FMO provides financing for companies in Africa, South and Central America, Asia, and Eastern Europe, and its mission is to empower entrepreneurs to build a better world.

“And in the context of this mission we have two objectives,” says Paul Buijze, FMO’s director of finance & mid-office.

“We only finance those companies that we expect will make an impact. They must contribute to the type of development that maintains a balance between financial returns and environmental and social aspects. In other words, the investment must stimulate development. We don’t finance ventures that commercial banks already do. We invest only in private companies that would otherwise not be able to grow; it’s not our place to finance governments.”

Focus Areas

The development bank invests in sectors in which they expect the impact to be the greatest, such as financial institutions, energy, and the agrarian sector. “Many companies are too small to be served from The Hague,” reasons Buijze, “but a local bank is far better positioned to reach companies in a country on a smaller scale. “And without our second focus area, energy, development isn’t even possible. Without light, you can neither read, study nor run a factory. Energy facilitates a great deal of development. “Our third focus area is food and water. By 2050, our planet will be home to nine billion people and they will all have to eat and drink, within the realms of what’s possible, of course. There will probably be enough agricultural land, but at the moment it’s being used very inefficiently. “It’s about the complete chain, incidentally. If there is insufficient refrigeration capacity, food will spoil before it even reaches consumers.”

Finally, in addition to these focus areas, we serve a sector encompassing infrastructure, production and services. Kept deliberately broad, this ‘other’ sector owes its importance to distribution, and mainly because of risk considerations. Here, on specific issues we always collaborate with partners that have certain expertise, while in the first three focus areas we ourselves often lead the way.

Strong Corporate Governance

With an investment portfolio of €8 billion in more than 85 countries, on a global scale FMO is one of the biggest development banks serving the private sector. It finances entrepreneurs directly through funds, but the decision to invest in funds depends on more than just financial criteria. Buijze is a member of the credit commission that assesses the suitability of projects. “Over the years we’ve built up an extensive list of investment criteria. A bank must have a certain level of solvency. For an investment in energy, for example, we insist that the energy provider will be called on to supply a certain amount of energy over a certain period of time. “And we opt for renewable energy, as opposed to the fossil-fuel-generated variety. We have extensively documented conditions for each type of financing. This is a departure point. “If, on that basis, a request fails to meet our conditions in the areas of the environment, society, governance, or return, we’ll take it from there whether we can implement the development with the company in question. We’ll look at the impact the company can generate, such as employment, for example. Every situation is different, which is what makes working in these countries so complex.” In combination with a report set up by the investment officer, who will have checked out a few things onsite, it’s decided with the aid of the criteria whether financing is eventually granted.

Negative Travel Advice

But how does that work, for example, in countries governed by ‘dubious’ regimes? “We have very strict and influential corporate governance and compliance officers,” says Buijze. “In that respect, our demands are uncompromising, and we carry out thorough research beforehand. We check, for example, to ensure a company has no ties with the government.” And what about companies in high-risk areas, such as a country embroiled in a civil war? "It’s absolutely essential that we have access to the country in question,” he answers. “We must be able to keep our finger on the pulse. If our government advises against travel to a particular country, funding will not go ahead. “However, if it’s already been extended, we cannot change it. Such a situation was created by the recent Ebola crisis; at one point, we could no longer travel to Liberia or Sierra Leone. “Of course, there are countries in which you are exposed to more risk, but our portfolio has a good spread and includes many countries which are now making good progress and where there is no political tension. “You’ll find savvy entrepreneurs in the most difficult of countries.”

According to Buijze, FMO has had to write off very few investments so far. “Every company experiences a hiccup from time to time, such as local demonstrations or disturbances. But at the end of the day, the situation usually sorts itself out. “Everyone needs energy, just like they need banks and telecommunications, for example. “And, of course, water too, although this issue is somewhat politically sensitive.”

Setting up authorizations

In many respects, FMO has a completely different risk profile compared to a commercial bank. “We don’t employ traders, and we are not subject to unrealistic financial pressures from shareholders,” says Buijze. “It allows us to be very focused on what we do. In my view, this doesn’t make our risk greater than that of a commercial bank.” Despite vastly differing missions and approaches, FMO nonetheless faces the same demands. “For example, DNB makes sure that our ICT architecture and its system administration comply with certain standards,” says Rolf Daalder, director of ICT & facility services at FMO. “Security must be paramount. FMO is free in its choice of cloud, but it must comply with certain DNB conditions. “We only do things we know about, and if we cannot do something ourselves, we have a number of partners we can fall back on for specific expertise.” Every year, FMO is audited by KPMG, which, in 2014, stipulated that the development bank should take a long, hard look at its internal authorizations and diverse roles and functions.

“Everyone in the bank has a certain function, to which certain rights are allocated,” explains Daalder. “You must know what you are approving. Some 10 years ago, we set up the WSS Suite (Finance Kit) system exactly for this purpose, but it had to be brought up to date.” What FMO needed was an independent party that also had expertise in how others approached this kind of task. “We had no intention of convincing ourselves that everything was hunky-dory; there was no point in the left hand checking what the right hand was doing!”

Four-eyes principle

How can you effectively monitor an existing system? “FMO wanted to be challenged and asked us for advice on best practices,” explains Zanders consultant Bart Timmerman. “During a regular update to a newer version, Finance Kit gained a new authorization functionality called Security Centre. It’s a completely separate module in which the organizational structure can be set up. It offers more possibilities and works differently, but that doesn’t detract from the fact that it must be checked to ensure that everything is set up properly.” The questions then were: what are all the processes, and what are they used for? “Supposing, for example, that one person was responsible for two processes, Zanders indicated what improvements should be feasible,” answers Daalder. In this way, it was possible to assimilate authorization profiles to the current systems and requirements. “It’s the best way: start from scratch, investigate who does what, who must be able to do what, and then set up the system on that basis,” says Zanders consultant Annelies Labots. The size of the development bank also plays a role, according to Daalder.

“We are a relatively small bank in which, in certain areas, a few people do relatively quite a lot. It makes the four-eyes principle more challenging than it is for larger banks, which have more people for the diverse functions. If one presses the button, another – and maybe even a third – has to check whether it’s all correct.”This is indeed a challenge for relatively small organizations, agrees Timmerman: “Processes must be flexible and easy to carry out, and this implies that there must be a sufficient distinction between functions.”

Knowledge Sharing

The authorization project, which ran from August 2014 to the beginning of 2015, was complex and comprised numerous small elements that had to be harmonized with one another. “It was completed successfully and to the satisfaction of KPMG,” says Buijze.

And what about FMO’s plans for the future?

“Our strategy is that by 2020, we want to halve our footprint and double our impact. Food production must be maintained at the right level if it is to keep pace with the enormous growth in population, a huge challenge in itself. The population of Uganda, for example, is burgeoning—from just 5 million people in 1950 to 32 million currently, and it’s projected to exceed 100 million by 2050. Another example is Nigeria, whose population will eventually surpass that of the United States. And all these people need to be able to live worthy and dignified lives.” It’s about more than just money, insists Buijze. “Knowledge sharing is also an extremely important way of ensuring that people can grow their own food. All this, combined with being commercially and responsibly active, appeals greatly to the people who work here.” The sheer extent of social engagement at FMO is clearly evident and often critically discussed. “We want to facilitate growth in a country, but this is often accompanied by tension between development and environmental interests,” assures Buijze. “For example, can the installation of a wind farm in a poor region where there is no electricity be seen as a sustainable solution? There will always be people who feel their voice is not being heard. We are not dogmatic, but the result must be the correct one.”

What Did Zanders Do for FMO?

Since 2006, Zanders has carried out projects for FMO in various areas, including:

• Shaping investment policy
• Providing advice on its property investment portfolio
• ALM (Asset and Liability Management) studies
• IRS rating
• WSS Suite (Finance Kit) implementation
• Assessing an update of the capital planning model
• IRRBB (Interest Rate Risk in the Banking Book) validation

If you’d like to learn more about authorization issues or any of the above-mentioned topics, you can contact us.

The Estée Lauder Companies (ELC) set out to change its European banking landscape and one of its first goals was to reduce its banking relationships in the EMEA region from 32 to two. The task required a rigorous request for proposals (RFP) process to select the banks. Writing more than 200 targeted questions for the RFP, with guidance based on Zanders' experience in this area, enabled the company to make a clear decision.

Born Josephine Esther Mentzer, Estée Lauder was raised in Queens, N.Y., by her Hungarian mother, Rose, and Czech father, Max. The name Estée was a variation of her nickname, Esty. In 1946 she and her husband, Joseph Lauder, officially launched the company and, almost 70 years on, the company still has an entrenched sense of family history. The Estée Lauder Companies Inc. is one of the world’s leading manufacturers and marketers of quality skin care, makeup, fragrance and hair care products. Its products are sold in over 150 countries under brand names including Estée Lauder, Aramis, Clinique and M•A•C.

As part of its growth cycle, in 2009, the company appointed an outside CEO – Italian business executive Fabrizio Freda. Since then, the company's net sales have increased from $7.3 billion to $10.97 billion in 2014. This growth cycle has necessitated a more efficient, streamlined way of managing cash flows.

From 32 to two banks

ELC's European operations cover 23 countries, had 32 banking relationships and approximately 200 bank accounts. This had several implications, including inefficient centralization of cash, increased counterparty risks and difficulty in implementing host-to-host connections. The set-up also meant there was less than optimal control and management of excess cash, as well as an opportunity to gain greater efficiency in payments and statement processing. Hence, ELC identified the need to significantly rationalize the number of cash management banks and bank accounts – so the 'Pan European Bank Structure Project' was born.

So how did the company approach the vast task of streamlining almost 200 bank accounts and its numerous banking relationships? It was decided that two or possibly three pan-European cash management banks should be selected. The project involved implementing a centralized liquidity structure for excess cash with a zero-balancing account (ZBA) structure.

Success is in the preparation

The first step of the project was an extensive request for information (RFI) project, which lasted 18 months. The company’s international treasury centre (ITC) began by gathering information from ELC's many affiliates in the region and then broadened the research to include current best practices for banking and cash management. Executive director for European treasury and accounting at ELC's ITC, Bart Taeymans, says: “During the RFI process we wanted to reach out to and learn from our relationship banks that participate in our revolving credit facility as well as other major banks. We were looking at what might be possible and wanted to learn best practices on how companies can manage cash in Europe.”

The RFI looked at all possibilities, from the best way to obtain a report on all balances, to ways of pooling or centralizing cash management in each country. It was a vital information-gathering stage to prepare specific, targeted questions for the RFP. Towards the end of the RFI, ELC invited Zanders to come on board to provide input for the next phase – choosing a long-list of banks for the RFP based on the RFI responses. Taeymans, who joined the company in early 2007, says: “Having a consultant next to you when you are learning about best practices is extremely useful. Banks will give differing opinions according to their abilities and strengths. Zanders provided a neutral view in that process of understanding best practice.”

Five banks were selected to participate in the RFP. “Zanders guided us from a structural perspective – they had the required knowledge and knew what questions to ask, as well as how to score and evaluate the replies. That definitely helped us – but it's not something you can completely outsource, so a lot of work was definitely involved internally,” notes Taeymans.

An eye on the road

Prior to starting the RFP process, ELC also developed a five-year strategic roadmap for treasury. “Zanders was helpful in putting that in place. The consultants' knowledge on treasury best practices helped us draw up a detailed plan on how to integrate treasury systems and processes more efficiently,” says Taeymans.

We wanted to learn best practices on how companies can manage cash in Europe

The treasury roadmap looks forward three to five years. The first step was to set out ELC's current position in relation to its peer companies and best-in-class treasury models. The second step was to decide where the company aimed to be in five years and to establish its short- and long-term priorities and objectives. A gap analysis of the current situation and the desired outcome was valuable in understanding what needed to be done. Finally, the roadmap set out a phased approach to implementing the sub-projects needed to achieve the goals.

Ask the right questions

A great deal of detail was provided to the banks at the RFP stage – something that many of the banks said they appreciated. The RFP document itself covered 39 pages and included more than 200 questions. As renowned author and professor Clayton Christensen once said, “Without a good question, the answer has no place to go.” This underlines that the preparation and drawing up of the questions is really a key stage in ensuring a positive outcome for the RFP. Taeymans notes: “The more information you provide and the more detailed the questions, the better the responses you receive from the banks. It's about letting the banks know how we operate.” It then took about six weeks from October 2013 to November 2013 to receive the responses from the banks.

ELC used a Six Sigma methodology to score the responses – an area in which Zanders was able to provide experienced guidance. The carefully weighted scoring allowed for banks that were the best fit for the customer's requirements to be differentiated in key areas, while responses to certain questions that did not meet ELC’s core requirements meant that a bank could be ruled out completely.

Hugh Davies, associate director at Zanders, was closely involved in this stage of the project. He explains that the Six Sigma methodology enables companies to have a consistent approach to evaluating and scoring complex data, providing a clear frame of reference which is particularly needed when several people are involved in assessing the RFP. Davies says: “This scoring methodology provides a completely objective, robust and defendable set of results. This is important if anyone – a bank or senior management – later ask questions on how the results were obtained.”

Following the evaluation of the RFP responses from the banks, a round of queries and responses clarified any outstanding issues, as well as further meetings with the banks where they could present their proposed solutions. Following that, reference calls with some of the banks' existing clients with similar requirements were made and the short-listed banks' operations and service centers were visited to validate certain aspects of their proposals.

A strategic view

As has been witnessed recently, some banks have been rationalizing or closing down their cash management operations completely, so it was also important to understand the bank's longer-term plans for its cash management business. Taeymans says: “We wanted to understand the bank's approach to practicalities such as pooling, accounts, implementation, contingency, data reporting, etc., but we also had an eye on its strategic vision of cash management. It's important to understand the strategic motivation from senior management at the bank, in the region and beyond. We gained an understanding of this from speaking to many different people at the bank, up to senior levels.”

It’s important to understand the strategic motivation from senior management at the bank, in the region and beyond

It was only in the very late stages of the selection process that negotiations on pricing began with the selected banks, while those that were not chosen were informed and given detailed feedback on the strengths and weaknesses of their proposals.

ELC reached its decision in April 2014 and finally, out of five short-listed banks, BNP Paribas and Citibank were chosen. What clinched the deal? Taeymans says it was very much based on the Six Sigma scoring method and the two best performers were chosen. However, the overall relationship was an important factor and services were allocated according to each bank's strength in particular regions.

Satisfying results

But far from being the end of the project, the bank selection was just the beginning, and in April 2014, the implementation of the pan-European bank project really began. Taeymans says: “Since then, Zanders has been involved on select occasions, in particular with workshops for affiliates because they know how banks operate in certain markets.”

You need to involve your people, including legal, local finance teams and IT

Some of the lessons learned from the project so far include getting early involvement from stakeholders, including the affiliates, as well as IT, legal and accounting departments. Taeymans adds that, when 23 countries are involved, one shouldn't underestimate the time needed for legal and documentary matters. He says: “You need to involve your people, including legal to help with documentary requirements, as well as local finance teams. I myself am definitely not an expert on some of the technical details regarding the file formats needed to integrate with SAP – so that is where cooperation with IT really is key.”

While more work lies ahead on ELC's treasury roadmap, the Belgian ITC can for the moment feel content with its achievements so far. Taeymans says: “It's fair to say, when you see the migration taking place, that's satisfying. It's great to see a workable solution within the company that is the result of a project that is steered from within treasury, but has impacts on affiliates and their financial departments, who all have other priorities. It's very satisfying to see the benefits for the whole company – monetary benefits but also a more efficient process.”

Would you like to know more about RFPs and/or bank selection? Contact 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.”

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.”

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

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

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

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

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

Designing project TaO

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

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

Creating a bespoke but balanced system

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

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

The ‘fit-gap’ analysis

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

Ironing out the bugs

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

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

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

Team work

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

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

Ambitious plans

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

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

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

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

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

Isabelle Badoux, European treasury & credit leader at Owens Corning

Local knowledge

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

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

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

For several years

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

In-house bank

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

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

The same language

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

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

Change and training

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

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

When Coca-Cola Hellenic (CCH), one of the biggest bottlers and sellers of Coca-Cola products in the world, implemented SAP in 2008, the treasury team expected great improvements in cash management and financial communication across the 28 countries in which the group operates. The reality was somewhat different, with the implemented version of SAP not interacting in harmony with CCH’s enterprise resource planning (ERP) system, called Wave 1. It was at that point that the newly appointed treasurer, Bart Jansen, decided to re-design and improve the SAP implementation – with help from Zanders.

When Bart Jansen joined CCH treasury in 2008, he might have been forgiven for thinking that he had joined at the perfect time – the company had just gone live with SAP Treasury. So with the latest technology already in place, surely Jansen would be able to focus on the bigger treasury issues?

He soon found that the treasury team in Athens was far from happy with how SAP was running. Treasury operated a stand-alone ERP5 installation that had to integrate with three SAP kernels at different versions of SAP. There was repetition of functions and lack of integration. Jansen explains that there were high levels of dissatisfaction with the functionality of the system among CCH’s users: “I started the new job as treasurer in the midst of the financial crisis with a team that was quite frustrated with their tools and also understaffed. I needed to do something drastic about this, so I called Judith van Paassen at Zanders.”

Jansen’s relationship with Zanders goes back a long way. As a Dutch national, he was previously treasurer at Dutch utility group Nuon, where he carried out a successful system implementation with Zanders. “After that experience, I knew that Zanders were knowledgeable about SAP, so when I moved to CCH in Athens, it was a natural step to call them,” he says. CCH sent out a request for proposal (RFP) and Zanders won the selection process.

Once Zanders had become involved in the project, things started to move quickly. Jansen says: “Bas Rebel and Bart Mol came over and worked with us in early 2009 and helped to identify 70 ‘gaps’, or weaknesses, in our process. While we identified some ‘quick wins’, we also realized that a lot more effort was required to address more structural issues.”

Integrating treasury with Wave 2

The aim of the SAP implementation was to upgrade the system to fit in more coherently with the Wave 2/ECC6 template. Every country treasury unit had its own banking partner and was communicating in its own way, so this also had to be upgraded to Wave 2. Jansen explains how the project team worked to resolve these issues: “With help from Zanders we started to develop a business case that would solve our immediate and long-term structural issues related to the tools we use and the way we interact with our 28 countries. We now have a more integrated solution – particularly for FX and cash management data – that complies with the latest standards and strengthens communications.”

The business case was approved for the implementation project in November 2009 and work started on it in January 2010. As with any major implementation involving many different disciplines, it was not without some challenges. Jansen says: “One of the difficulties was the tight corporate deadlines regarding the Wave 2 roll-out. We had to comply with the Wave 2 deadlines imposed upon us by our own company, so we had to get the project started quickly.”

Communication is key

One of the challenges of working with an international team of consultants, according to Jansen, was getting people together in the same place: “The complexity of the system and the solution meant we had to involve several experts from different fields. Ultimately it was a matter of finding the right experts and getting them together, for example getting the people from Zanders together with our IT people. It wasn’t easy as they were not always in the same country, but we still managed to communicate and address the issues.”

Zanders partner Laura Koekkoek adds: “We’re very pleased with the professional way the project has been run – in particular the testing phase was taken very seriously. We had a lot of people working together on this, so communication has been crucial.”

Complex challenge

The best advice is always to stay as close to the standard version of SAP. Although this isn’t always possible, it helps to keep the complexity at a manageable level. We absolutely benefited from Zanders’ expertise and knowledge of SAP in this regard.

Bart Jansen, Treasurer at CCH

With a complex system, designing the security and access rights has also been a time-consuming operation, as Jansen explains: “We spent a lot of time designing the authorization system, bearing in mind the segregation of duties within the company, and that has been really challenging on an integrated platform. We worked on this with internal auditors, and it was one of the most important aspects before we went live.”

A pleasant working environment

So despite the pressures and complexity of this SAP implementation, is CCH happy with the results? For Bart Jansen, the most important gauge of the project’s success was whether his treasury team in Athens was happy with the tools and system. “It has been a great success from that point of view,” he says. “They were previously spending a lot of time on administration and spreadsheets, whereas now they can spend time on more meaningful tasks. We have been able to streamline processes and thereby reduce time spent on certain tasks by 30–50%, while the controls have significantly improved. So the team has a much more manageable workload and therefore a more pleasant working environment.”

CCH’s treasury is now in the process of rolling out SwiftNet and the SAP Bank Communication Management module to the country units, replacing the local electronic banking system functionality. This year they will begin work on an in-house bank, and once that is completed, they will set up a payments factory as part of the SAP system. Jansen adds: “We are now in the process of fully automating foreign currency accounting. We’re making a significant investment into the Wave2 platform. So we are already seeing significant benefits and hope to see more in the future.”