Leveraging Technology to Become a ‘Smart Treasury’

In 2014, A. Schulman made the decision to embark on a global treasury transformation to support the group’s evolving business needs in a changing market and regulatory environment, and also to position the company for growth. A. Schulman’s treasury worked with PwC to design a new framework which included centralising treasury activities and reviewing every aspect of its business, across technology, banking relationships, funding, liquidity and risk, to achieve best-in-class processes and decision-making. In this article, Nicolas Tusseau, Global In-House Bank Manager at A. Schulman describes some aspects of the project, and the benefits that have been achieved. 

Positioning treasury for success 

The aim of our global transformation was not simply to replace our systems or processes, but to demonstrate best-in-class processes, controls and decision-making. We therefore needed to determine whether we could achieve this objective using our existing infrastructure. We issued a detailed request for proposal (RFP) to both our existing treasury management system (TMS) provider and other leading vendors to ensure that we had the right systems capability to underpin our current and future treasury needs.

Following a rigorous evaluation, we opted to replace our existing TMS with Kyriba for a variety of reasons. Kyriba is delivered on a software-as-a-service (SaaS) basis, which was attractive as it would simplify the ongoing maintenance, upgrading and introduction of new functionality in the system. We were also impressed by Kyriba’s depth of expertise and presence in both the United States and Europe, and the company’s proven experience in working with the partner banks we were appointing as part of our transformation. 

From a functional perspective too, we recognised that the new TMS would be instrumental in supporting our new treasury strategy. For instance, we were seeking to become state-of-the-art in cash and liquidity management, including using XML to exchange payment and account statement information with our banks, and CAMT.086 for bank services billing. We wanted a single system across both cash and risk management, which needed to be intuitive, easy to use and cost-effective. Furthermore, we evaluated potential systems based not only on our current needs, but also on the system’s flexibility, breadth and depth of capability to support our ongoing needs. Kyriba was able to support these requirements, giving us a high degree of confidence in our ability to deliver on our transformation project. 

Cash and liquidity management transformation

As part of our project, we rationalised our cash management banks from around 30 globally to three partner banks: Bank of America Merrill Lynch, Citi and J.P. Morgan, each of which we connected to Kyriba for payments and account statement reporting using XML formats. By rationalising our cash management banking panel, and streamlining the way that we communicated with these banks, we achieved far better visibility and control over cash and risk, and we were able to standardise and improve control over our treasury processes. We were able not only to manage our cash and risk with greater confidence, but also to respond quickly to changes in market conditions or the group’s cash or risk position.

There were also advantages from a liquidity perspective, and in particular, the new system enabled us to manage liquidity more dynamically. We have around 124 bank accounts globally across our three banks. We have set up zero-balancing in nine currencies across fifteen countries in three continents, supported with a multi-currency notional pool. We manage this automatically in Kyriba, including posting to the relevant intercompany accounts, producing intercompany statements for each business unit, allocating intercompany interest and withholding tax, and, last but not least, automating the sending and posting of accounting entries related to treasury transactions into our ERP. This has been a major step towards becoming a ‘smart treasury’, leveraging technology to reduce manual processing and introduce intelligent automation wherever possible.

Project outcomes and benefits 

Our treasury transformation project, including the implementation of Kyriba, has resulted in significant benefits. By improving efficiency and automation, we have made substantial time and resource savings. Our cash pools and in-house bank have enabled us to reduce bank charges, lower borrowing costs and achieve some tax efficiencies. In summary, we captured $91m of cash within the in-house bank, we closed 84 bank accounts through rationalisation, and we decreased globally our electronic banking systems from 28 to three. Overall, we have calculated these savings to be $2.5m per annum. 

In addition, by implementing cash pooling together with an in-house bank and multilateral netting process using Kyriba, we have reduced the number of physical transfers between entities and replaced them with intercompany flows, leading to savings of $500m of intercompany payments per year, and the banking costs (wires and FX hedging) associated with them.

These cost efficiencies are not restricted to treasury. As general ledger postings have been automated through the Kyriba cash accounting and netting modules, our shared service centre has generated efficiencies equivalent to 1-1.5 full time employees. 

Sharing experiences 

Our initial system implementation took around six months to complete, including cash pooling, and we have continued to expand our use of the system ever since. As a $2.5bn group operating globally, with a high level of complexity, we have sophisticated and diverse treasury requirements but we lack the resources of larger corporations. By implementing Kyriba, we have been able to achieve a comparable degree of sophistication, depth and scalability of treasury capability, but with lower cost and resource overheads. Kyriba has also proved adaptable to our specific needs, such as modifying XML formats to meet individual banks’ requirements and supporting local payment formats in countries such as Romania, Poland and Hungary.

Although the project was complex and challenging, there were a number of factors that have contributed to its success. In particular, we were able to rely on excellent support from our system vendor Kyriba, our banks: Bank of America Merrill Lynch, Citi and J.P. Morgan, and our consultants: PwC and Simon Bishop of Future State Treasury. Similarly, we had very strong leadership and involvement from the global treasury team: Timothy McDannold, Treasurer and Jeff Goggins, Assistant Treasurer. The internal IT team also played a key role by bringing the right balance of skills and experience, together with a great deal of commitment and hard work.

Our project involved substantial change not only for treasury, but also for our business unit finance teams. Consequently, it was critical to have senior management support for the project to substantiate our business case, provide the necessary motivation for the project and avoid any organisational roadblocks. 

Implementing a new system, or a new banking and liquidity structure does not deliver value in itself: it is using these as opportunities to deliver improvements in efficiency, cost-effectiveness and decision-making, ultimately bringing both operational and strategic advantage to the enterprise.