Published: September 22, 2008
The scale and breadth of Daimler’s operations necessitate a large number of legal entities, high transaction volumes and complex, diverse treasury and cash management requirements globally. Although treasury activities take place in various locations, we have achieved considerable effectiveness and efficiency by adopting a centralised approach to treasury processes while ensuring that these are conducted with the greatest degree of automation possible.
We have consistently aimed to optimise our treasury processes by implementing industry-recognised, best-in-class technology solutions.
To achieve this, we have focused on putting in place integrated technology that provides a cohesive way of managing transactions, reporting and business processes in each of our locations globally. One element of this solution was to replace our previous front and back office systems with a new, integrated treasury management system (TMS), Wallstreet-Suite (formerly Trema) which we implemented in 2005, and which has subsequently also replaced the ERP we used for treasury accounting.
Unlike most companies and long before we implemented our new TMS, we had already enhanced the way in which we communicate with our banks. There are, of course, a variety of different types of information which a corporate treasury exchanges with its banks, including confirmations, bank statements and payments. We first started looking at ways of standardising the exchange of information with our banking partners in the late 1990’s. At that stage, while there were some regional initiatives to create common channels for connecting with the banks for payments, bank statements etc., none of these were globally applicable. Consequently, we retained our proprietary banking applications for these areas, but decided to seek alternatives to the manual production and exchange of confirmations, which was an activity which took time and resource without creating value to the business.
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While there were various solutions for confirmation matching available at that time, Daimler’s back-office team was already familiar with the use of SWIFT communication within the banking community. So we reviewed the opportunity to use SWIFT and SWIFT Accord to exchange and match confirmations, and decided to confirm FX and money market (loan/deposit) transactions (MT 300 and MT 320 respectively) with our banking counterparties. Although we are predominantly a non-financial corporation, our financial services activities and the overall objective to be best-in-class in our business operations called for the investment in a solution which while new for corporates, provided a firm and versatile basis for the future.
In 2005, we started expanding our use of SWIFT by acquiring Business Entity Identifiers (BEIs) for various Daimler entities in Stuttgart, using the TR-CO model. At that point, we decided to connect to SWIFT through a member/concentrator (Mercedes-Benz Bank). Apart from reasons of cost, this approach removed the need to build and maintain the interface to SWIFT separately for each registered entity within the group, a model we have continued with ever since.
In 2007, we enhanced our SWIFT connectivity further by joining three Member Administered Closed User Groups (MA-CUGs). The objective at this stage was to improve our ability to make high-value payments (MT 101) through SWIFT and also to receive bank statements (MT 940). For the Mercedes-Benz Bank entity, we also started using SWIFT FileAct for direct debits.
During the course of 2008, we have extended our use of SWIFT and our TMS beyond Stuttgart to entities in US, Canada, Mexico and the Netherlands, and will also have operations in Singapore live by October. Since the introduction of SCORE (Standardised CORporate Environment) in late 2007, we have commenced negotiations with some of our banks based on this access model, a trend which we expect to continue in the future.
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We have consistently aimed to optimise our treasury processes by implementing industry-recognised, best-in-class technology solutions, an objective which has remained for a number of years. Both the implementation and rollout of our TMS and the expansion of the way in which we use SWIFT have been significant elements of this overall project. We now have the TMS live in Europe and North America, with all our treasury dealing counterparties for FX and MM (MT300/320) as well as all account holding banks (MT940) connected via SWIFT. Around 10 banks connect with us via SWIFT for MT101 (high value payments). These initiatives have contributed significantly to achieving our objective of being a world-class treasury organisation with efficient, secure processes globally.
With our new global TMS and the SWIFT interface, we have been able to implement consistent processes across the Group and gain greater flexibility by becoming independent from local or regional proprietary systems. Control and efficiency of both confirmations and payments has been substantially improved through workflow automation and SWIFT connectivity. Furthermore, the standardised platform has enabled better quality, timeliness and transparency of information across all our treasury activities, contributing to better decision-making, risk management and forecasting.
Inevitably for a project of this scale, there have been, and remain some challenges, primarily in the areas of contract negotiation and integration. The contract negotiation process for each new bank, particularly to support the exchange of payment messages is substantial. In particular, due to the lack of standardised, accepted templates and differing legal positions of individual banks, agreements have sometimes taken more than six months to conclude. This is less of an issue for receiving bank statements and does not apply to confirmations at all. Organisations considering SWIFT connectivity should build the relevant time and resource into the implementation project to accommodate the negotiation period with each bank.
The lack of standardisation of formats across banks has created some challenges as not every bank is able or willing to accept the same file/field formats. This frequently results in investment on both sides so that a common format can be exchanged.
Looking ahead, we anticipate expanding our TMS and SWIFT implementation across our remaining treasury units in Asia and Latin America during 2009. Industrial/supplier payments using SWIFT FileAct instead is also on the agenda for the near future. In general, we spread the message to our banks that we want to communicate with them using SWIFT.
We intend to complete further SCORE or MA-CUG agreements with an extended range of banks. Wherever possible, our priority is to connect via SCORE. If this is not feasible in specific countries or with certain banks, we prefer to make use of existing MA-CUG agreements and set up forwarding arrangements as opposed to negotiating new MA-CUG contracts. New Daimler entities should join existing SCORE/MA-CUG agreements.
We also anticipate extending the range of message types we exchange via SWIFT, such as confirmations for additional instruments (MT 3xx messages, such as 305 (FX Options) 340 (FRAs) and 360 (Interest Rate Swaps) and MT 600 messages for commodity trades). Together with our TMS provider we plan to implement an automatic transfer of the SWIFTNet Accord matching results to TMS to allow for fully automated processing of corresponding transactions.
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