Imagine the stress and pressure of a finance and treasury function that has to combine operational excellence with innovation, because every dollar saved means another impoverished child can be fed, another woman can be empowered to become independent or another example of life-saving support in times of disaster. All the while ensuring the day-to-day pressures of liquidity, payments and regulations are met. Well, that’s exactly the challenge faced by the team at World Vision International.
World Vision is a global Christian relief, development and advocacy organization dedicated to working with children, families and communities to overcome poverty and injustice, and consists of numerous national entities around the world, grouped in what is informally referred to as the World Vision “partnership”. The organization relies on donations from around the globe. For every dollar collected, 85 cents goes to social causes on the ground. That means the day-to-day operation has to be airtight.
Only 6 cents of every dollar donated goes towards management of the organization. The organization relies heavily on a global supply chain in order to take advantage of global purchasing power, which allows the value of every dollar spent to be stretched as much as possible. Foreign exchange is therefore vital. Add into the mix the high volume of micro-transactions made every day, and it’s clear to see this is one complex treasury function. So how is it managed?
“It’s certainly complex,” says Kathryn Powers, Global Treasurer at World Vision International. “We operate in nearly 100 countries and our annual revenue is somewhere around $2.7bn. Our activities are as diverse as bringing water to a village in Zambia to our day-to-day operations and meetings at the UN to advocate for the rights of children in Thailand. We need to ensure we connect to all that’s going on as treasury professionals to support the World Vision mission.”
Powers continues on to highlight how this has required a mindset shift within the organisation that has challenged how it looks at the processes typically managed by the treasury team.
“In my experience, our organization had a tendency to look at things from an accountancy perspective, so it has been difficult for them to fully understand the impact of managing cashflow throughout the organization. I think we’re there now and have a structure that works.”
The treasury team at World Vision has a complex flow of funds to manage. Money comes in from donors through sponsorship, grants and corporate donations. Those funds are centralised in global treasury and then go out to the various parts of the organisation, including our micro finance arm ($412m portfolio of loans to over a million active borrowers), our relief activities (in 2017 World vision responded to 170 relief situations) and the programming side of the organisation that looks at a wide variety of projects. Then there’s operations and infrastructure within the organization itself, where the treasury function sits.
Three key treasury challenges
“Global treasury performs the typical treasury operations that you would find in any corporation,” explains Powers. “We ensure the delivery of funds on time and we make sure we’re preserving the value of the funds as they move between countries. That said, there are really three key challenges that we’ve had to find solutions to, namely decentralized banking, managing foreign exchange to impact the greater good and straight through processing.
“Decentralized banking can be a real challenge because of our reach. We work in over 100 countries and, over time, in each of these countries, more bank accounts have been opened with various banks. This really doesn’t allow for the leverage of the banks we work and it’s really hard to get transparency. We really weren’t managing our global bases.
“So, we decided to start rationalizing our banks,” continues Powers. “Unlike many RFPs, We didn’t focus on a specific country or region – instead we developed clusters featuring a mix of geographical areas. This way the banks couldn’t just cherry pick the best countries to bank in. For example, a cluster could include Kenya, which is desirable to bank in, alongside Somalia, which as you can imagine is kind of difficult to work in.”
“We developed clusters featuring a mix of geographical areas – this way the banks couldn’t just cherry pick the best countries to bank in”
Powers says that this has been a positive move for World Vision. Banks now understand locally that the organization is part of a bigger banking infrastructure, the banking relationship is stronger, and the levels of support received considerably better. It’s also much more cost-effective.
“It has also been very, very useful as we’ve moved towards more electronic and mobile applications, which drives efficiency and helps us prevent fraud,” adds Powers.
Foreign exchange volatility
Having such a global reach inevitably means World Vision’s treasury team have to closely manage foreign exchange volatility – which is no easy task given the levels of global uncertainty at the moment.
“Moving funds through 100 countries, you can imagine how much we’re exposed to currency movements. It’s also critical that when funds are donated the value is retained,” explains Powers. “The treasury team manages exchange centrally and works with the banks to make sure we have good delivery, as well as good pricing.
“The treasury team manages exchange centrally and works with the banks to make sure we have good delivery, as well as good pricing”
“Previously, we had managed our exchange through plain vanilla forwards, which we would view at the start of each fiscal year. In 2016, we began much more actively managing the portfolio with stop-losses. This takes a lot of work, but it allowed us to lock-in and preserve our budget rate. Many of the currencies we work in can and sometimes do devalue – this way we can pick up the upside potential.”
As a decentralized organization, it’s hard for world vision to manage payments processing with so many activities being conducted out in the field – that’s why straight through processing is key to the organization’s success.
“Relying on paper or emails that are insecure, and which have to be keyed, so are therefore susceptible to mistakes, is not the best way to operate,” Powers explains. “We also have to ensure we’re doing everything we can to prevent fraud. So, we started looking for a solution that delivered efficiency, transparency and security. How do we have stability? How do we effectively transform?
“We realized that technology was going to be key to this. We had been using an in-house developed solution that gave us straight through processing capability but very little functionality. This led us to realize that we weren’t going to solve the whole world solution ourselves – so we took everything we had learned and went out to the market with an RFP. We talked to 15 vendors in total and ended up choosing Kyriba. Their solution, built from the ground up, has really transformed the flow of payments and allowed us to really drive projects around the world.
“World Vision exists to deliver projects to those most in need around the world. By getting the treasury function right, making a difference at a strategic level, we can help the organization further its cause and deliver more acts of kindness.”