By Anne Friberg
What are the key steps in building an international treasury to support an expanding company? We sit down with NeuGroup member Tina Kobetsky from VMware for some lessons learned.
Tina Kobetsky took the reins as treasury leader at VMware in 2008. Since then, her department has grown and evolved to keep up with a company clocking in at a 23 percent CAGR in revenue (2008-2013). She agreed to be interviewed by iTreasurer in the midst of earnings season.
Anne Friberg. How big is VMware and what does the company do?
Tina Kobetsky. VMware has more than 500,000 customers, 75,000 partners, and almost 18,000 employees in over 50 locations around the world. Since I joined in 2008, revenues have grown from just under $1.9 billion to 2013 revenues of $5.21 billion. VMware is the leader in virtualization and cloud infrastructure solutions that enable businesses to thrive in the Cloud Era. VMware simplifies IT complexity across the entire data center to the virtual workplace, empowering customers with solutions in software-defined data centers to hybrid-cloud computing and mobile workspaces.
AF. That sounds complicated. Let’s talk treasury instead. Tell us what you and your team have done to develop treasury to support the company’s growth.
TK. Since joining in 2008, the focus has been on building a world-class team to scale with the relatively high growth of VMware, the international complexity, the integration of newly acquired entities, the evolving business model and of course the ever-changing regulatory environment. I started with a staff of one; now we are much larger, with regional treasury centers in Europe and Asia. By way of treasury milestones, we (1) implemented a balance-sheet FX hedging program in 2009; (2) created our $1.7 billion-fixed income investment portfolio across multiple asset managers in 2010; the portfolio has since grown significantly and is now about $4.6 billion; (3) initiated a share repurchase program in 2010 and have bought back over $2 billion worth of stock from inception to date; (4) implemented a cash flow hedging program in 2011 to hedge certain local currency expenses; (5) negotiated financing for the 2014 acquisition of AirWatch for $1.5 billion; and (6) implemented a treasury management system this year.
AF. Founded in 1998, VMware is a growing corporate “teenager.” What are the objectives and key considerations when developing policies that will set an appropriate framework to guide treasury’s work?
TK. Our guiding principles center around cash preservation, liquidity management, and risk management. In the context of cash preservation, we have centralized control over cash movements, access to bank accounts and signing authority. Local signers are rare, and only where required by local regulations. Regarding liquidity and risk management, our principles are aligned with funding our business investments, managing FX volatility and return on capital within our established risk tolerances.
The dilemma is finding the right balance between centralized control and local support in different time zones. That’s important not only for certain routine local treasury requirements, but it can also be incorporated into a business continuity plan. For example, if a natural disaster were to knock out the California HQ, international locations could provide crucial treasury coverage.
AF. What are the factors of success for what you’ve accomplished so far?
TK. Without a doubt, securing and developing the right talent to scale with the business, and we do this with rotations, training, clear communication and empowerment in decision making. Another factor is putting the highest priority on improving cash-flow generation and forecasting. Third, the evaluation, approval and implementation of a TMS have enabled the automation and efficiency required to free up our people to do higher-order analysis and thought leadership.
AF. Speaking of systems, what kind of tools do you have at your disposal to execute treasury’s processes?
TK. The systems we have in place include systems for cash management, bank administration, investment management, and FX funding and risk management. We have invested heavily in systems for automation which drives efficiency and also reduces the risk of errors.
AF. Growing a company isn’t always smooth sailing. What are the risks you see from a corporate and treasury point of view?
TK. Like any other large company, we are vulnerable to broad macroeconomic risks. Generally speaking, every Treasury department also faces risks from cybersecurity threats and fraud. The regulatory environment remains complex as well. At VMware, we prioritize hiring, developing and retaining our talent to mitigate risks and continue to support the company.
Looking Ahead
AF. What’s next in support of VMware’s growth and treasury’s excellence goals?
TK. We will continue to make process improvements, implement new systems and tools so we can adapt to the changes in the market, new regulations and impacts on our liquidity and risk management strategy. And of course, in this process, we are seeking to ensure that treasury becomes a trusted advisor, integrated with peer finance groups and senior VMware leadership.
AF. What’s next in support of VMware’s growth and treasury’s excellence goals?
TK. We will continue to make process improvements, implement new systems and tools so we can adapt to the changes in the market, new regulations and impacts on our liquidity and risk management strategy. And of course, in this process, we are seeking to ensure that treasury becomes a trusted advisor, integrated with peer finance groups and senior VMware leadership.
AF. Thanks for your time, Tina. We wish you and VMware continued success.