Corporate View: Brent Callinicos, Google

Published: Sep 2010

A search engine so widely used that it entered the Oxford English Dictionary as a verb in 2006, Google is headquartered in Mountain View, California in the US and has been listed on NASDAQ since 2004. Google has over 20,000 employees and reported revenues of $23.7 billion in 2009.

Brent Callinicos

Vice President and Treasurer

As Vice President and Treasurer at Google, Brent is responsible for treasury and risk management activities. He joined Google early in 2007 after 14 years at Microsoft. His most recent role there was as Corporate Vice President and Divisional CFO for Microsoft’s Platforms and Services Division, which encompassed the Windows, Server and MSN business groups. He was also Microsoft’s Treasurer from 2000-2004. Brent has received numerous awards and commendations for his leadership at Microsoft, including a 2003 Alexander Hamilton award for Overall Treasury Excellence. Previously, Brent worked at Walt Disney, with financial responsibility for Walt Disney Records, and in various treasury and financial capacities at Procter & Gamble. Aside from his many other memberships and advisory roles, Brent served on Washington State’s Governor’s Council of Economic Advisors from 2001-2006.

Brent received a BS in business administration from the University of North Carolina at Chapel Hill and an MBA in finance from the Kenan Flagler school at UNC. Brent is also a CPA.

Then and now

“The current climate does put a little bit more of a light on treasury,” said Brent Callinicos, speaking to Treasury Today in 2009. “It also makes it easier to see if you have something that you need to improve in terms of a policy or an approach or a system.”

Fast forward 18 months, and it is clear that in the interim the Google treasury team has been applying itself wholeheartedly to improvements across the full range of treasury disciplines. Named ‘Top Treasury Team’ in Treasury Today’s 2010 Adam Smith Awards, Google was also the outright winner or highly commended entry in five other categories.

This impressive list of achievements has been orchestrated from Google’s global headquarters in Mountain View, California. The treasury team, which numbered only six people in 2007, has now evolved to a team of 30 across cash management, portfolio management, foreign exchange, operations, stock administration and insurance. In that time, the company’s cash balance has likewise grown from $11 billion to a staggering $26 billion.

Portrait of a treasury

Brent Callinicos, Google’s charismatic Vice President and Treasurer, was appointed in 2007 following 14 years at Microsoft. With only a skeleton staff in treasury at the time, Callinicos’ briefing upon arriving at Google was “to figure out what treasury should look like now and in the future, given Google’s needs.”

Having initially focused on determining the treasury’s current needs and future direction in terms of people, systems and strategy across the range of treasury activities, Callinicos set out a manifesto for all the areas of treasury, identified hiring needs, drew up an organisational structure and began implementing systems and policies.

Building on these foundations, Google’s more ambitious projects have included hiring seasoned portfolio managers from the investment industry to manage Google’s sovereign portfolios in-house, building a state-of-the-art trading room, developing a methodology to benchmark the performance of its cash flow options portfolio, leveraging SWIFT in payments and receivables and automating the company’s foreign government bonds settlement process using a CLS solution.

We spoke to Callinicos about some of these projects and discussed the opportunities that treasurers can tap into by thinking outside the box.

What have you achieved since April 2009 when we last spoke?

April 2009 was an interesting time. You could say that it was the ending of the actual crisis, right when the green shoots were starting to emerge. At that stage we looked like most corporates that had a large amount of cash, in that we had gone super-conservative. We pretty much had a sovereign-only portfolio (both US and other large sovereigns), because it was not a time to be out taking credit risk in the market. It wasn’t clear how the meltdown was going to continue – were we going to have a V-shape, a W-shape, an L-shape, a square root sign?

So from late 2008 to that point, we had gone super-conservative. We were still doing well in terms of managing our money but obviously the yield had been pushed down a fair amount as a result of going shorter-term and as a result of going to sovereign-only debt.

The period between April 2009 and today, give or take a couple of months, is when we went to get approval for and rolled out our new portfolio policy, which was moving away from a super-conservative portfolio. We moved further out the yield curve in terms of taking out more duration risk, and we started taking some credit risk in the portfolio.

We started going into some non-sovereign backed fixed income. If you look from April 2009 to now, you can see a pretty large shift in the portfolio, and the impact on our interest income. That’s probably the largest change we’ve made.

When we spoke in 2009 we were in execution mode on several system strategies that we were undertaking, and a lot of those projects have come to completion. Now, with most systems-related initiatives, you’re never done.

There’s always a new round of sophistication that you can put in place – not for sophistication’s sake, but to meet the goal of taking the manual processes out of the equation, really pushing things towards real time, providing more analytical tools and leveraging a team of 30 or so people, which is still a pretty small group when you’re talking about a multi-billion dollar FX programme, around $26 billion in cash and a large amount of core activities. Getting those tools, pushing those tools forward, is something we’ve been doing a lot of in the last year and there’s more to be done.

In terms of things that stood out in your Adam Smith Awards submissions, CLS is another high profile project.

CLS was a way of enabling us to scale our foreign government bonds portfolio. There are lots of nuances associated with investing with foreign government bonds and hedging the FX risk in terms of FAS 133, in terms of settlement issues et cetera.

We recognised we were going to have difficulty scaling on that without systems solutions, so that was recognised as something we needed to deploy for, and that has also worked extraordinarily well.

The other thing is that since April 2009 we haven’t hired as many people as in previous years, but we obviously have hired some key people to bring on board. It does take a while to first find the right person, but I feel very good about the hiring we’ve done as well.

How co-ordinated are all these projects, and do you have a grand plan?

Very, and yes.

With everything we do we are continually asking, “Where do we want to be?”, not just now, but in the future as well. If you look at where you want to be now then you might take on a bunch more cash, or add several more currencies, or take on a new line of business that has different payment methodology – and all you’ve done is put a band-aid on something.

What is more important is figuring out where we want to go – not just this year, but in several years’ time. This is pretty much how Google does things on a company-wide scale, so it’s not a coincidence that we happen to think this way. What this means is making sure we’re building for that, making sure we’re staffing up for that, making sure the policies take that into account and making sure the systems are scalable.

Even though I said you’re never quite done from a systems standpoint, the last thing you want is never to be quite done because all you did was solve today’s problems.

So although we may be building out people, policies and systems in advance of where we are going to go, that’s much better than actually just dealing with today – if you do that, you find yourself starting on something new because the band aid now needs a splint and a cast and the people aren’t adaptable to it and so therefore you’ve got to hire new people. That is not what we want to do.

We are looking at a multi-tiered time horizon of where we want to go. Now, obviously this shifts based on the company’s priorities, so it needs to be flexible as well. But everything we’re doing on a one year basis, on a six-month basis, on a three-month basis, be it systems, be it accounting policies, people, is very co-ordinated.

We sit down once a year, and agree on the next year’s goals: but then we do the same thing on a quarterly basis, and on a bi-weekly basis – we’re constantly amending our goals and making trade-off decisions. People are just talking and communicating with each other constantly. That actually was the rationale to some extent for the treasury trading room. It fosters better communication on a real time basis, and that really is the key.

Can you tell me about the trading room and why that was set up?

It is a room that facilitates communication and it is where all of the capital markets activities take place. There are trading desks, where an individual sits with multiple screens and multiple tools that they look at on a real time basis.

Across from them are the folks who are doing FX. They are looking at different things, and they have different goals, and different policies. They may be hedging balance sheet risk, or maybe hedging cash flow risk.

Next to them will be sitting the cash folks, who are be dealing with bank accounts, moving subsidiary cash around the world, and the operations folks who will be settling trades for FX and trades for portfolio. There is the financial risk person who is doing the checks and balances on what the portfolio is doing, what the FX people are doing, but also adding quantitative expertise where necessary.

So there are managers and analysts in different groups, and then accountants have a seat in there, IT has a seat in there, most of the assistant treasurers actually sit in there during the day. When the markets are open, more people are sitting in there than are sitting outside.

The point of having it was so the activity could take place there and so that people could talk to each other in a way they can’t when you have offices or cubes. If you have cubes it’s too noisy; if it’s offices, you can’t stand up and say “I just bought a GBP bond – can you hedge the FX risk?”

If you’ve got to hang up your phone and go outside of your office, you can’t move on to the next trade that you’re doing. You’ve got to walk to the next person and wait for them to be done with their phone call, or hope that they’re not in a meeting. It just doesn’t facilitate real time communication.

When people are in the trading room, they can stand up and yell at each other, or they can pull the chair round and tap somebody on the shoulder. They can huddle together to work on a strategy; there’s a white board in there, there’s a table where people can meet. There are television screens where you can watch Bloomberg or CNBC – or Wimbledon, if the market is closed!

What is particularly striking about some of your projects, such as the trading room and CLS, is that these aren’t spaces that are necessarily seen as corporate.

I would say it’s not atypical for a large corporate to have a trading space, but we are leveraging technology in a way others haven’t done, and maybe on a larger scale than most I’ve seen.

I agree that CLS is traditionally bank territory, but you know, we don’t limit ourselves by sandboxing ourselves and saying, “We’re a corporate, therefore we should do X.” Rather, what we do is say “We want to do Y, and how are we going to do that?”

That sounds a little nuanced, I realise, but we don’t limit ourselves and that is the benefit of being Google: we have a very mathematical data based approach to things. I can sit down with senior management and have a discussion about treasury that goes pretty deep.

We don’t tend to put artificial constraints on where we can go. It’s not that we are trying to be disruptive in the financial world – it’s more that, if it makes sense and the data validates it, then we’re probably going to move forward.

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