The challenge
The world faced unprecedented challenges with the COVID-19 pandemic. In addition to global challenges, in 2022, Sri Lanka suffered an economic crisis with an acute shortage of forex, electricity and fuel. This posed a significant business continuity risk in executing food and beverage manufacturing processes to meet consumer demand.
The solution
During these tumultuous times, Nestlé Lanka devised a robust and dynamic cash flow forecasting process to understand its working capital and investment capital requirements. Nestlé Lanka secured an intergroup foreign currency borrowing of US$45m. This borrowing facility was structured prudently to navigate between liquidity and profitability during challenging times.
Nestlé has formulated multiple solutions to manage FX revaluation losses on foreign currency borrowings amidst steep currency depreciation. The extensive risk management strategies adopted by Nestlé Lanka mitigate the adverse exchange impact on its foreign currency borrowings by c.a 70%.
The Treasury team members continuously engaged with finance and non-finance cross functional teams of the organisation to formulate initiatives such as dynamic cash flow planning, robust receivable collections, digitisation of documentation, transaction processes and adopting changes in treasury accounting functions from financial reporting perspectives.
A proactive understanding of local interest rate movements enables Nestlé Lanka to place its liquidity in new rupee investment instruments in line with the organisation’s investment policy. Core banking partners and Insurance service providers extended their fullest support, providing uninterrupted financial services and solutions to ensure business continuity.
“Understating changes in the operating environment and proactive collaboration with non-finance business partners are imperative for value creation. One solution will not suffice when the risks are multidimensional. All teams orchestrated multiple solutions in a dynamic environment,” explains Manosh Kulasena, Head of Treasury.
Prudent treasury management has facilitated to maintain an undisrupted business operation in Sri Lanka. This enabled Nestlé to continue its contribution to the livelihoods of approximately 20,000 Sri Lankan dairy and coconut farmers during such a challenging period.
Best practice and innovation
Under the ‘Nestlé Continues Excellence’ model, treasury risk management was identified as a key business priority in the operational master plan. Leading and lagging KPIs were established and measured in weekly and monthly operational reviews with cross functional teams.
Continuous collaboration with banking partners accelerated the automation drive to improve the efficiency of transactions, optimise bank charges, along with company ERP solution.
Investment instruments and bank accounts linked to the treasury management software and ERP, and automated interest computation and postings. Structured functional training programmes were conducted with banking partners to develop the capabilities of team members.
Key benefits
