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The most important element of any digitisation strategy is a “crystal clear” view of what the organisation is trying to achieve. Speaking during a recent Treasury Today webinar on digitisation, liquidity and leverage in the post pandemic era, Andrew Blincoe, Head of Corporates & Institutions at NatWest Group explained a second pillar to success comprises ensuring all stakeholders within the organisation are on board with the strategy.
A third is investment appetite: digitisation is a costly, multi-year commitment, he warned corporate treasury teams. “You need to avoid implementing obsolete processes; always think how the programme will be delivered too. Partnerships are prevalent and investing time in partners at the outset pays off many times over.”
A multi-year digitisation strategy at food group Kraft Heinz has been developed and structured along a timeline that takes into account the company’s strategic direction. It is also tailored to the external environment and direction of the wider industry, like changes in buying behaviour for goods since the pandemic, explained Yang Xu, Senior Vice President, Global Treasurer & Corporate Development, Kraft Heinz. She also highlighted the importance of identifying key disruptions and where the biggest impacts will fall. “Break down the project into critical milestones.”
Finally, Xu advised treasury teams to always look for a return on investment on activities, whether low hanging fruit or longer-term indicatives, and stressed the importance of a popular mandate. A board level mandate from the top cascades through the organisation, she said, listing the resources Kraft Heinz has put into its transformation, including a project management team, dedicated risk resources, and specialist talent.
Liquidity lessons from the pandemic
Xu said that the pandemic had shone a spotlight on liquidity. The key priority in the food industry at the time was safeguarding supply chains and production. The company already had careful plans for tightening liquidity and was able to draw on its playbook, including known pockets of liquidity, external funding and revolvers. She said that clear dialogue and preparation had ensured treasury and executives didn’t have to scramble “at the 11th hour.”
Blincoe added that the pandemic has also highlighted the importance of contingency planning and thinking ahead. It demonstrated the importance of having different pools of liquidity on hand, and of key bank relationships. It also demonstrated the value for treasury teams of being able to secure trusted advice at short notice, he said.
“Strategic banking relationships are one of the superpowers of treasury function,” agreed Xu.
Looking to the future, Blincoe said treasury teams would continue to draw support from supportive central bank policy and low interest rates. Corporates should also plan to return to their long-term target capital structure and take advantage of available sources of liquidity today to put themselves in the best position possible for the future.
Xu said prudence was her most important learning from the pandemic. For example, measures put in place ahead of the pandemic stood the company in good stead during the crisis, including a tender refinancing to reshape near term debt maturities, and holistic liability management beyond debt, such as proactively and consistently funding the pension scheme, which ensured the company didn’t have any unexpected large outflows of cash. Treasury was able to tap into the market when it was “friendly”, but if market conditions deteriorated, had options of liquidity to draw on, she said.
Blincoe concluded with an eye to the future, highlighting the opportunities that treasury teams will increasingly have to incorporate artificial intelligence (AI) into modelling and decision-making. The technology will allow teams to tailor responses and ideas, allowing real-time decisions based on AI projections. “The speed and opportunity is exciting, and one we can see coming,” he said.
Xu concluded with another word of advice on the importance of a prudent, proactive approach. She said liquidity was the “front line” and it was treasury’s duty to safeguard it.
“But ultimately, we are also only ever as good as our team,” she concluded the importance is to have a strong treasury team.
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