Bringing Group Treasury to the Business
by José-Carlos Cuevas, Regional Treasurer Europe, Alstom
Alstom works in four distinct business segments (thermal power, renewable power, grid and transport) each comprising a large number of subsidiaries operating globally, it was difficult to align cash and processes. To address these challenges, we made the decision to centralise and optimise our treasury structures, and enhance communication between treasury stakeholders. This article outlines some of the ways in which we have achieved this, and our plans for the future.
Centralising cash and treasury management
As a first step, we revised and restated our corporate treasury objectives. We determined that cash is a corporate asset and a common resource for all Alstom entities; therefore, it should be managed centrally. We aim to minimise the impact of financial risk on our balance sheet and the potentially negative effect of fluctuations in the foreign exchange and capital markets on our profits. We achieve this by identifying, hedging and actively managing risks, within well-defined objectives and limits, as well as actively evaluating and monitoring the cost of debt.
While many large multinationals have focused on establishing a single, global treasury centre, we recognised that this approach would not be feasible at Alstom. It is important that our treasury team maintain close proximity to the business to understand and respond to changing regulatory, operational and strategic requirements. At the same time, we wanted to achieve a simple, transparent treasury organisation that leveraged skills efficiently across the business. We therefore established regional treasury centres (RTCs) in each key region: Europe; North America; South America; Middle East & North Africa and Asia (including China). This allowed us to maintain a presence in each major time zone and develop expertise in regional treasury issues. These RTCs report into our group treasury in Levallois-Peret, France.
This structure offers the simplicity and transparency that we were seeking, and enables us to standardise policies and procedures at a group level. Country treasurers report into the relevant RTC, who act as treasury’s eyes and ears in each country, providing treasury expertise and input across the entire organisation and relationships with our key banking partners at a local level.
One of the primary objectives behind our treasury organisation was to enhance the way that we managed liquidity and risk. We recognised that we could not achieve this without a consistent, automated means of communicating both across and beyond our treasury organisation. For example, cash flow forecasts are completed by local finance teams. These were often produced differently, making it difficult to aggregate information in a consistent and reliable way. Implementing such a tool would also be essential to support a centralised treasury organisation. Funding would be provided through treasury, whenever possible through an automatic cash pool replacing intercompany borrowings.
We therefore extended the use of our Group cash management tool to provide web access to local treasurers and finance teams. Currently, the tool is used to input cash flow forecasts, retrieve reporting and request foreign currency (FX spot) and is being rolled out globally. Cash flow forecasts (announcements) are produced daily by all entities included in a cash pool, and every two weeks by those that are not. We are also integrating this tool with our hedging solution and other systems used in treasury to create an integrated, automated treasury technology infrastructure.
In the near future we will expand its use to FX (forwards and swaps), enabling us to use a single tool to support liquidity and risk management. Alstom’s hedging activities are very complex, particularly bearing in mind the large number of currencies that we manage and the volume of exposures across the business. By bringing together exposures in a consistent way and aggregating these more effectively, we will be able to implement a more integrated approach to hedging at a group level.