The challenge:

When Lee Trewartha joined Fortescue Metals Group (FMG) as Manager Treasury in 2013, the company’s transactional banking solution was a result of an exponential growth period and lacked integration with other systems. What’s more, it was not aligned to the company’s core banking relationships, there was a duplicate bank account structure and inefficient processes. Therefore, Trewartha undertook a structured review of the business with the outcome being a Request for Proposal (RFP) to selected banks to provide a holistic cash management solution.

There was a need to streamline systems, processes and banking services across multiple entities in multiple geographies – Hong Kong, Singapore, the US, New Zealand, Australia and the UK. Any solution would require a bespoke account structure to accommodate multicurrency needs and a range of payables and receivables. There was also a need to have favourable clearing windows including access to real-time visibility of a US domiciled requirement in conjunction with the other core currencies to ensure efficient movement and settlement of funds.

The solution:

Trewartha’s decision was testament to his ability to recognise the opportunity of how treasury can align its outcomes to the longer-term strategic vision of the company and he decided to entwine KPIs to the corporate objectives of operational performance and low-sustainable costs.

The selection of ANZ as a banking partner provided FMG with a comprehensive liquidity management solution which included an account structure with currency centres established in key markets to drive operational efficiencies with the most favourable cut off times – and deliver the treasury objectives with risk mitigation as an over-arching feature. The solution was underpinned by ensuring treasury KPI’s were being addressed along with the broader corporate objectives. Key outcomes include:

• Rationalised bank accounts through consolidation of operating accounts.

• Consolidation tools to self-fund accounts and optimise interest.

• Bespoke trade settlement solution (which reduced FMG’s working capital cycle by 24 hours).

• Single portal to control cash flows from a central treasury location.

• Bank accounts geographically located to:

  • Extend clearing windows for shipping payments (key to supporting company objectives associated with shipping tonnes).

  • Align with the treasury team’s operating hours (based in Perth, Australia).

  • To ensure inward payments are received with same day value, especially important for the USD revenue account.

  • To have real-time access and extended cut-offs to a USD bank account for US capital markets settlements.

Best practice and innovation:

Given the long and stable history with the previous banking provider, Trewartha was instrumental in harnessing FMG’s culture of global best practice methodology in switching banking providers even when it required challenging the approach of maintaining the status-quo. Other objectives unique to treasury included: ensuring adherence to treasury policy benchmarks (eg liquidity policy of $1.0bn – $1.5bn cash); assessment of counterparty risk where levels of cash held with FI’s depend on credit rating; investment policy, key measures on cash-to-invested-cash ratios and associated tenor and stretch targets for active cash management; and the execution of exchange rates to budget/market moving average.

The recognition from a well-regarded industry benchmark, is well received, especially with my continuing efforts to benchmark FMG’s treasury to other corporate treasuries around the globe.

FMG has had a short corporate history, however has managed to achieve global recognition in many areas for its best-in-class solutions. The Adam Smith Asia Award is a continuation of these efforts and especially valuable given FMG’s investment in the Asian region.

“The bank account structure that was implemented assisted in these KPIs by consolidating cash and aligning this structure to a bank where there was greater appetite for holding cash due to the relationship, higher credit rating, competitive fee structure and improved interest income,” explains Trewartha.