Honeywell is a Fortune 100 globally diversified manufacturing and technology company. The firm’s products include automation and control solutions, aerospace, transportation systems and speciality materials. With around 122,000 employees worldwide, the company reported revenue of $31 billion in 2009. Honeywell was named ‘China Treasury Team of the Year’ in Treasury Today’s 2010 Hui Chuan Awards.
Pui Yee Lee
Director, International Treasury
Pui Yee Lee is the Director of International Treasury at Honeywell. She is responsible for all treasury activities, including cash and liquidity management, risk management, corporate finance, mergers and acquisitions and foreign exchange, as well as customer and supplier finance.
After joining Honeywell in 2002, Pui Yee has headed the Asia Pacific treasury organisation since 2006. She previously served as Investment Manager at the Government of Singapore Investment Corporation, and as Assistant Treasurer at the Development Bank of Singapore, accumulating nine years of banking and investment experience.
Honeywell’s history in China dates back to the 1930s and the company now maintains presence in 15 cities nationwide. With sales of $1.4 billion in the country in 2009, Pui Yee Lee says China will only become more important to Honeywell as economic growth continues.
The APAC treasury is a lean team of six, spread over two locations. Pui Yee is based in Singapore, alongside two treasury managers who focus on south Asia – India, Mauritius, Australia, New Zealand, Singapore, Malaysia, Thailand, Indonesia, Vietnam and the Philippines. A further two treasury managers and one analyst are based in Shanghai, covering north Asia – China, Japan, Taiwan, Hong Kong, Macau and Korea. The team’s coverage spans across Honeywell’s entire footprint in Asia, where the company has a presence in 16 countries with over 150 legal entities.
The company’s strategy in China is based upon a “partnership with local government and industry, an in-depth understanding of customers’ requirements, and a very strong technological leadership in the industry.”
Although Honeywell is a diversified large multinational, it promotes a common set of initiatives and behaviours to help employees work towards a common set of goals. These initiatives focus on:
- Growth.
- Cash.
- Productivity.
- People.
- Process enablers.
The key behaviours include adopting a global mind‑set, intelligent risk taking, effective communication and fostering teamwork and diversity.
The treasury team works alongside these initiatives and with these behaviours. Pui Yee Lee further explains the treasury team’s specific development goals: “We are very much driven by our quest to be recognised internally by our business partners as well as externally by our peers as the best in class at the work we do. This means the team is constantly challenging the status quo and is always looking for areas of improvement.”
We spoke to Pui Yee Lee about the team’s goals, as well as the challenges her team is facing over the coming months.
What challenges do you expect to face over the next 12 months, and how well prepared are you for them?
Over the last five years, the team has invested a substantial amount of time and resources to put in place an appropriate treasury infrastructure for the region. The diversity of markets we work in means that whilst we apply our guiding principles to all situations, tailored solutions have been designed and applied to accommodate specific requirements in each area. As such, we already have robust policies and processes in place and consequently, we do not have to spend much time fighting fires or putting together the basic fundamental building blocks.
Having said that, we continue to face numerous challenges on a day-to-day basis. I would break these challenges down into two main areas. The first one relates to the dynamic marketplace in which we work, coupled with Honeywell’s rapid growth in this region. Consequently, we are constantly challenged to find the best ways of supporting this growth in an ever-changing environment. Growth through M&A presents funding, integration and streamlining challenges, for example, and expansion over many countries means we have additional FX exposures to manage. To this end, our very lean team has to keep our focus on ways to improve productivity and leverage our banking relationships.
“In China, the regulatory changes have been positive, as seen from the internationalisation of the RMB.”
The second challenge relates to regulations in the Asian markets, which vary widely from country to country. This leads to a problem which is very fundamental to many treasuries, which is the issue of trapped cash in regulated markets. This in turn leads to a host of cash, liquidity and investment management considerations. Furthermore, regulations are constantly changing across the region, which the team needs to track carefully.
There are some upsides here. In China, the regulatory changes have been positive, as seen from the internationalisation of the RMB. The pace of changes has also quickened over the last year, and we can expect more of that in the next 12 months.
The idea was driven by Honeywell’s rapid growth – both organic and through acquisition – in China. It is important that treasury can work alongside the business units and support the growth strategy of the company. We can only implement the most effective solutions if we understand exactly what that business unit does, and that means maintaining strong communications with them throughout the process. If a disconnect develops between the treasury and the business unit, that can result in a loss of traction, delaying the project, as well as reducing the effectiveness of the end result. That means we need to be constantly ahead of the curve, anticipating the treasury requirements of the company in a very dynamic business, regulatory and banking environment. I felt the establishment of an overarching plan detailing where we are now, where we want to get to and how we will get there would keep the team anchored and focused.
What did the roadmap look like, and where did you begin?
We started by identifying five key objectives:
- Build a stable and effective treasury organisation that focuses on people, processes, controls and technology.
- Establish an efficient banking structure for Honeywell China with its chosen partner banks.
- Improve operational efficiencies within Honeywell Treasury and the businesses.
- Concentrating and mobilising cash from China in a tax efficient manner.
- Monitor and respond to the constantly changing regulatory landscape.
As we identified projects under each of these objectives, we established project teams to work with internal stakeholders and external banking partners on the implementation.
Our initial attention was focused on the first two objectives as they were the fundamental building blocks on which the other objectives were built.
What were the key challenges you encountered in taking these first two steps?
The challenges can be grouped into three categories.
The first is regulation. China’s regulatory environment is complex and dynamic, and varies across provinces and local authorities. This means additional attention has to be put into maintaining proper documentations to meet regulatory requirements. In addition, we also need to keep abreast of regulatory developments to ensure we understand and respond appropriately to regulatory changes.
Secondly, the banking landscape poses challenges of its own. The market is fragmented, with a proliferation of local banks as well as increased competition from foreign banks. As a result, there is a huge diversity in terms of what different banks are able to provide in areas like branch network, product capability, market focus and service delivery. It is a question of going through that whole mix and trying to find an effective blend of banking partners to support the requirements we have.
Finally, we faced organisational challenges. The company’s rapid growth has resulted in a structure involving more than 60 legal entities across China. That means the team has to support business units across the country irrespective of location. Given that we have traditionally maintained a highly centralised operating model, working with this hugely diverse range of businesses across different locations is not an easy task.
In terms of strategy, what role did Six Sigma play in the treasury’s road map?
We did not make a deliberate effort to adopt a Six Sigma methodology, but given the fact that most Honeywell employees are Six Sigma trained and certified anyway, a Six Sigma mind-set was inevitably present in the project design and its outcome. As a result, there was a very strong focus on driving process improvements whilst delivering cost savings.
This was really done by looking at each of our projects and trying to remove non-value-added work and at the same time trying to standardise, consolidate and digitise processes to improve the productivity of the group as a whole.
What has been achieved since you implemented this road map?
We have been successful so far. The building blocks are now fully in place, and this has provided us with a good foundation on which a host of best-in-class solutions have been implemented. These cover a broad spectrum of finance activities, and they were all implemented far more quickly than expected.
Through all of this, Honeywell’s treasury team has remained lean, stable and highly productive. It has also encouraged a set of behaviours that focus on continuous improvement and proactive partnering with internal and external stakeholders. All in all, I would say we are making very good progress and definitely the original goals that were set down are being met.
Having said that, of course the team is not resting on its laurels – we continue to focus on delivering results. That is really done by making sure that we look to the future, focusing on consistent execution as well as constant innovation to make sure we create the most value as possible for the group. We also continuously benchmark, in order to ensure our processes are best-in-class.
What advice would you give to other treasurers tackling similar projects?
There is no ‘one size fits all’ approach towards treasury management. Each company is so different and has its own set of issues, priorities and constraints to deal with. However, I would still say that there are some key ingredients for success, which I would like to highlight.
- Buy-in from senior management.
- Define and deliver on commitments.
- Proactive engagement and good communication with the businesses.
- Quantify value creation to the businesses.
- Leverage people and systems to drive results.
More broadly, companies need to stay on top of regulatory changes and banking innovations, especially in the emerging countries.
