Lessons for treasurers and other risk managers from recent disasters: A Reflection on the Ornithology of (Black and White) Swans.
This week FTA has been privileged to hear from a speaker who has climbed four distinct career peaks in government, corporate treasury, pension management and insurance.
Dr Reg Hinkley FFTP is Chair of Trustees of Lloyd’s (of London) Pension Scheme, former Deputy Group Treasurer and former Head of Internal Audit at BP Plc, and a also former ASCT/FTA Victorian Chapter Chair. On Tuesday Reg shared his perspectives at a lunch session for FTA at a Vic Chapter Lunch hosted by Deloitte, and then an AICD lunch for company directors on Wednesday.
Reg’s key messages can be found in his presentation here.
As Dr Hinkley is now a private citizen, both talks were conducted under the Chatham House Rule. I witnessed both, and the following are a synopsis of the group/table discussion at FTA’s event, the Q&A at the AICD lunch, and my takeaways from the discussion Dr Hinkley inspired.
- Discussion naturally gravitated to corporate events such as VW’s admissions about their diesel engines, the failure of the BHP/Vale owned mine dam in Brazil, and the BP Deepwater Horizon oil spill in the Gulf of Mexico.
- Two of these events have seen loss of life, and each of these have been reputation risk events for the company’s involved, and the cause of losses to shareholder value much greater than the cost of any risk system or process they might have implemented.
- Were they Black Swan events or just long tail possibilities no-one (risk manager or Board) could or would quantify?
- In talking about such major corporate disasters it is important to recognise that risk is always there, and is the price of doing business. Not all risk is capable of being managed down, transferred away, or mitigated by hedging or insurance.
- It is a delicate balance between blaming others (e.g. contractors) and taking corporate-level responsibility, but how companies respond in times of crisis is generally a predictor of future brand value and share market performance.
- The trend to lean management and ever shorter term focus on financial metrics has the by-product of shortening time horizons on investment in new business, and on risk management.
- Pension and super fund investors want to invest in sustainable business franchises i.e. companies with not only a distinct business strategies but also a readily apparent culture.
- Corporate cultures that are sustainable are those that respond best to inevitable crises. They don’t expect to fully prevent risk or to “get it right” all of the time and are flexible enough to respond to contingencies.
- Arguably this suggests greater need for right brain (sensing, creative) over left-brain (analytical, numerate) in business-structure and risk management,
- Treasuries role in responding to events is central to the company’s survival. Boards should talk to treasurers about their liquidity risk reserves, and alternate sources of funding and ensure treasuries are sufficiently resourced in manpower, technology and delegated authority to do their critical roles in a contingency situation.
FTA wants to do more again in the risk space as it intersects with treasury. Please suggest to us future speakers on related topics.
I will republish Dr Hinkley’s two previous articles for FTA in coming weeks.
The Victorian Women in Treasury Networking dinner at Macquarie Bank was a big success with 28 professional women in treasury enjoying dinner with a view from the 24th floor dining room of 101 Collins Street. Thanks to our speaker Caroline Andrivon of REST for sharing her fascinating career journey through the ‘80s to now with a women’s perspective on the pilot’s strikes of old, dealing with the failure of Ansett Airlines, and the need to speak truth to power when acting as a fiduciary. Also many thanks to Justin Williams of Macquarie Bank for kindly supporting the event. If you are interested to join the network you are encouraged to join FTA for early advice of future events.
Christmas functions are being planned for every State. Whatever the subject, wherever the location FTA members are encouraged to attend to mix with peers to share the highs and lows of their year, and some Christmas cheer.
South Australian Chapter Networking
Wednesday November 25 @ 3:45 pm – 6:30 pm
It is with pleasure that in partnership with Bloomberg the FTA brings to you a Networking event for the South Australian area.
Topic: Showcase of Treasury Management System & Regulating Your Risk
Presenter: Robin Pickover, Fixed Income and Derivatives Specialist, Bloomberg
Keeping you up-to-date with recent enhancements in the following fields and how they feature in the larger ‘Treasury Risk Management’ system – Verifying pre-trade CVA charges or post trade derivative values according to IFRS, the question of Basel III inspired capital charges on derivative trades and even, for a limited number, the issue of ASIC Trade Reporting. Also touching on cash management and Hedge Accounting.
Please feel free to invite a friend or colleague to learn more about the topics and to introduce them to the FTA and the great opportunities that being a member can provide.
Places are limited so please RSVP: to email@example.com before midday Tuesday 17th November 2015
Location: ANZ Boardroom Level 21, 11 Waymouth Street, Adelaide
Important: Please advise any dietary requirements.
Queensland Chapter Xmas Party will be on Wednesday 9th December and will also kindly sponsored by Bloomberg.
Victorian Chapter Xmas Wine-tasting will be Thursday 10th December at Imperial Hotel Melbourne with tasting of wines from three Victorian vineyards, led by Master of Wines (candidate) Julie Morrison of International Wine Exchange.
NSW Chapter Xmas Drinks
Date still to be confirmed
Save the date, for both of these events. More information to follow.
Congress presentations are nearly ready.
For now, do enjoy the photos from Congress posted on the FTA website.
Finally, the FTA Board met prior to the FTA Congress.
Stay tuned in coming weeks you will be advised of outcomes from the Strategy meeting and the work conducted for FTA by Proto Partners.
We believe the changes in train will mark an exciting new chapter for the Association.
So stay tuned.
David Michell CFTP (Snr)
CEO, The Finance and Treasury Association