Corporate Finance

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Transforming Finance and Treasury at Novartis In 2010, Novartis embarked on a major finance transformation programme to position treasury and the wider finance function as best-in-class for the pharmaceutical industry.

Transforming Finance and Treasury at Novartis

by Brice Zimmermann, Head, Treasury Control & Reporting and Peter Zumkeller, Manager, Finance Transformation Programme, Novartis

In 2010, Novartis embarked on a major finance transformation programme to position treasury and the wider finance function as best-in-class for the pharmaceutical industry. During the Cash Management University hosted by BNP Paribas, Brice Zimmermann and Peter Zumkeller of Novartis, shared their experiences of finance transformation.

Transformation objectives

Treasury is a corporate unit within Group Finance at Novartis, located in Basel, and divided between International Treasury, Capital Markets, and Control & Reporting. Treasury’s objective is to manage risk on behalf of the group and ensure that operating units are appropriately funded to meet their strategic and operational objectives.

Novartis aims to be best-in-class across all of its activities, including Finance. To support this objective, we launched a finance transformation programme to optimise process efficiency, enhance the quality of business intelligence and decision-making, foster the best skills in the profession, and improve transparency and control. We identified a variety of ways in which this vision could be achieved in treasury, including the following:

  • Achieve full control and visibility over financial risk at a group level
  • Achieve full control and visibility over group liquidity
  • Centralise cash using cash pooling wherever possible
  • Rationalise cash management banks to enhance efficiency, avoid fragmentation and create economies of scale
  • Streamline payments processes and infrastructure
  • Introduce centres of competence within financial service centres

Ultimately, the objectives were: to standardise, simplify and automate treasury activities wherever possible.

Legacy treasury operations

Before embarking on the transformation programme, we had a fragmented approach to cash management and banking relationships. Cash management and funding were managed locally in each country, working with multiple banking partners: 56 for euros alone. It was impossible to centralise cash effectively with so many banking partners, and communication between business units and treasury lacked a timely, accurate view of cash and risk as reporting was provided only on a monthly basis. Each business unit had different processes and controls in place, with separate bank interfaces and file formats.

A new concept for treasury

We restructured our treasury business so that cash, liquidity and risk were all managed centrally in treasury (figure 1), supported by an in-house bank. We rationalised our cash management banking partners in Europe to just three, including BNP Paribas. We standardised our processes and reporting using SAP, and we are now in the process of implementing a payments factory to centralise payments processing, connected to SWIFT for multi-bank connectivity using standard formats.

Figure 1
lick image to enlarge

It took around 18 months to migrate from more than 50 banks to just three. We used strict criteria for our bank selection, including: credit rating; pan-European network; the quality of our existing relationship; flexibility to configure systems and file formats, and the support that we would be able to rely on both during and beyond the implementation. As a result of this process, we selected BNP Paribas and two other banks, to balance diversification with financial efficiency and economies of scale, and ensure that we were receiving best-in-class services in each country.

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