From the recent two-year drought to the onset of the global pandemic, Australian food company SunRice has faced some major challenges over the last few years. As corporate treasurer Jonathon Hirst, these challenges have above all highlighted the importance of building strong relationships.

Managing risk in challenging times

“Treasury is just an amazing part of any organisation,” says Jonathon Hirst, Corporate Treasurer at SunRice. “Not only do you get to understand how an organisation actually operates, but you can also see how the cash flows around it, where that cash came from and why it came the way it did – and what it’s doing now.”

Hirst grew up in rural Queensland. “Most people would consider it the middle of nowhere, but it was a lovely spot and a wonderful place to grow up in. It not only taught me about hard work but also the importance of having good, solid ethics,” he recalls. He them moved to Sydney to study accounting at university and gained his chartered accountancy qualification in 2002. Alongside his studies, Hirst joined an undergraduate programme with KPMG Audit, and worked for other accounting firms while gaining his professional qualifications. “But I was never going to hang around the accounting service firms too long,” he says. “I was very keen to get out into the corporate world.”

In fact, it was a change in Australian accounting from local to international standards that provided the catalyst for Hirst’s move into treasury. “I went to work for an oil company called Caltex. The change to IFRS (International Financial Reporting Standards) was quite complex, so they needed someone in their treasury team with a deeper knowledge of accounting.” With his promotion to Treasury Manager, Hirst was able to successfully deliver systems and processes for the migration to new IFRS accounting standards, as well as implementing new IT systems to improve transaction settlement and control within the treasury department.

Leaving Australia to move to London, he took up the position of Group Treasurer for Habitat, the iconic UK furniture business, at a time of uncertainty in the high street retail sector. With cash management a high priority, he was able to build a cash flow forecasting model supporting the CFO in managing the procurement of store items, as well as negotiating a warehousing facility in France which provided Habitat with additional credit capacity.

When Hirst moved back to Australia, he re-joined Caltex to project manage a capital structure review before being promoted to a finance manager role, where he managed a team of 11 staff across the traditional finance functions of credit, accounting, tax, transaction services, IT and business support.

In 2009 he took up the post of Assistant Treasurer, and in 2015 became Regional Treasurer for the oil company based in Singapore, reporting to both the General Manager and Group Treasurer. Returning from Singapore in 2017 he joined Blackmores, one of Australia’s leading natural health company, which produces a range of vitamin, minerals, herbal and nutritional supplements.

Current responsibilities

In May 2018 Hirst took up his present position as Corporate Treasurer of SunRice, Australia’s leading producer of rice. “It’s quite a broad-based treasurer role” he says. “The treasury’s core components are the traditional treasury functions. As well as looking after all the risk financing for the group and cash management, we have transaction services, accounts receivable and accounts payable, and responsibility for the balance sheet from a funding perspective. And we also have insurance.”

Hirst describes his role as being about creating a strong, controlled framework in which to operate. He adds: “We have a wonderful group of people who are experienced in what they do and who have an excellent understanding of the controls that are required to do things well.”

Although as an agricultural company SunRice is ordinarily subject to volatility, the effect of the recent two-year drought in Australia was to reduce rice exports dramatically. Understandably this had serious implications for the organisation. One of the major impacts was the need to adjust the supply chain, with only 5% of global demand available to be sourced from the Riverina.

“With that comes a change in risk,” explains Hirst. “You need to be able to cope with volatility not only in terms of your own organisation, but also the markets in which you are operating. In addition to this, you have the uncertainties of the foreign exchange market – particularly the instability of the rates between the Australian dollar and the US dollar.”

Innovative approaches

As a treasurer of many years’ experience, Hirst is acutely aware of the importance of innovation in the world of treasury. “For many years there have been wonderful advances in technology,” he says. “But there can be so many costs involved. The most important thing is to make sure that the treasury management systems are fit for purpose.”

His aims in bringing new technology into treasuries have primarily been to drive benefits for the organisation, improving information flow and risk management and supporting treasurers in understanding the risks. “It is all about trying to save money for the company, while protecting the balance sheet” he explains. “In the 20 years that I have been involved in treasury, I have seen the evolution from just day-to-day bank and bond borrowing into much more innovative working capital type structures.”

For Hirst, using innovation as a way of reducing costs and increasing profitability is only part of the picture. As SunRice is part owned by the farmers growing the rice crop, it is vitally important that they receive support from the company. “We use innovative financing not only to fund the investment of the farmers in their rice crop but also to support the early payment for that crop once delivered.”

In the area of international trade, it is the slowness with which digital documentation is replacing the physical that Hirst finds most frustrating, particularly in many parts of Asia where there are still legal requirements for ink signatures and the impression of company seals on paper. “International trade is still in the Dark Ages,” Hirst comments. “There is a whole world in international trade that is still paper driven, that still requires wet signatures. In some countries there is still a need for cross stamping – that’s where you have to lay out all the pages and stamp across the outer edge, inking each page.”

Increased visibility

Where the role of the treasurer is concerned, Hirst is a firm advocate for treasury having a very visible presence in the organisation. “What I enjoy most about treasury is that you feel that you are at the heart of the organisation,” he says. “You get to really know the cash flows and risk exposures, and this gives you a particular insight into how it operates.” Hirst sees his role as one of both protecting and supporting the organisation in making money: “I’m sitting down with the CEO, CFO and heads of finance every month to go through exposures and look at the cash flow forecasts and to examine the overall risks of the group from a treasury perspective.”

Turning to the evolving role of the treasurer, Hirst says there needs to be a strong sense that the treasurer is the “overarching financial risk manager of the organisation – you’ve got the financial risks, you’ve got insurance risks, and that gets you to this holistic understanding of how to manage the risks of the organisation, as well as playing the role of advisor to the CFO. So I’m hoping that treasury continues on this path.”

When it comes to advising the CFO, Hirst emphasises the importance of ensuring that the CFO can rely on the skills of the treasurer in a world of increased risk, and with volatility in financial markets set to continue. “It’s the systems and processes that we put in place that will ensure that the organisation retains stability as it sails through troubled times,” he adds.

From drought to pandemic

Following the difficulties presented by the two-year drought, the escalation of the global pandemic in March 2020 brought some different challenges – not least because the company’s year-end is on 30th April. “The funding market wasn’t exactly fun last year,” says Hirst. “But we had a plan which we were able to execute. In reality, it’s about choosing the right vendors and the right banks. Ultimately, we were very fortunate in having a solid group of banks that supported us.”

For Hirst, the experience of the global pandemic has only served to strengthen his belief in the importance of strong relationships. “That really is number one for me,” he explains. “You develop relationships with banks and insurance providers, and with other organisations. Over the last 20 years, there have been some good times – a lot of good times – but there have also been bad times. It’s when those harder times come that you need to draw on those relationships.”

He also believes that in being a supplier of such an important food staple as rice, the organisation was in a fortunate position. “If you think about when COVID-19 hit Australia, what did people run to the shops for? They ran for toilet paper. And they ran for rice.”

With a surge in demand – “with orders at one point some 200% of forecasts” – and exporting to markets that were significantly affected by the pandemic, Hirst and the treasury team worked hard to ensure that the supply chain was supported, that cash was available when needed, “and that there was never a concern about the creditworthiness of our organisation.”

On the other side of the equation, it was important to ensure that customers were able to pay. “We needed to make sure that we were dealing with the right customers, and they were paying on time. But at the same time we were also there to support them if they were having trouble.”

Some other major challenges that Hirst faced were in the insurance markets and the foreign exchange markets. “In this COVID-19 environment, the insurance market has gone haywire. With the financial markets that happened quickly. But because most insurance contracts are renewed on an annual basis, it has taken time for the effect to work through to policy holders.”

For Hirst, it all comes back to the organisation’s understanding of, and appetite for, risk. “Do we truly understand our appetite for risk? And what can we do to make sure we’re buying an insurance portfolio that’s really fit for purpose in terms of protecting or reducing costs in this type of environment? That’s probably our biggest challenge at the moment.”

In addition, Hirst notes that foreign exchange fluctuations have always had a significant impact on Australian companies. “We don’t know for sure where that is going. There is a wide range of expectations from highly qualified researchers in banks,” he says. “What we have to do is to figure out where best to place the hedging portfolios that we have in order to best protect our organisation. But it may also represent a good opportunity for our growers.”

The pros and cons of remote working

Like many treasurers, Hirst has had to come to terms with the challenges of remote working, made necessary by the global pandemic. “There’s definitely some wins and some losses in a working from home situation,” he says.

As a strong believer in collaboration, he misses the proximity of colleagues in an office environment, as well as the general atmosphere that can inspire people to push themselves further. “There’s a real benefit from actually being near people and listening to them and the whole buzz of the office.” However, Hirst is also a strong believer in the benefits of increased flexibility to the organisation and feels that the argument against people being allowed to work from home – that they would spend too much time relaxing and not enough time working – has been proven to be wrong.

“You know, when people are given the opportunity to work from home, they work more hours. When they are given more flexibility, they work harder. For me, it’s all about having trust in the people who work for you,” he argues. “You expect them to deliver. You monitor their output. And then you find they have delivered.”

That said, Hirst is also aware of the possible negative impact of remote working conditions on individuals. With the lockdowns and forced isolation have come increased stresses and strains to everyday life, bringing with them an increased public awareness and acknowledgement of the possible mental health implications.

In Australia, this greater focus on mental health has led to the establishment of what are called ‘R U OK? Days’. The purpose of such days is to make time to engage in conversation and help those who might be approaching a personal crisis to feel supported and encouraged to access appropriate help if necessary. “Perhaps the traditional view of Australians is that we are a little bit ‘rough and tough and tumble’,” Hirst reflects. “But underneath that exterior we are as soft as anyone else.”

As someone who likes to work as efficiently as possible, Hirst is keen to make use of the time not spent commuting to the office each day – time that he can spend with his children instead. “We’re a typical family, so that means we’re a noisy bunch of people,” he cheerfully admits. As both a father of four children and an enthusiastic scout leader, family and community are very important for him. When time permits, he likes to get back to the family farm. In his own words: “Family, community and a whole lot of work. And then I’m done.”