- Guy Ingram
- Treasury Manager, SABMiller
Working with Business Partners to Enhance Bank Connectivity
by Guy Ingram, Treasury Manager, SABMiller
One of the world’s largest brewers, SABMiller has brewing interests and distribution agreements across six continents. Their wide portfolio of brands includes premium international beers such as Pilsner Urquell, Peroni Nastro Azzurro, Miller Genuine Draft and Grolsch along with market-leading local brands such as Aguila (Colombia), Castle (South Africa), Miller Lite (USA), Snow (China) and Tyskie (Poland). The company is also one of the world’s largest bottlers of Coca-Cola products.
Treasury Organisations
At Group Treasury in SABMiller plc’s office in Woking, UK, we currently set policy, arrange the funding requirements of the group, alongside running the treasury and risk management activities of the parent company and the group’s cross-currency cash pool. Outside head office, each business currently takes care of its own treasury requirements, either through a local treasury in the case of larger businesses, or as part of the regular finance function. These activities are largely focused on day-to-day cash management and, currently, hedging of foreign currency exposures, although the intention is to move the management of foreign currency to the centre where this makes sense to do so. Each group company currently maintains its own banking relationships so there are dozens of banks with which we work around the globe, although there is a project underway that will rationalise the number of relationship banks in due course.
Barclays is a key relationship bank for SABMiller PLC and has significant expertise in SWIFT connectivity for corporates.
Technology in Treasury
We currently manage our treasury operations using a combination of disparate legacy systems, both in Group Treasury and in local treasury centres. The first step in introducing greater consistency was to introduce a specialist system to manage our activities in a more robust fashion and allow us to collate treasury information easily across the group. We wanted to introduce more efficient and standardised processes across each of our businesses, improve visibility of exposures across the group and automate bank communications. In 2007, we took the decision to implement a treasury management system (TMS) and, after a rigorous selection process, we selected IT2 from IT2 Treasury Solutions. We intend to go live with the IT2 system in Group Treasury during the first quarter of 2009 and then plan to roll it out across the group over the next two years.
Options for Bank Connectivity
Implementing a new system, particularly to replace manual processes, has required a complete redesign of business processes. Bearing in mind the large number of banking relationships we have, and the diversity of locations, we had to find an efficient way of connecting with our banks, wherever they are in the world. We identified various alternatives:
Firstly, we could implement separate, proprietary connections to each bank individually. This would have been highly costly and resource-intensive. [[[PAGE]]]
Secondly, we could put in place a traditional hub banking arrangement, which would have met our requirements of reducing interface costs, but would not have delivered the transferable arrangements we were seeking.
A third option, which we also did not consider feasible at this stage, was to rationalise our banking relationships and manage these centrally, therefore reducing the number of connections we would need to make.
The fourth option was SWIFT Corporate Access. When we first heard about this capability in 2007, we quickly recognised the potential advantages for SABMiller.
Outside Head Office, each business currently takes care of its own treasury requirements, either through a local treasury in the case of larger businesses, or as part of the regular finance function.
Progressing the SWIFT Project
We initially talked to Barclays Commercial Bank about SWIFT. Barclays is a key relationship bank for SABMiller plc and has significant expertise in SWIFT connectivity for corporates. The bank’s SWIFT experts were able to help us understand the costs and benefits which we could expect in more detail. Although some companies find it difficult to articulate the business case for SWIFT connectivity, this was one of the easier parts of the internal approval process for us. We recognised not only the potential advantages for Treasury, but also as part of a larger group-wide SAP project. Implementing SWIFT gave us the opportunity to build a connectivity platform which could be leveraged by companies throughout the group. For example, as part of a regional SAP project in Latin America, the local team had also recognised the benefits of SWIFT at a similar time to Treasury. We are therefore implementing SWIFT connectivity to support both FIN (high value urgent payments) and FileAct (high volume bulk payments) so that it can be used for a variety of different business purposes.
Deciding on a Service Bureau
As part of our analysis, we explored both direct and indirect connectivity to SWIFT. As a company, SABMiller has a policy of outsourcing its IT infrastructure and management, as we prefer to dedicate our resources to core business activities. We also recognised the value of the expertise which a service bureau could bring. Consequently, we decided that connecting indirectly to SWIFT via a service bureau was the best option for us. Both Barclays and IT2 introduced us to the SMA Financial Service Bureau at a similar time. The endorsement of a key relationship bank was an important factor in deciding to work with SMA as was the high level of SWIFT accreditation and access to all the available services and solutions from SWIFT. When we met with SMA, we were impressed by their team and the approach they took to assisting their customers with SWIFT connectivity.
Project Progress
The project to implement a new TMS and SWIFT connectivity has gone well; we are now completing testing and we anticipate going live early in 2009. We have built a very good project team by supplementing our own resource with external consultants to limit the potential for project overrun caused by other business priorities, and completed the structure with our key banks, system vendors, and service providers. Although SABMiller is one of IT2’s earlier customers using SWIFT, the system is proving capable of producing and receiving the appropriate file formats.
Project Challenges
The documentation process has been more difficult than we anticipated due to our decentralised structure as we have needed to obtain the necessary signatures from different businesses across the group. Although this has slowed the implementation process, the pace of the TMS implementation project has been slower than the SWIFT project would otherwise have been, so this has not caused us any particular issues.
One of the things which surprised me is how long it has taken to re-engineer underlying business processes when introducing a new system. While moving from one system to another may not require such a great deal of process change, putting in an entirely new infrastructure means building new business processes from scratch. For a centralised treasury, this is possibly more straightforward as only a few people need to be involved. For SABMiller with our distributed treasury organisation, we wanted to develop a global process template which could be rolled out across the group. Therefore, we needed to seek the buy-in of many people over a number of locations. [[[PAGE]]]
A further challenge was ensuring the security and authorisation of payment files before they reach SWIFT. Although not yet fully tested, we believe we now have a good solution to this problem using SWIFT’s own Local Authentication (LAU) protocol.
Anticipated Benefits
Despite the challenges which are inherent to every project, we anticipate substantial advantages with the new treasury infrastructure. A key objective was to integrate our treasury activities into a single system and automate our processes as far as possible. By implementing a combination of IT2 and SWIFT, with the help of our business partners, we envisage a huge improvement beyond where we are today, particularly in straight through processing. For example, payments will be approved in the TMS and released to the bank, and confirmation of payment received in the same system only a short time afterwards.
We will implement SWIFT connectivity with Barclays and Citibank initially and then roll out connectivity more widely as we extend our use of the TMS to other group companies. We will exchange payment requests (MT101) confirmations of debits and credits (MT900/910), prior day bank statements (MT940) and treasury deal confirmations (MT3xx) initially, but as the SWIFT platform is leveraged more widely across the group, it will also be used for bulk payments and other bank communications.
