
He acknowledged that these strategies allowed ICTSI to save on financing costs, add additional liquidity to the group, and continue pursuing lucrative investment opportunities despite the global pandemic.
What advice would you offer finance professionals tasked with the TCM function?
For Boo, discipline and resilience in working capital preservation are critical both in good and bad economic times. “To this end, continuously ensuring strong collaboration and trusted relationships within internal stakeholders as well as external (bankers/lessors/shareholders) is important. Keeping abreast with the latest technologies and products is also essential,” she offered.
Consign suggests continuing to optimise capital structure through liability management exercises to see if there’s an opportunity to switch financing options with the goal of reducing related costs.
He also recommends continuing dialogues with banks that offer market insights to craft good strategies for funding and risk management. His other recommendations include:
- Digitise workflows as much as possible to promote sustainable operations and reduce time spent on manual administrative tasks so the team can concentrate on value-adding activities.
- Read market updates daily and try to assess the potential impact on the group, be proactive vs reactive.
- Constant analysis of the company’s positions (cash, FX, tax, etc.) to minimise surprises by mitigating risks and taking advantage of market opportunities.
- Constant dialogue with subsidiaries and other departments to identify issues or potential issues at the earliest stage possible
* Editor’s note: Malaysia Aviation Group Berhad and International Container Terminal Services, Inc. are finalists in the FutureCFO Excellence Awards 2023 in the category of Excellence in Treasury and Cash Management.