Q&A: Swiss Re’s FP&A Head on the Francogeddon
“I can promise you the second it popped up on my iPhone, I interrupted the meeting I was in and said, ‘Look, guys, I’m not sure if any of you are investing in Swiss stock or trading in currencies but you may want to call your broker,’” said Schertzinger.
But Schertzinger has other challenges to deal with – many of which are familiar to financial planning and analysis (FP&A) professionals across the globe. Schertzinger also is chairman of the
2015 AFP FP&A Leadership Summit
Q (gtnews): First, thank you for volunteering to help in designing the summit.
I think it’s a fantastic event. I’ve read about a lot of what you guys do and know and contribute to Europe, so I’m happy to help and to be part of it.
Tell me a little about your company and your job responsibilities.
Swiss Re is the global market leader in the reinsurance business. Essentially there are two main players – it’s Munich Re and Swiss Re, and depending on how you measure it, we’re number one and number two. We have a market cap of about US$30bn, revenues of about US$40bn, so a highly-leveraged balance sheet business, as well as 11,000 full-time employees. Essentially, we’re taking risks comparable in size and complexity to what investment banks would do so it easily can be more than US$100m of capital for a single transaction.
What’s your responsibility within the firm?
I am – for the reinsurance business, which is about 80%-90% of Swiss Re – the head of FP&A or head of performance management, depending on how you want to call it. I oversee the financial steering of the business. We steer new business to enhance our financial performance. We do performance analysis on business performance and its levers and drivers, and we work with the respective functions that own these levers to enhance performance.
Examples are asset management, treasury, underwriting, products, operations and so on. We also run quite a few performance initiatives or transformation initiatives where the objective is typically to lift financial performance. So, we’re a heavily involved performance project shop, if you will.
It strikes me as difficult to forecast and plan for an event where someone would need Swiss Re services. It seems like you have quite a challenge there – your entire firm, not just you.
Yes, absolutely. I think overall 60% of our business is what we call “standard business.” It means it is essentially a continuation of an existing business relationship. You can have a good forecast based on, “Will that relationship continue and what risk and profitability profile would we expect to see?”
However, 40% of our business is large transactions. We do have the US$50m, US$100m and US$500m transactions, where it is difficult to predict what transaction we’ll be doing and what type of risk and profitability profile it will come with, and then it’s challenging to then plan for that. It creates quite an uncertainty around how much profit we’ll be producing and also how many resources in terms of capital liquidity we will be needing. We use quite a bit of scenario planning.
Does this make your job easier because you can use the – for lack of a better word – excuse that you don’t know what’s going to come so it makes it an easier forecast? Or, does it make your management even more anxious because they want an accurate forecast?
Well, accuracy is important. I just joined Swiss Re two years back and one of my briefs was, “If you were to fix planning how would you do it?” That’s not an uncommon brief, I guess, for an FP&A head, and accuracy was part of it. We have debt, equity capital and liquidity in the system, and are essentially a dividend stock. We must deploy these resources efficiently and avoid inadequate cushions, so to create value for our shareholders.
Does the Swiss franc (CHF) decision impact your company in any way?
Good question. Generally speaking, the CHF got a significant uptick in value so Swiss franc-nominated stocks – which have most of their income or revenue generated in US dollars (USD) or euros – were hit on the stock market. I don’t know what the current status is, but probably a little bit of that will go away. Generally we’re currency hedged and our revenue and costs are global, so the impact is minimal.
What is your biggest challenge right now and what do you think will be the big challenge for you and your team throughout the year?
I’m still fixing infrastructure while needing to deliver value to the business. First, I’m currently introducing an end-to-end financial planning system that integrates account planning and balance sheet management. This requires quite heavy lifting. We need to be able to understand our entire value chain to price risk adequately – essentially all the business I talked about. So introducing an integrated view is important.
Secondly, managing us through quite a challenging market environment. Price pressure is significant. Interest rates are obviously as low as they can be and investors at the same time are – more than ever – craving returns. So, we’re working hard on achieving the targets we have communicated to the market and how we then meet them. At the same time, we are working a lot on how to enhance our performance midterm, addressing rather strategic questions.
How did you get involved with the FP&A Summit?
[FP&A Club executive director] Larysa [Melnychuk] pinged me and we had conversations on LinkedIn and at the Zurich FP&A Club meeting and she explained what you are trying to achieve. I like the aspect of up-skilling people, certifying people and introducing new ideas into FP&A, so I asked how I can support and be part of it.
What do you hope to gain from the FP&A Summit?
I think it’s an excellent event to network or to create a network amongst your team and practitioners as a first step, and then hopefully there’s a global step after. So, creating a network of European practitioners – I hope that is something we can achieve and I would want to get out of this. Secondly, from the knowledge exchanges we’ll have, I hope to get a few inspirations or more tactics and even a few best practices. But I’m also interested to hear from others what their challenges are to understand that some of the challenges we have, we’re not alone.
Learn more about the 2015 AFP FP&A Leadership Summit.