Setting up a New Treasury Centre for WTW
By Caroline McCarthy, Director of International Treasury, Willis Towers Watson plc
Following the merger between Willis and Towers Watson, we reorganised and streamlined the newly combined group’s treasury function and decided to set up a new treasury centre in The Netherlands. The plan for the new centre was to consolidate and unify treasury activities from the two legacy companies, improve visibility and transparency and service all jurisdictions with the exception of the US and UK due to their strategic importance and need for an in-country treasury team.
Willis Towers Watson offered me the opportunity to manage the set-up of the new treasury company in The Netherlands, and as such, in February 2017 I packed my bags and transferred from London to Amsterdam to start on this once-in-a-lifetime project. From a personal point of view, the move to Amsterdam was easy. Having previously lived in The Netherlands, I considered it a home away from home. I spoke the language, was familiar with Dutch customs and culture — and knew how to survive when commuting by bicycle.
The remit of the new treasury centre in The Netherlands was to 1) be the new in-house bank to the group, 2) manage the hedging programmes, 3) be cash pool leader and master account holder for cash concentration. The go live deadline was set for Q4 2017.
Drawing up the project plan
On arrival in The Netherlands, my first task was to work with our legal and tax teams along with their outside consultants to determine the project scope and objectives, as well as the operating model for the company, which combined became the main building blocks for the project plan. Then we identified and prioritised individual tasks and set a schedule for implementation. We determined the staffing levels to physically be located in Amsterdam. We developed the job descriptions with the intention of filling the roles by the summer of 2017.
A very talented member of our London treasury team expressed an interest in joining me in Amsterdam, and with a lot of work with HR, I had my first hire. Over the course of the summer, we were able to identify a third team member, an experienced outside treasury analyst. In terms of local finance support, a dedicated financial accountant was appointed who was already based in The Netherlands to manage the books of GTC; the opportunity to learn about treasury activities and foreign exchange was a big selling point for this job.
Now, one (that would be me) would assume that setting up an in-house bank is a cookie-cutter process with a straightforward recipe book of how it is done. Well, I was wrong! In part because of the specific jurisdiction(s) of the parent company, the existing intercompany relationships and the impact on all of the statutory entities, the process becomes quite bespoke for companies with otherwise simple ownership structures.
First on the project plans was to form a new legal entity and as such in March 2017 WTW Global Treasury Company B.V. was born, and christened GTC, after a number of potential names submitted in a ‘name the treasury centre’ contest were rejected, in some cases with good reason.
After a fair amount of financial modelling, a variety of factors led us to the decision to set the functional currency of the GTC to USD. Those factors included:
- The main intercompany related treasury activities, i.e., cash pooling and lending arrangements, being dollar denominated.
- GTC would need to put on external hedges to offset the net position of major non-functional currencies and choosing the currency with the largest net position would minimise the volume of external hedges relating to the lending portfolio.
- GTC was to become principal borrower under the group’s external credit facility and related borrowing flows are mainly in USD.
You need to think carefully about your capital structure – depending on how much risk you retain in the in-house bank, the desired equity as a percentage of assets may change significantly.
After we established the capital structure of GTC, the next significant step was to cement the corporate governance of the company. So we:
- Formed a board of directors, including local and overseas directors with cross-functional expertise.
- Elected a credit committee to oversee lending activities of GTC – even though the GTC is only lending and borrowing internally, it was beneficial to be able to determine the right pricing and ongoing credit monitoring.
- Established delegation of authority rules to ensure efficient and smooth operations for daily deal management, intercompany lending and banking activities. For any operating model to work in practice, there needs to be a crystal clear framework of who does what, and we created just that.
Subsequently, and key in the project plan, was the engagement with internal stakeholders, such as different parts of Finance, Legal and IT teams, to ensure the design and operating model was achievable and sustainable and any considerations and recommendations from these parties were taken into consideration.