Applying Treasury Policies - Financing during the crisis
Interview #2 with Peter van Rood, Group Treasurer, AkzoNobel
In the first article of this series, Peter van Rood, Group Treasurer of AkzoNobel, introduced the treasury transformation project that he has pioneered since joining the company in September 2007. Every aspect of treasury has seen radical change and enhancement, including banking infrustructure, policies and processes, treasury skills, IT and internal business relationships. In this edition, Peter talks to Helen Sanders, Editor about the role of its revised treasury policies, both for the treasury transformation and for the ongoing financial risk management of AkzoNobel.
What was the starting point for reviewing your treasury policies?
We started with the revision of our treasury policies during the middle of 2008. At that stage, we were in the middle of the integration with ICI, with a large number of new entities and people who needed to be brought up to speed with how we conduct our treasury activities at AkzoNobel. We recognised the need for an integrated approach towards the merger of the treasury functions as well as to the transformation of treasury. This required us to look at each of the building blocks of treasury at the same time. These building blocks comprised our IT infrastructure, bank relations and global bank account design, organisational set-up and policies and procedures. The last of these brought all of our aspirations together. The treasury policies were for us the tool both to communicate how we expect treasury activities to be executed across the group and to support the migration towards a new way of working. We therefore reviewed the policies with the intention of offering maximum on-boarding support to new AkzoNobel staff, to implement best practice treasury policies and to facilitate treasury change management.
We used our treasury policies also as a means of managing treasury change globally, not only within the central treasury function.
The original policies were actually well-constructed and formed a useful basis for our revised documentation. The AkzoNobel treasury policies comprise two documents: the Treasury Statute, which covers the treasury function, and the Treasury Policies, which covers the execution of treasury related activities in the businesses. We adjusted these documents in three distinct areas:
Firstly, we refined the governance structure of treasury, which resulted in changes to the Treasury Statute. Treasury is governed by a Corporate Finance and Treasury Committee. This committee meets at least quarterly and oversees the management of financial risks by treasury. It comprises participants from treasury, taxation, controlling and legal. The committee is chaired by Keith Nichols, our CFO. A Corporate Finance Coordination Team supports this committee. This team has the same functional composition as the Corporate Finance and Treasury Committee and deals in particular with the group’s internal funding. This set-up supports the financing activities of the group on a global basis, and the management of our financial risk infrastructure. Our Treasury Statute has been updated to reflect this new way of working.
Secondly, we made alterations to our policies to support change management of new processes. As we were redesigning our processes to increase our automation and efficiency, we needed to reflect these developments in our documentation. We used our treasury policies also as a means of managing treasury change globally, not only within the central treasury function. For example, the policies can support a shift from a decentralised to a more centralised and standardised approach. Processes that are designed and operated centrally are easier to describe in detail than the processes that are subject to variation at a local level. Consequently, the policies became more explicit in terms of what was expected from staff in the businesses, and in some areas more detailed.
Thirdly, we embedded the compliance monitoring structure in our policies, using a combination of self assessment tools and the annual Letter of Representation process.
How are the documents that make up AkzoNobel’s treasury policies structured?
As I mentioned, we have two documents that make up our treasury policies: the Treasury Statute, which defines treasury operations at AkzoNobel; and the Treasury Policies, which forms part of our broader financial manual, outlining the boundaries for our businesses. The Treasury Statute outlines the following:
- Treasury roles and responsibilities, and each individual’s mandated actions;
- Individual authorities including counterparty and currency limits for dealing, approvals etc.;
- Permitted financial instruments;
- Accountability and discharge. This also includes the role of the Corporate Finance and Treasury Committee and Corporate Finance Co-ordination Team.
- Planning, progress reporting and end of year appraisal processes;
- The central treasury policies with regard to capital (e.g. dividend policy, debt policy), liquidity (headroom policy) , currency, interest rate and credit risk management policies.