Embracing Change and Opportunity in Treasury

By Séverine Le Blévennec, Director, Treasury - Europe, Middle East & Africa, Honeywell

Honeywell’s treasury team have achieved a high level of centralisation and efficiency over the years, leveraging best-in-class technology, driving best practices and building the right internal and external relationships. This is a constant process in order to understand new opportunities and meet the changing needs of the business. In this feature, Séverine Le Blévennec, Director of Treasury, EMEA, discusses some of the initiatives in which treasury is engaged and how these fit into the wider business strategy.

Managing change and growth

Honeywell in Europe is a cash-rich business, which creates particular demands in terms of maximising visibility and control over this cash. By late 2015 Honeywell had a global surplus cash balance of close to $10bn.  We have very effective cash management structure and cash concentration process which include a Belgian in-house bank. As a result of having a clear view and treasury control over cash, we are able to make optimal cash investment decisions, and support business growth objectives. Honeywell is a highly acquisitive enterprise and grew significantly in Europe in the past one and a half years through a series of acquisitions. EMEA Treasury covers all treasury requirements of over 600 affiliates in the 50 countries of the region. This would have been impossible without the right systems and processes to integrate new entities quickly. When acquiring new businesses, our first focus is on achieving visibility and control over cash. We have refined our processes and systems over the years, and built strong bank relationships and connectivity such that we have 100% daily visibility over cash globally, with complete accuracy in reconciling this information with accounting.

Focus on technology

Implementing and getting the best from the right technology is a matter of survival when trying to deal with the scale and speed of change in our own business and the wider market. Not only do we use technology to continue our own treasury transformation and achieve the highest levels of productivity, accuracy and agility. We also want to understand how banks are taking advantage of technology ecosystems, including both established and emerging fintechs, to prepare for new opportunities for operational and strategic advantage that may arise in the future. This includes analysing new technologies such as distributed ledger technologies (blockchain), which we consider to be a potential game-changer for cash and treasury management, and exploring our banks’ appetite and commitment to technology innovation and investment. For example, this year we started visiting banks’ innovation labs, which often leads to some interesting comparisons between banks, and work with them to understand how innovative concepts could be translated in useable, value-add solutions for corporates. 

Given that we have become quite sophisticated and mature in the use of currently-available systems and solutions, being an early adopter of relevant new opportunities is a crucial element in maintaining our technology leadership position and creating operational and competitive advantage. 

The value of strategic bank relationships

It has been quite illuminating to witness the difference between banks in terms of their innovation agenda, and it is essential for us that we continue to work with banking partners who can support our business needs today and in the future across the geographies in which we operate. 

Even with today’s technology, the level of transparency and automation that we have achieved make us particularly aware of required enhancements to bank systems. It is not rare that our demanding requirements lead banks or other system providers to fund developments to fully satisfy our needs. This in turn benefits the global treasury community.

By appointing the right banks, and working with them closely in the long term, we have been able to build relationships characterised by mutual trust, which has also been invaluable when dealing with extraordinary events such as M&A. Furthermore, tapping into banks’ local expertise is very important to understand the regulatory and cultural nuances in each market, in Africa for instance. 

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If we speak of day-to-day cash management, there have been a number of instances of banks exiting markets or product lines over the past two years, and while we have been less significantly impacted than some other corporations, there have been situations such as in Slovakia where our bank has closed its operations and we have been obliged to change banks involuntarily. However our ‘one bank per country’/sub-region strategy has typically protected us and limited the need for a forced change in bank partners, as we generally work with banks in their home or close-to-home markets. Even so, we continue to try and guard against involuntary changes in banking partners with extensive analysis of a bank’s background and ongoing commitment to a particular market as part of the initial evaluation process, and engage regularly in ongoing dialogue on our partner banks’ market and network strategy.

Aligning treasury with regional strategies

It is not only in countries that are perceived to be challenging that we need to review our strategy and how we operate. Europe is a case in point. As a US company doing substantial levels of business in Europe, ongoing uncertainty in the Eurozone and low growth rates mean that it is not a primary growth region for us. The focus on other regions as sources of potential growth has an impact on treasury in terms of business financing, but also on the treasury function itself. Many of our internal finance partners have had their function transferred to high growth regions, leaving us with a smaller in-region finance network.  At the same time, Europe as a mature market brings advantages such as a relative regulatory certainty and significant cash generation from our business operations. We are looking closely at Brexit and the potential effects, but while it is still early days in the negotiations, the direct impact on our business from a treasury perspective is likely to be limited, as although the UK will continue to be an important sales market, we do not have major treasury operations there.  

Plans and priorities

From a business strategy perspective, M&A will continue, particularly as our surplus cash is back at the same levels as late 2015, which will need to be invested given the low interest rate environment.  The company’s investment in people, processes and systems, ensures that we can continue to meet the demands of funding and integrating acquisitions throughout the world regardless of the complexity of the acquired business.

Over the next one to two years, new European money market fund (MMF) regulations will impact us, and we will most probably need to adapt our investment policies. The new rules will also require some changes to our internal systems to maintain the same level of transparency and manage the accounting of these instruments correctly.

We continue to look for ways to optimise our treasury and cash management operations. At the same time, our focus remains the maximisation of our investment return under our investment guidelines and taking into account our business requirements and growth strategy. We conduct a constant review of our treasury infrastructure to ensure that we are meeting the changing needs of the business as effectively as possible. At the same time, we are preparing our treasury to integrate new technology from our banks and their fintech partners. We have already been a pilot customer for some new products, so we will build further on this, leveraging both new and emerging technologies as effectively as possible as part of our quest for innovation and to maintain our treasury leadership position.