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Holding down the fort during a crisis Add to ...

When an Enbridge oil pipeline suffered a serious rupture last summer, the company's chief financial officer Richard Bird was thrust into a crisis-management role. But he was not on the ground in Michigan, where the spill occurred. He was one of the team who stayed at home to run Enbridge's other businesses while colleagues, including chief executive officer Pat Daniel, were on the accident's front line. At the same time, Mr. Bird had to keep on top of one of the country's most demanding finance jobs - for which he was last year's co-winner of the CFO of the Year Award.

As part of the family that built Bird Construction, why aren't you in the construction business?

I'm in that business to the extent that I sit on the [Bird Construction]board, but that's not my calling. It's not a capital-intensive business. My interest has always been in capital markets and large projects, and securing capital and deploying it.

What's the secret to being a CFO in a capital-intensive business with so much uncertainty about projects?

One important thing is liquidity - making sure that you've got the cash. When you get into developing big projects, you make commitments. You can't just turn those projects off if, for some reason, things aren't going well in financial markets. Having liquidity is important to being able to fulfill your commitments and to seize opportunities when they come along. That's a big part of my approach.

For us, access to liquidity means committed lines of credit with banks - what is sometimes referred to by our banks as being a credit hog. I think we have more bank lines than any other Canadian company, and we generally run, depending on our activity on projects, $6-billion to $8-billion of bank facilities. That would span all the large Canadian banks, most of the large U.S. banks, and many of the large European and international banks.

Is that liquidity emphasis shared by other pipeline companies?

I suspect you'd find that in most other companies in our industry, but probably not to the extreme we take it. As a result, even though we were in the midst of the biggest capital program in our history - a $12-billion program - we skated through the entire financial crisis without going to the capital markets. We waited until it was over, got in and got some very attractive permanent financing once the storm had passed.

Your crisis at Enbridge was not financial but a physical calamity in terms of the Michigan spill. What was your role as CFO?

There is a very significant financial support aspect to any crisis. We were there rallying tremendous amounts of resources at very short notice. There is an extensive administrative process that goes into that, making sure it is done right. One reason is you will have to account ultimately to your insurance companies for the money that you spent. You'd better be able to demonstrate that you've done a thorough job in managing that spending process.

So there is a financial support process - payment of claims, contracts, and insurance administration that is behind the scenes - and it is important to feed the machine.

Does a crisis require you to step out of your normal role?

There are other parts of the business which aren't involved in the crisis but require executive leadership during that period when the CEO's attention is fully focused on the problem. That was the role of myself and other executives who were not directly involved in the crisis. [The spill]pulled quite a lot of our bench strength down there [to Michigan]but a couple of us had to be minding the shop.

And certainly the financial management of the business goes on all the time anyway, so my day job continued to be overseeing that aspect.

And you didn't actually go to Michigan?

I wasn't on site, and that was part of the overall management - to make sure we weren't all completely preoccupied with that one thing.

Are you knowledgeable about the rest of the company?

I've been CFO for just over three years but I have been with the company for over 16 years. I am pretty familiar with all aspects of the company and ran the liquids pipeline operation for many years. I know all of our operations pretty well.

It's not a prerequisite [to being CFO]but it helps to have that in-depth familiarity with the operating side.

What is your PhD all about?

I have a PhD in managerial economics from the Faculty of Management at University of Toronto. My thesis was a pretty theoretical piece of work - optimal guidance of economic systems. It was the application of mathematics to the solution of complex economic systems that can be characterized by a large mathematical model.

Were you going to teach?

I did teach at the Queen's School of Business for about six years but that wasn't really the plan. I had graduated with my MBA at a point in the business cycle when there weren't that many really interesting jobs. I decided this wasn't the time to get out in the job market, so maybe I'll just stick around for a few years and add a few more initials to my name and then move out into the business world.

My intention was not to be an academic. My interest was always applying advanced concepts in financial management and capital investment analysis to large capital projects in business.

Was the time in academia a worthwhile detour?

It was all formative and it didn't hurt. Some of the learning is still part of the framework I bring to my job - so it was generally helpful.

When I do occasional presentations on my CFO of the Year status, I make a connection to that past - to approaches I studied that we now bring to bear at Enbridge. It has a lot to do with how to source your capital to minimize its cost and deploy it to make sure it is generating value for shareholders. My topic is "Creation and Preservation of Shareholder Wealth." Capital investment decision-making has probably been the single theme of my career.

The Gateway pipeline from Alberta to the West Coast is potentially Enbridge's next big challenge. Are you getting ready?

The actual spending on Gateway is far enough out that this would be a little too soon to be packing away liquidity for that - but we certainly have to design the financial structure of Gateway. It will be project financing for a $5.5-billion project. It will involve a fairly intricate financial structure to bring it about.

What's next in your career?

I enjoy what I am doing - it's the ideal job with someone with my interests and background. If I've got another career, it's one that I would try to overlay on what I've already got - to be a champion for career and professional development in the company.

 

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