Investing in service

Recently making the move from Skanska’s construction sector to the company’s commercial development stream for Europe, Maciek Müldner, Financial Director, Skanska Property Poland & Risk Manager, Commercial Development Europe, Skanska, talks to Treasury Today about how his new focus on investing the company’s cash is shaping an opportunity-driven approach to risk.

Having been with Skanska for 13 years, Maciek Müldner has inevitably witnessed considerable change in the company’s treasury function. Treasury was centralised just a year before he joined in 2002 as treasurer of Skanska’s Polish operations, and the holistic approach to business has since developed further. Taking foreign exchange (FX) hedging as an example, Müldner describes how colleagues are able to work collaboratively. “Business controllers analyse the cash flow and the exposure and then, together with the treasury team, they establish a hedging strategy. As a finance director, in order to run the business effectively, I know what we need from treasury but it is their responsibility to hedge the position and ensure the controllers are included, in order to use the correct rate in their forecasts.”

Expanding horizons

Internal dialogue and co-operation is something Müldner relies on in his new role, but this was also the case in his previous position at Skanska, where he worked as Finance Director for an entirely new business unit in Romania, a new market at the time. Here he engaged with two of Skanska’s business streams: construction services, which he had been exposed to as previous Head of Treasury for Skanska Poland, and commercial development, an area of Skanska to which he was first introduced in his current role.

If you hire a person that knows how to do complicated transactions but does not understand the importance of line management, then lines of communications are likely to break down weakening the effectiveness of a financial support function.

When Skanska entered Romania, there were only six employees and very little else. “It was an interesting adventure starting the whole business from scratch,” says Müldner. “When I left Romania in March this year, we had divested our first office building, produced a great return, had over 70 employees and established a solid business.” But how was this achieved? Due to an increased workload and long list of responsibilities, Müldner opted not to establish his own treasury in Romania. He – and the team back in Warsaw, Poland – agreed this was the better option: “The whole idea in Romania was that we could cement other aspects of the business, but all the treasury activities – cash management, hedging and risk mitigation, for instance – would be done via the ‘original’ treasury in Warsaw.”

After agreement with Skanska Financial Services (the group’s treasury and in-house bank), Romania was the first country integrated with Poland’s treasury – of course, Müldner knew operations were in safe hands having been head of the team for nearly a decade. But the Polish treasury team needed to be properly introduced to the working model. “They came to Romania, met with their financial partners and began what is now a well-established line of communication between the financial controllers in Bucharest and the treasury team in Warsaw. This integration needed to be established early on,” he explains. “If you hire a person that knows how to do complicated transactions but does not understand the importance of line management, then lines of communications are likely to break down, weakening the effectiveness of a financial support function.”

Service first

It is without a doubt that elementary learnings in the workplace have stuck with Müldner. He initially started at an Austrian bank – “the service side of the business” – and received training back in the 1990s about how to be client-orientated and how best to work with a service-minded approach. “Whilst I see service-orientated skills increasingly appreciated, today I see few opportunities for this kind of training and people aren’t necessarily prepared to work well with internal clients,” he says. By internal clients, he is referring to business units operating under the same company that need to cooperate in order to achieve their respective goals. According to Müldner, it is employing and encouraging people with these skills which has permitted a strong working relationship, and in turn, impressive results for Skanska Romania.

For Muldner, internal synergy and willingness to co-operate are key ingredients to successful business. “In Romania, once we started the operation with the original treasury in Warsaw, it worked well because the team was focused on delivering the best services to the internal client.” But this isn’t always the case with treasury, Müldner acknowledges. “Sometimes the problem with treasury is that because it’s often a back office orientated operation, people don’t have a service-minded approach.” His background in the banking environment, he explains, has helped him develop a mind-set willing to help others – and this is something he’d like to pass on. “From the very beginning, I put a lot of effort into creating the culture where people had this service at the front of their minds,” he says.

And Müldner is reaping the benefits from this workplace mentality. In his new role – as Financial Director for Skanska Property Poland, operating as part of Skanska Commercial Development Europe, one of the largest Polish real estate office developer and investors in the country – some of the financial operations he oversees are serviced by the same original treasury in Poland. “Right now all the treasury services are being provided by the same treasury team.” Of course, there is the dilemma whether to create your own treasury or rely on an existing team but the latter, for Müldner, has meant his time is freed up for his main focus: “To provide value-add for the business.”

Optimising working capital

As Müldner explains, working for a developer such as Skanska can be similar to working for an investment company. This is because Skanska’s business model directs the free working capital generated from its construction business stream to be used in project development which both generates contracts for Skanska construction and realises gains upon divestment. “We know how to run our construction business and our day-to-day operations in such a way that we generate cash. With that cash, we could put it in a bank account or we could do something smarter with it,” says Müldner.

For Müldner, internal synergy and willingness to co-operate are key ingredients to successful business.

For Skanska, the choice to invest and develop is simple and the business model is something the company is rightly proud of. “By investing in our development streams – commercial property development, infrastructure development and residential development – we are getting a better return on cash for our shareholders as well as giving back to our construction unit through internal contracts, meaning the money stays within the Skanska family,” Müldner explains. But the business model isn’t as straightforward as it perhaps sounds: “It is very difficult to implement. You need to understand the cash flows, how the relationships with the construction unit should work and most importantly for us is that we understand that Skanska doesn’t invest in long-term real estate.” Once the real estate is developed – the building is ready and the tenants have moved in and started to pay – Skanska divests it. At the end of the day, Müldner says, “what we are selling is a cash flow to our global investors. The money then moves back into the circle of cash.”

Combating external concerns

For such a company, there is bound to be apprehension towards the current state of play in global markets. The financial matters concerning Müldner the most are very much driven by where he is today, involved in real estate development. On the one hand, because it is Skanska’s cash the team invests, they benefit because they are not exposed to the banking sector – but on the other hand, it is a lot of responsibility as it is shareholders’ money. Aptly, Müldner, and his colleagues, keep a close eye on what is happening in terms of macroeconomic trends around the world and in their region. For instance, where the capital markets are going, how the US will behave and what China’s impact on the global economy could be. “From this perspective, we are looking very closely at our investment strategy and on our future divestment plans.

“What has happened in the markets over the last one to two years has raised more question marks over what is and what isn’t stable,” Müldner notes. Also, in the short-term, money markets and currency markets volatility is a concern, he explains, as it is difficult to predict where currencies could go next. “Unfortunately, as the industry has become more complicated, there is no single comprehensive answer.” His advice: to think global even if you are operating locally. “It is a never-ending story because the environment is dynamic; change happens so we need to follow that.”

Moreover, corporates should focus attention on how to run the business in the most effective way. “Not only thinking about cost effectiveness, but operational effectiveness as well. Having the right people, best systems and IT support; this is something we constantly follow up on at Skanska,” he says. And this is reoccurring advice from Müldner, to cultivate a workplace culture that supports integration and boasts a workforce that is keen to collaborate.

“There is a tendency for those that work in finance to operate in a silo, carrying out operations that few other people in the organisation understand. It may be comfortable, but this is ill-advised. The challenge is to get out of your comfort zone, move closer to the line management and cooperate with them – so much so that they understand what you are doing and vice versa.” Tackling some external concerns might rely on this constant dialogue. Hedging, for instance, goes into the budget of the project manager and his or her investment that needs to be delivered on time and within the agreed margins. Given that margins depends on risk mitigation, communication between treasurer, business controller and project manager is key, Müldner explains.

Skanska’s treasury team also plays an important role in assessing counterparty risk, a growing headache for corporations. For example, Müldner says: “When we deal with subcontractors, we want to mitigate the risk of their financials causing delays to projects if they were to experience trouble.” In order to assess this risk, Skanska gets credit reports provided by an external company. There is also a specialised unit within treasury – financial risk – that is responsible for making recommendations. “Treasury provides advisory support, especially on how to structure relationships with difficult counterparties from a financial perspective.”

Beyond the career ladder

Although, partly thanks to Müldner, Skanska Property Poland is on solid foundations, (gains on divestments totalled 504m SEK, exceeding the carrying amount by 18% in 2014), “I see that our work is never done. My whole idea is that I can concentrate mainly on supporting the business and mitigating the risks, without overlooking the processes.” From a treasury perspective, this means cohesion between Müldner’s expectations and what can and cannot be done in treasury. “Once structures – arrangements between Romania and Poland – are in place, we follow them up on a quarterly or bi-annual basis. This dialogue is crucial.” In fact, according to Müldner, “you won’t be able to do your job properly if you do not co-operate with the people around you and your stakeholders. What is often forgotten is that internal clients can sometimes be more challenging than external ones, but we need to remind ourselves constantly that business is about team work.”

We are not only thinking about risk management but risk and opportunity management too. You need to be opportunity-driven because if you are too risk aware – especially nowadays – you may miss great chances for business.

On a personal note, Müldner explains that tackling challenging issues and solving problems is what drives him. “I’m always on the outlook for new things. If there is the opportunity to get involved with something complicated, I jump at the chance.”

This holds true with his spare time as well, where Müldner finds himself with many ideas and not enough time. He is a self-confessed video game and science fiction fan, keen hiker and traveller – having covered 15,000 km sightseeing by car when in Romania – to name but a few favourite pastimes.

It would seem his attitude and aptitude for a busy workload make Müldner well-suited for his new role then. On a daily basis, the team of over 90 that he works with is used to investing hundreds of millions of euros. This, of course, is not for everyone: “We are not only thinking about risk management but opportunity management too. You need to be opportunity-driven because if you are too risk aware – especially nowadays – you may miss great chances for business,” says Müldner. But you can be sure Müldner is taking well-informed risks as his guiding principle is “the day you believe you have found everything and know everything is the moment when you need to start again.” For Müldner, the hunger for new knowledge – and challenges to apply it to – continues.