Faced with managing myriad bank accounts and payment data from 40 ERPs across 100 countries, the treasury team at ABB embarked on a centralisation project that has dramatically improved cash visibility, generating efficiencies and bolstering controls.

Towards the end of 2017, the treasury team at technology multinational ABB began a project that would simplify the way it managed its bank accounts, drive efficiencies in cash management, and ramp up controls around payments.

Oliver Schrüffer, Corporate Treasury Manager, ABB, explains: “We wanted to have a central platform that enabled us to have visibility of
all ABB bank accounts and then to track the entire life cycle of a bank account. In addition, when all the bank accounts were in the system, we wanted to design a new process around the life cycles, the requests, and approvals, so that treasury maintains, reviews and activates them.”

Visibility over all of ABB’s balances was a vital goal of the project. Previously, this had been
a somewhat manual exercise that involved collecting all the balances from the bank at month-end. The new project targeted having all account information available on request in one system that is updated daily.

“The quest for visibility over our bank accounts has been good for the company,” comments Schrüffer. “We’ve brought our treasury system landscape and processes into the future. Also, having all the relevant data on one platform makes it available to all stakeholders in a single place. Once the accounts and balances were there, we connected all our ERPs. This created a payment hub, enabling us to route all payments from the source systems. We have a central platform, pushing payments through one standard approval process and sending them on to the bank.”

A momentum for change

Since the treasury project at ABB launched, much positive progress has been made. Various business units and other stakeholders have contributed and are seeing the benefits. There is a clarity to having one platform and one process that has helped increase transparency and efficiency within treasury and to all the other stakeholders.

“It was all about change management – at the beginning, there was some resistance, people wondering why we were doing this now and commenting that the existing process was working,” reflects Schrüffer. “But the new system and processes have been adopted, and it’s working well.”

This adoption has represented a shift in the ownership of the banking and payment processes in ABB. Before 2018, much of the control resided in the individual country business units, as Schrüffer recalls.

“The in-country business used to have ownership of all of the processes, organisations, systems and the business,” he explains. “Our project represented a change away from this, towards much greater centralisation.”

System support is essential to achieve this. The project’s goals would not have been met if various systems had been maintained because that would have diluted the efficiency.

“The key is to have centralised platforms and standard processes, as that enables a business to centralise the activities,” enthuses Schrüffer. “ABB’s legacy is that of a conglomerate, growing through acquisitions, and there have been spin-offs and some divestments as well.”

Indeed, since the treasury project began, a new initiative called the Finance Transformation Programme has been launched within the overall ABB organisation, which shares some similar themes to the centralisation and automation project that Schrüffer and his team have been working on.

Cash is corporate

The drive to centralise treasury banking and payments processes has significantly impacted ABB’s cash management processes and efficiencies.

“For us, cash is king, but also cash is corporate,” underlines Schrüffer. “Of course, the business is generating the cash flows, but in the end, the cash is with corporate, so we need to manage it efficiently. This project has been about promoting cash visibility and then adding controls around that as we need to mitigate the risk. We need secure and integrated systems and processes to mitigate fraud.”

At the beginning of the project, ABB was running around 40 different SAP ERPs globally, hosting operations in more than 100 countries. Today, that number is a little lower, but the most important factor is that all relevant treasury data flows directly into the treasury platform from the ERPs.

“We have connected around 32 ERPs to our central platform,” adds Schrüffer. “That means whenever
a business unit anywhere in the world makes a payment, it goes via our central platform. We control these payments, and there’s a standard approval process. It also enables us to process payroll payments – this always used to be tricky, but the platform is powerful. It is like a third-party banking platform, but it’s central, and we can connect all our banks and payment sources.”

The net impact of this systems integration is that it has enabled ABB to centralise all treasury operational activities significantly. The central treasury platform is used by centralised regional operational teams to work more efficiently on liquidity management tasks using standard processes.

“The system does most of the work,” explains Schrüffer. “Having this one platform means we have immediate access to our bank accounts and payment information, and indeed everyone that needs to make a payment has the same access.”

The fact that ABB’s banking partners are also connected to the multi-bank platform means that the days of using various banking portals are over. However, treasury has decided not to ditch proprietary banking technology completely.

“We still have banking portals there as a backup in case of an emergency,” reveals Schrüffer. “We’ve been able to remove all of the localised solutions we’d used, which always required some specific knowledge. Everything with the new platform is well documented, which is the key to being more efficient.”

Taking control

ABB’s treasury platform also has a standard workflow approval process, which adds a necessary layer of control over the increased efficiencies and automation.

“We were focused on how we could get all of our data processes locked down because this is extremely sensitive and important information,” says Schrüffer. “As such, we implemented very secure connectivity channels, and once the data is in our central platform, it is set up so that no one can change it. It’s collected and stored but can’t be altered. There’s an approval process on top of that, which acts as a reconfirmation.”

The tools in place to monitor cash flow and payments have offered some great functionalities to the ABB treasury team, as Schrüffer highlights.

“The system supports duplicate check controls, which will show us if we received a payment file before or whether a manual payment had already been made, for example. In the past, we could only really discover these issues in hindsight – we used some tools to scan to see if we had paid something twice after the event. Now that the check is made before it goes out, the system will notify us that we already made that exact payment and ask if we really want to send the new one.”

It does not matter whether a duplicate payment is the result of a mistake or potentially fraud-related, treasury gets to see everything on one platform. This makes the whole process far easier to control. While that does not mean everything is completely secure, treasury knows which users can access the system. Risk has also been reduced thanks to the new streamlined process, which means that staff no longer have the authorisation to make payments directly through the banks.

“There is still some work ahead of us, but one day, I would like to see everything go through the central treasury system,” concludes Schrüffer. “We are always looking at what else we can improve, but this has been a big step forward in the right direction.”

Julle Pedersen, Director, Treasury, and Piero-Luigi Fratini, ESG Finance & Reporting Manager, Europe, Middle East, India, Africa (EMIA) Bridgestone

Many treasurers are pursuing a proactive ESG or environmental, social and governance (ESG) agenda, but Bridgestone has been a pioneer, both in placing ESG objectives at the heart of its business strategy, and taking a structured, data driven approach to the sustainability agenda in Treasury.

Embarking on an ESG strategy

ESG has been at the heart of our company culture from the start, with a guiding principle that a business that contributes positively to its society will be profitable. In recent years, this principle has informed our ESG strategies and priorities. As a treasury and finance function, and more widely across the business, we are always looking at how we can accelerate and enable the journey towards a more sustainable society.

These aims are not simply broad ambitions, but measurable objectives reflected in key performance indicators (KPIs), such as carbon emissions, use of sustainable materials and the environmental impact of our tyres. Our goal is to achieve carbon neutrality and 100% use of sustainable materials by 2050. In the meantime, we have milestone 2030 targets for a 50% reduction in carbon emissions compared with 2011, and the use of at least 40% sustainable material to manufacture our tyres.

Our ability to meet these aims requires lot of investment, a great deal of R&D work, significant financing activity and the need for transparent reporting.

Approaching sustainability in treasury

We recognise that to achieve our sustainability goals, we need to look beyond our own organisation and across our supply chain, and influence behaviours and priorities. To do this, we have implemented a sustainable supply chain financing programme as a useful step in incentivising our suppliers to improve their sustainability scores whilst also benefitting from improved liquidity. We have also been proactive in refining our governance structures and data to support more rigorous reporting requirements to give our internal and external stakeholders greater confidence in both our financial and ESG performance. Some examples of the initiatives we have undertaken include the following:

Carbon pricing

We have adopted a range of different strategies to achieve our financial and ESG objectives in a balanced way. For example, internal carbon pricing (ICP) is a voluntary tool that we have introduced globally. The idea is to place a monetary value on greenhouse gas emissions, which we then factor into our investment decisions and business operations. ICP takes different forms at Bridgestone, and we have introduced a shadow price system, such that the value of ICP reflects the cost of CO2 allowances in the EU emissions trading scheme (ETS) market. By doing so, we have created a level playing field between installations or plans which legally are in scope of the EU ETS (and as such, reflect real annual costs of emissions resulting from the manufacturing process) and those which are not, whether for technical reasons or because they are located in other countries or jurisdictions.

The adoption of ICP requires positive or negative CO2 impact to be calculated for most projects, converted into real cost and included alongside the traditional financial indicators to create a consolidated net present value or return on investment. This represents a complete change in investment decision-making paradigms. We’re now looking at how to further increase the impact of ICP using different models. Our “ICP 2.0” might be based, for instance, on the principle of ring fencing the amounts associated with our carbon footprint at the budgetary level, and through that budget, create a dedicated revenue line or investment stream to fund the company’s emission reduction efforts.

Sustainable supply chain financing

Bridgestone was the first corporation to link third party sustainability ratings into supply chain financing. This has been a very good example of co creation given that sustainability cannot be delivered on a standalone basis by a single company. As well as our banks, we have worked closely with a fintech platform provider and sustainability rating agencies to measure and monitor suppliers’ sustainability performance of the supplier. It is not just about linking sustainability metrics to financing incentives, but increasing the transparency over the sustainability impact allowing us to work together on solving challenges.

Embedding ESG metrics into new projects

Public subsidies and national resources are increasingly directed to best-in-class projects that make a demonstrable contribution to sustainability and/ or have a positive social impact. In addition, newer financing products, such as green loans or bonds, require a different approach to project financing, which must be now based on the use of proceeds principle. To maximise access to external financing and access the capital markets efficiently, we need to think differently about how capital is allocated, and how we measure

project performance. This includes identification of top performing projects, tracking their impact within the time, and producing reporting to public sector bodies, lenders and investors. To support this requirement, we have worked our manufacturing colleagues to introduce a set of sustainability KPIs that mirror those required by key regulators and stakeholders right from the point of project identification through approval. The data provided by these KPIs is then central to building up our sustainability scorecard that provides transparency over the use of capital.

Looking ahead

ESG and sustainability metrics, and the financing linked to these metrics, is still a new area, and as yet, there is still a lack of consistency across markets, industries and regulators. Having a common frame of reference is essential for global companies, not only to secure financing and produce reporting efficiently, but to measure and monitor impact in a way that is universally recognised. Without this, ESG reporting will become more of a compliance issue rather than fulfilling its purpose, which is to help deliver positive change.

The only way to address this challenge – and to deliver genuine impact – is through partnership and collaboration, and coordination across different stakeholders. This cooperation also generates new ideas and best practices, such as how to source and use sustainable materials most effectively, how to recycle and reduce waste, and how to leverage renewable energy opportunities. Some of these ideas will arise within industries, but in other cases across different industries, which is an exciting prospect.

Treasurers’ role in the ESG agenda

Based on our experiences at Bridgestone, and looking more widely across the industry, treasurers are very well positioned to contribute to the company’s ESG agenda. They have a good understanding of what financial market participants want, so they can make sure that the company’s financing strategy is aligned with this. There is also an important personal motivation. Having worked on this for three years or so, the personal satisfaction in having a measurable impact on our environment and our society is enormous.

with Bobbie Eiseman, President of Comcast Capital Corporation

Comcast is the world’s largest media company, bringing together some of the world’s most exciting entertainment platforms, from Xfinity cable and wireless services in the US, Sky in the UK, and NBCUniversal’s portfolio of news, entertainment, streaming services and theme parks. Since 2019, Comcast’s treasury has been engaged in a global programme to transform its activities and connectivity both within the business and beyond. In this article, Bobbie Eiseman, President of Comcast Capital Corporation, outlines some of the project facets, achievements and success factors so far.

Comcast’s global reach, scale and scope of activities and millions of subscribers creates a unique set of challenges for treasury. The group has grown through a series of major acquisitions, many of which – such as Sky – were already market leaders in their respective regions. Eiseman comments,

“Following the acquisition of Sky, our global liquidity structures had become quite fragmented.” Comcast had accumulated 82 bank relationships, over 3,800 bank accounts across 537 entities and several separate cash pools.

She continues,

”Our aim was therefore to optimise our global liquidity, leveraging our purchasing power with global banks, improve automation and technology for more efficient processes, and establish better control over our cash.”

Embarking on transformation

In December 2019, Comcast first embarked on a harmonisation and transformation project with partner PwC. The aim was rationalise its bank relationships and accounts and simplify its cash and liquidity management structures. By doing so, treasury would be able to centralise cash more efficiently and cost-effectively to finance group working capital and long term debt.

The transformation project was based on global design principles, which could then be applied on a regional basis. During the global design work, the value of restructuring its payment organisation became clear, a major undertaking given the number of payments and collections that Comcast processes each day, and the number of interfaces across both internal and external systems.

Part of Comcast’s banking, cash and liquidity transformation included its internal systems and connectivity. The group already had a leading treasury management system (TMS) in place, but its use across the group was inconsistent, and treasury was not making full use of its functionality. As part of the project, the team expanded its system use to in-house banking and cash management, and linked to its internal ERPs for general ledger integration. Eiseman notes,

“One of the distinctive characteristics about this project has been the number of work streams, including bank and account rationalisation, cash optimisation and automated liquidity management. We needed to upgrade our internal technology, so we expanded the use of our TMS to support in-house banking, and implemented a bank-agnostic connectivity hub to create a single connection to our banks across our business and achieve the daily cash visibility we needed.”

Project impact of Covid-19

The global design work was completed at around the time the Covid-19 pandemic struck. Treasury had to first focus on managing the immediate impact of the crisis, including radically shifting revenue streams as home entertainment expanded while parks revenue disappeared. After a few months, however, treasury wanted to restart the project to deliver the value that transformation promised. Given the constraints of remote working and continued uncertainty, treasury took a pragmatic approach, focusing first on immediate value that could be created through rationalising banking and cash management structures in EMEA. Eiseman outlines,

“The pandemic changed not just the way we worked, but also team capacity as we had to take into account the risk that multiple people could become ill at the same time. We therefore targeted the project on areas in which we could have the most impact.

We first put in place a multi-currency notional pool for our 10 largest cash holding entities. This took only 12 weeks, but was initially very manual – but we soon reaped the benefits and were able to concentrate on greater automation and a phased approach to wider transformation by region, starting with Europe.”

The team embarked on a bank selection process, choosing a primary bank per region. As Eiseman explains,

“With PwC’s help, we looked across our global banking relationships to see which could best provide the breadth and scope of services in each geography. This resulted in sub-dividing our regions more than we originally expected, such as having different providers for UK and continental Europe.”

These banking relationships were complemented with an in-house bank, and implemented a payments and bank connectivity solution that is provided by the same company as the TMS. Comcast was keen to centralise liquidity quickly, so treasury initially implemented a partially automated overlay structure at pace.

The project involved training and onboarding more than 200 payments system users and an additional 100 TMS users. With Sky the UK’s largest issuer of direct debits, and market leadership positions across its footprint, the team needed to process millions of direct debits a month.

Distinctive project characteristics

Comcast’s transformation project has been distinguished by the challenging circumstances under which the project was undertaken, and the scale of its treasury, payments and collections operations, including hundreds of system users and millions of transactions per month The combination of these factors created three distinctive project characteristics:

First, Comcast and its partners had to take a highly pragmatic approach to project delivery, focusing on activities that created the greatest value for the business, both operationally and from a liquidity optimisation perspective. Eiseman suggests that enforced remote working may have had some benefits,

“In some ways, it was a little bit more liberating, because weren’t waiting for infrequent, in person meetings to get things done. Instead, we had more regular contact through video conferencing which made us more nimble and better informed of progress across each workstream.”

Second, given the project scale and number of users and transactions affected, it was crucial to avoid any interruption to the business and manage the risk of failure. To achieve this, project discipline was essential, including rigorous testing, robust and secure interfaces and an extensive user testing and familiarisation programme.

Third, to minimise risk and maximise value, Comcast and its partners set – and achieved – ambitious project timescales, with the first wave of the banking rationalisation and in-house banking project achieved within 3-4 months, a remarkable achievement given the scale of the project and 100% remote working during lockdowns.

Project progress to date

Comcast has successfully rationalised its banking infrastructure, reducing from 22 banks to 6 banks in EMEA, and from 30 banks to 5 in North America. In EMEA, while previously, only around 55% of cash was incorporated in a liquidity management structure; today, around 80% of cash is now centralised, leading to a meaningful increase in available liquidity.

In EMEA, the team has replaced 2 SWIFT connections, 22 electronic banking systems and 10 host-to-host banking connections with just 1 SWIFT connection, and a total of 6 host-to-host and electronic banking systems, with similar improvements expected in other regions. This has led to significant operational improvements and cost savings, whilst improving process resilience and security. Eiseman says,

“Reducing our host-to-host connections and manual uploads provided a unique opportunity to improve security and ensure that we met consistently high encryption standards. It also reduced the number of bank portal users which made it easier to control user permissions.”

She continues,

“From a liquidity perspective, we can now centralise cash in one location and transfer easily between global pool participants. This removes the need for extra short term external borrowing, and reduces FX spot trades as we can fund foreign currency requirements across the group. We have also exceeded our original expectations in reducing our bank fees by leveraging our purchasing power with our global banking partners, providing a strong return on investment for the project.”

By establishing a well-designed bank and in-house banking structure, robust systems and connectivity infrastructure, Comcast has a trusted, secure platform on which to base both its existing activities and future growth. Having first implemented in EMEA, Eiseman and her team are now moving onto North America, to be followed by Asia Pacific and Latin America. Eiseman emphasises the factors that have made the project a success.

“The biggest success factor has been the collaborative culture that we have at Comcast. People have been very motivated to make sure the project works for their businesses, customers and internal shareholders. For us, this project has been trailblazing as it is one of the first projects to extend across all of the businesses: Comcast, Sky and NBC Universal. That’s exciting, but it also requires agility, and the ability to pivot and work together to find a solution when you hit roadblocks.”

She concludes,

“It’s essential to bring your IT and cyber teams into the project as early as possible, and to make sure you have the right people who can make decisions and resolve problems. It is difficult to overestimate the complexity of projects of this size, scope and reach so it pays to take a conservative approach when budgeting time, money or people, and managing expectations.”

The evolving tax landscape impacts the way multinational treasurers operate. One of the biggest game changers has been the OECD’s base erosion and profit shifting (BEPS) plan. Through its various action plans, the OECD is aiming to bring taxation rights closer to the country “where value is created”, and their key focus is on substance and transparency. How does this affect company XYZ?

Pre-BEPS situation

• Intercompany funding was granted by the Group treasury centre except for two loans issued by a group affiliate “XYZ” to two other subsidiaries. XYZ has limited substance with two fly-in directors.

• Upon issuance of these two long-term loans, no clear analysis was carried out to determine the arm’s-length interest rate, and no documentation was prepared to support the applied rate.

• Additionally, all the funding provided by the treasury centre is structured as one month roll- over loans, so that both the treasury team and its subsidiaries have full flexibility. Part of this funding relates to major CAPEX investments.

Post-BEPS situation

• As part of the BEPS requirements, the Group needs to file a yearly tax form giving a snapshot of its worldwide activities. In this report XYZ popped- up as a red flag: it qualified as an intercompany financing entity with very significant interest income, no employees and fairly limited amount of taxes paid. To anticipate questions from the tax authorities worldwide, the group reassessed its funding set-up. Although there were valid historical reasons for the set-up, a detailed analysis showed that the structure no longer met current substance requirements. Taking no action in this respect could result in a major withholding tax leakage and the bulk of XYZ’s profits could become taxable in the treasury centre. To avoid such undesired consequences, XYZ reassigned the two loans to the treasury centre and XYZ was liquidated.

• Upon reassignment of the two loans, the historical interest rates were also reassessed. The risk profile of each subsidiary, as well as all the relevant terms & conditions of the loans were taken into account for this economic analysis. It appeared that the interest rates applied were defendable from a tax point of view. Moreover, the analysis showed that the loan was considered structured in a “commercial rational manner” taking into account all the relevant facts. The two loans could thus be kept in place. The analysis was formalised and now forms part of the local files of the treasury centre and the two subsidiaries. In the meantime, the files have been shared with the tax authorities as part of the new compliance requirements.

• Additionally, all the subsidiaries must file the group’s transfer pricing master file, providing information on the internal intragroup financing, as well as external financing arrangements.. In this case, the intercompany financing policy must be reassessed, as the short-term roll-over loans issued by the treasury centre did not always align with how a “commercially rational third party” would have behaved.

Part of the intercompany funding is now structured as long-term bullet or amortising loans with substantially higher interest rates. The remainder of the funding covers day-to-day cash requirements, and has been kept under the short-term flexible loans. However, a procedure has been put in place to regularly update the related intercompany interest rates to keep pace with the market interest rates.

• Corporate treasury will have to cooperate with its tax counterparts more closely than before, since a financing set-up is only sustainable for tax purposes if it is fully in line with operational reality. Harshening interest deductibility rules will also impact the cost of debt and thus how groups structure their funding.

To support a successful business carve-out, the treasury team at Daimler Truck had to understand which functions were essential from the outset and what could be refined once the new business had shifted into top gear.

With a company history stretching back more than 125 years, Daimler Truck is one of the largest manufacturers of trucks and buses in the world. It became an independent company in December 2021 following a spin-off from the Mercedes passenger car company. Today, Daimler Truck has circa 105,000 employees and 42 production sites in five continents.

Claus Baessler, Vice President Treasury & Tax, Daimler Truck, enthuses: “Last year was the best year in our company’s history, with outstanding financial results. We sold more than 526,000 trucks and buses and achieved an adjusted operating profit of €5.5bn with more than €50bn in revenues.”

These figures demonstrate how quickly the spin-off has proven to be successful. However, when the decision was made that Daimler Truck would become an independent entity, the treasury team had to act quickly to ensure that all essential processes were in place from the very outset.

“The spin-off announcement was in early February 2021, and our listing on the Frankfurt Stock Exchange was in December of that year, so we had roughly ten months between these two events,” recalls Baessler. “Honestly, this was a fast process.”

Given that timing, it was crucial to focus on setting up the necessary infrastructure for independence as fast as possible. Establishing the new company’s equity story to attract investors was vital, and achieving credit market readiness presented a further challenge. “We had a huge bridging facility in place that was arranged at Mercedes, and we were establishing an RCF [revolving credit facility],” Baessler elaborates.

To achieve these goals, attaining a solid investment-grade rating was essential.

“We got in touch with [rating agencies] S&P and Moody’s to sort out what the requirements for an investment- grade rating would be and how we would implement that,” states Baessler. “Additionally, there was a need to swiftly establish payment systems and implement ring-fencing for the IT systems, which were shared with the old company and are, to a certain extent, still shared today.”

People powered

When setting up the new treasury function in time for the go-live date, some elements presented more obstacles than others. In the treasury department, the immediate focus was on filling leadership positions.

“Personal planning was a critical task,” explains Baessler. “There were no dedicated truck and bus employees
in the treasury of the parent company, unlike in the more product-related areas such as development and engineering.”

From the outset, Daimler Truck had a much smaller team, approximately one-third of the size of the Mercedes passenger car company. With a smaller team size comes flatter hierarchies and fewer complex processes. “There are also fewer committees accompanying the processes, so that makes a difference,” Baessler acknowledges.

Even though the spin-off occurred less than three years ago, treasury operations look significantly different today than they did in December 2021.

“We started with a ‘copy-and-paste’ style of organisation, which made a great deal of sense at that time due to the time pressure,” Baessler adds. “But since the beginning of this year, we have now established a new organisational structure, moving away from the previous regional set-up.”

Today, Daimler Truck’s global treasury operations are steered from the company’s Stuttgart headquarters. Treasury centres worldwide, including more execution hubs than previously, are guided by steering and decision-making from the central team. This is helping to drive greater treasury efficiencies across the board.

Passing the tech baton

While the staffing of the new treasury department went relatively smoothly, the heavy time pressure did present specific issues regarding thinking through the treasury technology set-up for the new organisation, particularly concerning the legacy systems already in place.

“The systems separation occasionally caused significant headaches,” admits Baessler. “Thankfully, our colleagues from Mercedes were a huge help with this. Because of that, we had it figured out in time.”

Next on the agenda is completing the IT handover.

“Not all the systems are completely separated from Mercedes at this point, not only in treasury but all over the company,” affirms Baessler. “We have certain shared service level agreements [SLAs] in place, the longest of which runs until the end of 2024 when we are aiming to be completely independent.”

Establishing the new treasury ecosystem and completely separating from the ‘old world’ presents Daimler Truck with an excellent opportunity to shape a system that better fits its needs.

“The previous system would have been too customised to fit the needs of a truck company,” underlines Baessler. “We have made a pitch regarding the system we want to go for. It’s a huge amount of work, but the result will be something we probably wouldn’t have achieved without a spin-off.”

Be bold, be realistic

Reflecting on the journey to build the new treasury function at Daimler Truck, Baessler has identified three topics that he believes are essential to treasury spin-off success. The first of these is to be bold when streamlining processes and structures.

“What you do not change in the first year to 18 months, you will probably never change,” he suggests. “Don’t hesitate to eliminate unnecessary processes or elements early on and simplify wherever possible to create a lean and efficient treasury, from both an organisational and process perspective.”

A second takeaway is for treasurers to prioritise strategically and focus on what is needed from the start. “Determine where 80% completion is efficient versus aiming for a 100% solution,” advises Baessler. “Setting the right priorities is crucial, as achieving a fully fledged treasury capacity on day one is unrealistic.”

Finally, this project has underlined the crucial nature of time management. “Interestingly, we felt significant time pressure, but having more time would not necessarily have led to more beneficial solutions,” Baessler concludes. “The urgency of a spin-off situation forces efficient and fast decision-making. Having too much time could see treasurers lose themselves in long discussions and, ultimately, not achieve results any better.”

In 2023, European interest rates hit a peak not seen since 2001. Automating short-term investment processes enables treasurers to take advantage of these conditions while also bolstering counterparty risk practices. This is precisely what the treasury team at Dassault Systèmes has done.

Technology plays a critical role in the cutting- edge world of 3D product design, simulation, and manufacturing. For the multinational company Dassault Systèmes, a pioneer in this sector, deploying the best technology is critical for the organisation as a whole and the treasury function specifically.

John Colleemallay, Senior Director, Group Treasury & Financing, Dassault Systèmes, comments: “State-of-the-art technology is
in the DNA of Dassault Systèmes and in the DNA of the treasury that I lead. It permeated the thought process around the tools we implement, and the way we manage cash and treasury. Indeed, we’ve always tried to find a very lean way of working – meaning that we have interconnected systems where possible and avoid manual intervention.”

A recent example of this can be found in how the Dassault Systèmes treasury team manage their short-term investments. The treasury department has teams in the US, Asia and EMEA. Cash management, and specifically investment management, is a fully centralised function in the firm’s global headquarters in France. Every day, group treasury would wait for cash to be pooled into one account in London and then invest the cash from this account. However, the global nature of the treasury structure was creating certain inefficiencies.

“With the US east coast being six hours behind France, we were in a position where the cash coming in from there could not be invested
on the same day as we had a cut-off time of midday, Paris time,” reflects Colleemallay. “That was when we had to close the books and invest everything before moving on to the next day.”

Finding a better way

A solution presented itself when Colleemallay attended a recent treasury conference. At the event, representatives from a multinational investment company mentioned they were partnering with with a TMS vendor to offer an automated investment solution. This solution uses the uses the vendor’s cloud to to offer a single sign-on solution to digitise corporate investment workflows.

“This piqued our interest because we make many investments on the money markets,” notes Colleemallay. “It offered a good way of directing
all our investments through our TMS. The goal was that it would not only optimise our cash investments but also save us money. For example, we would save on the custodian fees. Everything
is embedded in the solution itself, so we no longer need the custodian. The annual savings we achieve immediately makes the project a winning one.”

The tool also offered a solution to Dassault Systèmes’ same-day investment issue. Even the cash generated in the US can now be invested on the same day by the team based in France, as Colleemallay explains.

This solution enables us to extend the cut-off time until 3pm Paris time. This is 9am New York time, which means that our teams in the US can give us the information on the excess cash they have – and move that to us – on the same day. In turn, we can also invest the cash on the same day. Saving a day in the process is significant.”

Unlocking the automation

Another benefit for Dassault Systèmes is that the investment tool is completely embedded within the TMS. “The solution sits within our TMS, and it is a completely secure system with a single sign-on,” he says. “When we sign into the tool with our Windows password, we’re into the TMS and have access to cash markets. The system is completely secured all the way through, which is important because we are naturally very cautious about security.”

Valérie Maniere Rochedy, Director, Group Treasury, Projects, Integration Processes & Systems, Dassault Systèmes, adds that setting up this solution was relatively straightforward because it is embedded

in a TMS system. “Of course, we had to do some documentation with our funds because we had to open direct accounts with them,” she notes. “This step entailed quite a lot of work, but this needs to be done only once, at the beginning. After that, it was relatively plain sailing.”

From a systems perspective, using the solution gave the company much greater control over its investment management. “One of the benefits of this tool is that we can segregate duties between traders and approvers,” adds Rochedy. “We were able to introduce the four-eyes principle and increase the security of the process.”

Visibility and control

It is around a year since Dassault Systèmes’ treasury team set up the tool and started using it. Getting all of the funds onto the platform has been a phased process, as it has required discussions between treasury and the asset managers to bring the latter on board. Still, increasing numbers of funds that treasury wants are being transferred onto the platform. This is particularly vital when considering the economic environment in 2023.

Colleemallay comments: “With interest rates rising, we are increasingly returning to MMFs. If you talk to the corporate treasurers, they will tell you that they mainly invested in bank deposits over the past 10 years, rather than MMFs, as the latter yielded negative rates. Today, with the rates picking up, we are all going back to MMFs. We are bringing the new funds we are now using onto the platform, so most of the funds we need will soon be there.”

Seeing all of the MMFs in which treasury is investing in one place also brings benefits on the reporting side, with visibility into where the cash is and when the funds are coming due. There are also counterparty risk management benefits, which have been particularly useful recently.

“Earlier this year, there was some turmoil in the banking industry,” recalls Colleemallay. “In the system, you can quickly drill down into the investments to identify the different lines of the portfolio and identify exposures to anything you may not like.”

The system also means treasurers can be proactive in their counterparty
risk management by inputting rules to govern how much cash is deposited
in specific funds. Rochedy remarks: “We can define limits in terms of the approvals and apply ratios regarding country risk, counterparty risk and similar measures. This is a useful risk management tool.”

Adaptability through automation

In these volatile economic times, having an automated short-term investment process helps treasurers have visibility over their cash and the funds they are invested in, and offers controls to help navigate the uncertainty safely – and always with an eye on the upside.

Colleemallay concludes: “This type of economic situation is where a tool like we are using is very interesting for treasurers because it gives us the capacity to choose where we want to invest, based on up-to-date information. We can also look at how different products adapt to the economic volatility – which is critical for liquidity and risk management.”

In conversation with John Colleemallay, Senior Director Group Treasury & Financing, Dassault Systèmes

“Digitalisation at Dassault Systèmes’ Treasury is driven by a single concept: we want to be best- in-class in whatever we do, and digitalisation enables us to do this.”

Dassault Systèmes has a largely centralised treasury that is responsible for cash and treasury management at a group level. In a rapidly growing organisation, deploying best-in- class, secure technology is essential to provide visibility and control over liquidity and risk.

“We use a secure, cloud-based treasury management system to monitor and manage our treasury activities, with digital authorisation of transactions using SWIFT 3SKey. Through our treasury technology rollout strategy, we are extending the same technology across group entities on a ‘plug and play’ basis to harmonise our processes, controls and reporting, and enable group treasury to view, access and inform decisions on our cash and liquidity.”

Although treasury’s technology rollout strategy is proving a highly effective, the level of technology maturity and culture varies in different parts of the world.

“One difficulty we have faced is that the same technology is not necessarily available or familiar in every country. This is less of an issue in western Europe, North America and some parts of Asia, but in regions such as central & eastern Europe, Russia and emerging economies, it is far more difficult to harmonise. Even obtaining complete and timely access to bank accounts can be challenging as there is often pressure to use banks’ proprietary technology. It takes time to explain and educate on what we are trying to achieve and why.”

In addition to embedding treasury’s core technology infrastructure group-wide, Colleemallay and his team seek constant improvement in the way that they operate, and are actively engaged in a variety of innovative initiatives. These include engaging with banks and SWIFT to evaluate and contribute to the next generation of 3SKey, and working with the treasury technology vendor to continue improving and expanding treasury’s use of the platform.

“We are also actively involved with SWIFT gpi (global payments innovation) to increase predictability and traceability of cross-border payments, which would be particularly valuable for large transactions relating to M&A.”

As a results-driven business, treasury actively measures and monitors the success of its digitalisation strategy and wider cash and treasury optimisation initiatives.

“When we started to build our digital roadmap ten years ago, we were centralising around 50 percent of group cash. Today, we have upstreamed 95 percent of our cash, with visibility, control and the ability to use cash to meet cash and liquidity management needs at a group level. We have also improved the way we manage FX exposures, and increased our investment returns, despite the low or negative interest rate environment by investing over a longer term.”

Colleemallay and his team are also engaging in understanding the potential of emerging new technologies and solutions. For example, treasury is exploring opportunities to use blockchain technologies to streamline and reduce the operational burden of KYC processes and documentation.

Christian Schmahl, Treasury Director, Delivery Hero

Delivery Hero is one of the great successes of the digital era, and a flagship for the platform business model. Founded in 2011, it was listed on the DAX within only a decade, and operates in c. 50 countries around the world. In this article, Delivery Hero’s Treasury Director, Christian Schmahl discusses the experience of founding and operating a ‘greenfield’ treasury in a fast-growing digital business.

Like many companies, we started our treasury journey with a centralised global treasury, but as our business grew, both organically and through M&A, we took a more regionalised approach, which is consistent with our wider operating model. We now have a treasury team of 15 professionals, operating in Berlin (Global Treasury Centre), Singapore (Asia Pacific), Dubai (Middle East & North Africa) and Uruguay (Latin America). By combining a global approach to processes, controls and technology, with close proximity and deep insights to our local markets, we can support the business effectively without creating operational risk or fragmentation.

Managing scale and complexity

Delivery Hero has grown 100% year on year, resulting in rapidly increasing scale and complexity in treasury. This creates a challenging dynamic: on one hand, it is exciting to be part of such a fast-growing business, on the other, we need to demonstrate good governance and compliance as required for a DAX-listed company, and best practices in treasury and finance management.

Instead of expanding headcount to manage these requirements, our aim from the start was to create a digital treasury from end-to-end that was standardised, automated and scalable. By doing so, we could manage current and future demands, whilst ensuring from the outset that we had a focused, professional team that delivered value to the business rather than processing transactions.

We did this by implementing SAP S4/HANA as our digitally-enabled core platform for treasury, which supports all cash management, risk management, bank connectivity and data analytics requirements. With increasingly demanding treasury requirements, and escalating payment volumes, we took a standardised approach to implementation to enable us to roll out the platform at pace. We now manage over 110,000 payments per day (as at February 2021) with automated vendor payments in more than 20 countries, and automated restaurant payments in over 9 countries.

Realising a real-time ambition

In many respects, our digital treasury objectives: standardisation, automation and scalability are not new. After all, these have been treasury goals for many years. However, increasingly, there is the opportunity for processes and information flows to take place in real-time. This creates a very different dynamic in treasury, but is essential to platform businesses such as Delivery Hero, which create competitive advantage through the speed with which data and cash flows can be exchanged across our ecosystem.

Realising this ambition is a little easier for Delivery Hero than some longer-established businesses. We were setting up our treasury function from scratch, so we did not have to deal with legacy processes, technology and mindset.

We have 5 core partner banks, and a highly engaged IT and fintech team that work closely with treasury to achieve the end-to-end payment automation and integration that we need. One key driver of success is our ability to support local payment requirements, such as wallet-based rider payments in Asia Pacific. We piloted this solution in Singapore, but we are now benefitting from our standard processes and technology to roll out the solution across various markets within the region at scale and at pace.

Our experiences in digitising and automating our treasury processes have emphasised that the concept of the real-time digital treasury is not a future vision, but an objective for today. COVID-19 accelerated the digitisation trend, and emphasised the risks and friction associated with manual documentation and ‘wet’ signatures, but it simply helped to realise an existing objective. We have already seen major progress in digitisation of formerly manually-intensive tasks such as bank account management, but there is significant untapped opportunity. We can also see potential for technologies such as blockchain, such as for smart contracts, and robotics to replace routine tasks. Collaboration within businesses, and with partner banks and technology vendors, will be key to leveraging these opportunities to create solutions that deliver demonstrable value.

Sharing advice

Treasurers and their banks tend to differentiate between traditional businesses and digitally-led, platform businesses. In reality, digitisation and real- time automation are relevant – and indeed, will be essential to future success – for every business. The challenge for some, however, is to create a business case and budget to digitise and automate processes and technologies that have evolved over many years.

Whether or not a treasury function is new or established, it is important to have a clear vision of the digital treasury, and what it will deliver to the organisation. This vision may seem unrealistic, but working towards an end goal will help in getting the basic building blocks right at the beginning. With the right structures and technology in place, and a

clear vision, it becomes easier to realise the end- to-end standardisation, real-time automation and scalability on which the digital treasury will rely.

About Delivery Hero

Delivery Hero was founded in Frankfurt, Germany in 2011 as an online delivery company, and went public on the Frankfurt Stock Exchange in 2017. In 2020, it entered the DAX, an index listing the 30 largest companies trading on the Frankfurt Stock Exchange. The company provides doorstep delivery in 4 continents and 50 countries globally. Delivery Hero became carbon-neutral in 2021.

DELPHI TECHNOLOGIES (“DELPHI”) has only recently become an independent business, having been spun off from Delphi Automotive (now Aptiv) in 2017. As a new corporation, Delphi has a more straightforward organisation than longer-established businesses. Even so, global tax reforms, such as around BEPS (base erosion and profit shifting) have prompted important questions to ensure that the business and the financial structures that support them are aligned. Alan Dick, Vice President of Treasury for Delphi, describes some of the implications of a changing tax culture on corporate treasury.

The question of substance

Alan Dick first explains how the newly formed company contrasts with other organisations.

“Treasurers are reviewing their intercompany funding structures in particular as a result of evolving tax regulations globally. As a new company, Delphi has a relatively straightforward structure, with less than 100 entities. In comparison, many other more established corporations’ structures have evolved over time, many with more than 500 entities, including special purpose vehicles and holding companies. We have been quite fortunate as we have not had to change our intercompany structures significantly given the structure established at the spin off. We have our cash management hub and treasury team in Luxembourg along with a technical centre, so we can use that jurisdiction for intercompany funding.”

In other situations, however, companies have been forced to reorganise. Those with financial structures in low tax jurisdictions such as Luxembourg and Switzerland, particularly amongst US corporations for historic reasons, may lack substance in these locations. Companies may also need to demonstrate clearly where activities take place, which

requires a change of responsibility in some cases.

“Intercompany funding from a low tax jurisdiction such as Switzerland could raise the question of substance to justify the lower tax rate benefit: it is important to look at funding as a whole and look ahead based on the direction of travel from an international tax perspective.”

The impact of digitisation

The question of substance remains a challenging one not least because it may not always be clear to tax authorities how treasury is organised. Given that many organisations are leveraging digital technologies to facilitate a more ‘virtual’ treasury organisation, it can be difficult to identify one country that represents treasury’s primary location.

“It takes time to explain the practicalities of treasury to tax authorities, particularly as a growing number of corporations centralise their treasury functions.”

Choosing a location can also be complex.

“It is important to locate treasury teams where you have a lot of business activity, and create interaction with the business at that point. You start having problems where funding and tax structures end up in different jurisdictions. There is no ‘right’ location: a lot is determined by where people want to live and work, but it is essential for treasury to work closely with tax, which may potentially involve recharging people to different places.”

A shifting culture

In addition to changes around issues such as substance and location, there is also a shift in position amongst tax authorities around acceptable structures which creates complexities for treasury.

Geert Wouters, Head of Structured Finance and Treasury, DEME

DEME is a world leader in the highly specialised fields of dredging, land reclamation, marine infrastructure, offshore energy and environmental remediaation. With more than 145 years of experience and about 5,000 highly skilled professionals, the Group has built up a vast bank of knowledge and expertise, and provides tailor-made solutions, innovation and new technologies to support customers’ projects safely, efficiently and cost-effectively. In 2017, Geert Wouters took on responsibility for Treasury, and has since embarked on a multi-faceted transformation project, as he describes in this article. This includes screening of payments against international sanctions lists, an activity more commonly managed by banks.

I took over responsibility for treasury in early 2017 and quickly realised that we were using too many banks, accounts and systems around the world. This made it difficult to gain visibility and control over cash and liquidity, but managing payments through 40 systems was also cumbersome and inefficient. Users had to carry multiple tokens and adopt different processes, and the variety of ways in which each system was managed resulted in potential security flaws.

Our initial objective was therefore to streamline our bank connectivity and implement a single platform through which we could communicate with our banks to send payment instructions. Implementing a new payments platform is not a

standalone undertaking, however. We talked to other companies who had embarked on a similar project, and engaged PwC with whom we have had a long-standing relationship. As a result of these conversations, we expanded our project in three key ways:

Firstly, we needed to look beyond our payments infrastructure to our treasury management system (TMS). We were only using our existing TMS for deal capture, and the system did not support our wider payments and in-house banking requirements. We therefore expanded our project to evaluate and implement a new TMS that would enable us to digitise our entire range of payments, cash and risk management requirements.

Secondly, our problem was not only the number of banking systems in place, but also the number of banks. Therefore we decided to rationalise and harmonise our bank and account structure: effectively an entire redesign of our systems, processes and relationships. We tendered for partner banks on a regional basis, and gradually closed the accounts with banks.

Thirdly, an important priority for us is sanctions screening. The payments and bank connectivity system we selected did not offer extensive sanctions screening capabilities, as most corporations rely on their banks for this activity. We therefore selected and implemented an additional solution, typically used by banks. We have now implemented a segregation of duties such that treasury releases payment files, which are then screened by our compliance team.

Successes to date

We’re now close to the end of the project, and have seen an enormous change in our treasury department. Our TMS has been live since late 2019, which provides comprehensive functionality and reporting capabilities, and the flexibility we need to manage the changing needs of our business.

We have reduced our banking panel from around 50 to 8, and rationalised our bank accounts by around 40%, with further reduction in progress. We also have better control over our outgoing payments, with full sanctions screening before release to the bank.

We have rolled out our payments and bank connectivity system across our business, replacing existing electronic banking systems and security tokens with a single process and security protocol. We now receive statements on all our accounts every day via SWIFT, so we now have a central view of cash and liquidity that we could not have achieved before.

Looking ahead

Now that we have our banking and systems infrastructure in place, we continue to review and refine our processes, reporting and decision- making. We’re also working with our joint venture companies with a view to rolling out our payments and connectivity platform.

Our banking redesign has been a success, but it is important that we do not end up with the proliferation of accounts and fragmentation of cash that we experienced before. We are therefore working with colleagues across the business to set up internal controls so that any new accounts are set up and managed centrally.

Our sanctions screening process is working well, but we recognise that payments screening needs to be the final step in our efforts to comply with international regulations. Therefore, we are

working with our compliance department and our procurement team on implementing tools and processes to check suppliers more rigorously when first onboarded. This means that ultimately, screening of the payment (which typically takes place after the supplier has undertaken work for us) will be more of a final check rather than a first defence against international crime.

Dr Gerd Berghold, Director of Treasury Operations & Digital Treasury, Deutsche Bahn AG

Deutsche Bahn is a leading provider in mobility and logistics, with a constant aim to enhance its operational efficiency, quality of decision- making and governance. As part of this ongoing effort, treasury had automated some elements of its activities, but these initiatives was more tactical than strategic, and ‘pockets’ of automation lacked the full end-to-end impact that treasury was seeking. In this article, Dr Gerd Berghold, Director of Treasury Operations & Digital Treasury, Deutsche Bahn AG describes some of the initiatives that have taken place as part of its Digital Treasury ambition.

Implementing the core infrastructure

To create a more sustained and far-reaching transformation, Deutsche Bahn embarked on a comprehensive digital programme across finance, treasury and procurement, with a focus on increasing productivity, and implementing new integrated processes and technologies. This would enable the end-to-end flow of transactions and data both across the enterprise, and with the Group’s banking partners. In treasury, this included putting in place a treasury management system EBICS and host-to-host connectivity for bank communications, and an FX execution platform.

COVID-19 had a major impact on our ‘Digital Treasury (no speech marks’ ambition, however, and created significant budget constraints. Even so, by leveraging internal treasury resources, open- source and Deutsche Bahn standard applications, and adopting an agile project approach, we have been able to achieve considerable success.

Credit Risk Dashboard

This uses a web crawler in connection with a sentiment analysis and an R/Shiny dashboard.

End-to-End Guarantees

Our end-to-end guarantee process is based on Microsoft Power Platform, our treasury management system, and electronic signature solution Adobe Sign.

Outcomes

As a result of these projects, we have achieved better risk analysis and assessment, executive decision- making, and risk management. At the same time, by creating these capabilities in-house, as opposed to relying on external or Deutsche Bahn IT resources, we have avoided external software or resourcing costs, and ensured that we maintain expertise within our team. We have also reduced costs and improved productivity by using automation technologies to achieve end-to-end digital processes.

Managing change

We have taken a pragmatic approach to identifying, prioritising and developing digital solutions, without preconceived ideas. This has allowed us to be agile in creating and testing new solutions and approaches, but adapting quickly if these do not meet our needs.

Despite the pace and scale of transformation, the team has responded well to the changes in our business processes, reporting and decision-making, particularly as many of the more tedious and time- consuming processes have been eliminated. However, the move towards a Digital Treasury marks a shift from a process-driven, operational business function to a strategic, digitally-driven department. To adapt to this new culture and business focus, we will need to upskill some parts of treasury, and encourage a change in mindset. We are also prioritising new skills in our treasury recruitment policy, with a focus on technology and digital, project and programme management, as well as specialist treasury domain knowledge.

Future developments

There are various areas of treasury automation that we would like to improve in the future, and we want to retire the remaining document-based processes that we have in place. We aim to implement SWIFT for bank connectivity, and we are exploring the use of APIs; however, a challenge today is the lack of standardisation across banks.

We have not yet achieved fully automated confirmation matching. In the short term, we are using a combination of OCR and robotics to do this, but we expect to implement a more permanent solution in future.

Organisational impact

As a result of implementing our Digital Treasury strategy, we have been able to move from a fixed organisational model, in which each team member has defined responsibilities, to a more fluid approach that allows people to develop skills across different fields of treasury. It has also enabled us to implement a more flexible working model to enhance our employees’ experience of working for Deutsche Bahn, and improving their work-life balance. This in turn leads to greater enthusiasm, commitment and productivity, benefitting both employees and our business.

Having identified cash management inefficiencies across its various group entities, Elevion Group’s treasury team set out to dramatically improve performance by implementing a multinational cash pool.

European MNC Elevion Group focuses on end-to-end decarbonisation projects and complex energy efficiency solutions. It is a member of the ČEZ Group, one of Europe’s largest utility companies. It currently consists of three business units: building energy solutions, green energy, and energy for industry. Founded in 2017, the business broke through the €1bn revenue milestone
in 2023.

The company operates in 12 European and Asian countries, with its most prominent presence in Germany, the Netherlands, Austria, Italy, Poland, Romania, and Hungary. Overall, the Group comprises more than 70 highly specialised and independent companies.

Its treasury team identified that the scale and scope of the company’s operations were causing cash management issues that prevented it from hitting peak performance.

Company CFO Jiri Pecka explains: “Prior to implementing the cash pool, each group entity used its historic
local bank, and financing was carried out through intercompany loans from the ČEZ Group. This led to cash management inefficiencies, where one Elevion Group company could have a significant cash surplus, while another could have a major financing shortfall.”

To overcome that type of inefficiency, it was necessary to implement a comprehensive system that would allow for a more effective liquidity and capital management process, one that could reduce interest costs and bank fees.

“In 2021, we decided to establish a comprehensive system for managing liquidity,” recalls Pecka. “We approached five international banks to design how they would implement an international multicurrency cash pooling structure, and then went through a selection process.”

‘We like digitisation’

In the bank selection process for the cash pool, Elevion sent RFPs to the five potential partners. While pricing was naturally a crucial element, treasury also sought a bank with a presence in all of Elevion’s required countries.

Zuzana Matečková, Treasury Manager, Elevion Group, reveals: “Electronic connectivity, such as EBICS [Electronic Banking Internet Communication Standard] or host-to- host, was vital, as were options for the liquidity concept.”

Once the banking partner had been selected, the new cash pool went live at the beginning of 2023 with a big- bang approach. More than 30 businesses’ accounts in six countries made up the initial cash pool structure, which has already grown significantly in scale.

“Today, we have 50 business accounts in eight countries, and Elevion Group operates a multilevel cash pooling mechanism,” Matečková explains. “At the top of the structure are three main header accounts, for the euro, Polish złoty and the Romanian new leu.”

All three header accounts were initially opened in the Netherlands. However, the złoty and new leu accounts were moved to the local bank branches because of the better interest rates.

On the pricing side, each account has its own debit and credit interest rate set in the banking platform. This is regularly updated by the central treasury team. The price includes market rates plus debit and credit margins.

The margins are calculated in a relatively automated manner based on the financials of each participating company. This is carried out using an external online software tool for the calculation of arm’s-length interest rates.

Pecka highlights: “We use this tool because we like digitisation. The tool also automatically generates transfer pricing documentation to substantiate the arm’s- length principle, which generates further savings on tax advisory costs and is also helpful for IFRS disclosures.”

The connectivity between the bank and the cash pool participants was organised individually for each subsidiary. German companies used their own banking solutions and connected via EBICS.

Matečková elaborates: “This was implemented through co-operation between the bank and our German colleagues. For entities without EBICS, host-to- host connectivity has been established, meaning that the payment rounds and bank statements use XML files.”

Overcoming distrust, managing expectations

Implementing the cash pool has dramatically benefited the Elevion treasury team’s cash management efficiencies, as Matečková explains.

“Robust liquidity management is crucial in optimising balances on the header accounts. We have adopted a centralised approach with Elevion, participating in the ČEZ Group cash pool structure using two business accounts, one for the euro and one for the Polish złoty.”

If there are excess cash balances, the idle funds are transferred from the headers to other business accounts in the ČEZ cash pool. Should there be a projected cash shortfall, the headers are funded from the business account.

“A unified cash forecast report was created for all entities,” adds Matečková. “Reports are prepared by the cash pool participants weekly and shared with headquarters. This is not yet a fully automated process, but we aim to achieve this as part of our treasury management system and ERP efforts.”

The greatest project challenge that the team faced came from the fact that the implementation process was managed by an extremely small central team.

Pecka emphasises: “We needed to be very efficient. What proved to be a key success factor in the implementation stage was proper communication to convince all relevant stakeholders about the benefits of the cash pool. This factor should not be underestimated.”

Given that the Elevion Group has many SMEs, highly motivated local management is necessary. However, this did prove to be a slight obstacle in the smooth implementation of the cash pooling initiative.

“Unfortunately, the practical experience of local executives with cash pooling was fairly limited, and
the implementation process was viewed by some with certain distrust,” admits Pecka. “Its complexity was aggravated by the potential personal liability of local management from the entry of their respective entity into the cash pool.”

This challenge led to intricate intergroup negotiations, which spanned several months, regarding
indemnities and the underlying legal documentation. Excessive internal expectations that everything would be perfect from day one caused a further pain point in the day-to-day operations of the post-implementation phase.

Faced with these issues, the team prioritised frequent escalations with their banking counterparts. As a result, the bank and the treasury team refined processes to meet both parties’ needs.

“We now have weekly calls with the bank, tracking the status of various service and implementation issues,” outlines Pecka. “As a result, I believe that the general perception of the cash pool will significantly improve within the Elevion Group entities.”

The significant benefits and synergies realised through the cash pool implementation should help with this perception. A vital achievement here is that the treasury’s consolidated cash position has been substantially optimised.

“In the past, the group had huge cash balances, as well as significant intercompany debts towards the ČEZ Group on the liability side,” reflects Pecka. “After implementation, both the cash balance and liability were substantially reduced, leading to interest savings for Elevion and the ČEZ Group. We estimate these savings to be between €1m and €2m annually.”

Implementing the cash pool has unleashed additional positive factors, such as savings on tax advisory costs. “The total financial benefit of the cash flow implementation is estimated at up to €2.5m per annum,” Pecka adds.

One unintended benefit of the cash pool implementation is that it forced Elevion Group to refine its internal treasury processes and to harmonise them as much as possible across the various entities and countries. In addition,
the complexity of the whole process and the challenges encountered throughout the project strengthened the team’s determination to work on further digitisation.

“Digitisation should be the ultimate goal of every finance organisation,” enthuses Pecka. “It has also boosted our motivation to take our treasury function to the next level.”

Embracing the challenges

The treasury team is firmly committed to automating treasury processes where appropriate.

Matečková emphasises: “Our vision is to eliminate manual tasks and the potential for human error as much as possible. Therefore, at the end of 2023, we kicked off the implementation of a TMS.”

In the initial phase of the implementation, the team will connect its bank accounts to the TMS to use only one tool to gain complete visibility over all group cash positions per currency and country.

“In the future, we would also like to focus on automating our cash forecasting by establishing connectivity to the local entity ERP systems, as well as the harmonising of payment runs,” Matečková adds. “We are also working on unifying the ERPs in our organisation. It is impossible to get bored in our company, and we love the challenges ahead of us.”

That positive attitude is essential in any treasury project, but particularly in an implementation as complex as a multinational cash pool. For treasurers embarking on a similar project, Matečková notes: “It is extremely hard work, but the rewards are worth it. You need to be patient and resilient.”

For Pecka, treasurers need to ensure proper communication with all project participants and display a positive attitude toward problem-solving.

“Treasury must align properly with all relevant stakeholders,” Pecka concludes. “Also, having a talented team that is used to working in an international environment is vital, as they will support you on
your journey.”

New Zealand-headquartered Fisher & Paykel Healthcare (F&P) is a specialist in respiratory and acute care and the treatment of obstructive sleep apnoea, selling into more than 120 countries through 31 sales offices. With the vast majority of its sales made internationally, managing foreign exchange (FX) risk is a major treasury priority. Since 2001, Jeff Hawkins, Group Treasurer, and his team have worked closely with PwC to develop a sophisticated and highly effective FX risk management policy and approach, incorporating sophisticated financial modelling.

As a company headquartered in New Zealand, with 99 percent of sales made internationally, managing FX risk is a priority for treasury and our wider business given the potential impact on our gross business margins, profitability and shareholder returns. Over the past twenty years, the NZD has experienced considerable volatility against major currencies such as the USD, appreciating from as low as USD 0.3800 to as high as USD 0.8800, and typically moving well in excess of a 15 percent annual average range. To mitigate the effects of this volatility, we have taken a very detailed and strategic approach to FX risk management.

Our aims over the medium- to long-term are to achieve predictable FX outcomes that smooth our converted revenue results and outperform the spot rate, reduce volatility and improve certainty. We periodically hedge FX out to five years, which is significantly longer than other companies in most cases. To achieve this, we have developed a robust treasury policy framework, supported with a sophisticated financial stress testing modelling tool to help identify and evaluate hedging alternatives. Proactive ongoing management is another cornerstone of our approach.

Systems infrastructure

Any effective approach to hedging relies on robust and reliable exposure information, and the ability to execute and manage hedging instruments accurately and efficiently. We have implemented a new sales forecasting solution which provides us with a robust 12-month rolling sales and cash flow forecast. We also have a dedicated treasury and risk management system, and purpose-built spreadsheets for certain specialist calculations. To execute our FX hedging transactions, we use an automated dealing platform FXGO in addition to orders left for overnight execution; however, as forward pricing on the platform generally extends no further than 12-15 months, we also correspond directly with banks’ FX dealing teams through Bloomberg Chat.

Short- to medium-term hedging (up to 2 years)

Our short- to medium-term policy is to hedge up to 75 percent of our exposures in year one using FX forwards, collar and call options, and a further 25 percent in purchased call options. We hedge up to 65 percent in year two, using a combination of instruments including call options, at treasury’s discretion. We consult regularly with PwC, to review our hedge position, foreign exchange markets developments and outlook.

This hedging policy and approach uses a variety of inputs, including the wealth of cash flow forecasting data in our sales forecasting systems. Forecast exposures are detailed for a rolling 12 month period, and summarised beyond 12 months. Other business parameters such as budget rates and other forecast information are also inputs into hedging decisions.

Longer term hedging (2-5 years)

We originally developed our treasury management policy framework and constructed the longer-term hedge modelling tool in 2001 in conjunction with PwC, which we have continued to refine ever since. We look at the outputs from a range of FX policy alternatives and FX rate scenarios to determine an optimal policy structure. We reference rolling 7-year average FX rates to determine longer-term hedging decisions, specifically where we can achieve outright FX rates of approximately 12.5 percent to 17.5 percent below the 7-year average.

This is not prescriptive, so based on the outcomes of this model, we decide what action to take to meet our policy objectives, building up layers of hedging over time. This approach also allows us to be responsive to market events. Earlier in 2019, for example, there was a ‘flash crash’ in the NZD/JPY rate, although it bounced back shortly afterwards. However, we were able to execute various orders we had placed with our banks to support our long- term hedging objectives.

The model can be applied to any currency; however, most sales offices will sell in-country in local currency. In general, we tend to focus on around 10 major currencies, and group the remaining currencies into risk categories. However, over time, as the number of sales offices has increased, the number of currencies to which the business is exposed has also increased. We therefore factor a continuation of this into our post-year 1 analysis, as well as looking at growth and the impact of one- off events. In China and other developing markets, where growth rates have historically been higher, we tend to use different growth parameters and assumptions to other regions.

Managing expectations

As the nature of our business, the proportion of our international sales, and the hedging policy we have adopted differs from many other organisations, it has been very important to consult with, and seek consensus from the senior management team and Board. We have been fortunate that our executive team has remained very stable, so there has been a good level of understanding and support for our underlying treasury policy framework and hedging strategy. Our Board composition has changed gradually over time, so we have engaged in a continuous dialogue to explain and illustrate the value of our approach. For example, during the global financial crisis, the value of the NZD fell sharply against most major currencies, so we committed considerable time with the Board to keep them up-to-date and also used the opportunity to put in place additional reporting to boost confidence and trust. This involved extensive forward stress testing of policy, strategy and hedging outcomes and impacts on earnings and balance sheet.

Managing external expectations has also been very important. We provide complete visibility over our FX gains and losses, and the effect of our hedging activities. For example, we provide our annual conversion rate in our financial statements which is unusual, but gives investors greater confidence.

Measuring value

The value of our FX hedging policy and approach has been considerable. During the five years after the global financial crisis, long-term hedging activity generated additional profits of NZD 200m compared to transacting at spot rates. Overall, since listing as a stand-alone public company in 2001, the performance of the treasury function and application of the long-term FX policy has contributed an additional NZD 380m to pre-tax profits (compared to transacting at spot rates), with relatively stable performance of FX rates achieved year-on-year and a significant reduction in volatility, therefore avoiding large swings in profitability. This has been extremely important in terms of shareholder and analyst confidence, and our reputation as a reliable, responsible and stable business partner.

Consequently, FX risk management has a fundamental economic impact on business margins and profitability which is supportive of other business components. This is highly significant in terms of profitability, but it also indicative of FX as a major business risk. In recognition of this, we perform frequent stress testing to evaluate the impact of FX on our earnings and balance sheet, and have reviewed our capital structure as a result.

Looking ahead

Over the coming months, we will continue to review our treasury policy, strategy and operations, such as exploring the potential to use additional functionality in our treasury and risk management system. We will also be bringing in new currencies into our risk analysis model, which also involves setting up new bank accounts and putting in place the necessary reporting to comply with local regulations.

We continue to evaluate developments in FX dealing platforms. Currently, it is difficult to obtain reliable forward FX rates beyond 12 months through these platforms, so we work directly with banks’ FX teams. However, as these teams continue to shrink in size, we need to ensure that we have reliable market access for our longer-term hedging instruments, particularly in the event of a significant market event.

Although we are a small business by global standards, we have a global reach, and we have experienced cumulative annual growth rates of around 12 percent since 2001. We anticipate that growth will continue and we aspire to double our constant currency revenue every 5 or 6 years. The nature of our business is also evolving. For example, the proportion of sales in consumables as opposed to hardware has changed significantly as our business model evolves, which has implications for cash flow forecasting and exposure management. The additional scale and complexity of our business has significant implications for a small treasury team, and we will need to equip ourselves accordingly. For example, we will be working in conjunction with our financial reporting team to look at potential treasury structures and organisational models for the future, so we can continue to serve and add value to the corporation as a whole.

In 2017, group Treasury at GE embarked on a major, multi-year cash transformation project aimed at driving improvements in cash management across the company. The program was measured by key performance indicators (KPIs) and leveraged digital capabilities as an accelerator. One element of this transformation project was to harness cash data to enable a data-driven approach to identifying better ways of working and informing decision-making, as Kristen Michaud, Managing Director, Treasury Operations at GE, describes in this feature.

Leveraging data science in treasury

An important first step in the digital cash project was to employ the right resources.

“We made the decision to invest in people with a digital background to support our cash project. These team members do not necessarily have a treasury background, but their skills in data and analytics mean they can look at our processes from a different perspective, which has proved very insightful.”

GE employed practical, user-specific techniques to help harness the data.

“It was essential to structure data to be relevant to different types of users. We therefore worked with end users to create a variety of personas that we continued to test and refine to reflect how people would use data in practice and tag data in an appropriate way.”

Data cleansing and tagging was a major part of the data consolidation process. For example, GE was able to combine the wealth of payments data from its ERPs with data from the banks to produce a broad foundational data set. Once the initial set of tags had been applied, GE

was able to identify inconsistencies in banks’ data sets, for example, and work with them to resolve them.

“It was a challenge initially to help people become comfortable with data that is not perfect, but as they worked with the data and recognised the directional nature of the data, this became easier. The scale of data sets was also a challenge. While we had more data than we expected, we had to leverage tools and techniques to ensure we focused in the most meaningful data. After all, however rich and complete the data, it is only valuable to us if we are harnessing it in the right way to improve how we run our business.”

One way of ensuring that people could use data effectively was to have the right visualisation and analysis tools. GE leveraged a variety of third-party tools to visualise data in a convenient and intuitive way, enabling users to ask their own questions.

“We used building blocks to bridge the pathway from the old to the new. We gave the digital team access to simple data visualization tools and empowered them to ask questions of the data and partner with process owners. This helped the team think and work differently without having to engage with complex new technology solutions.”

Quantifying the benefit

GE set clear, measurable outcomes such as reducing manual payments, increasing the automatic cash application rate, and centralising processing into the shared service centres. One important benefit has been a significant increase in automatic cash application by 40 percent and posting of accounts receivable information received from banks.

When GE HealthCare was separated from GE to become an independent organisation at the start of 2023, a new treasury function was also born.
The treasurer managing this process started with a blank sheet of paper and one crucial deadline.

This year began with a bang for Robert O’Keef, Corporate Treasurer, GE HealthCare, with his organisation becoming newly independent from the GE ‘mothership’ on 4 January 2023.

“It’s been quite a journey,” O’Keef reflects. “I joined GE HealthCare about a year before the spin-off. When I arrived, we were a $20bn leader in MedTech diagnostic imaging company inside of GE. Treasury was handled by GE Capital Treasury, a highly professional treasury operation but one that was really created to service the $650bn bank that is GE Capital, along with the industrial companies that GE owned and operated. Arriving at GE HealthCare, it was essentially just me in treasury.”

The professional challenge faced by O’Keef was huge. He was starting with a clean sheet and tasked with building a fit-for-purpose treasury function in a complex, global functioning business in a timeframe where it could be separated from GE in a year.

“Professionally, it has been fascinating, but it’s not for the faint of heart,” he quips.

Grand designs

Having been in and around corporate treasury for more than 30 years and served as a treasurer in several companies, O’Keef was well versed in that element of his new role. But the MedTech space represented a sector that was brand new to him.

“Our colleagues at PwC, BNP Paribas, and some of the other institutions we work with got me up to speed very quickly on the MedTech side of things, the peer benchmarking, and key design choice points and considerations that are very specific to the industry,” he recalls.

One compelling aspect of the treasury journey at GE HealthCare is that it has followed a ‘from-to’ model, inheriting much of the treasury technology and processes from GE.

“This is great technology, world-class process and, frankly, world-class people,” enthuses O’Keef. “The question was, how much of that was fit
for purpose for our new organisation? Some of it, definitely, but not all of it. For example, we are moving from 36 major technology elements in the treasury tech stack at GE Capital down
to nine. The 36 were optimised for something different – it was a super-impressive process and technology, but just too heavy for the GE HealthCare business.”

This move typifies another part of the ‘from- to’ journey that treasurers might not intuitively expect – the need to sub-optimise somewhat in terms of technology and process to enable the creation of a functioning treasury from the get-go.

“You accept technology that’s a little bit worse, by which I mean can the TMS do hedge accounting that’s good enough for a $20bn company, or do we need the niche hedge accounting software that the $650bn bank required?” explains O’Keef. The phrase ‘good enough’ was often used. In a typical, established treasury function, we’re all trained to continually optimise, get better, align things tighter, get better control, systems, and process, but the ask here was different.”

Treasury 2028

While creating a functioning treasury department that could be operational from day one of GE HealthCare as an independent business was a critical consideration, it was not the only goal for this project. O’Keef was also tasked with an exercise dubbed ‘Treasury 2028’, which was about prioritising what would matter the most for the treasury function over the next five years or so.

“Job one was to de-risk the spin-off, to stand up the organisation and not fumble the ball,” acknowledges O’Keef. “Job two was building out that plan. We’ve spun off, stabilised, and are about ready to exit GE’s transitional service agreements, so we’ll have our own technology stack and highly trained, super-efficient staff in the next couple of months. The next step is to start to optimise around that with 2028 in mind.”

By establishing the potential for 2028, treasury could reverse engineer that to 2023 to ensure that decisions made today would not reduce the optionality to achieve the 2028 vision.

“Treasury 2028 starts with deeper business integration,” explains O’Keef. “In a business this size, treasury needs to be part of daily strategic and tactical dialogue. That’s probably the hardest piece – when you’re in a business that has had treasury embedded in it for a long time, you don’t think about it – your FP&A [financial planning and analysis] and cash flow teams are plugged in, your IR [investor relations] team understands what they need from you, and you’re arm in arm with legal, tax, and accounting. In an organisation that’s never had treasury embedded into the business, sometimes people don’t know what to make of our corporate finance skill set.”

Picking the right partners

Choosing the correct external partners is vital when embarking on building a new treasury function. Fortunately for GE HealthCare, PwC had been embedded in GE’s transformational journey over the decades, which added value to O’Keef’s mission.

“PwC were helpful, first in helping me understand the history of why what I’m inheriting looks the way it does, and what the choice points and considerations were,” he says. “Second, from their ‘outside-in’ perspective, I suspect they enjoyed that I had a blank piece of paper so I could quiz them on how other clients think about certain things or ask what market best practice was for specific processes.”

Further perspectives were then added by looking at the project through the banking lens, O’Keef adds. “In a situation like this, I can ask the banks such as BNP Paribas and other partners how they help their clients, what’s core functionality for me and what should be non- core. It’s been about unpacking insights from more than a dozen institutions, a handful of consultancies, and dozens of my peers. I’ve learnt a lot, and what we’ve constructed here is very different than what I would have built had I drawn it all up on day one – or all by myself.”

Understanding what matters

Creating a brand-new treasury function from scratch is an ambitious project. Every decision made throughout the development phase could considerably impact the final result and how treasury operates in the coming years.

“When you start with a blank piece of paper, there are tough choices to be made – do you invest in an employee or in an asset for this process versus another?” comments O’Keef. “You also have to talk to the business partners and help educate them about what you can deliver based on the type of capabilities you build. Going through a project like this forces you to reflect on what matters.”

For O’Keef, treasury has a unique lens on the organisation that enables treasurers to see many elements no one else does. How a treasurer leverages that knowledge and applies their skills can significantly impact how they deliver value to the organisation.

“With this special knowledge and visibility that we have, it is vital to build that out and educate the wider business on what we can deliver,” he concludes. “In turn, they can open up and let us in treasury learn more about the business. This collaborative approach style means that the whole organisation’s value delivery goes up exponentially.”

Givaudan is a CHF 5bn revenue company and the global leader in the flavour industry. As such, the company has complex FX exposures, intercompany transactions and cash flow patterns to track, analyse and manage.

The Past

With a limited treasury team of seven (including back and middle office operations) the question is how to best deploy scarce resources. That is why Givaudan’s Head of Market Risk, Antonio Nota, turned to Robotic Process Automation (RPA).

Givaudan uses SAP Treasury as their main TMS, and captures their FX deals and counterparty risk within the system. However, despite having a relatively straightforward FX hedging policy, staff were faced with 3.5-4 hours per day of manual, repetitive effort to manage FX exposure, including:

• Capturing the exposures of more than 23 entities in the TMS;

• Pricing and execution of 50-60 intercompany hedges to transfer the exposure to HQ treasury and subsequently input into the system;

• Identifying netting opportunities and deriving the final exposure per currency for the group;

• Hedging treasury’s position externally, within their counterparty credit policy.

As a matter of fact, like many FX hedging programmes, it meets the classic criteria for RPA.

The process is:

• highly manual,

• high frequency,

• repeatable,

• rules- or policy-based.

The Present

As a first step, Givaudan used its systems provider’s standard functionality to capture their underlying G/L exposure as an automated process directly from the business entities.

Using a smart add-on, they automated the rest of the process. Put simply, they have taught the TMS their treasury policies and thresholds. The system has been enhanced to contain the parameters of Givaudan’s FX policies and hedge percentages, per currency and per entity. After setting these boundaries in the system, the team developed a series of automated functions where the system automatically identifies and executes the appropriate hedge with each internal counterparty, at the day rate uploaded from Reuters, in order to have an arm’s length trade vis-à-vis the tax authorities of the countries of the companies involved. Since Givaudan was performing exposure management for more than 23 entities and using up to 50-60 trades per day, this has saved significant effort and CHF 15 million.

The final product of the RPA is the consolidated net Group FX exposure, delivered to the treasurer in just 30 minutes. The information is provided early, allowing the treasurer more time to determine the best timing and conditions to trade their exposure in the market.

The Future

For now the company still performs the final deal with their banks manually, as they assess the robustness of the input data (to avoid the garbage in – garbage out problem). However, in the future they may, like some advanced corporates, automate this final execution of the deal with their external counterparties, which for many is also a highly manual, repetitive, rules-based process.

Advice from the wise

Antonio Nota, Group Treasurer at Givaudan, has sage advice for anyone embarking on such a project: map it out, simplify the process as much as possible, and try the process manually. This has the twin benefits of allowing you to refine the process before capturing it in the system, and identify a back-up solution easily replicable by humans should systems problems arise.

His advice is to constantly challenge yourself and look for other associated processes to pull into the RPA. For example, even after executing his hedges, Nota goes further and applies automated alerts to be notified of any material adverse change in his counterparty’s credit ratings (as measured by traded CDS spreads). These alerts are courtesy of another SAP add-on which combines the outstanding deal valuations with the cash held at the same banking group and compares these against CDS spread thresholds in their counterparty risk polices.

The use of RPA is perhaps an ongoing continuum of automation, but with advances in technology it is now moving at a rate, and with a scope, that is often only limited by our imagination and enthusiasm.

Tobias Thiessen, Treasurer, The Global Fund

Since its creation in 2002, the Global Fund has disbursed more than US$50 billion in the fight against HIV, TB and malaria and for programmes to strengthen healthcare systems across more than 155 countries, including regional grants, as of June 2021. As a result, it is one of the largest funders of global health. Health programmes supported by the Global Fund partnership had saved 44 million lives as of the end of 2020.

Treasury plays a major role in the Global Fund’s ability to invest in programmes that tackle health crises that devastate communities. It does this through efficient and cost-effective processes, effective cash and risk management to ensure reliable and predictable funding to programmes around the world, and contributing to sustainability goals that are aligned with the Global Fund’s government, corporate, community and individual stakeholders. In this article, Tobias Thiessen, Treasurer at the Global Fund describes his team’s priorities in the year ahead.

Treasury organisation

We have a centralised global treasury function based in Geneva, Switzerland, which comprises accounts payable, control, cash management, front office (for hedging) and corporate insurance. We also manage the Global Fund’s pension fund.

Although the programmes we fund are global, most of our bank accounts are held in Switzerland, and we transfer funds to our

delivery partners’ accounts in-country. In some cases, we leverage our corporate and bank relationships to help partners to access accounts, negotiate bank fees, manage foreign exchange etc.

Treasury priorities

As we look to the year ahead, I would highlight four key priorities: supporting our forthcoming replenishment conference through effective cash and risk management; tackling the growing cybersecurity threat; continued digitisation and automation of our treasury processes, and contributing to the organisation’s sustainability agenda.

Replenishment conference 2022

Our main focus for the coming months is our replenishment conference in September 2022, at which we hope to raise £18 billion to fund vital health programmes around the world. This is particularly important this year given the devastating impact that Covid-19 has had in the fight against HIV, TB and malaria. Around 50% of donations we receive are in non-USD currencies. In 2013, we embarked on a treasury transformation programme, which included restructuring our risk hedging programme. We now hedge within a three year FX hedging framework so that we can guarantee funding levels to the projects we finance. This approach has successfully enabled us to manage our FX and economic risk during the past two replenishment cycles.

Tackling cybersecurity

We continue to prioritise cybersecurity. Treasury is particularly vulnerable to cyber risk, given the large amounts we manage, so it is surprising that there are still some treasurers who do not play an active role in this area. We work closely with our chief information security officer (CISO) and IT security team to understand and manage the evolving risks, which includes working with key suppliers to align our standards. We regularly review our processes and systems infrastructure for potential security vulnerabilities, have rigorously applied multi-factor authentication, and achieved ISO27001 certification. However, given that the nature and scale of the cybersecurity threat continues to evolve, we remain vigilant in anticipating, understanding and implementing precautions.

Digitisation and automation

Third, we are keen to maximise the amount of money we can dedicate to tackling global health crises around the world, so process automation, efficiency and productivity are vital. We have a highly integrated treasury technology environment, connecting our treasury management system (TMS), enterprise resource planning (ERP) platform, FX hedging solution, confirmation matching tool and SWIFT-based bank connectivity. However, as new fintech solutions emerge, we continue to review and identify opportunities to automate our operations further, such as using optical character recognition (OCR) for invoice scanning and robotic process automation (RPA) for rich data exchange.

Sustainability

Given the global reach of the programmes and the vulnerability of the communities we support to the environmental and social challenges of our generation, sustainability is a major priority for the Global Fund. We work closely with the World Bank as our asset manager, which itself has a strong sustainability mandate, to identify opportunities to integrate environmental, social and governance (ESG) considerations into our investment process. We recently changed our benchmark index for our

global equities portfolio to an index which is more closely aligned with our ESG priorities but with the same risk profile as our previous index. ESG-linked investment is an area of continuing focus given the rapid development of ESG products that is taking place. Furthermore, we are looking at opportunities such as carbon trading to neutralise our carbon footprint.

Preparing for future challenges

The coming year will inevitably be one of market volatility and geopolitical and economic turbulence, with rising inflation and interest rates. Managing the impact of world events will increase the pressure on our treasury team, but we have developed effective policies, processes and systems, and a resilient team with strong skill sets across the different areas for which we are responsible, including digital. By mitigating the impact of volatility on our portfolio, we put the Global Fund in a better position to save lives and put an end to the healthcare crises that devastate communities.

Introduction - the digital context

World leading technology manufacturer Honeywell has a culture of innovation, sustainability and connectivity, in which treasury is taking a leading role,

“Digitisation at Honeywell is about leveraging technology to work smarter and increase productivity: in essence, to do more with less.”

Marie-Astrid Dubois, Assistant Treasurer, EMEA, Honeywell

In practice, this means looking for the next new technology opportunities, rather than waiting to be introduced to them, and working with banks and vendors that have put innovation at the centre of their strategy.

“We visited our banks’ innovation centres to understand their commitment to innovation, their ability to anticipate and respond to changing needs, and the quality of advice on digital innovation that they are able to offer their customers. We are very willing to work with these banks to help shape the value proposition of solutions in addressing customer challenges.”

Marie-Astrid Dubois, Honeywell

Honeywell’s digital agenda is centred around its treasury management system (TMS), which provides high quality management reporting based on a well-structured database. However, it is not just visibility over global cash that delivers value, but the ability to use this cash.

“We have been able to ‘unlock’ large amounts of trapped cash from across the business and invest this cash more profitably. The ability to analyse cash balances and forecasts by account, entity and country in detail has been essential to achieving this.”

Rónán Clifford, Treasury Manager, Honeywell

Leveraging robotics and AI

Within the context of its overall treasury technology framework, Honeywell is leveraging robotics and AI (artificial intelligence) to deepen its insights even further by harnessing better quality, more consistent data.

“We are already live on a small robotics project with one of our partner banks to collate and analyse FX exposures and automate the associated hedging activities. This was previously done in a shared service centre, with transactions undertaken manually, so the project represents a major resource saving and a streamlined FX risk management approach”

Rónán Clifford, Treasury Manager, Honeywell

Honeywell anticipates further use of robotics in the coming year, even if this is in small steps initially.

“We are under significant pressure to further improve productivity so by using these techniques to reduce the time spent on manual tasks and day-to-day, less strategic decision- making, we have more time to think and add value in more strategic areas of the business.”

Marie-Astrid Dubois, Honeywell Digital mindset

Embracing the concept of the digital treasury has not simply been a case of evaluating new technology at Honeywell; instead, it is part of the mindset. The whole team is Six Sigma trained, which ensures a disciplined and value-driven approach to project design and implementation.

Javier Orejas, Global Head of Banking, IATA

The corporate challenge

Corporations that work with multiple banks, and across multiple markets, face major operational challenges and overheads when advising their banks of account signatory changes. The process is typically manual and paper-based, differs across counterparties, and is prone to error or omission, either/ both on the corporate or bank side. As Javier Orejas, Global Head of Banking, IATA comments,

“Maintaining accurate bank account signatory information with our banks is a major ongoing challenge, particularly given that IATA works with 56 banks in 180 countries. Not only is the process time-consuming and cumbersome, but it can take a significant amount of time. In one instance, for example, it took more than three months for a signatory change to take effect, creating a serious risk to our business.”

Related to this, obtaining current signatory records from banks for audit purposes can often take a month, with this information likely to be outdated by the time it is received. In some cases, signatory reports received from banks reflect data that is outdated by three years or more.

For banks too, maintaining customer account signatory information is a cost to doing business that is not matched by the value it adds to the business. It presents a high operational and financial burden, while the risks associated with error or omission are high. Consequently, the potential benefits of alleviating this burden, improving security, and reducing risk, and digitising processes brings advantages to corporates and banks alike.

Formulating a response

Fintechs are emerging to provide a multi-bank approach to bank signatory management, with a view to creating a streamlined, digital and standardised process for managing authorised signatories on bank accounts. On his experience of collaborative working with a fintech and a panel of banks and corporations, Javier Orejas, IATA comments,

“We had a high level of confidence that together, we could devise a platform that would reduce the operational and risk burden that maintaining and reporting accurate, timely bank account signatory records creates for both corporates and banks. For example, initiatives such as SWIFT gpi have already proven the value and impact that co-creation of a bank-agnostic solution can have across the entire community.”

Progress to date and next steps

Although the programme was interrupted during the early months of Covid-19, two banks and eight corporate pioneers, including IATA, Salesforce, and Siemens worked with fintech Delega to successfully complete a proof of concept (POC). The POC included “many- to-many” connectivity and a standardised, digital workflow, both of which are essential to the success of an effective, global solution. Banks and their corporate customers share the same view of data, eliminating the need to request reporting and audit data. Following the successful POC, the project will now move into pilot phase in Q3, 2022.

Javier Orejas, IATA, concludes,

“This is another key example of how co- creation can result in powerful solutions that address long-standing challenges across the bank-corporate community. While banks could individually modernise and digitise their bank account signatory management process, this needs to be replicated across multiple banks to create a compelling value proposition for corporate clients. The new platform replaces fragmented, manual, disparate processes with a standardised workflow within a secure, digital, and bank-agnostic framework.”

Looking to enhance one of treasury’s most crucial processes, Ingka Group has successfully applied AI to its cash flow forecasting. By leveraging advanced algorithms, the company benefits from real-time insights that enhance overall cash management.

In today’s volatile financial landscape, cash flow forecasting has again emerged as a crucial element for treasurers seeking stability and growth. Traditional cash flow forecasting methods often rely on manual data entry into Excel spreadsheets and significant assumptions, which can lead to errors and inaccuracies.

In response to these challenges, AI-based cash flow forecasting has rapidly gained traction as an alternative. And this is the path that the treasury team at Ingka Group, franchisee of global furnishing powerhouse IKEA, chose to pursue.

Guzman Chavert Posa, Cash & FX Forecast Team Leader, Group Treasury, Ingka Group, reflects that the driver behind adopting AI-based cash flow forecasting was its transformative capabilities. “By harnessing advanced algorithms and machine learning techniques, AI-based systems can analyse historical data, identify patterns, and make predictions with unprecedented precision,” Chavert Posa states. “This helps eliminate the errors and inaccuracies that plague traditional methods.”

One of the prominent benefits of AI-based forecasting is its ability to provide real-time insights into a company’s financial position. The capacity to process vast amounts of real-time data enables businesses to make well-informed decisions and swiftly respond to changing economic situations, thus enhancing their agility in the market.

Moreover, AI algorithms excel in analysing diverse data sources, including historical financial
data, market trends, customer behaviour, and economic indicators. “This data-driven decision- making approach,” Chavert Posa explains, “empowers businesses to make strategic choices based on actual data, rather than relying on intuition alone.”

Beyond its analytical features, AI-based cash flow forecasting offers another significant advantage – reducing manual effort. By automating data entry and calculations, corporates can save precious time and resources while mitigating the risk of human errors.

But the benefits of AI-based forecasting extend beyond mere efficiency gains. Improved cash flow management becomes a reality with more accurate and timely forecasts, for example. “This empowers businesses to optimise investments, manage working capital, and effectively address cash flow challenges,” states Chavert Posa. “Ultimately, this leads to improved financial stability and better resource allocation.”

Indeed, cash flow forecasting has become increasingly relevant and crucial as the backbone of Ingka Group’s IHB operations, helping it efficiently manage the organisation’s cash, liquidity, and financial risks. The cash flow forecast system was developed in-house, leveraging the organisation’s internal resources and expertise.

The best of both worlds

“The project commenced with a comprehensive analysis of our specific cash flow forecasting requirements,” explains Chavert Posa.
“This included a detailed assessment of historical data, financial trends, and factors influencing cash inflows and outflows. By understanding the unique intricacies of our business operations, we aimed to build a system that catered precisely to our needs.”

The result was a cash flow forecast project that progressed from the initial concept stage to launch in less than eight months – and a potent mix of man and machine. “We chose not to apply the AI- based method to all areas of forecasting within our organisation,” Chavert Posa reveals. “We believe in a balanced approach that combines the strengths of both human expertise and AI technology.”

With the new cash flow forecasting up and running so promptly, Ingka Group is seeing enhanced forecast accuracy, thanks to sophisticated algorithms and ML methodologies that scrutinise past data, recognise trends, and generate predictions with heightened precision. It also offers new levels of adaptability and flexibility.

“AI-based cash flow forecasting models can adapt and learn from new data, making them more flexible in handling changing business environments,” elaborates Chavert Posa.

“As economic conditions, customer preferences, and market dynamics shift, the AI model can continuously update its predictions, enhancing the accuracy of the forecasts.”

The AI-based forecasting models can also perform scenario analysis by simulating various financial scenarios based on different parameters and assumptions. This capability helps the business assess potential risks, plan for contingencies, and optimise its financial strategies.

Adapting to the new normal

While the benefits of AI-based processes are gaining traction, understanding the main obstacles faced during this project and how the treasury team at Ingka Group navigated them offers even greater insight for treasurers.

One hurdle was market uncertainty and volatility, including factors such as customer payments, supplier invoices, and unexpected events, can impact cash flow and challenge the accuracy of the forecast. Chavert Posa also notes that a lack of data and visibility was another issue confronting the team.

“Accurate cash flow forecasting relies on timely and comprehensive data,” he affirms. “However, treasurers may face challenges in obtaining complete and up-to-date data from various sources within the organisation, leading to inaccurate forecasts and frustrations.”

Cash flow forecasting involves analysing and interpreting various cash flow drivers, such as operating, investing, and financing cash flows. Understanding the intricacies of these dynamics and their interdependencies can be another challenge that impacts accurate forecasting. This can sometimes be compounded by limited tools and technology available to the treasurer.

To address these obstacles, the team at Ingka Group changed its approach and way of working, adopting new strategies to give the project a sound footing.

“One of the changes we made to improve data management was to build a property model,” confirms Chavert Posa. “We ensured that
data is accurate, complete, and accessible by implementing robust data management processes and using technology solutions such as cash forecasting software.”

The project also implemented sophisticated forecasting techniques such as statistical models, scenario analysis, and Machine Learning (ML) algorithms to improve forecasting accuracy. And in addition to the work on the technology side, the project team also looked at how to enhance interdepartmental relationships to help treasury access all the relevant data the forecast relies upon.

“By promoting effective communication and collaboration between different departments within the organisation, we’ve obtained the relevant inputs to enhance cash flow forecasting accuracy,” enthuses Chavert Posa.

Retain the human touch

The accuracy that leveraging advanced algorithms and ML techniques provides
will help treasury to optimise investments, manage working capital, and overcome cash flow challenges, leading to improved financial stability for the organisation.

As dazzling as the benefits of AI can be to a cash flow forecast, however, it is vital not to discount the importance of the treasury and finance professionals that are steering the organisation’s cash management.

“Achieving a successful cash flow forecast relies on finding the optimal synergy between AI technology and valuable business insights,” concludes Chavert Posa. “Combining the predictive power of AI with human expertise enables accurate predictions, timely decisions, and effective financial planning.”

Wanting to enhance its cash management capabilities in APAC, Rotork embarked on an ambitious transformation project that included implementing a single e-banking platform and an intricate pooling structure that incorporated a link to its liquid assets in China.

Rotork, a FTSE 250 company, is an engineering business with a presence in around 40 countries. The company employs circa 3,300 people worldwide and is headquartered in Bath, UK.

William Potts, Rotork’s Group Treasurer, reveals:
“Our revenue turnover for 2023 was £719m, with a pre- tax profit in the region of £151m. The company has no committed debt facilities as it is highly cash generative, and at the year-end, it had around £134m net cash on the balance sheet.”

Internally, treasury interacts with group finance,
tax, legal, the company secretary and all operating divisions globally. Externally, treasury is responsible for managing the group’s banking relationships. Rotork works with six key banks but transacts with many other banks globally. Treasury’s key focus is on cash repatriation, as with no debt facilities to fund corporate activities such as M&A and dividends, repatriating cash into HQ is essential.

“Our primary function is bringing the cash back, especially from countries where this can be challenging, such as India and China,” explains Potts. “We also manage all foreign exchange, trade finance facilities for the group, all the banking requirements globally, and support M&A activity on both a pre- and post-acquisition basis.”

Laying firm foundations

To concentrate the company’s capital, Rotork’s treasury has set up several cash pool structures. In the UK, it has a cash concentration unit that centralises funds from all its operating entities in the country. With similar structures in Europe and North America, the next logical step was to implement a similar arrangement in Asia.

“APAC has its challenges, especially in places such as China,” notes Potts. “For this project, we wanted to create greater visibility and control over our cash in the region and streamline the number of banks and bank accounts we use. Bank rationalisation will help with cash control and visibility and reduce costs in the longer term.”

The transformation project also enabled Rotork’s treasury to optimise the amount of cash in Asia that it could bring back to headquarters.

Nick Batty, Rotork’s Treasury Manager, elaborates: “We are trying to access funds that we wouldn’t have been able to reach previously. The goal is to have as much of our cash as possible and to be as liquid as is practical.”

At the start of the project, the treasury team explored which banking-partner essentials would lead to a successful transformation. This began by collecting all relevant data from its operating subsidiaries around APAC.

Potts recalls: “There were eight or nine countries to cover, and many of the teams there are fairly thinly resourced and have constraints such as month-end reporting, forecasting and budget preparation requirements.

First, we had to gather all their information regarding the volumes of payments and receipts and what type of banking requirements they had in-country.”

While time-consuming, this process was crucial for understanding what exactly should be included in the RFP for prospective banking partners. The RFP recipient banks were primarily selected based on the ancillary business with which they provided Rotork and also on the treasury team’s perception of the bank’s presence in the APAC region.

“We sent out the RFP document to five banks with a fairly stringent response timeline,” Potts recalls. “But we also tried to give them some time so they could ask supplementary questions that may not have been covered in the document.”

Rotork’s treasury committee – comprising Potts, Batty, the CFO and the Group Financial Controller – sifted through the bank responses and shortlisted three. Those candidates were invited to deliver a presentation and demonstration of their electronic banking system, which had been identified as a crucial element of the project.

“We wanted them to use the presentation to convince us that they knew what they were doing, how they were going to set up everything in China, and where they were proposing that we have our hub for the cash concentration,” explains Potts. “We also wanted them to talk us through the implementation process.”

With the presentations completed, the Rotork’s treasury committee completed a scoring matrix for all three banks, evaluating cost, the electronic banking systems, what support they would provide, how treasury felt the implementation would be carried out, and their proposals for the structure in various countries.

“It was a rigorous process and, at the end, we selected BNP Paribas,” reveals Potts. “That was a slight surprise
to us because there were other banks that you
might assume would be a natural APAC provider, but BNP Paribas outscored the competition on virtually every matrix on which we judged this process.”

E-banking: a project cornerstone

As already noted, the global e-banking solution element of Rotork’s treasury transformation in Asia has been

critical in enhancing cash visibility and control. Combining this with a rationalisation of banking partners has been particularly powerful.

“Before this project, we had around 15 different banks for the APAC countries in which we operated,” Potts explains. “We whittled that down, although not to just one bank because there are certain countries, such as Japan, where a local bank is necessary to make tax payments.”

By significantly reducing the number of partner banks
in Asia, Rotork’s treasury was able to gain a far clearer picture of how much cash it had and where and how this was distributed between the various countries, with next- day visibility.

“Our control over where cash flowed to was also enhanced,” Potts adds. “Through that, we could augment returns on the surplus cash in idle balances.”

Rotork was familiar with the new e-banking system for APAC because it already used BNP Paribas’ Connexis system in Europe.

“I was already a ‘super administrator’ on the Connexis system, which meant that we could set up everybody and knew what we were doing,” reflects Potts. “If a colleague in Thailand or Singapore was experiencing difficulties, we could answer them fairly quickly, and the bank was also a great help.”

Despite having already captured many cash management benefits since moving to a single e-banking platform in APAC, this is still just the first phase of automation at Rotork. The group is also going through a significant transformation project, a vital part of which is moving onto a common accounting platform. “The real benefits will be seen once that has been implemented,” enthuses Potts. “After we’ve made payments, we’ll be able to download files from the ERP system, seamlessly process them with the necessary controls, and automate our bank reconciliations.”

Bringing China into the mix

Cash pooling is the crux of Rotork’s cash management transformation in APAC. There are two elements to the company’s efforts: a cross-border physical cash pool centralised in Singapore; and a Chinese domestic cash pool linked to a full-function cross-border pool in the Shanghai Free Trade Zone (FTZ), which feeds into the Singapore structure.

“Setting up the Singapore cash pool was fairly straightforward,” says Potts. “It was a similar experience to setting up a European cash pool, for example. Certain elements were set up quite quickly, such as adding Australia and Hong Kong to the pool.”

The critical element of the overall APAC cash-pooling project was finding a way to link China to the main one
in Singapore. As Rotork has a couple of entities in China, the first step was to set up an in-country cash pool. Then, within the FTZ, Rotork set up a bank account in the name of the entity that handles most of its treasury activities, and that was then linked to the cash pool in Singapore. Rotork has a CNY header account in Singapore and a USD account that pools all the cash from the other locations.

“Once we had the domestic China cash pool set up, we had to get PBOC [People’s Bank of China] clearance,” explains Potts. “The movement of cash from the domestic cash pool into the FTZ is not an automated process.”

This means that the treasury has to manually transfer the funds and obtain sign-off from PBOC for the payments. The same process occurs when repatriating cash.

The money transferred from the domestic cash pool into the FTZ is then automatically swept into the header account in Singapore.

“Conversely, when we want to pull money back, we just pay money out of the account in the FTZ into the domestic China account,” Potts elaborates. “That is automatically covered by a sweep from the header account in Singapore, but we then have to go through the same manual documentation process to get funds back into China.”

There are restrictions as to how much cash the treasury can sweep. With the structure that Rotork used, it is restricted to a maximum amount of the total equity of the separate entities in the pool. Additionally, cash cannot be outstanding over the year-end, so treasury has to repatriate it back annually. Despite these limitations, however, the new pooling system represents a significant improvement in cash management opportunities at group treasury level.

“Broadly speaking, about 30% of our cash is held in China, so to be able to gain access to that, to be able to utilise it, and enhance returns on that cash, makes a significant difference to us,” Potts reflects.

The paperwork required at the start of the process to arrange the China and the US dollar pooling structures took some time.

Batty outlines: “We received excellent implementation support from BNP Paribas to help us exepdite the documentation and get everything signed appropriately where needed, ensuring all the details were checked before we sent everything to the bank and the regulatory authorities. It’s a complex process to set up, but it’s well worth it when you get there.”

Raking in higher interest rate returns

A further pillar of Rotork’s treasury transformation in Asia is its use of interest optimisation. All the company’s bank accounts, including the CNY and USD accounts, are in the interest optimisation structure. Therefore, any idle balances will earn more interest than was previously possible.

“Anything over a certain threshold will earn a high interest rate, and anything under that threshold will earn a lower interest rate,” Batty explains. “At any point in time, we want as much cash as possible in APAC to be sitting in that structure to benefit from that higher interest rate.”

One benefit of the interest optimisation structure is
that the treasury team does not need to use deposit accounts, which would entail tracking the different credit ratings of various banks and deposit facilities. “The cash is just sitting there, which is brilliant,” Batty adds. “That’s greatly strengthened our control and visibility of cash and also helped with the repatriation of that cash to the UK.”

Taking everyone along for the ride

Much of what Rotork has achieved with its treasury transformation in Asia has been due to its carefully thought-out approach to change management. A vital part of that was ensuring that the local finance teams were included from the outset of the project.

Potts highlights: “We didn’t want the local teams to feel as if they were having something imposed upon them from the centre. We wanted them to buy into it.”

That meant engaging with these teams, and the regional CFO, from the planning stage, explaining exactly what treasury was looking to do, the reasons behind the initiative, and what benefits it would bring to the treasury team and the company as a whole. “If you don’t get the local finance teams on board from the beginning, things will not work,” Potts warns.

Once the RFP process had been negotiated and the project began in earnest, the next essential element
in ensuring a smooth change was to secure an implementation manager from the bank who would run the process.

“Good communications between treasury and the bank on such a project are vital,” Potts asserts.
“Our implementation manager is based in Singapore, and despite the time difference, we set up a catch-up call first thing every Monday morning at UK time to check on progress.”

From start to finish, Rotork’s APAC treasury transformation project took around 18 months. Reflecting on the tasks and schedule, Batty comments: “There’s a significant amount of paperwork to complete, much to read and comprehend, and various regulations to understand and follow up. But it’s well worth it when you eventually see the benefits.”

On the paperwork point, the lack of digitisation in the world of contracts was one element that could be a source of frustration. Potts comments: “The amount of paperwork generated by local regulations that requires wet signatures is unbelievable in this day and age.

We were couriering paperwork around the globe, and you also have to remember who the signatories are in certain businesses.”

Treasurers considering a similar project that includes China should also bear in mind that PBOC [People’s Bank of China] sign-off can take a long time. “We achieved PBOC sign-off in about three months, which is pretty good going,” admits Potts. “That’s also a testament to BNP Paribas’ support there.”

The relatively smooth execution of Rotork’s project was in many ways thanks to having two entities in China that have been operating for several years with active accounts to prove those business transactions. Starting from scratch and incorporating a new company into a cash pool structure could prove to be more challenging.

“We set up another entity in China fairly recently, it doesn’t yet have a full year’s set of accounts so we can’t include it into the cash pool,” says Potts. “While we will be able to do that by the end of this year, it is an example of how regulations can slow projects down.”

Faced with a decentralised treasury structure and local entities holding on to surplus cash, the treasury and finance team at media giant Mediahuis engaged BNP Paribas to implement a zero-balancing cash pool.

Formed in 2014, Mediahuis is a European media group with businesses and activities in the Netherlands, Ireland, Germany, Luxembourg, and Belgium. In 2022, Mediahuis realised a consolidated turnover of €1.2bn, with €200m recurring earnings before interest, taxes, depreciation, and amortisation (EBITDA).

Over the past decade, the group has acquired several additional companies. One side effect of this growth has been the emergence of a decentralised treasury organisation.

Assessing the goal

Kristiaan De Beukelaer, CFO, Mediahuis, comments: “We always try to ensure that all excess cash from the local operations flows to the holding company. This is easy when our treasurer manages the day-to-day tasks for the local operations in Belgium, but more challenging with some of the other countries.”

Following a new acquisition, the company’s operating model is to leave a certain level of local governance in place in the new entity. This requires formal agreement as to how to upstream excess cash to the group treasury. Somewhat understandably, local finance directors try to retain a certain level of cash locally as a buffer. With hundreds of accounts divided among different banks, the cash trapped within the various legal entities quickly escalated.

“I looked at our monthly balance sheet, and we had around €50m to €60m in cash spread throughout the group across various bank accounts,” De Beukelaer reveals.

To tackle this challenge, the treasury team at Mediahuis embarked on an ambitious project to free that trapped cash and manage it centrally. The ultimate goal of this project was to create a multi-entity, multi-currency cash pool to free the funds, where all manual processes were completely digitised.

Getting to work

The first step in the project was to open more than 60 new bank accounts with BNP Paribas across Belgium, the Netherlands, Luxembourg, Ireland, the UK, and Germany.

“We selected BNP Paribas as we wanted a bank that could offer resident accounts not only in
the countries we currently operate in but also with operations in most European Union countries to support our growth ambitions,” explains De Beukelaer.

Opening 60 new bank accounts is no quick and easy feat due to the associated KYC requirements. To make the process as smooth as possible, Mediahuis used the Welcome digital platform from BNP Paribas to ease the account opening and KYC processes, avoiding an excess of paper.

“When we had gone through the KYC and opened the BNP Paribas bank accounts with our local entities, we onboarded our processes in a two-step approach, starting with direct debits,” outlines De Beukelaer. “From a ‘cash in’ perspective, this is the largest part of our business.”

Indeed, the project has seen the centralisation of more than 10 million direct debits within BNP Paribas. Considering the decentralised structure of the Mediahuis treasury and finance operations, the group integrated a wide range of the bank’s e-channel products and tailor-made solutions into their day-to-day operation.

“Then we included all outgoing payments to suppliers and our employees, followed by the final phase of gradually onboarding all other revenue,” continues De Beukelaer. “That final part is possibly the most elaborate exercise – these are advertising customers, and changing bank accounts for many customers is always very intensive. But at this point, we have already completed that with two of our seven entities, so all cash transactions will eventually be held directly in the BNP Paribas accounts.”

From a group perspective, a zero-balancing cash pool was set up, with one master account in Belgium. Every night, all outstanding amounts are settled to the master account, so there is a zero balance on all accounts in the morning.

“Related to the zero-balancing cash pool, we have a credit line with BNP Paribas in the form of an overnight facility to ensure we always have available liquidity to pay suppliers or employees,” explains De Beukelaer. “This has the potential to expand in line with the growth of our group. Looking at the total cash turnarounds, today we have a €60m line that we use exclusively for our day-to- day operations. That is completely outside the structural financing of our growth or our operations.”

During the project implementation, Mediahuis was onboarded to INQUIRO – a web-based
BNP Paribas app for payments compliance queries that facilitates secure and rapid communication between the bank and Mediahuis. This has ensured that questions regarding payments and collections are tackled swiftly.

From the bank’s side, the project was closely monitored by the BNP Paribas implementation team. Working with a strict ISO-certified methodology meant the implementation was smooth and efficient.

Optimising group-wide cash management

With business entities being added, Mediahuis went live with the cash pool in October 2022. Even as the project continues, the benefits of the brand-new structure are evident.

“We always net the cash on individual accounts with what we have in our credit line related to the cash flow, and I see that the net is declining quite rapidly,” enthuses De Beukelaer. “The fact this is already visible underlines that we are succeeding in optimising our balance sheet and working capital.”

The benefits have also been felt on the funding side. “We work with an RCF, and the new set-up has certainly helped us in stretching that and being able to make some acquisitions without the need to go back to the banks as quickly as we did previously,” De Beukelaer adds.

The centralisation that Mediahuis has achieved due to this project has delivered several efficiencies. Balances are now available within the same value date, reducing the use of overdraft facilities. Centralising all SEPA Direct Debits and SEPA Credit Transfers with BNP Paribas has afforded Mediahuis best-in- class pricing. At the same time, the move to centralise all cash within one bank provides the company with excellent grounds for negotiating first-rate credit renumeration and debit interest.

In terms of the next steps, the goal is to have one bank account per legal entity so that, eventually, Mediahuis can rationalise the number of accounts. But the progress made to this point is already providing peace of mind.

“I no longer have to worry about €40m or €50m floating around the group that I could use but can’t get my hands on,” concludes De Beukelaer. “This enables me to focus on much longer-term strategic projects and M&A – which is where treasury can add even more value to the business.”

While settlement of FX cash flows at Merck was already highly automated, it still involved numerous manual steps – with which many treasurers will be familiar. Recognising this, Merck’s treasury team took the initiative in 2022 to automate all remaining manual processes involved in FX cash settlement.

Merck has a centralised in-house bank dealing with everything related to FX risk, which is managed by corporate treasury. Treasury uses daily FX rates and hedges all its exposures on a daily basis. It covers more than 40 different currencies and handles a substantial volume of more than 10,000 FX transactions annually, resulting in more than 20,000 cash flows. Consequently, settling FX cash flows is one of the department’s most crucial processes.

Uwe Reinemer, Director – Head of Treasury Operations, Merck KGaA, explains: “Given the predominantly manual nature of the legacy process, we decided to embark on a complete redesign. This involved streamlining sub- processes such as managing standard settlement instructions [SSIs], payment netting, payment processing, and monitoring. This transformation effectively converted the treasury department from a processing entity into a process steering team.”

FX cash settlement is a treasury-specific process that demands stringent security and reliability standards. Unfortunately, many related steps are performed manually at corporates and banks, leading to inefficiencies, instability, and insecurity. Merck’s treasury faced
similar challenges but proactively addressed these issues by automating four significant components along the process chain in 2022. As a result, it successfully achieved end-to-end automatic FX cash settlement and monitoring.

The four process steps automated in 2022 were:

1. Automatic updates of external SSIs

2. Automatic creation of net settlement amounts and reconciliation with external

   counterparties

3. Automatic release of payments after successful fraud monitoring

4. Real-time payment tracking via SWIFT gpi for Corporates (g4C)

“This automation, combined with other projects, granted treasury transparency over the daily FX settlement payments,” adds Reinemer.

Auto-SSI update

Typically, banks send their SSIs to clients via emails with PDF attachments. However, this process is prone to errors, as emails can be trapped in spam filters. Manual data setup in the system was necessary and each bank employs a different layout for their SSIs with varying mandatory information.

Since banks communicate their SSIs with other banks using the SWIFT message type MT 671, this information can also be utilised by corporates – opening up potential operational efficiencies. As such, Merck used its SWIFT Service Bureau to retrieve SSI information from its relationship banks and forward this to treasury. An automatic upload imports the MT 671 messages into the TMS, and notifies the treasury team of pending approvals.

“Everything is automatically structured with the correct data, a far cry from the old system of receiving PDFs where each bank would structure its data differently,” reflects Reinemer. “It is also significant from a security perspective – the SWIFT network is highly secure and for everything else the team has encrypted channels and files. Hence, treasury is confident that the data that left the bank is exactly what was imported, or vice versa. This change in the process has increased security tremendously.”

When the data arrives in the TMS, one team member verifies the new entries with the sending banks and approves them accordingly. Following the completion of the project, the process became reliable, repetitive, secure, and, except for the final approval, fully automated, resulting in a significant step forward in countering cyber fraud.

Auto settlement matching

FX settlement cash flows can be settled gross with a counterparty or netted. This approach aims to reduce overall counterparty risk and minimise the amount of cash in transit for FX settlement. Previously, the treasury department had a manual process involving telephone or email communication to agree upon the correct settlement amount and identify the payer among counterparties.

After the project’s completion, the team can now directly reconcile all outstanding netted FX cash flows with the counterparty using the confirmation matching services by the Swift Service Bureau. This process ensures a secure payment confirmed by the payee, similar to a direct debit or SEPA Instant (SCT Inst) payment process.

“If any unforeseen issues with the automated process occur, the treasury team receives email notifications from the TMS,” confirms Reinemer. “BNP Paribas was the first adopter and implementor of this process and did a lot of the groundwork, which helped enable Merck to become the first corporation worldwide to achieve complete automation of FX settlement reconciliation with its relationship banks. We are extremely proud of this.”

Auto payments processing

External confirmation from the counterparty regarding the beneficiary bank account enables treasury to eliminate manual payment releases altogether in terms of FX settlement.

“Of course, there are rigid controls around this new process,” comments Reinemer. “The automatic release of FX settlement payments
is contingent upon a payment fraud screening process and limit monitoring. Similar to the other process steps, the payment factory system notifies the treasury team via email if there are any unforeseen process issues, payments being stopped due to fraud rules, or surpassing predefined thresholds.”

End-to-end payment tracking

While SWIFT gpi is not a novel concept, when it is combined with the process steps mentioned, it enables treasury to monitor each FX settlement through a payment dashboard. Additionally, high- value FX settlement payments are executed within 30 minutes, the real-time status of the payment is visible to the payer, and the team has full transparency over bank fees and FX conversions. Thanks to the speed of these payments, the team can respond promptly to any unforeseen issues that may arise throughout the day.

Reaping the rewards

Overall, the implementation of the treasury auto FX settlement in 2022 has elevated the security level of Merck’s operations by automating error- prone processes and manual updates while incorporating the beneficiary bank account into the confirmation process. All of the steps are closely monitored through alert functions or dashboards, and fraud prevention screening prevents suspicious payments.

“The overall reliability of the process has also improved through STP of FX settlements after automatic matching with participating banks,” enthuses Reinemer. “In addition, process transparency has been enhanced by enabling end- to-end payment tracking. BNP Paribas’ experience with SWIFT gpi and its innovation with the add- ons such as g4C [SWIFT gpi for corporates] and BENEtracker1 has been invaluable here.”

Finally, the efficiency of the treasury department has been amplified, as the team no longer has any manual work to do in this area. The difference between today’s fully automated processes and what was undertaken previously is equivalent to one full-time employee (FTE). The department has been effectively transitioned from manual processing to workflow steering, monitoring, and exception handling.

An interview with George Zinn, Corporate Vice President & Treasurer

How did your digital transformation begin, and why?

We started our digital transformation journey around five years ago, with a move from on- premise technology to the cloud, as early adopters of Microsoft Azure. Our motivation was simple: like every treasury, our IT budget was stretched, so we needed to find ways to save money. To start with, we took a ‘lift and shift’ approach, as opposed to trying to optimise our treasury applications.

Even so, the results were remarkable, with cost savings of 20 percent. We are now moving SWIFT to the cloud too, which will further reduce our on-premise architecture and lead to additional savings. One of the reasons for this level of savings was capacity planning. Our peak system usage is at the end of accounting periods, so we had built our on-premise infrastructure to accommodate this. However, by using the cloud, our usage could be scaled to our needs at different times of the year rather than maintaining permanent excess capacity.

How has this transformation journey developed since?

Having reduced our costs, we could explore ways to optimise and digitise our treasury activities to deliver greater value to the business. The shift to the cloud revealed some interesting, and unanticipated opportunities. By bringing together all our data from our 40 treasury applications into the Microsoft Azure data lake, we now have far easier access to this data than ever before, eliminating problems of trust and consistency and enabling us to perform sophisticated data analytics. Using Microsoft Power BI, we were able to create dashboards

and dynamic reporting that changed the way we worked, the decisions we made and how we reported to senior management. No longer did the team have to spend most of their time collating and validating data, they could now spend time on analysis and making better decisions.

How has this changed the skills you need in treasury?

Data analytics have quickly become integral to the treasury and finance skill set. In the past, people carved out their role in treasury through their ability to manage spreadsheets that were often business-critical but which very few people understood. In the future, the ability to deal with and analyse data effectively will become crucial. Recognising this, we spent time on training and exploration of our new data opportunities. This was a catalyst for many of our team to develop their skills and career trajectory to include data science.

We have been able to use a variety of services in Azure, such as Azure ML12 Studio. This allows us to use historic data for predictive analytics, building data algorithms for cash flow forecasting. Previously, we had taken a ‘ground up’ approach to cash flow and exposure forecasting, relying on business units to send in forecast reports during the last week of each month. Initially, we ran the two processes in parallel, but it soon became apparent that the algorithm-based approach was the more reliable. Not only have we produced more accurate forecasts, and therefore managed our liquidity and risk more effectively, but we have eliminated the 5 to 10 days required to produce the monthly forecast, and reduced the pressure on business units and the treasury team.

You mention machine learning as a useful tool in treasury – what about other well-publicised technologies such as blockchain?

There has been lots of hype around DLT1 or blockchain, and we have conducted various tests by building DLT-based solutions on top of Microsoft Azure. Some of these tests have been positive, such as for processing standby letters of credit, but broadly speaking, we have found DLT is currently a technology looking for a problem to solve, as opposed to offering a compelling value proposition.

Now that we have moved from on-premise solutions to the cloud, we have rewritten some of our applications to create a suite of SaaS2 services for treasury - a platform based on Microsoft Azure, using services in Azure such as Microsoft Flow. Treasury solutions can be accessed through a modern browser, without the need for any dedicated infrastructure or interface, which we see could have value for other treasurers.

How has this offered value in practice?

One of the first solutions we focused on was bank account management, which is often a challenge for treasurers of multinational businesses who manage a large number of entities and bank accounts. Not only is it difficult to ensure that bank account access is correctly mandated, but access mechanisms across banks, such as bank signer cards and tokens, often differ across banks and countries, which need to be controlled and standardised as far as possible. Using this application, we have fully digitised our bank account management process internally using services like Azure Active Directory and supported with a full audit trail. Where banks support the use of APIs3, bank account signatory changes can be alerted automatically to the relevant bank, therefore further streamlining the process, although there are currently some regulatory issues and differences in banks’ capabilities.

You mention APIs for bank communications: how do you see the use of these developing in treasury?

We expect the use of APIs to become the norm, not only for bank account management, but a wide range of other purposes too, including bank account reporting etc. This is not yet the case, as banks are at different levels of maturity in their use of APIs. In the meantime, we have automatic downloads of 99 percent of bank and custody accounts directly into our ERP and the cloud, allowing us to measure daily cash levels and produce short- term cash flow forecasts with a high degree of accuracy. Consequently, for our business, the value proposition for APIs is currently limited to specific business tasks, but for many other treasuries, the use of APIs could become transformational.

What are the next steps in your digitisation journey?

We are experimenting with the Azure bot framework in our credit and collections team. We have around 45,000 sellers who invoice customers, which results in a large number of queries. Previously, this created significant resource constraints for our 60-strong team in credit and collections, and with a 24-hour service level agreement, the response time on queries could be relatively lengthy. With ‘Edward’ the chatbot, however, queries can be resolved immediately, with intelligent routing on how to unblock customer accounts etc. This frees up client accounts promptly, allows sellers to do more business and creates a better customer experience. We are also starting to use predictive analytics using Azure ML to identify which invoices are likely to be paid late, so we chase these before the due date, therefore reducing past dues.

What treasury challenges have proved most difficult to resolve through digitisation so far?

KYC4 and AML5 compliance is a major issue for multinational companies, not least because each bank’s requirements vary, even within the same country. Banks cannot share information with each other, leading to very high resourcing overheads to provide KYC data. There have been some efforts to automate and streamline the process, typically using cloud-based databases to avoid the need to recreate the data set each time, but they do not remove the need to produce and maintain the data in the first place, and the success of these initiatives has been limited so far.

The success of KYC solutions will be driven not necessarily by technology, but the degree of industry collaboration and consensus that can be achieved. This has been a critical element in our digitisation journey so far: technology is an enabler, but the driver of success is the enhancement in human interaction and the quality of experience. At Microsoft, for example we have implemented Microsoft Teams to improve the way that we communicate across the team, leading to better exchange of information, more co-operation and greater trust. For example, during a recent multi-stakeholder project, we connected both internal and external stakeholders through a single Teams channel, with a single set of documentation held centrally. This avoided the proliferation of emails and version control issues, and meant that people collaborated more easily and freely, accelerating the project whilst enhancing connectivity across the team.

One of the things that has surprised us most is the degree to which our digitisation journey has improved the quality of the day-to-day experience of our staff. This has led to greater enthusiasm for future change, a positive team culture, and a focus on value-added as opposed to manual activities, therefore creating benefits for the business as a whole.

Macer Skeels, Head of Treasury IT, Nokia

Real-time treasury is an aspiration for many companies, but the concept can be difficult both to visualise and deliver. At Nokia, this is becoming a reality more quickly than for many companies, with a culture of technology leadership across the business, including in treasury.

Nokia Networks was created following the buy- out of joint-venture partner Siemens in 2013, laying the foundation for Nokia’s transformation into primarily a network hardware and software provider. The 2015 acquisition of Franco- American telecommunications equipment provider Alcatel-Lucent greatly broadened the scope of Nokia’s portfolio and customer base. Additional acquisitions have positioned Nokia to be an industry leader in the transition to 5G wireless technology by offering the only end-to- end 5G network portfolio available on a global basis. In 2019, Nokia generated net sales of €23.3 bn, with 98,000 employees across 120 countries.

Treasury’s dedicated technology team, led by Macer Skeels, builds specialist capabilities across treasury, order-to-cash, and purchase- to-pay based on its Nokia Business Live (NBL) platform. This is closely integrated with core business applications, including FIS’ Quantum for treasury accounting, and the company’s various enterprise resource planning (ERP) platforms. In this article, Macer describes Nokia’s treasury technology vision and what this means in practice for users.

“Nokia’s treasury is somewhat unusual as we have built many of our treasury technology capabilities in-house, as opposed to expanding our use of our treasury and ERP vendors, or implementing third party fintech solutions. In some respects, this is a legacy system innovation, and we might be less inclined to invest in in-house development if we were starting today; however, there have been significant benefits. In particular, we have been able to take early advantage of new opportunities, such as SWIFT for Corporates, XML ISO 20022, SWIFT gpi and latterly application programming interfaces (APIs) for bank connectivity. These initiatives, and our dedicated focus on treasury users’ evolving needs, are helping us to fulfil our vision to become a real-time treasury.

Transforming Bank Connectivity via APIs

It was a relatively easy decision to replace existing bank connectivity with APIs for retrieving balance and transaction information. We already connected to our banks via SWIFT, but we found that daily account statements, which were occasionally delayed, restricted our ability to manage liquidity and risk dynamically.

We opted to maintain our existing SWIFT connection for payments, as we already had efficient processes in place, using XML ISO 20022 formatted payments on a routine basis, or MT101 messages for urgent payments. However, our treasury team has been so impressed by API connectivity for bank statements that they are looking at how APIs could enhance the payments experience in the future.

Implementing APIs

One of the stated benefits of APIs is the ability to implement them very quickly. With some banks that have pioneered API connectivity, this has certainly been our experience. With our first two banks, for example, we were able to conduct live communications via APIs within only seven days of receiving the specifications, and implementation was smooth and simple.

Other banks are further behind in their API strategy, however, so we are still working with them on implementation. In some cases, banks have focused first on APIs for payments, as opposed to bank statements, which can be frustrating given that for many corporations, the value proposition for real-time banking information is greater than for payments.

The value of APIs for Nokia

Using APIs for obtaining balance and transaction information has been transformational for Nokia. We now control what data we want to receive, and how often. Consequently, we are now receiving account information every ten minutes and distributing this automatically via NBL to our ERP systems. Users can instantly produce any statement they wish in real-time, with far more self-service capability than they have had in the past, avoiding the need to contact either IT or the bank.

Real-time data means that we can provide dynamic dashboards to users, with 30-40 now in place across the business. For example, today, users can see data across four banks (representing 70% of accounts) on the same screen via a real-time dashboard, an enormous benefit for managing liquidity and responding dynamically to needs across the business.

Realising the real-time vision

In addition to connecting to the rest of our banks using APIs, we are looking at other areas of treasury and finance to see how we can further remove friction and frustration for users. One such area is receivables financing, which we are aiming to digitise as far as possible in order to increase visibility over what receivables are available to sell, and communicate seamlessly with factors.

We also continue to identify and respond to ongoing needs in treasury as we increasingly function in real-time, and therefore need better, more immediate visibility over data, seamless, automated processes, and the ability to manage liquidity and risk dynamically. Real-time treasury is still a new concept, and as yet, it is not clear what the full implications will be, so we are working closely across our treasury team to understand and respond to emerging needs.”

Marc Krehenbrink, Head of Working Capital Management, Nordex Group

Wind turbine producer Nordex saw its business change considerably as a result of the merger with Acciona Windpower (AWP) in 2016, expanding from a mainly regional to a global organisation. One outcome of the merger was a renewed focus on working capital. In this article, working capital manager Marc Krehenbrink shares his experiences on the factors that have driven their success.

The merger with AWP created significant change in our business, including senior management and strategic direction. Our senior management recognised that enhancing working capital was essential to leveraging efficiencies post- acquisition, and help support future growth. Consequently, during Q2, 2017, we embarked on a working capital optimisation project. One of the first questions we needed to address was whether to manage the project internally, or seek external help. We had very limited dedicated working capital resourcing at that time, so it was difficult to fully resource the project ourselves. We therefore selected PwC to support the project and supplement our own resources. We recognised that a third party would offer some distance from our day-to-day activities, and take a more systematic approach. Furthermore, it is often easier for a third party to be open and honest in their recommendations.

Defining working capital priorities

We already had some perspective on the areas in which we could achieve the greatest working capital benefit, but together with PwC, we were able to analyse key performance indicators (KPIs) objectively, and identify where potential improvements could be made. We did this across all three focus areas: forecast to

fulfil, procure to pay, and order to cash. As a result of this process, we were able to make recommendations to senior management, most notably in supplier payment terms. Given the scale of trade payables on our balance sheet, any improvements would have a significant impact.

When we first appointed a consultant, we had not decided whether to engage them beyond the evaluation process into implementation. In fact, we found that the benefit of a third party view, and a systematic and dedicated focus, was very valuable, so we continued our relationship to implement the recommendations of the first project phase.

Six Steps to Success

Looking further. Many companies focus their efforts on the most obvious elements of the working capital cycle, namely payables and receivables. While there may be opportunities for improvement in these areas, companies with complex supply chains and long billing cycles need to look deeper into their supply chains, especially at inventory levels across all business units.

Senior management support. Proactive senior management sponsorship is essential to any major programme that involves different business functions, and challenges existing ways of working. In addition, we engaged very proactively with individuals across the business to explain the benefit of the initiatives we were undertaking, and their role in achieving these benefits to create ownership at all levels of the organization. Ultimately, this proved very successful, but clear, regular and open communication was crucial.

Working capital culture. While the initial project itself finished in 2018, individual tasks and projects are less important than the longer-term shift towards a working capital culture within the business. As we implemented the recommendations, we gained both senior management support, and wider attention from across the organisation. These factors were essential both during the project and over the longer term. Today, the business functions that contribute to working capital are far more conscious of the impact of their activities, and therefore take a more considered approach, e.g. to managing inventory. We have a small team now dedicated to working capital management, but its ability to add value is predicated on a wider working capital culture in the business.

Versatility. A project of this nature represents a complete departure from the normal, daily working capital routine. Consequently, it required a different set of skills, including people management, project management and communication. This was very motivating, and helped to shape longer term relationships between the working capital team and the wider business.

Reporting structure. It was essential to put a reporting structure in place to demonstrate working capital performance improvements. For example, by showing objectively the impact of shifting to upfront and milestone payments on customer contracts, we encouraged further senior management support. One of the problems with working capital projects is that it can take time for new strategies to bear fruit, so objectives and reporting need to be calibrated over the medium term rather than expecting all the advantages to accrue upfront.

Adaptability. Inevitably, the business continues to evolve and change, which has an impact on working capital and reporting. We restructured our business along division lines, so we had to adapt our reporting structure, including mapping KPIs with the previous organisation wherever possible. During a reorganisation, it was also important to maintain the focus on working capital, and ensure visibility and accountability at divisional level, whilst supporting consolidated reporting at a group level.

International manufacturer and retailer of premium and sustainable beauty and wellness products, L’OCCITANE Group, partnered with technology firm Kantox to remove manual processes from its FX management. This has created a more efficient and secure process while freeing up treasury to enhance hedging strategies.

L’OCCITANE’s treasury team is constantly looking for ways to automate time-consuming manual tasks and drive digitisation – when it brings a clear added value for the group. A recent project to automate the company’s FX management is a prime example of this approach.

The standalone endeavour to assess a specific part of the company’s FX exposure falls within treasury’s global digital framework, thanks to the connectivity of the solution that L’OCCITANE selected – Kantox – with its existing technology stack, including an ERP, TMS, and trading platform. FX automation is now part of the company’s daily global treasury management environment.

Unlocking efficiencies via API

At the start of the FX automation project, L’OCCITANE’s treasury was clear about what it wanted to accomplish.

Quentin Jarret, Front Office Treasurer, L’OCCITANE Group, explains: “There were three key goals: saving time, increasing reliability, and being able to monitor our FX exposure more closely. We wanted to achieve these advances while preserving control over why we hedge, when we hedge, and the amount we want to hedge.”

After selecting Kantox, an API connection was established between the FX platform and L’OCCITANE’s ERP (SAP). This enabled treasury to easily and rapidly monitor its exposure across the 15 to 20 currencies it handles on any given day.

“Before implementing the new solution, we had to check the ERP several times a day to see if the exposure had increased or not,” recalls Jarret. “This required a great deal of data processing and generated significant operational risk because there was the possibility that some invoices might be missed or double counted. Thanks to the API connection between the two platforms, we can now see our exposures instantly, which is crucial. It’s all about reliability and time savings.”

Smooth implementation

From L’OCCITANE’s very first discussion with Kantox, it took just one year to go live with the solution.

“For our part, the aim was to be live as soon as possible,” states Jarret. “As soon as we decided we wanted to go with the Kantox solution, following many months of discussion and debate, it was just over six months until it was live. That is quite fast considering the technical IT implementation required at initiation.”

Throughout the implementation, L’OCCITANE had one treasury person spearheading the project, alongside involvement from the company’s ERP and IT teams. The platform vendor also provided regular support.

“Kantox was always available, there were weekly calls about the project to ensure that the process was proceeding as planned, and they assessed every improvement and every issue throughout,” notes Jarret.

The implementation’s main challenges were to connect L’OCCITANE’s ERP to Kantox and ensuring that the correct data was being gathered, as the company handles several different types of invoices.

“The time between receiving and paying invoices varies depending on the client or what the invoice is for,” outlines Jarret. “Some are paid 90 days after invoicing, and others after 120 days, for example. This requires much processing since the payment terms are not standardised across the board. Thankfully, both L’OCCITANE and Kantox were efficient at overcoming this challenge, we worked well together to quickly solve all the pending issues.”

Indeed, the two teams held weekly calls to follow up on the improvement and assess specific points that treasury wanted to discuss along
the way. Meanwhile, Kantox could draw on the experience gained from various client projects it had already implemented to assist with the ERP connection.

Reaping the rewards

With Kantox now connected to the ERP and automating various FX processes – particularly in the pre-trade phase – L’OCCITANE’s treasury is hitting the targets that it set out to achieve.

“We are now saving time that we can dedicate to tasks with much more added value,” enthuses Jarret. “At the same time, we can still closely monitor the FX exposure because we defined our own rules for the process. We have access to the Kantox environment to monitor this exposure and decide whether to trade out of our positions or not. This is this real benefit.”

Another benefit is treasury’s new ability to change its business rules as and when required. Kantox and L’OCCITANE regularly assess the set-up to ensure it complies with the latter’s business rules in that the controls are adequate for treasury’s needs and the FX exposure.

“Kantox is still always available,” remarks Jarret. “If we have an idea for a development we would like or a feature that we think would be good for us in the platform, the team is there to discuss it with us.”

Taking a step up

With the automation up and running, L’OCCITANE’s treasury team has also had the time to assess its approach to FX management, launching a review of the entire FX process to see where incremental changes might bring even more benefits.

“We have a policy that 80% of our exposure should be hedged every month. The review is looking at whether we should switch to some budget-hedging processes rather than just hedging for hedging’s sake,” notes Jarret. “Kantox also allows us to reflect on our hedging strategies – to consider using options, for example. We did not use these much before because we had no time, but now we can think more strategically.”

As such, this implementation demonstrates that automation of treasury processes offers far more than simply removing manual tasks from the treasurer’s to-do list. It supports strategic thinking and enables treasury to add greater value to the organisation. And in this specific project, the fact that the solution provider is always on call and open to collaboration with the treasury team is vital to a continuing successful partnership.

“It is fair to say that using Kantox’s solution led to a significant digitalisation of our FX risk management and considerably eased the process,” concludes Jarret. “We always need to ensure that our project partners are reliable and this was the case with Kantox. That is an important takeaway for treasurers considering an implementation such as this.”

When Solvay announced it was splitting off its specialty chemicals business into the new firm Syensqo, its treasury hatched an ambitious plan to duplicate the function and have two independent treasury frameworks operating at full steam under one roof well before the go-live date.

Solvay is a Belgian multinational chemical company headquartered in Brussels. The firm was founded by brothers Ernest and Alfred Solvay in 1863, and the most recent chapter in Solvay’s history saw the company split, with the new firm Syensqo spinning off from

the parent. The plan was for the essential chemical businesses to remain under the Solvay banner while specialty businesses such as the materials, consumer, and resources segments would be taken on by the spin-off business.

François Soenen, Senior Manager - Corporate Banking, BNP Paribas Fortis, notes: “There is a trend for increasingly large carve-outs, as was the case with the Solvay-Syensqo demerger. They split the company and carved out around 60% of the revenues.”

Once the spin-off was announced, the challenge for the Solvay treasury department was to progressively create the emerging team at Syensqo and to continue working together to ensure both functions were fit for purpose on the day of the new business launch.

Sélim Ul Hasan, Head of International Treasury, Syensqo, who was at Solvay before the spin-off, recalls: “Right
up until the spin-off, it was one treasury team, working closely together until the launch date.

This approach was actually slightly different to what was happening in the rest of the business, where
the intention was for most functions to operate independently earlier than the actual spin-off date. Treasury and some finance functions were an exception, working as one team to ensure business continuity and to meet all requirements for Solvay and Syensqo for the demerger.

Grégory Roussis, Head of International Treasury, Solvay, agrees: “We in treasury were all focused on one common objective: to achieve the spin-off and ensure business continuity for both future champions. This was critical to be ready before the new business started operating to honour all our commitments such as paying salaries and vendors, while ensuring efficient cash collection.”

Don’t reinvent the wheel

The first crucial decision, which was quickly reached, was that the project would copy and paste the Solvay treasury framework for Syensqo rather than attempt to re-engineer or redesign it.

Ul Hasan outlines: “We were happy with what we had and concluded that the best course of action was replicating that. This option lowered the risk. It was not the right
time to try new things. Rather, we were in a position to guarantee that the benefits of the way treasury was working at Solvay would still be there for Syensqo.”

The fact that the spin-off created two companies with comparable treasury needs also meant it made sense for Syensqo to replicate Solvay’s treasury framework. This also required replicating products and services from the bank side.

Delphine Abesdid, Head of Solution Design & Implementation, M&A Deals, BNP Paribas, elaborates: “We set up the same connectivity with Syensqo that we had with Solvay, the same liquidity, and while we opened new accounts for them, they use the same bank connection.”

The foundation for the new function was the treasury framework, based on an IHB that had long been in place at Solvay. The framework included POBO and COBO processes, along with internal factoring mechanisms and cash pooling structures, both regionally and up to the parent company level.

Roussis reveals: “During the project, I was mainly involved in the duplication of the IHB. With my colleagues from treasury, we tried to anticipate all that was possible, deployed the treasury landscape and performed the data migration linked to the specialty business five months before the spin-off. Under the umbrella of one group, we were already effectively operating as two independent companies well before the deadline.”

Having this technical go-live date was a vital factor in ensuring the project’s success. Preparing the framework and all the necessary bank connectivity in advance made it possible to minimise the workload for the new company’s first day.

Abesdid enthuses: “Even though we were still in the Solvay environment, we built a separate framework with bank connections, TMS connections, and liquidity dedicated to Syensqo. We started to make payments from this technical framework to ensure that when it came to day one, we just had to rename some accounts and contracts to make the framework fully independent.”

With the goal of the treasury project established early on, the teams were in a good position to know what had to be in place with the banking partners for Solvay and Syensqo from a legal regulatory standpoint.

But even the best preparation could not prevent the familiar treasury pain point of time-consuming KYC from cropping up.

Ul Hasan recalls: “We ensured we collaborated early with our banks, explaining the project and sharing relevant details as soon as we could.”

Indeed, even with the dedicated preparation time, Syensqo still had to undergo some KYC recertification after the separation date. And it’s not just about the KYC. The cash pooling structure for the spin-off required both duplicate and new bank accounts for Syensqo and Solvay activities to be created, while the entire cash flow structure had to be built.

“The cash flow structure was a significant part of our preparation work,” comments Ul Hasan. “We built this in close collaboration with our banking partners, particularly with our cash management banks.”

The cash pool structure for the spin-off is essentially the same as that of Solvay, apart from some minor differences, such as Syensqo’s geographic footprint not precisely matching Solvay’s. Overall, it is based on the same logic and structure. The preparation also required the customers and suppliers of the Syensqo element

of the business to be alerted to the change, as the new bank account details required changes to be made by them. This communication was triggered in advance of the technical spin-off.

“Customers have their own processes to validate any new external banking details, so we tried to let them know as early as possible,” explains Ul Hasan. “We were in close communication with our credit management cash collection team and the different business units. Everyone needed to be aligned and ready to answer customer questions to authenticate that the new details were legitimate.”

Setting up Syensqo’s treasury technology was in itself a major task. Still, in keeping with the theme of simplifying where possible, the spin-off would continue operating on the same system that Solvay’s treasury used.

“We manage our IHB in an SAP system,” reveals Ul Hasan. “We created a new financial company in that system, replicated all the programs and the set-up, and adapted this to the new context. But we didn’t have
to go through a complete redesign, which made life a bit easier.”

Outside of the ERP, certain satellite systems, such as the TMS, also had to be duplicated, with technology integration a crucial priority.

“We had to ensure that we had the right connectivity channels in place and could clearly separate all the different transactions,” Ul Hasan notes. “Swift is an example of that.”

Partners for change

Solvay’s existing robust treasury team was vital in anticipating potential issues in the spin-off project. If a bottleneck or a peak in the workload was identified, treasury could immediately explain that to the project management office and secure additional resources to manage the extra tasks.

“One of the critical points was to maintain business continuity at all times,” emphasises Ul Hasan. “We had the support of PwC for project management aspects, and the rest was carried in-house by our treasury and IT teams. The experience of the people carefully planning ahead was a key success factor.”

The close collaboration with Solvay’s banking partners was another vital part of the project’s success, particularly BNP Paribas’ role as Solvay’s primary bank partner in Europe.

Solvay’s Roussis highlights: “The support of our banks was one of the main reasons why we were able to achieve the goals of our journey. It was not only a challenge for Solvay, but also for BNP Paribas and our other banking partners in different regions. Without the banks, we couldn’t have got to where we are today.”

That calibre of trusted relationship can only be cultivated over time, with open lines of communication between the corporate and banks to ensure that everyone knows the objectives of the project plan.

BNP Paribas’ Abesdid enthuses: “We developed an excellent team spirit with Solvay and Syensqo. Whenever they had crucial information that impacted the project, they shared it with us, which was extremely beneficial. Also, because we knew the clients well before the spin- off, we already knew their set-up in great detail.”

Internal communication between the treasury team and the rest of the business was also essential, enabling everyone to be kept abreast of deadlines.

Ul Hasan chuckles as he recalls how he quickly discovered that treasury could be perceived as “the
bad guy” in a spin-off project. “We came to the project management office with constraints and had to explain to them that we needed time to time to carry out certain aspects of the change properly,” he says. “If we couldn’t perform these things correctly, we would have a business continuity issue, which would be a disaster.”

Fortunately, by educating the project team and other stakeholders who may not have been fully aware of the constraints that treasury faced, the Solvay and Syensqo teams were able to navigate any potential friction and bring the project in on time.

One vision, two destinations

Solvay and Syensqo began trading as separate entities on 11 December, 2023. Reflecting on the journey, Ul Hasan says that the communication and education work with the rest of the organisation and external advisors on the project management was critical.

“Ensuring that communication on all levels was crystal clear was vital, as partners in the business needed to understand the constraints that treasury is under,” he stresses. “Treasurers operate in heavily regulated worlds, so there are certain incompressible timelines.”

Roussis agrees that looking beyond treasury and engaging with all stakeholders to tap into their knowledge and motivation is essential to achieving a successful spin-off.

“You need that in treasury, but also from other essential stakeholders such as IT,” he points out. “Without a great IT team, we could not have achieved what we did.”

Both treasurers also emphasise how helpful it was to work to a technical spin-off date for the treasury that was well in advance of the company’s actual separation.

Ul Hasan elaborates: “I would recommend anyone planning a spin-off to implement a date for a technical split in treasury if the project timeline allows it, rather than just jumping off the cliff on the spin-off date. It enables treasury to solve issues and manage potential obstacles while everyone is still within the same group.”

Roussis concurs that anticipation is critical in such a project. As this project proved, treasury can have everything set up before the actual separation date so that, inside the group, the structure is ready to operate independently even though both parties are still working together. “The earlier you are ready, the quicker you can identify any potential issues and sort them out before the spin-off,” he advises.

With Syensqo now spun off, the Solvay treasury now has a chance to reflect on how to maximise the opportunities created by this significant change to the business.

“We are going through a thorough exercise to reassess our processes and functions to look at whether they are fit for the new Solvay or if we need to change,” Roussis admits. “We have started the new Solvay with a book full of history and are now writing our future by assessing what is necessary for this new company, rigorously challenging whether a process is essential to support the current business, nice to have, or simply not needed anymore. Our day-to-day is to define what great looks like for Solvay.”

Lionel Jouve, Director, Finance & Treasury, PRINTEMPS

“Like every other treasury, tackling fraud is a major issue for PRINTEMPS. Limiting our risk to fraud and cyberattack therefore guides the way in which we structure our processes, controls and technology infrastructure. For a luxury goods company such as PRINTEMPS that has high value supplier flows, the validity and veracity of supplier settlement instructions, such as IBAN numbers, is particularly important. One important way we have taken to address this is our involvement in the development of an IBAN verification solution.”

When evaluating our fraud and cybersecurity risks, it was clear that the risk of misdirected supplier payments represented a major risk to our business. Fraudsters were using increasingly sophisticated and convincing methods to falsify supplier account instructions, which could result in financial and reputational damage, and negatively impact on supplier relationships and supply chain continuity. Most solutions we evaluated to address this involved conducting ad hoc checks: our objective, however, was to maintain a consistently high quality, trusted supplier IBAN database.

A startup strategy

We were fortunate to encounter startup company SISNET, which was exploring approaches to IBAN verification. Following a series of discussions, we became part of a small group of corporate pioneers who worked with SISNET to develop a new solution. We worked together on a detailed proof of concept and iterative development and testing process over two years. Today, the solution is in live operation across businesses that formed the initial development group.

The concept of the new IBAN verification is simple: companies extract a file of just two pieces of information: counterparty IBAN and company ID information from their enterprise resource planning platform (ERP), payments or treasury management system (TMS). This is then transmitted to SISNET who validate this data against similar files transmitted by the rest of the client community. This process highlights where IBANs have been successfully used by other members of the community and which may be fraudulent.

The solution had to be system-agnostic to reflect the diversity of corporate system environments, is cloud-based for convenience, and uses industry standard formats. It was originally designed to support IBAN verification across Europe, but has global applicability. For PRINTEMPS, for example, verification of Chinese suppliers’ IBAN will be important.

Extending the benefits

The benefits at PRINTEMPS have been considerable. In particular, we spend significantly less time checking IBAN numbers, and the process of supplier onboarding is more straightforward. Finding ways to eliminate error- prone, manually-intensive processes is part of the treasury DNA. With the solution now proven, our hope that the solution will now be adopted by a wider range of corporations and banks. The wider the community, the more reliable the process becomes.

Treasurers are called upon to produce reporting and information for senior management, often at very short notice, as well as fulfilling their compliance obligations, and treasury reporting and monitoring requirements. During the COVID-19 crisis, the pace of change, and therefore the immediacy with which data is now required, has added further pressure on treasurers.

While some treasury management systems (TMS) have sophisticated and flexible reporting, monitoring and dashboard capabilities, some treasurers have opted to implement an additional reporting and monitoring layer to avoid having to manipulate data within their core systems. In other situations, treasurers may choose to implement a separate reporting tool to combine data from multiple systems. In this article, Suzanne Perry, Assistant Group Treasurer at RELX, and Gregor Schwinning, Head of Fuel and CO2 Management at Cargolux Airlines describe the value of this approach for their business using Finmetrics’ FinBoard.

Suzanne Perry, Assistant Group Treasurer, RELX

“Over the past two decades, our business has been through substantial evolution, both as a result of our own evolving business strategies, but also as a result of changes in the external environment. We deal over $100bn of FX swaps and $7bn in outright FX each year, including a $1bn hedging programme, so monitoring policy and reporting are key requirements. Furthermore, changes to accounting and practices, such as the need for hedge designations for derivatives, could create a significant additional administrative and reporting effort without specific tools to manage these changing requirements.

We have had a treasury management system in place for many years, which covers all our treasury activities and offers a single source of truth. Making changes can be a major undertaking, however, and we did not want to risk disruption to the integrity of our data. Our challenge was therefore to respond to the changing internal and regulatory needs of our business, but without affecting our core technology environment. Our solution was to introduce FinBoard as an additional reporting layer. By introducing a dedicated reporting and monitoring tool, we could define and automate the reporting we needed, and provide our internal and external auditor with transparency over the data and calculations we were using.

It is not only extracting data that is important, but being able to present this in a form that is accessible and meaningful to senior management to drive decision-making. In addition to complying with accounting rules, such as hedge accounting designations, we have been able to model pension scheme portfolios, including hedging, fixed and floating mix, moved our treasury function from Switzerland to the UK, and introduced more sophisticated treasury policies, including modelling.

There were other advantages to using FinBoard. Reporting was previously a manual, labour intensive process using spreadsheets, which meant we were dependent on a few individuals to produce and refine reporting. As it was typically senior employees who did this, too much of their time was spent producing rather than analysing reports. Today, with reporting now far more automated, junior colleagues can take responsibility for this, freeing up more experienced treasury professionals to use rather than simply produce data.”

Gregor Schwinning, Head of Fuel and CO2 Management, Cargolux Airlines

“While the cost of jet fuel is a major input for a airlines, it is a proportionally higher cost for Cargolux as a cargo airline, as we do not have cabin crew. Jet fuel has been highly volatile in recent years, with the recent negative oil prices just the latest chapter. Hedging is therefore very important for us, and we have integrated our jet fuel hedging closely with treasury, which also covers aircraft financing, managing inflows across multiple currencies and global payments. Like every industry, we also need to comply with changing regulations, such as new accounting rules, and regulations specific to our industry.

We implemented FinBoard in 2009-2010 for analytics. The solution sits on top of our ERP and specialist airline software, and we integrate the output into our TMS. There were a variety of reasons for implementing a dedicated reporting tool. Reporting requests from senior management were becoming more demanding, both in the complexity of data, and expectations on timing, and we were unable to meet these demands with our existing systems. Since then, while we have upgraded our core systems, which now provide additional reporting capabilities, we are very satisfied with the infrastructure we have in place, and the level of responsiveness that a smaller vendor can offer.

The speed of change during the COVID-19 crisis has driven greater demands for meaningful, actionable data from senior management. We are already finding that data requested monthly is now requested weekly, weekly reporting is required daily, and daily reporting is on demand. With FinBoard, we have been able to meet these increased demands, which we expect to increase further.

It is not only the pandemic that is creating additional reporting and monitoring needs. We also need to analyse the effects of ongoing jet fuel and currency volatility, Brexit, changing accounting standards, and the results of the US election, for example. Furthermore, the ability to perform simulation and ‘what if’ modelling has become more important. With a flexible, versatile and highly responsive reporting tool, we are able to fulfil our reporting, monitoring and simulation needs today, and as they evolve in future.”

Global pharmaceutical corporation F. HOFFMANN- LA ROCHE LTD (“ROCHE”) has been engaged in an ambitious treasury transformation journey over the past decade. Across this period, Roche’s group treasury has centralised and optimised cash, liquidity and risk management, automated processes and strengthened controls, and continuously found new ways to add value to the business. As part of this transformation, Roche has introduced cash pooling, intercompany netting, and payments and collections factories that make and collect payments on behalf of group entities (POBO and COBO respectively). As Martin Schlageter, Head of Treasury Operations outlines, the next logical step in this journey has been the introduction of virtual accounts.

“The decision to introduce virtual accounts to replace subsidiaries’ external bank accounts was driven by two key issues:

Firstly, there was a huge amount of administration required to manage know your customer (KYC) and bank documentation requests.

Secondly, and more importantly, we wanted to minimise fraud potential and improve security. We have robust, central purchase-to-pay processes which involve approx. eight people in reviewing and authorising a typical invoice before it is finally paid. However, there was the potential for local subsidiaries to bypass these controls through their local electronic banking tool. We were therefore seeking to close down these channels to reduce risk and enhance consistency and efficiency.”

While the value proposition of virtual accounts was clear, the introduction was ultimately triggered by the decision of Roche’s partner bank in the Baltics to exit key markets in the region in 2013. Instead of appointing a new bank and setting up new accounts, Schlageter and his team opted to establish a virtual account solution, one of the very earliest corporations to do so.

“This represents a big change from traditional business operations where a company would expect to have its own bank account. It took a great deal of education and discussion, but our subsidiaries in the Baltics ultimately realised that virtual accounts represented a convenient way of addressing the problems resulting from the bank’s decision to exit these markets.”

The reality of virtual accounts

Planning a virtual account solution to support the full breadth of a company’s payment and collection activities brings a number of complexities, particularly around payments. Not only would Roche be making supplier payments on behalf of group companies, but also salary payments, taxes, and issuing bank guarantees. Virtual accounts, with POBO and COBO, needed to be versatile enough to support the same breadth of services as physical accounts, including issuing or receiving cheques and issuing letters of credit on behalf of group companies. It also involved a review of subsidiaries’ use of petty cash.

“As an early adopter, the challenges we faced differed in each market. For example, in Europe, not all countries had fully or consistently incorporated the requirements of SEPA (single Euro payments area) and the PSD (payment services directive). We therefore needed to work with the relevant authorities to overcome outstanding local restrictions. In one eastern European country, the regulator could support tax payments on behalf of the local entity, but initially, could not issue tax refunds other than to a bank account held by a local entity.”

Joachim Wettermark, Executive Vice President and Treasurer

Salesforce’s treasury function is still relatively new, having been built essentially from scratch eleven years ago. From its early roots in cash management, it has continued to expand in size, scope and international reach in line with the company’s international growth. The timing was highly propitious, as the new treasury department enabled Salesforce to weather the effects of the global financial crisis very successfully, a great start to Salesforce treasury’s story. Since then, the company has grown from $1.7bn revenue in 2011 to $13.28bn in 2018 with a steep upwards trajectory ahead. Consequently, Joachim Wettermark and his team are constantly looking ahead and positioning treasury to support the company through its next steps.

As the company has transitioned from being essentially a US domestic business to a complex international group, we have continued to add layers of complexity into our treasury activities, such as foreign exchange, free cash flow management and modelling, capital markets and liability management. We have also disseminated our treasury organisation across the business as we have expanded, including locating treasury team members in regional treasury centres in Switzerland and Singapore. We also conduct some treasury activities, such as cash, liquidity and potentially others in the future, within local business entities to remain close to internal customers.

We maintain a central view of cash and risk, and consistent processes and controls through a global TMS and ERP, therefore avoiding fragmentation as the business continues to expand. We also encourage close relationships across the global team by rotating team members across locations, promoting travel

across the group, and holding regular meetups to keep communication channels open and alive.

An integrated culture

Communication and an integrated management approach are not limited to our treasury. We are unusual at Salesforce in that our senior leaders across the business, not only in sales, play a senior role in account management and managing customer relationships. For example, I am sponsor for five large accounts, which allows me to work closely with the sales team and to appreciate in detail the needs of our internal and external customers.

People and culture are central to what makes our treasury work well today, and what will equip us for the future. In our early years, it was quite difficult to recruit in treasury as we lacked the recognition and reputation of larger, longer-established tech companies. Today, this is much easier now that we have built a reputation both as a company and as a treasury. Our San Francisco location is also an attraction for many people. We now have a young team who work and socialise together, building both formal and informal connections that allow better communication and collaboration. Our team is now large enough to provide valuable career experience by rotating through different roles, both in treasury and complementary business functions. Many people we employ might not have traditionally thought of corporate treasury in the past, but we welcome a breadth of experience and backgrounds which enriches our culture, perspectives and the quality of decision-making.

Managing change and complexity

One of the most complex aspects of our growth trajectory is the level of M&A that we undertake. We acquired seventeen companies in 2018 alone and are on track to acquire a large number of businesses again this year. It is important to gain visibility and control over cash and risk quickly, so treasury tends to be involved early on in the M&A process. Even so, although the M&A process is quite efficient, it can take time to close bank accounts, business entities etc. As many acquired businesses are small, without a dedicated treasury function, merging treasury teams is not usually an issue; that said, we have acquired some excellent people in treasury as a result of M&A.

A forward-looking approach

Looking ahead, we have ambitious growth plans, with a view to achieving revenues of $32bn by 2024. This is not a static target, but just one step in an evolving growth strategy, so constantly considering a five-year time horizon in all our treasury plans and strategies. A forward-looking approach is very valuable to help prioritise our activities, and to plan our organisational design and skill sets. It is also instrumental in defining our culture as a leading employer that hires, develops and promotes the treasurers of the future, benefitting both Salesforce and the wider treasury community.

Isabelle Badoux, Head of Global Treasury Operations, Systems and Treasury Transformation, Sanofi

Sanofi is dedicated to supporting people through their health challenges. We are a global biopharmaceutical company focused on human health. We prevent illness with vaccines, and provide innovative treatments to fight pain and ease suffering. We stand by the few who suffer from rare diseases and the millions with long-term chronic conditions. With more than 100,000 people in 100 countries, Sanofi is transforming scientific innovation into healthcare solutions around the globe.

Sanofi’s commitment to innovation extends not only to its healthcare solutions, but also its internal processes. In 2017, Sanofi launched a flagship project to implement a global ERP across the group and provide an integrated platform to support its operational and strategic ambitions. At the same time, Sanofi launched a treasury transformation programme. Isabelle Badoux, Sanofi’s Head of Global Treasury Operations, Systems and Treasury Transformation, describes the impact of this project on treasury, and the factors that have driven its success.

Project Background

Sanofi has a sophisticated treasury function, but to keep pace with our increasing responsibilities and ambitions, we needed to upgrade our systems infrastructure. Our aim was develop one system for multiple stakeholders, offer enhanced, real-time visibility of data, achieve better collaboration and greater flexibility.

In 2017, the decision was made at group level to implement a global instance of SAP ERP based on new S/4HANA technology. This would allow us to rationalise treasury processes and data and implement treasury best practices based on SAP Treasury, fully integrated with finance. The project was initiated as a multi- year programme, with a series of project phases. Treasury processes were deployed alongside the ERP implementation, starting in July 2018, and the full core treasury solution was deployed in September 2020.

Adapting to the new reality

Given the timing, the treasury implementation was inevitably challenged by the COVID-19 pandemic. We moved to remote working just before we started on a training programme to support user acceptance testing. Fortunately, Sanofi was well-equipped to support remote working. We quickly adapted to the new environment by setting up smaller training sessions delivered via telecommunication platforms. User acceptance testing was more difficult when people could not work together on-site, but we overcame this with detailed test scripts and virtual support rooms, with people available online, all day, throughout this period to help with user queries.

Our users did brilliantly by stepping up to the challenge of taking on a new and unfamiliar system during remote working, and we worked hard to provide them with the support they needed. Whereas under normal circumstances, people can experiment and explore how they will use a new system, it was far more difficult to do this in a remote working environment. This was a tremendous challenge as we could not manage a parallel run between our legacy treasury systems and SAP.

Leveraging the benefits of an integrated technology environment

The experience of moving to a single ERP, which provides both an integrated environment within and beyond treasury, represents a major step change for our business, including:

Integration. By eliminating most of our ancillary systems, we have reduced the number of interfaces, and became directly integrated with finance.

Streamlining processes. Previously, processes such as a cash and accounting reconciliation were separate, with considerable scope for differences; today, these are single processes based on the same core data.

Liquidity. Liquidity is far easier to manage, with timely, accurate visibility over our current and forecast cash position on a group basis.

FX exposure management. Under the legacy process, we had to collate FX exposures from across the business manually. We now have an aggregate position of exposures across entities, with automated dealing to streamline FX risk management. This is a considerable enhancement that we are keen to extend further as additional entities migrate to the new SAP platform.

Bank connectivity. This was an important priority for Sanofi, considering the high daily volumes settled via SWIFT. We have implemented direct SWIFT connectivity through SAP via SWIFT Alliance Access (i.e. without the use of a service bureau), enabling efficient, secure straight-through-processing, whilst remaining bank and vendor agnostic.

Adapting to change

It takes time to become accustomed to a new user experience of operating on a single, groupwide system in treasury. However, we are working far more collaboratively, both within treasury teams and more widely across the business. We are also changing the way we communicate, with a single source of the truth accessible by all relevant users, so we can spend our time discussing and analysing, and making more informed decisions. People understand each other better, and how the tasks and activities they perform contribute to the wider business.

Planning for the new future of work

Over the next two to three years, we will be migrating Sanofi’s remaining entities onto SAP. We will also deploy our core model to our consumer healthcare business, providing it with the technology and resources so it can operate as a standalone entity within the group.

Now that the core model is in place, future deployments will be more straightforward and integral to the rollout of the central ERP. In addition, to better control upgrades and become more agile when taking on new capabilities, we are working with SAP to extend its down port capabilities to treasury, so we can adopt new functionality without the need for a full upgrade. This will allow treasury to revert to being a small, agile team, focused on optimising the way we use SAP to fulfil our specific cash, treasury, and risk management responsibilities, and manage bank relationships and connectivity.

As we look ahead, we are planning our future working model, based on structured teleworking. We expect that people will work remotely at least two days a week, so we are prioritising digitization and automation, as well as cloud-based solutions to support this model.

Sharing experiences

Even while facing a global pandemic, our migration to SAP has been an important success in treasury and the wider business. There were several reasons for this success:

Dedicated project resourcing. Some treasuries plan their technology implementation projects on the basis that their treasury team will work part- time on the project alongside their day-to-day responsibilities. In contrast, we set up a dedicated project team, with the right skills and staffing. This proved essential to manage the demands of the project without impacting on our normal treasury business.

Embracing change and best practices. It can be tempting to try and replicate existing processes and data structures in their current form, rather than leveraging the capabilities of a new system. This can be detrimental by attempting to “force” the system to work in a way for which it is not designed, while ignoring potential opportunities to improve processes and adopt best practices.

Selecting the right implementation partner. While it was our intention to retain project skills and experience in-house, which we succeeded in doing, we also recognised the value of engaging specialist expertise to support us. We had a consulting partner working on the SAP migration at a group level, but we also secured SAP specialist treasury consultancy support, INTENSUM, which helped us to overcome obstacles, challenge SAP and make the best use of the treasury functionality provided in SAP.

with Filipe Santos, Treasury Analyst, SEGRO plc

SEGRO plc is a UK Real Estate Investment Trust (REIT) listed on the London Stock Exchange and Euronext Paris. The company is a leading owner, manager and developer of 9.6 million square metres of modern warehouses and industrial property located in and around major cities and key transportation hubs in UK and Europe, valued at £20.5 billion (30 June 2022).

SEGRO’s business challenge

SEGRO has grown both organically and by acquisition. When new companies are acquired, new assets or entities typically have their own bank relationships and accounts, leading to a proliferation of accounts and fragmentation of cash. Treasury was therefore seeking to simplify and rationalise its banking structure across its European footprint, centralising accounts with a single bank, and providing a simple playbook for integrating new entities into the structure in future.

Although most of SEGRO’s accounts were in continental Europe, these were all owned by different entities, leading to significant know your customer (KYC) and onboarding challenges to open new accounts. Excessive manual documentation and physical signatures were undesirable given SEGRO’s sustainability ambitions, and difficult to facilitate during an extended period of home working. Filipe Santos, Treasury Analyst, SEGRO plc comments, “Traditional account opening processes are very manual, and often differ across banks and countries. In some cases, we were finding that it took up to a year to open a new account. Even though we undertook the project during the Covid-19 pandemic, we found that not all banks had embraced digital documentation and signatures, despite the constraints of remote working.”

An essential requirement for selecting a new banking partner was therefore a digital solution to streamline, automate and accelerate its KYC and onboarding processes.

Selecting a banking partner

Having assessed a number of different options, SEGRO chose to work with BNP Paribas. There were a variety of reasons for this, including the depth and breadth of the bank’s solutions across SEGRO’s European footprint, and commitment to optimising customer experience through digitisation. An important deciding factor was the bank’s user-friendly onboarding application, Welcome, which is accessed via the BNP Paribas portal. Welcome digitises the KYC and onboarding process, eliminates the need for repetitive input and provides advanced level electronic signatures through DocuSign. Welcome also offers a high level of security and data privacy with best-in-class authentication tools. The solution is already in use by over 10,000 of BNP Paribas’ clients.

Digitising account opening

SEGRO started the migration from its legacy banks and accounts to BNP Paribas in March 2021, a year into the pandemic. The process took around 10 months, a period that was extended by the need to seek tax advice in some cases. By using Welcome, treasury has been able to onboard new group entities quickly using forms that were already partially pre-filled with data that BNP Paribas extracts from public sources. Documents that are required for every entity and country, such as directors’ passport information, are uploaded once, and then accessible as part of the application process for each relevant entity. Santos notes,

“By completing some documentation automatically based on data that is either publicly available or provided by SEGRO, we now have a more efficient, timely and cost-effective process that can be managed centrally, as opposed to requiring resources from the relevant entity.”

Leveraging the benefits of a harmonised banking structure

With a harmonised banking structure and digital solution now in place, SEGRO is now seeking to leverage the benefits to optimise the flow of transactions and data, and optimise its cash and liquidity management. Santos explains,

“Having now completed the essential first step in building our relationship with BNP Paribas, we are now seeking to implement the bank’s host- to-host connectivity for account information, payments and collections, including payroll. With a centralised, standardised platform in place, we can open access to our local users to make payments and download statements, knowing that our processes, controls are consistent across the business, with complete visibility in treasury.”

Created in 1863, Belgian-headquartered Solvay is an advanced materials and specialty chemicals company, committed to developing chemistry that addresses key societal challenges. Over the past year, we have broadly redesigned our treasury operating model inspired by best-of- breed benchmarks. Our aim was to enable us to support Solvay’s strategic agenda and emerging business models, while optimising operational efficiency and capital structure.

The design of Solvay’s treasury operating model comprises three key strands of activity:

• Defining the treasury vision, strategy and objectives. This has included the definition of services (and service quality) that we will provide to the group;

• (Re)-designing effective processes on a worldwide basis allowing the efficient execution of treasury operations, leveraging vehicles and techniques to optimise cash and cost while reducing complexity;

• Selecting a new treasury management system (TMS) which will be deployed across the group in the coming months.

• Building the right skills and mindset, automating processes, and developing more sophisticated analysis capabilities are critical elements to achieving these objectives.

A best-in-class in-house bank

Although we have pursued an ambitious treasury agenda over the past twelve months, this is the next step on our treasury journey on which Solvay embarked 30 years ago. Indeed, in the late 1980’s, our group first developed an in-house bank scheme, initially just covering intercompany transactions through internal bank accounts. We have progressively developed the in-house bank ever since. We put in place intercompany zero-balancing cash pooling, but the scheme was also extended to third party transactions: firstly, accounts receivable and subsequently, accounts payable. As a result, Solvay has been executing payments and collections on behalf of group companies (POBO and COBO) for more than 20 years.

• Introducing these solutions has not been a ‘one off’ process but we have taken a “test and learn” approach, rolled out on a country-by-country basis. More recently we have also taken the COBO concept one step further. In addition to processing collections on behalf of group companies, Solvay performs internal factoring, transferring full ownership of the receivables and therefore, the counterparty credit and FX risks, to the in-house bank. Today, Solvay operates with zero-day payment terms for intercompany invoices that simplify our reconciliation processes.

• We have implemented virtual accounts in some countries, such as Japan, but with less than one percent of unallocated receivables (at the end of each month), the value proposition is not that material to us. This level of automatic reconciliation and account posting has been achieved as a result of an iterative process of refining our technology and debtor management capabilities.

Kati Vellinki, Group Cash Manager

In 2016, SSAB was in the midst of a major organisational restructuring to reflect the acquisition of Finnish steel producer Rautaruukki Oyj. As part of this, the company needed a new cash management structure to reflect the needs of the expanded business. The new group was twice the size of the original SSAB business, with overlap in supporting functions and stock listings in two locations. One of the outcomes of this was the implementation of a new payments and collections factory. As Kati Vellinki explains, however, although the benefits of digitising payments and collections activities were compelling, it was the human factors that drove project success.

When we implemented our payments and collections factory, we aimed to centralise our cash management operations and harmonise processes and controls across business units, and gain visibility over the group as a whole. We used the latest SAP technology to standardise the flow of transactions and data based on XML formats, automate processes and digitise reporting.

This has brought a number of benefits, not least in terms of efficiency and the reduction of errors. One of our aims was to reduce the number of bank accounts we maintain and leverage our in-house bank and payments/ collections on- behalf-of structure. We have succeeded in doing this, reducing our external bank accounts by around 200. We were able to replace the electronic banking systems in each business unit, each of which had different security tokens and controls, with SWIFT as a single banking channel. With standard formats and higher levels of automation, we have been able to reconcile over 90 percent of flows in our major currencies. Cash flow visibility and forecasting has improved, including more accurate daily and

intraday positions, so we can manage and plan liquidity more accurately. Security has also been strengthened, with more robust and consistent policies and processes across the group. One of the most important benefits has been the ability to free up time to spend on activities that are of more strategic value to the business.

Extending the benefits

We are also leveraging our technology infrastructure to automate bank account management (BAM) as far as possible. Currently, few banks can support electronic bank account management (eBAM) but this is changing and we intend to use SWIFT for this purpose. The ability to maintain account signatories and manage our bank accounts digitally is particularly important to SSAB given that we need to keep track of over 500 bank accounts across the group. We have implemented automated bank fee reporting to have transparency over our banking costs and services; however, this has proved difficult, as there is not yet consistent adoption across banks although this is now a requirement for our banking partners.

Centralisation and harmonisation

We have taken a phased approach to the implementation of our payments and collections factory which has taken around 2 years. We started with our business units based in the Nordics, followed by the Baltics and Americas. We are now rolling out to Western and Central Europe, to be followed by Eastern Europe and Turkey. We are also expanding the scope of the factory to incorporate fraud prevention and then sanctions screening.

The first six months was spent pulling information together from different parts of the group, understanding cash management needs across the group and working out what type of cash management solution we wanted to build. Throughout this and subsequent periods, we had a proactive communications campaign, with monthly updates across the business of the project status and a forward view of the next entities to be included within the project. We also had an excellent core implementation team and strong management support, with ambitious goals that we held on to throughout the project.

Managing change

The experience of migrating cash management operations was different for each entity. For some, their operations were already managed in the shared service centre, so the process was quite straightforward. For others, we needed to communicate in more detail about what we were doing and why, and what the implications would be. We already had a global SAP solution in place so we were able to demonstrate our plans using proven technology as opposed to introducing something new.

Breaking habits can be difficult, however, and it is important to listen and understand people’s concerns. Ultimately, most people want to do their best, so we needed to listen and be responsive to both individual and organisational concerns, and adopt creative enablers to overcome them.

At an individual level, one of the most frequent objections we heard was “But it only takes five minutes!”. While this may be an individual’s perception (even if the reality is somewhat different), five minutes multiplied across the entities in scope, every day, and across multiple activities: downloading and printing bank statements, manual reconciliation etc., the resource implication becomes enormous at a group level: over 1,200 days according to our calculations. Most people do not question what they do every day and why, so some people felt that a project to centralise and digitise was a threat and became defensive.

However, in other cases, people enjoyed the opportunity to explore new ways to do things and learn new skills, and saw the value of being an early adopter. The more people we could encourage to think this way, the better able they were able to influence their colleagues. We also needed to build resilience across our teams. After all, in sport, when a team loses, the players need to learn from it and move on, but this attitude is more difficult to instil in a business environment.

At an organisational level, people are often resistant to changing familiar ways of doing things that seemed to work. We needed to help management to create an environment where new opinions were welcomed, and foster constructive disagreement to identify and test new ideas.

Flexibility was also essential. However well you think you have understood the needs of the business initially, additional issues typically emerge, so we needed the ability to adapt. This allowed us both to adapt to changing needs, but also to incorporate what we learnt as we went through the project.

Building a shared mindset is an essential success factor but this was particularly complex given that SSAB had become a more multicultural organisation and more widely scattered geographically and culturally since the acquisition. Even in a matrix organisation, where people are connected laterally across the business, these relationships are often virtual rather than personal. As a result, people’s perspective on multiculturalism and diversity can be that people should adapt to be more like themselves, and prioritise their own location, culture and language. This can take time to overcome, but by strengthening lateral connections and sharing experiences, people gradually come to welcome and value the depth and strength of a diverse organisation.

Sharing experiences

If we were undertaking a similar project again, we would probably take a different approach to selecting the first ‘go live’ companies. In particular, we would identify the people and entities first that were most positive about the changes. We found that by experience, we could become more agile and quicker to integrate entities and migrate processes. Balancing the benefits of automation and digitisation with the needs of our employees, whose experience and expertise are vital to our enterprise, is a delicate process. Achieving this balance, however, means that we can reduce the operational burden and make better use of these skills, allowing our employees the opportunity to shape and contribute more actively to our future success.

Kurt Crollet, Chief Executive Officer, Steelforce N.V.

Steelforce has been trading steel across the world since 1989, purchasing steel from 25 countries and selling into 90 countries, including some of the world’s most challenging markets. In 2019, the company had a turnover of €1.3bn, equivalent to 2.5 million tonnes of steel. In this article, Kurt Crollet, Steelforce’s CEO, describes how they finance and manage these transactions, whilst maintaining a high degree of customer focus.

With 3,000 – 3,500 transactions each year, with an average value of €350,000 - 400,000, a high- performing treasury centre is crucial to the success of our business. With an average transaction lifecycle of four months, we have around €430 million in financing needs at any one time. €60 million is financed through our own equity base, but the remainder needs to be financed externally. Given our small equity base however, our solvency ratio is not high enough for revolving credit facilities at the level we need, so we rely on trade financing. We need to gain specific bank approval for each transaction of an average value or higher, including providing the counterparty, shipment, insurance and legal conditions, and once approved, we are able to go ahead with the transaction. All of our transactions are self liquidating, for security of payment to the banks.

The role of relationship bankers

This a labour-intensive process, and we need to turn around transactions very quickly to minimize price risk given the volatile price of steel. Our banking partners therefore play a crucial role in the success of our business. In particular, they need to understand in depth what we do, how we conduct our business, our global customers, and the way that we manage risk. They also need to recognise the role that trade financing plays in the continuity of our business, and be highly responsive by approving each financing transaction promptly.

Most deals are back-to-back (i.e. purchases are matched to a sale) but we may use different trade finance instruments for purchases and sales. For example, on the purchase side, we generally use letters of credit, and prepayments of 10-30%. We also use credit insurance. On the sales side, we may also use letters of credit in some cases, but the cost can be prohibitive for some of our customers in parts of sub-Saharan Africa or Latin America, so we may use open account transactions with credit insurance. In some cases, we use documentary collections, bills of exchange and avalised bills of exchange (in which a bank guarantees payment of a bill of exchange drawn on an importer).

Digitisation vs personalisation

Unlike businesses in many other industries, we have not implemented a high level of digitisation in our internal processes, such as invoicing or trade financing. Although we look into this from time to time, we have realised that the level of differentiation between transactions would make it very difficult to standardise and automate our transaction flows. This can be frustrating and labour-intensive, but our flexibility and willingness to undertake tailored transactions is also our strength. Too many companies try to structure their service offering around their system capabilities, such as the information or formats that their enterprise resource planning (ERP) platform can produce. This makes it difficult to adapt to specific regulatory requirements in each country. For example, in one country, the importer needs to pay duty on the value of the goods, but not on the services, which may differ elsewhere. Each customs authority will stipulate the exact detail and format of documentation, so to do business successfully in more challenging countries, this agility is essential.

One of the other highly bespoke aspects of our business is the way that our liquidity capacity is calculated. For example, our ability to finance a transaction is based on a combination of the outstanding facility headroom with each bank, and the value of our assets. The complexity is that each bank’s calculation varies. For example, in some cases, if 90% of a transaction value is covered by credit insurance, this will be the amount covered by the bank guarantee. Non-executed transactions also have an asset value: for example, if we have the steel but it has not yet been invoiced to the customer, 60-80% can be included in the calculation. As a result, we tend to maintain this calculation of liquidity availability manually, reflecting the variability across banks.

The value of trust

Our business has succeeded due to our specialist expertise and market insights that is highly valued by buyers and sellers alike. As a result of this depth of insight, we are able to construct highly tailored transactions to meet our customers’ specific needs, adapted to the regulatory conditions in each market. Deep personal relationships and trust between Steelforce and our customers is intrinsic to this. Likewise, our strength of relationships with our banks, based on a clear, detailed understanding of our business, trust in our senior management and trust in the way we operate, underpins our business.

Automation and digitisation play a huge and growing role in today’s industries, but the value of automation needs to be balanced by the human dimension. In our interactions with our banks, for example, the compliance burden continues to grow, as regulations around corporate social responsibility (CSR), know your customer (KYC) and a raft of other areas become increasingly stringent. While the intention of these regulations is correct, relying on systems alone to create trust in the financial system and participants within it could create a false sense of security. Banks which grant trade finance loans have a clear and detailed view of the business they finance and the drawings under credit facilities. In addition to the frameworks set up by the regulators, this knowledge and relationship provides additional KYC assurance. After all, it is not systems and data that do business, it is people, and ultimately, everyone needs to know, and trust, who they do business with.

Pasi Kyckling, Group Treasurer, Stora Enso

Building on its heritage and know-how in sustainable forestry and renewable raw materials, Stora Enso has a unique position in the global sustainability agenda. Today, its products are found across the building, retail, food and beverages, manufacturing, publishing, pharmaceutical, cosmetics, confectionery, hygiene and textile sectors. Tomorrow, Stora Enso is realising a vision in which anything that’s made with fossil- based materials can be made from a tree. In this article, Pasi Kyckling, Group Treasurer at Stora Enso, describes the contribution that treasury is making, both to support internal sustainability objectives, and influence the wider treasury and banking community.

Towards a greener treasury

Sustainability is at the core of our strategic agenda, and every part of the business has a distinct role to play, according to their activities and responsibilities. Since 2017, treasury has been looking at what the sustainability agenda means for us, how we can contribute, and crucially, how we can balance sustainability with our other priorities. This has been challenging, particularly early in this journey when there were few examples of how treasury was participating in sustainability initiatives. However, as we have explored and learnt more about the challenges and opportunities, we recognise that sustainability contributes, rather than conflicts with treasury’s wider priorities, by opening up new seams of economic value, and supporting the business more effectively.

One of the key ways in which treasury at Stora Enso has both supported and driven sustainability is by accessing green financing. In 2017, we were one of the first corporations in Northern Europe, and the first in the Nordics, to introduce a sustainability- linked revolving credit facility (RCF). This operates in the same way as a traditional RCF; however, part of the pricing is linked to our science-based targets to reduce our carbon emissions. While this type of structure has become more familiar today, this was a highly innovative concept when first introduced. From a Stora Enso perspective, we were able to – quite literally – demonstrate our sustainability commitment in financial terms, ultimately delivering both environmental and economic value. Since then, we have pursued further opportunities for sustainable financing. We created a green bonds framework, within which we have issued a number of green bonds. Today, around one third (EUR 1.5bn) of our total debt portfolio (EUR 4.5bn) is a green instrument, a proportion that we expect to increase further.

We also recognise our wider role in promoting sustainability amongst our suppliers and business partners. We are particularly proud of encouraging all of our banking partners to sign up to our supplier code of conduct, which is a challenge given the diversity of banks that we work with, and their varying stakeholder interests. Sustainability in decision-making.

Sustainability is not only part of our operational decision-making, but also our strategic planning. For example, sustainability criteria are now embedded into our M&A evaluation process. Likewise, we have rigorous environmental and social key performance indicators (KPIs), such as carbon emissions and workforce health and safety, as part of our monitoring of capital-intensive projects.

The wellbeing of our workforce is an important priority across Stora Enso. During COVID-19, we have made every effort to keep our people well and safe, but this is an ongoing priority beyond the pandemic. A large proportion of our workforce is engaged on manufacturing sites, so they have not been able to work from home as office-based staff have done. We are therefore being proactive in looking at the occupational health and safety of all our people, whatever their place of work, as a vital way to ensuring the health and sustainability of our business.

A greener future

Looking ahead, we have a number of sustainability initiatives underway, including ensuring that we meet changing market and regulatory requirements. For example, the EU Taxonomy Regulations to define criteria for measuring sustainability will have significant implications for us, which we need to take into account in our plans and priorities. Internally too, we are looking to progress our sustainability agenda further, such as enhancing biodiversity as part of sustainable forest management. In treasury, we continue to explore new green financing opportunities, and also ‘go green’ through new products, or modifications to existing products, such as supply chain financing. During 2021, we will also be refinancing our sustainability-linked RCF.

Sharing advice

It can take time to win hearts and minds when embracing a new culture or set of priorities. When first approaching sustainability in treasury, it is important to understand what the objectives are, and what treasury can achieve. While there is plenty of external advice available, which can be helpful in establishing a direction and identifying opportunities, sustainability needs to be part of an organisation’s DNA, so it is important to take responsibility and drive initiatives from within the business.

Once treasurers understand the scale of opportunity for impact and influence, embracing sustainability and its implications presents a valuable and fascinating learning experience, and creates a new lens through which to look at traditional treasury activities. There are also new stakeholders to engage, which is interesting and personally satisfying, so it is valuable to spend time with sustainability leaders in the business and understand how to work on common priorities.

The market for green and sustainable products is growing, a trend that has accelerated over the past year. Even so, we are still only at the beginning of a new era in driving social, environmental and economic sustainability across value chains to make positive and permanent changes to our environment and communities. As sustainability becomes central to stakeholder priorities, all companies - and their treasurers - need to respond and adapt their agendas to achieve future success.

Derek Chan, Chief Financial Officer, Greater China & North Asia, Thales

Thales has been established in China for over 40 years, but its market presence became firmly imprinted in the mid-1990s with rapid growth ever since. The Group now employs 2,400 people in Greater China and North Asia (comprising mainland China, Hong Kong, Taiwan, South Korea and Japan), of which over 1,500 are located in mainland China. Thales’ primary businesses in the region include avionics and ground transportation. While the avionics business has been impacted significantly by the pandemic, investment in ground transportation, such as underground railways, continues to grow. In this article, Derek Chan, Chief Financial Officer of Thales Greater China and North Asia businesses describes the company’s transformative approach to cash and liquidity management to help meet short-term liquidity challenges both domestically and globally, and position the Group for further growth in the region.

A major, ongoing challenge for our business is how to optimise the use of our cash. We have a portfolio of businesses in China, which are at different levels of maturity: some are running cash surpluses, while others need cash to fund investment. While this is a situation familiar to many companies and regions, regulatory constraints in China mean that unlocking cash ‘trapped’ in China can be more challenging than in other regions. For example, having invested overseas cash in China, it can be difficult for a company to repatriate this cash. Our objective was therefore to find the best way to use our cash in China to finance our activities in an optimal way, both in China and internationally.

A catalyst for cash optimisation

In 2019, following Thales’ acquisition of digital identity and security leader Gemalto, our footprint in China doubled in size. Although Gemalto’s business was complementary to Thales, it created a new industrial context, and greater cash management complexity. We used the acquisition as an opportunity to rethink the way we managed cash and liquidity, and issued a request for quotation (RFQ) to a panel of respected international banks.

Following a rigorous evaluation process, we selected BNP Paribas as our partner bank. We already had a long-term global relationship with the bank across a wide range of activities, including cash and liquidity management, trade finance and foreign exchange. The bank’s team in China understood what we were trying to achieve, and took a partnership approach that extended beyond a credit-driven, transactional relationship. Administration requirements can be onerous in China, but another factor in our decision to select BNP Paribas was the team’s familiarity and assistance with the relevant processes and documentation requirements, which helped accelerate our project considerably.

Domestic cash concentration

The first step in this process was to rationalise our bank account structure and concentrate our cash across our China entities via a zero-balancing domestic cash pool. As a result, we now have greater visibility and control over our cash balances, and we can finance short term deficits in one entity with surpluses from another in an automated way. We also integrated our cash pool with automated yield enhancement solutions, including contract saving deposits and 7-day call deposits. This meant we could optimise the use of surplus balances held in the cash pool header account and generate a competitive return without the need to dedicate investment resources.Having centralised our cash, we were then in a position to determine more accurately what cash was required within the business in China, and what could be repatriated. Although this was the theory, COVID-19 created a new reality. Not only has the global aviation industry faced challenges on the demand side, other infrastructure markets were also impacted. Cash became king, and there was increased pressure to concentrate cash at our headquarters in Paris where it could be mobilised as required to meet the needs of the wider Group.

Cross-border cash pooling

We responded to this challenging liquidity environment by setting up a cross-border cash pool via the pan- China scheme. This enabled us to mobilise cash held in our domestic cash pool in China more easily, and transfer funds to our Group Treasury in Paris.

Payments, collections and connectivity

As part of our cash and liquidity project, we wanted to improve the way we made and received payments. We had multiple electronic banking systems in place, with payments made via different banks. We have now streamlined our bank connectivity and payments processing by implementing SWIFT as a single channel, and make our payroll payments via BNP Paribas.

By improving our automation, and integrated SWIFT into our internal systems, we now have more efficient, less labour-intensive processes with a high degree of straight-through-processing. We also have better visibility, and more control over the timing of payments, so we can synchronise our payables and receivables more precisely. Although there are still parts of the process that we need to enhance, we have already reduced our working capital requirements successfully, and reduced our administration burden.

We started the project in mid-2020, during the extended period of remote working, and successfully went live on target at the end of 2020. In addition to the efforts of our own team, BNP Paribas was instrumental to the process by providing the right people, a disciplined and rigorous project management approach and – crucially, particularly during remote working – commitment and momentum which helped drive project success.

Looking ahead

We have been through a major financial transformation over the past two years, coinciding with the acquisition of Gemalto and latterly, the pandemic. As we look ahead, we want to leverage the value of the new technology, processes and solutions we have put in place, and further automate and digitise our processes. By doing so, we can redirect our resources from low value to high value activities, and deliver an enhanced service to the business.

We will also look to simplify our accounting processes which are complex and labour-intensive currently, with separate accounting functions for eachentity. This creates a lot of duplication. To achieve this, we have identified a business process outsourcing (BPO) partner to help streamline and automate our accounting activities, and improve the consistency of our reporting.

Digitisation and automation is helping to increase the quality of data that we produce, so the next step is to determine how best to harness this data for analysis purposes and enhance our competitiveness. Although our business in China is growing rapidly, domestic enterprises are typically more agile and quick to take advantage of new opportunities. Our challenge is therefore to balance the risk management and good governance that Thales is known for, with the flexibility and agility to identify and respond to changing market conditions.

Catherine Cledel, Group Treasurer, Théa Group

Independent pharmaceutical group Théa has a small treasury team with cash, treasury and risk management responsibilities across its global footprint. Historically, treasury has used spreadsheets and manual processes to manage these activities, so five years ago, treasury put in place a new software solution to support more centralised operations. However, the COVID-19 crisis emphasised the value of further enhancements to process efficiency and controls. Before the pandemic struck, Théa Group’s treasury had started to embrace digitisation and automation in FX risk management. Its success has helped pave the way for a transformation in the treasury and finance function, as this article by Catherine Cledel, Group Treasurer at Théa outlines.

Addressing FX Challenges

With operations in 70 countries globally, and exposures in 30 currencies, resulting from both purchasing and sales, FX risk management is a significant treasury activity for Théa Group. Each subsidiary invoices customers in local currency, and we manage our FX risk centrally in group treasury. To help manage the scale and complexity of our FX hedging, within a small team, we implemented Kantox for some currencies. This is an automated currency management tool that helps automate our exposure reporting and hedging process. This capability has proved particularly important during the pandemic, both due to high levels of FX volatility, and the challenges associated with remote working.

Establishing Project Objectives

Before implementing Kantox, FX exposure management and hedging took a significant amount of time and resources, with manual processes leading to the risk of error and omission. We therefore realised that we needed to implement a more automated FX solution, and outlined the following objectives:

• Increase efficiency and automation in FX management to reduce manual intervention and resource requirements

• Reinforce internal controls to increase security and auditability

• Take a more strategic and systematic approach to currency hedging to comply with treasury policy and take advantage of favourable hedging opportunities

• Improve FX reporting, with a view to adopting IFRS accounting standards

• Become more resilient and better prepared for rapidly changing market conditions and high volatility.

We conducted research internally, and contacted our partner bank BNP Paribas. The bank recommended Kantox, with which the bank has a strategic partnership. This would enable us to access Kantox’s automated currency management capability as an integrated element of our banking solution.

Solution in practice

We have set up hedging rules so that FX hedging takes place automatically, 24/7, based on our preferred thresholds. FX exposures are generated at the point of billing and aggregated in Kantox. Once the system has calculated the hedging requirement, FX orders are transferred directly to CENTRIC, BNP Paribas’ integrated digital banking platform for execution.

We retain full visibility and control over our exposures and hedging activities via dashboards, which also allow us to adjust our hedging strategies if required, such as in the case of high market volatility in emerging currencies. We also use Defthedge, a third-party risk reporting tool for reporting, decision support, and help with accounting. Kantox enables us to automate our hedge accounting requirements and reporting, whilst maintaining the benefits of dynamic FX management. We have reduced hedging costs, managed our risks more systematically, and ultimately improved our P&L. Furthermore, we have freed up treasury resourcing that can be directed towards other business-critical activities.

Looking ahead

Like most other businesses, the pandemic has prompted us to review our priorities, the way we operate, and the systems we use to support our business. For example, with senior management now seeking an almost real-time view of the net cash position and our financing headroom, the crisis has emphasised the need for timely, accurate and complete visibility of cash.

Our CFO has launched a global transformation project, of which treasury is a part, in order to position the group for further growth, leverage digitisation and automation, and increase our resilience and agility as a finance function. This will involve implementing a treasury management system to support our activities in a more robust and systematic way, improve efficiency and control, and support better reporting and decision-making.

These objectives are even more important in a small treasury function. By digitising and automating our operations, we will be able to adapt to changing internal, market and regulatory conditions, and meet the needs of the group more effectively.

Global intelligence firm Enhesa is expanding rapidly worldwide, supported by a treasury function that demonstrates operational excellence.

Enhesa is a global provider of regulatory and sustainability intelligence, with more than 500 experts assisting some of the largest MNCs and leading brands with the renewables element of their operations.

Laurent Marcelis, CFO, Enhesa, explains: “We support clients in creating more sustainable products and implement accurate sustainability reporting for them. We are in the business of helping other companies get to the next level of their environmentally aware journey.”

As may be expected for a company in this burgeoning sector, Enhesa is a growth business, and Marcelis reveals that the firm has an organic growth rate that exceeds 20% annually. That has a direct impact on treasury management.

“As a growth company, it’s vital to have good cash flow management,” asserts Marcelis. “This helps us reassure everyone within the organisation that we can meet the increasing operational expenses.”

Additionally, by the very nature of its global presence, Enhesa has significant exposure to currency fluctuations. This is reflected in treasury’s attention to detail on
risk management.

“We have a focus on FX, but for us, all risk management is crucial,” reflects Marcelis. “We also have some senior debt that is sensitive to interest rate fluctuations, so we have to manage the risk and mitigate the financial impact of risk on the company.”

Enhesa’s treasury department works closely with
the FP&A team. This partnership plays a pivotal role
in examining the near future and beyond, planning future cash needs, and supporting the overall financial performance of the business.

Covenants are king

With entities across Europe, the UK, the US, Canada, and East Asia, managing cash is the primary focus of the Enhesa treasury in supporting the group’s working capital position. The cash management function was centralised at the group treasury level to ensure it was fit to support the company’s global growth prospects.

With cash management thus optimised, treasury then set about installing a worldwide cash-pooling system to improve liquidity further and enhance working capital.

“Cash is intrinsically linked with risk management,” muses Marcelis. “That means treasury is involved in implementing all internal controls within the group and enhancing them to ensure that everyone is in compliance with our framework across all regions.”

This includes conducting regular audits to reassure treasury and senior management that all participants follow HQ-issued rules. Then, in addition to the internal overview of cash and risk management, treasury also oversees vendor and supplier relationships with external third parties.

“Treasury works on negotiating better terms and conditions to optimise the cash flow centralised within Enhesa,” elaborates Marcelis.

Debt management, the other side of the working capital coin, is also closely monitored in treasury. Two private equity firms own Enhesa’s debt structure.

“We have a leveraged debt, which consists of a senior credit facility combined with an RCF,” outlines Marcelis. “The structure we have for funding with the RCF is quite flexible, which helps us with our cash planning.”

The RCF is linked to the cash flow forecasts, and where possible the treasury will reimburse the debt by cash inflows generated by the company. “That is where it is essential to have good cash flow planning so that we can predict the reimbursement of the RCF,” Marcelis states.

Every senior debt comes with several covenants and treasury is the gatekeeper of these, following up on all financial KPIs. “It is important to reassure the group that we have enough headroom when we talk about the covenants, which are linked to the group’s financing structure,” Marcelis adds.

Maintaining control in the face of adversity

At a high-growth company such as Enhesa, the business will not always expand in an upward straight line that is 100% accurate and predictable. This places specific importance on the company’s cash flow forecasting.

“Treasury is particularly essential as a link to the separate FP&A team as they collaborate to try to predict forecasts as accurately as possible for the coming months, quarters, and year,” Marcelis stresses. “Linked to that, our Treasury Officer then carries out the cash flow forecasting to plan for future needs, as our revenues and costs are not 100% linked to one another.”

All this work is driven by the goal of having the optimal cash position at any given time to ensure there is enough liquidity to meet the company’s operational needs.

“It is essential that treasury can reassure the business that, for a defined future period, we will always be able to meet all the demands for cash,” comments Marcelis. “The debt structure, with the flexibility we have there, and our good cash flow management makes this work.”

Accurate forecasting also supports good risk management practices, although naturally, there are certain events – such as the 2008 global financial crisis
or the lockdowns and port closures caused by Covid-19 – that are far from predictable. So, while the most significant predicted change in the financial world throughout 2024 has been about the number and volume of interest rate cuts by the world’s central banks, there might equally be the next black swan event just around the corner.

“We must think about everything, manage and plan for various possibilities, and ensure we have the optimal hedging products in place for interest rate and FX exposures,” Marcelis reveals. “Having control is vital here. Setting up and fine-tuning the control framework so that we manage everything in a structured way is essential within the group’s growth pattern.”

Feeling the pressure, delivering results

In addition to the operational aspects of cash management at Enhesa, the treasury function also delivers a critical strategic advantage by optimising the capital structure.

“The funding strategy of a company with a growth profile like ours is vital in supporting that growth and helping our investments,” enthuses Marcelis. “As a company, we are assigning significant sums to CapEx to develop our platform but also spending heavily on the content hosted there. Treasury comes into play for all the funding to support that.”

Enhesa’s recent acquisitive history has also been actively underpinned by the treasury team, which was vital in establishing the best structure for the transaction. This also extends to the post-transaction period, ensuring a structure to cover all the liquidity demands resulting from the acquisition.

“Treasury plays a role in dealing with any issue that potentially impacts the cash flow, risk, and processes,” underlines Marcelis. “The funding structure and the function’s activity during M&A transactions are two key topics linking treasury to the business strategy.”

Reflecting on the challenges presented by supporting an acquisitive company in its growth, Marcelis notes that the pressure felt by treasurers is acute, but that reflects the overall importance of the treasurer’s job. Details matter when planning an M&A transaction, and a treasurer’s eye for detail is central to a successful outcome.

“For the finance team as a whole, and treasury in particular, an M&A transaction requires comprehensive financial due diligence. It is vital that we understand all aspects of the target’s financial health,” he says. “That takes time and energy, but it’s essential in a deal.”

The work required following the transition from due diligence to integration planning is just as critical but not as lauded. Financing a deal is crucial and not always straightforward. However, having a cash flow plan following the completion of the acquisition is just as important.

Marcelis concludes: “Closing the acquisition is just the start of the journey. Planning the future cash flow of the target, post- integration, is equally critical. Integrating the target business into the group and the control framework is an area where treasury can demonstrate its added value to the business.”

A Fintech platform for reverse factoring is currently being implemented by Vattenfall, one of Europe’s largest producers of electricity and heat, to optimise its own working capital while reducing days sales outstanding for its suppliers.

Also known as approved payables financing, reverse factoring is a supply chain financing technique which allows Vattenfall to extend its own payment terms while offering suppliers quicker payments by leveraging its own credit rating. The platform was chosen so that all three stakeholders - suppliers, participating banks and Vattenfall as buyer - could benefit.

With no change to the purchase-to-pay process, invoices from €100 to €30 million, approved and marked for reverse factoring in SAP, are now automatically uploaded to the platform by the smart Enterprise Resource Planning (ERP) integrator.

“For us, it was key that the platform offered seamless integration with our ERP system as well as those of our suppliers, and that it was web-based to ease the on-boarding of new suppliers and banks,” said Anja Stranz, Head of Cash Management at Vattenfall. “Although no changes need to be made to the purchase-to-pay process, the speed in approving invoices is crucial, and workflows need to be able to achieve this within 10 days to benefit from the programme.”

All suppliers on-boarded to the programme receive invoice financing at fully transparent margins, negotiated bank by bank to be very competitive. Vattenfall communicates these competitive margins transparently to its supply base, so that all suppliers know the margin range and maximum margin to be applied. This means that suppliers can then benefit from Vattenfall’s credit rating, strengthening the supplier relationship. Naturally, it is up to them whether or not to use the option.

The banking partner with the lowest pre-negotiated margin automatically gets first reverse factoring business until its dedicated facility is fully utilised. Invoices are then pushed automatically to the bank next in line.

Vattenfall deliberately chose to separate financing from infrastructure so as not to have one single source of financing, and to remain independent from any one bank. It can then distribute credit exposure over multiple banks and facilitate wallet sharing by allowing multiple-relationship banks to participate in the programme.

The platform currently supports transactions in euros and Swedish krona for Vattenfall across multiple European countries, and connects four of Vattenfall’s relationship banks. Anja Stranz: “With our regional set-up, it makes sense to use well-known regional banks instead of just one bank”. Vattenfall will be adding other currencies and connecting with other banks in the coming years, and is looking at dynamic discounting as a potential additional solution to be activated on the platform.

Supply chain financing techniques, such as reverse factoring, are currently used by only a small proportion of corporates, and are traditionally engineered and provided by large global banks. Companies like Vattenfall are early adopters, and by using independent Fintech platforms, they benefit from the optimisation of their working capital, and can see that suppliers and relationship banks gain advantage too.

While making and receiving payments efficiently is essential to every business, the issue is particularly relevant for digital businesses such as online fashion platform Zalando. Customers’ ability to use their payment method of choice is key to removing friction and enhancing the purchasing experience, therefore increasing conversion rates and sales revenues. Similarly, timely, efficient payment to the 2,000 brands that supply Zalando, and its business-critical service providers, is a vital factor in ensuring reliability of supply. Marco Arosio, Head of Treasury, discusses some of the treasury implications of a dynamic and fast-moving payments landscape.

Treasury organisation

Our treasury function is based in Berlin, Germany, where we manage treasury activities on behalf of both our holding company and business units on a centralised basis. We have three streams within our treasury team: cash management, including payments, channels and liquidity; risk management, including hedging, capital markets and investments, and both internal and external financing. We also have a separate Zalando Payments entity that manages customer collections (sales proceeds) and payments (refunds).

Payments and the customer experience

As a digital retailer, it is in our DNA to create a seamless experience for our customers, which includes both payments and refunds. We need to support the payment methods that our customers want to use; however, we balance this objective with the need to remain cost-effective and operationally efficient. Consequently, we work closely with Zalando Payments to evaluate new payment methods. From a treasury perspective, we establish criteria such as:

• Cash should be transferred automatically into our bank account without manual intervention, such as the need to transfer credit from an account with a payment services provider (PSP).

• Cash should be received promptly, as opposed to cash becoming ‘trapped’ with a PSP for a period of time.

• Any detrimental impact on working capital (such as introducing longer payment terms in one of our revenue countries) must be justifiable, e.g. through increased sales volumes, customer conversions or enhanced connectivity.

The introduction of new payment methods can often be slow, and it can be difficult to predict which will gain customer traction, and for how long. We test and pilot new payment methods constantly, evaluating customer behaviour and preference, and determining the degree of customisation to our systems and processes that may be required. For example, it may be time and resource-consuming to support a very specific local format, but it may be essential requirement to do business in a country. In other cases, the cost and potential for fragmentation may outweigh the possible advantages of supporting a new payment method. Through experimentation and pilot projects with a small number of customers, we can trial new payment methods and then scale up quickly if required.

A high-quality customer experience goes beyond simply the transactional elements of our relationship, however, and encompasses what and how our customers purchase from us. While the right payment methods are factors in increasing customer conversion rates (i.e. the conversion from browsing and adding products in an online basket to a purchase) the payment is only one element of the customer experience. We need to create a personalised experience for each customer, but at scale, given that we have over 27 million ‘active’ customers (i.e. those that have made more than one purchase over he past 12 months) as well as a rolling customer increase, churn and ad hoc purchasers. From the point that customers arrive on a landing page that attracts them, we need to inspire and guide them through their journey on our platform, in which the payment is the final step, to avoid becoming overwhelmed by the range of products and brands we offer.

Business-to-business flows

Our payment priorities also extend to our outgoing, B2B payments. The number and diversity of the brands we offer is key to our value proposition. Each one must therefore have a positive experience of doing business with us so we have a reliable supply of their products. To achieve this, whilst also maintaining efficient and effective processes and controls, we manage all supplier payments and salaries for all business units globally through our central Berlin team. We channel all payments through SAP, with a single connection to our banks.

We aim to standardise our supplier payment processes as far as possible; however, this can be difficult as our brands differ widely by geography, size and level of digitisation, from the world’s largest consumer brands to small, boutique companies. We have introduced e-invoicing and streamlined, automated payments through SAP. We also have a supply chain finance programme for selected suppliers, but payments continue to be processed through SAP. In conjunction with these initiatives, we have aimed to standardise invoice formats to be processed automatically and passed for approval. Similarly, we are working with our service providers, such as logistics companies, advertisers etc. to digitise the invoicing and payments process as far as possible.

In comparison to many longer-established companies, it is relatively easy for us to standardise and automate processes as we lack the legacy processes and systems that can build up over a number of years. Optimising the use of new technology, such as our SAP HANA project, is also more straightforward as we do not need to rationalise and integrate multiple ERPs.

Looking ahead

One of the industry developments that we could have a major impact on our business is instant payments, in which we are keen to be early adopters. Although banks are at different stages of innovation around instant payments – and critically, instant information - we see significant value both for payments and collections. End customers gain better certainty and traceability of payments and refunds while in treasury, we can manage working capital dynamically rather than waiting for statements to be downloaded. We are already working on a pilot project with our partner bank to integrate real-time payments and real-time data into HANA.

Access to cash, and the data that relates to it, is fundamental to our business, so instant payments have a major role to play. In addition, there is still scope to improve other areas such as cash concentration by reducing friction in cross-border pooling and reducing trapped cash. Inevitably, in a small team with big ambitions, we are always trying to do a lot and need to prioritise. However, we do this by focusing on the initiatives, including the introduction of new payment methods, that offer the greatest value to our business, to enhance the experience of our customers, suppliers and service providers, and boost our competitive advantage.

‘Co-creation’ is a term increasingly used to describe the collaboration between corporate treasurers and their banks and technology providers on the priority, design and development of new digital solutions. Michel Verholen, Assistant Treasurer of global animal health company Zoetis, describes how he has embraced the opportunity to help shape the way that Zoetis interacts with its banks, and some of the outcomes so far.

“A recurring theme in our treasury function over the past few years has been to explore the potential and impact of digitisation. We had a number of inefficiencies in our operational and compliance processes and recognised that digitisation was the only way to overcome them. Consequently, we are very attracted to the opportunity to collaborate with banks such as BNP Paribas on various digital initiatives, for example to streamline the exchange of documentation and improve the analytics around our banking activities. Coupled with other initiatives to improve our operational processes, this will enable us to manage our activities more efficiently.

Engagement and relationship building

When I joined Zoetis four and a half years ago, we were implementing a new cash management banking organisation, with new accounts and liquidity management structures. This was the start of a proactive and constructive dialogue with our banks on how we could optimise the relationship and derive the greatest value from it. BNP Paribas invited me to join its Treasury Board, an advisory board of senior treasurers from across Europe which I recognised was an opportunity to explore and address our pain points in a collaborative and co-creative

way. This approach has proved mutually beneficial, both for Zoetis and the bank, but also for other corporations who also derive benefit. Across the working group, we have an iterative and discursive process to identify key pain points and priorities, and input to the design, functionality and delivery of new digital capabilities for corporate-to-bank interaction.

Digital processing, analytics and reporting

A long-term challenge has been to streamline the way that we exchange documentation with our banks. We have a repository of the data we have sent to the banks, either stored as scanned or hard copy documents, it is very difficult to confirm whether we hold the same information as the banks. We do not use digital signatures currently, and it can be cumbersome to have to send hard copy documentation, often certified copies. Although the processes are largely similar across banks, there may be additional steps in some countries and the documentation burden is high. The process for account opening can be particularly arduous and time-consuming. Having contributed to the co-creation of a digital account opening process, we look forward to leveraging this new capability, which will be far quicker and less labour-intensive than the existing current manual process, next time we need to open a new account.

Another digital solution we have worked on is a dashboard that enables us to see all the activities with the bank across the group. This is something we try to do regularly, but it can be very time-consuming to collate all the relevant data, which may quickly become outdated. During the early ‘strawman’ phase, we looked at design and user tools, but it was difficult to ascertain how we would use it in practice.

As soon as the dashboard was populated with our own data, however, we could quickly see the value and were able to make decisions to improve our account structures.

Co-creating the shape of the future treasury

All treasurers are seeking to improve the efficiency of their operations and the way that they fulfil their compliance obligations. Working with banks to streamline these activities is enormously beneficial, leveraging the combination of digital tools and the wealth of data that the banks hold. The treasurer’s role will look very different in the future as digitisation and the use of data develop, so it is extremely

valuable to engage now in the digital debate and be able to shape this future role.

We have seen a growing number of digital developments emerging in recent years, often as the result of partnerships between financial technology companies, banks and the corporates that help with co-creation. This type of collaboration is particularly advantageous as our banks are already trusted partners, and working together avoids the need to analyse and adopt individual solutions from less familiar third party companies. An increasing number of treasurers are participating in co- creation opportunities, which will further accelerate digitisation as these new solutions are launched and disseminated more widely across the corporate treasury community.”