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Treasury player widens services

NOT many businesses have a client base as diverse as Oakvale Capital.

Its clients range from international grocery group Foodland and mineral sands miner Iluka to health fund HBF, the Qantas staff credit union and the Congregation of Christian Brothers.

What all of these organisations have in common is the need to manage financial risk.

Over 15 years, Oakvale has built a substantial business as specialists in the field of financial risk management.

It has more than 120 clients in Australia and New Zealand, including AHG, Austal, MG Kailis, Keystart Loans, Forrestania, LionOre and Kagara Zinc.

Managing director Jim Cunningham is planning further growth, with the launch of a new ‘back office’ service for corporate treasurers.

Mr Cunningham expects the implementation of international accounting standards in 2005 will provide a further boost, by forcing businesses to move away from their reliance on spreadsheets.

“There is no doubt, if you are using spreadsheets, with what’s going to happen in the next three to four years with new accounting standards, you are going to really struggle to comply,” he said.

The breadth of Oakvale’s current business is a far cry from its origins 15 years ago, when Mr Cunningham was treasury manager of merchant bank Fincorp.

He joined Fincorp one week before the 1987 stockmarket crash, and found that Fincorp’s fate was tied up with another former WA merchant bank Rothwells.

“The government said, we don’t want Rothwells type organisations running around, whether they were well run like Fincorp or very badly run like Rothwells.

“Over time they regulated merchant banks out of the market, and that was the right decision.”

As a result, Mr Cunningham’s core job, managing a $50 million loan book, disappeared.

As a sideline, he had been providing some treasury advice to a handful of companies, including helping Foodland manage its interest rate risk.

“It was so successful that they decided to make it a permanent arrangement and pay us a monthly retainer,” Mr Cunningham said.

This sideline provided the genesis for the current business.

“It was really as we wound back the merchant banking loan book and repaid all the funds we had borrowed that Terry Strapp and I sat down and said what are we going to do in the future?” Mr Cunningham said.

“And Terry asked, this work we’re doing for Foodland, can we extend that on to other organisations?”

The company decided to broaden its services by recruiting Liam Twigger, who has since established Prime Corporate Finance, to provide bullion risk services, while Greg Madden, who now works for Credit Suisse in London, was recruited to advise on foreign exchange risk.

Oakvale Capital was formally established in 1994 when Allied Group’s corporate advisory business, known as Campbell Capital, merged with Fincorp’s treasury advisory business.

Mr Cunningham said the intention was to offer a full package of corporate finance services.

While the corporate advisory segment was originally the larger part of the business, treasury services achieved greater success from the outset, to the point where Oakvale eventually specialised in treasury risk management.

The company opened a Sydney office in the mid nineties and diversified further into treasury consulting.

“We help companies put in policies and procedures on how to manage their treasury,” Mr Cunningham said.

“We put a proper structure in place, link it to the business, and what the business is trying to achieve.”

Mr Cunningham emphasises the need for companies to have a disciplined approach.

“It includes segregation of duties, what authority the board gives management, what reporting the management have got to do back to the board, what systems, how much hedging you can do, a real structured approach.”

Oakvale’s next move was to develop more sophisticated treasury systems, initially for itself and then for its clients.

Mr Cunningham said the goal was an online treasury system that was affordable for SMEs.

“We could see the way the market was heading. Spreadsheets would not be good enough to keep up,” he said.

“We felt there was potential for a product where we could take small and medium-sized companies off a spreadsheet and give them an integrated treasury system but it would be our treasury system that they could access through the web, so they get all the benefits but don’t have to pay all the upfront and ongoing costs.”

About 17 companies use the Acorn system and Mr Cunningham expects the adoption of more onerous international accounting standards will cause that number to grow.

Oakvale also partnered with Sydney firm ProTecht to develop a risk management system for non-bank financial institutions.

The 15 users of this system include Australia’s largest credit union, Credit Union Australia and building society IMB.

Another initiative was the establishment of an asset consulting division, to invest the cash reserves of organisations with surplus funds.

Oakvale’s clients in this area include local government agencies, charities, and health funds, including HBF.

It’s latest initiative is the launch of a ‘back office’ service for mid-sized companies.

“The problem with most organisations is that they haven’t got the systems and the people to back up the guys who are making decisions in the treasury side,” Mr Cunningham said.

“We can now offer a complete back office service to medium-sized companies.”

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