From the June 2011 issue of Treasury & Risk magazine

Crisis Mode in Japan

To keep operations running, treasury pros had to move quickly to shore up liquidity, cover currency exposures and investigate supply chain damage. Now comes the recovery.

Rio Osumi, director of Japan treasury for Intel Corp., was working on a presentation at 2:46 p.m. on Friday, March 11, when the room started to shake. She dove under her desk. The 46-year-old Tokyo native wasn’t panicked. The take-cover move she had been taught in grade school was a reflex. But Osumi knew this was different. “It was shaking violently, up and down,” she recalls. “Usually it shakes horizontally. I knew this was a bad one.” Once again the orderly world of treasury and risk management plunged into crisis as the world’s third largest economy suffered an unprecedented disaster.

Multinational treasury staffs deployed quickly to shore up liquidity, cover currency exposures, investigate supply chain damage and react to risks that were hard to predict.

In the sensitive world of just-in-time inventory, Ford anticipated some production slowdowns. It moved to minimize the cost by juggling the schedule for plant downtimes that are a normal part of auto production, moving them up for some plants and back for others, so that they would  be in sync with production and inventory revisions, Schloss explains.

Ford gained planning time because of its physical distance from Japan. “Most of the parts we get from Japan come by boat, so that gave us quite a bit of pipeline,” he says. Looking at Ford’s working capital numbers, Schloss sees no blips that would indicate slower collections or stagnant inventory build-up.

Although there was no general crisis at Honeywell, the disaster touched off a vigorous review process. “We have a robust business process around our supply chain,” says John Tus, treasurer and vice president. “Once the earthquake and tsunami occurred, each business unit went into action to gauge the impact on their suppliers and customers and to report what they expected. We’d do this in any disaster.”

The experiences of the Intel, Ford and Honeywell treasuries provide a window onto the problems for business plans, budgets, cash forecasts, and property insurance availability and pricing. Dislocations could be far-reaching.

Another issue is attracting the right personnel to Japan. By the time that the damaged Fukushima nuclear reactors added a third element to the disaster, multinationals were pulling nonessential executives from Japan and bringing them home for safety and consultation. “Now some are finding it hard to get senior people to move with their families to Japan,” says Torsten Kaehlert, head of transaction banking in Japan for Standard Chartered Bank.

The disaster in Japan may be unprecedented, but after a slew of natural disasters starting with Hurricane Katrina in 2005, treasury staffs have learned how to operate in crisis mode.

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