Gtnews Awards Winners Book 2012 (2)

7/29/2019 Gtnews Awards Winners Book 2012 (2)

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gtnews Awards Winners Book | 2012 1

Gtnews AwArds winners Book 2012Sponsored by

w B 2012


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gtnews Awards Winners Book | 2012 3gtnews Awards Winners Book | 2012 3

Winning examples auy ucc

At a gala dinner at Amsterdams prestigious Sotel Grand Hotel, the winners o the 2012gtnews Awards or Global CorporateTreasury, sponsored by Bank o America Merrill Lynch (BoA Merrill), were announced. More than 110 attendees gathered romaround the world on 24 May to celebrate best practice and reward industry-leading projects and personalities. This winners bookcontains a collection o case studies based upon each winning entry into the 2012 Awards and is intended to demonstrate bestpractice and highlight some great projects.

Thegtnews Awards or Global Corporate Treasury, sponsored by BoA Merrill, recognise the treasurers and teams who have donethe most to contribute to the success o their organisation, wherever they are in the world.

Now in its third year, the Awards have a hard-earned reputation or authority and independence. The judging panel (see pages 4-6)consists o working treasury proessionals rom AkzoNobel, Etihad, and Thomas Cook, among many other corporates. All used theirreal world expertise to ensure that the very best examples o corporate treasury work were rewarded. The act that the Awards areindependently judged by a team o treasury proessionals makes the accolade or the winners that much more special.

A member o the judging panel in 2012, Michael Connolly, vice president and treasurer o Tiany & Co., acted as compere or the

evening and announced the winners or this year. Connolly is also the serving chairman o the board o directors at the Associationor Financial Proessionals (AFP). He said he was impressed by the international-ness o the entries and that, the companiesparticipating were rom many dierent countries, with entries spanning many borders.

According to Connolly, it is clear that treasurers ace similar global challenges: managing risk across the enterprise; interactingeectively with diverse business units; working closely with technology teams; and ostering good partnerships with banks andothers. As a corporate treasurer mysel, he said, it has been an honour to see how my colleagues have met these challenges andhow they have succeeded in todays nancial environment.

Connolly went on to thank the support o the sponsor, BoA Merrill, whose head o global transaction services (GTS) or Europe,Middle East and Arica (EMEA), Carole Berndt, took to the stage to say the bank was delighted to be sponsoring these awards andto see everyone enjoying themselves. These peer-reviewed awards demonstrate excellence in global corporate treasury and thewinners are truly deserving o the accolade, she added.

There were 76 entries in total rom 57 dierent treasury departments, spanning 11 dierent categories in the 2012 Awards or

Global Corporate Treasury. The trophies were handed out in the evening ollowing on rom the opening o thegtnews Forum orGlobal Corporate Treasury on 24 May, a two-day conerence that examined the key topics, trends and challenges currently acingtreasurers, with speakers rom the European Central Bank (ECB) and European Payments Council (EPC) addressing issues such as thesingle euro payments area (SEPA) and the eurozone crisis, among much more.

The 2012 Awards winners represent a revealing cross-section o all that is best in the world o treasury and show how corporationsare coping with the pressures o an increasingly globalised marketplace, economic recession, and debt and exit ears in parts o theeurozone, allied to tight credit conditions and a rat o new regulatory compliance demands.

Our congratulations go to all the winners and highly commended entrants detailed in this book. I hope you enjoy this collection obest practice winning case studies and nd them useul or your uture treasury operations. We look orward to reviewing a urtherbatch o awards entries next year and welcome any eedback in the meantime.

Best wishes,

Neil Ainger

Editor-in-Chie,gtnews

Introduction

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1.Mark Tweedie, head o technology, media and telecoms, EMEA, GTS, Citi, accepting on behal oUPSandMicrosoft, which respectively won theCash Flow ForecastingandWorking Capitalcategories;2.Doan Nguyen, nancing and treasury director, GEEnergy Power Conversion and3. Cara Hanrahan (behind), a treasury services salesexecutive, EMEA, at project partners, JP Morgan, accepting the bestSWIFT Implementationtrophy; 4.Willem Dokkum, global head o sales, payments and cashmanagement, ING, category sponsor or theShared Service / Payment Factorycategory, which was won byPhilips, working with project partners Zanders. The award wascollected by5.Gary Throup, vice president and treasury controller at Philips. 6.Jessica Ewing, treasury consultant, Dell, accepting on behal oGary Bischoping Jr, who won

the readers choice Corporate Treasurer of the Yearaward.7. Paul Boodee, director, Americas region nance, Toyota Financial Services, picked up theRisk Managementtrophy.8.Joerg Bermuller, head o cash and risk management atMerck KGaA, which won theSupply Chain /Trade Finance category and the overall Gold Awardor thehighest scoring entry across all categories. 9.Vanita Aggarwal, director o treasury risk, Toyota Financial Services, collected the bestTreasury Technologyaward on behal oToyota Motor Credit Corporation, with10.Juddith van Paassen, a partner at the category sponsors, Zanders. 11.Carole Berndt, head o GTS, EMEA, at the overall event

sponsors, BoA Merrill accepting the award orTreasury Team of the Yearon behal oQinetiQ. Her colleague, 12.Jennier Boussuge, head o global treasury sales at BoAMerrill, is on her right.13.Patrick Coleman, general manager or EMEA at IT2 is on stage with 14.Alan Chitty, treasury controller atSABMiller, winners o theForeignExchange (FX) Project o the Year. 15.Michael Connolly, vice president and treasurer o Tifany & Co., was the compere o the 2012 Awards.


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4 gtnews Awards Winners Book | 2012

The Judging Panel


The Jugg PalAll entrants to thegtnewsAwards or Global Corporate Treasury 2012, sponsored by BoA Merrill, were judged by a highly qualied team ocorporate treasurers. The peer review system in place or the Awards ensures that all entries are judged airly on their merits by people who dothe job themselves on a day-to-day basis and are well placed to pick the winners. The judging panel were assigned to the categories that bestmatched their expertise and brought their hundreds o years o combined experience to bear on deciding who should win.

The judging panel o 14 highly qualied proessionals is completely independent: neither the Awards sponsors norgtnews itsel has anycontrol over which entries succeed.

Michael Connolly, vice president and treasurer o Tiany & Co., who acted as compere or the Awards evening and is the serving chairmano the board o directors at the Association or Financial Proessionals (AFP), unveiled the winners in 2012. He commented on what anhonour it had been to see how treasury colleagues rom around the world had risen to the challenge o succeeding in todays toughnancial environment.

Another member o the judging panel, Craig Ehrnst, a certied treasury proessional (CTP) and treasurer at NCCI Holdings, said he wasimpressed by the scope and quality o the entries, while Linda Williams, assistant group treasurer at Thomas Cook Group said she oundthem inspiring. According to Craig Busch, group treasurer at WorleyParsons, the execution o the various projects was extremely high,which was even more impressive given the high degree o volatility that now exists in the markets that treasury operates in.

For Anthony Scaglione, CTP, senior vice president (SVP) o merger and acquisition (M&A) and corporate treasurer at ABM Industries,the entries showcased a broad base o industry expertise and, in some cases, leading edge solutions, while ellow judging panelmember, Ricky Thirion, vice president o treasury at Etihad Airways, said he thought the standard o submissions continues toimprove year-by-year.

The judges or thegtnews Awards 2012 were as ollows:

Mchal CllyVice President and Treasurer at Tiany & Co.Mike Connolly is the vice president and treasurer o Tiany & Co., the world renowned jeweller andspecialty retailer with retail stores and manuacturing and distribution acilities throughout the US,Europe, Asia and Latin America. Having been with Tiany & Co. or over 22 years, Connolly's primary

areas o responsibility include treasury operations, global tax matters, nancial risk management,operational risk management, credit, accounts receivable (A/R) and insurance. He is also a member o theTiany & Co. pension, enterprise risk management, business recovery and continuity, security and saetycommittees. Connolly also currently serves as chairman o the board o directors o the AFP.

Cag BuchGroup Treasurer at WorleyParsonsCraig Busch is group treasurer o Worley Parsons, a top 50 Australian Stock Exchange listed companyemploying more than 35,000 people across 43 countries. Busch is responsible or the global liquidity,unding and risk management strategies or the group and the management o the global treasury

centres. He has 25 years o experience in nancial markets, including as head o international andtreasury or banks in Australia and Japan.

Cag ehCTP, Treasurer at NCCI HoldingsCraig Ehrnst has been treasurer o NCCI Holdings in Boca Raton, Florida, US, since 2000. He wasormerly with ExxonMobil's Latin American aliate as a senior treasury manager. Ehrnst has been a

member o the board o directors since 2008 and also serves as a member on the policy committee. Hewas a member o the AN08 Annual Conerence Task Force and in the past he has served as the chairmano the Treasury Management Advisory Group, as well as with the AFP Working Capital Management TaskForce. He has been a speaker at the AFP Annual Conerence in past years, and currently serves on severallocal community advisory boards.


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The Judging Panel


J JhCTP, Treasurer and Vice President, Investor Relations at DeluxeJe Johnson is treasurer and vice president, investor relations at Deluxe in Shoreview, Minnesota, US.His responsibilities at Deluxe include treasury operations, investor relations, retirement plans, and riskmanagement. Prior to joining Deluxe, Johnson was chie nancial ocer (CFO) with ABS Global. Heis currently a member o the AFP Finance Committee and has spoken at the organisations annual

conerence.

rb PlayAssistant Treasurer, Treasury Operations at General MillsRobert Polansky, chartered nancial analyst (CFA), is assistant treasurer, treasury operations at GeneralMills in Minneapolis, US. Polansky earned AB and MBA degrees rom the University o Chicago, and hasbeen in General Mills corporate treasury or more than 25 years. His current areas o responsibility includeoverseeing the cash management unction and managing all treasury trading operations including short-term and long-term debt, short-term investments, stock repurchase, interest rate derivatives and oreignexchange. Polansky also led implementation o SAP's treasury module, value-at-risk (VaR) or treasury andsupply chain, and treasury issues o General Mills' Supply Chain Finance Project, which won thegtnewsCorporate Treasury Gold Award in 2010.

sacy rhalHead o Corporate and Payments Strategy Americas at SWIFTStacy Rosenthal joined SWIFT in early 2008 rom Bank o America. At SWIFT, Rosenthal ocuses on strategic bankingand corporate initiatives, working on key projects with market inrastructures, banks and corporates including newproduct innovation, global remittances, inormation reporting, exception management and electronic bank account

management (eBAM). While at Bank o America, she was SVP, product consulting in global treasury. She served as asubject matter expert or treasury ront/back oce integration, comprehensive payables, and electronic receivables.Rosenthal has broad knowledge o treasury management and the transormation rom paper to electronicsolutions. She was with Bank o America rom 2003-2008. For 10 years prior to that, Rosenthal worked or leadingenterprise sotware organisations on global initiatives. Her areas o ocus included sales, business development,consulting, product launch and project management. Rosenthal has a BA degree rom State University o New Yorkat Albany and a MBA in management and technology rom Long Island University at CW Post.

ry smaTreasurerMost recently Rey Sermonia was treasurer o Qatargas in Doha, Qatar. He received his MBA rom theUniversity o Chicago and his MA rom Williams College, Williamstown, Massachusetts, USA. Sermonia

has a certicate in International Cash Management (CertICM) rom the Association o CorporateTreasurers (ACT) and a certicate in Financial Asset Management and Engineering (CFAME) rom theSwiss Finance Institute.

Ahy scaglCTP, SVP o M&A and Corporate Treasurer at ABM IndustriesAnthony Scaglione is vice president and corporate treasurer at ABM Industries in New York, NY. Priorto joining ABM Industries, Scaglione was vice president, assistant treasurer at CA. He currently serves

as a member o the audit committee, as well as the strategic alliance committee. He has presented at anumber o AFP conerences and gatherings.


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The Judging Panel


Paul shmaIndependent ConsultantPaul Stheeman started his career in international banking in various roles at Commerzbank in Germany.He then moved to the oil and gas industry, where he has worked in several treasury unctions atDeminex, Veba Oil & Gas and most recently as director international treasury with Petro-Canada. Heretired in April 2010 and is now using his experience to advise corporates in treasury matters. During his

long career, Stheeman has worked in several European countries and has broad experience in settingup new treasury operations centres and in-house banks (IHB). He also has extensive experience ininternational cash management and nancial risk management.

rcy thVice President, Treasury, Etihad AirwaysRicky Thirion oversees the treasury portolio at Etihad Airways, which includes the treasury, corporateinvestments, corporate and structured nance and insurance departments. His highest qualication isa Masters degree in Mechanical and Aeronautical Engineering, and he also holds various nancial andbusiness management related qualications. Thirion was voted Global Corporate Treasurer o the Year2010 by the readership o gtnews and is an honorary ellow o the ACT. Prior to his role as vice presidento treasury at Etihad Airways, Thirion was group treasurer at South Arican Airways, managing directoror Andisa Treasury Solutions, and managing director with Standard Risk and Treasury Management

Services, a subsidiary o the Standard Bank Group in South Arica.

P va rCorporate Director o Treasury, AkzoNobelPeter van Rood was appointed as corporate director o treasury or AkzoNobel in September 2007.Since then he has been responsible or a ull transormation o the treasury unction, comprising thereplacement o IT systems, implementation o cash management solutions, benchmarking and rollout onew policies and a reorganisation o the department. Prior to joining AkzoNobel van Rood worked or17 years or the Royal Dutch Shell Group in various roles across pensions, trading and corporate. Duringthat period he was involved in a broad range o nance disciplines and projects. Van Rood completed auniversity degree in business economics rom the Erasmus University in Rotterdam, the Netherlands, andholds a chartered nancial analyst (CFA) designation and a controllers degree.

La wllamAssistant Group Treasurer, Thomas Cook GroupLinda Williams is primarily responsible or the back oce o Thomas Cook treasury, a key role given theextent o the travel groups hedging requirements and cash management activities. Reporting to thegroup treasurer, she has been with the group or our years and is responsible or some key projectsincluding the development o their cash concentration structure and replacing the treasury managementsystem (TMS). Prior to joining Thomas Cook, Williams was treasurer at Metronet Rail and the Laurel PubCompany. Holding the MCT qualication, she also trained as an accountant and held several positions innance with Whitbread, the retail and leisure group.

ec CamllSenior Analyst, AiteEnrico Camerinelli is a senior analyst within Aite Groups wholesale banking group, based in Europe.

His current research at the consultancy ocuses on global transaction banking, trade nance, cashmanagement, the single euro payments area (SEPA) and the nancial supply chain. Prior to joining Aite,Camerinelli was an analyst at Celent and, previously, an independent analyst and advisor to organisationssuch as the Supply Chain Council and the Theory o Constraints International Certication Organisation.Camerinelli has been vice president and research leader o the worldwide practice o EnterpriseApplication Strategies at Meta Group, and a senior marketing consultant at JD Edwards. He has alsoworked or more than 10 years in the industry as a supply chain and plant manager.

nacy ASenior Analyst, AiteNancy Atkinson is a senior analyst at Aite Group, specialising in wholesale banking issues includingglobal business-initiated payments, trade nance and the nancial supply chain, plus working capitalmanagement. Prior to joining the Aite consultancy, Atkinson was rst vice president o institutionalmarketing at Mellon Bank, where she worked or more than 20 years in treasury product and operationsmanagement. She is a ormer vice chairperson o the National Automated Clearing House Association(NACHA) cross-border ACH Council, which developed US-Canada-Mexico cross-border ACH capabilities.She is also a ormer executive committee member o the Financial Services Technology Consortium (FSTC),where she prototyped the Bank Internet Payment System (BIPS), an early eXtensible Markup Language(XML)-based protocol. She holds an MBA rom Cornell University and is a certied cash manager (CCM).


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Cash Flow Forecasting Project o the Year


When it comes to shipping, reight,logistics and supply chain management,United Parcel Service (UPS) knows how tomove packages pretty much anywhere in

the world. Yet obtaining daily visibility intoits bank balances across 1,600 accountsglobally was anything but simple or theUPS treasury team.

To address this challenge, the treasurydepartment recently implemented aglobal SWIFT bank balance initiative andintegrated it into its global cash foworecasting platorm. The bank balancedata serves as one o the main inputs orthe cash fow orecasting process.

The key objectives o the UPS initiative,which won the Cash Flow Forecasting

Project o the Year category at thegtnewsAwards 2012, are outlined below:

Attain previous day-ending bank accountbalances or each legal entity rom everybank globally by a pre-determined cut-o time every morning.

Use actual balances in the cashorecasting process. Part o the cashorecasting process involves a previousday set o actuals to be submitted. Thepurpose o this is to conduct orecastedto actual variance analysis. I the actualcash movements do not balance to

the end o day bank account balances,the orecast cannot be accepted by theorecasting platorm.

Establish a standard global processenterprise-wide, as well as a centralisedsource o inormation.

Link UPS regional treasury centres (RTCs)and local in-country subsidiary nanceunctions around the globe to a commonplatorm.

Enable bank balances and transactioninormation to be aggregated andautomatically uploaded to the companys

global treasury management workstationsystem daily.

A major part o UPSs corporate culture isits commitment to delivering the highestlevel o service at every touch-point o the

organisation. To achieve its global SWIFTbank balance initiative goals, the treasurylooked to apply these same standardsthroughout the planning and execution

phases o the project.In developing the project plan, thetreasury team took a global perspectiveo the initiative, dening the process anddetermining the roles o key stakeholdersin the RTCs and local oces. Theplan also established a timeline andcritical milestones. Once in place, theinitiative was rolled out region by region,beginning in Europe, ollowed by Asiaand Latin America.

Treasury worked with its banking partner,Citi Global Transaction Services (GTS),

to execute on the ramework thatwas established or receiving previousday-ending bank account balancesand transaction inormation via SWIFTrom third-party banks. A Citi projectmanager was responsible or workingwith third-party banks to enlist them inreporting via SWIFT. In addition to weeklyconerence calls, UPS treasury heldquarterly meetings with the Citi teamto assess the banks success in recruitingthird-party bank partners.

Citi also implemented its web-basedTreasuryVision solution which acilitates

visibility through multibank, currencyand asset data aggregation, allowingUPS to manage reporting banks andaccounts globally so they can moreeectively manage global liquidity andrisk across the enterprise. Citi eedsthe aggregated data directly into UPSstreasury workstation, centralising criticalinormation that is then easily accessibleby the regional treasury teams.

Obstacles and Bank AccountReductionThe biggest obstacle UPS aced inimplementing its global SWIFT bank balanceinitiative was getting third-party banksrom around the world to send accountbalance and transaction inormation

electronically via the SWIFT network.

To achieve this goal, the treasury team

leveraged its relationships with these banks,

and in cases where the bank was unable

to send SWIFT messages, UPS consolidated

those accounts with banks that could. By

administering this process UPS was alsoable to ocus on consolidating duplicate

accounts within each o the business units.

Since the initiative began, UPS treasury

has consolidated 1,600 accounts down to800 globally, delivering another signicant

project benet.

To ensure that manual processing waskept to a minimum, Citi GTSs back-

oce tracked les as they arrived rom

the various banks, and provided UPS

with a convenient dashboard indicating

the progress o implementation o each

account rom beginning to end. Thisdashboard allowed UPS treasury to better

manage its banking relationships. Part o

Citis monitoring process provides critical

inormation on each tardy report, such

w: Cash Flow Forecasting Project o the Year

UPs ovcm daa Aggava, iga

swiFt impv Cah Fl FcagThis entry, which won the Cash Flow Forecasting category at thegtnews Awards 2012, explains how UnitedParcel Service (UPS) implemented a global SWIFT bank balance initiative, allowing it to obtain better dailyvisibility into its bank balances across 1,600 accounts around the world and to cut the overall number and saveUS$25m. By integrating SWIFT capabilities with its global cash fow orecasting platorm, UPS has achievedsignicant results. This case study is shared here to provide an overview o cross-border cash fow orecastingand in order to encourage best practice among treasuries.

The biggest obstacleUPS aced inimplementing itsglobal SWIFT bankbalance initiativewas getting third-

party banks romaround the world to

send account balanceand transactioninormation


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as whether or not there was a holiday inthe banks country o origin. The partnerbank is proactive in sending emails tothird-party banks reminding them that UPSbalances are due each day. These eortshave dramatically improved the level oautomation made possible by the initiative.

BenetsThe programme has successully deliveredon its anticipated benets, but has alsoyielded several that go beyond the originalscope o the initiative. As a result o thepush to automate delivery o accountbalance and transaction inormationvia the SWIFT network, UPS treasuryhas subsequently consolidated its bankaccounts, including eliminating those thatcant accommodate SWIFT messaging.By consolidating 1,600 accounts down

to 800, the treasury is now better able tomanage its banking relationships, whichare at a more manageable level.

Additional project benets included:

Facilitation o internal UPS programmesdesigned to minimise in-country saetymargins on a daily basis. All excess cash isswept into a global cross-currency, cross-border notional pooling structure wherethat cash can be used or the greaterbenet o the rm (und acquisitions,external investments, etc).

Establishing a platorm that objectively

helps UPS to undertake accurate cashfow orecasting variances.

Improved coordination andcommunication between RTCs, drivinggreater eciency and productivity.

UPSs global SWIFT bank balance initiativehas proven to be an overwhelming successor the company. All o its objectives havebeen realised, including standardising andstreamlining bank account balance andtransaction data and reporting. Treasuryhas attained centralised visibility andcontrol o vital treasury processes, and as

a result is able to view overall positionsand orecasts, and more eectivelymanage global liquidity and risk across thecompany.

Consolidation o bank accounts hasenabled greater automation and controlledworkfow processes, which have reducedoperating costs and administration risk.The elimination o manual processeshas allowed UPS treasury to increaseproductivity, and thereby ocus criticalresources on more strategic tasks. Overall,the global SWIFT bank balance initiativehas led to either direct or indirect benets

to UPS that are in excess o US$25m.

Cash Flow Forecasting Project o the Year

(L to R) 1. Michael Connolly, vice president and treasurer o Tifany & Co., and compere o the gtnews Awards 2012, with Jennier Boussuge, head o

global treasury sales at BoA Merrill, (in middle), present the trophy or the Cash Flow Forecasting Project o the Year to Mark Tweedie, head o

technology, media and telecoms, EMEA, at Citi, accepting on behal o UPS.

Hghly Cmm:Cash Flow Forecasting Project o the Year

The winner o this award (see previous page) was the treasury thatwas best able to demonstrate improvement in its cash management

processes, whether in accounts payable (A/P), accounts receivable(A/R), cash orecasting, netting/pooling, etc. Two other noteworthycategory entries received highly commended certicates inrecognition o good treasury projects.

Carlsberg - Liquidity Management ProjectCarlsbergs liquidity management project is already showing positive results. By havingan automated and structured solution, the accuracy o company-wide cash foworecasts has increased. The web-based Sotware-as-a-Service (SaaS) solution is hostedand maintained by Opus Capita. Carlsberg now has an attractive value proposition orits subsidiaries, as they have their own structures, processes and reports.

Merck KGaA - Global Restructuring o Cash

Management ProcessesThe reorganisation o the cash management procedures at Merck KGaA wasundertaken with the assistance o Deutsche Bank, JP Morgan and BNP Paribas,and delivered global benets to the rm.

Attendees arrive at the Sotel Grand Hotel in Amsterdam or the gtnews Awards or Global Corporate Treasury 2012, sponsored by BoA Merrill.


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Foreign Exchange (FX) Project o the Year

The strategic objective o Project Grin,the name given to the implementationo a new European treasury centre at themultinational brewers, SABMiller, was

to leverage the scale o the corporationto deliver improved control and cutcosts and risk exposures, including on itsoreign exchange (FX) activities. Workingin partnership with partners at IT2 andCiti, the project was started on1 November 2010 and completed ontime and on budget in April 2012.

The aim was to establish best practicetreasury operations throughout theregion, centralised on the UK oces.The key requirements in the project planwere to:

Transition rom decentralised tocentralised treasury management atSABMiller by establishing a Europeantreasury centre in the UK.

Introduce an IT2 treasury managementsystem (TMS) to the Europeanbusiness units, providing dependableFX exposure and cash orecastmanagement capabilities.

Ensure risk management centralisation.

Introduce European bankrationalisation, reducing the number olocal banking partners, and make Citi

SABMillers European regional bank. A simplied banking landscape

was also targeted, allowing or aneasier rollout o SWIFT FileAct/XMLcapabilities or operational bankingpurposes, covering accounts payable(A/P) and accounts receivable (A/R).

The project aims, described above,were delivered over an 18 monthdeployment, across 12 countries and14 businesses.

The Grin teams approach to projectmanagement was central to achieving a

superior result in terms o completeness,quality and timeliness. All 12 countriesare now completely migrated to the newsystem, meaning that in excess o US$1bnin FX exposure is now under central

treasury management at SABMiller.

The on-time execution o the project plan

was thanks to the hands-on approachtaken by SABMiller senior treasury

executives and sta, allied to strongcentral management and scope discipline.

A transparent project methodology, clearmanagement lines o responsibility andescalation paths were also important.

No extra resource was needed beyondthe original plan. The successul

implementation o the new TMS andcentralised European treasury centreinvolved diplomatic negotiations with theexisting European business units nance

management structure, while enorcingSABMillers standardised treasury

operations model.

Obstacles and DicultiesThe excellence o the SABMiller treasuryteams project management minimisedthe obstacles and diculties encounteredwhen implementing Project Grin.

The team worked collaboratively with adiverse group o nance executives, rom

countries including the Czech Republic,Poland, Hungary, Switzerland, Slovakiaand Romania. The education, planningand rollout processes were needed to

achieve the local business units buy-in, inorder to ensure that the project benetswere worthwhile, realistic and deliverable.

The centre might enjoy the benets ocost savings, banking eciencies and

improved controls, but the local businessunits needed to understand and acceptthe real overall corporate value o makingcuts to their budgets. This required

creativity and fexibility.

SABMiller treasury also successullymanaged the substantial workloado nancing the simultaneous Fosters

beer acquisition, worth AUD$10bn(USD$10.1bn), without disruptingProject Grin - a major achievementconsidering the amount o work involvedin both initiatives.

BenetsThe precision o Project Grins planning

let little room or achieving benets

beyond the original project scope.

There was one such benet, however,

relating to accommodating a much more

granular approach to hedge accounting

than was originally envisaged. This takes

advantage o IT2s in-house bank (IHB)

acilities to allocate external hedges to

more specic accounting categories,

such as inventory, capital expenditure

and operational expenditure. As a result,

the actual deal volume is approximately

double what was originally planned,

and has been managed without cost or

timetable slippage.Project Grin has already yielded a

number o other, expected benets. The

advantages o the new TMS, harmonised

banking inrastructure and new

centralised European treasury operation

are quantiable against the previous

situation at SABMiller, delivering:

On-going FX and ull time equivalent

(FTE) benets estimated to be worth

US$1m per annum.

Pooling and central unding benets

ar exceed the original business caseestimate o US$1m.

There has been a reduction rom 25

banks to one regional European bank,

namely Citi.

Bank ees have been reduced by

approximately US$0.5m per annum.

A simplied banking landscape allows

or an estimated one-o deployment

cost saving to be achieved or the

installation o SWIFT FileAct/XML

capabilities (still to be deployed).

Regional cash visibility via SWIFTmessaging into IT2 and concentration

had already been optimised through an

earlier phase o the Citi multi-currency

cash pool implementation.

w: Foreign Exchange (FX) Project o the Year

sABMll eupa tauy C

implma impv FXThis entry, which won the Foreign Exchange (FX) Project o the Year category at thegtnews Awards 2012,explains how Project Grin at SABMiller built a European treasury centre in the UK to provide eciencies andstandardisation. The project has enhanced control and reduced risk across the board at the brewer, in additionto generating substantial savings and transparent workfow optimisation in FX pricing, cash and exposureorecasting. This case study is shared here to provide an overview o eective FX operations and in order toencourage best practice among treasuries.


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Foreign Exchange (FX) Project o the Year

Technology and CentralisedFX DealingTechnically, the results have been

achieved using the web-based IT2 .NETmodule to intercommunicate betweenthe business unit network and thecentralised European treasury centre inthe UK, producing the required robust,cost eective 24x7 service needed orproactive treasury management. Thereare about 40 IT2 .NET users supportingthis part o the business.

FX pricing perormance has beenoptimised through leveraging theeciencies and added value ocentralisation via a straight-through

processing (STP) link between IT2 and360T, compared with the business unitspre-project perormance with their localbanks.

In Europe, SABMiller can nowconcentrate FX exposures in theIHB, and execute securely with themost competitive counterparty. Thecentralisation o FX dealing brings theadditional benet o broadening thescope o counterparty risk management;this enables the treasury team to managethis kind o risk more eectively, withthe ecient use o dealing lines and

transparent exposure management.

The estimated deployment cost savingsare based on the completion o astandard SWIFT FileAct/XML interacebetween Citi and SAP, meaning it is nolonger necessary to build and support aseries o one-o interaces, enhancingthe control quality and eciency o A/Pworkfow on a continuous basis.

The SABMiller brewery now enjoysthe dual benets o SAP-basedenterprise resource planning (ERP)and management, plus IT2s value-

adding cash, treasury and nancial riskmanagement acilities.

Centralisation has generated manybenets through the concentrationo ront and back oce proessional

resources and expertise, versus the

preceding localised arrangement.

The highly automated IT2 workfow

integrates the inormation fows or

SWIFT (or statement and payment

management and deal conrmation),

SAP (or G/L), 360T (or dealing) and

the subsidiary network via IT2 .NET (or

FX exposure and cash fow orecasting),

reducing manual eort and error

potential, and signicantly enhancing

transparency and control. The critical

mass o headcount now allows best

practice segregation o duties.

Forecasting requency has now been

upgraded to weekly or cash fows, ona 12-week rolling basis, and quarterlyor FX exposures, on a rolling 18-monthbasis. The new environment now allowsmaterial orecast changes to be made onan ad hoc basis, at the business unitsdiscretion. The centralised organisation

also provides a uture platorm orthe development and deployment oorecasting perormance measurementand management tools at SABMiller.

Michael Connolly (let), vice president and treasurer o Tifany & Co., and compere o the gtnews Awards 2012, with Jennier Boussuge, head o

global treasury sales at the sponsors BoA Merrill, (on the right), present the trophy or the Foreign Exchange (FX) Project o the Year to Alan Chitty,

treasury controller at SABMiller.

Hghly CmmForeign Exchange (FX) Project o the Year

Amid increasingly complex and volatile markets in a globalisedtrading environment, the winner o this award (see previouspage) exhibited best practice in FX hedging, currency control and

management. Two other noteworthy category entries received highlycommended certicates in recognition o good treasury projects.

Cognizant Treasury - FX Hedge ProgrammeThe global treasury team o Cognizant Technology built an FX hedge programmecovering both long-term cash fow exposures o the Indian rupee and Europeanbalance sheet exposures. The goal was to mitigate volatility on the income statement,thereby increasing the predictability o the companys margins, contributing toshareholder value.

Thai Airways - Comprehensive FX and Cash ManagementSolutionThe comprehensive cash management solution deployed at Thai Airways, which wasdeveloped with Citi, eciently supports day-to-day operations across 45 countriesworldwide. It has also improved liquidity management and currency control in theSingapore hub.

12 countries are nowcompletely migratedto the new system,meaning that in

excess o US$1bn inFX exposure is nowunder central treasurymanagement atSABMiller


11/32


Risk Management Project o the Year

Emerging markets are a strategic priority

or Toyota Motors Corporation. Its captive

nance arm, Toyota Financial Services, is

expected to support Toyotas sales eorts in

these markets whenever possible. Access

to diversied, cost-eective sources o

term liquidity is thereore critical to Toyota

Financial Services success in maintaining

its competitive position in markets such as

Brazil.

But even when attractive oshore

unding opportunities arise, internal risk

management policies related to emerging

market sovereign risk exposure must be

respected. What are some o the options

and possibilities available to treasurers

wanting to mitigate the sovereign risk

associated with cross-border unding? This

article will discuss Toyota Financial Services

evolution and approach towards managingits exposure to Brazilian sovereign risk.

Background and Funding

OpportunityBanco Toyota do Brasil (BTB) is Toyota

Financial Services aliate in Brazil. BTB

was established in 1999 to provide

consumer retail, lease, dealer nancing

and insurance products to Toyota/Lexus

dealers and their customers in Brazil. BTBs

US$1bn balance sheet has beneted rom

the strong Brazilian economy and growth

in the domestic automotive market. BTBunds itsel primarily through the Brazilian

interbank market and issues certicates o

deposit (CDs) and nance bills supported by

a brAAA, standalone, domestic credit rating

rom Standard & Poors (S&P).

Strong capital infows to Brazil over the past

ew years have created pricing disparities

between the Brazilian real (BRL) onshore

and oshore swap markets. Periodically,

companies located in Brazil that borrow

oreign currency rom oshore sources are

able to swap and hedge the proceeds in

BRL onshore at signicant savings comparedto domestic alternatives. BTB wished to take

ull advantage o such opportunities, and

Toyota Financial Services global banking

relationships were engaged.

Mitigating Sovereign RiskWhen Funding rom OshoreBanksSeveral banks were prepared to provideBTB with US dollar (USD) denominatedterm loans rom their US oces, and theeconomics were compelling. However, akey risk was BTBs inability to pay its lenders,which in turn triggered an event o deaultunder its loan agreements. The issue wasnot BTBs inability to pay because o itscreditworthiness but, rather, its inabilityto pay due to a Brazilian sovereign event.Specically, BTB would be exposed i theBrazilian government took actions thatresulted in the BRL becoming inconvertibleand/or i unds were non-transerableoutside o Brazil. In other words, i BTBcouldnt swap BRL into USD or remit unds

back to its oshore lenders, then it wouldbe in technical deault. And irrespectiveo the probability (or improbability) o aBrazilian sovereign event actually occurring,Toyota Financial Services global policiesorbade exposure o its debt to emergingmarket sovereign risk. Unless the risk couldbe properly mitigated, BTB would lose itsoshore unding opportunity.

The solution was to restructure BTBs loanagreements. I BTB was unable to paydue to a sovereign event, then the loanagreement would now allow BTB to pay

the equivalent USD amount in BRL to anaccount in Brazil as specied by the lender.This in turn ullled BTBs USD loan paymentobligations under the agreement. Theability o BTB to substitute its cross-borderpayment obligation with an in-countrypayment in its local currency eectivelyextinguished its exposure. In short, thesovereign risk was shited rom BTB to thebanks.

The banks reactions were mixed. Somewere concerned with the revised language,while others were comortable with theirexisting exposure levels to Brazilian risk.

And it was clear that some would simplyprice the sovereign risk into the loans costo unds. Either way, the end result let BTBin a position to opportunistically executeUSD term loans and benet rom the swap

arbitrage, while simultaneously complyingwith corporate risk management policies.

Sovereign Risk and Cross-border Intercompany Fundingin a Time o CrisisBTB has drawn a number o oshore bankloans since 2007, and this unding sourceand the indirect method o managingsovereign risk served BTB well or severalyears. As the global nancial crisis continuedto deteriorate, however, many internationalbanks either began to deleverage romemerging markets, or capital constraintsmade their loan pricing uneconomical.Although the arbitrage opportunities orBrazilian borrowers that could still undoshore persisted, BTB couldnt eectivelyaccess the global capital markets to tap

oreign currency debt. However, BTBssister company, Toyota Motors CreditCorporation (TMCC), could. And with aglobal credit rating o AA-/Aa3, TMCC cansource liquidity through its global undingplatorms more cost eectively than mostinternational banks or other captive nancecompetitors.

TMCC is Toyota Financial Services USaliate. TMCCs team o 45 treasuryproessionals located in Torrance, Caliornia,co-ordinate Toyota Financial Services globalcapital market unding activities (US$20.5bn

o debt securities issued in the US last year).It manages over US$20bn o direct issuancecommercial paper and oversees the treasuryactivities o its Americas region aliates.TMCC is already an intercompany undingprovider to multiple aliates and has thecapabilities to easily source and manageterm unding or BTB. But even thougha compelling economic case was made,TMCC management was unpreparedat that time to assume any Braziliancross-border risk, particularly given theon-going precarious European sovereignenvironment.

TMCCs treasury team explored dierentrisk management possibilities such as thepurchase o Brazilian credit deault swaps(CDS) or the execution osetting derivativestructures. However, all were imperect

w: Risk Management Project o the Year

tya Facal svc Appach ta

Maagg Bazla svg rThis article looks at Toyota Financial Services evolution o managing sovereign risk in Brazil to support itsintercompany lending activities. It details how the division ound a special orm o insurance known as politicalrisk insurance (PRI) to be the most successul choice to suit its needs. The case study is shared here to providean overview o sovereign risk procedures and to encourage best practice among treasuries.


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Risk Management Project o the Year

hedges that were either cost prohibitive

or would leave TMCC exposed to risk.

For example, a CDS would be ineective

against a currency inconvertibility event

i the Brazilian government continued to

make payments on its sovereign bonds. And

with osetting derivatives structures, one

must make strong assumptions with respect

to the behavior o the BRL onshore/oshore

swap markets ollowing a sovereign event.

Ater urther evaluation, treasury ultimately

chose political risk insurance to protect its

intercompany lending activities.

Political Risk InsurancePolitical risk insurance (PRI) unctions much

like any other insurance policy, whereby

a policy is underwritten to protect a

policyholder against certain risks during

the policys lie. PRI is generally meant to

protect the policyholder against loss rom

expropriation, political violence, or currencyinconvertibility/transerability events. Loss

rom expropriation or political violence is not

a material risk applicable to Toyota Financial

Services business. However, loss rom

inconvertibility/transerability events related

to cross-border lending to emerging market

aliates is indeed a material risk. A policy

to address this sole risk could be written or

TMCC.

TMCC approached a broker who specialised

in PRI. The broker solicited underwriters

interest in insuring TMCCs potential lendingactivities with BTB. TMCC then provided

a orecast o its portolio including loan

amounts, tenures, disbursement dates,

orecast interest rates, and the loans

amortisation schedule (quarterly loan

amortisation versus bullet repayment was

chosen to reduce the policys premium). The

underwriters quoted an annual premium

based on the portolios outstanding

balance each year (note that the premiums

cost is clearly driven by the probability o the

risk event occurring: e.g. sovereign risk or

Brazil is much cheaper to insure today than,say, or Argentina or Venezuela). At the end

o each premium period, a true up would

occur between the orecasted loans cash

fows and the drawn loans cash fows, with

the premium dierence added or subtracted

to the ollowing years premium.

TMCC may make a claim ater proving loss

rom non-payment due to the risk events

dened in the policy. Particular to PRI is a

negotiable waiting period o anywhere

between 3-12 months beore compensation

or the claim is paid. The waiting period

provides time or the sovereign event topotentially reverse or correct, allowing the

borrower to then resume payments or

make catch-up payments to the insured

during this period.

ResultsTMCC executed a US$150m, seven-year

policy in 2011 to protect TMCC against

losses on a basket o Brazilian intercompany

loans. To date, loans totaling US$125m

with tenures o 6-7 years have been

disbursed. BTB was able to capitalise onthe swap arbitrage opportunities and

will enjoy risk-adjusted interest expense

savings o US$16m over the lie o these

loans compared to domestic alternatives.

Furthermore, BTB is well-positioned to

continue oering competitive automotive

nancing to Toyota dealers and their

customers, particularly when production o

small-sized vehicles in Toyotas new Brazilian

actory commences later this year in 2012.

Additionally, the evolution o TMCC

treasurys eorts to deliver eective risk

mitigation solutions has provided thecompanys management with an enhanced

understanding o emerging marketsovereign risk and related risk managementstrategies.

All o the aliates existing oshore undingarrangements have now been reviewedto determine i proper risk mitigationstructures are in place, and global riskmanagement policies and guidelines havesince been modied. Consequently, TMCCsintercompany unding capabilities canbe leveraged and opportunistic undingstructures or other aliates in emergingmarkets are under evaluation.

Political risk insurance may not be the mostsuitable or appropriate choice in all cases ortreasurers wanting to manage cross-borderrisk. For TMCC to support its intercompanylending opportunities and meet its globalpolicy requirements, however, PRI waschosen as the simpler, better correlated and

more cost-eective solution to manage itsexposure to Brazilian sovereign risk.

Hghly Cmm:Risk Management Project o the Year

The winner o this award (see previous page) demonstrated how

an enterprise-wide approach to risk management is now businesscritical. Two other noteworthy category entries received highlycommended certicates in recognition o good treasury projects.

Aerofot - Implementation o SAP in TransportationIndustry TreasuryAerofots broad and deep transormation o its operations and treasury has made itsmarter and more competitive and positioned it to become a leading airline in Europe.Working with SAP and Citi, it has streamlined the use o inormation, centralisedmultiple unctions and improved eciency, visibility and control.

Henkel - Global Bank Account Visibility

Henkel has achieved automated visibility o all bank account details, including authorisedsigners, business purposes and so orth, allied to balance oversight on a daily basis.Thanks to this project it now meets internal audit guidelines and has consolidated andoptimised its account structure and banking relationships, while improving counterpartyrisk management and the rms ability to manage currency exposures.


global treasury sales at the sponsors BoA Merrill, (on the right), present the trophy or the Risk Management Project o the Year to Paul Boodee,

director, Americas region nance, Toyota Financial Services .


13/32


Shared Service/Payment Factories Project o the Year

In 1998 Philips treasury introducedthe Philips Payment Factory (PPF). Themodel or the PPF had been based ona bank styled intercompany currentaccount that could be used or initiating

intercompany and external transactionson bank accounts owned by the treasury(so called payments on behal o(POBO). The PPF operates accounts in 25countries and 15 dierent currencies.

Despite the many benets, the PPFdid not work or all subsidiaries andpayment methods due to issues oa technical, scal or legal nature. Asa consequence Philips maintained aglobal cash management and paymentprocessing inrastructure, in addition tothe PPF inrastructure. It was this thatthe electronics group wanted to removewith its Next Generation Philips PaymentFactory (NGPPF) project. It worked withproject partners at SAP, BBP, the Zandersconsultancy, and with Citi and BoAMerrill to achieve its objectives.

Key ObjectivesThe NGPPF project had the ollowing keyobjectives:

Fully centralise bank communicationor all countries and payment methods.

Create an unbroken, online audit trail

or payment processing. Minimise repair charges by banks.

Provide ull visibility on liquidity.

Improve the fexibility in Philipsbank connectivity (reduce switch /maintenance costs).

The NGPPF is based on SAP EEC6 andSWIFTNet or Corporates and acts as asecure hub between the local enterpriseresource planning (ERP) installations andthe banking community. The NGPPFadds an additional processing centrein SAP IHC or local payments next to

the original PPF. The additional centrereceives the intermediate document(iDOC) SAP ormat data rom localnancial systems and orwards paymentles via SAP business communication

manager (BCM)/SWIFT link to local bankbranches as instructions on the bankaccount owned by the subsidiary butselected by the centre in SAP IHC.

At the centre o the new solution is

a custom built, rule-based logic thatdetermines the most ecient nalpayment method and validates thecompleteness o the instruction, whichallows Philips entities to use a limitednumber o originating payment methodsthat automatically get translated in anexternal payment method or the mostecient way o processing. For example,a payment method 5 can automaticallyget translated into an automatedclearing house (ACH), single europayments area (SEPA), real-time grosssettlement (RTGS), book, or internationaltransaction based on dened criteriaand the available static data. Next tothis, the central inrastructure supportslocal cheque, bill, direct debit payments,

but also unusual requirements such asthe French lettre de credit releve (LCR)transactions.

The NGPPF already provides paymentprocessing in some 13, more complexenvironments, covering the Belarusianruble (BR), Russian ruble (RU), Ukrainianhryvnia (UAH), Turkish lira (TR) and Taiwandollar (TW), plus 13 additional currenciesincluding the Lithuanian litai (LTL) andBulgarian lev (BGN).

Project Execution andTimerameThe business case or the NGPPF wasapproved in Q410 and the project was

started at the end o Q111 with a smallproject management team rom Philipstreasury and SAP application support.SWIFT connectivity was technicallyavailable or testing in August 2011 and

available in production by December lastyear. The development was prototypedand unit tested between April andAugust 2011.

Implementation and user acceptancetesting (UAT) was done in parallelwith two treasury projects during theSeptember-December 2011 time period.The new payment inrastructure orthe supplier nancing project went livein January 2012 and or the spin-ocompany TP Vision project completionwas achieved by February 2012. Sincethis time Philips has been rolling out the

new inrastructure; a process which hasnow been completed.

Additional BenetsThe NGPPF platorm comes with manyringe benets or Philips, including theprovision o:

1 Vbly all ba balac: Onall accounts operated by treasury andsubsidiaries the new platorm receivesstatements once. These are integratedor auto-matching locally and cashmanagement purposes centrally. Thisprovides treasury with daily visibility onall Philips cash, irrespective o it beingunder control o treasury cash pools.From this oundation a new and moreaccurate cash orecasting and liquidityplanning system can be built out.

2 Full cl v ba accuaucu: Like most othercompanies, Philips has a policy thattreasury has to approve the opening oany bank account. The NGPPF platormbrings the enorcement o this policyto the next level because payment

interaces cannot now be implementedoutside the central inrastructure.

3 Full apacy lcal paympc: All incoming and outgoingtransactions are now processed via

w: Shared Service/Payment Factories Project o the Year

nx Ga Phlp Paym Facy (nGPPF)This entry, which won the Shared Service/Payment Factories Project o the Year category at thegtnews Awards

or Global Corporate Treasury 2012, explains how Philips Electronics successully completed the centralisationo all its global cash management and payments processing or 25 countries and 15 currencies. The NextGeneration Philips Payment Factory (NGPPF) gives the rm greater control over the group bank inrastructureand payments. It enables treasury to advise local aliates on ecient working capital management, whileimproving trade credit management and cash fow orecasting. This case study is shared here to provide anoverview o payment actories and to encourage best practice among treasuries.

From this oundationa new and moreaccurate cashorecasting and liquidity

planning system can

be built out


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Shared Service/Payment Factories Project o the Year

the central platorm. This provides an

unbroken, online audit trail and detailed

evidence about the use o (inecient)

payments instruments, plus ready

access to bank charge inormation

and the timing o cashfows. On

outbound transactions, the platorm

provides control over the used payment

method, allowing or cuts in the cost o

transaction processing.

4 eay p /ga

bu: Mid-stream duringthe NGPPF project, Philips spun o

its worldwide TV business. Philips

treasury had to provide a standalone

cash management and payment

processing inrastructure in more than

25 countries, six banking groups, 23

dierent currencies and eight dierent

payment methods, including direct

debits (DDs) and LCRs. The NGPPF

provided the inrastructure to do this

eciently and eectively within the set

timerame o ve months. Integrating

new business is equally ecient giventhe standardisation on iDOC and XML

interacing.

5 M accua ma

a c: Bank statements on

operational accounts are uploaded and

processed automatically. This allows

or closer supervision on daily post

processing o statements. This does not

only reduces local nancial aid cost,

but also makes trade credit inormation

more up-to-date.

The above benets stemming rom the

NGPPF project at Philips have allowedthe company to complete what it started

back in 1998 with the PPF and laid an

eective oundation or still urther

improvements in the uture.

The winner (let), Gary Thorp, vice president, treasury control and operations at Philips, shakes hands with the category sponsor in the middle,

Willem Dokkum, global head o sales, payments and cash management at ING, while Michael Connolly, vice president and treasurer o Tifany &

Co. and compere o the gtnews Awards 2012, looks on.

Hghly Cmm:Shared Service/Payment Factories Projecto the Year

The winner o this award (see previous page) exhibited a cutting

edge approach to centralisation, whether through a shared servicecentre (SSC) or payment actory. Two other noteworthy categoryentries received highly commended certicates in recognition ogood treasury projects.

AB Sciex - Readiness ProjectIn less than 18 months AB Sciex built global cash and currency management modelsand state-o-the-art payment actory solutions in enterprise resource planning (ERP)and in-house bank (IHB) systems operated by another multinational company or morethan 35 entities worldwide.

Dassault Systemes - Treasury Using XML to Become a KeySupport Finance PartnerThe main objective o Dassault Systemes treasury was to better organise, control andsecure the payments issuing rom its European SSCs. Another goal was to implementstraight-through processing (STP) o payments combined with electronic signaturesand SWIFTNet transmission to bank partners across Europe.

Bottom let: Carole Berndt, head o global transaction services or Europe, Middle East and Arica (EMEA) rom the overall sponsor BoA Merrill,

speaks to Doan Nguyen, nancing and treasury director at GE Energy Power Conversion, during the pre-Awards drinks.

Bank statementson operationalaccounts are uploadedand processed

automatically. Thisallows or closersupervision on dailypost processing ostatements. This notonly reduces localfnancial aid cost, butalso makes trade creditinormation more up-

to-date


15/32


Supply Chain/Trade Finance Project o the Year & the overall Gold Award or the highest scoring entry

The pharmaceutical and chemicalcorporation Merck KGaA wanted to breaknew ground and introduce a consolidated

bank guarantee acility to help improve thespeed and eciency o its supply chain andinternal nancing. Like every business thecorporation has to rely on bank guaranteesor letters o credit (L/Cs) issued by nancialinstitutions to ensure that beneciaries inits supply chain get payment undertakingsand notications. With 250 subsidiariesacross the globe the complexity and costo the process was something the rmwanted to improve. The procedure is, ocourse, a prerequisite or any operationsunit at a multinational treasury and isrequired by customs and tax authorities,not to mention tender organisations i youare looking to win new business or provebona des.

The previous workfow relied on localterms and conditions with the individualbanks that Merck KGaAs 250 subsidiariesdealt with, with the onus being on localunits to sort themselves out. This wasnot an ecient procedure, however, andMerck saw an opportunity to centralise thegroup-wide bank guarantee business at itsmain German treasury unit and establish astandardised global process that had better

transparency, quicker turnaround timesand was scalable or the uture.

The problem was that, as ar as it is aware,Merck is the rst multinational company toattempt to introduce a global guaranteeand L/C management system so it couldntsimply copy best practice or install o-the-shel technology, instead having torely on developing its own system, withan internal team o only two peopleand no budget or external consultants.Another challenge was that whatever wasintroduced had to comply with the local

trade nance legal rules and regulations ineach and every country around the worldwhere the pharmaceutical and chemicalgiant operates.

An unconventional approach was

thereore needed and the small treasuryproject team o two people embarked ona seven month long exercise, in addition

to daily responsibilities, that ran romFebruary 2011 until the end o the year.The team, led by Joerg Bermueller, heado cash and risk management at MerckKGaA, questioned each Merck subsidiaryto scope out the project and developeda request or proposal (RFP). This led to acompetitive tender and the selection o asingle banking partner, and ultimately anew inrastructure or the start o 2012.

There were seven distinct project phases:

1 daa cllc a aaly: TheMerck KGaA treasury project team

surveyed all 250 subsidiaries anddiscovered that 300 guarantees areissued each year, worth 150m. Bankees rom the 103 local banking partnersused to run into the low millions perannum. The portolio covered morethan 900 guarantees or L/Cs across 43countries, with 67 subsidiaries havingguarantees outstanding.

2 Ma cg: No existingconsolidated bank guarantee solutioncould be ound so the project teamtalked to ve global trade nance banksabout the easibility o them developing

one.

3 rqu ppal: A 14-pageRFP was created by Merck rom scratchcontaining 66 detailed questions. Notemplate existed beore and Merck hassince become a valued advisor to othertreasury departments, looking to emulatetheir achievements.

4 shl: Five trade nance bankswere whittled down to three aterresponding to the FRP, which prioritisedtwo requirements - namely, a presencein the countries where Merck needs L/Cs

and the availability o an online tool tohandle subsidiary requests and oversightreporting.

5 Bauy c: The three shortlistedbanks had to answer an additional 35

questions, 15 ollow-up queries andpresent a compelling case as to why theyshould be selected as Mercks partner, as

well as meeting the prime preconditiono providing a price reduction.

6 slc bag pa: Eachbank was tested against the clearselection criteria that Mercks treasuryproject team developed. The winningbank would have to oer ull countrycoverage; provide an online tool tosuit Mercks needs; ensure that theissuance, booking and managementprocedures or guarantees tted withMercks requirements; demonstratecommitment; a clear non-complex

implementation plan; and reducedpricing. All the competing banks receivedextensive eedback on their perormancerom the Merck treasury project team,but no bank was able to meet all therequirements. The winner, DeutscheBank, had to develop a tailored onlinesolution or Merck.

7 Pjc mplma: Merck andDeutsche Bank nalised the terms andconditions o the consolidated creditacility agreement and embarked uponthe implementation phase which wascompleted at the turn o this year.Training or 150 users across Merckssubsidiaries was provided usingwebex teleconerence sessions andonsite sessions in Darmstadt, Romeand Madrid to ensure that everyonecould use the new computer systemsand consolidated database. Extensivetraining materials and booklets wereprovided and a bank IT specialistwas seconded to provide supportand programme the online request,reporting and management tool.

The SolutionAter the seven-month project, Merckwas let with a single worldwide bankguarantee acility worth over 150m,valid or all 250 subsidiaries. The global

w: Supply Chain/Trade Finance Project o the Year& the overall Gold Award or the highest scoring entry

Mc kGaA Glbal Guaa Maagm L/C

MaagmThis entry, which won the Supply Chain/Trade Finance Project o the Year and the overall Gold Award or thehighest scoring entry across o the all categories at the gtnews Awards 2012, explains how a small treasuryteam at Merck KGaA introduced a single global, consolidated bank guarantee acility worth 150m. Valid orall 250 subsidiaries, the system uses a single procedure and bank platorm to minimise letter o credit (L/C)errors and has automated reconciliation and ee management, cutting the required documents rom 575 tove, banks rom 103 to just one, and time taken to issue a guarantee rom two weeks to a day.


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Supply Chain/Trade Finance Project o the Year & the overall Gold Award or the highest scoring entry

online pricing grid also does away withthe myriad o dierent platorms that eachsubsidiary used to use, delivering a singleweb-based tool. Other benets include:

One global guarantee issuance processor all types o L/Cs across all jurisdictions.

One straight-through process (STP) thateliminates error-prone paperwork stages.

One source o truth or reporting toensure 100% transparency in the uture.

One interace with the in-house bank(IHB) cash management system orautomated ee payments.

One interace with the bookkeepingsystem or automated reconciliation.

BenetsThe benets o Mercks new consolidatedbank guarantee solution is that it has

enhanced internal processes, meaningthat paper has been eliminated and thetime taken to submit an L/C request hasbeen reduced rom 60 minutes to 12. Theissuance timerame has been slashed rom14 days to just 24 hours.

Increased transparency has also resultedwith all guarantees now residing in oneonline system, so the database can bemined and interrogated more easily. Inaddition, email notications are now sentor required actions such as requests orauthorisations and pre-notications go

out or expiring guarantees to ensure asmoother, easier procedure. The groupaccounting manual guarantee reportingprocess at the end o the year has naturallybeen made redundant. Global monitoringo ees and commissions is also nowpossible and, crucially, nancial risk positionsin the supply chain can also now beincluded at group level much more easily.

Complexity has also been reduced with thenumber o banks Merck uses or guaranteesalling rom 103 to one. The amount orequired documents has been cut rom

575 to just ve per year, covering balancesheets to signature cards, prot and losssheets, passport copies and commercialregisters. More than 60 previously local-onlyprocesses have been eliminated.

Signicant Cost SavingsAs a result o the project, on-going bankees have been reduced by almost hal, sothat they are now much less than 1m peryear. The number o work hours neededor guarantee handling has also been cutrom 250 hours every year to 25 hours perannum now, reeing up treasury sta andothers to undertake other tasks. Courierees in the procurement unit have been cutand Merck is estimating it will save 2m inextra eciency savings resulting rom theimproved workfow.

The small project team o just two peopleachieved a lot, working in conjunctionwith their banking partner, and didso or an implementation cost o only15,000, although Deutsche Bank willstill receive reduced on-going ees ocourse. The seven month implementation

timerame, equating to approximately200 work days on top o the project

teams usual everyday responsibilities, wasalso impressive. Merck is now enjoyingthe benets o its new global, ullyautomated, and standardised solution.


global treasury sales at the sponsors BoA Merrill, (on the right), present the trophy or the Supply Chain/Trade Finance Project o the Year and

or the overall Gold Award or the highest scoring entry across all categories to Joerg Bermueller, head o cash and risk management at Merck

KGaA.

Hghly CmmSupply Chain/Trade FinanceProject o the Year

This award (see previous page) was given to the corporate treasurythat developed an innovative supply chain or trade nance project,and exhibited best practice in its relationships with its bankand business partners. Two other noteworthy category entriesreceived highly commended certicates in recognition o goodtreasury projects.

Foxconn Technology Group -Supply Chain Finance ProgrammeFoxconn has grown to become the worlds largest electronics manuacturing servicesprovider, serving customers such as Apple, HP, Dell, Intel and Sony among others. Ithas large exposures to oreign exchange (FX) fuctuations and interest rate changesaround the world due to its global client base, so has introduced an oshore US dollarsupply chain nance solution in conjunction with BoA Merrill to mitigate risk andprovide steady fows o capital.

Stanley Black & Decker -Supply Chain Finance EMEA ExpansionFollowing the merger o the Stanley works with Black & Decker in March 2010, the

combined organisation embarked on its integration plan to leverage best practiceacross the new entity, including Stanleys experience in working capital improvement,expanding its supplier nance programme in the US and internationally.


17/32


SWIFT Implementation o the Year

GE corporate treasury recogniseda need to reduce its administrativeburden when retrieving inormationrom the corporations many banks and

accounts around the world. The treasurydepartment required a streamlinedprocess that would deliver greatereciencies across multiple banks, inexcess o 100 globally and 14,000accounts worldwide. It naturally turnedto SWIFT or its international reach andcross-border, cross-bank capabilities.

The corporation successully introducedan electronic statement (e-statement)solution this year, working with SWIFTand its key banking partners at Banko America Merrill Lynch (BoA Merrill)and JP Morgan (JPM) to develop it. The

project start date was in February 2011and the key objectives were as ollows:

Reduce the administrative burdeno retrieving inormation rom multiplebanks by requiring the use o SWIFTFileAct to deliver an image versiono a bank accounts nal periodend statement.

Dramatically reduce the eort neededto ensure compliance with internalrules and processes around risk andsecurity by introducing automation andstandardisation as much as possible.

Reduce the companys carbon ootprintby eliminating the printing, mailing,transportation and storage o paper.Paper was the enemy and needed tobe eliminated as much as possible.

Eliminate the need or sta to maintainentitlements and stay current ontraining to use multiple banks dierentelectronic e-banking and repositoryapplications. I a single system could beused then training, fexibility and ease-o-use would all be enhanced.

The GE e-statement project involvedthe corporations treasury workstationvendor, as well as SWIFT and the bankingpartners, and needed careul planning.The project was structured in threephases.

Phase One:The Technology ChallengePhase one o the GE e-statement projectmeant building the inrastructure neededto warehouse the electronic statements,as the data load was about to go updramatically. The new system also neededto integrate with GEs treasury workstationand leverage the existing security accesswithin the technology environment.

Phase one was thereore quite technicaland took about eight months to completeby year end 2011, the designated targetend date. GE had to rst build a librarywarehouse and then to work with thetreasury workstation vendor to establishan interace to the library warehouse. This

was achieved on schedule.

Phase Two:Developing and Pilotingthe SystemThe second phase o the project, runningsimultaneously with the other phasesin the plan to ensure a quick deliverydate, was the requirement to organisea pilot group o banks to participatein developing and implementing anindustry standard with regards to

the dened SWIFT FileAct deliveryparameters. The education o about3,300 GE business users on the newe-statement process and systems wasalso a necessity.

The extent o the work or this elemento the project meant it ran or the ull 18months o the undertaking, concurrentlywith all other sections o the projectplan. GE had to rst introduce theconcept o delivering e-statements overSWIFT FileAct to the banks. GE presentedthe requirements in a non-technicalmanner to clearly explain the project at

this initial stage, as well as documentthe technical requirements latterly. Thetechnical requirements document wascontinuously updated during the courseo the pilot. This was in response to the

ndings that occurred during the testingprocess with the pilot banks.

Phase Three:

DeliveryThe third section o the project plan wasto work with GEs remaining relationshipbanks to implement a smooth e-statementdelivery process and ensure a hassle-reego live in February 2012. The successulexecution o the project requiredconsiderable project management and ITresources, as well as executive sponsorshipat the board level and across the variouspartner banks and SWIFT.

Co-ordinating a large group eort suchas this and keeping the team ocused so

they could deliver against a single goalwas extremely dicult but the treasuryproject team managed to execute thestructured roadmap they had developed,meeting all the appropriate deadlinesalong the way.

The Old ProcedureFor GEs treasury and nance teams, aswell as or the various GE businesses thatuse the new e-statements solution, it hasbeen a revelation. Obtaining over 14,000paper-based statements or reconciliation,

review, approval and auditing purposesused to be a real pain. Sta used to haveto access multiple e-banking platorms,which in turn required them to be currenton procedures and application training,as well as manage multiple passwords inorder to actually get the statements. Withthe new SWIFT-centred system only onestandardised system is used, cutting downon expensive training and expensiveduplication o eort over dierentsolutions. The process eciencies gainedare considerable.

In addition, paper statements neededmanually intensive processing in thepast, via large and expensive internalmail systems. Each statement had to beopened, reviewed, reconciled and thenphysically stored. Document retention and

w: SWIFT Implementation o the Year

H Ge rcv a wahu e-am

ima Ac Mulpl BaThis entry, which won the SWIFT Implementation Project o the Year at thegtnews Awards 2012, explains howGE solved the problem o accessing and retaining bank account statement inormation or 14,000 accounts,across more than 100 banking relationships and 98 countries, by working with SWIFT. The electronic statement(e-statement) project will save GE US$1.7m and has eliminated the need to store paper documents. Crucially, italso enhances process eciencies. This case study shared here as an overview o how SWIFT can help introducemultibank capabilities to treasuries, and in order to encourage best practice.


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SWIFT Implementation o the Year

destruction policies had to be adheredto in order to stay within strict regulatorycompliance guidelines. Interrogatingthis paper system or reporting purposesor business insights was also very time-consuming, so rarely happened.

The New SystemThe new system relies on SWIFT FileActor its cross-border and cross-bankcapabilities and it has been integratedinto GEs existing treasury workstationas ar as is possible to eliminate theold cumbersome and conusing set

o multiple bank-led processes. Thereis no longer a need to print, store ordestroy any documents as they arenow immediately available as electronicimages which are all saely stored in asecure database.

This electronic archive also deliversa positive environmental impact orGE as it does away with the printing,mailing, and storage o paper, aidingthe corporations corporate socialresponsibility (CSR) aims. It has cut thenumber o compliance and controllershipissues and is delivering more benets asGE involves more and more o its banksaround the world in the e-statementprocedure via SWIFT FileAct and the twokey partner banks, BoA Merrill and JPM.

The new solution is also scalable or theuture, says GE, with urther integrationinto internal and back-oce applicationsat the corporation currently underway.More process eciency benets arebeing targeted.

BenetsSta hours have been cut due to theelimination o manual processes, withemployees able to undertake othermore rewarding tasks. GE has alreadyrealised process eciency cost savingso approximately US$200,000 in scal

year 2012 and estimates urther costsavings o over US$1.5m next year. Thesecurity o the procedure has also beenenhanced as paper and people havebeen replaced by secure online channelswith appropriate access control.

Beyond solving a vexing treasuryproblem or GE, the new e-statementinrastructure has also allowed theparticipating bank members and SWIFT

to move beyond oering domesticperiod end bank statements towardsinternational bank statements, wherepossible. Other possible uture benetsinclude the easier use o billingstatements, lockbox cheque images inAmerica, and so orth. Further process

eciencies are expected to accrue overthe coming years.


global treasury sales at the sponsors BoA Merrill, (on the right), present the trophy or the SWIFT Implementation Project o the Year to Cara

Hanrahan, a treasury services sales executive, EMEA, at project partners, JP Morgan, accepting on behal o GE.

Hghly Cmm:SWIFT Implementation o the Year

This award (see previous page) was given to the corporate treasurythat has shown industry-leadership through its implementation

o SWIFTNet connectivity. Two other noteworthy category entriesreceived highly commended certicates in recognition o goodtreasury projects.

Johnson Controls International - SWIFTNet (TRAX)Implementation in Asia-Pacic/Middle EastJCI has achieved ull access to all its bank accounts across 23 countries via a singlenew platorm. It has gained ull visibility o its bank accounts and streamlined moneytransers, access rights and settlement procedures with a solution that is secure andreliable, while also being scalable and bank independent.

eBay - SWIFT Implementation

eBay has grown into a truly global business since its launch 17 years ago, butwith more than 250 bank accounts across 37 countries a consolidation projectwas now overdue. Its work with BoA Merrill and SWIFT in introducing commonstandards and widespread mandated use o SWIFTNet transactions has providedconsiderable benets.

The treasurydepartment requireda streamlined processthat would deliver

greater efcienciesacross multiple banks,in excess o 100globally and 14,000accounts worldwide.It naturally turnedto SWIFT or itsinternational reach


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Working Capital Project o the Year

Microsot runs a centralised treasuryor more than 350 legal entities in 118countries. The sotware giant has more than1,100 bank accounts with 100 plus bankingrelationships worldwide. At the height othe global economic crisis in 2008 and2009, each dollar held in local subsidiarymanaged accounts aced increasedcounterparty risk, sovereign risk, oreignexchange (FX) fuctuations, and raudconsiderations so the process began to nda long-term solution.

Many o these ormer concerns are onceagain key considerations as the eurozonecrisis and economic uncertainty oncemore raises its head, making Microsotsrecent introduction o a ully automatedinternational zero balance account(ZBA) structure even more timely. During

such volatile times ew things are moreimportant than having eective workingcapital management and oversight. Now,Microsot has a ZBA structure that sweepseach account to zero every day and createsjournal entries with no manual involvement.And the solution has no negative impacton the operations o nance stas in thesubs, explains George Zinn, corporate vicepresident and treasurer at Microsot.

As one o the non-aligned corporatetreasurers on the judging panel o thegtnewsAwards or Global CorporateTreasury 2012 pointed out, the act thatMicrosot has developed a scalable, cost-eective platorm that allows it to reducecounterparty exposure and gain [cash]visibility is very impressive.

BackgroundThe global cash management (GCM) andthe global cash operations (GCO) teamswithin Microsots large centralised treasurydepartment in America are responsibleor ensuring that hundreds o worldwidelegal entities only have enough cash oroperations, and that all collected cash

balances are concentrated eciently.

Microsot has 175 actively undedsubsidiaries and the process to undthem or payroll, accounts payable (A/P),taxes, and so orth is an exceedingly

time-consuming and manual process.Additionally, the cash planning managerworks with each subsidiary to repatriateany cash balances not needed or operatingexpenses. For the GCO team, the ultimategoal is to promptly transer availablebalances to the parent account in order tomaximise the investment return. However,it is time consuming to manually sweephundreds o worldwide bank accounts andMicrosot were unable to perorm same-day unds transer or European and Asianaccounts due to the time zone dierences.

With these challenges in mind, the treasuryat the sotware giant realised the need todevelop a cost-eective strategy to reduceaverage daily balances by automating thecollection sweeps and implementing ajust-in-time unding model or subsidiary

disbursements.The GCM and GCO teams in the treasury,which lead the initiative, conducted kick-o meetings one year prior to the golive, with the project getting underway inAugust 2010 with a planned completiondate o Q311. The goal was to develop acost-eective strategy to reduce Microsotsaverage daily balances. Many joint workingsessions were scheduled internally withIT resources and externally with projectpartners, Citi, to outline the existingchallenges and brainstorm a solution.

During this initial planning stage it wasquickly determined that the establishmento inter-company ZBA structures would bethe optimal solution.

The ProjectThe project required close coordinationand collaboration between numerous keystakeholders. The initial scoping meetingswere held with the aim o developing astrategy to reduce Microsots averagedaily balances by increasing the requencyo collection sweeps and implementing ajust-in-time unding model or subsidiarydisbursements. The GCM and GCO treasuryteams soon realised that while introducinga new cross-border inter-company ZBAstructure could meet both goals, the currentIT inrastructure was not up to the job. It

could not handle ZBA transactions withinthe SAP in-house cash centre (IHCC),meaning that key changes needed to bemade to SAP.

Numerous conerence calls over a

10-month period were held with Citi andSAP developers to outline and test newcongurations. Meanwhile, the treasurycontrollers group at Microsot completedsix months o comprehensive accountingtesting to ensure that the planned newsolution would impose no operationalchallenges. Once all this testing wascompleted, the GCM team held conerencecalls with all subsidiary stakeholders toadvise them o the changes. The successo this project is largely due to the hardwork and co-ordination o all these variousstakeholders involved in the improvement

drive, and their early engagement eased theprocess along.

Microsot aced two signicant obstacles inthe execution o the plan:

th a ZBA h cumx capably: Although manymultinational banks have a ZBA product,no single bank oered a solutionto contain customised texts in thetransaction details. However, this iscritical to the subsidiary identicationunction o the Microsot IHCC. In act,a ZBA transaction without this specic

text will not be recorded automaticallyby the treasurys SAP enterprise resourceplanning (ERP) system, causing inter-company imbalances. Microsot,thereore, partnered with Citi to developand implement a new global cashconcentration product called the GlobalConcentration Engine, which allows therequired customised text to be included.

th auma accug:Despite ZBAs years o history, there hasnot been an inter-company ZBA solutionthat allows automated accounting withinan IHCC. I Microsot were to automatethe collection o sweeps and enablejust-in-time disbursements or hundredso accounts, the resources required tomanually post accounting entries wouldbe overwhelming. Thereore, the treasury

w: Working Capital Project o the Year

Mc ta Lquy sucu

a whl n LvlThis entry which won the Working Capital Project o the Year at thegtnews Awards 2012, explains how Microsotintroduced a completely automated international zero balance account (ZBA) structure into its global liquiditymanagement unction. The initiative has streamlined the cash concentration or hundreds o bank accounts andcreated a just-in-time unding model or subsidiary operating accounts. It is shared here as an overview o eectiveworking capital management procedures and in order to encourage best practice among treasuries.


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Working Capital Project o the Year

had to make a series o developmentalchanges to SAP to enable automatedaccounting. It did this by triggering thegeneral ledger entries, based on thecustomised text, which is included in everyZBA transaction.

Challenges Along the Way

In response to the European debt crisis in2011 and more recent events, Microsotpartnered with Citi to re-prioritise the ZBAimplementati

Documents

Gtnews Awards Winners Book 2012 (2)