Cash & Liquidity Management

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Insourcing Treasury Operations at Borealis Treasury operations at Borealis had been outsourced for a number of years until 2008, when it was decided to bring them back in-house. After an evaluation process the company selected IT2 as its TMS supplier and began the integration process with SAP. Banking relationships were also reconsidered and while RBS remained Borealis’ key cash management bank, Nordea and RZB were appointed for the firm’s Nordic and East European activities respectively.

Insourcing Treasury Operations at Borealis

by Eddy Jacqmotte, Manager Cash & Bank – Head of Back Office Administration, Borealis

Borealis has a centralised, multi-site treasury organisation, with the front/middle office based in Vienna, and the back office in Mechelen, Belgium. Until 2008, Borealis had outsourced its treasury front- and middle- office operations for a number of years to an agency treasury in Dublin, Ireland. This included connecting directly to the agency treasury’s treasury management system (TMS) from both locations, and downloading data into our ERP. While this arrangement worked well, we made the decision to bring our treasury operations back in-house. There were a variety of reasons for this. Firstly, as a complex, multinational business, we needed more flexibility than a standardised service offering was able to provide. For example, it was not always easy to adjust the outsourcing service in line with changes to the business or mergers/acquisitions. Secondly, treasury outsourcing can be quite an expensive option, and bearing in mind we had the skills and resource in-house and the availability of better as well as more cost efficient systems it was advantageous to manage treasury operations internally.

Adopting a new TMS

Having made the decision to insource, we started to manage our treasury activities in-house on 1 April 2008 but we had already undertaken the migration project before this. We needed a new TMS as although we had been very satisfied with the TMS used by the agency treasury provider, it was getting older and the new versions were not able to fulfill all our requirements.

Furthermore, more user-friendly systems were available. We therefore reviewed the market and shortlisted three TMS suppliers. We conducted an evaluation process, looking at the degree to which each solution supported our functional requirements, integration with SAP and the cost benefit. Based on this combination of criteria, we selected IT2. Initially, it was difficult to convince our IT department of the need to adopt a specialist solution as opposed to using the standard solution SAP, but ultimately, we decided that it much better suited our objectives.

Treasury integration and automation

Achieving integration between IT2 and SAP was a major exercise, both to achieve the automation we were seeking and to align our accounting rules. We were fortunate in that our accounting rules and coding had already been well documented for our agency treasury provider, which made it easier than trying to start from scratch. The next step was to look at connectivity between IT2 and our banks for transmitting payments and retrieving statements. This was a very quick and straightforward process of less than one day, and RBS, our key partner bank, was very responsive in making formats available and facilitating easy integration. In addition to our key interfaces to RBS and SAP, we also integrated IT2 with Misys, our confirmation matching platform used by our back office, and to both Bloomberg and 360T for market rates and electronic dealing respectively in our front office.

The migration proceeded very smoothly and we have found our new treasury technology infrastructure intuitive and easy to maintain. The cost benefit is also strong, which was particularly important during the financial crisis. We have achieved considerable process automation, not least because when outsourcing treasury operations, it is vital that processes are already streamlined and efficient. Therefore, when bringing this activity back in-house, process efficiency was relatively easy to achieve as well as remaining an important objective to leverage our technology investment and optimise the use of our resources.

We achieved a high level of straight-through processing between our different departments in different locations (front office - middle office – back office – accounting).

Banking relationships

We have found our new treasury technology infrastructure intuitive and easy to maintain.

In addition to our TMS vendor, our banking relationships are very important to us, and we are highly dependent on the quality and timeliness of data, as well as the services that they provide. It had been our intention before the crisis to maintain a single global banking relationship, and we have worked very successfully with RBS as international cash management partner. In addition, due to the scale of our activities, it was beneficial to work with an additional regional bank for the Nordics, and we appointed Nordea. Since the crisis, we have extended our banking panel a little, appointing RZB for our Eastern European activities. We have been pleased with the way that our banks have worked together to fulfil our requirements and learned from each other. RBS remains our key cash management bank but both Nordea and RZB make a very important contribution to our business.

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