Start Up to Grown Up: Zalando’s Treasury Journey

by Marco Arosio, Head of Treasury, and Paola Andrea Jimenez, Senior Treasury Manager, Zalando SE

Technology is at the heart of Zalando’s value proposition. We leverage sophisticated technology and big data to reach and attract customers, provide convenient access through our customers’ favourite devices, identify and offer up-to-the-minute fashion brands, and create a high quality customer experience through efficient delivery and customer services. This commitment to using best-in-class technology and sophisticated analytics to increase competitiveness and effectiveness extends across our business, including treasury.

Treasury organisation and challenges

Treasury operates centrally from our Berlin headquarters, with responsibilities across cash management, risk management and debt financing.

In the early phase of the treasury team build-out we operated mainly with offline processes. This made it challenging to monitor and manage liquidity requirements efficiently and to identify and hedge FX exposures. Similarly, FX transactions were put separately into the trading platform and into our treasury management spreadsheets. The valuation of FX forwards was also a manual process. In payments and cash management we used a number of online banking platforms, which made it difficult to achieve timely visibility over cash balances.

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Embarking on a systems project

When we joined the company in 2012, the accounting department was in the process of selecting a new system. Following an evaluation process, they decided to implement SAP, initially for accounting and receivables management and then to provide automation of payments. As treasury would therefore already be working with SAP, and many of the underlying flows would be within that system, it made sense for us to consider SAP for treasury management too. However, this was not a default option, and we recognised that there is a variety of highly functional systems available. Our treasury and IT departments therefore worked together to review and evaluate a selection of several different systems.

We were attracted by many of the capabilities offered by some of the treasury management systems, but we were concerned about potential complexity around integration and internal/external communication. We therefore opted to extend the use of SAP into treasury as it fulfilled our functional requirements, and enabled a smooth integration of information across our business.

The initial implementation of basic functionality took just under a year, and we have since then developed our use of the system further. In 2015, we implemented EMIR reporting, for which we considered using a third party tool, but ultimately, we decided to use SAP. Additionally we use a state of the art web service technology to connect Bloomberg, SAP and our trading platform (360T).

Benefits in practice

Implementing a robust, secure treasury technology framework allows us to manage far greater scale and complexity of treasury activities than we were able to do in the past. We have estimated that without SAP, we would now need two or three times the workforce in treasury that we have now. We are able to collate and analyse data automatically, and communicate seamlessly both internally and externally. By achieving greater automation and control, we have also reduced operational risks.

Specifically, from a cash management perspective, we now have a single point of access and visibility to all of our bank accounts, with automatic cash pooling and robust payment approval processes. We are able to identify our exposures more easily, analyse potential hedging strategies and transact automatically with full FX valuation capabilities, leveraging 360T and Bloomberg, respectively, as integrated components of our overall treasury solution. The system supports the full range of transaction types that are described in our treasury policy.

Sharing experiences

The project has been highly successful but we have learnt some valuable lessons along the way. The first was to manage expectations about what we could realistically achieve while implementing the system. We defined a comprehensive set of requirements, but some of these would require customisation or additional development. We therefore had to prioritise our requirements and balance the value to our business with the potential cost of development. Similarly, although we had developed an ‘ideal’ process map, it was more cost-efficient to adapt our processes to the existing system configuration in some cases, rather than adapting the system to our workflow. Not only were there upfront costs to consider, but we also recognised that future upgrades would be more time-consuming and costly if the system had been customised.

As we had not used a system in treasury before, we needed to spend substantial time familiarising ourselves with SAP and training users. Furthermore, as the project required input from multiple departments, it was important to align our resources and gain commitment from each department to our project timeline.

Looking ahead

As a technology-oriented company, we recognise the value that sophisticated technology offers both to optimise internal processes and engage with external counterparties. Although we have not yet fully reached a ‘steady state’, either in treasury or the business model as a whole, we are now able to be more adaptable and support ongoing change and growth. We are involved in a growing range of activities and projects that require treasury support, to which we are able to respond quickly; however, as always, we need to balance responsiveness with the risk of fragmenting our standardised, efficient processes. To do this, we continue to keep our overall treasury vision in mind, and aim to deal with issues on a more strategic than ad hoc basis, therefore equipping us to support the business as it continues to change and expand.