WPP is a world leader in marketing communications services. The WPP group comprises companies that provide marketing services in a range of disciplines, from advertising, media investment, consumer insight, branding to public relations and healthcare communications. Operating in over 100 countries worldwide, WPP employs 138,000 people and in 2009 reported revenues of £8.7 billion.

How is the treasury structured at WPP?

The group has regional treasury teams in London, New York, Brussels and Hong Kong and they are responsible for bank relationship management, liquidity and funding arrangements.

WPP Treasury manages networks’ balance sheets and cash resources on a macro scale. For instance, WPP sets net working capital targets and cash targets to operating companies at networks. WPP also authorises the set up or increase in credit facilities. WPP does cash pooling in a great number of countries, conducts regular balance sheet review meetings and also ensures maximisation of dividend extraction. In particular, company networks are being continuously monitored by WPP on their performance of debtor collection.

What are the most challenging aspects of your job today?

Looking at the cash management side in the Asia Pacific region, we have more than 400 companies with more than 1,000 bank accounts. This set-up can be extremely complex, in particular since we look at everything on a company-by-company basis. Some companies are short in cash and some are long, so we really need to examine each of their funding needs on a regular basis.

There are foreign currency exposures to consider as well, so we need to review those regularly, and also perform ongoing monitoring and assessment of our FX positions. We do this on a company basis and country-wide basis. We do have cash pooling set up in some countries and this tends to make our task a bit easier.

But for some countries, where there is no cash pooling, and when there is a funding need, or perhaps guarantee requirements, then on a day-to-day basis we will need to work with our bank and our operating companies to arrange the proper facilities. In a sense, we act like an internal bank. The work we do on one day is never quite the same as the work we do on the following days. That is where the challenge lies.

Another key part of treasury management is that we monitor FX exposures. Our group companies are regularly being awarded contracts in different currencies than their own. We therefore need to assess how to hedge these exposures, which is certainly a challenge.

In China we set up cash pooling solution approximately three years ago. Our cash pool in China has been growing rapidly – to almost four or five times the size it was at the beginning. The main purpose of it is for funding our group companies using internal resources.

Is regulation a major challenge in China in particular?

In China there are often new rules and regulations coming out. As such, we always need to review whether the new or revised rules will have any impact on our operations. One of the major challenges we used to face regulatory-wise was the repatriation of cash from China to overseas, but this has become easier than it was several years ago. From time to time we get updates on rules and regulations from the bank. But we also have constant dialogue with our finance people in China to share their knowledge, and to see if there are any updates from the regulatory body.

Another challenge is the need to explore different product offerings from the bank. For example, we might want to know how we could be using our cash within the region more efficiently, as well as how we could make use of our excess funding and earn a better yield without compromising our risk exposure.

In China there’s not much we can do to improve interest yield because the interest rate is tightly regulated by the People’s Bank of China (PBoC). But for the Asia Pacific region more generally, there may be benefits to be accrued from cross-country notional pooling for instance.

We are always keeping our eyes open to see how we could enhance our efficiency and maximise yield on existing liquidity, how we could minimise the cost of borrowing, or reduce the magnitude of bank borrowing.

Have you introduced any new treasury practices since the financial crisis hit?

I think essentially, with regard to collections, we already had very stringent controls in place before the crisis. But during and after the financial crisis we put in even more effort, particularly where collections are concerned with seemingly problematic clients.

We have been monitoring our operating companies in different countries more closely, and also working with the network CFO on collection as well. We need to make sure that every dollar and cent that is owed to us is coming in on time; otherwise we need an explanation, and a definite timeline for collection. Invoice discounting is generally not encouraged in the company because it distorts the working capital. It is however allowable in circumstances where client collection default poses a serious risk to the group.

Treasury has always been a very important function, particularly when we have companies in some parts of the world that need financing and companies in other parts having surplus cash. So we need to look at how we could use this surplus cash more efficiently and also reduce the company’s borrowing costs. This is a very important component in the total P&L and that is why the board has entrusted a great deal of power and many responsibilities to the treasury function.

What technology do you use in your treasury?

The treasury team is currently operating a centralised cash management system in the headquarters, and here in the Asia Pacific region we access the front end to retrieve key data to facilitate our regular monitoring and review. We have collaborated with our main banker to develop an online real-time balance reporting platform for us to gain visibility to all group bank accounts.

What projects does your treasury department have planned over the next 12 months?

We are working on several projects with our bank at the moment and hopefully these will come to fruition over the next year. Finally, I hope that we will be using our surplus funding in the region to lower the debt at the group level.