Treasury within a growing European media empire

François Masquelier has worked at the highly centralised and automated RTL Group treasury since 1997. Headquartered in Luxembourg, the media group’s roots go back to 1924 when Radio Luxembourg launched. Today, RTL owns stakes in TV channels and radio broadcast stations in Germany, France, Belgium, the Netherlands, Luxembourg, Spain, Hungary, Croatia and South East Asia.

Before joining RTL, Masquelier worked at the agri-food business Eridania Béghin-Say and then at Dutch bank ABN Amro. He is a Doctor in Tax Law, has a degree in Economy and Administration from the University of Liège, Belgium, and graduated from the Solvay Business School in Brussels as Executive Master in Management.

Masquelier is also chair of the Association of Corporate Treasurers of Luxembourg (ATEL) and honorary chair of the European Association of Corporate Treasurers (EACT). He took time out from his busy schedule to discuss the economic prospects, volatility, risks and challenges of 2016, including the Organisation for Economic Co-operation and Development (OECD)/G20 action plan on base erosion and profit shifting (BEPS).

What do you see as the major risks and opportunities in today’s economy?

The first risk I’d mention is market volatility – especially foreign exchange (FX) volatility, which is close to a treasurer’s heart and in recent months has reached extremely high levels. Just look at the recent turmoil on the Chinese stock markets and the knock-on effect worldwide on shares and currencies.

The risk of a long period of negative interest rates in the eurozone is also worrying. I’m confident about the long-term future of the European Union (EU) and the eurozone, but I’d admit there is a risk of a ‘Japanification’ – or period of stagnation – of our European economy in the short-term. This is something that we as European treasurers need to envisage, think about and consider how to respond.

On a more macroeconomic side, I keep thinking the fundamentals of the real economy are not that bad and the wider world economy should soon recover. Growth will return.

Regarding interest rates, I don’t expect these to peak up in the US in the coming months after their earlier tentative rise. It will only be a gradual rise anyway in the US so it’s not a worry. I’m convinced that rates in general will be low for quite a while for the major economies and currencies. Negative rates are more of a concern in Europe as it then costs money to keep funds in a bank – with the intention of encouraging investment instead and staving off deflation. In this context, a rise in rates would be welcome as it would mean real growth is coming back to the economy, but it’s very unlikely. We’d all love to see a little bit of inflation in Europe wouldn’t we?

How do you mitigate common risks at RTL Group?

Whatever financial risks you’re exposed to – short, or long/fixed or floating – you need more than ever to consider ad hoc hedging to mitigate risk. In a volatile world where share prices, valuations and currencies are all fluctuating short-term hedging becomes more and more important for a treasurer. We use it a lot at RTL, with internal policies for risk management per category and per type. We stick to these policies and to the hedging instruments authorized by our treasury and audit committees.

When I joined RTL in 1997 as head of the treasury it was a much smaller group. It has since expanded as our responsibilities have; stretching to include non-cash management issues such as finance and enterprise risk management (ERM). Risk is now near the top of a treasurer’s priorities and duties. This has been a big sector-wide change during my treasury career. In common with many other large multinationals our treasury function has become highly centralised, at our Luxembourg HQ and cash management duties have been automated.

Back in 1997 Compagnie Luxembourgeoise de Radiodiffusion – which had its roots in Radio Luxembourg – combined with Germany’s UFA Film- und Fernseh-GmbH to form CLR-UFA. RTL Group subsequently formed in 2000 after CLR-UFA merged with Britain’s Pearson TV. German mass media group Bertelsmann became the majority shareholder in July 2001. We now have interests in 57 television channels and 31 radio stations in Europe and Southeast Asia, with annual turnover of €6bn.

I still love my job, but the job has grown with the company and the focus has changed so that risk is now more prevalent. RTL has been listed on Deutsche Boerse’s M-Dax index since 2013. Such a large, diverse group requires ad hoc hedging across risk categories and types, in order to function safely and for the long-term.

What makes you hopeful for 2016 & the treasury function in the future?

My intrinsic optimism makes me hopeful for 2016, as well as all the efforts made on compliance, new IT solutions implementations, internal controls enhancement and new reporting mechanisms, such as IFRS9 risk reporting. All of this should bear fruit for RTL in 2016, but also for the treasury sector as a whole, which I have to consider as chair of ATEL and honorary chair of the EACT.

When you are able to further automate and secure processes, as is the case with new IT and automated reporting duties, you save time. This can then be dedicated to more value-adding tasks instead. That’s my priority this year. I want to create more value in the treasury function and ensure it keeps moving away from mere cash management into risk, finance and other fields.

In my view, the biggest change for corporate treasury during my 20-plus year career has been the evolution of our function over into new non-cash management areas. It has speeded up since the great financial crash of 2008, with an increased focus on risk. This is now one of the most interesting and exciting parts of being a treasurer.

What big treasury projects are you working on at the moment, why and what are the details?

Among my major projects in the coming months will be a BEPS implementation and transfer pricing review in order to comply with coming new laws derived from EU directives. The OECD/G20’s BEPS action plan, which is driving European law, is intended to restrict transfer pricing under certain circumstances and multinational corporations’ (MNCs) ability to shift profits and liabilities around cross-border to low- or zero-tax jurisdictions.

As an MNC with operations in 29 countries via our FremantleMedia content production arm this is obviously something we have to consider. We create over 10,000 hours of TV programming each year, and distribute 20,000 hours of content in 200 territories, so any changes to international cross-border tax rules is something we need to look at.

Other RTL treasury projects currently include finalising the plans for this year’s rollout of our global ‘Bank Single Gateway’ project. This is designed to set up one single bank connectivity IT tool, via Datalog CashPoolerWeb (CPW) system, with one single messaging format – XML ISO 20222 – via the SWIFTNet platform.

Standardised IT and messaging will increase our speed, efficiency and ease-of-use when undertaking global banking and payment activities. Eventually, the major challenge will be to enhance the dashboard business intelligence (BI) capabilities of our new technology infrastructure. This would enable us to enhance our internal controls and financial reporting, planning and predictive capabilities.

Are there any concerns or opportunities specific to your sector and/or treasury that you can share?

I do believe all industries – financial and non-financial – have to on-board the ‘Uberisation’ of the economy and the digital transformation that is impacting all sectors. The digital revolution has been accelerated even in 2015 and this year with new analytics, computer intelligence, processing power and connectivity. We all need to adapt our businesses to new technological realities and models. That’s a major challenge for all of us across Europe and indeed the whole world.

Learning to operate with continuous and perpetual evolution is a challenge we all face. The biggest driver at the moment in my opinion is technical and IT advances. The rise of financial technology (FinTech), for instance, could rapidly reshape the financial ecosystem as we have known it and encourage bank disintermediation. That is a developing trend to watch.

What issues keep you awake at night?

Fortunately, nothing keeps me awake. However, I’m always amazed and worried about the quantity of information we receive every day, about the number of emails we need to manage, and the impressive list of tasks and reports (always new ones) that we need to fulfil.

For years, I’ve had the strange feeling that we are overloaded by too much information these days. Whatever your job, you need to be capable of Stakhanovism. But in the meantime you shouldn’t search for too much perfectionism because the scarcest resource on earth – time – is often lacking. I fear the frustration of not being able to nicely and completely finish and polish my tasks as I would like to.

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