My instinctive sympathy is with the fall guy in last week’s story that Greenpeace International has fired a member of its Amsterdam finance team for losing 3.8 million euros on “an ill judged contract aimed at managing foreign currency exchange costs.”
I also work in finance for an international NGO, fortunately a much smaller and less complex organisation than Greenpeace. We receive most of our income in euros and dollars, our corporate accounts are in sterling and our expenditure occurs in a mix of the world’s poorest countries. This is a classic profile for exchange rate losses.
There are common sense ways for small non-profits to manage the risks. By far the most important is to make sure that relevant financial skills are represented on your board and at the highest level of influence within the executive.
I’ve no inside track on Greenpeace International but this basic principle of financial governance appears conspicuous by its absence, at least on the evidence of an hour or two of surfing obvious reference material. The “complete independent audit” promised by Greenpeace to sooth angry supporters might usefully make a start with the senior management organisation chart? Notice anything missing?
The Head of International Finance is off the chart to the right, reporting to the Organisational Director, three tiers distant from the Executive Director. That will surely change.
Occupancy of all the positions in the lower half of the organisation chart has been in flux over the last year or two, doubtless a further aggravation for the finance team. There are signs that a UK troubleshooter on NGO finance has been installed in Amsterdam for most of 2014.
At Board level, the Treasurer of Greenpeace International is Ed Harrington, whose financial credentials draw on senior management experience for San Francisco local government and utility bodies, not exactly the sharp end of multi-currency risks.
Somewhat better qualified is Steve Francis, an accountant from the European life assurance sector. However, it’s not clear from Greenpeace publications which of these two board members has direct responsibility for finance (and therefore for that hole in the organisation chart – and for currency risk management policy). Both will presumably make a decently hasty exit.
Full details of the hedging contracts will of course emerge from the audit, if not before. The extent of the loss appears surprising in relation to the amount of cash potentially available. Greenpeace International accounts suggest that the total face value of the contracts is unlikely to have exceeded 15-25 million euros. Losing 3.8 million sounds more like betting the farm than hedging risk.
All this is guesswork but, if I was a Greenpeace donor, I’d like to know which bank or currency trader was hawking such a toxic bundle of futures and whether that institution observed proper process for executing the customer agreement – and for disclosure of risks on the specific contracts.
The Independent in the UK reports that the Greenpeace finance employee obtained the necessary second signature on the trading contracts from a junior rather than senior colleague, this by implication being the sackable offence.
My imagination readily paints a picture of the context ……that there were foreign exchange losses of 600,000 euros in 2012 (for the normal reasons), creating pressure on the finance team to “do something”, a recognised slippery path to bad advice. The team member had become hardwired to coping with a vacuum of financial competence in the corporate hierarchy and instead turns to a colleague to make it happen. There but for the grace of God……
Greenpeace International has obtained the headlines it wanted – invoking speculation, bad bets and gambling by a rogue individual. The public story will probably end there. For the sake of the world’s most incisive environmental campaign group, I hope there’s a radical repositioning of finance within the governance structure.
Greenpeace International statement on foreign currency exchange losses
Greenpeace loses £3m of public donations after currency gaffes from The Independent