Treasury Transformation: Delivering Value
Our journey with AkzoNobel started in 2007, when they embarked on a treasury transformation project called ‘One Finance’, with the intention of achieving a number of key objectives for their finance function:
The project was demanding and entailed changes to their banking infrastructure, technology, treasury policies and relationships with business units.
As part of One Finance, AkzoNobel floated an Asia cash management RFP in 2009 with the intention of increasing visibility of cash, improving cash flow control, enhancing cash management and FX efficiency and standardising documentation under global and regional groupings.
In view of its extensive network, HSBC was appointed by AkzoNobel as the company’s primary banking partner in a broad range of regions and countries:
In order to meet AkzoNobel’s objectives, the solutions that HSBC needed to deliver included a single centralised electronic banking platform, Payment on Behalf of (POBO), payment in the name of and cash pooling structures. In order to accomplish these implementations successfully, it was apparent that close collaboration would be required. This was accomplished by a combination of detailed dialogue and robust project governance by the steering committee, which established a shared vision and goal. This meant that HSBC understood the requirements and was well prepared from the outset to partner and provide strategic advisory during the transformation journey.
The project included design and development of various SAP treasury modules, such as in-house cash, payments factory, treasury risk management, and SAP XI, together with the application of XML ISO 20022, MT101/940 messages and SWIFTNet through a Service Bureau. Once implemented, these would improve control over cash flow as well as enhance cash management and foreign exchange execution.
An in-house bank structure was deployed in Asia Pacific and zero balancing structures were implemented from all open and semi-open economies into Singapore, where POBO and payments in the name of are executed.
The benefits captured by successfully implementing these solutions have been substantial. AkzoNobel has been able to reduce the number of bank accounts it holds by 50%. Furthermore, by streamlining processes it has been able to lower foreign exchange and transactional charges by nearly 70%, as a result of economies of scale and straight through processing. An important consequence of these improvements has been that they have been able to enhance their capital structure by substantially reducing net debt and freeing up working capital.
Recent developments
In addition to the cash management mandate, in March 2014 HSBC was awarded the sole bank mandate for trade finance activities, which included letters of credit and guarantees. (All these were previously managed locally by each entity, resulting in an inefficient process.) The mandate spanned 14 countries in Asia Pacific, with AkzoNobel NV borrowing under a single umbrella facility.
AkzoNobel has also revisited the management of foreign exchange risk in a search for further improvements, which has since resulted in the introduction of centralization of hedging exposures for restricted currencies in Asia Pacific. Pre-agreed margins have been established up to certain thresholds with HSBC, after which Bloomberg FxGo is used for competitive bidding and transaction execution.
A strong relationship: now and into the future
Over the past five years AkzoNobel and HSBC have built a robust and trusted relationship. Core to the success of the relationship has been HSBC’s open approach, consistent engagement, insights on best practices, regulatory guidance and innovative market-leading solutions. This has enabled them to leverage HSBC’s insights to adapt their business agenda in response to an era of shifting economic powers and volatility in the business environment. “Our sectorized focus has enabled us to better understand clients like AkzoNobel and link their needs with trends in the industry” says David Andrada, Global Sector Head, Natural Resources and Utilities, Global Liquidity and Cash Management at HSBC.
Asia Pacific, and particularly China, continues to be an important and growing market for the company, where their banking requirements and the solutions needed to satisfy them are continuously evolving. AkzoNobel has also recently announced the separation of its Speciality Chemicals business, where HSBC is providing cash management advisory and subsequent implementation.
“Our relationship with HSBC has grown significantly since 2012 and the team demonstrates good collaboration and delivers commitments on time,” says Eva Pang, Head of Treasury at AkzoNobel. “Trust is one of the core components that has helped to build our strong and enduring business relationship. Therefore, while the company has already achieved considerable benefits from the transformation, we look forward to continuing our partnership with HSBC to bring further value to our businesses.”
“Our relationship of more than five years with AkzoNobel is a testament to our strong advisory, implementation and ongoing services, which are key elements for a successful start and longevity in any cash management relationship,” says Syed Zohair Ahmed, Senior Vice President, Global Liquidity and Cash Management at HSBC Singapore. “AkzoNobel and HSBC will continue to explore opportunities to expand and further strengthen the partnership. With an evolving regulatory landscape and our investment in innovation on the rise, the journey continues.”
About Akzo Nobel
AkzoNobel is a leading global paints and coatings company and a major producer of speciality chemicals. Customers around the world use their brands and products. Some of these are household names, while others are more specialised products, but they share a common purpose to create everyday essentials that make people’s lives more liveable and inspiring. The company has recently announced the separation of its Specialty Chemicals business.
Today, AkzoNobel is a EUR7.4bn company (1H 2017) with over 46,000 employees.
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