Photo of Philippe Robert, HSBC and Fabio Sarao, BNP Paribas accept the award on behalf of Chalhoub Group.

With this solution, Chalhoub Group now has a treasury that can support the company through the various economic challenges and “new normal” that has been developing in the local Middle Eastern region. In hindsight, the timing of this treasury solution was ideal and permitted a high level of support that would not have been possible just a few years ago.

Value-added ‘advisory/in-house bank’ treasury model chosen by this family business

The challenge

Historically, Chalhoub Group’s treasury activities were decentralised, reflecting the culture and development of the local market. However, rapid growth had made the decentralised treasury activities less sustainable due to poor visibility of cash balances and risk exposures, limited opportunities for economies of scale and no central policies. The solution was to establish a central group treasury function with responsibility for managing these key activities.

The solution

The initial phase of the treasury implementation took place in 2014, after a thorough assessment of the existing situation and an ideal target operating model was drafted with the group’s advisors and partner banks. This delivered many quick benefits to validate the business case. However, it was recognised early on that the ideal solution would be a journey rather than an overnight project, with a three-year strategic plan to achieve the desired best in class treasury solution. The plan was successfully completed during 2017 and covered the following areas:

Vision:

To provide a world-class, centralised treasury service to the group.

Mission:

• To provide robust control of the group’s cash and liquidity.
• To ensure a sustainable framework for financial risk management: liquidity, cash, FX, funding, interest rate and counterparty.
• To ensure the business has adequate mid to long-term funding to achieve its strategic and commercial goals.
• To generate tangible added-value for the group.

The Adam Smith Award for ‘Best in Class Treasury Solution in the Middle East’ is a great honour and recognises the fulfilment of our strategic vision for the treasury department. I would personally like to thank all our partners who have supported us in this journey, and the hard work and dedication of our teams at Chalhoub Group; without which none of this would have been possible!

– James Adams, Group Treasurer, Chalhoub Group

Best practice and innovation

The treasury function expanded rapidly, delivering the original vision for change in 2017, from a small treasury system mainly supporting domestic activities, to a group-wide function with responsibility for banking requirements across 14 markets, centralised FX services, POS card acquiring, investment management and treasury advisory. In addition, 2017 saw the addition of many new digital requirements (such as new tender types/eCommerce) and a new layer of sanction compliance challenges. All of this has been achieved with a relatively lean team leveraging various system technologies.

Chalhoub Group now has a treasury that can support the group through the various economic challenges and the “new normal” that has been developing in the local Middle Eastern region. In hindsight, the timing of this treasury solution was ideal and permitted a high level of support that would not have been possible just a few years ago.

“These achievements mark a milestone in the strategic treasury journey of the Chalhoub Group in 2017. We believe they are a good example of how the treasury profession can add value to family businesses in the Middle East; a region where treasury is still a relatively new field. We hope these experiences can be shared to show what can be achieved through a long-term strategic plan and inspire similar private family groups to consider taking this journey. The Middle East region has experienced considerable change over the past few years, with lower oil prices, slower economic growth, new taxation, higher interest rates, shifting consumer mindsets and increasing adoption of new technology. All of these factors are likely to make the development of treasury an increasingly important priority for local Middle East corporates, as this solution should highlight,” comments James Adams, Group Treasurer, Chalhoub Group.

Key benefits

• Shareholder value improved: the treasury team has generated material tangible benefits over three years by leveraging economies of scale in banking activities, facilities and cash management. In payments alone, the costs have reduced significantly since more efficient methods were implemented. There is a recurring annual cash flow benefit that has directly increased shareholder value.
• Improved efficiencies.
• FX exposures tracked in real-time.
• Risk reduced.
• Interest savings.
• Manual processes reduced.
• Treasury now viewed as strategic partner.

Key learning points

• Create a clear vision and roadmap to communicate what you intend to achieve from the outset. Regularly review progress against this over time to ensure you do not lose sight of the bigger picture.
• Develop a business case to win the backing and participation of senior management. This has been instrumental in securing additional investment and gaining early shareholder support, which was a critical success factor.
• Ensure there are some “quick wins” to validate the business case at an early stage.
• Consider using an external advisor to provide the expertise you do not have in-house, to validate your planning, and to add value as needed.
• Do not underestimate the human resources needed for success! Work with your team to identify the necessary resources to complete the project as planned.
• Expect challenges and potential setbacks along the way – as with any major change project.

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