Financial management - keeping ahead of the risks

20 March 2018

Jon Boaden, Group Financial Controller of Williams and the winner of the Cracking the C-Suite code competition from the last issue, outlines some of the unique challenges of financial management in one of the world’s most glamorous industries.

Williams is an iconic name in motor racing. The team has won 16 FIA Formula One world championships and founder Sir Frank Williams has been feted not only for his sporting achievements but also for his promotion of UK business overseas – the company has two Queen’s Awards for Export Achievement.

Starting from a small group of just 17 in 1977, the company now employs more than 700 people at its technology campus in Grove, Oxfordshire.

Group Financial Controller Jon Boaden has been with the company since 2015. Balance is a word that crops up regularly when he talks about the work of the team and his role in particular.

“When it comes to the construction of the car, we need something light, resilient and reliable and it is the same in my world,” he says.

“It is about trying to get that balance between allowing the performance to come through and investing in particular areas while ensuring that, from an overall profit and loss perspective, the financial dynamics are working correctly.”

Williams gets its power units from Mercedes and, given the importance of these units to the performance of the cars, this is a crucial relationship.

However, it is just one of the partnerships that underpins the company’s ability to perform at the highest level.

“Martini is our title partner, but we also work very closely with other brands including Unilever and BT, to help them achieve their commercial objectives,” explains Boaden.

“They are looking to maximise the value they get from their partnership with the team, so they will work with us to do activations which promote their brand and engage consumers, such as the Terrazza Martini, or an in-store promotion for Rexona.

“This generates a lot of publicity and is a very important example of the way we deliver value to our partners.”

Motor racing revenue streams

In addition to sponsorship, the company receives prize money every year based on its finishing position in the previous year’s championship.

Its third revenue stream is its advanced engineering business, which accounts for a quarter of turnover and generates cash that is reinvested into the racing part of the business.

Boaden observes that the big variable is the prize money – sponsorship is fixed for the season and the engineering side is controllable.

“You don’t want to end up in a situation where performance is not where you want it to be, so you have less money to spend on the car next year, which in turn affects performance so you end up in a vicious circle,” he says.

“The challenge in Formula One is that you are thinking and investing in performance over a period of years.”

While Williams has achieved significant success over the past four decades, Boaden acknowledges that some of that success happened a relatively long time ago.

“We are very focused on looking towards the future and getting back to the level of performance we all aspire to and everything has to be the best to do that – the sponsorship deals, the drivers, the cars, the engineering,” he says.

“It is a big spreadsheet and there is a lot of risk to manage.”

Business interruption

Boaden accepts that articulating the value of risk management to the board can be a challenge, while adding that Williams appreciates that it is involved in some pretty high-risk pursuits.

“We are producing a car that is at the limits of what is technologically possible and asking someone to drive that car at the limits of what is humanly possible, so we try to make things as safe as possible, and there are systems and processes in place to ensure that,” he says.

Then there is logistical risk relating to sending between 70 and 90 people around the world to 20 different events with a huge amount of equipment.

“We also run to very tight tolerances in terms of what we produce in the factory and the time available to produce things,” he says.

“Business interruption is something we are focused on, understanding that if there is a problem in the factory it could stop us racing and we might have to go out and source components at a massive premium.”

“In relation to engineering consultancy, there is an indemnity aspect to the quality of the professional advice we deliver and a product aspect relating to products we manufacture that are going to other assemblies,” adds Boaden.

As Williams works more with automotive companies, it also has to look at issues such as product recall.

Boaden observes that some of the large automotive companies have firm views about where risk should sit in the supply chain and, if you want to be part of that supply chain, you have got to be comfortable that you can cope with that.

“That package has got to work for us in relation to the commercial return, the risk that we are taking on, whether we want to insure it or not and the legal protections that we can put in place,” he concludes.

Williams: key facts and figures

  • Participating in F1 for 40 years
  • 30-40 tons of freight moved to each race
  • 114 race wins
  • 20 races across five continents in 2017
  • 50,000 parts required to be manufactured for the first three races

For more information please contact Hamish Robert, Business Development Director on +44 (0)20 7528 4141 or email hamish_roberts@jltgroup.com.

YOU MAY ALSO BE INTERESTED IN