The TMI Corporate Recognition Awards reflect the pinnacle of achievement in treasury and finance policy, practice and innovation. With the help of banks, technology providers and consultants, the treasury and finance functions featured in these Awards have addressed common challenges in new ways, overcome obstacles and delivered successes that have a tangible impact on the organisations of which they are a part. One observation from reading through all of the winning submissions once again is that these projects have not been without difficulty. A characteristic of some of the projects that have ultimately proved the most successful are those where treasurers, finance managers and project managers have had the confidence to stop, regroup and change direction where necessary. Treasury solutions and advice are not hard to come by, but personal and organisational confidence can be more elusive. With our thanks to all those who submitted such excellent Award entries, either directly or on behalf of their clients, and congratulations to our Award winners. And, as they say, in no particular order…
Treasury of the Year
Etihad Airways
What marked Etihad Airways (Etihad) out as TMI’s 2016 Treasury of the Year was the breadth of activities in which treasury has excelled. While many treasury functions can deliver a specific project alongside ‘business as usual’ activities, Etihad has driven change and innovation on multiple fronts, despite having a small treasury team. These include:
- Re-engineering of its cash and banking structure across 71 countries to support the company’s ambitious growth plans. The objectives included promoting centralisation and improving controls by establishing strategic banking partners and best-in-class cash management structures, automating processes and improving account visibility. Following an extensive RFP process, Etihad awarded mandates to National Bank of Abu Dhabi for the Middle East, and Citi as its international partner bank. As a result, treasury achieved its cash visibility and operational objectives, whilst also benefiting from consistent processes and decision-making, enhanced liquidity management and lower costs.
- In conjunction with this project, Etihad reviewed its technology infrastructure and opted to replace its existing treasury management system and replace it with OpenLink’s Findur for payments, cash and treasury management, with 360T for online dealing and SWIFT for bank connectivity, as recognised in the 2015 TMI Corporate Recognition Award for Payments, which was explored further in edition 242 of TMI.
- Finally, Etihad deserves recognition for its $700m collateralised loan obligation (CLO) to raise five-year unsecured debt for members of Etihad’s equity alliance of six airline partners – Etihad, Alitalia-CAI, Air Berlin, Jet Airways, Air Serbia and Air Seychelles – and Etihad subsidiary - Etihad Aviation Services (EAS) for capital expenditure, fleet investment and refinancing. The financing was arranged on an unsecured basis, despite the fact that some of the obligors are weak credits. Each of the obligors’ material obligations is on a standalone basis, with each paying a rate of interest commensurate with its standalone credit rating, resulting in a weighted average coupon of 6.875%. This innovative ‘platform financing’ structure enables all participating airlines to access the capital markets in a transparent and efficient way, while allowing investors to capture multiple airline risks in one structure, buying into large, liquid structure, and a proxy to a group performance as opposed to a single entity exposure.
We look forward to featuring more of Etihad’s story in future editions of TMI.
Cash Management – Europe
The Estée Lauder Companies Inc.
Estée Lauder has established a global reputation for high quality, premium beauty products, but the group’s commitment to quality and excellence applies across the full reach of its activities, including treasury. Together with consultancy firm Zanders Treasury & Finance Solutions, Estée Lauder’s treasury has undertaken a series of projects that have resulted in a highly efficient cash management organisation that also forms the foundation for future innovations. These include developing a treasury roadmap of short-, medium- and long-term objectives, rationalising bank relationships and connectivity and implementing a pan-European cash pool with BNP Paribas. These initiatives position Estée Lauder’s treasury for future innovations, such as implementing a payment factory that operates on a payments-on-behalf-of (POBO) basis.
Bart Taeymans, Executive Director, International Treasury Centre, the Estée Lauder Companies Inc. presented at BNP Paribas’ 2016 Cash Management University with Hugh Davies, Director, Zanders Treasury & Finance Solutions. The article which follows their presentation can be found in TMI’s Innovation in Cash Management supplement, an overview of the 2016 Cash Management University, published in association with BNP Paribas in December 2016.
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Cash Management – Asia Pacific
Sany International Development Limited
Chinese multinational Sany International Development Limited (Sany) is the world’s sixth largest heavy machinery manufacturing company. Over the past two to three years, Sany has experienced a major increase in the proportion of revenue derived from overseas sales, across an expanding geographic footprint, as well as strong year-on-year growth in its domestic and international business. Sany has put together a banking panel of both Chinese and international banks to meet its current and future needs, to which it connects via SWIFT. Based on this project, it has been in a position to implement best practices in international cash management in an environment of changing political, social and economic pressures, and support future growth. Sany’s approach has been highly collaborative, both in the way that it has worked with external partners, but also in sharing experiences with other Chinese multinationals on how best to achieve operational and financial efficiency in each market.
More information on Sany’s experiences can be found here.
Cash Management – Middle East & North Africa
Khidmah LLC
Khidmah LLC, subsidiary of Aldar Properties & Capital Investment, is a fully integrated property & facility service solutions provider in the Middle East. The diverse nature of Khidmah’s property-related services, and substantial growth in recent years, created a variety of cash and treasury related challenges, not least difficulties in controlling, managing and reconciling incoming and outgoing cash flows in line with industry best practices. To overcome these challenges, and achieve best-in-class efficiency, control and quality of service, Khidmah’s treasury implemented an ambitious project alongside partner bank Abu Dhabi Commercial Bank (ADCB). This included streamlining the approval, transmission and reconciliation of outgoing flows, and enhancing collection processes across a variety of different collection methods, therefore supporting greater efficiency and control for Khidmah, and contributing to a higher quality service to customers.
More information on Khidmah’s project can be found in TMI’s supplement Promoting Treasury Best Practices in UAE, published in association with ADCB in September 2016.
Cash Management – Nordics
Sandvik
Sandvik is a hi-tech global engineering group that has grown by acquisition, but maintained a decentralised business model. From a treasury and finance perspective, this resulted in a fragmented IT landscape and multiple payment processes. The company therefore decided to implement a payments factory to standardise transaction and information flows across its business, streamline bank relationships and connectivity, and enhance controls leveraging FIS’ TRAX solution and XML ISO 20022 as a global format. In addition, treasury has integrated supply chain finance with the payments factory to improve the supplier experience. Sandvik’s European businesses are now live, with substantial improvements in standardisation, efficiency and control. In Sweden alone, for example, over 30 different payment processes across 30 companies have been harmonised and reduced to two processes.
We look forward to publishing more information on Sandvik’s experiences during the course of 2017.
Credit & Collections
Konica Minolta
Japanese technology specialist Konica Minolta has clustered credit and collections teams in Europe: Cluster West, for example, is made up of Belgium, Netherlands, Austria and Germany. These clusters were managing collection processes manually, which was operationally inefficient and led to a reactive rather than strategic approach to collections. To address these limitations, Konica Minolta has now transformed its credit and collections based on FIS’ GETPAID solution. The project has resulted in significant efficiency and productivity improvements and productivity, greater visibility over cash and risk and substantial days sales outstanding (DSO) improvements.
We look forward to publishing more information on Konica Minolta’s experiences during the course of 2017, including the quantitative and qualitative outcomes in more detail.
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ERP Solution in Treasury
Cameco
Cameco is one of the world's largest uranium producers accounting for about 18% of the global production from its mines in Canada, the US and Kazakhstan. Before embarking on this project, Cameco’s treasury had a fragmented approach to treasury technology, with numerous electronic banking systems, spreadsheets, reporting tools and data providers. This limited treasury’s ability to respond to the changing needs of the business, and created efficiency and control challenges. With the help of SymQ Consulting, Cameco therefore decided to implement SAP HANA to create the scalability, automation, control and reporting capabilities that treasury required. Treasury now has a single point of reference for treasury that is scalable to meet future growth and compliance requirements. The use of spreadsheets is minimal, while processes are efficient, less vulnerable to error and fraud, and meet the highest standards of international treasury practice.
We look forward to publishing more information on Cameco’s experiences during the course of 2017.
Corporate Finance & Funding
Hyundai Capital America
There were two projects that led to Hyundai Capital America (HCA) winning the Corporate Finance & Funding Award:
Firstly, since 2012, Hyundai Capital America (HCA) has issued an average of one senior unsecured bond per year with 3 and 5 year tenors to match its asset duration and minimise interest expense. In mid-2016, with USD interest rates starting to rise, HCA assessed strategies to lengthen its liability duration whilst limiting the near-term profitability impact. Treasury recognised the potential interest in HCA issuance from non-US investors, so following extensive evaluation, and a recognition of the risks and complexities, HCA launched a 10 year $1.1bn transaction ($600m – 3 year; $500m – 10 year) from its parent company’s office in Seoul, resulting in 2.9 times oversubscription at highly competitive pricing levels, with more than 50% investors from Asia.
Secondly, during the global financial crisis, auto leasing virtually dried up in Canada, so purchasers lost a popular low-monthly payment financing option. Consequently, HCA’s parent, Hyundai Motor, decided to establish a greenfield finance business in Canada to address unmet customer demand. Hyundai Capital Canada (HCCA) focuses on leases, one of the most volatile auto receivables, and most difficult to borrow against. These leases extend out to 60 months, almost 2x the traditional US duration, increasing business volatility. Despite no track record or parental guarantee, HCA successfully sought external financing for the new business, and set up intercompany financing structures. In year one, HCA established a scalable funding platform of more than US$300m and grew its customer base from zero to approximately 20,000 retail customers and 400 dealers supporting Hyundai and Kia new vehicle sales in Canada.
We look forward to publishing more information on HCA’s experiences during the course of 2017.
In-house Banking
British American Tobacco plc
British American Tobacco (BAT), partnered by Deutsche Bank, undertook a global treasury centralisation and bank integration project to optimise visibility and control over liquidity, risk positions and transaction flows. Having rolled out a single instance of SAP across the group, BAT was in a position to migrate more processes to finance shared service centres (SSCs) and achieve a more centralised treasury function. As a result, BAT was able to extend its in-house bank to support third-party payments and receipts through a payments-on-behalf-of (POBO) and collections-on-behalf-of (COBO) model. The project spans 25 countries across Asia and Europe with a different structure for each region to match BAT’s customer distribution models. In both regions, physical bank accounts were replaced by virtual accounts, with processing and reconciliation of incoming payments from thousands of customers.
We look forward to publishing more information on BAT’s experiences during the course of 2017, including exploring in more detail the outstanding cost, control and efficiency savings that the treasury and finance teams have achieved.
Liquidity Management
eBay
Cash investment was a manual and inefficient process for eBay, resulting in low returns and high overheads. As the short-term investment market continued to evolve, treasury worked with partner bank HSBC to implement the bank’s Liquidity Investment Solutions (LIS). LIS has allowed eBay to set up its risk parameters, cash trigger levels, and select the funds in which it wished to invest, from which point the investment of surplus cash has been entirely automated. Balances are automatically transferred from eBay’s operating accounts into off-balance sheet solutions including AAA-rated money market funds offered by a variety of leading providers. Similarly, if balances in the operating account fall below the agreed level, the relevant amount of cash is divested and returned to the account. As a result, eBay has realised substantial financial and operational benefits, whilst achieving a scalable solution to meet its changing investment needs.
We look forward to publishing more information on eBay’s experiences during the course of 2017.
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Payments - Joint Award
Air France
Air France has a generally decentralised approach to cash and treasury management, including payments and collections, except in Europe where an SSC based in Budapest manages supplier payments across most countries in the Eurozone. The company implemented FIS’ TRAX some years ago to achieve consistent processes and controls, and a cohesive technology infrastructure. Since the initial implementation was completed, the company has continued to invest in making optimal use of the solution to meet its evolving business needs. For example, Air France has been able to add challenging countries such as Russia and Ukraine, without the need for specific customisation or consultancy support, and expanded the reach of TRAX, e.g., by routing treasury payments from a non-FIS treasury management system through TRAX, therefore maximising the value of a standardised payments infrastructure. Similarly, bank data is channelled through TRAX to update the cash position in the treasury solution. Air France has continued to maintain payment practices in line with industry best practices, such as using ISO 20022 messages across the organisation.
We look forward to publishing more information on Air France’s project during the course of 2017.
Lufthansa
At the start of 2014, Lufthansa Group embarked on an ambitious project to achieve visibility and control over group liquidity across its 540 global entities, and centralise, harmonise and standardise payment processing. Prior to this, Lufthansa held around 800 accounts with more than 100 banks across 107 countries. The group used numerous local electronic banking solutions with which to communicate with these banks. This resulted in fragmented processes such as payment execution and authorisation. Most business units conducted payments locally, but a central payment processing hub supported 25 group companies that used SAP. However, while this centralised approach had proved successful, the solution was not scalable to meet the needs of the wider group. Lufthansa opted to work with Hanse Orga to build a bank-independent hub that would connect its in-house systems on one side, and its banks on the other for the two-way flow of transactions and information. Following a variety of project phases, around 90% of payments globally were routed through the payment hub, including SSCs in Krakow, Bangkok and Mexico as of September 2016, with the plan to complete the rollout globally. The project has reaped significant rewards, not only in payment processing and visibility and control over account information, but also in areas such as bank account management.
More information on Lufthansa Group’s project can be found here.
Mergers & Acquisitions
HP Inc.
When the division between HP Inc. (HPI) and HP Enterprises was announced, treasury was set the ambitious task of building two new treasury functions based on the existing HP treasury. Although a transformation project was underway, given the timing involved and the scale of the task, the new treasury was set up on a ‘clone and go’ basis. This involved replicating 17 different systems, together with over 25,000 static data configurations, and 15,000 outstanding transactions. Key to the success of the project was its ‘command centre’ project structure, headed in the US with regional centres in Poland and Malaysia to provide 24/7 coverage. A proactive, disciplined communication and engagement strategy was essential to managing both internal and external expectations, particularly those of employees of the two treasury functions. Both treasury functions now operate independently, so HPI can focus on the specific nature and unique dynamics of the new business, and adapt its capital structure, redefine its liquidity and risk management approach, and resize its working capital programmes accordingly.
More information on HPI’s project can be found here.
Risk Management
Ericsson
Global telecom infrastructure provider Ericsson has operations in more than 180 countries, exposure to over 100 currencies and more than 500 currency pairs, of which 150 are deemed material risks. Given that Ericsson is a $27bn operation, an appropriate risk management programme is critical. In 2013, treasury embarked on a three-year evolution plan to automate data collection, reduce administrative overheads to free up time for strategic risk management, and to review the group’s hedging strategy in an environment of growing market and regulatory challenges. Ericsson quickly recognised that the project could not be delivered based on its existing technology infrastructure and restructured the project to introduce a third-party solution. Ericsson now runs a treasury ‘technology stack’ comprising a single bank (SEB Trade Station), a multi-bank trading station (FXAll), a treasury management system (Wallstreet Treasury), market analytics portals and a cloud-based FX exposure and capture and definition tool (FiREapps) providing a single point of collaboration for over 70 team members globally. As a result, treasury is now able to deliver a more sophisticated and responsive hedging strategy which has generated remarkable human capital savings, transaction cost savings exceeding $6.7m over three years and a 40% reduction of overall hedging programme volume.
As even a brief write up illustrates, Ericsson’s achievements have been enormous, and we very much look forward to providing more detail about the project in TMI during the course of 2017.
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Technology Transformation
Givaudan
Givaudan is a global leader in the fragrance and flavour industry based in Switzerland. Treasury had first implemented a treasury management system and in-house bank platform in 2009. In 2015, supported by PwC, it embarked on a new treasury automation project to design and implement a new, dynamic approach to currency hedging in response to changing market conditions. This included improving the methodology for cash flow forecasting, analysing the effect of currency volatility on future cash flow, and implementing automated trading ‘robots’ to hedge exposures. This initiative has resulted in substantial efficiency gains, and a dynamic hedging approach significantly reduces the volume of external FX trades. Furthermore, treasury is in full control of the balance sheet and forecasted FX exposures.
We look forward to featuring Givaudan’s project in more detail during 2017, and exploring the implications of this project for other treasury functions.
Treasury Technology
Dassault Systèmes
Dassault Systèmes’ treasury has played a fundamental role in facilitating the group’s successful growth strategy, with a proactive programme of optimisation initiatives to meet its changing needs. One of these initiatives has been the shift to a cloud-based treasury technology infrastructure, Kyriba. Cloud-based technology was preferred to allow easy setup and maintenance without the need for internal IT resources, lengthy and disruptive upgrades, and to provide the assurance that the latest innovations and compliance features would be available. Since the initial implementation, Dassault Systèmes has developed its use of Kyriba further including implementing payment factories for centralised payment processing within each of its SSCs, including a custom workflow and approval process. Treasury has also continued to extend its digital agenda with a central KYC repository, a secure, cloud-based approach to bank account management (BAM) in co-operation with Bank of America Merrill Lynch, and standardised bank fee reconciliation.
More information on Dassault Systèmes’ experiences can be found here.
Treasury Transformation
Johnson Controls
In June 2015, Johnson Controls International plc (JCI) announced the spinoff of its automotive business, effectively half of the company, into a new corporation, Adient, with a target completion date of October 2016. Soon after, JCI announced its merger with Tyco. The impact of these events across the former JCI and Tyco businesses, as well as the new Adient corporation, has inevitably been enormous, not least for treasury, with a finite period of time – effectively September 2015 until July 2016 - to develop a new, fully functioning treasury department, complete with systems, bank relationships and accounts, credit facilities etc. To achieve this, JCI worked closely with FIS which provides its treasury management system, Quantum, and payment factory system, Trax, in addition to a number of consultants and contractors to supplement its internal resources. A variety of factors contributed to the ultimate success of the project, including FIS’ hosting and management of the treasury and payments technology infrastructure, the quality, integrity and commitment of internal resources across all three companies, the support of external partners, strong project governance and reporting, and early bank onboarding.
An article describing JCI and Adient’s project in more detail can be found here.
Treasury Value
World Food Programme
The World Food Programme (WFP) is the United Nations agency with a mission to end global hunger. Improving cash and treasury management processes is not simply a tactical means of reducing costs or demonstrating best practices, it has a direct impact on its ability to deliver food aid and reduce hunger in crisis-struck communities globally. WFP has achieved an ambitious programme of bank rationalisation and streamlined bank connectivity through SWIFT, initially with Citi and Standard Chartered and subsequently more widely, including in Africa where this has traditionally been seen as more challenging. Related elements of the project included implementing an integrated payments infrastructure and setting up new cash pooling structures in central and west African states, working with its two primary banks. With a strong basis for cash and treasury management, WFP has been able to implement new mechanisms for delivering aid, such as cash-based transfers, prepaid debit cards and mobile money solutions, meeting the needs of beneficiaries as quickly, directly and securely as possible.
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Working Capital Management
CIMIC
CIMIC Group Limited (CIMIC) an international construction and project management company, and the world’s largest contract miner, has worked with partner bank ANZ to implement an innovative receivables financing programme. CIMIC was seeking to strengthen its balance sheet by improving cash-backed earnings and utilising receivables finance to drive behaviours, improve its cash conversion cycle and reduce the working capital employed at its operations. CIMIC needed a bespoke, scalable working capital solution that allowed banks to purchase receivables relating to specific debtors on a true sale basis and transact on an ‘undisclosed’ arrangement to debtors. The receivables financing facility of more than $250m was implemented across more than 10 strategic debtors across the CIMIC Group, which is scalable over time. Not only has the programme enabled CIMIC to meet its working capital objectives, but it has achieved lower cost of capital and access to an alternate source of funding. Furthermore, the solution has been tailored to the specific needs of the construction contracting services industry, particularly around its payment certification process.
Lifetime Achievement Award
François Masquelier
Senior Vice President, Head of Treasury & Risk Management at RTL Group, Chairman of the Association of Corporate Treasurers of Luxembourg (ATEL) and Honorary Chairman of European Association of Corporate Treasurers (EACT)
Just as TMI would be a poorer place without the insight, expertise and enquiry of François Masquelier, so too an awards programme would have a major gap without honouring his achievements. It is eleven years since TMI recognised François’ contribution to the treasury profession for the very first time. Since then, François has continued to champion technology innovation, promote rigour in treasury policy and practice, guide treasurers on the direction and implications of regulatory and accounting change, and ultimately shape the treasury community of which we are all a part. It is a great honour, therefore, to offer this special Lifetime Award to François and offer our thanks on behalf of treasury professionals globally.
With many thanks to BNP Paribas for kindly sponsoring these Corporate Recognition Awards
