The future of working capital: reporting from Working Capital Forum London14/10/2021

​The first live Working Capital Forum event for over two years took place at the Waldorf Hotel in London’s West End on 14th October 2021. The event has brought together more than 100 treasurers and working capital experts to discuss the latest themes, challenges, and keys to success in working capital.
The event started with some long-overdue networking. Mike Hewitt, Managing Director of the Working Capital Forum then welcomed delegates to the event and introduced the theme for the day: data-driven working capital management.

​Jakob Ruden, Partner at McKinsey & Company used his opening session to explain how to achieve sustainable working capital excellence by getting a handle on the data around cash in and cash out of a business. Jakob took delegates through some fictional figures for a consumer goods company to show how it could improve its working capital performance and add value.

He said: “Working capital is a good indicator of having an efficient and well-run company. Only if you change behaviours, mindsets and the thousands of front-line decisions made every day by finance and treasury, can you really change performance.”
​
Jakob also talked about the importance of role modelling in the business. He said: “It’s about setting the tone and having different conversations to ensure that working capital is looked at, targets are set and that there is the data to support it.”

Drax Group
Speaking under the Chatham House rulet, Chris King, Group Treasurer at Drax Group explained how he helped to ensure that the right working capital structures were in place for M&A activity. Drax Group is the UK’s leading renewable electricity generator and has the world’s largest wood pellet biomass generator. Its purpose is to enable a zero-carbon, lower-cost energy future and its working capital programme supports that.

RHI Magnesita
After a quick break, it was time to hand the stage over to Rodrigo Guerra, Head of Corporate Treasury at RHI Magnesita, which is a global leader in refractories. It was formed when two separate companies merged in 2017 and has grown very quickly. Rodrigo shared what he learned from helping to reorganise the group’s Corporate Treasury operations and team. He said that at the time of the merger; “RHI had a very centralised treasury that was stronger in receivables, while Magnesita was stronger on payables. We did a lot of best practice sharing to try to get the best of each and ensure we had sound working capital management from both ends.”

The company has 300,000 products and 12,000 suppliers and Rodrigo explained that its working capital is a risk mitigant and commercial enabler that supports important aspects of the business and treasury strategy. It reduces the risk of late payment and credit and frees up internal credit limits. It also reduces supply chain disruption and builds stronger relationships with suppliers. As a commercial enabler it helps to bring flexibility to customer negotiations and provide cheaper funding options to suppliers.

RHI Magnesita’s working capital financing portfolio is now global and local across Accounts Receivable and Accounts Payable. By having global and local factoring programs the company has the tools for quick access to liquidity that also create value for customers. The company also has three supply chain financing programs in North America, Brazil and Europe which helps procurement professionals to remain close to suppliers and use their knowledge of the local markets.

Rodrigo’s work helped the company to win an Adam Smith Award for best working capital strategy. He said: “In essence there is a vast variety of stakeholders that you need to be across. Through thorough, transparent and pre-emptive stakeholder alignment we have made it very clear, so everyone is aware of their role. We are also transparent with our disclosures of working capital and we try to have a balance of liquidity sources.”

Keeping Working Capital front-of-mind
Next, it was time for the first panel discussion of the day, where the topic was what can be done to keep working capital projects front-of-mind in the organisation.

Andy Gifford, Consultant at Falcor BC, kicked off by explaining how companies can have rapidly changing obsessions with different aspects of working capital; “When it comes to cash we can adopt, implement and embed across working capital areas, treasury management systems and cash processes. And when the eyes of the business aren’t so focused on us, we must take the time to plan and prepare.”

When asked what can be done to ensure working capital projects don’t fade away, Bruce Denyer, Senior Treasury Manager at Dentsu said that; “You need to know the data to understand what the added value of different solutions are. You can then promote that benefit to all, so communication is key.”

Mark Douglas, Managing Director at PrimeRevenue followed on by saying how collaborating between departments is also vital: “It can be really hard for larger organisations that have lots of departments which aren’t used to talking to each other. An important question to answer, if you’re a Treasurer, is do you know your CPO and vice versa? You need to plan for the challenge of cross-collaboration.”

Tim Shell, Director, Working Capital Solution Structuring said that having live data is also important; “You need to be able to elevate your treasury teams and access real-time data, so you can look at your live cash position then look ahead to what it may be in 3, 6 and 12 months time, so you can really optimise your working capital.”

On the point of data Mark said that it can help to; “Shift the perception that you’re beating up your suppliers to actually being able to offer them something of value.”

After a busy morning, it was time to break for lunch and give delegates the opportunity to discuss the insights they have heard with fellow professionals. There’s much more to come including a success story from the Co-op and more engaging panel discussions.

The Co-op Group
The afternoon agenda at the Working Capital Forum event in London started with an insightful success story from Simon Nuttall, Head of Tax, Treasury & Insurance at The Co-operative Group. The Co-op is the UK’s sixth biggest food retailer with 7,300 active suppliers and has transformed how it approaches working capital.

Simon said; “We have ensured that there is a group wide focus on cash to ensure efficiency and to provide greater value to members and their communities. The Group Treasury & Finance team have also increased reporting and taken it very much back to basics; we explain things to the executive team very visually whenever we can.”

Simon shared how his team developed a more inclusive supply chain finance programme. He said; “We have an eye on the metrics, but they are not the be–all and end–all. Doing the right thing is important, so we are fair to our suppliers in line with our values and pay our smaller suppliers within 7 days. Helping suppliers fly helps everyone.”

Medtronics
Then, just as we thought the world of video calls was behind us, Paul Miseré, Senior Treasury Director EMEA at the medical device company Medtronic, joined us live from Belgium over Zoom! Paul explained that Medtronic operates in over 150 countries with 19 distribution sites and 79 manufacturing sites. The treasury team has a global presence and has worked hard to help the company to become laser-focused on cash flow. He said: “This enables the company to invest in what really matters, such as manufacturing equipment, research & development or M&A activity.”

However, Paul warned that there isn’t a silver bullet to delivering free cash flow growth. He said: “Initially Medtronic focused on receivables and payables, and then later on free cash flow together with a finance transformation programme.”

By focusing on digital transformation, Medtronic assessed a number of tools to automate and optimise finance processes. It decided to use AutoBank which is a specialised tool for cash accounting. It now automates up to 85% of cash application transactions and up to 96% of other bank transactions. Paul said; “Through implementing the AutoBank solution we have instant updating of our financial statements and from a working capital perspective that means our cost and accounts statements are immediately updated.”

Data-driven DPO
The next panel discussion of the day focused on how to manage payments terms by taking a data-driven approach. Steven Williamson, ex- VP Finance, Working Capital at Walgreens Boots Alliance started by saying; “I’ve learned that it’s important to understand where you are and the governance of the terms you have, before you start getting into a supplier chain finance programme, because you can quickly get into mistakes which can be costly to get right.”

Eugene Buckley, Partner Founder at Calculum then explained how his young company is approaching data as a service; “A key thing is to always compare yourself to market, what are your peers doing, strategically, commodity wise, time frame wise? Our solution is a market-facing database, but it also helps you to bring together your data on suppliers with a dashboard that explains what can be achieved and the message that needs to be delivered to each supplier. You can immediately get a summary of where you’re at with your payment term optimisation.”

Matt McQuillan, Managing Director at C2FO said he sees some unique data but that some is more valuable. He said; “The most useful data for designing and running working capital programs can be simply what shows the value of your cash to a particular supplier and how you can collaborate with them so they can benefit from it?”

John Moodie, Account Director at Coupa explained how the company wants to give companies the data that benefits them. He said: “By incorporating data into one place it can drive smart decision making and actual cost savings.”

Steven picked up that point by saying: “Every organisation I speak to is challenged by data, but sometimes 80% is good enough if it helps you to create value and make a decision. Sometimes we may also need to go to an external source, when we don’t have the internal capability, and there should be no shame in doing that.”

John gave the final piece of advice from the panel; “Be bold in your digital transformation because the proven tools are out there and you no longer need to be fearful.”

Life after Greensill
After a quick break, it was straight back to another panel discussion. This time we looked at how rating agencies, regulators, and auditors view working capital products. Sean Edwards, CEO of the International Trade Finance Association started by reflecting on how the Greensill saga has affected regulation. He said; “There was concern coming out of Greensill that there would be extra regulation, but the banks are already regulated so I’m far less worried about that. In this context, Greensill was such a large player, providing the tech and the finance, but you don’t normally see that, so I don’t see that Greensill was systemic or left a vacuum.”

Chris Southworth, Secretary General at ICC United Kingdom shared how he sees the regulatory environment developing. He said; “The overall macro focus is all about economic recovery and driving better, more sustainable economic growth and the ‘build back better’ agenda. Also, across Europe there is an appetite to look at better ways of working and finding practical solutions, such as harmonising legal frameworks to help to digitise trade.”

Chris went on to talk about ESG, he said; “This is absolutely where everyone’s minds are and there is expectation from the ICC that we will see greater regulation, so that’s a space to watch. We need to be fully engaged to ensure regulations are designed correctly.”

Frederic Gits, Group Credit Officer, Corporates at Fitch Ratings said that although supply chain finance is perfectly fine, there is some concern about how to assess risk: “SCF is growing with lots of innovation, but there may not be common understanding and a lack of disclosure. Good disclosure would go a long way to preventing another Greensill.”

Sean followed on from this point by saying; “It’s important to remember that SCF is not about squeezing suppliers, it’s about supporting the supply chain. What we’ve heard from the Co-op is a good example of that.”

Chris made the final point by saying; “The only way we are going to get to smart solutions is if we pool our knowledge and experience. The context we are in is extreme, but that can lead to greater innovation and we shouldn’t be afraid to go forward with solutions.”

Working Capital finance as a force for good
Our last panel discussion of the day looked at the often-contentious issue of supply chain finance programmes and whether they really offer a good outcome for both supplier and buyer. Liz Barclay, Small Business Commissioner for HM Government opened the conversation by giving her view of the problems that very small businesses and freelancers are facing. She said; “Part of the problem for a small business is that if they don’t get paid, they are putting it on the credit card, running up their overdraft or borrowing from family and friends. They are experiencing moving payment dates, overdue payments and extending payment terms. Small businesses feel they have no power in the game so have to accept payment terms of 120 days, even a 360 payment day someone was telling me about the other day.”

David Venables, Director at Taulia picked up the point of responsibility: “We need to think more about the S in ESG which is social responsibility and the impact that we have. The use of technology to scale programs is essential and then developing the structures that can give suppliers certainty.”

Parvaiz Dalal, Global Head of Payables Finance for Treasury and Trade Solutions for Citi explained how the bank is approaching supplier finance. He said; “You need to shift your entire supply chain process and at the speed the clients wants. This has become a really relevant thing, when you see what’s happening with supply chains at the moment. You now need to go deeper in the supply chain to 2nd tier, 3rd tier and think about finance solutions for them where there is a bigger need.”

Thomas Dunn, Chariman at Orbian explained what the role of the supply chain provider is when it comes to improving society. He said; “We all need to stay humble in what we can do. This is the vast web of global business from the smallest freelancer to the largest company and we should stand in awe that 99% of the time it works. But we will see a change to ‘just in time’ supply chains and more inflation. That means a lot of the solutions to the problems we have discussed will need to be local solutions.”

The Working Capital Forum event successfully brought people back together and provided some great success stories and engaging discussion points to consider. Thank you to all of our speakers who shared their very valuable insights. We look forward to seeing you again next year

Drax Group
Speaking under the Chatham House rulet, Chris King, Group Treasurer at Drax Group explained how he helped to ensure that the right working capital structures were in place for M&A activity. Drax Group is the UK’s leading renewable electricity generator and has the world’s largest wood pellet biomass generator. Its purpose is to enable a zero-carbon, lower-cost energy future and its working capital programme supports that.

RHI Magnesita
After a quick break, it was time to hand the stage over to Rodrigo Guerra, Head of Corporate Treasury at RHI Magnesita, which is a global leader in refractories. It was formed when two separate companies merged in 2017 and has grown very quickly. Rodrigo shared what he learned from helping to reorganise the group’s Corporate Treasury operations and team. He said that at the time of the merger; “RHI had a very centralised treasury that was stronger in receivables, while Magnesita was stronger on payables. We did a lot of best practice sharing to try to get the best of each and ensure we had sound working capital management from both ends.”

The company has 300,000 products and 12,000 suppliers and Rodrigo explained that its working capital is a risk mitigant and commercial enabler that supports important aspects of the business and treasury strategy. It reduces the risk of late payment and credit and frees up internal credit limits. It also reduces supply chain disruption and builds stronger relationships with suppliers. As a commercial enabler it helps to bring flexibility to customer negotiations and provide cheaper funding options to suppliers.

RHI Magnesita’s working capital financing portfolio is now global and local across Accounts Receivable and Accounts Payable. By having global and local factoring programs the company has the tools for quick access to liquidity that also create value for customers. The company also has three supply chain financing programs in North America, Brazil and Europe which helps procurement professionals to remain close to suppliers and use their knowledge of the local markets.

Rodrigo’s work helped the company to win an Adam Smith Award for best working capital strategy. He said: “In essence there is a vast variety of stakeholders that you need to be across. Through thorough, transparent and pre-emptive stakeholder alignment we have made it very clear, so everyone is aware of their role. We are also transparent with our disclosures of working capital and we try to have a balance of liquidity sources.”

Keeping Working Capital front-of-mind
Next, it was time for the first panel discussion of the day, where the topic was what can be done to keep working capital projects front-of-mind in the organisation.

Andy Gifford, Consultant at Falcor BC, kicked off by explaining how companies can have rapidly changing obsessions with different aspects of working capital; “When it comes to cash we can adopt, implement and embed across working capital areas, treasury management systems and cash processes. And when the eyes of the business aren’t so focused on us, we must take the time to plan and prepare.”

When asked what can be done to ensure working capital projects don’t fade away, Bruce Denyer, Senior Treasury Manager at Dentsu said that; “You need to know the data to understand what the added value of different solutions are. You can then promote that benefit to all, so communication is key.”

Mark Douglas, Managing Director at PrimeRevenue followed on by saying how collaborating between departments is also vital: “It can be really hard for larger organisations that have lots of departments which aren’t used to talking to each other. An important question to answer, if you’re a Treasurer, is do you know your CPO and vice versa? You need to plan for the challenge of cross-collaboration.”

Tim Shell, Director, Working Capital Solution Structuring said that having live data is also important; “You need to be able to elevate your treasury teams and access real-time data, so you can look at your live cash position then look ahead to what it may be in 3, 6 and 12 months time, so you can really optimise your working capital.”

On the point of data Mark said that it can help to; “Shift the perception that you’re beating up your suppliers to actually being able to offer them something of value.”

After a busy morning, it was time to break for lunch and give delegates the opportunity to discuss the insights they have heard with fellow professionals. There’s much more to come including a success story from the Co-op and more engaging panel discussions.

The Co-op Group
The afternoon agenda at the Working Capital Forum event in London started with an insightful success story from Simon Nuttall, Head of Tax, Treasury & Insurance at The Co-operative Group. The Co-op is the UK’s sixth biggest food retailer with 7,300 active suppliers and has transformed how it approaches working capital.

Simon said; “We have ensured that there is a group wide focus on cash to ensure efficiency and to provide greater value to members and their communities. The Group Treasury & Finance team have also increased reporting and taken it very much back to basics; we explain things to the executive team very visually whenever we can.”

Simon shared how his team developed a more inclusive supply chain finance programme. He said; “We have an eye on the metrics, but they are not the be–all and end–all. Doing the right thing is important, so we are fair to our suppliers in line with our values and pay our smaller suppliers within 7 days. Helping suppliers fly helps everyone.”

Medtronics
Then, just as we thought the world of video calls was behind us, Paul Miseré, Senior Treasury Director EMEA at the medical device company Medtronic, joined us live from Belgium over Zoom! Paul explained that Medtronic operates in over 150 countries with 19 distribution sites and 79 manufacturing sites. The treasury team has a global presence and has worked hard to help the company to become laser-focused on cash flow. He said: “This enables the company to invest in what really matters, such as manufacturing equipment, research & development or M&A activity.”

However, Paul warned that there isn’t a silver bullet to delivering free cash flow growth. He said: “Initially Medtronic focused on receivables and payables, and then later on free cash flow together with a finance transformation programme.”

By focusing on digital transformation, Medtronic assessed a number of tools to automate and optimise finance processes. It decided to use AutoBank which is a specialised tool for cash accounting. It now automates up to 85% of cash application transactions and up to 96% of other bank transactions. Paul said; “Through implementing the AutoBank solution we have instant updating of our financial statements and from a working capital perspective that means our cost and accounts statements are immediately updated.”

Data-driven DPO
The next panel discussion of the day focused on how to manage payments terms by taking a data-driven approach. Steven Williamson, ex- VP Finance, Working Capital at Walgreens Boots Alliance started by saying; “I’ve learned that it’s important to understand where you are and the governance of the terms you have, before you start getting into a supplier chain finance programme, because you can quickly get into mistakes which can be costly to get right.”

Eugene Buckley, Partner Founder at Calculum then explained how his young company is approaching data as a service; “A key thing is to always compare yourself to market, what are your peers doing, strategically, commodity wise, time frame wise? Our solution is a market-facing database, but it also helps you to bring together your data on suppliers with a dashboard that explains what can be achieved and the message that needs to be delivered to each supplier. You can immediately get a summary of where you’re at with your payment term optimisation.”

Matt McQuillan, Managing Director at C2FO said he sees some unique data but that some is more valuable. He said; “The most useful data for designing and running working capital programs can be simply what shows the value of your cash to a particular supplier and how you can collaborate with them so they can benefit from it?”

John Moodie, Account Director at Coupa explained how the company wants to give companies the data that benefits them. He said: “By incorporating data into one place it can drive smart decision making and actual cost savings.”

Steven picked up that point by saying: “Every organisation I speak to is challenged by data, but sometimes 80% is good enough if it helps you to create value and make a decision. Sometimes we may also need to go to an external source, when we don’t have the internal capability, and there should be no shame in doing that.”

John gave the final piece of advice from the panel; “Be bold in your digital transformation because the proven tools are out there and you no longer need to be fearful.”

Life after Greensill
After a quick break, it was straight back to another panel discussion. This time we looked at how rating agencies, regulators, and auditors view working capital products. Sean Edwards, CEO of the International Trade Finance Association started by reflecting on how the Greensill saga has affected regulation. He said; “There was concern coming out of Greensill that there would be extra regulation, but the banks are already regulated so I’m far less worried about that. In this context, Greensill was such a large player, providing the tech and the finance, but you don’t normally see that, so I don’t see that Greensill was systemic or left a vacuum.”

Chris Southworth, Secretary General at ICC United Kingdom shared how he sees the regulatory environment developing. He said; “The overall macro focus is all about economic recovery and driving better, more sustainable economic growth and the ‘build back better’ agenda. Also, across Europe there is an appetite to look at better ways of working and finding practical solutions, such as harmonising legal frameworks to help to digitise trade.”

Chris went on to talk about ESG, he said; “This is absolutely where everyone’s minds are and there is expectation from the ICC that we will see greater regulation, so that’s a space to watch. We need to be fully engaged to ensure regulations are designed correctly.”

Frederic Gits, Group Credit Officer, Corporates at Fitch Ratings said that although supply chain finance is perfectly fine, there is some concern about how to assess risk: “SCF is growing with lots of innovation, but there may not be common understanding and a lack of disclosure. Good disclosure would go a long way to preventing another Greensill.”

Sean followed on from this point by saying; “It’s important to remember that SCF is not about squeezing suppliers, it’s about supporting the supply chain. What we’ve heard from the Co-op is a good example of that.”

Chris made the final point by saying; “The only way we are going to get to smart solutions is if we pool our knowledge and experience. The context we are in is extreme, but that can lead to greater innovation and we shouldn’t be afraid to go forward with solutions.”

Working Capital finance as a force for good
Our last panel discussion of the day looked at the often-contentious issue of supply chain finance programmes and whether they really offer a good outcome for both supplier and buyer. Liz Barclay, Small Business Commissioner for HM Government opened the conversation by giving her view of the problems that very small businesses and freelancers are facing. She said; “Part of the problem for a small business is that if they don’t get paid, they are putting it on the credit card, running up their overdraft or borrowing from family and friends. They are experiencing moving payment dates, overdue payments and extending payment terms. Small businesses feel they have no power in the game so have to accept payment terms of 120 days, even a 360 payment day someone was telling me about the other day.”

David Venables, Director at Taulia picked up the point of responsibility: “We need to think more about the S in ESG which is social responsibility and the impact that we have. The use of technology to scale programs is essential and then developing the structures that can give suppliers certainty.”

Parvaiz Dalal, Global Head of Payables Finance for Treasury and Trade Solutions for Citi explained how the bank is approaching supplier finance. He said; “You need to shift your entire supply chain process and at the speed the clients wants. This has become a really relevant thing, when you see what’s happening with supply chains at the moment. You now need to go deeper in the supply chain to 2nd tier, 3rd tier and think about finance solutions for them where there is a bigger need.”

Thomas Dunn, Chariman at Orbian explained what the role of the supply chain provider is when it comes to improving society. He said; “We all need to stay humble in what we can do. This is the vast web of global business from the smallest freelancer to the largest company and we should stand in awe that 99% of the time it works. But we will see a change to ‘just in time’ supply chains and more inflation. That means a lot of the solutions to the problems we have discussed will need to be local solutions.”

The Working Capital Forum event successfully brought people back together and provided some great success stories and engaging discussion points to consider. Thank you to all of our speakers who shared their very valuable insights. We look forward to seeing you again next year

---