Dutch company AkzoNobel is known worldwide for its coatings and specialty chemicals for both industry and consumers. As part of a new strategy to accelerate growth and value creation, the multinational decided to spin off its chemicals division. The challenge was to do this in just eight months. How did AkzoNobel’s treasury manage to split its activities into two?

With activities in more than 80 countries and 46,000 employees, AkzoNobel has a turnover of around EUR 14 billion. In April 2017, the company decided to change its strategy and transform itself into two high-performing businesses focused on coatings and specialty chemicals. “We needed to embark on a new strategy to build two strong independent companies”, says Gerrit Willem Gramser, head of treasury at AkzoNobel. “This plan had been on our mind some for some time, but was accelerated by market forces.”

Apart from timelines, the challenge in this project was to set up the new environment technically, with the right master data.

Laura Koekkoek, Partner Treasury Advisory Group

Rules of engagement

The announcement to split up the company went out on April 1st, 2017. “We almost immediately started having discussions for treasury on how to digest this”, says Gramser. “In Q1 of 2018 we wanted the company to be completely separated. So, as treasury, we started to do our math backwards. And we realized, given the timelines, it was probably something we couldn’t fully execute ourselves. When you realize that, all other decisions fall into place.”

AkzoNobel’s treasury department had already gone through a bank rationalization and had a fit-for-purpose treasury management system (TMS), in the form of SAP Treasury. “The system was complex, but it fit our needs very well”, says Joshua Watts, treasury infrastructure and project manager during the internal spin-off activities. “With the tight timelines, the first thing we decided as a treasury team, was to determine our so-called ‘rules of engagement’. We needed full focus on replication, duplication, cleansing – and not transformation. The treasury management structure we had was a strong solution. We’re going to continue working as one team and apply strict strategic discipline to meet our deadlines. That was our starting point.”

Treasury setting the scene

To achieve its aims, AkzoNobel required more resources than were available internally. “We were cautious about the deadlines”, says Watts. “The infrastructure we had was built, to a large extent, with the continued support of Zanders. We already had a long-running partnership, so we said: this is where we want to go – can you support us? By the end of June we had started and according to the planning, which was aligned between AkzoNobel and Zanders, we should have the system up and running by the first of January 2018.”

AkzoNobel also built up a cross-business project management office (PMO) to manage the separation from a group level, for all functions. The governance for the project consisted of the central PMO and expert-separation teams for treasury, tax, HR, commercial, accounting and other functions. “Beneath that we had local separation teams to deal with the local issues”, says Gramser. “We aligned ourselves as treasury in that expert-separation team in which the separation of our cash management and treasury technology were our primary deliverables. It was a layer of projects with a portfolio management on top of it. In the end, that structure worked very well. We started very early, so instead of watching how the rest of the company would approach the separation, we immediately formulated a plan. Quite deliberately we made choices in the beginning of the process – from a timeline and resources perspective – and that was crucial.”

From a systems point of view, the SAP Treasury system was cloned and the set-up was adjusted to fit the new bank account landscape. Watts says: “The system was already built for purpose and, as such, we had a good starting point for both companies.”

Integrated complexity

During the project, the main challenge was to align the cash management stream and technology stream. The idea to clone the system and not to build a new environment and cash management structure was therefore an important decision, says Zanders consultant Laura Koekkoek. “Apart from timelines, the challenge in this project was to set up the new environment technically, with the right master data.”

Decisions needed to be made regarding which entities belong to the coatings business and which to the chemicals business. Some entities needed to be split and it took time to arrange these new legal entities. For the integration at the end and to test the new solution, the bank accounts also needed to be ready, as well as the banking infrastructure. Koekkoek adds: “But at the end, all bank accounts were open, with all legal documentation in place.”

That was an achievement, according to Watts. “Everything is so integrated; you can’t start on one area without knowing the status of the other. The complexity is that – apart from all of the individual legal entity or bank account issues – there are so many interdependencies. You can’t approach the TMS separately from your global cash management activities. At a certain point we put a lot of energy into the so-called long tail of the separation. Small entities or small branches, that have a small impact on the overall figures, were consuming a significant amount of project resource time. So at a certain stage we changed the priorities to the bigger impact issues.”

We needed full focus on replication, duplication, cleansing – and not transformation

Joshua Watts, AkzoNobel

Team effort

Across AkzoNobel, the vast majority of the teams were already allocated to the specific business units, so fully separated. Both parts are and remain active in the current global markets. Gramser notes: “The two separated businesses are both good businesses, but they have different futures. And that will be the same for the treasury environment. But starting from now, the businesses can run very well on what we’ve given them.”

In March 2018, AkzoNobel announced the sale of its specialty chemicals part to The Carlyle Group and GIC. “Irrespective of the new owner’s system, our function was to be ready, no matter what scenario. That has been successful, with treasury being an early mover, having a clear plan and sticking to these rules of engagement. We’ve been quite brutal in protecting our own boundaries and guidance. The ‘as-is principle’ was leading: this is what you get. Treasury is an integrated, global operational function.”

According to Watts, the project’s success was a real team effort: “The interaction was great, on all levels. Compared to the more generic technology consultants, Zanders is much more strategic in its advice. We understand each other’s language and our teams were quite impressed by the efficiency of the work. There was good integration, good communication. It was on time, on budget – we’re very pleased.”

Endemol Shine Group (ESG), a private equity-owned, Dutch-based media company with global operations, is the world’s largest independent producer and traveler of formats. The company has grown mainly through acquisitions, resulting in a treasury organization that was largely decentralized. In 2017, the new treasury team opted for a full treasury transformation project, to unlock the available potential and to support the business’s growth ambitions.

With activities in more than 80 countries and 46,000 employees, AkzoNobel has a turnover of around EUR 14 billion. In April 2017, the company decided to change its strategy and transform itself into two high-performing businesses focused on coatings and specialty chemicals. “We needed to embark on a new strategy to build two strong independent companies”, says Gerrit Willem Gramser, head of treasury at AkzoNobel. “This plan had been on our mind some for some time, but was accelerated by market forces.”

Moving to more scripted productions has led to significantly longer cash conversion cycles, which increased working capital needs

Albert Hollema, Treasury Director at Endemol Shine Group

In 2017, Endemol Shine Group created over 800 productions in 78 territories, airing on more than 275 channels around the world. The group’s turnover is around 2 billion euros. Global hits include many non-scripted formats such as MasterChef, Big Brother, Your Face Sounds Familiar, Fear Factor and Hunted. The company's scripted business focuses on scripts for films and television series with a longer life cycle, such as the drama blockbusters Black Mirror, Humans, Peaky Blinders and Broadchurch. These series were each sold in at least a hundred regions. Another example is Sweden’s critically acclaimed hit Bron/The Bridge, which has been successfully adapted for different local regions.

As the group has mainly been growing through small acquisitions and the merger of the Endemol and Shine business, the decentralized treasury organization lacked full visibility at a central level. Consequently, treasury head office wasn't aware on a daily basis of the cash movements and other activities of thousands of bank accounts at more than 40 banks, resulting in high amounts of trapped cash. Besides, the company is highly leveraged with limited additional borrowing opportunities. Although a treasury management system was in place, it was mainly used to maintain intercompany accounts only.

Time for change

In early 2017, the treasury team underwent some changes and was slightly expanded. In the meanwhile, the demand for scripted business started to grow quickly. “For these scripted productions we need to invest more, and the broadcaster pays ESG later due to the longer production time”, Albert Hollema, treasury director at Endemol Shine Group, explains. “So, due to the longer life cycle of these productions, our opcos (operational companies) were increasingly demanding more working capital. For us there is no real credit risk – we always have signed contracts before we start to produce, so we know that the client is going to pay – but we need to bridge the gap between producing and getting paid. The cash conversion cycle is important for us. Moving to more scripted productions has led to significantly longer cash conversion cycles, which increased working capital needs. The non-scripted productions, like The Wall and Deal Or No Deal, have shorter cash conversion cycles and are therefore important for financing our business.”

Hollema explains: “We are a highly leveraged company and have a credit rating of CCC+, so for additional financing we can’t simply go to a bank to invest in working capital. Also, our two shareholders – Apollo and Fox – were not really looking to put more money into the business.” The increase in working capital thus had to come from the company’s existing resources. Hollema says: “There was a lot of cash in the organization, spread over all different bank accounts and in different entities on different locations. If we could unlock that amount of trapped cash, we would find our source of finance. That’s why we started a treasury transformation project: to make our treasury activities more efficient and to use the cash within our company to finance our growth. Because by developing the business, we generate higher profits and a higher cash flow which will help to reduce our debts and get out of the highly-leveraged situation.”

To a better category

The group’s treasury transformation included improved use of a treasury management system (TMS), bank connectivity and new treasury processes. Hollema adds: “We needed our TMS supplier to be a business partner, providing us with a solution that would really help us in today’s markets. We reached out to several providers and at the same time we had contact with Zanders, who was already supporting us on some treasury matters. They told us about their new offering, the Treasury Continuity Service, consisting of a certain number of consultancy days per month on which they support treasury, with provision of a high-end TMS and including access to their knowledge database. The service looked very helpful and was a good fit for our needs. We are a relatively small business and had just experienced a lack of interest from system providers, but due to the support of Zanders we moved to a better category on the system vendors’ lists. So, we got a state-of-the-art system that we normally wouldn’t have bought. Another important thing for us was that it offered us a software as a service (SAAS) solution, which basically needs no internal IT support. Updates are done on a regular basis and keeps our system up to date all the time. Overall, the combination of supporting elements was attractive for us.”

During the EuroFinance conference, the audience was impressed by what we had achieved in such a short time frame

Albert Hollema, Treasury Director at Endemol Shine Group

The award winning show

According to Dave van der Zwan, deputy treasurer at Endemol Shine, the implementation process went quick and smoothly: “As a team we worked closely together and within four months we were live on FIS Integrity SaaS.” At the same time, the company decided to set up new bank connectivity via Swift to receive the bank statements and access liquidity through the TMS in an efficient way. “We have a lot of opcos and learned that as a group we held over 1,000 bank accounts – and the information on these accounts was previously only available by the end of the month and a subsequent week for major opcos after the cash flow forecasting was submitted. With the managed bank connectivity solution from FIS’s Swift Service Bureau, we managed to get connected to all our banks directly to pick up all balances from all the opcos on a daily basis. Now we can see exactly how much money an individual opco holds and how much money can be extracted from it. That’s very helpful. During the implementation we opted for active pulling of balances as well – giving ourselves authority to move funds in and out of the opco accounts.”

The innovative system solution won two awards. Global Finance awarded the group for the ‘Best Treasury Management Systems Program’ and Treasury Today gave an Adam Smith Award in the ‘Highly Commended – One to Watch’ category. Hollema notes: “During the EuroFinance conference in October 2017, we presented our case and the audience was impressed by what we had achieved in such a short time frame; the solution, approach, and project management together with the scrum approach, cutting the process into small pieces.”

Bridging the gap

So what exactly made this project so successful? Van der Zwan says: “Our aim was to unlock funds for our investments in working capital. By freeing up that liquidity we were able to keep funding the business according to plan and without any need to postpone certain productions. The business case was easily made from a treasury perspective, it pays for itself quickly, but it also unlocks the liquidity we need in order to be able to grow the business. During the process, there was a snowball effect by which we’re moving from one improvement to the next. Also, the opcos realized what we were trying to achieve and proposed their own initiatives, which fitted perfectly in our overall strategy. A lot of elements came together and were unlocked in this transformation process by a small and high-quality team of Endemol Shine and Zanders people.”

Hollema adds: “From the investment point of view the treasury transformation project was a real success. By unlocking trapped cash for the company, the whole business case is basically paid out of the savings achieved in the first six months. Remember our financing costs are high given our CCC+ rating. We started to build in mid-2017 and by the end of the year the investment in the transformation was repaid, from that perspective.”

To be continued

It was the first time that the company’s head office was centralizing some activities. Van der Zwan says: “If we had taken a ‘big bang’ bank rationalization approach and required opcos to change their invoicing details, electronic banking, etc., we would have seen strong resistance. But instead we said: you can stay with your bank, things will remain as they are, we only want visibility and access. We wanted the transformation to disrupt as little as possible but on the other hand we knew exactly what our end goal was. Step-by-step, with support from the opcos, we will move to that end goal. Once you take the first step, the next step is obvious, and that response was exactly what we saw from our opcos. The support we received from both management and opcos was a big help during implementation.” Zanders consultant Adela Kozelova adds: “Endemol Shine’s treasury acted quickly, while doing things step-by-step, to get as many people on board as possible – a good example for many companies.”

With greater visibility of the company’s cash, the treasury team will be able to better evaluate which businesses are performing well and where to allocate capital. Hollema concludes: “We now pick up information via the bank statements, which doesn't require additional reporting from the opcos, but is very useful for us as a group and can even be seen as an early warning indicator on how our businesses are performing. The next steps involve the creation of cash P&Ls and cash flow overviews from this info, eliminating more manual processes by integrating the local ERPs with the FIS Integrity Solution to help improve real-time cash forecasting. Better control over FX and simplification of the IC settlement process by optimizing the in-house bank (IHB) module are also high on the priority list. The banks and bank accounts will need to be further rationalized to help the opcos. They do a lot of things that can better be centralized so they can focus on doing business. We are a business partner to our opcos, we take care of the whole financial logistics. Zanders and FIS are our sparring partners and we use them to discuss what to do in the next phase.”

Caring for the environment has, for many years, no longer conjured up a vision of living an alternative lifestyle; it’s become an accepted fact of international business life. Our current sustainable mindset owes a great deal to the awareness campaigns carried out by environmental organizations such as Greenpeace. This movement has, for decades, crusaded against commercial and governmental activities that are harmful to the environment and brought ecological anomalies to the attention of the press and the public.

It all started in 1971, on an old trawler. It was manned by a handful of Americans and Canadians who set course for a location off the coast of Alaska to protest US plans to carry out above-ground atomic tests. They failed to reach their destination but succeeded in their campaign, generating so much publicity that the US called off the tests. The trawler was renamed ‘Greenpeace,’ and from then on its popularity grew, thanks largely to its protests against hunting young seals for fur. Demonstrations against whaling, nuclear energy, and chemical discharges quickly strengthened Greenpeace’s influence. In the years that followed, dependencies sprouted up in more and more countries. Then Greenpeace International was founded, first in London, and for pragmatic reasons, its headquarters were moved to Amsterdam, as it wanted to operate from a liberal, progressively minded country.

Too slow

Great strides towards adopting more sustainable solutions have been taken in recent years in various sectors, such as the electronics industry and energy. “But it’s still all moving far too slowly for our liking,” says Radboud van Delft, organization director of Greenpeace International, the umbrella organization of nationally active Greenpeace branches. “We worked out energy scenarios for migrating to fully sustainable energy years ago, scientifically verified by country or continent. What’s more, we’ve already shown that it’s all technically feasible—something which was often disputed in the past. But governmental policies also have to be accommodating. Unfortunately, little is accomplished through climate summits, so we find ourselves having to focus on individual energy companies and governments. Even in Europe, it’s difficult to quickly adopt significant policy changes. Poland, for example, still depends heavily on coal, while France refuses to play ball when it comes to nuclear energy. European policy is very slow and cumbersome, and with certain species facing extinction and people suffering from the consequences of climate change, nature and people need change to happen now.”

Greenpeace can be characterized as an ambitious, action-oriented organization. Its approach is valued throughout the world, as evidenced by its millions of donors and many thousands of volunteers can all bear witness to.

We were looking for a bank that was safe and one we could be sure was investing
our donors’ money responsibly, financing the solutions too.

Radboud van Delft, organization director of Greenpeace International.

Cleaning up

As an organization, Greenpeace prides itself on its use of independent, non-violent, creative confrontation. “We seek neither political nor commercial links, and we have no permanent enemies or allies,” says Van Delft. “We don’t accept money from companies or governments; financial dependence or obligation would make it difficult to be critical, so we avoid such situations. We seek common cause through our work with governments and, of course, our work with companies, like Coca-Cola and McDonald’s, to promote sustainable business. However, while we applaud them for doing the right thing, we never endorse them. We are more than willing to work with any party that shares our objective: protecting the environment. Take Dutch energy supplier Nuon, for example. We are exploring ways with them of producing cleaner energy that will represent a significant step forward in sustainability while maintaining commercial viability.”

Taken in a global context, the situation becomes more complex. As climate summits have shown, it’s the big countries, the ones that use the most energy, that erect the biggest obstacles to far-reaching international agreements. “China is a very interesting example,” says Van Delft. “There’s just so much going on there. Here in the Netherlands, we’ve campaigned strongly against plans to construct five new coal-fired power stations, spread over a period of a few years. In China, they build five such power stations every month. That said, the Chinese government knows it has a lot to do when it comes to the environment; the national government actually uses our reports to put pressure on provincial governments to get things done. Demand for energy is growing very rapidly there, but no other country invests as much in clean energy as China.”

So, given that Greenpeace cannot take action in China, does that mean an increased emphasis on lobbying? “We are a campaign-oriented organization, and there are different ways of campaigning. Over the years, we’ve broadened our campaigning base. We’ve embraced scientific research, for example, and in recent years we’ve become very active on social media, with up to 24 million people who like, share, tweet, sign up, and campaign with us. These efforts have led to wins such as getting Apple to adopt green energy and major fashion brands to drop toxic chemicals from their production processes.”

Green and healthy

During the 1970s and 1980s, Greenpeace gained a lot of brand awareness and donors. Those followers are still faithful, but people in today’s younger generation in the West are more difficult to connect with, which is a problem many other organizations also face. Despite the aging of its donor base, Greenpeace has many supporters worldwide, and in Asia and Latin America, it is growing particularly strongly.

“Our donors make it possible for us to campaign all over the world,” continues Van Delft. Local branches in 40 countries contribute financially to Greenpeace International, which is responsible for worldwide strategy and coordination. Over the past few decades, its worldwide income has grown to approximately EUR 240 million, some EUR 60 million of which is channeled to Greenpeace International. “The money is used to fund global campaigns, our ships, worldwide IT systems, and to pay international employees. We set aside part of our cash reserves for future campaigns and investments. But we want to prevent these reserves from being invested in activities that we typically oppose, such as those of oil and nuclear energy companies. Most mainstream banks do invest in activities like these.”

Greenpeace has, for a while now, used green banks such as Triodos and ASN, but on a very limited scale. Most of their assets have been held by what were considered reliable mainstream banks. The Greenpeace International board was recently looking for a suitable bank and was spurred by a growing need for security. However, it was unfamiliar with the relatively small, Dutch green banks. Van Delft says: “First and foremost, our money had to be secure, and with the smaller banks, it wasn’t clear how secure they were. In a nutshell, we were looking for a bank that was safe and one we could be sure was investing our donors’ money responsibly, financing the solutions too.”

If a bank wants to stay financially sound it must invest in government bonds, but not one government can claim to have a perfect, sustainable energy policy.

Radboud van Delft, organization director of Greenpeace International.

Greenpeace had a few financial institutions in mind, but unfortunately, the smaller banks hadn’t been assessed by the big rating agencies. So, the board decided to have the candidates that showed potential assessed externally, and Van Delft went in search of an independent advisor to help them make a well-founded choice. “Which brought us to Zanders and Sustainalytics.”

Sustainalytics: Sustainalytics is a global provider of environmental, social, governance (ESG) research and analysis. Provided by Sustainalytics, ESG research and analysis enable organizations to assess the potential influence ESG issues will have on the risk and return of their investment portfolios and funds. You can find more information about Sustainalytics on: sustainalytics.com.

Looking further

Coincidentally, these two were already on the same wavelength, and so began a collaboration in which banks could be assessed on both creditworthiness and sustainability. Zanders had experience in financial ratings, for which it had already developed models, such as Eagle, while Sustainalytics had experience in assessing companies on their sustainability.

Zanders and Sustainalytics started by whittling down a long list compiled by Greenpeace into a shortlist. Based on their initial ratings, it was possible to eliminate all candidates outside Western Europe and the US. When further scrutinized for sustainability, even many Western banks failed to meet Greenpeace’s exacting criteria.

“We can easily verify a bank’s creditworthiness,” says Zanders consultant Hans Visser, explaining that over 30,000 banks worldwide can be allocated a credit rating through the Zanders bank risk-rating model.

But Greenpeace wanted to look further than that; they wanted to see where a bank invested its money. We were aware of the need for sustainable investment products, but in this respect, we had to check out the bank as a whole."

The question that had to be linked to the creditworthiness factor was what criteria had to be applied to a sustainability rating. Van Delft adds: "It’s not enough for a bank not to invest in activities that could be detrimental to the environment," he explains. "Investments in the defense industry, for example, or those that rely on child labor are also unacceptable. Sustainability criteria are, of course, very specific, the others are more generic. You can quickly ascertain that a bank doesn’t directly finance dubious activities, but it’s much more difficult to establish exactly what happens to the investments it actually makes."

Tal Ullmann and Joris Laseur were responsible for the assessments of banks on their sustainability performance on behalf of Sustainalytics. "To begin with, we assessed a dozen or so banks on Greenpeace’s sustainability criteria," says Ullmann. "You have to realize that no bank can comply fully, so we weighted each criterion with a number of points that were awarded to banks, and in this way, we came to a ranking." The resulting shortlist was then further analyzed and assessed. "We then checked out the banks that scored the most points on Sustainalytics’ more generic sustainability indicators," adds Laseur. "These included indicators in the area of corporate governance, and those pertaining to policies and environmental and societal programs."

Usually, banks that have high ratings are the ones that have clients with high ratings. And the fact that scores for sustainability criteria will never be 10 out of 10 is quite logical, explains Van Delft: "If a bank wants to stay financially sound, it must invest in government bonds, but here’s the thing: there’s not one government that can claim to have a perfect, sustainable energy policy. And that’s just one of the aspects that have to be taken into account."

Other Organizations

The collaboration between the three parties was excellent, assures Van Delft. "I was particularly pleased with the way both Zanders and Sustainalytics were willing to invest in the development of these tools and adapt them to our specific requirements. Their joint expertise was efficiently exploited and it created a lot of synergies. I believe that this cooperative effort between business and society demonstrates how many of the complex problems we face in the world today can be jointly tackled. To the best of my knowledge, rating the combination of a bank’s financial soundness and sustainability in this way is quite unique. Wouldn’t it be great if it could be done by a lot of other organizations too? Not just NGOs but organizations that are active in both the public and private sectors — in fact, everyone who wants to support a newer, greener economy."

The assessment criteria could be adapted to the values and objectives of the relevant organization. "But at the same time, we have to keep following the criteria used for Greenpeace," insists Visser, "it’s a snapshot and, of course, everything changes." Even the collaboration itself is sustainable: it will be followed up by a Monitoring Service, with which bank ratings can be continuously monitored.

In Van Delft’s opinion, their choice of bank indirectly sends a signal to all banks. "Our motivation to use this combination was mainly for internal use, but it certainly contains useful elements that could influence clients’ behavior. The way we have now invested our money complies with our procurement policy and, for example, the construction of our new ship, Rainbow Warrior III. This too must meet the highest possible sustainability requirements and be safe for all those who sail with her."

If you want to know more about rating the combination of sustainability and financial soundness, contact us.

When one of the world’s biggest tobacco companies decided to bring all its entities onto the same enterprise resource planning system, there were some challenges along the way. Zanders brought its expertise to bear, to help design, test and go live with the chosen system - and ultimately make the SAP implementation a success.

British American Tobacco (BAT) was founded in 1902 as a joint venture between the UK’s Imperial Tobacco and the American Tobacco Company. In its 110 years of business, BAT has grown considerably through acquisition to become the world’s second largest tobacco firm and a top 10 FTSE 100 company with 183 companies around the world. One of the biggest acquisitions of recent years was the purchase of Rothmans International in 1998. Its biggest brands include Lucky Strike, Pall Mall, Dunhill and Kent cigarettes.

Gavin O’Dowd was the Project Lead for the Treasury part of the SAP implementation project based at BAT’s London headquarters. He says: “Until now, BAT had never integrated their business cohesively into a single model within our financial operating system. We therefore decided to launch two programs to achieve this.” The first of these programs was to roll out a single ‘Target Operating Model’ (called project ‘TOM’), while at the same time supporting this with a single SAP system across the company (called project ‘One SAP’). BAT treasury has been using SAP since 1999, but different business units were using different versions of the application. These two projects were combined and became a single global program called TaO (Tom And One SAP). Tao is the Chinese word for ‘path’ or ‘way’ - which is apt since China is BAT’s biggest single market, and has 40 percent of the world’s smokers.

As a system becomes more bespoke, it also becomes more complicated to update and maintain

Gavin O’Dowd - (BAT - Project Lead for the Treasury implementation)

Designing project TaO

The aim of project TaO was to create a template for all of BAT’s operations. It was a complex, multi-pronged project involving several departments across the group, not just treasury. The other departments involved in the project included financing, operations, and marketing. BAT’s Dutch entity had been a Zanders client for several years prior to project TaO, so the consultancy was asked to join and began working on the design phase of TaO in April 2011. While the TaO project involved a company-wide SAP implementation, the Zanders team worked exclusively on the SAP Treasury & Risk Management, Bank Communication Management (BCM), and In-house Cash elements of the project. Judith Wissink is a Zanders consultant who managed the implementation of the SAP Treasury & Risk Management module and worked closely with the BAT treasury team throughout the project. She says that the team had to work quickly to understand what was needed: “One of the biggest challenges was that BAT had been thinking about the new system and how they wanted to work for 18 months before the actual project started. So we had to get up to speed quickly. We needed to fully understand BAT’s requirements before we could begin designing the system.”

Zanders worked with BAT on designing the future software architecture for all of BAT’s entities. First of all they created the templates for this. BAT’s O’Dowd says: “The first challenge was to define the overall goal of the project. What did treasury want to achieve? We had to consider the structure of our treasury, as BAT has some huge foreign currency exposures because we function in pound-sterling, although we make relatively little profit in our operations in the UK.” He adds: “The next thing was to be clear on the benefits for treasury and to always make decisions with that in mind. All the benefits were quantified and were considered in terms of risk reduction.”

Creating a bespoke but balanced system

While SAP was BAT’s chosen system, it didn’t provide all the functionality that the group required. Some custom development and design were therefore needed. O’Dowd explains: “The second challenge was that SAP did not give us all the capabilities that we needed and so we had to create some bespoke functionality. We needed to strike the right balance though - as a system becomes more bespoke, it also becomes more complicated to update and maintain.”

There were several enhancements to be made during the implementation project. One of these was the part of the system called Deal Optimiser. Zanders was responsible for the system design of the bespoke elements of the system and it collaborated with developers on the realization of that part of the project. BAT had a very specific vision of what it wanted to achieve through the TaO project and this made certain aspects of realizing the project quite challenging. The build phase began in September 2011 and involved customizing the standard SAP system and building the bespoke part. This also posed a challenge because treasury was part of the bigger company-wide project. At various stages during the build phase, this required close alignment between the treasury workstream and the other ‘workstreams’ within the TaO project, as a lot of processes were interdependent. As well as the Treasury Module, SAP In-house Cash and BCM also needed to be customized. The customization of In-house Cash and BCM was managed by Zanders’ Mark van Ommen. Both Deal Optimiser and In-house Cash had a large geographical spread and the latter has now been completely rolled out across the company. Deal Optimiser is also live across 90 percent of its target end users.

The ‘fit-gap’ analysis

The treasury system template was designed to fit the needs of global treasury in which most of BAT’s treasury activities take place. To make sure the template also fitted the end market’s requirements, BAT Malaysia was chosen as a pilot company. Once the template design was complete, the template needed to be evaluated against the exact needs of the Malaysian company, one of BAT’s top 10 end markets. This phase of the project was referred to as the ‘fit-gap’ phase and its aim was to see if the template would meet the company’s specific needs and if any changes to the template would be necessary. Wissink explains: “After the fit-gap analysis we started to actually build the system for the entities in scope. This was our first proof of concept for the designed template.”

Ironing out the bugs

Both the design and the testing phase were key stages of the project. Once the system had been designed, customized and built, three rigorous testing cycles were carried out. These consisted of an initial technical test cycle carried out by Zanders consultants (unit testing); an integration test cycle conducted by the consultants and BAT’s staff; and the user acceptance testing stage with BAT’s key users testing by themselves.

O’Dowd says: “During the testing phases we got rid of a lot of bugs - to the point where there were none.” BAT’s key users were the group’s central treasury and central accounting departments based in London, the Romanian shared service center, the treasury and shared service center in Malaysia, as well as other end markets. After these testing cycles, the design and build of the system was signed off.

At each stage of the project, there was a strong focus on documentation and support. Wissink explains: “During each phase, we documented all the settings that we made, and explained the logic behind the settings for the future support team to be able to maintain the system. We also produced training material and user manuals.”

Team work

The go-live date was the third of September 2012. O’Dowd notes that there were no major issues with the SAP systems after go-live (during the after care phase): “We had done so much testing that this went smoothly.” However, there were other challenges during the pre-go-live phase for treasury in Malaysia. O’Dowd explains: “It was a challenge to get bank connectivity ironed out in Malaysia. In the end, the banks resolved any problems in a satisfactory way.”

A team of 14 Zanders consultants worked on the project, while BAT had a team of 25 in place for the testing phases of the projects. Deepak Aggarwal was the overall project manager for Zanders and both Judith Wissink (who managed the SAP Treasury & Risk Management implementation) and Mark van Ommen (the In-house Cash and Bank Communication Management modules) and their teams reported to him. O’Dowd says: “Zanders were a young and dynamic team. Deepak Aggarwal had some fantastic experience, which really boosted the design process. Judith van Paassen, partner at Zanders, was also involved and was able to influence at a high level at BAT, which helped us enormously. All the consultants showed great expertise in the areas of In-house Cash, bank connectivity, and the SAP Treasury module.”

Ambitious plans

BAT is ambitious for the future implementation of the TaO program. Over the next three years, it intends to roll out the SAP system to more than 120 countries. The In-house Cash module has already been rolled out to 62 countries and is now processing 60,000 transactions per month. Deal Optimiser is live in 25 countries.

O’Dowd says: “Overall, the program has been a roaring success. The smoothness of the go-live was second to none. The attention to detail during the design, testing, and pilot cycles really paid off, so I would really emphasize this to people starting out on a similar project.”

Expansion into new markets brings challenges on many levels, not least of all financially. When Sulzer, a leading provider of products and solutions in markets such as oil and gas, power, water, and transportation, decided that it needed best-practice treasury and cash management processes to support the developing business operations, the two-pronged treasury project required some external help. Zanders was able to advise on and facilitate a European cash concentration structure and a TMS implementation project.

Sustainable value creation and profitable growth are the ultimate strategic priorities of the company and the financial side of Sulzer’s organization has to be flexible to keep up with the changing patterns of cash flows, revenue streams, investments, and new risk exposures. Treasury needs to move with the challenging cash management environments in new markets, often in developing countries around the world, and it was decided that treasury processes and structures needed to be updated. In 2008, Sulzer’s treasury team embarked on a dual project to implement a new treasury management system (TMS) as well as a new European cash concentration structure.

“In an ideal world we would be able to monitor all the subsidiaries’ transaction data by having access to a data warehouse”

Jean-Daniel Millasson (Corporate Treasurer at Sulzer)

Need for a treasury realignment

Jean-Daniel Millasson, the corporate treasurer at Sulzer, explains that the company has grown organically but also considerably through acquisitions. Today, it has a production and service network of over 170 locations around the world, while back in 2008 it had about 120. He says: “We have legal entities in many countries and each has its own set of bank accounts, banking relationships, and manages its payments and cash management independently of the treasury center in Switzerland, although we give clear directions and guidelines for their treasury activities. We feel it’s very important to further develop in the area of cash and risk management, hence centralizing business support functions such as treasury is a vital way to achieve higher efficiencies, greater transparency and access to real-time information across a broad geographic area.”

With this in mind, one clear goal of this treasury project was to improve cash management and visibility by implementing a Europe-wide zero-balancing cash pool. Equally important was the selection and implementation of a new TMS. Millasson says: “It was clear for me that we needed external support to realize two projects of this magnitude since we are a small treasury team. We therefore decided to conduct a request for proposals (RFP), after which Zanders was selected.”

Cash pool implementation project

The cash pool implementation involved intense interviewing and liaising with Sulzer’s European subsidiaries. Eric Schwarz, head of the corporate treasury center at Sulzer, explains that this data-collection phase of the project was time-consuming. Zanders consultant Bart Timmerman carried out many of these visits and fact-finding missions with Sulzer or on the company’s behalf.

Schwarz says: “During the cash concentration project, Zanders contributed to the success by taking care of that part of the project that we just didn’t have the resources for. They were able to collect and collate data and meet our subsidiaries. Although we at Sulzer didn’t lack the expertise to go ahead and implement the kind of Europe-wide cash concentration structure that we had in mind, Zanders was able to alleviate an important part of the hard work where we needed support.”

The objectives of the cash concentration project were to increase the centralization of cash, to improve visibility of cash balances and flows in Europe, to improve efficiency of cash management, and to later leverage the platform across the organization in a broad geographical sense covering different time zones. The cash concentration project also included an analysis and redesign of the company’s European banking infrastructure and was successfully concluded in 2009.

Gaining visibility and control

The second phase of Sulzer’s treasury transformation was initiated at the same time as the cash concentration project. In fact, the TMS implementation was partially triggered by the need for a best practice system to manage the transaction data generated by the European cash concentration project.

Millasson explains that the previous TMS was not operating in line with best practice and there were still manual processes involved that prevented automated processing of data: “Having a zero-balancing cash pool created a high number of transactions for us – which meant more work for the back office. With the new TMS in place, we’re able to handle this workload. Previously, we didn’t have straight-through processing (STP) or electronic bank statements through our front or back offices,” he says.

Expert advice was invaluable during the selection of a new TMS provider. Sulzer first of all consulted Judith van Paassen, partner at Zanders, and then worked closely with Zanders consultant Bart Timmerman. Millasson adds: “For the TMS project, Zanders’ expertise was crucial. We were looking for professional support on the evaluation of different systems and also on the implementation at a later stage. Even for an experienced treasury department it is difficult to make a decision on an individual system. It was therefore invaluable to work with experts who have in-depth knowledge of the systems.”

Eventually IT2 was chosen but it couldn’t become fully functional until the cash concentration structure was in place, because of the need to have a clear view of the new bank reporting infrastructure. Although IT2 went live with FX deals and reporting in 2009, the full implementation was completed in 2010. Bart Timmerman worked closely with the Sulzer treasury team on the TMS implementation but was also present for much of the European cash pool project. He says: “The two projects were complementary. It was an opportunity for the company to make better use of its idle cash. However, implementing a cash pool without a TMS would have been impossible.”

Millasson adds: “The benefit of the TMS was also that it enabled us to carry out compliance and reporting. It has made a big difference in terms of improving our processes. Of course, data quality is crucial for risk management, too.”

Continuous improvements

While the new TMS has introduced best practice treasury processes, there are still some areas that could be improved, according to Sulzer’s Millasson. He says: “We try to be in a position to best monitor our entities but what we can monitor is limited. We don’t have a common ERP system in the group, which given our business model is not essential, but makes it more difficult for us to access detailed transaction data. At the moment we have to rely on data sent to us by subsidiaries and their analysis. In an ideal world we would be able to monitor all the subsidiaries’ transaction data by having access to a data warehouse.”

In 2011, the new IT2 accountancy module was added for the company’s new cash pool in Australia. Millasson says: “Thanks to Zanders’ knowledge of TMS, this was a short and smooth project, which was nonetheless very important for us.” Currently, Timmerman and his colleague Tobias Schaad are upgrading IT2 to the latest release, while looking at possible enhancements and extended functionality simultaneously with the treasury staff of Sulzer.

“These projects support internal and external growth by concentrating processes
and increasing efficiency”

Jean-Daniel Millasson (Corporate Treasurer at Sulzer)

Future support for a developing business

As Sulzer continues to develop and grow, both geographically and in terms of its markets and technology innovation, Millasson and Schwarz now feel it is well supported by treasury. Millasson says: “We still want our business to grow, so you need to finance it. These projects support internal and external growth by concentrating processes and increasing efficiency – these contribute to growth.”

And like the operational side of the company, Sulzer’s treasury team is not likely to let the grass grow under its feet. Rather, they are constantly looking for improvements to their financial processes. Millasson says: “The immediate projects and priorities are still efficient, to make better future use of the TMS in certain areas, to make processes even leaner, which means having electronic dealing and electronic data submissions from legal entities through the TMS. We also want to roll out our cash concentration strategy to more countries such as Singapore and China.”

Treasury is also considering doing some work to establish meaningful and effective key performance indicators (KPIs) for the business. Millasson explains: “The benefits of KPIs are twofold: a means for continuous improvement and illustrating Treasury’s contribution to the business’s financial performance, and a prerequisite for being able to benchmark against other treasuries. Furthermore, we continuously assess opportunities to expand our in-house bank activities, for instance, by considering how payment factory solutions in certain regions could add value to Sulzer.”

Timmerman summarizes the overall feeling about Sulzer’s treasury project: “What was interesting was that there was dedication at Sulzer and there was a really strong drive to lift the treasury practice one level higher. As clients, they were open about shortfalls in their processes and supporting systems, and this really contributed to the quality and progress of the project. Taking on both projects together was a real challenge and, ultimately, it went very well.”

An iconic character symbolizes the global leader in fiberglass technology. The Pink Panther – an idiosyncratic, elegant, aristocratic yet cuddly cartoon character – is the official corporate mascot of Owens Corning. How much success the character has brought is difficult to quantify. But the fact remains that the American company, with sales of USD 5.3 billion, has been the global frontrunner in the fiberglass market for decades. Applications include building, insulation, wind blades, hockey sticks, tennis rackets, sailboats, and much more.

With a company the size of Owens Corning, it is a challenge to arrange all treasury administration, in various currencies, properly and efficiently. “Our previous treasury management system was outdated,” says Isabelle Badoux, European treasury & credit leader at Owens Corning. “It was not a global implementation, and at the end of the day, we used the system in Europe and North America in two different ways. Also, the system did not support all transactions. In addition, the company had decided to upgrade to SAP 6.0 as a general ERP.” ERP is enterprise resource planning, a system that integrates all (financial) processes within a company.

“The system will be there for several years. There’s only one chance to do it right”

Isabelle Badoux, European treasury & credit leader at Owens Corning

Local knowledge

What can a company do with its current treasury management system and the interface to the old SAP version 3.1i, including posting the accounting entries of treasury transactions? In other words, how was Owens Corning going to integrate a new SAP upgrade into its system? Badoux explains: “We had to consider whether we were going to use the interface of the old treasury system or choose the fully integrated approach. It became clear that the development of a new interface would be a large investment and would have considerable consequences, although it would not achieve full integration. We then made a strategic decision to go for the integrated version of the SAP treasury, migrating to one global integrated version for Europe and North America, which could be implemented in Asia Pacific and Latin America, too.”

This was 2010, a period in which Owens Corning was looking at ways to increase efficiencies within its department. “The new treasury system created an opportunity to review all our processes, aligning them with all global activities,” says Badoux. The company sent out a request for proposal (RFP) to a number of specialized companies. Two of these, Zanders and the American company e5 Solutions, combined an offer for global design and implementation. “We were having partnership discussions with e5 Solutions at the same time both of us received the RFP,” says Laurens Tijdhof, who manages Zanders’ international offices in Brussels, London, and Zürich.

“Our presence here, and that of e5 Solutions in the US, made it easier to have quick, local decision lines. The partnership worked well for Owens Corning, and we have continued this partnership in other fields as well.” Badoux acknowledges: “For global implementation, it helps to have consultants with local knowledge. And we liked the offer. It was very efficient for us.”

For several years

In the RFP process, you need mutual understanding of the scope, says Tijdhof. “It starts with a proposal but, while discussing the scope in detail, the proposal changes and you end up with a document describing exactly what you’re going to do. That way, the number of uncertainties is reduced and the result is clear for both client and consultant.” Owens Corning required help from both a specialist and a generalist, says Badoux. “Since this field is very technical, we really needed a specialized consultant in treasury. I knew Zanders from the interim management perspective of my previous company, and I knew that they have consultants for implementing systems as well. In Europe, Zanders is recognized for its consulting expertise within treasury, and during the project the cooperation between both Zanders and I was always ‘straight to the point’. That made decision-making much easier. Good documentation has been very valuable in the process too, as it shows all pros and cons of all options. Configuration is key. You need to configure well from the start, as the system will be there for several years. There is only one chance to do it right.” The planning was aggressive. The project kicked off in January 2011 and five months later, in July, Europe went live.

In-house bank

At the end of 2010, a month prior to the kick-off, one of the employees left Owens Corning’s treasury department. Badoux says: “One of the Zanders treasury consultants joined us for interim support and advice on daily treasury operations. After that, he was transferred to a new department to assist in treasury accounting, now segregated from the treasury area.” In Brussels, five people are managing Owens Corning’s treasury, foreign exchange (FX) management, and cash management in Europe, including Badoux, who is also responsible for the company’s credit management. The treasury department in Brussels is like an in-house bank for the European entities of the group.

“Structure was crucial,” says Badoux. “Treasury also performs a number of services for hedging the foreign exchange exposure centrally for the entities in Europe. This used to be a manual process, as we had to look at the individual ERP’s of the entities and their balance sheet exposures. Then we had to consolidate it in an Excel template before taking action. That’s now facilitated. We also do the processing of most of the internal and external payments centrally. Not all, but we are centralizing the platform for the electronic banking system. SAP ECC 6.0 is now connected to our electronic banking system.”

The same language

The concept of in-house banking has been common in Europe for some time, but not yet at Owens Corning's U.S. offices. Badoux explains: “One of the advantages of the global design is that we now have in-house banking in the U.S. as well as in Canada. The advantage is that you can offset some flows and avoid certain bank transfers, such as internal loans, optimizing cash management on a global scale.”

Owens Corning is now focusing on centralizing FX exposures in North America, hedging the exposures of Latin America and the Pacific from there. Europe served as a model. "Asia is much less centralized than we are, so the challenge there is clear. We are looking at other companies to find the best way to implement it. But SAP’s treasury functionality has made things much easier; in the U.S., they now have access to our data, and we are working together much more. A major advantage is that everything is standardized and configured in the same way. We speak the same language due to the global design.”

Change and training

In order to achieve the global design, OC Europe had several design sessions with colleagues from the U.S. Badoux says: “We discussed process by process and made various decisions in terms of elements fitting the overall blueprint. It was a short time-line, but all resources from both Europe and the U.S. were dedicated. And having a good resource on the consulting side is then of great importance too.” On behalf of Zanders, consultant Laura Koekkoek managed the project. “In particular, the full-time availability, of both Nicolas Van de Maele and the Information Services (IS) resources in Europe, were very efficient and kept the momentum going,” she says.

After going live, it became clear that two elements should not be underestimated. “Change management is key in post-project implementation,” says Badoux. “People need to have the commitment to work with the system. They have to get to know the system and be curious about it.” Also, the training of people involved is essential after implementation. Within Owens Corning, Nicolas Van de Maele appeared to be the appropriate trainer for his colleagues. And he could work without external assistance. “In the final stage of a project, it’s important to be able to work independently, without an external consultant,” says Tijdhof. Badoux agrees: “A treasury system changes, it is a living system, so you definitely need internal resources for the configuration maintenance.” According to Tijdhof, the main aim is to achieve a stand-alone client. Badoux adds: “And a happy one.”

WPP has treasury operations on three continents and each center has its own individual needs. The company needed to devise a request for proposals (RFP) for implementing a new treasury management system (TMS) and Swift-based bank communication that would serve the diverse needs of each regional office. Zanders worked on this project from an early stage, helping WPP to write a cohesive RFP and providing objective advice at the selection stage.

The biggest marketing company in the world, with 2,400 offices and operations in 107 countries, WPP has four main treasury centers. With headquarters in London and three regional treasury centers in Brussels, New York, and Hong Kong, the requirements of each hub differed considerably. The process of writing an RFP that would meet, combine, and harmonize the needs across the London, Brussels, and New York treasury offices was the first conundrum.

An RFP to meet all TMS requirements

Zanders was involved in the RFP from the outset, having come through a consultant selection process. Paul Delaney, director of treasury at WPP’s London headquarters, says: “We felt Zanders were best qualified to help us in the project, and they had good feedback from other companies with similar requirements.”

It was Zanders’ task to become very familiar with the organization, processes, and system requirements of each of WPP’s three treasury centers, and they did this by visiting each office and spending three days assessing their needs. Three Zanders consultants were working on the project throughout: Thomas Pels, David Kelin, and Laurens Tijdhof, all of whom worked with the treasury staff at WPP to write up an RFP that would set the company on its way to selecting a new TMS. “It was a joint effort between WPP and ourselves to make sure that we went into great detail and got all the questions we needed for the RFP,” explains Thomas Pels, of the Zanders’ Brussels office.

We felt it was important to bring in an independent view partly because, as a treasury department, we aren’t necessarily up-to-date with the changes in TMSs and aren’t best-placed to make an objective assessment of what best suits our needs.

Paul Delaney, Director of Treasury at WPP.

Paul Delaney believes that bringing Zanders on board was the right way to manage the project. “We felt it was important to bring in an independent view partly because, as a treasury department, we aren’t necessarily up-to-date with the changes in TMSs and aren’t best-placed to make an objective assessment of what best suits our needs,” he says. This is an opinion echoed in each of WPP’s treasury offices. David Hughes, WPP’s director of treasury operations in New York, points out that Zanders facilitated the RFP process between the three offices: “That is something I think we would have had a really hard time doing if we didn’t have Zanders – they were able to take an objective point of view.”

Three treasury centers – one global TMS

The most important requirement for the TMS from the London headquarters’ point of view was to have an updated reporting function, says Felicity Ronayne, UK treasury operations manager in WPP’s London office. “We wanted a system we could all use that was up-to-date, with really good report-writing features and a cash position worksheet that we could access across all regions.”

The heavy reliance on checks, zero-balancing, and WPP’s large number of US operating companies meant that the needs of the US office varied significantly from the offices in Europe. David Hughes notes: “We sometimes have over USD 100 million checks clearing in the morning, so one of our needs was for controlled check disbursement funding notification to be included in the workstation cash positioning. We also need to maintain a lot of inter-company schedules on the treasury workstation and another big difference is our reliance on zero-balancing from the operating company accounts to the main WPP account – in the US it is the basis of everything we do.”

The requirements for the Belgium office were slightly different. Veronique Freymann, European treasury manager at WPP’s Brussels office, notes: “The Belgium team manages more than 2000 accounts of the 750 entities in more than 15 countries. Furthermore, we manage the cash pools (zero-balancing, notional, and multi-currency), the group account structure, inter-company loans, and the group’s guarantees. For this, the possibility to have cash forecast information delivered via the web was one of the major requirements.”

Zanders managed to combine all the different regional requirements into one global RFP document. The RFP resulted in three potential TMS providers, but WPP finally chose IT2. The system is being implemented gradually across the headquarters and two regional centers. It is near completion in New York and Brussels, while implementation in the London office will begin with static data in Q4 2012.

Veronique Freymann says: “The implementation of IT2 is gradual – so we have started to upload data from bank statements, which enables us to use some tools already. We will start with the inter-company loans and it will be a step-by-step process.”

The TMS in the New York office will be fully functional by the first quarter of 2012, although they will be testing it and running parallel with it before then.

Choosing a Swift Service Bureau (SSB) provider

As well as playing an active part in the TMS selection, WPP’s Brussels office also led the process in selecting an SSB provider. David Kelin, director at Zanders’ London office, points out that the TMS selection and the choice of SSB provider were complementary projects. “When we were looking at the TMS, we also assessed WPP’s banking relationships and communications – we established early on that an SSB would be necessary and that Alliance Lite would not be sufficient for WPP’s needs.”

WPP eventually chose Swiss provider BBP to provide their Swift bank communication. The selection of the SSB was completed in August but it has not gone live yet. WPP’s Brussels office is currently transmitting data across to the new SSB system, and it will become effective before the end of 2011.

As with the TMS selection process, Zanders was instrumental in helping WPP to understand their needs for Swift and then choose the right product. “We are the end users, so we know what we want, but we don’t know what advantages one solution offers compared to others,” says Thierry Lenders, European treasury manager at WPP’s Brussels office.

It is expected that the SSB will bring significant benefits for the Brussels office. Veronique Freymann notes: “SwiftNet gives a single channel of communication between us and the banks, so it will be a lot easier for us.” For now, WPP is reserving judgment on whether the SSB will be needed in its other treasury centers. Paul Delaney says: “It was evident that we needed the SSB in Brussels, but it is not yet clear if we will get the same benefits from it in New York and London. We are watching what happens in Brussels closely and we’ll make a proper assessment once it’s fully installed there.”

Bringing the project to a happy conclusion

This has been a long and complex project. What began as a challenging RFP in 2010 then became the selection and implementation of a TMS and an SSB. The project is ongoing, and several months remain before both IT2 and the SSB are fully functional.

We were very impressed with the quality of the people at Zanders and the depth of their knowledge. Most of all, we really appreciate the fact that the same three Zanders consultants have seen the project through from beginning to end.

David Hughes, Director of Treasury Operations.

For more information on selecting a Treasury Management System or on the process of choosing a Swift Service Bureau provider, contact us.