Financial Management Excellence Award: SCG
This is an era of accelerated uses of technology which anyone can manage their financial transactions on the internet network and smart phones. The lives of human beings are affected by an active role of the digital technology, making online financial transactions part of daily life. Thailand was among the first in ASEAN to adopt the UN e-commerce law, develop the national e-payment masterplan, and enact laws to support online transactions to facilitate safer and easier online financial transactions – promoting a cashless society. On a business side, leading organizations have launched their financial and business applications to accommodate money transfer through digital information system. The COVID-19 disruption certainly speeds up the online business practices and thus digital payment transactions. The innovative digital payment system allows consumers and businesses alike to manage their financial transactions and keep records of income and expenses with ease and speed. Transaction abnormalities can be recognized immediately with a notification of thecorresponding application and reviews of the transactions are at a fingertip. For example, a traditional paper process involving accounts payable can be fully digitalized, from customer invoices to payments, thus allowing for a remote invoice processing. Businesses must adapt to a new normal and invest significantly in the digital technology and automation (e.g., artificial intelligence and cloud-based applications) to prepare for the future.
In 2020, the Financial Management Excellence is awarded to the Siam Cement Public Company Limited (SCG) for its endeavor to be at a forefront of a digital organization. SCG is a leading business conglomerate in the ASEAN region that commits itself to good corporate governance and sustainable development throughout her 100 years’ history. The company’s longstanding tradition of learning, adjustment and development enables SCG to survive wave after wave of crisis and challenges. Here are the outstanding practices for its financial innovation, financial operations and sustainability development.
SCG collaborates with Digital Ventures Co., Ltd. to launch a fully integrated blockchain solution for Procure-to-Pay to facilitate the procurement process that delivers the convenience and ensure the security and transparency of the company’ssupply chain network. The company joins Thailand Blockchain Community Initiative to develop a letter of guarantee (LG) platform on blockchain to facilitate the LG issuance andrenewal process that instantaneously delivers to the beneficiaries.
SCG implements its own-developed Advance Financial Management System (AFMS) to optimize the back-office operations (e.g., cash management, promissory note issuance, foreign exchange (FX) transactions, hedging, etc.) through the integration between the company’s enterprise resource planning (ERP) system and the bank interface functions. In addition, to facilitate the company’s bondholders, SCG implements the online debenture subscription through Money Connect by Krungthai.
Recently, SCG signs a memorandum of understanding (MoU) with the Bank of Thailand and Digital Ventures to develop a prototype system of Central Bank Digital Currency (CBDC) to enhance the efficiency of purchasing and payment processes.
SCG centralizes its corporate financial functions including the cash management, debt financing, foreign currency hedging, commodity hedging, insurance policies, liquidity management, and financial risk management to gain competitive advantages. SCG manages its group liquidities by pooling cash from subsidiaries to maximize benefits from cash surplus and minimize negative carrying cost. One outcome is a low refinancing cost, especially with the domestic debentures.
Suitable Capital Structure and Financial Performance and/or ROI
SCG’s financial performance is resilient through multiple economic expansion and contraction. Since 2008, the Net Debt to EBITDA has on average remained below the internal target level of 2.5x.
Risk Management Plan
SCG appoints the Financial Committee to superise an integrated FX risk management. For example, operational FX isk is natuarally hedged-matching revenues and expenses in foreign currency. Hedging instruments suh as plain vanilla swaps
and options are applied to reduce the risk from commodity price fluctuation to maintain competitive in the global market. Recently, in the global market. Recently, due to the US-China trade war, conflict in Middle East and COVID-19, SCG re-assesses the situations to evaluate their impacts on SCG businesses and prepare the corresponding contingency plans.
SCG honors all stakeholders by adhering to the businesses with ethics and responsibility for sustainable mutual benefits. Sustainable business growth and financial performance allow the company to deliver a steady dividend payout ratio for its shareholders since 2004. Another stakeholder recognition is that SCG also treats all creditors (i.e., financial institutions and bondholders) equally.
Transparency and Accountability in Doing Business
SCG sets its sustainable development framework in accordance with the global practices, covering three dimensions of the economy, society and environment. The company’s business operationsare aligned with the corporate governance principles to ensure fairness, transparency and accountability in accordance with its business philosophy “Adherence to Fairness.” Specifically, SCG has in place the proactive and preventive system, ethics e-testing for employees, three lines of defense for risk management and internal control, and anti-corruption case studies, among others.
Awards and Recognition
In 2019, SCG earns the Sustainability Award of Honor and Thailand Sustainability Investment Award at the SET Award for the 5th consecutive year from the Stock Exchange of Thailand. The company is rated “Excellent” in the Corporate Governance Report of Thai Listed Companies by the Thai Institute of Directors and scored 100 points in the AGM checklist evaluation of listed companies by the Thai Investors Association.
One nominated company uses 10 robotic process-automation (RPA) software robots to replicate routine and manual tasks to execute more than 130,000 of payment transactions by running non-stop 24 hours (holidays included), resulting in a saving of overtime costs by about 600,000 baht per month. This nominated company invests and fosters digital innovations by partnering with other companies and startups to enhance internal capabilities. For advance risk management practices, this company identifies and assesses the three emerging risks including the climate change risk, cybersecurity risk, and artificial intelligence and big data risk.
Another nominated company emphasizes financial stability, taking into consideration the well-being of all stakeholders (e.g., steady returns to shareholders, compliance with the UN SDGs -- United Nations’ Sustainable Development Goals). This nominated company invests in a renewable energy by installing solar panels on rooftops that generate the clean energy of 9,045 megawatt hours (i.e., equivalent to 33.9 million baht) in 2019. The company also implements a crisis management plan during COVID-19.