Treasury Today Country Profiles in association with Citi


Corporate View: 
Rakesh Kochhar, Nissan Motor Company Ltd

Rakesh Kochhar, Senior Vice President, Global Treasury and Global Sales Finance, Nissan

To be given full responsibility for a treasury department just four years into your working career is no small feat. But Rakesh Kochhar, Senior Vice President, Global Treasury and Global Sales Finance at Nissan, has demonstrated his capabilities in two continents and is evidence that self-motivation – with the ability to learn from experience – is key to success.

Rakesh Kochhar

Senior Vice President, Global Treasury and Global Sales Finance

Nissan Motor Company Ltd is a Japanese multinational automobile manufacturer headquartered in Nishi-ku, Yokohama, Japan with over $120bn in revenue. Nissan’s Global Sales Finance business unit has assets of around $80bn and makes over $2bn of profits.

In having dual responsibility for Nissan’s global treasury and heading the company’s global sales finance business unit, Senior Vice President Rakesh Kochhar certainly has a busy schedule. But for him, this is nothing new. After studying to be a chartered accountant in his home country of India, he went on to have a job in this arena for three years at GE Capital Transportation Finance (called SRF Finance Ltd prior to acquisition by GE). “The qualification only helps you to get the first job and after that, it’s how well you excel in the role,” he explains. And although he was successful, accounting wasn’t the end game for Kochhar. “I realised I was more of a strategy, big picture and finance person than an accountant, so when the opportunity came up to work in treasury, within the same company I held an accounting role, I jumped at it.”

And it wasn’t long before Kochhar was faced with his first challenge in treasury. The treasury department’s Head quit, along with his own boss, so Kochhar started handling treasury on his own at an early stage of his career. Yet, what could have thrown up numerous problems actually gave Kochhar a huge step up the career ladder as he excelled with the additional responsibility – such that the Managing Director of the company thought he didn’t need to replace those who left. “I achieved a lot during my time as treasurer of GE Capital Transportation Finance – bringing in cheap financing from International Finance Corporation (IFC), a world bank affiliate, and loans from multinational institutions, for instance.”

Global experience

Further challenges were to follow as Kochhar started to look for opportunities in other regions around the world. “The experience gained heading a treasury department in India helped me get a role in Singapore to work in a regional treasury position for Delphi automotive systems,” Kochhar recalls. Here, he was responsible for regional treasury operations in Asia Pacific and China, including financing, cash and risk management for the region.

It was in this role that Kochhar developed his working philosophy. “In this regional position, I thought that head office was sending us a lot of requests which weren’t necessarily value-add. They were simply asking a lot of questions.” Therefore, after around four years in Singapore – when Kochhar moved to Delphi’s global treasury in Troy, Michigan (where he eventually became “the number two person” in Delphi’s global treasury) – he made it a priority to ensure his team weren’t just asking questions of the regional controllers, but also adding value to the business. “From my perspective, for anyone who is in a global role it really helps to have also worked in at least one of the regions. The reason: you understand their outlook and can take that regional thought process into consideration.”

Further down his career path and after several years at Delphi in the US, Kochhar moved to Nissan to work in a regional role once again. As treasurer of Nissan North America, he was based in Tennessee when the financial crisis of 2008/9 rocked the markets and although he describes the time as “tough”, Kochhar was sure to learn from the experience. As a result, when he moved to his current position as Global Treasurer for Nissan (based in Japan), Kochhar made sure that the company had adequate liquidity lines for longer durations. “I worked with the financial institutions to make sure that the terms and conditions are improved so that lines can be drawn in a severe economic climate.”

Banking relationships and beyond

But many years later, as is well known, it’s far from smooth sailing for global businesses. There are new concerns and new obstacles for treasury to overcome on a regular basis. Off the back of the financial crisis, for instance, Nissan started to pay more attention to counterparty risk. “We look at our counterparty risk with a bank and ask ‘how much deposit should we place?’ We have rules that if the bank’s rating is below a certain level, we cannot place deposits. Also, in terms of us taking credit lines from the banks, we are diversifying to avoid over-exposure to one bank.” This does not mean any of Nissan’s banking relationships suffer, however. “We have a healthy group of banks supporting us – around 17 with whom we have grown relationships over the last ten years or so,” says Kochhar.

Being a global company, Nissan needs expertise in different countries and having diversified – but well-established – banking relationships allows this. As Kochhar explains: “One bank will be very strong in one country versus another bank whose strengths lie elsewhere, so we try to marry our needs with their capabilities. We are also very focused on making sure the fee-based business is shared among banks in a fair manner not only based on their capabilities, but also on the credit they are able to provide to us. It’s a win-win relationship between banks and Nissan and we ensure it stays like this.”

In addition to heading automotive treasury for Nissan, Kochhar is also responsible for the company’s Sales Finance Business Unit (SFBU), including the treasury side of this sales finance business. Here, the priorities are slightly different. “We have a lot of debt and cannot depend solely on bank loans. As a result, our debt structure is diversified among bank loans, capital markets and securitisation products.” The reason: “Our needs are increasing every day and the banks are not able to keep pace with us.”

Best practice treasury is not forgotten amongst this increased pace, however, as this side of the business aims to raise money in the local markets where it is doing business. “We have sales finance businesses in 11 countries so we tend to avoid raising money in Japan, for instance, to lend to the US. Instead, I try to raise money for the US business out of the US capital markets and banks. Having local access to credit is best way to ensure adequate availability of competitive financing for business growth.” This is also beneficial for the banks, who, as a result of mounting regulation, want to do less and less balance sheet lending. “But they want to help us raise money in the capital market because this is where they can make their fees,” says Kochhar.

Managing dual responsibilities

Against this backdrop, it proves useful to clarify the distinction between Kochhar’s roles. Apart from being Corporate Treasurer for Nissan where Kochhar is responsible for automotive and sales finance treasury, Kochhar, as briefly mentioned above, is also head of SFBU which has over ten sales finance companies globally making vehicles loans to customers as well as doing dealer financing.

For Kochhar, treasury on the financial side is more dynamic and fast paced. The finance leasing part is “deal-driven” as the business unit needs to raise a lot more money. “What’s more, we pay a lot of attention to term-matched assets and liabilities because you have debt (liabilities) in the market on one hand and, on the other, the loans (assets) you have made to your retail customers and dealers. We must manage the liquidity risk and interest rate risk by term-matching assets and liabilities.” This is a contrast to Nissan on the automotive side which is cash-rich and doesn’t require money to be raised.

However, treasury on the automotive side has its own challenges. For instance, a concern arising from operating in different parts of the world is how volatile the global environment has become in terms of currencies. “Given more than 90% of Nissan’s sales are outside of Japan, we pay a lot of attention to emerging market currencies, how they are moving and managing the risk associated with those.

“Throughout 2015, the US dollar became very strong against certain currencies – the Brazilian real, Argentinean peso, Mexican peso and most of the Asian currencies, for instance.” Therefore, limits need to be in place on how much cash can be kept in these countries and decisions made on how the company’s FX exposures will be managed, Kochhar explains. And although this is a process taking up much of his time, Kochhar doesn’t believe hedging currency exposures is a long-term strategy; hedging works in the short term only. “It’s largely about risk management in a natural way. If the company imports a lot of material into Brazil, for instance, that’s not good because the local currency has been depreciating and we are selling vehicles to local customers in Brazilian real. We therefore try to naturally hedge FX exposures by localising more and more in Brazil to minimise exposure to the currency.” Localisation is a long-term strategy which can reduce FX exposure, according to him.

Lessons to learn from

With comprehensive experience in different regions of the world, cultural diversity, perhaps surprisingly, isn’t something Kochhar has encountered problems with. “For the most part, I have worked in multinationals. There could be differences in terms of how people approach work or how many hours they sit in the office, but it’s typically a multinational culture which is above and beyond the region you are working in,” he says. What this means is that people will have developed a similar mind-set on delivering the corporate objectives. “You can fine-tune that mind-set over a period of time when working with different teams of diverse cultures.”

“I believe everyone has the power within themselves to succeed. You shouldn’t rely on others to motivate you; if you are self-motivated then you will do a fantastic job. Always believe that you can do better than you are today.”

In terms of personal strategy, according to Kochhar, you must choose a career based on what you enjoy in order to succeed. Around ten years into his career, he made the decision to add an MBA in Finance to his impressive resumé. “I delivered a lecture at a US college recently and was asked what advice I had for students and the guidance I shared was to avoid going into a career based on the fact it is in demand or you feel there are more opportunities. Rather, do what you enjoy and more opportunities are likely to come your way.” Kochhar’s further advice – to never shy away from additional responsibility – is applicable to professionals of all ages. “Always raise a hand when your boss asks who wants to do this project.” You also must be very diligent in what you deliver, he hastens to add.

Tuned into technology

Certainly for Kochhar taking on responsibilities and diversifying his skill set has paid off. Therefore, it is interesting to note what treasury trends he is keeping his eye on. “Treasury uses a lot more technology today than treasury of five years ago,” he says. Not only is Nissan investing a lot in their own treasury systems to ensure it is able to meet its needs today and those of the future, but the company’s expectations of the banks are on the rise. As Kochhar explains: “Those banks which are able to provide innovative solutions and advanced technology to make it easy to work with are the ones that are going to win business with corporates.”

These solutions could be to do with improving supplier financing, access to the capital markets or cash management for net exposure management in different countries – depending on the needs of the corporate. “At the end of the day, we keep our cash with the banks and we work with them for different financing alternatives. The better technology they have, I think the better the banks’ probability to win business – and satisfy the corporate – is.”

There is also the issue of risk management, for which technology could be the answer. In terms of supplier counterparty risk management, Kochhar is working on projects to analyse the capability and credibility of suppliers. “As an automotive company, we rely to a great extent on the capability of suppliers to deliver the right parts at the right quality.” For the quality part, the capability of suppliers is assessed by the purchasing organisation. But the financial credibility is assessed by treasury. Even if a supplier has the right technology to meet company demands, Kochhar explains, in order to prevent product lines being delayed, or prices going up, the financial position of a supplier must be good. It isn’t hard to think of recent examples where a collapse within the supply chain has affected the profitability of all counterparties involved. “What you don’t want is a distressed supplier which could potentially bring your vehicle assembly line to a stop for not being able to deliver parts.”

As part of his role in sales finance, Kochhar is also looking at a project for asset liability risk management. As a result of a huge company balance sheet – loans to dealers and customers of different maturities, as well as debt on the other side – mismatch risk must be counteracted. “If we are not term-matched, the business would carry mismatch risk which could also throw up liquidity, interest rate and profitability concerns.”

Keeping up momentum

With all of these projects running in tandem, Kochhar’s workload certainly appears daunting. There is also, he notes, the onerous matter of documentation due to increasing regulation. “The banks’ need for KYC is growing which means that our data submission to them is mounting. What’s more, the disclosure requirements when we raise money in the securitisation market in the US have gone up significantly. Regulators want more data disclosures in the public deals.” Although this is encouraging the company to use enhanced technology, Kochhar also cites concern over the costs. “As a result of Basel III, the overall cost of capital has gone up, as well as the increased regulation on access to the capital markets making costs slightly higher there too.” But against this challenging backdrop, Kochhar enjoys coming into the office – perhaps because he has the experience and attitude necessary to tackle the volatility of an ever-changing landscape.

Given that it was very early on that he decided treasury was the career path for him, the fact treasury remains an enjoyable profession is inspiring. As he explains, he finds this continued motivation from within: “I believe everyone has the power within themselves to succeed. You shouldn’t rely on others to motivate you; if you are self-motivated then you will do a fantastic job. Always believe that you can do better than you are today.”