AkzoNobel Interview: Preparing for Change
Peter van Rood is the corporate director of treasury at AkzoNobel
Cash is king at the moment due to the volatile economic situation at the moment and Peter van Rood is more aware of that than most. His company, AkzoNobel which owns Dulux paints, ICI and many other brands, has already repatriated excess cash from Greece amid fears of a possible exit from the eurozone and has been pursuing outstanding debts and adjusted its IT systems to handle dual currencies, just in case it is required.
“We put these plans into place in Q4 last year,” says van Rood, “and activated them at the start of the year when the Greek situation started to deteriorate further. This is despite the fact that we have no significant exposure to Greece or indeed Portugal or other states that have received bailouts so far, but we wanted to be prepared.”
The fear of contagion into other big markets like Spain or Italy, and the potential knock-on the affects around the world of the on-going eurozone crisis were no doubt also key drivers in AkzoNobel’s planning. Interestingly, Spain has since received its own banking bailout, justification perhaps for the forward planning demonstrated by the AkzoNobel treasury team that is headquartered in Amsterdam, the Netherlands. As the director of the team, van Rood admits that the world has changed since 2008. In his opinion, banks have become side-tracked and are becoming borrowers themselves now, rather than traditional lenders.
“Corporate treasurers are increasingly ‘doing it themselves’ these days,” he adds, referring to the trend of corporations raising finance on their own and the strange situation that has arisen post-crash where the world of finance and of treasury have almost swapped over following the crisis in 2008 and the credit crunch, which has only temporarily been relieved by some governments, before coming back with a revenge.
“The [post-crash] regulations that are imposed on banks are not likely to be extended out to us anytime soon,” expands van Rood, potentially highlighting further opportunities whereby corporate treasurers can raise finance more easily than the banks, which are being hindered by the developing Basel III rules and other capital adequacy and transparency stipulations.
Corporations can also fall back on their large reserves of cash if they are lucky enough to have them, as many major multinationals such as AkzoNobel do, although finding short-term places to invest it is no easy task. “The new post-crash regulations are here to stay, so the changing world and reversing roles of finance and treasury will be with us for some time to come.”
Convergence and Systemic Risk
The convergence of the five main treasury risks – namely, capital, liquidity, credit, currency and interest rate risk – are also concerning van Rood, because he believes it is creating systemic risk that permeates everything at the moment. “This notion of risk surrounding us everywhere manifests itself in volatile markets, adversely affecting confidence, investment, planning and the general economic environment for companies,” he says.
Mature economies are seeing an erosion of their wealth, which has been falsely sustained for too long by excessive borrowing, causing the sovereign debt risk that we see now across Europe and indeed in many other parts of the world. Remember, even the mighty America government itself got a warning from the credit ratings agencies.
If they haven’t done so already, treasurers need to prepare themselves for this new world and prepare for the changeover, believes van Rood. “I’ve spent the last five years at AkzoNobel after leaving Shell in 2007, so most of my treasury career at my new firm has been spent dealing with these issues of risk and coping with the new environment in which we find ourselves.”
Van Rood joined Shell in 1990 when the world looked very different. Yes, there was recession then too, but the great shift of wealth and influence from West to East had yet to occur and, once recovery came, developed economies launched themselves upon a decade of debt-filled growth that seemed to have no end, although the consequences of it are now, of course, being felt. He started out as a financial controller in the pension fund unit, before joining the trading centre at Shell in London and Barbados.
“Principally, I was there to facilitate the flow of goods and commodities, and to optimise the supply chain,” explains van Rood. “I’d take positions in the markets and in shipping as well, as part of my everyday operations.”
A qualified financial analyst and certified controller, van Rood remembers his time in sunny Barbados in the Caribbean with fondness. But he returned to the European centre of Shell in 2000 to join its treasury department, where he spent five years and was involved in a huge US$10bn project to refinance its US activities. “It was a very big scheme that involved lots of tax negotiations and saved the group a lot of money,” he explains, while outlining one of his career highlights.
Van Rood spent another two years at Shell in the governance, risk and compliance (GRC) department, which proved to be good training for the challenges ahead at AkzoNobel, which he joined in 2007 just in time for the credit crunch and the coming financial storm of autumn 2008. “It’s been non-stop since,” he says, but with good planning and effective treasury procedures in place you can cope with the changed world in which we find ourselves. Prepare for change and you are preparing for success, or at the very least survival in these challenging economic times.