Published: September 01, 2012
Over the past six decades, air transport, IT and communications specialist SITA has developed a truly global portfolio of services, and prides itself on delivering solutions and services that specifically meet the needs of their members and customers globally. One result of globalisation has been a slightly fragmented approach to cash and treasury management, with a diverse spectrum of banking partners, multiple technology platforms and disparate processes. To address this, and create a platform for future growth and efficiency, SITA launched a series of initiatives in 2008 with a view to rationalising technology, centralising financial activities, and replacing fragmented bank relationships with regional banking partners. In this article Yann Guengant, Director, Corporate Treasury, SITA, outlines some aspects of these parallel initiatives, with specific focus on Central and Eastern Europe (CEE).
SITA has a centralised approach to treasury with a single Group Treasury based in Geneva, Switzerland. Five people are employed in treasury with a full range of responsibilities across cash and working capital management, bank relationships, trade finance, debt, investment and risk management. In 2008, we established a Financial Service Centre (FSC) in Prague, Czech Republic to provide centralised support for accounts receivable, accounts payable, billing, collections, purchasing and customer services. Local subsidiaries remain responsible for customer facing functions such as sales and services delivery and related activities that cannot be centralised or performed remotely.
The FSC services have been rolled out gradually, focusing first on Western Europe, North America and Eastern Europe. We are now introducing the FSC service to our Asia Pacific operations. From an IT perspective the FSC uses Oracle as its ERP platform, which is integrated with our treasury management system, Kyriba, to receive country funding requests from business units. Hyperion is used for financial planning and reporting.
As part of the FSC implementation, we recognised that rationalising our bank relationships would be instrumental in enhancing our cash and treasury management activities, and streamlining our financial processing. This led to the development of our Bank Footprint Project which aimed to reduce the number of global banking partners with which we work.
In CEE, we had a variety of banking partners before initiating the project. This made it difficult to achieve oversight over accounts, consolidate cash positions and leverage economies of scale. We therefore decided to review our bank relationships in CEE with a view to enhancing our cash and banking efficiency, leverage our FSC more effectively and streamline our payment processes. By reducing the number of banking partners, we would also be able to manage our bank relationships more effectively and strategically, and optimise liquidity management.[[[PAGE]]]
We issued a request for proposal (RFP) to a variety of leading banks in each region, and made the decision to appoint ING as our cash management and payments bank for CEE, a key region for SITA. There were a variety of reasons behind this decision. Firstly, ING is one of our strategic banking partners, and is a member of the banking panel that provides financing through a revolving credit facility. We also recognised ING’s track record in CEE and capabilities as a truly pan-European bank. We saw that the bank had a strong commitment to CEE, with considerable expertise and on-the-ground presence. Finally, ING was able to offer excellent local payments and cash management capabilities, together with an overlay liquidity management solution that was tailored specifically to requirements in the region through its subsidiary Bank Mendes Gans (BMG).
By rationalising our bank relationships, we would be able to reduce the total number of bank accounts, leading to greater visibility and control over cash, easier bank account maintenance and reduced costs. Furthermore, working with ING would enable us to achieve a complete overview of our account structure in CEE and centralisation of cash balances through BMG’s automated liquidity management solution.
The capabilities provided by today’s sophisticated and integrated technology makes the implementation of complex projects such as centralisation and bank migration far more manageable than they have been in the past. In addition, working with a trusted bank partner that has the expertise and experience to support the project is essential. Consequently, our Strategic Financial Systems Initiative and Bank Footprint Project have been both critical enablers and key success factors in the success of our FSC migration and process centralisation. ING’s experience in this kind of project, and its well-established project management approach, has also been instrumental. Project tasks, dependencies and resourcing have been planned in detail, with a transparent approach to project reporting and considerable management oversight. These factors have been valuable in building trust, reducing project risk and ensuring a high level of confidence among our project team and senior management. This structured, rigorous approach is particularly valuable in a region such as CEE where the diversity of local requirements and market standards can create pitfalls and diversions in a complex project. As a result of these factors, the project is on track and entering the system phase (connectivity, system set up, training and testing).
Running multiple projects concurrently can inevitably be challenging, particularly with a small team, with competing priorities and resourcing requirements, and the need to manage normal daily activities while focusing on the longer-term vision. However, by planning each project carefully, aligning key stages in order to manage resources, and ensuring visibility over project tasks and dependencies, we have managed to overcome this.[[[PAGE]]]
In addition to the challenge of multiple projects, there were also issues related to the specific projects in which we were engaged, such as ensuring effective knowledge transfer from the regions to the FSC, and ramp up of its capabilities and geographic scope. We also needed to put in place mechanisms to reduce staff turnover, and facilitate a smooth transition. This included training people on new systems, defining and testing new processes, and checking and adapting reports and processes to comply with local regulatory requirements. We also needed to handle specificities in local markets, such as supporting Cyrillic character sets in Russia.
Although we have not yet fully completed all the various projects on which we have embarked, we are already receiving considerable benefits. For example, by rolling out the capabilities of the SSC based on a single ERP platform, we have achieved considerable economies of scale and streamlined our financial processing. By achieving greater standardisation and consistency across our financial processes, we have been able to obtain more complete and consistent reporting to facilitate enhanced decision-making, and administering reference data has also become less onerous by using a single system. We have also been very successful migrating our CEE cash and banking activities to ING, rationalising our bank communications technology, and optimising cash and liquidity management, whilst ensuring compliance with regulations in each country.
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We intend to complete the projects that are currently under way, including roll-out of the FSC in Asia Pacific, and finalising the Bank Footprint Project in the last remaining region. We are also heavily focused on optimising systems integration. For example, in treasury, we are looking to enhance cash flow forecasting by automatically importing accounts payable and receivable data from Oracle according to pre-defined rules. We will also be integrating an electronic FX and money markets electronic trading platform (most likely within the Kyriba system) to streamline and automate the foreign exchange/investment end-to-end trade lifecycle. Additionally, new features to be released shortly in Kyriba will allow us to support valuation, accounting and documentation requirements for hedge transactions. In the FSC, we are maximising automation in the payments process by streamlining payment generation, validation, approval and release of payment files and integrating Oracle with our key relationship banks such as ING.
In treasury, in addition to enhancing our forecasting and FX and money market processes, we will be implementing target balancing in situations where zero balancing is not possible, in order to enhance our liquidity further. We also have a variety of other treasury initiatives planned such as implementing SEPA Direct Debits leveraging SEPA Credit Transfers and payments ’On-Behalf-Of’ capabilities in Oracle to further rationalise our bank account structures in Western Europe. We will also introduce virtual accounts to facilitate cash posting, increase reconciliation and limit the proliferation of physical bank accounts, and implement an online trade finance platform and internal self-service reporting to free up treasury resources.
Given the challenges of CEE and the differences that exist between each country, it is important to choose a banking partner with long-standing experience, in-depth local knowledge and a clear commitment to the region. At the same time, it is important to keep in mind the overall regional and global cash and treasury management objectives, so the combination of local presence and regional/ global solutions offered by ING has been instrumental in facilitating our strategy for CEE and beyond.
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