Cash & Liquidity Management

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Bank Connectivity for Strategic Advantage Statoil launched a cash management optimisation project in 2009. This has four key elements: bank connectivity; bank account management; review of liquidity structure and banking partners; and optimising the in-house bank. We look at how they have improved their bank connectivity – and outline plans for the next phase, eBAM.

Bank Connectivity for Strategic Advantage

by Olav Risa, Head of Cash Management, Statoil ASA

Statoil has always been a company that aims to pioneer industry best practices, leveraging technology to create greater efficiency, automation and business success. This is apparent in our corporate functions, such as treasury and cash management, just as much as in our exploration and production activities. For example, we implemented SAP across our finance function around 10 years ago, and achieved a very high degree of centralisation, including an in-house bank and payments factory. Prompted by the recognition that our middleware was becoming obsolete, and in order to maintain our competitive position, we launched a cash management optimisation project in 2009 comprising four key elements: bank connectivity; bank account management; review of liquidity structures and banking partners, and optimising our in-house bank. We are currently in the bank connectivity implementation phase, with bank account management to follow.

Bank connectivity background

We have relatively few banking partners at Statoil, with four primary cash management banks, to whom we connect through host-to-host connections historically. We also work with a variety of banks that provide domestic services in locations not covered by our key banking partners. Although these banks play an important part in supporting our business strategy, currently we do not have automated payment processes with them. We have enjoyed long-term relationships with our banking partners, and we regularly review performance of the four primary cash management banks, including key performance indicators.

Late in 2010, we made the decision to replace our host-to-host connections with SWIFT connectivity. Despite the longevity of our bank relationships, we wanted to create bank independence, and make it easier to connect to new banks in the future. In addition, we recognised that maintaining a single channel would be easier to maintain and enable a more consistent approach to business processes and security.

Decisions on connectivity

We explored different connectivity options, specifically whether to manage the SWIFT infrastructure in-house or to outsource this to a service bureau. Although Statoil is a highly technologically competent organisation, we realised that it would be more cost-effective and resource-efficient to work with a service bureau, particularly bearing in mind what is the relatively small scale of our treasury and payments operation compared with Statoil’s core activities. We also made the decision to implement XML-based ISO 20022 for payments, as by standardising the file format used for payments, we could automate our processes independently of individual bank formats.

Project progress

We have now completed the SAP elements of the project, and we are converting the formats to ISO 20022 on a country by country basis. As we convert each country format, taking the opportunity to include other improvements such as reduction of payment methods per subsidiary, we are then migrating it to the new SAP platform, so we are currently maintaining both the old and new infrastructures (figure 1) during the transition period. Eleven countries are now live, and we are starting on the second phase which comprises five or six countries. Currently we are migrating to XML, still on host-to-host connections, and we will start the XML conversion with at least one of the Nordic banks before we are live on SWIFT. These will take a little longer to implement as we have retail as well as wholesale activity, which is more complex.

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