Corporate treasurers, faced with volatile financial markets and geopolitics, are looking to new technologies to reduce costs, gain efficiencies and strengthen their teams.
Sandy Dominach, SVP, and Treasurer of Constellation Brands, Michael Dawson, Head of Liquidity & Foreign Exchange for Shell and Todd Yoder, Head of Derivatives and Hedging Strategy and Director Global Treasury at Fluor Corporation spoke about their journey to embrace new digital solutions and create strategic opportunities for their firms at the recent Association of Financial Professionals (AFP) national conference.
“We use technology to challenge ourselves, think beyond what we’re doing today, and get a new perspective on risk,” said Sandy Dominach, SVP, and Treasurer of Constellation Brands, a Fortune 500 company that is a global producer of beer, wine and spirits. New, disruptive technology helps minimize and manage risk, and ensure that the company’s profit and losses are protected, she added.
One new technology that has brought tremendous benefits, she said, has been to change the way they hedge. Previously, like many companies, they hedged according to a certain percentage. Today, they use a sophisticated formula to calculate the balance between their cash flow at risk (CFaR) and their earnings at risk (EaR).
“Now, our calculations can be done in a matter of minutes, instead of hours. We have real-time data when we need it, and can easily show our executive management board a simple graph to show how we’re hedging,” Dominach said.
The new technology has improved life for her treasury team, too, she added. They use robots and artificial intelligence (AI) to handle manual and repetitive tasks, so her team can concentrate on more high-value and strategic projects. “We didn’t just cut costs, we enhanced our entire operation,” she said.
Challenge from a huge technology ecosystem
For Royal Dutch Shell, part of the challenge was the pure size of their operations. How do you replace multiple, separate execution systems with one integrated one, and still safely execute billions of foreign exchange trades?
“Our technology ecosystem was huge. Several systems had reached their end of life and we had to continue to automate, the flow is just too great to manage via spreadsheets and email,” said Michael Dawson, Head of Liquidity & Foreign Exchange for Shell.
They wanted the best system possible, but they also wanted to create a new best practice for the industry globally, not just something bespoke.
“Technology can be challenging, but you have to see the value in it and get comfortable with change,” Dawson said.
Shell replaced multiple systems and worked with Bloomberg to develop an expansion of FXGO, Bloomberg’s electronic foreign exchange trading platform. The new streamlined solution helps eliminate risks and achieve best execution, he said, adding that, “We have significantly reduced our costs.”
Technology is not appropriate for everything, Dawson said, adding that you need to automate things that do not add value. “Our new system gives us optionality, and empowers people. We have removed manual tasks, and now have the time to focus on more creative, value-added tasks that allow us to make smarter decisions.”
Exciting time to be corporate treasury
It is an exciting time to be corporate treasury, said Todd Yoder, Head of Derivatives and Hedging Strategy and Director Global Treasury at Fluor Corporation, one of the world’s largest global engineering and construction firms that designs, builds, and maintains some of the world’s most complex projects.
“The acceleration in technology and innovation within the treasury ecosystem is being driven by lower costs for computing power and data storage, combined with an increase in the availability of data and applications being developed,” he said. Yoder talked about the need for treasurers to be educated on artificial intelligence and robotics, so they are able to discern the current hype from the real value add.
“At Fluor, we wanted to use technology to get better visibility into our foreign currency exposure, more specifically our cash flow at risk (CFaR) considering the impacts from diversification and carry. We wanted more information to ensure we implement the optimal hedging strategies in alignment with our overall objectives,” said Yoder.
Fluor, like Constellation Brands, uses tools developed by Bloomberg’s quantitative analysts to help optimize their hedging strategies. “The right hedging strategy can mean millions of dollars to the business, so we are looking for any edge we can get. The quants at Bloomberg are some of the best in the world,” Yoder said.
This round-up of the panel discussion first appeared on the Bloomberg Professional Services Blog.