Treasurer's Q&A: Operating in the Middle East
Daniele Vecchi started his career at Nestlé, where he worked until 2002 in various treasury departments in Italy, US and Switzerland. In 2002, he moved to Panalpina to run their treasury operations; then, in 2005, he became head of investor relations following the company’s initial public offering (IPO). In 2007, Vecchi moved to Dubai as vice president of treasury in charge of funding for Majid Al Futtaim Investment. In 2008, he was appointed senior vice president head of group treasury with the objective of setting up the department and creating a state-of-the-art treasury.
Q (gtnews): Could you outline your organisation’s global cash management structure in terms of cash management techniques, treasury headquarters and banking relationships, etc?
A (Daniele Vecchi, senior vice president, head of group treasury at Majid Al Futtaim Group): We have a team of seven people that manage treasury operations for a group comprised of seven shopping malls, 30 hypermarkets, two hotels and other businesses. The treasury headquarters is in Dubai. Our cash management set up is geared to achieving the most efficient cash concentration and avoids any dilution in terms of controls and liquidity. We operate a triple layer zero balancing system that allows us to pool funds at different geographical levels: local, regional and inter-regional. Our banking relationships are with local/regional institutions and international banks. Because our funding requirements are restricted, we cherry-pick services among financial institutions. We work with a limited number of banks to leverage buying power.
Q (gtnews): What does your typical day as head of group treasury involve? Could you describe some of your key responsibilities?
A (Vecchi): I am responsible for the group treasury and the primary task is to ensure the solvency of the group at any point in time. I co-ordinate a team of seven people with a strong focus on cash management and liquidity risk. Debt management takes up a lot of my time, as well as interest rate risk management. As the group is expanding in the region, the organisational complexity and the need to support foreign operations has also increased. Different projects are also very demanding ‘from a time perspective due to the need to hold regular meetings to go through analysis and comparisons, as well as meetings with vendors or service providers. I typically have two or three meetings everyday and I receive on average about 50-60 emails. I reserve some time everyday for educational reading.
Q (gtnews): What are your main challenges? For example, what’s on your treasury wishlist?
A (Vecchi):We are currently selecting a treasury management system (TMS) and working on a global cash management request for proposal (RFP). At the same time, the group is moving towards an economic profit management performance metric and this requires treasury to take full ownership of anything related to capital structure and the weighted average cost of capital (WACC). Our wish list is therefore a TMS implementation and cash management overlay structure.
Q (gtnews): As a UAE treasury operating in the retail industry, are there are any tax, legal or regulatory issues that you need to be particularly mindful of when it comes to the company’s cash management?
A (Vecchi):The tax environment here is less complicated than in other areas of the world. As a UAE-based treasury operation, we have a relatively friendly environment within the Gulf Co-operation Council (GCC) area. Obviously, as we move into the broader Middle East/North Africa (MENA) region things are less straightforward and the degree of complexity increases. For example, there are still hurdles in managing cash on a cross-boarder basis. Cash management practices in each country are also remarkably different as well as the level of technology sophistication of payment systems. Despite these challenges, we are optimistic about the improvements we will see in each country.
Q (gtnews): What steps will you take in 2008 to make your treasury more efficient?
A (Vecchi):We are currently working on the fundamental pillars of a strong treasury operation: TMS, policies and procedures, as well as a team of people. At the same time, we are reviewing our cash management operations in order to add an overlay banking structure to gain better visibility of our liquidity and more efficient cash concentration. Financial risk management is also an area where we invest a lot of our time in ensuring adequate risk monitoring and constant improvements in our processes.
Q (gtnews): If you weren’t a treasurer, what would you be?
A (Vecchi):I think I would be doing something totally different, but with the same passion. I like to be outdoors so I would probably like to be climbing mountains or a professional cross-country skier.