Cash & Liquidity Management
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A Focused Approach to Risk Management

by Maciej Müldner, Treasurer, Skanska Poland

Skanska globally combines both centralised and decentralised elements in its financial management. Skanska Financial Services (SFS) provides a central in-house bank, but there is also a treasury function for each business unit. In some cases, as in Poland, this comprises a team of 12 individuals, while in other countries the treasury function may be smaller. Treasury in Poland needs to support between 100-300 projects each season, each one of which operates as a separate entity. Around seven members of the team provide daily financial operational support to these projects and the remainder are involved in cash management.

We conduct transactions across a range of financial instruments, including traditional hedging, capital financing, leasing, project finance etc. and perform all associated activities with the exception of accounting. To enable this, we use several modules of a TMS (treasury management system) globally which is integrated with our general ledger. This is used across the business, supporting all our main business lines including hedging, cash management (which also comprises a payments factory), documentary credits (such as guarantees) which are important in the construction sector, and insurance lines.

Approach to risk management

For many years, we have adopted a consistent set of risk management processes globally, termed ‘Operational Risk Assessment’ which is central to the way we work. For each business opportunity, we perform a detailed risk assessment, which includes technical issues, but also others such as human resources, health and safety and environmental impact and financial risks. This comprises a detailed, step-by-step process to assess requirements in terms of hedging, cash flow, guarantees, insurance and counterparty risk. The Operational Risk Assessment approach has now been in place for more than eight years, so it is deeply entrenched in our working practices and project teams have the necessary expertise to conduct the risk analysis. Having assessed a project’s financial risks, treasury then helps the project team to find ways of mitigating them. Ultimately, the project manager is accountable for all aspects of the project, including finance, and treasury provides a vital support function.