Future-Proofing Treasury Management

In light of the ongoing economic downturn, the need for treasurers to streamline their cash management processes and unlock trapped liquidity is growing. Simeone Sperotto, Group CFO, Tecnica, explains how his company, an international Italian sports equipment provider, was already upgrading its treasury systems when the pandemic hit – enabling the company to absorb the economic shock and maximise internal liquidity.

In 2017, strategic investor Italmobiliare acquired a 40% equity stake in Tecnica – a leading retailer of outdoor footwear and ski equipment. This was a pivotal moment for Tecnica’s treasury department, with the new shareholders triggering a digital transformation process designed to upscale and streamline the Group’s treasury processes.

The transformation involved partnering with a selection of fintechs – including Piteco, to fully-digitise treasury management; SAP, to establish efficient accounting and finance practices; and AnaPlan, to implement structured reporting capabilities. At the same time, UniCredit was brought onboard to advise on Tecnica’s transformation and sought to rationalise the company’s numerous subsidiary accounts – establishing a complete, digital payment factory solution, spanning the length and breadth of Tecnica’s large sales and production network.

Originally conceived as a progressive exercise to generate internal efficiencies, the importance of these treasury upgrades has since been underlined by the Covid-19 pandemic, which left the business facing reduced collections on winter sales and severely dampened consumer appetite across spring and summer. Countries heavily impacted by the pandemic, including Italy, Spain, and France, saw sales and collections fall considerably – contributing towards a drop in top-line revenue and a squeeze on liquidity.

In this respect, Covid-19 has functioned almost as a stress test for the new treasury infrastructure. Adjusting to localised shocks, for instance, would have been challenging under Tecnica’s previous structure, with cash siloed across numerous physical accounts, managed by around twenty subsidiaries. Indeed, collating the cash to support branches in need of short-term liquidity would have been a laborious task – requiring the request and co-ordination of inter-company payments from each of the various local finance teams.

Overcoming the liquidity challenge

At the core of this new cash management solution – and central to the liquidity optimisation effort during the pandemic – is cash pooling. Working with UniCredit, Tecnica has implemented a fully-automated cash pooling solution, rationalising the company account structure to incorporate just two bank accounts per country, with daily international sweeps from local accounts into the company master account in Italy.

Under the new framework, Tecnica has been able to respond quickly to the economic crisis – unlocking trapped liquidity and directing it to the most impacted branches. For instance, if a local subsidiary is short on cash due to low collections and needs to make salary payments, the treasury team can quickly and efficiently reallocate funds from the central cash pool to cover the costs. This capability has proven critical in keeping the company running smoothly – minimising the need to draw on short-term credit lines. 

It was also important that Tecnica could maintain existing accounts with other relationship banks. As such, UniCredit’s solution ensured the company could continue to do this – executing sweeps from both UniCredit and third-party bank accounts. The only requirement was to establish a dedicated sweeping account at each of our other relationship banks in order to link it to the UniCredit cash pool.

The cash pooling tool also gives Tecnica the ability to sweep cash into overnight investment facilities – ensuring surplus liquidity is put to work, even when not needed for immediate disbursements.

Boosting treasury efficiencies

These cash management activities are all executed through UniCredit’s e-banking portal, which not only gives Tecnica central visibility and control over its cash positions (aggregated via the cash pool), but also makes this information available any time and from anywhere in the world.

This immediate access and high-level of transparency is reflected elsewhere within the new digital treasury set-up. As part of UniCredit’s payment factory implementation, the Tecnica treasury team can execute international payments via SWIFT gpi – ensuring most cross-border transfers are executed within half an hour of initiation. The service is also enhanced by UniCredit’s proprietary International Payments Tracking solution, providing real-time traceability at every step of the payment process and notification as soon as the payment has been received.

The e-banking platform has proven a timely cash management solution for Tecnica – making it simple for the central treasury to conduct daily duties anywhere, including from a home office.

Of course, it is one thing to assemble a collection of premium parts, but another to make them work together. Arguably, one of the most challenging milestones in the implementation of a new treasury infrastructure is pulling together the various digital solutions – in this case, from UniCredit, Piteco, SAP and AnaPlan – and ensuring they work alongside one another in a harmonious and efficient manner.

Working alongside UniCredit and its e-banking platform, however, Tecnica was able to ensure that each of its fintech partners could plug into and draw data from the necessary parts of the infrastructure in order to automate and optimise key parts of the workflow.

Future-proofing treasury today

Having begun just two years ago, the digitisation of Tecnica’s treasury processes is almost complete, with the final roll-out to separate entities due to be carried out in the near-term future.

What started as an exercise in streamlining the Group’s cash management processes, triggered by new shareholders, has created a robust and streamlined system that has already proven it has what it takes to weather considerable economic volatility.  

Indeed, through the e-banking platform, Tecnica has been able to maintain a strong level of liquidity management while working remotely – reducing the need for short-term borrowing and additional lending facilities. These are benefits that will stand Tecnica in good stead long after the pandemic’s effects have taken their course.