Payments - Joint Award
Air France has a generally decentralised approach to cash and treasury management, including payments and collections, except in Europe where an SSC based in Budapest manages supplier payments across most countries in the Eurozone. The company implemented FIS’ TRAX some years ago to achieve consistent processes and controls, and a cohesive technology infrastructure. Since the initial implementation was completed, the company has continued to invest in making optimal use of the solution to meet its evolving business needs. For example, Air France has been able to add challenging countries such as Russia and Ukraine, without the need for specific customisation or consultancy support, and expanded the reach of TRAX, e.g., by routing treasury payments from a non-FIS treasury management system through TRAX, therefore maximising the value of a standardised payments infrastructure. Similarly, bank data is channelled through TRAX to update the cash position in the treasury solution. Air France has continued to maintain payment practices in line with industry best practices, such as using ISO 20022 messages across the organisation.
We look forward to publishing more information on Air France’s project during the course of 2017.
At the start of 2014, Lufthansa Group embarked on an ambitious project to achieve visibility and control over group liquidity across its 540 global entities, and centralise, harmonise and standardise payment processing. Prior to this, Lufthansa held around 800 accounts with more than 100 banks across 107 countries. The group used numerous local electronic banking solutions with which to communicate with these banks. This resulted in fragmented processes such as payment execution and authorisation. Most business units conducted payments locally, but a central payment processing hub supported 25 group companies that used SAP. However, while this centralised approach had proved successful, the solution was not scalable to meet the needs of the wider group. Lufthansa opted to work with Hanse Orga to build a bank-independent hub that would connect its in-house systems on one side, and its banks on the other for the two-way flow of transactions and information. Following a variety of project phases, around 90% of payments globally were routed through the payment hub, including SSCs in Krakow, Bangkok and Mexico as of September 2016, with the plan to complete the rollout globally. The project has reaped significant rewards, not only in payment processing and visibility and control over account information, but also in areas such as bank account management.
Mergers & Acquisitions
When the division between HP Inc. (HPI) and HP Enterprises was announced, treasury was set the ambitious task of building two new treasury functions based on the existing HP treasury. Although a transformation project was underway, given the timing involved and the scale of the task, the new treasury was set up on a ‘clone and go’ basis. This involved replicating 17 different systems, together with over 25,000 static data configurations, and 15,000 outstanding transactions. Key to the success of the project was its ‘command centre’ project structure, headed in the US with regional centres in Poland and Malaysia to provide 24/7 coverage. A proactive, disciplined communication and engagement strategy was essential to managing both internal and external expectations, particularly those of employees of the two treasury functions. Both treasury functions now operate independently, so HPI can focus on the specific nature and unique dynamics of the new business, and adapt its capital structure, redefine its liquidity and risk management approach, and resize its working capital programmes accordingly.
Global telecom infrastructure provider Ericsson has operations in more than 180 countries, exposure to over 100 currencies and more than 500 currency pairs, of which 150 are deemed material risks. Given that Ericsson is a $27bn operation, an appropriate risk management programme is critical. In 2013, treasury embarked on a three-year evolution plan to automate data collection, reduce administrative overheads to free up time for strategic risk management, and to review the group’s hedging strategy in an environment of growing market and regulatory challenges. Ericsson quickly recognised that the project could not be delivered based on its existing technology infrastructure and restructured the project to introduce a third-party solution. Ericsson now runs a treasury ‘technology stack’ comprising a single bank (SEB Trade Station), a multi-bank trading station (FXAll), a treasury management system (Wallstreet Treasury), market analytics portals and a cloud-based FX exposure and capture and definition tool (FiREapps) providing a single point of collaboration for over 70 team members globally. As a result, treasury is now able to deliver a more sophisticated and responsive hedging strategy which has generated remarkable human capital savings, transaction cost savings exceeding $6.7m over three years and a 40% reduction of overall hedging programme volume.
As even a brief write up illustrates, Ericsson’s achievements have been enormous, and we very much look forward to providing more detail about the project in TMI during the course of 2017.