Our judges felt BGC should win this award because it has created an entirely new work culture in the treasury where service and efficiency are prioritised and skills and continuous learning are prized. Moreover, while this evolved over two years, many key initiatives were introduced in 2014 which is also the year in which Iraq faced fundamental security challenges.
Photo of David Aldred, Citi and Jean Vacqué, Basrah Gas Company.
Head of Treasury
Basrah Gas Company (BGC) is a two-year old joint venture between the Iraqi State South Gas Company (SGC), Shell and Mitsubishi to capture and process associated gas from three oil fields in the south of Iraq. It is the largest gas project in the history of Iraq and the world’s largest flare reduction project.
in partnership with
Iraq is an extremely difficult environment from an operational perspective with a security situation that makes regular working life a constant challenge. Thirty years of turmoil and embargoes have affected – and degraded – all aspects of the Iraqi economy. The country also presents a number of significant treasury challenges. Much of the Iraqi financial system and banking infrastructure is still emerging with a legacy of state bank monopolies, paper-based transactions, dominance of cash as a payment method and little modern communications. Local regulations, with regard to currency conversions, for example, are highly restrictive and subject to regular unforeseen changes. This left a legacy of mistrust of banks and a fear of failure (and therefore a reluctance to innovate).
Jean Vacqué, Head of Treasury at BGC explains that: “as a young company, BGC wanted to overcome these challenges to ensure that our banking operations would be stable, that we could honour our local and international commitments and that our supply chain receivables would be secure. We wanted to use modern treasury strategies and tools right from the start to reduce the use of cash by centralising payments and introducing corporate cards to improve visibility, control and efficiency.” To do this, the company invested heavily in training and support to develop local staff skills. It established banking and insurance partnerships to implement a complete banking, treasury and supply chain solution that would deliver comprehensive risk mitigation, streamlined processes and enhanced efficiency in Iraq’s challenging operational and banking environment.
Over two years, BGC’s treasury has created and implemented a modern – and pioneering – banking solution in Iraq that addresses the country’s unique challenges and delivers the functionality and results the company wanted. It includes:
A multi-country account structure involving: capital injection accounts opened with a leading Iraqi bank acting as a correspondent for Citi; a single USD account with Citi Dubai from which all payments, internationally and into Iraq, are managed; a USD account opened in 2014 with Citi London for collections and investment.
Host-to-host connectivity between bank accounts and BGC’s ERP platform to support electronic payments.
Remote printing of local currency cheques.
The first corporate credit cards issued by an international bank to an Iraqi company.
Reloadable travel cards, largely to facilitate foreign travel.
Seamless electronic payments to the state company joint venture partner.
BGC treasury started with a team of local staff, most of whom had limited English and computer skills initially and had little knowledge of modern banking, insurance or credit. Eighteen months later and through intense training, BGC has a motivated and autonomous treasury team who – using ERP tools and modern working methods – are processing payments of over $1bn per year and managing insurance cover for 5,000 employees and well over $1bn of assets. To reduce BGC’s use of cash, treasury has encouraged the business to establish contracts and payment practices – despite strong resistance – based on more efficient and transparent payment methods. These efforts include leveraging banking relationships to help local vendors to open their first bank accounts. As a result, physical cash usage has been reduced by over 80%.
BGC has built a strong credit reputation with its vendors and partners to obtain competitive payment and insurance terms in spite of a challenging location and perceived political instability. To date, BGC has not had to issue any credit support instruments and instead successfully managed to obtain unsecured payment terms and securities from vendors on most contracts, thereby directly improving working capital and credit risk. BGC and SGC also structured an innovative stand-by letter of credit solution to mitigate risks associated with gas sales receivables.
Best practice and innovation:
BGC created a modern treasury in an extremely risky country. It has a centralised structure for payments, both in Iraq and internationally. The company also has a full suite of treasury tools, including a London account for investments, remote printing of local currency cheques and corporate/travel cards. These solutions have delivered visibility, control and efficiency, helping BGC to achieve its treasury objectives, including reducing the use of cash. BGC has also created an entirely new work culture in the treasury where service and efficiency are prioritised and skills and continuous learning are prized. Moreover, while this evolved over two years, many key initiatives were introduced in 2014 which is also the year when Iraq faced fundamental security challenges.
Reduction in bank charges.
Time taken to implement solution and realise benefits.
Local staff development and local content maximisation.