Against the Clock: Creating the Treasury Organisations of the Future

Published: January 23, 2017

Against the Clock: Creating the Treasury Organisations of the Future


Since Alex Molinaroli became CEO of Johnson Controls International plc (JCI, formerly Johnson Controls Inc.) in 2013, the business has been through a radical transformation. Initially, this included divesting a number of business units and divisions, and some small acquisitions to refocus the business; however, in June 2015, 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, which then took place in September 2016, only a month before the conclusion of the Adient spinoff. 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. In this article, Jean-Philippe De Waele and Mario Del Natale of JCI discuss some of the factors that contributed to the successful creation of the Adient treasury function, particularly focusing on the treasury technology implications.

 

 Key Points

  • Johnson Controls International decided in 2015 to spin-off its automotive business into a new corporation, Adient, and shortly after that JCI announced its merger with Tyco which would take place in 2016

  • These changes had enormous impact on treasury, with particular implications for technology; all the preparations for a fully functioning treasury department for Adient had to be completed in under a year

  • The corporation worked closely with FIS (formerly SunGard) which already provided its TMS system Quantum and payment factory system Trax. Existing Quantum and Trax applications were cloned, and the FIS-hosted infrastructure migrated to the UK
  • Quantum was updated and replicated for Adient, and Trax was connected to SWIFT in 35 countries

  • The authors describe the factors which contributed to the success of the complex project and note some of the obstacles which had to be overcome during implementation 



A ticking clock

Once the spinoff of Adient had been announced, we had a finite period of time – effectively September 2015 until July 2016 - to make all the necessary preparations. By July 2016, the new spinoff company had to have a fully functioning treasury department, complete with systems, bank relationships and accounts, credit facilities etc. It was clear that we would need help to achieve this, not least as we still needed to resource our day-to-day treasury activities. Therefore, we worked closely with FIS (formerly SunGard) which provides our treasury management system, Quantum, and payment factory system, Trax to make sure that we had their support for the project. We also appointed a number of consultants and contractors to supplement our internal resources based on their experience, knowledge of JCI and commitment to our project.

We spent October and November 2015 in detailed planning, and started the spinoff project in December. Quantum and Trax were critical to our treasury technology infrastructure at JCI so it was essential that the new Adient treasury function could benefit from the same capabilities given that the business had comparable requirements. We therefore made the decision to ‘clone’ our existing Quantum and Trax applications, including migrating the FIS-hosted infrastructure to the UK, to support the new business. This approach was complicated somewhat by the fact that we were using an old, unsupported version of Quantum. Although we had planned an upgrade to Quantum 6.2 version, we needed to accelerate this process and complete the upgrade before cloning our infrastructure for Adient. As well as offering an enhanced user experience and updated functionality, the new version also provided performance benefits. We were already using an up-to-date version of Trax, so we only had to focus on the replication process.


Replicating the treasury technology environment

We therefore had eight months to upgrade our Quantum architecture, and to replicate it for Adient, including all the necessary testing and integration work. For Adient’s payment factory (Trax), this included connecting to SWIFT in 35 countries, which involved technical integration and onboarding banks with Adient’s new BIC code. We spent five months on the Quantum upgrade and three months on the replication, and completed the project exactly on time on July 1 2016. This included a ‘clean up’ to remove obsolete data and reflect the new entity structure. One important issue, however, was the jurisdiction of the new business. Johnson Controls had previously been headquartered in the United States, but the new Adient and merged JCI/Tyco corporations would be headquartered in Europe. Both treasury functions therefore needed to produce EMIR reporting, which was supported in Quantum.

 

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Factors in success

A key factor in the success of both the spinoff project, and our ongoing use of Quantum and Trax, is that these solutions are hosted by FIS. Treasury is a niche, albeit critical function, rather than the company’s core business, so we recognised that it was better for our treasury technology infrastructure to be supported by professionals who understood both the core and ancillary systems such as SWIFT, but also the way that we use them to support our business. There is also a cost advantage, as there are synergies when accessing shared technical resources rather than having to set up a dedicated technology support function. Our previous TMS was hosted internally and required considerable resources to maintain, particularly given the need to offer round-the-clock support. Furthermore, it was difficult to retain skills and expertise on the system in a small team. Working with FIS as a single partner for both application and architecture support has been very convenient and ensures sustainable access to specialist expertise. This was particularly valuable during the treasury spinoff project, as we avoided significant project risk by relying on FIS to replicate not only our core systems environment, but also interfaces with systems such as SWIFT, online dealing platforms (FXall), market information providers (Bloomberg) etc.

In addition to FIS’ hosting and management of the treasury and payments technology infrastructure, there were a variety of factors that contributed to the success of the project:

Internal staffing. The people element of the project was vitally important. We knew from the outset that we would need two strong treasury functions in both JCI and Adient, with an equivalent balance of senior and more junior staff. We decided early on which individuals would migrate to each of the two treasury functions, and made sure that these new teams were equally represented on the project team. This ensured that both companies would have appropriate skills and knowledge of the systems after the spinoff. 

External staffing. Working with FIS and independent consultants who knew our business well and had a demonstrable commitment to our business was essential to success as they were able to provide specialist skills at the appropriate time, and ensured that the project continued to receive the priority it needed, rather than diluting resources. 

Project governance and reporting. We had a disciplined process to project monitoring, oversight and change management which was very important to meet our ambitious timescales. A dedicated project manager and regular status reporting helped to maintain momentum and identify and resolve potential risks quickly.

Bank onboarding. It was important to onboard banks early, so as soon as we had appointed the project team and scoped the project, we involved all our banks to align priorities, timescales and resources. We replicated our JCI bank relationships with Adient which made the onboarding more straightforward, and our banks were reassured of our commitment to long-term relationships in both the new and existing business.


Project obstacles

The biggest challenge when divesting such a large part of the business was simply the scale of the task and the number of things that needed to be done. Furthermore, as the treasury project was a small, albeit critical sub-stream of the broader spinoff project, with a number of interdependencies across different sub-streams, regular progress reporting was essential, but this inevitably took time and resources. Before starting the project, we had not fully appreciated the difference between project skills and treasury skills, so it was important to be realistic about our skills gap and make sure that we covered these when bringing consultants into the business. 

Furthermore, bearing in mind that day-to-day activities had to continue, we needed to make sure that we did not simply appoint the most experienced people to the project, only to find that we did not have the right skills and expertise left to manage the business. Resource planning is not only challenging in terms of balancing skills, but also scheduling holidays, which can have a major impact on the project; again, we had not anticipated that this would be such a difficulty.

 

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Integrating treasury strengths

We are now focused on integrating the Tyco treasury function into JCI’s processes and systems. JCI had an in-house-bank in place 12 years ago, but has outsourced this to Bank Mendes Gans. Conversely, Tyco, which is a smaller company, operates an in-house-bank structure but not a payment factory. After reviewing both structures, the size of the merged company, the benefits and scalability of each treasury’s solutions, the combined JCI-Tyco treasury team decided to integrate Tyco’s business into JCI’s existing treasury structures. Similarly, Tyco had a TMS in place, but it lacked the functionality of Quantum, such as EMIR reporting and hedge accounting, so the newly combined treasury function will be based on Quantum and Trax. Tyco had an effective trade finance solution, however, which the new treasury function will continue to leverage.

A project of this scale, complexity and timing is a ‘once in a career’ event for most treasurers, so it is almost impossible to rely on internal expertise alone, even where there are no resourcing constraints. Consequently, the combination of technical and business expertise and commitment to our business that FIS provided, together with the crucial contribution of the consultants and banks that supported us, played an essential role in our success.

 

Johnson Controls International plc

Johnson Controls International is a global diversified technology and multi industrial leader with 130,000 employees operating in more than 150 countries. 

 

Jean-Philippe De Waele
Jean-Philippe De Waele

Vice President & Treasurer EMEA, Johnson Controls International plc 

Jean-Philippe De Waele is Vice President & Treasurer EMEA at Johnson Controls International plc. He joined Johnson Controls in 1998 as Foreign Exchange Manager. In 2003 he was appointed Director Financial Risk Management looking after FX, Commodity and Interest Rate risk and in 2005 he became Treasurer for Europe and Africa. Since 2012 he has also been responsible for the Middle-East. Before joining Johnson Controls Jean-Philippe worked for several years in financial markets at Citibank and ING. 

 

Mario Del Natale

Mario Del Natale
Director Treasury Operations, Systems and Applications,
Johnson Controls International plc

Mario Del Natale is Director Treasury Operations, Systems and Applications at Johnson Controls International plc. He joined Johnson Controls in 1997. He is based in Brussels where he is responsible for Treasury Operations (global back- and middle-office for all derivatives trading) as well as for providing long-term strategic recommendations on global Treasury IT Applications and Solutions to the VP Corporate Treasurer and to the Treasury’s leadership team. Before joining Johnson Controls, Mario worked for several years in IT solution deliveries at GE Capital and Corporate Sciences Corporation. 

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Article Last Updated: May 03, 2024

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