Published: September 01, 2009
In 2008, ASSA ABLOY migrated its group treasury department from Geneva to Stockholm, a major undertaking involving an entirely new treasury team. Now that the department has been established in Stockholm for a year, this article looks back at some of the challenges and opportunities that the project presented, and makes some suggestion to other companies embarking on a similar project based on our experiences.
ASSA ABLOY operates a centralised treasury organisation, with group treasury managing the cash and treasury requirements on behalf of all group entities. In 1998, group treasury relocated the treasury department from the corporate headquarters in Stockholm, Sweden to Geneva, Switzerland, which remained there for ten years. Fifteen people were employed with dedicated IT support, so the department was largely self-reliant. At the end of 2007, with new management in place, there was a concern that treasury was too remote from strategic decision-making at ASSA ABLOY’s corporate headquarters, so in early 2008 initial plans were put in place to transfer treasury back to Stockholm. This was a huge undertaking as treasury was very well-established in Geneva. Most of the team were either Swiss or Swedish professionals who had settled in Geneva and consequently wanted to remain there.
The new treasury in Stockholm is a completely new team who effectively inherited the cash, debt and investment positions, banking structures and technology in their entirety from Geneva treasury team.
Consequently, the new treasury in Stockholm is a completely new team who effectively inherited the cash, debt and investment positions, banking structures and technology in their entirety from the Geneva treasury team. While this means that no-one has vested interests in legacy processes, it also means that no-one has any history with the company or insights into past decision-making. This has created particular challenges from a technology standpoint.
Although many of the new team had experience with different treasury management systems (TMS) none of us had used the TMS that had been in place at ASSA ABLOY since 2004, SunGard’s AvantGard, nor were we familiar with the interfaces between AvantGard and other internal and external systems. Previously, treasury had managed the system itself, but as part of the migration we decided to move to a hosting arrangement with SunGard, so the system and associated infrastructure is now maintained by SunGard. We had a start-up review of the system with SunGard, and one of their consultants worked closely with us on-site for the first few days. We also received training both on-site and in London, which was specific to ASSA ABLOY’s implementation. While we still have some way to go in becoming fully familiar with the system, particularly as we were not involved in some of the original set-up decisions, we have made progress in optimising both our day-to-day use of the system and management reporting.
All of the treasury professionals who comprise the new treasury have experience in working in treasury in other companies in Sweden, and also experience from the banking side. The individuals within the team bring a broad range of skills and senior-level experience, which has been extremely valuable in developing professional standards, efficient processes and synergies between different parts of the department.
As part of the migration to Stockholm, our banking relationships and cash management structures have also been inherited. There was a series of cash pooling projects already under way which we have continued with, but we have not yet reviewed our cash management operations to identify any further improvements. Although we work with a number of banks, SEB is our ‘house’ bank and we consolidate balance information through SEB’s system SEBScreen. We work with SEB in France, Finland, Germany, Norway, Singapore, UK, US and Sweden and we are extending the relationship into Canada.
SEB has been instrumental in enabling the migration to Stockholm and has helped us to gather all the necessary paperwork, including copies of agreements, mandates etc. as authorities on every account needed to be changed. The SEB team has also made the effort to introduce us to senior management for each of the countries in which we bank with them. Our relationship extends to trade finance as well as cash, and SEB has provided us with support in understanding our trade finance portfolio and helped us to find information where necessary. [[[PAGE]]]
Now that we have had the new treasury in place for a year, and the day-to-day operations have been bedded down, we can now look ahead. We are intending to continue working with SEB to concentrate our EUR position. At present, we have in-country EUR pools to which we will add an overlay structure. A major focus for ASSA ABLOY is to reduce external cash. There are various elements to this, including making sure that we have access to cash across the group. We are looking at each country in turn, closing accounts where possible and transferring liquidity into cash pools. Where no cash pool exists, local business units will transfer to group treasury in its capacity as in-house bank. Over the course of a year, we are planning to implement seven new cash pools, an ambitious target, including Canada, Mexico, China, New Zealand, and Czech Republic. We have already put one cash pool in place in Ireland. At times, we need to take an arm’s-length approach and work with the local business unit, as it can be difficult for a Swedish company to set up a cash pool in countries such as China.
As part of the same initiative, we will be changing our multilateral netting process, for which we use SEB’s SubNetting. This is currently managed in treasury and involves more than 275 participants. At present, it is payables-driven, but we are amending the programme to be receivables-driven. This will encourage different behaviours and reduce the number of disputes, therefore becoming less time-consuming and more efficient.
While we have achieved a great deal over the past year, there are inevitably some things that we would have done differently with the benefit of hindsight. We had no real overlap between the Geneva and Stockholm treasury teams, and none of the original team moved to the new department. It would have been helpful to have an extended hand-over period, either by maintaining the Geneva team for longer, or appointing new personnel earlier. This was not possible in our case, so we were very dependent on our key banks and suppliers, but we would recommend that this is an important area for consideration by companies embarking on a similar project. A project of this type involves a major learning curve for new personnel to understand routines, systems, reporting and interfaces, and additional resourcing should be built into the project plan and budget to allow for this. In our case, we were not in a position to make changes and improvements as part of the migration. It was additionally unfortunate for us that our migration project and building a new treasury team coincided with the financial crisis, which added significant additional pressure on staff who were very committed but did not yet know each other well, having not worked together before.
With the benefit of hindsight, we would also have budgeted for more consulting resource from our TMS vendor, as their support proved very valuable, and we would have benefited from their time one or two days a week over a period of time. We also did not appreciate how important the support of our key banks, such as SEB, would be in achieving a successful migration.
The past year has been a difficult one, but it has also been a hugely enjoyable journey. Starting a new role is challenging and exciting for one person, but even more so when eleven people are all starting together, bringing together different experiences to meet a common objective. During the past year, it has been vital for senior management to create a positive working environment and keep an open mind to the thoughts and advice of staff. At ASSA ABLOY, we have worked together as a team, including SEB and other parties, to create a treasury department that is poised for significant future success.
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