Today’s insurance and reinsurance broking sector is dominated by three dominant groups: Aon, Marsh and Willis Towers Watson. The latter, a leading global advisory, broking and solutions provider, describes its remit as helping clients around the world to turn risk into a path for growth.
With roots going back to 1828, Willis Towers Watson has 39,000 employees in more than 120 countries and was formed when the merger of the Willis Group and Towers Watson merger completed earlier this year. This followed Willis Group’s acquisition last year of leading French broker Gras Savoye, in which it already had a 30% stake and independent London-based wholesale insurance broker Miller.
Presiding over this flurry of activity has been Christof Nelischer (pictured), global group treasurer for Willis Towers Watson. Based in London, he joined Wills Group six years ago.
What attracted you to the world of treasury and how did you come to work in a treasury role?
It’s probably fair to say that deciding to become a treasurer is not something you set your heart on at primary school. Originally, my first role was as a trainee commercial banker. While going back into banking might have been the obvious choice as my degree neared its end, I came into treasury quite by chance when interviewed for a position as the right-hand man of the newly-appointed group treasurer of Heraeus, a precious metals company in the Frankfurt region. I developed a passion for treasury, enjoyed every minute of the job I was doing then and that enthusiasm has never ended.
Since then, subsequent roles have given me exposure across a range of different industries, and in different locations, and I have been able to put all those ideas to work at Willis Towers Watson. The common theme in my working life is that I find myself either building an all-new treasury function, or re-building an existing one. At every step of my career I looked at what – if anything – I had inherited, what was really needed, and how we could get from where we were to where we needed to be.
I lead all aspects of corporate treasury, having joined what was then Willis Group in 2010 and being appointed global group treasurer. During this time I have overseen an overhaul of the treasury IT platform, including the introduction of an electronic dealing platform, implemented a completely new and fully integrated treasury management system (TMS), introduced SWIFT corporate membership and established an intercompany netting system.
I also have a risk management remit, as part of which I issued new treasury policy to businesses, initiated and executed new interest management strategy and adapted FX risk management to address the challenges the business faces, as well as a response to the eurozone crisis.
As far as capital management is concerned, my role has involved managing a debt portfolio of US$4bn in total, including raising and subsequently adapting a US$800m revolving credit facility and US$250m term loan, leading several bond issues. This included the firm’s inaugural Eurobond issue, as well as arranging a US$1bn term loan facility to fund the Gras Savoye acquisition and the merger with Towers Watson, which took place simultaneously.
Tell us about the challenges involved with that merger.
Many of them have been focused on the merging of two organisations that work on very different systems and platforms. The legacy Towers organisation will continue to work on a different IT platform for some time to come and until we are all on the same system architecture, it will be quite difficult to have everything working at least broadly to the same operating model.
Where cash management is concerned, there will always be some challenges as long as you still account for items on different ledgers in different systems in each of your operations around the world. There is also a special purpose credit facility in the legacy Towers business that has come with some restrictions relating to funds moving in and out of this part of the organisation. This limits us to some degree in merging cash management, as we need to manage cash in that part of the organisation quite separately.
There are also a number of considerations when it comes to international banking partners. The merger makes the imperative of streamlining banking all the more apparent, as it really shines a light on the way that we operate together.
No two mergers are the same, and acquisitions are different again. With a merger you’re bringing people together from different legacy organisations. There’s no naturally dominating party in this merger. You also want to retain a blend of talent, organisational know-how and experience, but at the same time make a decision on a single organisation – while also recognising that it will take time to become fully embedded at all levels of the organisation.
The merger aside, what other major challenges do you face today in your role?
Treasury has always grappled with the banking operations arena, which is, in parts, unfortunately not moving forward. It’s mostly driven by the regulatory bureaucracy – tracking all of which makes life very difficult – and partly also by the challenges posed by the negative interest rate environment. First it was the yen, then the euro, and now the pound is looking to possibly become the next currency with negative rates. This is having a damaging effect on cash management and we’ve long given up on any decent yield.
That aside, the operational aspect of the banking industry continues to be a challenge, particularly in emerging markets. I have also observed an increasing reluctance on the part of banks to execute settlements to or from sanctioned countries, or what the banks classify as such.
For instance, you might have a settlement with a client that has nothing to do with any sanctioned country, but banks will just pull up the drawbridge and avoid at all costs anything that has, in their perception, anything to do with the concerning jurisdiction however abstract and remote.
Convincing banks of the legality of a settlement, while having a client waiting for his money, is now a frequent experience. It seems that banks reacted to past failings by establishing draconian compliance measures, which are hurting perfectly legitimate business.
How have treasury policies responded to the reality of increased financial risk and the pressing corporate focus on efficiency now impacting businesses globally?
One key aspect that we really do need to be sure of is that we are working with quality banks. We’ve had some unpleasant surprises in recent years, where long-standing banking partners have suddenly been unable to support us – be it that the financial institution in question is itself going through troubled times and that has had a knock-on effect on staff morale; or that is its technical capabilities, such as connecting through SWIFT for instance, have in some way been below par. Sometimes this issue can arise out of the blue, after many years of successful partnership.
How does the treasury function work with other business functions to achieve corporate objectives and help steer long-term strategy?
You can’t run treasury in an ivory tower, it has to be cross-functional. It’s absolutely imperative that treasury is connected to the other business functions; in particular to the neighbouring finance function, financial planning and tax. Essentially, what we do is inherently complementary and people have either a very good understanding of it or none at all. This year’s merger has brought about a new level of understanding of this in particular.
As an organisation, we’re facing some challenges from the integration of such a large merger, adding to the complexities of our existing restructuring programme and the recent acquisition of Gras Savoye. Treasury is required to manage through that situation while delivering cost synergies at the same time.
You’ve been complimented as progressive and visionary and a highly strategic thinker. What other characteristics does it take to be a successful global treasurer today?
Throughout my career, my roles have given me the opportunity to set up, restructure and manage international corporate treasury functions in a range of challenging environments, including demerger and acquisition, and it helps to be able to negotiate well with banks for arranging finance and operational relationships.
Something I also think is key in this role is having the ability to step back and see the big picture and resist the temptation to get too deeply involved in the detail, which can mean you get lost and miss what really matters. Finally, today’s treasurers need to appreciate the importance of communication within the company, as well as outside of it. So much of what I do is simply about managing expectations within the firm as well as among the banks and ratings agencies; and bringing all that in line with what I think and what is realistic.