Published: February 01, 2012
In July 2007 (issue 158) Martin Schlageter and Alexandra Greiner wrote an article in TMI describing Roche’s approach to developing a global treasury organisation, with close collaboration between treasury and IT. Since then, Roche has successfully optimised many of its treasury processes and developed its in-house bank into a payment factory, which is now in the final stages of rollout. In this article, having achieved a world-class treasury operation, Martin and Alexandra discuss how they have now extended treasury’s activities further across the business, beyond treasury.
Roche’s corporate treasury organisation comprises bank relationship management, financing, cash, interest rate and FX management. In addition, Treasury also provides in-house banking and bank communication services to its subsidiaries. Our treasury mission at Roche is that treasury should be a service provider to the business, effectively providing all the services that an external bank could offer, but by leveraging a single SAP platform, and therefore being able to achieve a high degree of integration, it is our aim to be the preferred partner for our subsidiaries. To achieve this objective, we have a highly centralised treasury organisation, based in Basel.
In 2004, we first started to realise our objective to offer a wider range of banking services to our subsidiaries with the rollout of an in-house bank and optimised treasury processes. Since then, we have rationalised our bank relationships and reduced the total number of bank accounts, implemented cash pooling and in-house banking for intercompany FX-hedging and payments and established a central, global bank communication platform based on SWIFTNet. Standardisation is a key objective for Roche, so we were an early adopter of SEPA payment instruments, and we work with our banks to achieve a similar degree of standardisation not only regionally but on a global basis. This has enabled us to build a payment factory with global reach, and we are now in the final stages of implementation.
There have been a few key enablers for the success of this treasury optimisation initiative:
Firstly, establishing a global cash pool with a header account in the Netherlands, which is the backbone of our in-house bank. This provides us with the internal mechanism to manage our cash effectively externally, whilst meeting the needs of our subsidiaries.
Secondly, rationalising our banking partners to three or four global cash management banks reduces fragmentation of cash, enables us to minimise bank accounts and allows us to achieve economies of scale.
Finally, a vital enabler has been, and remains, the close collaboration between treasury and IT. Working in tandem has meant that we can achieve the automation and standardisation that we require, but also integrate data and processes seamlessly across the business, which is an essential feature of the service we are able to provide.
Having achieved a high degree of centralisation, automation and standardisation, we have sought to find ways to leverage our infrastructure further, and deliver an enhanced level of service to the business. For example, by using SWIFTNet as a single bank communication channel, business units no longer have to maintain their own banking interfaces. Most importantly, we have built a reputation for delivering a reliable and professional service to our business units, and increasingly, therefore, we find that they come to us for assistance with both operational and strategic initiatives.[[[PAGE]]]
Supplier finance has recently become more attractive to our business units as a means of improving working capital whilst increasing the resilience of the supply chain. Initially, these initiatives were established locally, but business units quickly recognised the substantial workload involved in setting up and administering a supplier finance programme. Consequently, several business units turned to treasury, with the result that we are now working with three banks to build a global programme with standardised processes in SAP. This takes time, particularly due to the technical complexity involved on the banks’ side. Furthermore, few companies have yet established large, complex supplier financing programmes with a truly global scope, so we are pioneering this initiative.
Having now built our payment factory that links all subsidiaries across all regions, one of the outcomes has been the development of a powerful, comprehensive database of all information relating to payment flows globally. This is of particular interest for the export finance team to ensure compliance with prohibited counterparty lists. While this process is managed by the export finance team, Treasury provides the data. Furthermore, we have agreed that all payments worldwide should be passed through the central database to enable full transparency over payments, which is also a commitment shared by our business units, as local, manual payments are difficult to monitor for compliance purposes.
It was a logical development of our payment factory to extend its scope to payroll, and we are just going live in the US now, including all US subsidiaries. We now have around 20 companies leveraging the payment factory for payments to employees, including key locations such as Germany and Switzerland. Extending the payment factory to payroll has taken a great deal of time as we used the opportunity to align payroll approval and file execution procedures across the regions, which brings substantial benefits to the human resources IT team. This initiative has proved a perfect example of rationalisation and standardisation of cross-functional processes across the Roche group worldwide.
Roche is perhaps unusual in the degree of standardisation that we have been able to achieve across our treasury-related processes, not just in one or two regions, but on a global basis. Some corporations may be sceptical about implementing SEPA and other standardisation initiatives, but we have derived considerable advantage from doing so. We have, in fact, worked with our banks to achieve a level of standardisation that transcends SEPA to achieve consistency on a global basis. This has been a primary consideration when deciding which banks to select. Like many other large multinationals, we have a high level of technical and functional capability in-house; consequently, bank tools that provide treasury and cash management functionality, such as cash flow forecasting etc., are of no interest to us. Indeed, disparate tools that can be implemented at a local or regional level controvert our aims to achieve standardised processes globally based on a single platform. Instead, a priority for us is our banks’ ability to provide enriched data in a consistent format.[[[PAGE]]]
By centralising and standardising financial processes, and proving our ability to deliver a superior service to our subsidiaries, treasury has become a role model for service delivery, centralisation, standardisation and integration. The close synergy between IT and treasury has been a major factor in achieving this.
Looking forward, we are keen to leverage our infrastructure further. One area in which we are likely to do this is centralising collections, but the extent to which we do this will depend on the business requirements. We will conduct a pilot project first which will help to determine the benefits of doing so, and gauge the business response.
We are committed to constant improvement, and we need to continue demonstrating success in performing daily operations promptly and accurately. As our capabilities are further refined, it is reassuring to see continued growth in the range of areas in which subsidiaries wish to engage our services.
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