Goodbye, Excel: Automating Bank Guarantees at Arup

A frequent user of bank guarantees to support its business, the treasury function at Arup was frustrated by using Excel spreadsheets for the application, maintenance and reporting of guarantees. Automating the process through a module from Trezone was the key to greater efficiency – and to reinforcing Group Treasury’s reputation as a proactive centre of excellence.

Multinational design and engineering firm Arup Group (Arup) uses bank guarantees, standby letters of credit and surety guarantees for its engineering business. The company is frequently requested to provide a tender guarantee when bidding for work. Once the project is won, it isn’t uncommon for performance and advance payment guarantees to be requested.

Arup maintains significant available facilities, drawing down between 60-80% at any one time. There is a primary facility in the UK, with smaller facilities in Australia, Hong Kong, China, Turkey, Poland and Colombia. In total, there will usually be around 200 guarantees in issue, with an average churn of up to three guarantees per week.

Historically the capture of the applications, maintenance and reporting of these guarantees has been on Excel spreadsheets, which made this a manually intensive process. Identifying this inefficiency, Arup’s treasury team decided to look for a solution to enhance the operation.

“With Excel spreadsheets everywhere, it was very difficult to keep the data clean,” says Richard Abigail, former Group Treasurer of Arup. “Keeping a record of correspondence with the actual bond documentation can’t be done in Excel. So, being able to do any reporting on it or any proactive analysis was almost impossible.”

It was clear that a new approach was required.

Selection criteria

To start the process of identifying a solution, Abigail outlined three key objectives in the business case:

Finding the system to meet these needs was initially a challenge. Arup found that most solutions were targeted at high-volume users of bank guarantees, with little in the way of offers targeted at the small and medium-sized enterprise (SME) segment.

“We initially found that there were solutions for corporates using thousands and thousands of guarantees,” explains Abigail. “But there was nothing in the SME market to allow us to have a workflow, and to hold the records to report to attach documents. The size of these solutions meant they were too cumbersome and too expensive - they did so much that we just didn’t need. It was tricky to find a solution that was in our sweet spot.”

Eventually, however, Arup found a package that was fit for their purposes, Trezone’s Guarantees module. “Trezone has a number of modules that complement treasury management systems, and we selected their bond system,” explains Abigail. “We knew from conversations with a FTSE-250 company that they’d implemented it and really liked the package. They gave us a good reference for them. And we’ve found Trezone to be a friendly, personal, team.”

System implementation 

With selection complete, the software implementation itself was simple and quick. “As it is a software-as-a-service (SaaS) product, the installation time was around a week, and the team found the system to be highly intuitive,” comments Abigail. Moreover, the package enabled Arup to configure the guarantee application form and reporting to suit its needs.

“Previously, we had an Excel-based form that all our operations had to fill out to request a guarantee, but we were able to replicate that and enhance it in the system quite easily using standard fields,” notes Abigail. “The system offers a lot of flexibility, and the security and the workflow were easy to set up. Getting to the stage where we had the empty database ready to go was simple, populating it was the difficult bit.”

Indeed, ‘scrubbing’ the data that Arup put into the system proved to be the main challenge of the implementation process. Issues such as missing data were identified in a number of guarantees. There were also numerous guarantees where the local project teams had not requested cancellation. This resulted in the banks charging Arup fees for these guarantees, which in turn was eating into the finite facility headroom. It was only through re-analysing the data at this stage of the implementation that this issue was properly identified.

“The data cleansing element of the implementation was a painful process, but also a really necessary one,” says Abigail. “It gave us a good baseline. Once we got the data in the system, we were confident with it.”

Capturing the benefits

Since the system was implemented in Q1 2019, Arup has seen a variety of benefits. First and foremost, treasury now has the required single source of truth for all bank guarantees in the group. The software enables treasury to capture guarantees from all the facilities, regardless of geography.

According to Anita Polzhofer, the company’s current Head of Treasury, “Having that single source of truth means we can actively monitor and manage it and drive down the amount we’ve got outstanding at any one time. She continues: “We’re addressing any issues as and when they arise rather than months, if not years, later when we look at problem bonds. Having all the data in one place saves so much time.”

The new solution also means the issuance and approval process has been streamlined, reducing the flow of emails, while the cancellation process is now centralised and actively monitored. The enhanced reporting of guarantee risks and issues also enhances the quality and timeliness of communication with senior management.

“The other good thing about that reporting is it is now embedded, so we can go back to our main bank - HSBC - as and when a bond requires action,” says Polzhofer. “We can proactively do this on a monthly basis. We also report to our operations team on a monthly basis and request that they update the data where necessary. In addition, we highlight bonds that are due an event in the next month – they might be going to expire or they’ll need renewing, or we expect there might be a valuation change. The team can be alerted regarding necessary actions on a monthly basis.”

This additional insight and ability to be proactive has meant treasury has been able to cancel a significant number of old and troublesome guarantees, freeing up more than 5% of the guarantee facility capacity.

“We have also been able to use this new system as a catalyst to run education programmes for the rest of the finance community and the commercial teams in the Group,” says Abigail. “These have raised awareness of the risk and issues inherent in using guarantees. They have been well received and have reinforced Arup Group Treasury’s reputation as a proactive centre of excellence.”

The wider significance

Arup’s bank guarantees project demonstrates that software to improve and automate processes is no longer simply the preserve of the largest treasury departments. It can be effectively and quickly deployed by everyone. In addition, it also highlights that treasury teams can look beyond cash and risk management software, such as the traditional treasury management system (TMS), to other areas of the department.

“The focus has always been on the building blocks – visibility over all your bank accounts and all the balances, and automate all that through MT940s, sweeps, cash pooling, and so on,” notes Abigail. “But treasury usually has a wider remit than that. I’d urge treasurers not to just stop at cash or risk, look at other aspects of treasury that you can automate.”

Meanwhile, Abigail and Polzhofer continue to pinpoint more efficiencies that could be driven through the bank guarantee process. He notes: “We still have to take the data, send it to HSBC electronically and retype it in the system. Over the next couple of years, I can see the process developing whereby an application programming interface [API] from the system to the bank could be set up, so that the data can flow in directly. That will take us to the next level of efficiency, and help to ensure Arup’s treasury remains at the cutting edge.”