Last week Treasury Today Asia heard how Rio Tinto planned its voyage towards the first ever commercial treasury function. This week we hear the results so far…

Driving efficiency

In the move to create the first commercial treasury function, Abel Martins Alexandre, Head of Commercial Treasury, Rio Tinto, says that progress to date “has already proven quite fruitful”. But the company is still on a journey. He arrived in Singapore as a solo act and now has a large team to help. The focus is now on optimisation and ensuring the strong controls can be enhanced. With plans for the new treasury and trading management system under way, working efficiency is set to increase. But this is only part of the shifting technology landscape.

“In three years’ time, treasury will be significantly more technology and strategy-based than it is now,” says Martins Alexandre. “We are working on the ‘art of possibility’ through the adoption of technology and digitisation and the alignment of the physical and financial supply chains.”

Rio Tinto has a vision of creating a “true” in-house bank. It already has a version funding the group on a day-to-day basis but not one based on the concepts of in-house cash, POBO and ROBO. This, he feels, will promote further standardisation, efficiency, effectiveness, visibility, access and control of cash and better liquidity management. But it also encourages discussion across pricing and financing solutions for the business.

This is not about deploying technology for the sake of it: it has to be the right solution for the right problem. For example, using robotics to automate the download of bank statements and bank reconciliations makes little sense if you are not looking at significantly reducing the number of bank accounts first, including using virtual accounts, says Martins Alexandre. Blockchain is also a technology that the team is looking at but in a measured approach and with no detriment to the priority of implementing the new trading and treasury management system.

A positive outlook

As a mining company, Rio Tinto makes a business of generating cash across all parts of the cycle and has to prepare and react with the inherent volatility of the prices of its products. With a large share of its sales going to China, Rio Tinto pays particular attention to the macro-economic environment of this country and in particular to some key industries, including the steel industry. “Medium to long term fundamentals are strong”, says Martins Alexandre, “but we do pay attention to the country’s monetary policy and how it will manage the deleveraging of its financial sector”. “As a global business we thrive on open trade, so we also keep a close eye on the current noise around potential restriction on international trade,” he states.

Of course, thriving in a dynamic global environment, with so many changes, is not easy. Rio Tinto’s commercial treasury team has purposefully developed a solid relationship with its banking partners. These must be able to provide not only a genuine understanding of the firm’s unique business pressures, but also offer the full set of products and treasury services it needs in every location.

And with the technology landscape Rio Tinto has set out to navigate becoming rather crowded and noisy, Martins Alexandre is all too aware of the difficulties in selecting the right tools for the job. “That’s why we need our banks to act as technology partners as much as our advisors,” he adds.

Moving treasury to the next stage as a commercial partner, making it “an active participant in the journey to commercial excellence”, clearly has distinct advantages and Rio Tinto is setting itself up as a leading light in this respect. There are challenges ahead but, as Martins Alexandre recognises, “fundamentally reorganising treasury and redefining its purpose” means you get to move the goalposts.