The new EU directive regulating alternative investment funds management (AIFMD) meant that asset manager ACTIAM had to make substantial changes to its risk management, a major operation that had to be carried out in a short period of time.

ACTIAM was founded on 1 July 2014 after a merger between SNS Asset Management (SNS AM) and SNS Beleggingsfondsen Beheer (SBB, Investment funds management). The company now has more than EUR 50 billion assets under management for insurers, banks and pension funds. Among them are Reaal, Zwitserleven, ASN Bank and SNS Bank. “Responsible asset management is our specialism,” says Rob Verheul, COO at ACTIAM. “We manage all our investment categories in a responsible fashion. We have made doing business in a responsible way core to our investment process. It is in our DNA and we are proud of it. “ACTIAM originates from the Hollandse Koopmansbank (Dutch Merchant Bank) and has more than earned its reputation as a responsible asset manager. It has managed the ASN equity fund for more than 20 years. In 2013, this fund was awarded the Golden Bull for the best investment fund, and in 2015 was deemed the best equity fund in the world. Verheul says: “We do not invest in companies who do not trade in a sustainable way and we let people know through our website which companies we exclude. The universe in which we invest is therefore not as big as that of many other players, but we have already proved that social and financial returns go hand in hand.”

According to Bart Harmsen, head of risk management at ACTIAM, it is not a question of just excluding the insufficiently sustainable companies. “We try to encourage these companies to become more sustainable. We keep many lines of contact open in order to bring about improvements in that area.”

Growth ambition

As a part of VIVAT Insurance, ACTIAM considers Zwitserleven and Reaal (also part of VIVAT Insurances) just as much a client as ASN Bank and SNS Bank, says Verheul. “We have also close commercial contracts with them, just as with our other external clients. We have seen that the combination of professionalism, flexibility and sustainability has created a lot of interest for our funds from institutional investors. The legislator gives us a helping hand here, since pension funds are required to use part of their capital for sustainable investments.”
As administrator of institutional investment funds, ACTIAM’s name is well-known in this market segment. Our ambition is to grow in the retail market as well, says Verheul. “We are investigating whether funds for institutional investors could also be made suitable for retail investors. Our name recognition among a larger audience will then grow as a matter of course.”

Tougher demands

Under VIVAT Insurances, ACTIAM operates independently, with its own license, policy and statutory board. “Even though SNS AM and SBB have worked together for years, with this merger we are creating one expertise centre for our clients,” Verheul explains. “By doing this, we are creating even more commercial and operational strength and we can more easily comply with legislation and regulations.” Tougher demands on fund management as a result of new legislation and regulations in the AIFMD (Alternative Investment Fund Managers Directive) were important reasons for the merger. This legislation requires that a fund manager may not outsource both its portfolio management and its risk management. Verheul explains: “The fund manager (SBB) would therefore have to go to great lengths to rig up its risk management. Asset management was already outsourced to ACTIAM (at the time SNS AM). If we had not integrated SBB and SNS AM, the cost to the client would have been much higher than it is now. The costs of the merger are small by comparison. We are trying to absorb these by working more efficiently.”

Gap analysis

The AIFMD legislation sets out best practices in the area of risk and liquidity management, among others. As far as ACTIAM was concerned, this guideline had an impact on many different levels. “Most of them were under control,” says Verheul, “but we were not able to make the changes for the risk management part on our own. We could see that the scale of changes necessary within risk management was too great for our own staff to contend with. We had discussions with a number of contenders, but Zanders was selected fairly quickly. During the very first meeting they showed their pragmatic, down to earth approach. No standard consultant-talk, but serious people who gave the impression they would get on with it and deliver something of real useful value.”

Time was of the essence: ACTIAM had to be AIFMD compliant by 22 July 2014 and have its risk policy implemented, otherwise obtaining the license would be under threat. So, article for article, a speedy start was made on analyzing the legal texts; what was written down exactly, and what is the impact of them for ACTIAM? And as far as the risk management parts were concerned, where were the gaps as far as the guidelines went? And that’s how the risk management and risk methodology were assessed, a process during which hundreds of pages were read and analyzed. Zanders consultant Mark van Maaren says: “Early on we involved the front office, as well as others, in the development of risk policies, risk methodology and risk reporting. They made a valuable contribution and their involvement facilitated the acceptance of the risk framework.” During the whole process the strategy was developed gradually and the levels of risk became clearer. Beforehand, Verheul expressed progress in terms of a target figure: “We wanted to achieve 6.5 on reaching compliance, then we wanted to take our time in order to make it an 8.” In that way the inaccuracies in some reports, which were a result of tight deadlines, were corrected, while the reporting process itself was speeded up.

With constant to-ing and fro-ing, i.e. by involving front office, a large number of issues were solved.

Jasper van Eijk, Partner at Zanders

This way most of the interest rate sensitivities on fixed interest instruments could be calculated, but a number of rates differed to what front office saw. By constantly going back to departments involved, the results were fine-tuned.

Internal involvement

In a short time frame a lot had to happen on both sides, but the interaction was ideal, Verheul thinks. “And what is so good is that we have improved the whole ACTIAM risk management framework. We are much more aware of the whole spectrum since it had much more impact than just the AIFMD part.” Harmsen nods in agreement: “The risk policy was also immediately adopted by the business and, as a result, the quality of thinking in terms of risk in the organization was given an enormous boost.” Van Maaren adds: “ACTIAM’s board’s strong commitment was an important factor in the success of the project. All directors gave up a lot of time to review and discuss the risk strategy, the preparation of risk reports and the development of risk methodology. Quick decisions were also made where there were issues within the project.” Van Eijk also felt the interaction within the organization was a success factor. “This was at all levels within the organization. The formulated policy had to take form by setting up models, methods and systems. But due to the limited timeframe we had to do this in parallel. This demands good co-ordination to get all cross-references tied in. Thanks to a pragmatic approach and the broad internal involvement, this was achieved.” The deadline was reached; ACTIAM was AIFMD compliant as of 22 July 2014.

Stick to the plan

For monitoring risk, ACTIAM used the existing risk management system, Dimension, from supplier Simcorp, of which Zanders implemented the new risk module. Verheul says: “We want the whole organization to use this system and the starting point was to include the whole risk reporting process in this system. Zanders firstly evaluated the suitability of this module for implementation of risk reporting together with ACTIAM and Simcorp before starting the implementation process.”
It symbolizes the secret of success of the whole journey, Verheul thinks: “Make considered choices and then stick to the plan. Don’t fall into the trap of implementing another system just because a report is easier to print for example, as this always leads to different problems. In retrospect, it all went very well, but there was a lot of pressure on everyone involved. All in all we are very pleased with the whole project. If we had to do it again then we would do it the same way.”

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In order to be able to integrate a number of activities and improve efficiency, the oil company Argos decided to implement a new treasury management system (TMS).They chose IT2 and were very satisfied with the result. This best-practice implementation provides an excellent example for other corporates, showing how such a project should be tackled.

Argos is a young oil company that combines the storage and distribution of oil with the international trade in, and sale of, mineral oils and biofuels. The roots of the company go back to 1918, when Ad van der Sluijs opened a bicycle shop in Geertruidenberg and decided to sell petrol there, too. This turned out to be a good business move because the Van der Sluijs Group went on to become a big player in the areas of sales, storage, and transport of mineral oils in the nineties.

In 2009, the group merged with FNR+, which, with its companies Frisol, North Sea Petroleum, and Reinplus Vanwoerden, is a market leader in bunkering and trading. Hence the North Sea Group came into existence. In 2011, the North Sea Group joined forces with Argos Oil. Since then, the logo is displayed at the head office in the Rotterdam harbor Waalhaven, as well as on the signs outside around 70 Dutch petrol stations and – due to the lubricants sold by the company – on the shirts of the Argos Shimano team during the Tour de France races in 2012 and 2013.

In the Western European downstream oil market, Argos is now the largest independent player (since it is not stock-market listed or state-affiliated).

More rigid

In 2015, Argos has more than 500 employees, with branches in several different European countries as well as offices in Brazil, Hong Kong, and Singapore. The turnover of the company lies between EUR 14 billion and 16 billion per year.

“Around the time of the merger between FNR+ and the Van der Sluijs Group, from which the North Sea Group was born, I started working here,” says Jan Tijmen Donkelaar, Argos’s manager of finance projects. “The market and the company have been constantly moving since then. New business was created by the merger and the internal structure also changed. In the treasury department, you need to keep up with all those developments, which entails a great deal of adjustment and steering. That requires flexibility in the set-up of your system.”

A treasury department was built up in the North Sea Group, whereby two activities needed to be integrated: the trade activities and the bunker activities, where all the LCs (letters of credit: the guarantees for oil products) were settled. That integration of the two activities gave rise to a department with a front office, a middle office, and a back office.

Donkelaar was given the task of supervising that process. “That concerned the middle office, involving setting up the processes, and I started there by implementing an online trading platform (FXall) for currency transactions.”

For the selection of a new TMS, Argos asked Zanders to advise during the request for proposal (RFP). Donkelaar notes: “The shortlist put forward by Zanders included IT2, Bellin, and SunGard. SunGard offered greater flexibility in the connection with third-party systems, while IT2 placed greater focus on the support of best-practice processes during the implementation. The latter was a better fit with our needs, and so finally we selected IT2.”

Near real-time

One important reason for choosing IT2 was that it is ‘near real-time’. Donkelaar explains: “The FX deals, for example, are fed into our system every five minutes. That isn’t live, of course, but it’s certainly fast enough for Argos.” Bart Timmerman, consultant at Zanders, adds: “Where banks require genuine real-time data, near real-time is fast enough for corporate treasuries. There are multiple currency dealers at banks, and every deal needs to be directly visible to the other traders.” At Argos, all the commodity traders are connected to FXall, an electronic trading platform for currency and money market instruments. Donkelaar says: “When our oil traders do a deal that requires FX risk cover, they put the deal into FXall. The transaction is then sent from there to treasury, which subsequently makes a transaction with a bank. The currency risk arising from oil trades is therefore covered by the traders themselves. In addition, treasury looks at the overall position on a daily basis, and the risk arising thereby is also covered. Cash optimization – if, for example, a swap needs to be made overnight – is carried out by treasury itself.”

Phased approach

Argos decided to take on the project leadership itself on the implementation of IT2. Zanders was asked to assist Argos with the implementation of the best-practice processes. The optimal set-up of the treasury processes in IT2 from a software point of view, while keeping in mind the demands from the business, is determined and fixed in the blueprinting phase – the first phase following the purchase and technical installation of the system. The oil company chose to implement a phased approach. Donkelaar says: “We started with the basics: the things we needed for our daily position management and for our LCs and guarantee summaries. This meant, for example, that we recorded all the FX deals and all the money market transactions with banks in IT2. We also wanted to build up all the historical data into the system from January 1, 2013, such as all the FX data, all the LCs and all the guarantees. From that point we could then continue to build further on the payment process and set up the accounting module, which links bookkeeping to the system. In addition, the introduction of a clear, logical division of functions and data integrity was high on the agenda.” It is an approach that is typical for this type of project, says Timmerman: “Certainly in situations where speed is needed and capacity is limited. There wasn’t a capacity problem at Argos, but treasury relied on Excel. The first thing you need to make sure of is that the basic functionality works quickly, so that the deals and cash management can be carried out well. You can then roll out the flow of payments, followed by coupling that to accounting.” “IT2 placed focus on the support of best-practice processes during the implementation” 5 Jan Tijmen Donkelaar (right) and Bart Timmerman The Argos head office in the Rotterdam harbour.

Intercompany efficiency

In this way, IT2 functions as a symbolic umbrella under which increasing numbers of functionalities can be introduced by making connections within the organization. Timmerman continues: “For the benefit of the set-up of your accounting module, you need to keep in mind that the codes you use within the organization – for example in the ERP system – can also be found in IT2. This means that during the first phase of such a project, you need to make choices concerning the set-up, which prove to be important at a later stage.” Treasury often has specific accounts, such as in-house bank accounts, and for specific products, such as interest-rate derivatives and LCs. All transactions in that area must be recorded in the general ledger and, with the accounting module, IT2 offers a means for generating the necessary journal entries in the system and exporting these to a general ledger such as Navision. “In addition, the system can also be used as a sub-ledger”, says Timmerman. “This means having your own general ledger system that, instead of journal lines, exports balance sheet items to the bookkeeping program – which can make it even easier for the accounting department.” Internal settlements can be made via an in-house banking structure, meaning that the cash management is far more efficient and savings are made on transaction costs. “The annual turnover of Argos is between 14 and 16 billion euros”, says Donkelaar. “There are around 3 billion euros of intercompany settlements. An internal structure has therefore been set up for this, and that is also picked up by the accounting module. Instructions are processed automatically; the straight-through processing (STP) has been improved enormously, which in turn leads to greater efficiency.”

Best practice

Argos’s treasury needed to change over from an Excel-based environment to a new treasury system. Within treasury there was already a lot of in-depth knowledge to set up treasury processes. However, there was also a lack of experience with system implementations. Donkelaar says: “IT2 was able to provide good support on a technical level, but we needed more substantive advice for translating the business processes and the reports. We therefore asked Zanders to help with the connection to the business, on the basis of best-practice principles. Once the blueprint had been set out and approved, we organized a number of work sessions for each different part under the supervision of Bart Timmerman, whereby firstly the system was set up and then an extensive users’ acceptance test was carried out.” Once this cycle had been completed, the system went live. “But even after the system had gone live, Zanders provided us with coaching in that area on a number of occasions, and we also received additional advice from IT2. This is a good example for other corporates as to how this should be approached.” The same approach was also applied with setting up the accounting module. Donkelaar says that the knowledge that was gained was subsequently documented. “We had three people who were directly involved with the implementation of the accounting module. This meant that all the accounting templates were tested extensively and we now have our own user’s guide of 175 pages, in which every type of transaction is described. This means that when new members of staff come to work for us, they can be trained more quickly and will therefore be able to use the module sooner.” According to Timmerman, that documented knowledge is one of the success factors of the project. “Argos also knew very clearly what it wanted. We were therefore able to carry out the set-up to a greater extent from the point of view of best practice. Still, the availability of people within the treasury organization can make or break a project such as this. Only the people who work at the corporate have the relevant specific knowledge. That is why the transfer of knowledge is so important; when a problem arises, you need to be able to solve that internally.”

More than expected

The efficiency achieved with the new system also implies a correlation between the purchase of IT2 6 “We now have our own user’s guide, in which every type of transaction is described” Jan Tijmen Donkelaar and Bart Timmerman and the number of staff in the treasury department. “No, that isn’t an immediate result,” says Donkelaar. “We wanted to achieve better capital management for treasury, meaning that we can look more strategically at the way in which money is handled; for example, the choice between paying in advance or giving guarantees in the form of LCs. And that also applies to financing arrangements: how do you deal with your working capital, and via which flows do you allow that to work? We previously did that far more on an ad hoc basis, but now with IT2 we have a much better view of that. This has meant that we’ve been able to greatly reduce the number of bank accounts. These are things that you may not immediately have in mind with a new system, but which that new system actually makes possible.”

Timmerman nods in agreement: “I often notice that many treasurers don’t immediately realize the full potential of a TMS. The implementation of a TMS usually leads to a high level of STP, which makes processes quicker, more efficient, and less subject to mistakes. The TMS offers the possibility of building more checks into the treasury processes, as well as regularly and simply being able to report on key performance indicators (KPIs). The focus shifts, as it were, from gathering data to analyzing data, not least of all, due to the time saved by the TMS. This leads to the creation of other possibilities for optimizing your working capital management. And that is an important advantage for every corporate.”

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At more than 275 years old, Van Lanschot is the oldest independent private bank in the Netherlands. With an eye on the rapidly changing market, last year the bank decided to change its strategy. Evi Van Lanschot is now the young face of the oldest bank and is focusing on the wealthy client of the future.

2013 was an important turning point in Van Lanschot’s development. Under Karl Guha, the new CEO, the bank implemented its new strategy for the coming five years based on three key points: focus, simplification, and growth. “Focus means that we concentrate on what we are really good at, i.e., the retention and growth of our clients’ capital,” explains Martin Van Oort, Van Lanschot’s financial risk management director. “Over the past few years we have increasingly become a ‘small large bank’, with a business banking portfolio. As a result of consolidation in the sector, this will be scaled down even more. As a specialist and independent wealth manager, we think we can really make a difference for our clients.” Customers also wanted simpler and more transparent products. “And we want to extend this line through our organization, in our IT systems and in operations – it has to be simpler and more efficient,” Van Oort continues. “That means rigorous internal reorganization in order to serve our clients in the best possible way. The growth we strive for has to come from the capital management area.”

Synergy with Kempen

Van Lanschot and Kempen are strong labels, which enables the bank to offer a combination of private banking, asset management, and merchant banking. “This offers clients huge advantages; they enjoy an even more tailor-made service,” says Van Oort. The bank’s changed service concept is particularly visible from the outside. For the personal banking segment, Evi Van Lanschot is a clear proposition targeting starters on the capital markets. With the idea that there is private banking potential present, Evi’s entry threshold is much lower. Van Oort says: “Medical specialists and business professionals have differing requirements over the course of their careers and we can assist them in the best possible way over the whole cycle. The Evi bid is going very well; in the Netherlands and Belgium we have approximately €1 billion in savings and managed capital.”

At the same time, clients who currently belong to the personal bank but who require private banking services can – if they pay for it – choose this option. Finally, the bank has a Private Office for extremely wealthy clients. “They too of course profit from the synergy between Van Lanschot and Kempen,” adds Van Oort. Van Lanschot is parting company with another section of the bank – the corporate banking portfolio, which includes commercial real estate financing. “We will do that in a respectable and professional manner. By winding down slowly but retaining service levels, losses can be minimized and clients will have enough time to get a new roof over their heads. Running down this portfolio is going according to plan. We are taking leave of something which no longer fits in with our new strategy and we are putting a lot of effort into private banking. This gives direction and clarity to all of our stakeholders.”

Shorter lines

 All of the bank’s departments are occupied with change. “It’s going well. The shop is open during the reconstruction phase and so customer experience should also stay at a good level. Even the balance sheet ratios – solvability and liquidity – which are so important for the bank, are ahead of our anticipated long-range targets.”

The bank’s culture is changing as well: the traditional bank, where change sometimes appears to be dragging its feet, is becoming younger and more modern. Van Oort explains: “The Evi customer needs a transparent digital service, preferably with a handy fancy app on their mobile. You can see that the bank is also changing in that respect into one with a dynamic culture. For professionals who embrace change, it’s a really great and exciting time. We hear more often that people would like to work for Van Lanschot since so much is happening and we are in the thick of it. Lines are shorter and your ideas have an impact. The fact that it is going well on the personnel front is, of course, important as after all, it is the people who make the bank.”

Parallel to strategy changes, the bank is also investing a good deal in specialist staff functions. Last year it was decided to revise the bank’s risk management; as of March 2013 Van Oort is in charge of a new department – Financial Risk Management. The creation of this department, which was an amalgamation of various teams, was the first step towards further professionalizing risk management. “This second-line department is responsible for consolidated financial risk management within the bank,” he explains. “Besides setting limits and the integral monitoring of the bank’s risk position, this department is also a negotiating partner and advisor to the bank’s senior management.” The department is made up of a group of young and highly educated professionals who are extremely driven. Van Oort adds: “Our traineeships contribute a great deal to recruitment and internal dynamism.”

Forecasting

It is important that the bank is now capable of looking ahead to future developments with the use of forecasting tools. “The classic risk management function of monitoring, reporting and, if necessary, adjusting risk is possible using models and systems, but the world is changing fast – that is a huge challenge,” says Van Oort. “In addition, there is a mountain of rules and regulations that continue to descend on us and which has a great influence on the playing field. As a bank, you have to be more and more critical of the various balance sheet components. Partly because of the low interest rates, it depends on basis points and it is essential to look ahead using various scenarios to see what the impact on the balance sheet ratios and profit could be. The basic model Van Lanschot deployed has to be developed still further, last but not least because of the implementation of Basel III. Therefore, as of 2013, the development of a new forecasting tool was initiated which generates an integrated capital and liquidity forecast based on the expected balance sheet developments. “Zanders made an important contribution here. The good thing about Zanders is that they are real specialists with insight and a lot of practical know-how. But their pragmatic approach also appealed to me. It has resulted in a tool where we can detail the expected development of core ratios and where we can easily and quickly analyze the impact of mitigating measures on these ratios,” Van Oort says. “We are going to continue fine-tuning the good foundations we now have and by constantly carrying out back tests we can see if the forecasts tie in sufficiently. Where necessary, we will adapt the tool. After that, we will further integrate the tool with our ALM systems.”

A more complicated playing field

Van Lanschot is listed on the stock exchange but a large proportion of the shares belong to large financial institutions. “We are active in the capital markets and rating agencies look critically at how our ratios develop and how we cope with risk management. The playing field has become more complicated and the supervisory body also makes its presence felt. Shareholders are of course critical and look at our figures differently to how they did in the past.” The question is whether or not the rapid regulation changes have not overshot their goal in some areas. Van Oort adds: “You see that in the current lending climate: the required growth of capital buffers puts the brakes on possible lending. A new balance has to be found. Extra regulations were necessary, but the amount and complexity of these regulations results in higher costs. Banks’ buffers have increased enormously and also the quality of these buffers has never been so high. The AQR (Asset Quality Review) has confirmed that most banks are on track on this point. Last year it was clear that this was also true of Van Lanschot.” The rating agencies have recently reconfirmed Van Lanschot’s rating, and S&P has upgraded its ‘negative outlook’ to ‘stable’. This is a clear sign that Van Lanschot is on the right track. “It is still closely monitoring the execution of the strategy, in which profitability will be an important factor. Wealth management strategy implies that the interest company reduces in value but is compensated for by increased commissions. In the meantime, we have to maintain our healthy capital and liquidity position. Over the next few years, we will have to prove that the new strategy has been a success.”

Excellent

In the new banking territory, Van Lanschot, with its new strategy, is focusing more than ever on the customer. “Customer satisfaction is up there on top, as it is a very competitive business and for our bank it is essential for us to be an excellent service provider and offer customer value. The strategy we have set out provides a clear answer to how we see ourselves in the future. Within the field of risk management and ALM we are looking for professionals who feel at home in a specialist and dynamic private bank. The added value of our department is to be a sparring partner and advisor to the bank, all the while keeping in mind our penchant for discerning risk. That is a role which will develop along those lines. With all these changes we have a wonderful challenging time ahead of us.”

Acomo, an abbreviation of Amsterdam Commodities N.V., originated in the Rubber Culture Company Amsterdam (RCMA), which listed on the Amsterdam stock exchange in 1908. The family business, Catz International, one of Acomo’s current businesses, sold itself to RCMA in exchange for 90 percent of the shares, thereby making the company active again.

Soft commodities

Between 2001 and 2010 the company acquired five other companies. The last company which traded in rubber was sold in 2010. In the meantime, the name Acomo has become an anomaly, since the company is no longer operating in Amsterdam. The head office is situated in the heart of Rotterdam with six employees. However, a total of 550 people work in the various trading companies, which are split into four segments: edible seeds; nuts and spices; food ingredients; and tea. “Our group is quite diverse”, says Jan Ten Kate, Acomo’s CFO. “We deal with many different products in many different countries”. This is a result of an increase in demand and the various take-overs made by the holding company. This year Acomo acquired the German seed company SIGCO. Now the group consists of eight companies, which trade products such as spices, herbs, nuts, seeds, dried fruit and tea to and from between large parts of the world. These products all fall under the denominator of soft commodities. “The meaning of the word ‘commodity’ causes a lot of confusion”, says Ten Kate. “Soft commodities have no stock market listed value, which means no price forming is done on an exchange”, he explains. “Today we can sell something we will deliver a couple of months later. As a trading company we carry the price risk for both the supplier and the client”. Products which are traded on the stock exchange, such as grain, wheat
and sugar, are quoted commodities. On these stock exchanges future price fluctuations can be covered but, for Acomo’s products, this is not the case.

Volatile function

The various food products are shipped from all corners of the world – Vietnam, Kenya, South America – to countries such as the USA, the Middle East and various European countries. Acomo is the largest independent tea exporter. “It’s important you can physically reach your products quickly”, explains Ten Kate. “Therefore we are always located close to large ports such as Rotterdam and Mombasa, the largest port for exporting tea from East Africa. A lot of tea is exported from Kenya to Europe and the Middle East, where a lot of tea is drunk.” In developing countries where the middle class is growing, the increased demand in trading products is very apparent. Where people are able to afford relatively more expensive products, nuts and chocolate are becoming more popular. Ten Kate says: “You see products streaming into countries as never before. For example, countries that exported tea are now importing it as well.”

All products Acomo trades are liable to risk, particularly those caused by the weather. Harvests can fail because of heavy rainfall or extreme drought. “On the demand side you have to cope with geographic and demographic factors, and on the supply side more with climatic ones. Because of this, the relationship between supply and demand is a volatile one. We are able to fulfill the function we have because volatility in volume automatically leads to volatility in price. We can assume a large part of the supply chain risk with respect to reliable delivery since we always have products in stock – usually they have a long shelf-life – or we have purchase orders with reliable suppliers in the countries of origin.”

A large appetite

With the increase in turnover after the three large acquisitions in 2010, it was time for new financing. “Our business is typified by lengthy transport routes and shipping products which we buy and then have to deliver and all of that has to be financed”, Ten Kate says. “To ensure future growth we wanted to create a new starting point for our financing. We wanted the groups’ various loans which were taken out with different banks to be amalgamated under one umbrella. We were able to approach the financial markets, since the banks were hungry for business; after the major take-overs in 2010 we had proved we were successful. Over the past four years, our turnover rose from 200 to 600 million euros.” Profit for the past few years is around 27 million euros. These are good results for which Acomo has also achieved recognition on the stock exchange.
In spite of this ‘hunger’, Acomo approached Zanders for help with the new financing. Ten Kate explains: “We needed a partner who could help us in the game with the banks. Before I joined Acomo I had a boutique in corporate finance and one of my colleagues, Bert van Dijk, left to go to Zanders. We got talking and clicked straight away.”

Acomo allowed the existing banks to participate in the process but wanted to bring in other new, effective banks. Ten Kate says: “We were looking for a mix in the banking group. We wanted internationally operating Dutch banks, mainly because of our worldwide tea trade. And we were looking for a bank which would cover our interests on the American market, since a third of our turnover is in the USA.”

So in autumn 2013 a selection process of scanning and approaching a number of banks began, questioning how they would fulfill the requirements. Ten Kate notes: “Negotiating is in this company’s blood, but you have to move forward with those banks with which you have fought a hard battle. Then it’s good to have an intermediary with expertise – from what is happening in the market to what you can and can’t ask. It was also good that an external advisor carried out the bank pre-selection process." After completing the legal documents, the final contracts were signed in February 2014.

It was a process in which everyone knew his own role – and Zanders carried out its role vis-a-vis the banks very well.

Jan Ten Kate, Acomo’s CFO

Lucrative business

The outcome of the selection process was a group of banks consisting of Rabobank International, ING Bank, HSBC and Fifth Third Bank. “New financing means we have even more financial leeway so that our anticipated growth is securely financed and, that we are linked to a strong banking group which can grow with us,” says Ten Kate. “For us this also comes with attractive conditions and rates. Therefore we are very happy with what we have achieved.” Hidde ten Brink, one of Zanders’ consultants, is also happy with the result. “Due to current strict legislation it has become more difficult for banks to extend financing, but Acomo is a good example of a company where you can see positive effects. If you are a part of the relatively small group to which banks will grant loans, you can haggle over the terms. Acomo has a strong track record and so the future looks rosy.

All purchase and sales contracts in the various countries are signed locally by Acomo, so that currency risks are covered by the banks. “We are an attractive customer for a bank, since FX is a lucrative business,” says Zander van Ooij, Acomo’s treasurer. “The FX risk is covered in each region by currency, term or spot contracts or balance sheet hedging.” Van Ooij comes originally from the banking world and knows that lending has been difficult for some time. “The fact that banks want to grant us loans is therefore significant.”

Future growth

Acomo’s product range expansion is only possible in soft commodities. “A product like cocoa has a futures market. The position of a trading company in the value chain is then completely different to when price risks cannot be covered by a futures exchange. We focus more on niche products, with relatively small harvests and different forms of transport to the huge grain or soya tankers. That is a totally different market.” Of course Acomo has competitors, but each ‘competitor colleague’ has its own range of products. From an acquisition point of view, the medium sized niche companies are interesting and could offer more branches worldwide or different niche products. New markets such as those of the recently acquired German grain trader SIGCO add value, according to Ten Kate, who adds: “In certain countries it is a business advantage if you physically have an office there, and now we have that in Germany.”

Acomo as a shareholder is also an interesting prospect for such companies, Ten Kate believes: “The holding offers our companies the financial support they need to do business well, by means of the financing we have in place. Product pricing can significantly increase and for many family businesses, this can lead to banking challenges. I know for example that the price of pepper was USD 1,500 per ton, and that it is now more than USD 8,000 a ton. A container with 20 tons of pepper then amounts to USD 160,000. Smaller companies cannot cope any more with this sort of financing requirement.” Although the soft commodities market is not always transparent, Acomo is able to financially absorb such impacts now it has banks on board which understand the game. “Higher prices for tea or sunflower seeds result in increased demand for financing because of their large volumes. However, banks who understand our markets no longer worry about it.”

According to Ten Kate, the banks still have clear coverage. “Stocks are liquid and are easy to price. These are products which have a quick turnover – there is always demand for tea, nuts and pepper. That is also an interesting factor in our business: you can touch, smell and sample our products. We literally have a very tangible company.”

The average car contains 3-5km of cables while a plane has more than 650km and it takes more than 1,000km for an oil platform to function. There are more energy cables around us than we realize, and they are produced to handle extreme temperatures, deep oceans, or high air pressure. One of the industry leaders in energy (and some telecommunication and LAN) cables is a French multinational called Nexans. Worldwide, 26,000 people work for the Nexans group, with yearly sales of around €7 billion.

“We have new markets that need to be equipped, and there are old markets that need to change all the installations they made 40 years ago – for example, in the US,” says Thomas Wagner, financial manager at Nexans. “But the cable industry is quite a mature market. A significant part of our sales are in Europe.”

In 2013, most sales (57%) were in Europe. But like many in the past few years, Nexans had to deal with a complicated environment, with a global market in crisis, higher bank fees, lots of tools, and – of course – regulations.

Customized matrix

In 2010, the Nexans group decided to define the key strategy for its treasury in a global project. Wagner says: “We started with a worldwide survey to see where we could improve our operations. The area of bank relationship management was quickly identified because we were dealing with more than 100 bank groups worldwide, and our subsidiaries had more than 900 different bank accounts. This number was too high for a group of our size.”

The group’s first objective was to start streamlining their banking relationships. Nexans managed the bank selection process in three steps. First of all, it prepared a cash management RFP (request for proposal) to evaluate the capabilities of the different banks. In a ‘request for quotation,’ Nexans received detailed answers from the banks and analyzed whether the proposed solutions were meeting its requirements.

For this analysis, Zanders created a customized evaluation matrix for us, with a scoring model for each bank.

Thomas Wagner, financial manager at Nexans

“Then we sent our additional follow-up questions and remarks to the banks, and they returned precisions on the previous RFP. Subsequently, we came to a shortlist, and we organized face-to-face meetings with the remaining banks. Finally, based on the selected cash management banks, we developed a global cash pooling architecture together with Zanders and started its implementation.

On the technology side, it was important for the project team to check the capacity of the bank to be able to move to Swift. We wanted to standardize and harmonize the format as much as possible.”

Rationalization criteria

The bank rationalization consisted of defining new core banking partners at the group level. “It meant that we had to reduce the number of banks and bank accounts related to that,” says Wagner. For a bank, a larger share of the wallet in the project is attractive and results in lower banking fees for Nexans. However, the number of banks was not only minimized. A trade-off was also needed to reduce the counterparty risk per bank.

Nexans used four criteria for the banks to be eligible for cooperation. Apart from the bank’s credit rating and the banking fees, a condition for the group was that the bank would become a core partner – not only for cash management but also for providing credit to the group when necessary. Also, it was important for Nexans that the bank would be able to answer the company’s technology and service requirements. Based on the criteria, Nexans ended up with a selection of global cash management banks after previously working with mainly local banks – due to a large number of mergers.

“We also needed to optimize the structure of the group’s bank architecture, in order to reduce the fees at the group level.” The main focus was on bank relationships. “Reducing the costs was an important goal, but building a strong win-win relationship with the banks was key. We therefore made the bank selection not only based on price but also wanted a footprint making Nexans able to deal with all its future business,” Wagner explains.

One of the goals was to decrease banking relationships from 100 down to 20 or 30 banks and to reduce the number of accounts to less than 600. Apart from bank rationalization, the other important objectives of this treasury strategy project were improving bank communication, establishing a payment factory and in-house bank, as well as making necessary changes to the current treasury management system.

Wagner adds: “We intend to have around 550 bank accounts, so during the project, we will close roughly 350 accounts. The bank rationalization was the cornerstone for the rest of the project. It was clear that our bank communication had to improve, and in some countries, we needed to change our outdated communication tools. Especially in Europe, with the realization of SEPA, we took the opportunity to implement new technology.”

One bank, one currency

Where Nexans really wanted to improve was on foreign exchange payments. It decided to build a bank organization that would limit cross-border payments. “Without that, we would not have been able to implement a payment factory. We need to leverage the group.” Besides that, a cultural aspect played a role too. The Nexans group was built by buying several entities spread all over the world, each with its own relationships and financial culture. Technologically, it was not possible to control the company on each level of detail.

Therefore, new technology was implemented for the payment factory and the in-house bank too. Wagner explains: “When a Nexans entity based in France, for example, needed to pay in US dollars to a client in the US, it was using an account opened in Paris, generating a payment outside of France – so it was cross-border, with a transaction fee of roughly €5-6 per payment. The new situation allows this entity to use an account located in New York. This meant the price became a domestic one. To discover this advantage, we needed help from treasury experts and found that in Zanders’ consultants. They knew that, with the new technology, one entity of the group was able to pay on behalf of the other entities. This payment factory allows Nexans Services to have one account open in each currency country and to offer services to each entity. It opens an account in the US for USD, in London for GBP, etc. In the end, we have one balance per currency.

So, a subsidiary in France paying someone in the US now happens via the payment factory. We then reduce the external fees to these flows; internally, there are only booking flows, no financial flows between the two entities. Because we have a cash pool in place, we also save money on the interest we pay our banks.

Thanks to the new bank architecture, we are now able to pay on behalf of our entities. We are a global group, so the banks must be able to follow us wherever we are. That’s why we decided to give one currency to one bank.

In a treasurer’s way

Most of the banks are now active and around 60% of the sales of the group have been covered. The project was launched in April 2011 and in August Nexans chose its banks. The implementation part, however, was much more complicated and lasted a lot longer. Wagner adds: “The finalizing part will always be the longest one. Implementation is a process that never really ends – we keep on discovering that new changes are needed. In some countries it is very difficult to do the implementation and so in these cases it’s easier to adapt the system.”

Still, in the relationship with its banks Nexans is stronger now, which leads to a more flexible and reactive behavior from the partner banks. Wagner notes: “One of the big returns on investment of this project was the fact that we converted cross-border flows to booking flows. We will have return on this investment after four or five years.”

Zanders consultant Ruud Mullens managed a big part of the project, interpreting the client requirements and, after implementation, structuring the bank relationships too. “It was important for us to have skilled resources that could help,” says Wagner. “We didn’t have the necessary internal resources and needed someone to react to certain developments and to negotiate with the other parties involved. The team that Zanders proposed to us was really pragmatic, had a strong methodology and was able to look at the project from a treasurer’s point of view. In order to improve our treasury organization the global idea had to be clear and Zanders understood that need.”

What did Zanders do for Nexans?

• Assisted in managing the bank rationalization process
• Prepared detailed RfP document, customized to Nexans’ specific requirements
• Provided an evaluation model to validate and evaluate the answers from the banks in the selection process
• Assisted in analyzing and evaluating bank proposals
• Developed account and cash pool architecture
• Followed up contract negotiations with banks
• Helped to implement the new bank infrastructure

A transfer to a new system is usually a complicated and time-consuming process. This particularly rings true for a company like GlobalCollect, which processes hundreds of thousands of online transactions for banks all over the world on a daily basis. How did this payment service provider (PSP) tackle the complicated challenge of adopting SWIFT as its new system?

In 1994, the current GlobalCollect was set up as a division within the old TPG Post company to ensure a well-organized payment system for parcel deliveries. Back then it was dealing with offline payments, such as cash on delivery, but when digitalization took off, the postal company decided to go online with its payment services. Now, GlobalCollect is a fast-growing company, independent of TPG Post, which processes worldwide online payments for retailers operating internationally. This PSP offers them one platform so that they do not have to deal with the complexity of various foreign banks and their payment systems.

Connections and conversions

Michael Roos, vice president of merchant boarding at GlobalCollect, says that the market for PSPs has quickly become ‘professionalized’. “The industry has developed enormously over the past 10 years, also as far as legal and statutory regulations are concerned. We fall under the supervision of the Dutch central bank, De Nederlandsche Bank, and are affected by the EU’s Payment Services Directive (PSD). Companies who conduct business abroad, such as airlines or online retailers, need to receive payments from abroad. That adds to the complexity as it is a huge challenge setting up all the connections. You not only have to deal with the local banker, but also with all sorts of foreign banks.” A PSP not only has all those necessary local connections but is able to offer the client various payment methods via one point of access. “As a company you then have not only the local payment method, such as iDeal in the Netherlands, but also those in other countries where you have customers.”

Since GlobalCollect processes many millions of transactions each month, it is able to compete on price – something a single company cannot do with only several hundred transactions. Customers enjoy a more favorable rate – despite working with an intermediary – than they would with a bank. Besides dealing with the complexity of connections, GlobalCollect’s clients enjoy large-scale benefits for other services, such as currency conversion. “Collection of foreign currency can be outsourced,” Roos adds. “If you get paid in Brazilian real, which is not freely convertible, we do the conversion. Clients then have quicker access to their money in their own currency.”

New for corporates

 When GlobalCollect was starting up, it began with a few bank interfaces. “But after about 15 years we had more than 50 interfaces within an out-of-date infrastructure. In order to bring this infrastructure up to a technological standard that was market compliant, we decided that SWIFT was the best solution. But to get started we didn’t have the required know-how and manpower. So when we looked around for a company with plenty of expertise we hit on Zanders. I had spoken to Sander van Tol about three or four years ago and remembered that Zanders knew a lot about SWIFT. In the spring of 2012 I met Jill Tosi and in October the project kicked off.” Zanders taught GlobalCollect about the possibilities and impossibilities of SWIFT. “And Zanders was the right choice,” says Roos. Originally, SWIFT was a connectivity channel for banks, and since 2000 it has also become available to corporates. When GlobalCollect decided to start using SWIFT’s Alliance Lite2, a new cloud-based SWIFT communication tool, it was new to the market. Roos says: “As one of the first adopters, we were working with a completely new SWIFT system.

The interfaces particularly were new and unknown.” GlobalCollect’s reason for acquiring SWIFT was twofold. On the technical side, the number of interfaces had to be reduced. On the other hand, SWIFT had to standardize formats and the provision of information. Roos adds: “In order to be able to profit from the systems we had to have good information. Good information is standardized in IT, and so we ended up with SWIFT. The way information was shared with banks had to be standardized as much as possible. This was our starting point with a kick-off on various workflows.”

Fully-fledged tool

The challenge for GlobalCollect was mainly in connecting to banks. The old interfaces had to be replaced with new ones. Whereas SWIFT has everything standardized, it appeared that the banks did not. Roos explains: “Banks who want to connect via SWIFT each send their own technical implementation document; where one sends a single Excel-sheet with technical details, another sends a 20-page contract.” Roos noticed that SWIFT, banks, and corporations were not necessarily used to dealing with each other in this context. “Particularly outside of developed markets, the banks have not come that far yet and there is a good deal of indifference. This makes project-based work and estimation of turnaround times difficult. We approached a number of banks and looked to see which ones reacted the fastest and in the most professional way, and we started with them. This is not what you would normally do. I think we got off to a good start, but the migration path will take a number of months to complete.” The time required for testing individual connections and carrying out test cases can be very long. Roos says: “SWIFT is a fully-fledged tool and the parties used to working with it are large financial institutions. For us as a young, upcoming, dynamic industry, we really have to adapt to the banks – it’s a completely different culture.”

Change of format

With the huge amount of transactions involved, a transfer to another system is risky. “Therefore we ran the two systems in parallel during the migration,” he explains. “We also deliberately decided to link the largest parties first, leaving the legacy system running as we integrated SWIFT into the organization.” This means that a back-up is not necessary. “SWIFT is a unique system, with relatively large numbers of redundancy channels and recovery scenarios, so that it can guarantee unique processing.”

According to Zanders consultant Jill Tosi, this is because SWIFT is owned by the banks: “They have so much trust in their system that they assume responsibility for payments. SWIFT has such a robust system with minimal failure percentages, that customers can put complete trust in its information process.”

At the time of transferring to the new system, GlobalCollect had a lot of IT projects on the go. The SWIFT implementation was also part of a much larger project, Process Excellence, where several systems had to be modernized in order to meet market standards. “There was a lot of pressure on the IT department at GlobalCollect,” Tosi says. “The electronic banking systems were all stand-alone, i.e. not integrated into the daily processes. There were about 50 electronic banking systems, and someone had to log into each one separately with a different token each day. For one or two that is feasible, but 50 is too many.” And Roos adds: “The whole idea was to continue with significantly fewer interfaces – preferably one. And we are still very busy with that.”

While GlobalCollect was carrying out the migration to the new system, the banks were right in the middle of the SEPA migration. “That had consequences for the introduction of new formats within SWIFT,” Roos says. “We had to make a decision: do we go for MT940, the old standard for bank statements, or do we go for CAMT 053, the XML-successor of MT940? XML is a future-proof format but is not offered by all banks. As a consequence of SEPA, some banks will have to be migrated twice: firstly to MT940 and then to XML. An interesting aside is that where SWIFT offers the version 2.0 solution to corporations, many banks are just not ready for SWIFT connectivity with businesses. A number of large Anglo-Saxon banks have indicated that MT940 interfaces are not yet available for a direct connection to SWIFT Alliance Lite2 with corporates.”

Business as usual

The SWIFT migration to large banks is over and this year other banks will follow. After the first three banks, Zanders withdrew from the process. "It is now more like business as usual,” says Roos. "Zanders not only did the implementation, but was also responsible for the learning curve in our company. We have become self-supporting as far as SWIFT is concerned.” After the SWIFT project, Zanders also helped GlobalCollect with the selection and implementation of a new treasury management system (TMS) and a reconciliation tool. "Messages coming from SWIFT could be uploaded to our TMS straight away,” Roos says. "The same goes for our reconciliation system. If we didn’t have the standardization of the SWIFT system, it would have been much harder. In the banks’ own technical file formats there is a degree of standardization, but it’s not complete. It is clear to us that getting the standard functionality working would not have been possible without the successful implementation of SWIFT Alliance Lite2.”

Six years ago, in the middle of the challenging days of a new-born financial crisis, Anadolubank Nederland N.V. entered the Dutch market. Looking back, the bank didn’t seem to suffer much from those challenges and managed to grow steadily. However, during that process, it became clear that the bank needed to bring its risk management framework to the next, higher level.

The parent bank, Anadolubank A.S., was established in Turkey in 1996. Nowadays it is a well-known middle-sized bank with 2,100 employees, providing credits for small and medium-sized businesses. On entering the Dutch market in 2008, the bank had a challenging start but its results steadily improved and it expanded from 15 to 35 employees. The growth meant that more and more projects needed to be managed while banking regulations were intensified.
“We didn’t have all the expertise readily available to deal with the latest developments,” says Nuriye Plotkin, managing director with responsibility for risk management at Anadolubank. “Larger banks have invested heavily and therefore have more mature risk management frameworks.” For the implementation of a comprehensive risk management framework, the bank was looking for more advice and support.

Three phases

In late 2012, we invited six different parties to be interviewed about their ideas and to get an impression of their approach. We chose Zanders because it was clear that they knew the Dutch market and regulation very well, while showing a good understanding of the specific risk aspects of our bank – so this met our needs.

Nuriye Plotkin, managing director with responsibility for risk management at Anadolubank.

As a result, in January 2013, the ‘Risk Management Review’ project was initiated, covering three consecutive phases. In the first phase, completed in March, Zanders performed a scan of the risk management framework. The detailed review of the existing situation resulted in a number of recommendations for further improvements. “It showed exactly what we were missing,” says Mrs. Plotkin. The completion of the second phase provided a risk governance and policy update, which was approved by both the bank’s management board and supervisory board. The main objective of the third phase, which started in July 2013, was to improve and implement the risk models and corresponding risk reports. A practical approach was adopted that dealt with the most relevant items, in line with current best market practices and took into account the limited size of, and capacity within, Anadolubank.

“For instance, a model was developed that forecasts future cash flows for various purposes, such as interest rate and liquidity risk analysis, including the expected behavior of our savings portfolios,” Mrs. Plotkin says. Charles Zondag, executive consultant at Zanders, adds: “Many elements played a role in the project. As a small bank, you need to be flexible; continuously balancing between the importance and consequences of relevant topics, in order to make the right decisions.”

This last phase of the project was completed in November 2013. During the entire project, Zanders partner Jaap Karelse was impressed by the way Anadolubank worked.

A small but fast-growing company like Anadolubank has to deal with a lot of challenges. Regulators, the parent company, and customers all demand fast follow-up to their requests. But everyone at Anadolubank was so dedicated and worked incredibly hard – it was really impressive to see.

Jaap Karelse, Partner at Zanders.

Comprehensive

The bank’s steering committee continuously monitored and evaluated the project and took appropriate steps where necessary. The project team members, consisting of both Anadolubank employees and Zanders consultants, met on a bi-weekly basis to discuss the progress of the various deliverables, identify action points, and update the planning. “We are a small, new bank with new people entering the organization throughout the year. So you have to set clear standards. And this project helped us to do so,” Mrs. Plotkin emphasizes.

Anadolubank’s Lütfi Öztürker, who was responsible for all credit risk activities within the project, agrees: “In the past, the bank primarily relied on its banking experience. Now we have a written framework with guidelines for our day-to-day credit risk management operations. If you have a problem or a specific risk issue, we know how to best handle it. It’s clearer for everybody in the organization now.”

His colleague Ersoy Erturk adds: “As we mentioned in the beginning, the financial sector has been the most influenced by the volatile conditions of the financial crisis. In order to promote confidence among financial institution stakeholders – including regulators, supervisors, and shareholders – the bank must endorse strong risk management within their organization. This project was embraced by all team members. In our experience, behind the success of the project we have both a top-down and a bottom-up approach – risk management is mandated and supported from senior management, and each team member is empowered to speak up and take action.”

Turkish differences

“Risk management is a very deep and wide field of expertise,” adds Efsun Degertekin, risk manager at Anadolubank. “It is not easy to implement a framework into a growing organization that can deal with many changing elements in regulation and the current market.”
Besides that, the Dutch business differs from the Turkish one, adds Mrs. Plotkin. Both the parent bank and Dutch subsidiary have corporate clients. Mr. Öztürker points out: “In terms of credit assessment, both banks are conservative. But in the Netherlands, we work with larger international corporates sensitive to interest rates, while our parent bank prefers small- and medium-sized enterprises.” According to Mr. Öztürker, the main issue is the difference in regulation. “For a foreign bank in the Netherlands, that is a challenge. You have to adapt your strategies in a short period because of the different regulations. For the Turkish head office, however, this also brings useful know-how.”

Conservative approach

What about competition with other Turkish banks? Mrs. Plotkin notes: “Anadolubank’s principal strategy is to continue healthy growth in each line of business and capitalize on the growth potential of the Dutch market.” The bank achieved this growth while maintaining its conservative credit approval processes although in the corporate lending business the competition is high.
“Anadolubank has adopted a different but prudent and conservative lending approach since establishment,” Mr. Öztürker adds. “Risk management is primarily associated with the flexibility of organizational structures. Reacting in different ways and responding quickly in spite of changing conditions is a flexible approach. And both banks, parent and Anadolubank N.V., have a conservative approach but adaptive capacity.”

Future steps

For Anadolubank, 2014 will have additional challenges, says Mrs. Plotkin. “We plan to improve the reporting system. We received more feedback than we expected from Zanders. We learned a lot during the project.”
Mr. Öztürker adds: “It was a time issue to finish all items, but we managed it. And we now have the necessary know-how to scope all remaining items.”

What are Anadolubank’s plans for the next five years? Mrs. Plotkin explains: “First, we get started in the right direction and we need to stay on track. Our objective is to maintain a dynamic risk management framework to ensure we profoundly address regulatory challenges and the changing economic environment.”

The Netherlands’ most compact university has a prime location: adjoining the capital’s Zuidas business district and the VU medical center. The VU’s situation is unique in that the city has grown towards it. Both its collaboration with the business sector and with the medical world takes place just a stone’s throw away.

In 1992, the university had approximately 8,000 students; that number is now around 24,000. In terms of the university’s physical real estate, however, not much has been added since the early 1990s. And yet, without any appreciable increase in its accommodation, the number of students studying at the VU has tripled. Partly because of the major growth that the university has experienced, the VU adjusted its substantive vision to the future, under the motto ‘VU Amsterdam: looking further,’ and plans were drafted for expanding or modifying the campus. Since 2003 the university has been considering a vision for the campus; it was only a few years later that it made that vision concrete and the plans for the current renovations on the VU site were established. This gave rise to funding requirements as well.

The early crowd-funders

The VU was founded in 1880 by a group of reformed Protestants, led by Abraham Kuyper. They felt that the education offered at other universities was too liberal. The ties with the reformed Protestant church were strong up until the 1970s. The VU was in fact founded using an early form of crowdfunding: donations from reformed Protestants throughout the Netherlands financed the education at the VU. Fundraisers went door to door asking for donations, carrying green collection boxes bearing a picture of Abraham Kuyper—not only a minister and politician but also known as the founder of the Anti-Revolutionary Party. Radboud University was financed in a similar manner, but by the Catholic community in the Netherlands.

Its original source of funding means the VU has a special structure. While other universities have their roots in the Education Act, the VU is a Dutch stichting (foundation), called the Stichting VU-VUmc, with the university (VU) and medical center (VUmc) as divisions. Other universities such as Leiden University and Utrecht University also work with medical centers, but as separate legal entities and not within a single foundation. “This structure makes it more difficult to arrange funding in the way that other universities do,” says Hanco Gerritse, financial director at the VU. “The VU and VUmc operate as separate entities but must always take each other into account in their financing. In the Netherlands, universities have the possibility of getting funding from the Dutch Ministry of Finance. However, this method of funding, called ‘schatkistbankieren,’ was less attractive in this instance. We therefore chose to work with Zanders, so that the consultants could support us in finding the best financing solution.”

As first university

Zanders first had to investigate how the VU could finance its accommodation plans. Alongside possibilities of bank financing, the VU was also advised to look into a loan via the European Investment Bank (EIB). Gerritse says: “The VU did not have any long-term capital. It was not something we were set up for. Most of the knowledge required we gained from Zanders. And they played an important role in the contact with the EIB. The cooperation fits us like a glove; it is a real partnership.” And the fact that the EIB emerged as a financier is special, says Gerritse. “What makes it so special is that we are the first university in the Netherlands to receive financing from the EIB. Due to both the creditworthiness and nature of the EIB, the pricing is far below those of commercial banks. And they still have more funds available, for the Netherlands and for education in particular.” The construction project involves a total investment of some €460 million. The maximum amount of funding the EIB will provide is half of the investment by way of combined project financing.

Most of the knowledge required we gained from Zanders. And they played an important role in the contact with the EIB. The cooperation fits us like a glove; it is a real partnership.

Hanco Gerritse, financial director at the VU

At other universities, schatkistbankieren and/or loans from commercial banks play a large role in the financing; the VU itself contributes the rest of the investment sum for this project, generated from cash flows and its own resources. These cash flows come from the government, based on the number of students and graduates (the first flow of funds), in the form of research financing (second flow of funds), or originate from the European Union and businesses (third flow of funds). “The buildings used to be owned by the Ministry of Education, but since 1995 the universities own their buildings and sites and are therefore responsible for their accommodation, maintenance, and investments as well,” says Peter Wemmenhove, head of planning & control. “The VU’s main building was built at the beginning of the 1970s and is now in need of renovation. This modernization also falls within the scope of the financing.”

Seven Projects

The projects that fall within the project financing are:

• The O|2 building (due for completion in 2015)
• The Campus square (University building NU.VU)
• New power turbines in the VU’s own power plant: Energy center
• Renovation/upgrade of Main building
• Car park under the O|2 building
• Upgrade of the Medical Faculty building
• Changes to the Mathematics and Physics building

Long-term partnership

Wemmenhove started at the VU in May 2012. The project had already been under way for six months at that point; the information memorandum was being prepared and sent out. Gerritse was appointed financial director one year later. Not long before that he had held the same position at healthcare institution Cordaan, where he also worked on a financing project with Zanders. “We see the EIB’s financing as a show of confidence in our plans from a triple-A-rated European institute,” says Gerritse. “After all, it is a public agency and cannot invest indiscriminately. By investing in our plans, the EIB is endeavoring to achieve the objectives agreed on between the European countries.” The VU and EIB did not only discuss the financial angle; the EIB also cooperated closely with VU’s accommodation department, the Campus Facilities Organization (FCO), and of course the VU medical center.

Zanders also played a big role in that, especially because the process was complicated due to the complex legal structure of the foundation.

Hanco Gerritse, financial director at the VU

The most expensive sports fields

Gerritse proudly explains what buildings are being built with the funds raised: “It is a combined project to build a number of new buildings and overhaul existing buildings. The new buildings will be the O|2 building and the new university building NU.VU. We are also improving the sustainability of all our buildings. For instance, in our own power plant we use seasonal thermal energy storage (STES) to cool or heat the buildings. In the main building, the shell will remain intact and we will open up the many small rooms into larger, brighter open-plan offices. All of which meets the needs of our lecturers and students.” This means more flexible workspaces as well as more opportunities for contact between lecturers and students. “The building must be up to date for at least the next 15 years,” adds Wemmenhove.

Connections between the businesses in the Zuidas district and the university are also being stimulated. “The most expensive sports fields in the Netherlands are across the street,” says Gerritse. “They are owned by the municipality but we are going to trade that land to accomplish a more explicit connection with the city. The sports fields will then be moved to behind our site. This puts us closer to the Zuidas district and brings the businesses even closer to our campus.” So there will be even more cooperation between university, business, and the government—something the government is also eager to encourage.

The VU recently started a major research program in cooperation with the University of Amsterdam and ASML. Some of the laser technology used by the semiconductor manufacturer was developed at the VU. Gerritse adds: “That is a really fine example: conducting research together, using the technological expertise from within the universities and then together finding applications for this knowledge. It has yielded a great deal for Amsterdam. Investing in a strategic partnership makes it easier to achieve such results.”

Phased approach

The VU’s real estate investment is a multi-year plan that runs to 2030. Underlying the multi-year plan is the thinking that the university must find more points of connection with the city: the VU, looking further. “The gates must be open,” says Gerritse. “By establishing the connection with the Zuidas district we can give the entire urban district a boost. That is the larger, urban planning vision behind our plan.”

Within the time span that the European Investment Bank provides funding, seven projects have been defined, both new builds and renovations of existing buildings. These projects comprise the combined project financing for the first phase. The total multi-year plan is executed in different phases. The reason for this phased approach is mainly to limit the risks linked to the investments. “We will examine the situation during every phase,” explains Wemmenhove. “How many students we have, whether the government financing is changing, how business is developing in the Zuidas district—these kinds of factors can prompt us to adjust the course of the plans.” The current investments are still in the first phase and are expected to be completed in 2018. Residential facilities, retail units, and movie theaters are also included in the subsequent phases.

What did Zanders and the VU do together as a
project team?

• The contact with financiers (EIB, commercial banks, and the Ministry of Finance), including negotiations
• Cooperation with FCO (campus facilities organization), VUmc, and Van Doorne (lawyer)
• Drafting of information memorandum, including model and multi-year projections and RfPs
• Selection of financiers
• Structuring of the financing, tailored to the organization and its current financial statements

Better positioned

The funding from the EIB also reflects another trend in the academic world, specifically that universities are becoming increasingly international. The competition between universities is no longer confined by national borders or even by European borders. In the international realm, the city of Amsterdam will also profit from the developments at the VU. “More than half of the master's curricula are in English,” explains Gerritse. “As a university and as a city, you are competing on the international market for higher education. The fact that we have good facilities puts us in a better position in that market as well.” In that sense, too, the financing from the EIB is an affirmation of its confidence. “Compared to a commercial bank, the EIB looks at a financing plan very differently, looking far beyond cash flows and revenue forecasts,” says Koen Reijnders, consultant at Zanders. “Probable questions include, for instance: how will the envisioned building function and how sustainable is it? The EIB only starts looking at the financing component when it’s satisfied from both the engineering viewpoint and the perspective of education economics.”

“We are investing in the Zuidas district,” says Gerritse. “When the VU moved here it was surrounded by farmland that was being sold and bought. Since then, this land has grown into a unique area. The VU had to investigate the right way to develop the space available and, with this plan, we have succeeded in doing this.”

Although DSM’s payment factory offered an exceptionally high level of service, the system was no longer supported by SAP and, to avoid rising maintenance costs, Dutch multinational DSM decided to switch to a new version of the SAP system. With 160 business units in 25 countries around the world, as well as new standards for SEPA and SWIFT, the challenge was huge.

In the first half of the twentieth century, state-owned company Dutch State Mines was still exploiting underground coal seams in the province of Limburg. Slowly but surely, it continued to expand as a chemicals company, when it started producing ammonia and artificial fertilizer based on by-products released when coal is vaporized. In 1973, the last coal mine was shut down but the decision was also made to abbreviate the company’s name to DSM. Production had been shifting increasingly away from bulk chemicals and towards nutrition and performance materials (plastics). The petrochemical activities were sold in 2002. The Dutch government listed 69% of the shares on the stock exchange in 1989, followed 17 years later by the remaining 31%. DSM has held the designation ‘Royal’ since 2002. From its head office in Heerlen, the company operates on an international scale from several hundred branches and its products are used in various sectors including the food industry, the healthcare sector, the automotive industry, paint, and construction. DSM has steadily expanded in recent years and now operates in 25 countries around the world.

A new SAP system

In 2002, its expansion prompted the company to acquire and implement an SAP system which (on a small scale) was gradually rolled out across various countries in which DSM was already active at that time. The ultimate outcome was a new payment factory capable of processing all payments through a single channel, which went live in 2005. “We were really pleased with the system and had built a reputation and a service level that we could be proud of,” relates Raymond Snijkers, manager of the payment factory & IT. “In terms of straight-through processing (STP) rates, the banks rated us very highly. We had very few payments refused in proportion to the volume.” In other words: the payment instructions were automatically processed correctly, without human intervention. In 2012, however, the need arose for a new SAP system. Snijkers says: “To avoid an exponential increase in maintenance costs, our IT organization decided that the existing SAP system had to be upgraded to the latest standard. We were still using R3 systems, with a CFM2.0 module for treasury. But by then, SAP had adapted its products to new technologies. With treasury, we set about investigating what this would entail for us and it soon became apparent that we were looking at more than just a technical upgrade. The SAP system for treasury had changed so much that an upgrade alone wasn’t enough; we had to do a redesign.”

Thoroughly prepared

 The treasury department began looking into the best way of tackling the redesign. Snijkers says: “If we were going to make such a big investment, we would have to look at ways from the outset of maximizing the benefits, guided by the basic premise that processes had to remain secure. Our internal control design was perfect and we certainly didn’t want to abandon it. So the choice was to opt for an upgrade that was both technical and functional, but which is based on the current treasury processes, with internal control and all the features necessary in order to use the system securely. In this sense, it was not a ‘green field’ approach.” By then, SEPA was also in the offing, which meant that, as a corporate, DSM had to get to grips with different payment methods. On top of that, Swift was opening its doors to corporates with SWIFTNet. As well as the various new takeovers and cooperative ventures, it was clear that DSM, and corporate treasury in particular, faced quite a few challenges in switching to the new system. “That’s why we prepared the project very thoroughly,” recounts Snijkers, “being well aware of what lay ahead. As treasury, we are in a high-risk environment, which means we are extra cautious with these kind of things. After thoroughly investigating all the potential implementation partners, we chose Zanders.”

Tight timescale

The project, which was dubbed TRUST (The Road to Upgrade SAP Treasury), got underway in September 2012, with Snijkers as the project manager. “We were aiming to get the system up and running in less than 10 months, including the roll-out to 160 DSM business units in 25 countries. To compound matters, we had to achieve all of this at a time when DSM was already tied up with another large project involving the global reorganization of its creditor admin system, as part of which all the units around the world were transferring their invoice payments to a central service center. So, as well as building a completely new treasury system, with all the interfaces, we also took on the task of simultaneously switching to SEPA and SWIFT connectivity,” explains Snijkers. “It was partly because of all the challenges we were facing that we chose such a tight timescale,” relates Hans Vossen, VP corporate treasury at DSM. “DSM never stands still. As a company, there are a number of risk factors in a project which you constantly have to bear in mind, such as the right staffing levels, backup and communication, and good time management. Everything had to be done within a very short space of time. So the idea was: we freeze everything and don’t make the changes until the new system has been introduced. You can’t sustain this situation for long, not least because overruns cost money. Things went smoothly for a long time; it wasn’t until the end that we came across hurdles. One and a half months before the system was due to go live, we knew it wouldn’t be easy to stay on schedule but at the same time I think the success of the project really hinged on the fact that, for a very long time, we focused on going live on 1 April. Because of this, everyone worked tremendously hard when we decided to postpone the implementation by a fortnight.”

Unexpected hurdles

The project went live on 1 May 2013, and all customers started using the new solution from that date. “Zanders was actually ready by then,” says Vossen. “All the major issues had been resolved. But when we went through the payment circle, we did encounter a few problems. Internally, it was paramount to get all 160 units up and running but, where creditors are concerned, you can’t test in advance whether everything will work properly. To then discover that something isn’t working properly is, naturally, frustrating. And a real shame, because everything had been going so well up to that point. Although it caused the users a bit of inconvenience, all the issues were tackled swiftly.” According to Snijkers, the complexity and diversity of the payment factory was one of the key issues. “Migrating from the various customized elements we had introduced in the old system to the new payment factory proved very challenging. On top of that, the introduction of ISO20022, combined with SWIFT connectivity, didn’t deliver the degree of standardization we had hoped for. Because of this, the set-up and testing phases of the change process are a huge undertaking – which meant the project threw up plenty of unexpected hurdles.”

What did Zanders do for DSM?

• Treasury process analysis via workshops to determine the project scope, for the following processes;
• Master Data Management
• Market Data Management
• Recording and accounting for financial instruments
• Cash Management
• Intercompany Payments
• Bank Connection
• SWIFT Onboarding and Implementation
• SWIFT service bureau selection and implementation
• SAP Treasury Implementation, including Cash Management (CM), Treasury and Risk Management (TRM), In-House Cash (IHC) and Bank Communication Management (BCM)

Resuming high service levels

In the end, therefore, it took longer than planned to make the switch to an efficient new system of standardized processes. “Compared with the implementation of the old system, this project was rather more complex,” says Snijkers. “Our payment factory has expanded greatly in the past seven years. We now provide a truly global service and the number of payments, payment methods, and customers has increased dramatically. Despite this, we have managed to maintain a very high level of quality in recent years. And it proved challenging maintaining this level during this latest implementation.” According to Vossen, the treasury department has also set the bar high: “If 99 percent of payments proceed smoothly – that’s the percentage we are currently achieving – that means one percent is going wrong. Other companies have an average of one and a half percent. So we’re doing well, but we’re coming from a figure that was less than one percent.” As soon as the final problems have been resolved, that percentage must creep back towards the old, exceptionally high service levels. “It’s already clear that we can handle acquisitions and disposals much better and faster than in the past. A company that is being taken over can quickly be connected up to the payment factory. These are major benefits,” Vossen believes. “And when you bear in mind how many stakeholders we’re dealing with, how complex it all is, we’ve done tremendously well. For just one team, comprising DSM insiders and Zanders consultants, to successfully complete the project is very impressive. Snijkers says: “It was delivered within budget and without any significant adjustments. And I’m confident that we can now further improve our straight-through processing (STP) rate and are able to offer our customers the high service level to which they are accustomed.”

Growing with DSM

Despite its international expansion, the company has also increasingly become “One DSM.” Vossen explains: “The payment factory is still the best example of the standardization we have achieved. Everyone initially had their own payment solutions; now we handle around 80% through a single channel. So there are still quite a few units and countries to go. And because DSM is undergoing such a transformation, you constantly have to adapt to the elements of the payment factory. At the end of the day, it’s all about the users: they have to make it cost efficient.” At present, around 45% of sales are still generated in Europe. With the change in focus, moving from coal, via chemicals to nutrition and performance materials (like plastics), DSM’s sales are also shifting towards China, Latin America, and the USA. “It was only a couple of years ago that we were able to connect nutrition to the payment factory. Sales in high-growth economies such as China have risen very sharply in recent years,” explains Vossen. “Now that we are getting more and more business from our international activities, the roll-out of the payment factory became a necessity. We are growing with DSM.”

In the 150 years of its existence, Swiss Re has grown to be one of the world’s largest providers of reinsurance and insurance-based forms of risk transfer. Reinsurers are mostly associated with insurance for extreme loss events, such as natural catastrophes. However, Swiss Re’s services cover the entire insurance spectrum: Swiss Re is the counterparty to risks which primary insurance companies and large corporates decide to mitigate.

Liquidity risk

Usually, liquidity is not the first topic that comes to mind as a key risk for reinsurance companies. “The general view was, and kind of still is, that reinsurance companies do not run a lot of liquidity risk, like a bank,” Martin Ramseyer says. For banks, the main driver of liquidity risk is a sudden customer run on deposits. The risk for reinsurers is rather that claims can reach the order of billions, sometimes to be paid out at short notice relative to the magnitude. If sufficient assets cannot be liquidated at a reasonable price within the required time frame, the company not only puts its reputation at stake but also risks bankruptcy – regardless of its solvency or profitability.

From a capital perspective, expanding services across businesses yields a risk diversification benefit. But that benefit does not extend to liquidity, Ramseyer clarifies: “There are many legal limitations imposed by different jurisdictions that limit our abilities to move assets between subsidiaries within the group.” A joint effort of risk and treasury was initiated several years ago to create a framework to measure and manage funding liquidity risk. Initially, the primary objective was to identify potential liquidity constraints for the major legal entities. Calculations gradually grew more extensive, and the framework evolved into an important scenario analysis mechanism used to support executive management decisions. Its execution had become time-consuming, and the operational risk inherent in manual calculations increasingly relevant. The time was ripe to streamline and automate liquidity risk analysis and the reporting process. Andreas Tonn became the business project manager for the system selection and implementation.

Implementation

The choice was made for a vendor solution. “The core advantage is that they provide a framework, which reduces implementation time and facilitates the translation of needs into requirements,” Tonn says. “But as you will never find the perfect tool, it is important to have a clear focus.” Liquidity risk measurement models for the insurance business in vendor systems are still in evolution phase. Flexibility was therefore a key priority for Swiss Re, as the majority of the logic needed to be implemented from scratch. Swiss Re embarked on an intensive proof-of-concept phase, and asked vendors to provide a working demonstration that addressed all aspects of its liquidity risk framework. They chose Wolters Kluwer’s RiskPro, as it proved both mature and sufficiently flexible at the same time.

A phased implementation approach was chosen to gradually introduce the solution into the reporting cycle. However, after the first release, it became apparent the project team would need additional business support if it was to cover all the aspects thoroughly within the stated time frame. “Our internal resources were too committed to other tasks and could not provide support to the extent an intensive project requires,” Tonn says, “but external resources are actually only beneficial to a project if they bring the right expertise to the table.” There were very positive experiences with Zanders on other treasury projects so a request was made for support.

Jeroen van der Heide from Zanders was asked to join the project team: “His ample experience with functional design of various systems across risk domains convinced us that he would indeed accelerate our project.”

Andreas Tonn, business project manager for the system selection and implementation

Challenges

As with many system implementations, getting the data delivered in a systematic fashion was a challenge: different departments have different priorities and downstream reporting is often not on top of their list. Afterwards, the interpretation for modeling was not always clear either as it was complicated by the global reach of the company in which data ownership spans across time zones. For example, intra-group funding was previously measured using a net aggregate approach. With the implementation of RiskPro, the choice made sense to model each debt contract based on its characteristics as booked in the system. Understanding how to calculate the impact of all implicit options automatically for different scenarios required detailed discussions across teams and continents.

The project team has worked relentlessly during the past year in close cooperation with business and IT colleagues. A total of six minor and major releases were accomplished, during which the necessary data and calculations with respect to investments, collateral, reinsurance portfolios, debt, internal cash flows, and contingent funding requirements were added to the system. The RiskPro results were embedded in existing reporting templates, and the change analysis process between reporting dates was partly automated. They were very satisfied with the Zanders support: “Of great benefit was Jeroen’s talent to quickly gain insight out of a huge amount of information, and present the newly created results in such a way to make them understandable to the business user and fit right into existing business processes. That has been a very valuable business contribution.”

Looking towards the future

With the system up and running, the team is able to provide reporting and analytics for the major legal entities within the group and across business segments and branches, rather than only for those with the largest impact from a risk perspective. “It allows us to understand and represent the liquidity dynamics in a more systematic way across the group,” Ramseyer says. The next step is to increase the quantity and quality of the information flow between local business units and treasury. “It will really enhance the risk awareness of local boards and empower them in their active steering efforts. With their feedback they will help improve the framework in return.”

Developments within Treasury Business Services don’t stop there. The system contains the vast majority of Swiss Re’s economic balance sheet down to the transaction and cash flow level. “The vendor software is designed to be an integrated risk system. With the market data and contract data available in full detail, we have a suitable basis to extend the scope of the solution to other domains,” Tonn says. The plan for the next two years, therefore, is to gradually support other analyses, for example with respect to currency risk, funding cost, liquidity planning, and ALM. The consistency between and efficiency of the analyses will improve, enabling the treasury teams to dedicate more time to proactive analysis and steering. Zanders will continue to support these efforts: “Given his successful contribution to the project and his interest to continue to support Swiss Re, we asked Jeroen to manage next year’s project,” Tonn says, “But first things first: we are very much looking forward to the daily use of the implemented solution.”