Case Study: From Fire-Fighting to Foresight - Enterprise and Treasury Risk Management for a Trans-Tasman Manufacturer
Drawn from the hands-on experience of O&U Group Director, Rachel Southee: how a trans-Tasman manufacturer moved its leadership out of reactive fire-fighting, built an enterprise-wide approach to risk, and hedged foreign exchange for the first time in its history.
The challenge
The organisation is a manufacturer with operations in both New Zealand and Australia and a parent company that plays an active role in its governance. Like many capital-intensive businesses, its earnings are exposed to a wide range of operational, market and financial risks, with foreign exchange among the most significant.
Risks were eventuating faster than the business could get ahead of them. Senior leaders were spending a large share of their time responding to issues as they arose, leaving little room for the strategic work that would move the business forward.
In practice, the urgent was crowding out the important. Without a consistent, organisation-wide way to identify, rate and prioritise risks, every issue competed for the same executive attention, whatever its real significance.
The organisation's Risk and Insurance Manager wanted to change this: to shift the organisation from reacting to risks to anticipating and managing them in a structured, transparent way.
The approach
Supporting the organisation's Risk and Insurance Manager, Rachel led a staged programme that built the foundations first, brought people with it, and then proved the framework on the risks that mattered most.
Build the framework. Rachel drafted an Enterprise Risk Management Framework Policy and Procedures, giving the organisation a common language and a consistent method for identifying, assessing, monitoring and reporting risk.
Engage beyond the boardroom. She presented the framework to the Health and Safety Representatives Forum, so that risk management was understood as everyone's responsibility, not only a finance or executive exercise.
Pilot it with Finance. In an interactive workshop with the senior finance leadership team, Rachel used financial risk as the first practical rollout of the framework. Together the team:
uncovered financial risks across the whole business, not just within the finance function;
applied bow-tie analysis to map each risk's causes, consequences, and the preventive and mitigating controls between them;
rated each risk by materiality and compared it against the organisation's risk appetite;
identified the internal controls needed for every risk sitting above appetite.
Act on the most material risk. The assessment confirmed foreign exchange as the single most material financial risk to the business. To govern it, Rachel:
led the establishment of a Treasury Management Committee bringing together the Group CFO, the CEO, senior finance representatives and a representative of the parent company;
developed a Treasury Policy setting out how financial market exposures would be managed and overseen;
developed an IFRS 9 hedging policy and procedures providing clear guidelines for reducing risk in proportion to the entity's actual exposure, and supporting the hedge accounting requirements of the standard.
The results
For the first time in its history, the company began hedging its foreign exchange exposure. Its most material financial risk moved from being absorbed as it arose to being actively managed under an agreed policy.
Clear governance. The Treasury Management Committee gives the executive team and the parent company a single forum with oversight of key financial risks.
Policy-led decisions. The Treasury Policy and IFRS 9 hedging policy mean hedging decisions follow agreed rules linked to actual exposure, rather than being made case by case.
A repeatable method. The finance pilot gives the business a tested template for extending the ERM framework to operational, safety, environmental and strategic risks.
Time back for strategy. With risks identified, rated and assigned owners in advance, leaders have a structured basis for focusing their time on what matters most, rather than on whatever is most urgent.
In their words
“Rachel played a key role in developing and strengthening enterprise-wide risk practices, ensuring risks were identified, assessed, monitored, and managed in a structured and transparent manner across the organisation.
From a finance and treasury perspective, Rachel has led the development and implementation of financial risk management frameworks, policies, and governance structures. This included establishing and overseeing a Treasury Committee to provide effective governance and management oversight of key financial risks.
Rachel combines strong technical expertise with a practical commercial mindset, ensuring risk management practices support both compliance obligations and business objectives."
Senior executive, trans-Tasman manufacturer
Is your leadership team stuck fire-fighting?
If risks are consuming time your executives should be spending on strategy, or if foreign exchange and other financial exposures are being managed without clear policy and governance, O&U Group can help. Talk to us about bringing this experience to your business.
Book a discovery call today or email us directly at hi@oandugroup.com