The Holistic Treasurer

Managing the End of Globalisation as We Know It

A philosopher and photographer, Jonas Falk, Head of Risk and Operations at SKF, a leading global supplier of solutions for rotating equipment, is not your traditional treasurer. Here, he reflects on the many hurdles he and his team faced in centralising the group’s treasury operations during the pandemic. Looking ahead, he also highlights some of the major challenges facing treasurers, not least the implications of deglobalisation and the regionalisation of trade.

After a tumultuous few years for the global economy and the outlook still decidedly uncertain, it perhaps helps to be a little philosophical – especially if you are a hard-pressed treasurer at the sharp end of overseeing a company’s financial affairs. Jonas Falk certainly advocates staying calm  when dealing with tough situations and, as a keen student of philosophy, he recommends delving into the discipline itself for valuable, enlightened approaches to life and work. 

While he regards himself as very much a beginner in exploring the vast terrain that is philosophy, he believes it has helped to make him a better thinker and develop reasoning skills and strategies that are transferable to other areas, not least his work.

He says: “Philosophy can be very intellectually addictive. Some might regard it as idle navel gazing but I, and many others, believe studying it can only be beneficial. It covers an astonishing range of areas but I feel that just by dipping into one or two topics in my leisure time – moral and political philosophy for instance – it has made me a better thinker and a better treasurer. It is about critical thinking, logical analysis and strategising but also communication skills, including developing the ability to defend your views against others. These are the kind of skills that are valuable irrespective of profession or walk of life.”

Falk has certainly had to call on some of those competencies in recent years, not least in achieving the impressive feat of transforming SKF’s regional treasury structure into a centralised operation – during the pandemic. The final decision to centralise operations to the group’s headquarters in Gothenburg, Sweden, was made by SKF in late 2019, just a few months before the global acknowledgement of a health crisis. At the time he was based in Singapore managing SKF’s APAC treasury operation, which was  set up by the group in the late 1990s in response to the Asian financial crisis.

There were  several reasons for the move to centralise operations, Falk says. While certainly informed by a fast-changing geopolitical landscape and trading environment, the decision was also made in response to advances in technology, and SKF’s move to transform its finance function and streamline processes via several shared financial operation centres.

He explains: “The move to centralise the treasury function after so many years of a regional structure made a lot of sense. I told my staff in the beginning of 2020 that we would close down in Singapore in six months, and we began the preparations. But then, of course, the magnitude of Covid dawned on everyone over the next few months and the lockdowns and restrictions took hold.”

It was a stressful time for his team in Singapore with remote working being a huge unknown. “I was so dependent on my team!” he says, chuckling. “It was a team of four in Singapore and I really couldn’t afford to lose any of them. So, as for many treasury leaders at the time, it was a challenge for me to motivate and make sure we were doing the right things at the right time. In our case, of course, it was more complex because of the need to close down operations in Singapore as smoothly as possible and relocate back to HQ, which we achieved by July 2020. I still have very vivid memories of trying to fly back to Sweden at that time – it turned into quite an adventure, and not in a good way, with all the cancellations.”

The times they are a-changin’

When considering the key operational impact of centralisation, Falk points to the “federalisation” of risk that it has enabled for the group as a major positive. “By combining APAC-focused Singapore and Gothenburg, which previously handled the rest of the world, we see the whole picture, making it easier for handling risks. We now have common processes for handling FX, we take care of the entire group’s liquidity and cash management requirements. Concentration of cash becomes simpler when it’s in one place.

He continues: “The main challenge we anticipated with centralisation was the different cut-off times across zones, but with better forecasting thanks to technology that needn’t be a problem. We now have the latest version of our treasury management system, although in some areas we carry out processes in the same way as we have done for a long time. But we remain constantly open to new possibilities from technology.”

While the fracturing of the geopolitical landscape that was already evident even before Covid played a key role in the decision, Falk believes developments since on that front, coupled with ongoing market turmoil and the uncertain outlook, have only strengthened the case.

 “I believe we’re entering a phase of sustained regionalisation when it comes to trade. With that in mind, it is important to have a global centralised risk management operation that sits on everything. I don’t see the need for physical, tertiary centres to take care of that challenge. We have a presence in more than 100 countries, we have dedicated people taking care of treasury-related matters in different regions, so I don’t believe we require a separate entity. At least not today.

“Under the new structure, it is now my team’s responsibility to ensure we have global, regional, and local cash management solutions in place that are suitable and efficient for the group as well as resilient given SKF’s global footprint. My own scope of responsibilities and those of my team has become much greater than just financial risks. It’s become even more important for us now to understand and work very closely with the wider organisation to ensure the financial wellbeing of SKF.”

From globalisation to regionalisation

More broadly, Falk believes there are three megatrends that will impact the evolution of treasury operations over the next five to 10 years. Not least of these is technology, which he believes is beginning to have a major impact by delivering speedier operations and more accurate and timely intelligence. It is also helping to slash time spent on manual tasks enabling treasurers to focus more on strategic work.

“Technology will have an even more profound impact on treasury in the future. The challenge for treasurers comes when we adopt new solutions too fast and have not done our homework and fully appreciated the consequences of the move. Over and above that, making sure IT and data security go hand in hand is an absolute must. That is not always as front of mind as it should be, in my view, when considering new solutions. Automation, implementing new systems, integrating different platforms, leveraging APIs … with all these kinds of advances there are always exposures to potential cyber threats to consider.”

Sustainability, and ESG more broadly, represent another fast-evolving megatrend for Falk. While there is currently considerable variation across regions in implementing elements of ESG – there has, for instance, been more focus on the ‘E’ in Europe than in Asia – Falk believes that over time, markets, investors, and consumer pressure will help reduce disparities. “There is some concern, for example, about how far Asia generally is lagging Europe regarding low-carbon. But having been based in Singapore for many years, I know things happen there much more quickly than in other regions. As we speak, I can only see momentum behind ESG across Asia continuing to build rapidly.”

The third megatrend Falk points to is “the end of globalisation as we know it” and a transition to more regionalised world trade. Deglobalisation has been a concern to Falk, as for many others, since trade wars broke out between the US and China in 2018. The impact of the pandemic and war in Ukraine have only reinforced those concerns.

“Issues such as trade wars and bilateralism are never good for global trade or indeed for the running of treasuries for cross-border payments, collections, setting up loans, and deposits. I’m a big fan of globalisation and the role it has played in delivering worldwide trade, helping poor countries develop and, consequently, alleviating poverty. Corporates have also benefitted greatly, of course. In manufacturing, outsourcing in order to access cheap labour costs, for example, was very much the order of the day when globalisation was in full swing. Today, much production in manufacturing can be achieved with help from automation, advanced technologies, and so the need for cheap labour is not so great.”

Having said that, Falk does not foresee the rise of hard trading blocs and ultra-aggressive protectionism – global trade and interdependence is too entrenched for such an about-turn. For him, it’s not so much about the end of globalisation per se but rather its metamorphosis, it’s restructuring, into a different version better suited to a regionalised world order.

Forewarned is forearmed

For Falk, a major overarching implication of the three megatrends of technology, ESG, and regionalisation is that treasurers must focus on resilience of operations more than ever. There has been much talk in recent years about the ‘strategic treasurer’ and ‘value-added treasuries’. Those are still extremely  important aims, but Falk believes resilience will be even more crucial  as an operational necessity in future.

Vital elements needed to ensure resilience include treasurers working much more closely with the operation and support business units. “Key here is understanding how business and profitability is affected not only by current market conditions but also what-if scenarios for interest rates, inflation, counterparty risks, diversity of funding and so on. “

With greater use of technology potentially increasing exposure to cyber-attacks, IT security must also be high on the agenda for resilience planning, he says. “One good tip here is to print out – yes, print out! – contact information for all internal or external stakeholders or counterparties. Make sure everyone who needs to have it does so, in case things go wrong with computer access to those details.”

He adds: “I also think we should spend less time preparing budgets and more on scenario analysis. We need to learn from what has happened with Russia, Ukraine, sanctions, trade flow disruptions and try  to prepare for unfavourable scenarios in order to create resilience to them. And that means test-disrupting your organisation before you get disrupted: try as much as possible to figure where the weaknesses are and look for mitigating solutions.”

The shifting geopolitical landscape also needs to be considered when resilience-planning. Falk recalls listening to a speech by former NATO Secretary General Anders Fogh Rasmussen in which he argued that all global MNCs should now have a “foreign minister” who follows and analyses global politics and geopolitical developments.

Falk says: “I think Rasmussen is right. Now, more than ever, treasurers need to follow geopolitical developments as closely as macroeconomics and business-cycle analysis. The ultimate aim should be to create resilience towards everything that could affect the cash flow. Zooming out to gain a broad overview can be just as important as being laser-focused on specifics. As treasurers looking out on what is after all quite a challenging, uncertain outlook whichever way you look at it, a holistic, helicopter view of current political and economic development of the world can only be helpful to us.”

It is a perspective, and moreover a way of expressing it, that perhaps reflects Falks’ love of photography – a hobby about which he is even more passionate  than philosophy. He is an accomplished observer of animals, although landscapes are his favourite subject matter. He has even had a book of his work published.

“Photography is my main go-to [activity] when I want to really relax and refresh my mind. Most people enjoy doing something creative, whether it is painting, writing, singing, baking, gardening or playing golf. For me it’s photography. I find it totally absorbing. Learning new skills and exercising your mind should be seen as a lifelong endeavour – you are never told old to learn or ask questions,” he notes.

Indeed, he believes that for treasurers, weary after several solid years of firefighting, unwinding and immersing themselves in hobbies can be beneficial to their wellbeing. As SKF’s Head of Risk and Operations, Falk tries as much as possible to be mindful of the pressures on individual members of his now seven-strong team. He might not be able to persuade them to take up philosophy or photography, but there are still steps he always believes he can take to help mitigate stress in the workplace.

“As treasury team leaders, I think we have a huge responsibility to develop a stimulating, creative environment, both at the team and individual level. Even if personnel are not moving about much and gaining different experiences, such as when going from cash management to front office for example, there are still things you can do to create variety, raise the ceiling.

“I think it’s vital to create an environment for the team that encourages the sharing of knowledge, the striving to better yourself and the organisation. And of course, you need people to participate in that environment because without their engagement it can be difficult. I am fortunate not to have that problem with my team. We are all very different as individuals but when we come together, we are very effective indeed. Sometimes it is quite magical how we work together and deliver –  I love it when those special moments happen!”