The chief financial officer of Micro-Mechanics, Chow Kam Wing, was named CFO of the year in the 2008 Singapore Corporate Awards for, as the company's mission states, "doing things right".
Since its founding in 1983, Singapore-based Micro-Mechanics has grown to be a major designer and manufacturer of precision tools, assemblies and consumable parts that are used in semiconductor manufacturing and testing by customers around the world. Its operations include: six manufacturing facilities in China, Malaysia, the Philippines, Singapore, Thailand and the US; sales offices in China, Indonesia, Switzerland, Taiwan and the US; and a distributor in Japan.
Chow spoke to FinanceAsia about how Micro-Mechanics' treasury has contributed to the company's success.
Please describe your role at Micro-Mechanics.
I am currently the group CFO, company secretary and an executive director on the board of directors. I have been at Micro-Mechanics for 14 years and our group's finance team comprises of about 30 great people who are based at our six different manufacturing locations.
My major responsibilities are to oversee the accounting and finance function and IT system, risk management, compliance, corporate governance, decision support to the board and strategic planning. In addition, I take on the role of being a watch dog for our stakeholders.
What is Micro-Mechanics' cash management strategy?
When the financial tsunami hit the global economy in 2008, our balance sheet had almost 30% of our assets in cash and no bank borrowings. One of the reasons for this sound and clean balance sheet is our effective cash management.
Our cash management strategy is simple and straight forward. All of our payment terms with our customers are open credit from between 30- to 60-days. The key is collecting our receivables in a timely manner. We have a dedicated finance team and a monitoring system to focus on handling collection. To provide an incentive to our staff, we have a performance measurement on collection of receivables.
We also have a longstanding practice of paying our suppliers promptly, normally within 30-days. Even during the financial crisis last year we maintained this practice. We have two reasons for doing so: firstly we value the importance of having a reliable supply chain for our business and believe this is achieved by building strong long term relationships with our suppliers; and secondly, prompt payment helps our suppliers with their cash flow, particularly during difficult business periods.
Would you call this a centralised treasury?
Our treasury model is a blend of centralised and decentralised models. Subsidiaries have autonomy to handle their own treasury matters while the holding company's focus is more on monitoring the group's overall cash position and risk management. We tend to keep minimal cash balances in our subsidiaries. This is achieved by up-streaming dividends regularly to the holding company which forms part of our risk management and control.
How do Micro-Mechanics' subsidiaries and overseas operations fit into the group treasury?
We have a consistent and simple treasury management system for all of our subsidiaries based on the arm's length principle. All subsidiaries treat each other like suppliers and customers, while the holding company is treated as their investor. In other words, inter-company payables and receivables are settled according to the credit terms and dividends are paid yearly to the holding company.
To facilitate our treasury management, we standardise the weekly and monthly reporting systems and formats which in turn assist our decision making process.
In 2008 you won the Singapore Corporate Award for best CFO. Could you describe your road to success?
The CFO award was a great encouragement. It showed that we had been doing the right things and that we are moving in the right direction.
Micro-Mechanics' unique culture was a critical success factor. Our management team has a strong sense of corporate governance and business ethics which we continually work to instil at every level of our organisation. Since our IPO [initial public offering] in 2003, we have received a number of awards for our corporate governance and transparency from the Securities Investors Association and other overseas organisations. In fact, this culture helps up to retain good people especially for our finance team. Our people say they can sleep well as they have the assurance that things are done the right way.
Micro-Mechanics has a very multinational management team, is that an important factor for the group's progress abroad?
The management team of Micro-Mechanics comprises different nationalities -- our CEO is American, our COO is Singaporean, our VP is Swiss and I am from Hong Kong originally. We have five factories in Asia, one in the US and a sales office in Switzerland. This unique mix of eastern and western cultures in our management team really facilitates our business in today's globalised environment. "Think globally and act locally" is the key to our success.
Our focus is mainly in the semiconductor business although we have been gradually diversifying to other high tech industries such as aerospace, instrumentation and medicine. We are constantly striving to improve our competitive advantage; by transferring technology from the US and Europe to our Asia factories where we have the benefit of a lower cost for example.
Looking ahead, what plans does Micro-Mechanics have for its corporate treasury?
Our priority has always been to maintain a sound and clean balance sheet. Because of the recent financial crisis we expect changes with laws and regulations in the banking system, monetary policy and volatility in foreign exchange rates. The next financial crisis is just a matter of when and we believe in the importance of always being prepared.
To keep our business rolling and growing we see the need for a more rapid response in our system. We are currently putting an integrated enterprise resource planning system into place for our whole group to enhance monitoring of the business and to strengthen our external and internal treasury operations in preparation for any uncertainties that may lie in the future.
