FinTechAutomationQ&A: An interview with Frank Muusse, Philips Lighting

Q&A: An interview with Frank Muusse, Philips Lighting

In this interview, Frank Muusse, head of corporate finance and financial risk at Philips Lighting, outlines his work for the company and the impact of changing risk and financial regulation.

Frank Muusse joined the Dutch technology company Philips more than six years ago, and has served in various posts across the business. Based in Amsterdam, for the past year he has been head of corporate finance and financial risk at Philips Lighting, the company’s division that focuses on the manufacture and application of innovative, energy-efficient lighting products, systems and services.

Q (GTNews): How did you come to work in a treasury role?

Frank Muusse: My experience with ABN AMRO and Deloitte enabled me to gain a number of vital skills for basic cash management and treasury roles. At the time, I had to learn on the job, starting at zero and I think that was an important factor in my development.

At [information services group] Wolters Kluwer I was working in a small team, so the scope of my role was quite broad – involving merger and acquisition (M&A), equity transactions and buy-backs, for instance.

When the financial crisis hit in 2006, that presented another steep learning curve – no one was expecting that. Sometimes, though, this way of learning can be the best.

Subsequent to that, I worked for KPN the Dutch telco – a frequent debt issuer and with relatively large shareholders returns at that time. It taught me financial stakeholder equilibrium.

It was six years ago that I joined Philips, during which time I have held a number of different roles in a rapid changing and evolving company. In my view, treasury is the best place to work in the finance function; there is always a treasury angle in business, dealing with the board – a function with direct impact and for me it’s a great fit.

What challenges do you currently face in your work?

Our parent company issued an initial public offering (IPO) last year, as a dual track process, and we were responsible for the capital market access and treasury scenarios – fitting for both a public and private route. Now, as a listed company, we are seeing a lot of major change on many levels. We have to set up the corporate function and external reporting responsibilities that come along with this, complete the stand- alone credit and banking lines and grow the treasury function and team.

In addition to this, the business is currently going through another major change as it transforms from conventional to light-emitting diode (LED) technology. This means a new business model and changes to the way we operate, including a shift from using our own in-house factories to more outsourcing. This has a considerable effect on cash flow and currency management.

Those developments aside, changing regulation, trade policies, taxation and also capital structure – at both group and local level – present the function with an array of ongoing challenges.

Finally, having the right team members is vital to the efficient running of the treasury function – that is to say, people who are not only doing today’s job, but who are also able to deal with tomorrow’s role. And it’s also my job to keep them on track.

How have treasury policies responded to the reality of increased financial risk and the now pressing corporate focus on efficiency?

To deal with ongoing financial risks, the starting point should always be very conservative and you have to consider worst-case scenarios. Going back to the financial crisis, that degree of collapse was not something that was ever considered, and serves as an excellent example of how imagining the worst-case scenario is a good point from which to start when dealing with increased financial risk in our changing world.

The scope of policies and liquidity risks continue to be extremely important but now also in somewhat different ways due to cybercrime, central bank policies and negative interest environment, and just as important as it’s always been but sometimes overlooked are details like contingency planning for payments, and overall trust in IT.

We work closely with the business continuity and risk functions inputting into plans that incorporate an element of such issues as financial risk, but also of power outages and cybercrime, for instance.

To what degree is technology positively impacting treasury operations?

In my view, IT is the tool not the solution. It’s so important to fully understand the basics of doing business first. Only then can IT really support the function. Besides the core basics, understanding the accounting impact of a single payment, for example, is vital. IT can help speed up and expedite this seamlessly to greatly enhance the treasury function.

Beyond processing payments, using IT as analytics and intelligence is of growing value, and can greatly enhance business success. Collecting customer data, or Big Data, allows us to predict and benefit from new trends.

How does the treasury function work with that side of the business on corporate targets and long-term strategy?

We are directly involved with that task. The treasury set-up is quite lean and we are able to process our payments with just a small team, so IT is a big part of it as enabler. Another tool for that is automatic bank statement collection and reconciliation.

We recognise that change and roll-out of proven solutions can require patience. There’s a balance to be achieved between what you want, what IT can deliver and what the business needs are at that moment. It’s never going to be perfect, and sometimes you just have to wait your turn.

What about your work with other business functions in these areas?

Besides the group/HQ functions like M&A, investor relations (IR), legal and tax more and more direct connection with the business is gaining importance. From the supplier base (metal hedging, supplier finance and FX clauses) to sales and the end-customer (price-setting, FX clauses and hedging, cash collection, credit risk mitigation, financing solutions)

The treasury ivory tower is not fit for purposes anymore – at least not for us. Business demands are increasing and that provides an opportunity for us treasurers as well.

How are current trends affecting the relationship between banks and companies today – for better or for worse?

Banks have changed their focus in recent years, and have begun to look more closely at the way they do business. And with the emergence of other finance intermediaries, banks do need to adapt, as challengers are beginning to win some of their business. But ultimately, the bigger banks still have trust on their side. This trust is the cornerstone of the monetary system – as worthless coins and paper cannot be exchanged for gold anymore – which banks could expand upon to in areas of information exchange, client connection and a global accepted network.

In the same way as we are adapting to the changing needs of our clients (to LED technology and expansion into systems and services), so the banks need to adapt to our new requirements – enhancing their solutions to the clients beyond simply borrowing and lending – that old model is no longer fit for purpose. Again, technology can help here.

To what degree is regulation currently impacting the work of the treasury function?

On the one hand, it does make our jobs more complicated. That’s partly a result of globalisation too; but on the other hand, I believe regulation provides a great opportunity to add value to the business. It helps to deal with the ongoing nature of change – and ensures you can demonstrate continuous learning, and a willingness to do so.

What three pieces of advice would you give to a professional looking for a career as a global treasurer?

Face the world with an open mind: Working within a true global company with a diverse cultural workforce help with this.

Keep on learning: Not only adapt to change but lead the change.

Keep it simple and logical: Only enter into transactions you understand. My former chief financial officer (CFO) once said ‘If you cannot reduce the calculations you have made to the back of an envelope I do not want to see it’.

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