In a short period, the company took several steps in maturing its treasury, so successfully that it received an Adam Smith Award. How did Kongsberg Automotive manage to achieve this?

Since the late 1950’s, Kongsberg Automotive has developed from a Scandinavian automotive parts supplier to a global leader in one of the most competitive and complex industries in the world. With more than 11,000 employees in 19 countries worldwide (European countries, USA, Canada, Mexico, South Korea, India and China), the company provides high-quality products to the global vehicle industry, such as custom powertrain and chassis solutions, interior comfort systems, cables and actuators for passenger cars.

When Abraham Geldenhuys joined Kongsberg Automotive as Group Treasurer in October 2017, the company’s treasury function needed further development. “At that time our treasury department was very administrative of nature,” he says. “It is key for treasurers and CFOs to know their company’s cash balance. That was partly not at our disposal. There was a clear need for a treasury transformation, with better cash visibility, cash flow forecasting and control over payments and liquidity. Due to our global activities, these things were hard to combine and tough to control – they needed to be centralized.”

At that time our treasury department was very administrative of nature. It is key for treasurers and CFOs to know their company’s cash balance. That was partly not at our disposal.

Abraham Geldenhuys, Group Treasurer

Challenge

Road map

Kongsberg Automotive’s treasury therefore started a journey to become more mature. Geldenhuys: “During the 2017 EuroFinance Conference, I met some Zanders people. The conference was full of buzzwords like blockchain, machine learning and RPA. We were talking about all these new technologies but most of us still have a lot to innovate in that area. It was clear that, like many companies, we need to get rid of repetitive, Excel-based ways of doing treasury. It was time to clearly define and then centralize, standardize and automate treasury processes. Technology is evidently the enabler to bring all this together. You can’t be strategic when your house is not in order.”

Shortly after joining Kongsberg Automotive, Geldenhuys formulated a three-year strategic Treasury Transformation roadmap to determine where the treasury was today and where it wanted to be tomorrow. “In our roadmap I described the vision, function, building blocks of treasury, a road map time line and existing risks,” he explains. “In January 2018, I presented this roadmap to our CFO. We agreed that cash visibility was key and that we needed daily cash reports to be able to make the right decisions. The roadmap also included refinancing the group. We needed to ensure our capital structure and financing was in order and finally decided to refinance by issuing a corporate bond. The transaction was done in a very short space of time. Timing was critical and the transaction were concluded in July 2018.  We then really started our journey, together with Zanders, to achieve centralization, standardization and optimization of our treasury activities.”

Solution

Pricing tool

Two main steps in the treasury transformation journey were a complete bank reorganization and the implementation of a new treasury management system (TMS). “In May 2018, we completed the solution design and a blueprint for our Treasury Transformation and after presenting our business case, I got final approval in early November 2018,” Geldenhuys says. “I was challenged to have the new structure up and running by June 2019. With this very short timeline the big challenge was without a doubt: will we be able to go live in June? We effectively officially kicked off in mid-November 2018 with our selected TMS partner and in January 2019 with our new selected corporate banking partners.”

Kongsberg Automotive’s treasury also needed a solution to leverage technology for arm’s length transfer pricing of financial transactions. Geldenhuys: “If you have a global zero balance cash pool and intercompany loans, the pricing needs to be in order and set. The focus on these intercompany transactions has increased in the past couple of years. With the current focus of tax authorities globally, we need to make sure that we are ahead of the curve. So, we shared our thoughts with Zanders and the idea was to have a full-proof, state-of-the-art pricing to meet all requirements. Their solution was a Transfer Pricing Solution. With a new Intercompany Rating & Pricing (ICRP) tool we were able to price our cash pool and our intercompany loans.”

Packaged and presented

Next to bank reorganization, the implementation of a new TMS and the ICRP tool, the company took it a step further to enhance and standardize cash application. Geldenhuys explains: “Redesigning this process, we went from having people manually print out all bank statements and manually booking all to pushing these statements to the ERP environment and achieving automated reconciliation to a larger extent. We’ve made great strides. Together with the cash pool and the TMS we also implemented an in-house bank. One of the big achievements of this project was that we – the central treasury team – are now releasing the majority of Kongsberg Automotive’s payment traffic after validating these payments against the global liquidity and currency positions and planning. Soon, in addition to this, we will further streamline our payment traffic by going live with Payments on behalf of (POBO).”

The next question was how to put these massive changes to the organization. “The biggest challenge is bringing the people with you on the journey,” says Geldenhuys. “The coaching, teaching and showing was a daily job. All of the new tools had to be packaged and presented within the organization – the users of these tools. And we managed to do so through new technologies – again the enabler.”

In terms of cash visibility and liquidity planning, the treasury organization is now able and equipped to effectively manage the cash needs of the group. “All these things were previously done in Excel, but now completely captured in the TMS,” Geldenhuys adds. “We make sure to utilize as much functionality in our new TMS as possible. We really have a one-stop solution for all treasury activities.”

We’ve made great strides. Together with the cash pool and the TMS we also implemented an in-house bank.

Abraham Geldenhuys, Group Treasurer

Performance

Extensive Journey

The new TMS went live in June 2019. “Keeping the timeline in mind this was an immensely intense period,” says Geldenhuys. “Two things were absolutely key. Support from our in-house project management function and the role of our consultants as a reliable, trusted partner. From the blue print stage to the system selection and bank reorganization, to a tool that can do the pricing of your cash pool and intercompany loans. That journey has been an extensive one; Accounting, Legal, Tax (Transfer pricing), Change Management, Implementation teams and Technical teams on banking and payments were involved – apart from the dreaded KYC procedures that accompany a bank reorganization. So, all in all implementing completely new features and solutions to treasury – all to be able to say that the foundation has been laid. It’s been an intense journey containing a lot of details, a journey that could not have been taken on by ourselves.”

One of the final steps to take, and quite a tedious one according to Geldenhuys, is the transition from the old to the new banking environment, so ensuring that customers pay to the new accounts. “But when you get to the point where we are now, focusing on closing legacy bank accounts, it’s rewarding to see that the entire picture and plan has come together and is starting to lean towards a real transformation.”

A good foundation

Doing a treasury transformation – implementing a new global cash pool, a new system and really centralizing payments – takes a lot of effort and commitment, Geldenhuys emphasizes. “But it’s worth it, absolutely! It’s been a tremendous journey, from the start to where we are right now. It is important that your C-suite believes in it and that it delivers its fruits – a project of this scale needs to be justified. Although technology is the key to standardize, centralize, automate and combine all treasury activities, processdesign and effectiveness still ranks at the top of my treasury foundation, and it’s exactly here where I believe in leveraging the technology to ensure that we have a real treasury function. It is process married with technology.”

Zanders was part of this project in six different areas, according to Geldenhuys: group advisory, system selection, bank reorganization and negotiation, change management and operational support. “Also, they did a lot of sound boarding. We went from nothing to today having daily bank statement reporting, full control over our payments and much more details around this. That is probably the most important part: if the foundation of your house is not solid, forget about the rest.”

The new data system now takes care of the storage, conversion and application of data needed for treasury, to determine the rates for its loans, forwards or swaps.

Sulzer is a Swiss industrial engineering and manufacturing firm that specializes in pumping solutions and offers services for rotating equipment and technology for separation, mixing and application. The company, established in 1834 as Sulzer Brothers, now has a network of over 180 production and service sites in around 50 countries around the world.

“As a company we have concentrated our activities and divided these into four divisions,” says Alexander Sika, senior treasury manager at Sulzer. “There are four of these divisions and they are quite diverse. One produces centrifugal pumps and mixers for a broad range of industries. The second one offers services and repair solutions for rotating equipment such as turbines, pumps, compressors, motors and generators. The third division is called Chemtech and offers components and services for separation columns and static mixing. And the fourth, a relatively new division, delivers mixing and dispensing systems for liquid applications, for healthcare markets, amongst others. So, it’s all very diverse from a treasury perspective.”

We wanted an automated, more secure and stable framework for our financial data.

Alexander Sika, Senior Treasury Manager

Challenge

The perfect edge

Sulzer aimed for a unified ERP to support all its data-driven processes. “It was required to have rate visibility and to automate our treasury,” explains Sika. “To improve the rate visibility and automate our treasury we started to look for partners. We have been teaming up with Zanders since 2008, so we knew what they could deliver. They could implement the middleware, bridging the operating system to the database and applications. First it was a manual process, so we wanted an automated, more secure and stable framework for our financial data – that was rather important for our treasury activities.”

Once the system was implemented, the organization needed to take the next step: a solution to collect market rate data. Within our network we heard about Brisken as an approved designer and developer of rate apps.

“We saw a demo from Brisken and they offered exactly what we wanted,” Sika says. “Flexible and web-based, without the requirement to code, independent maintenance and up- or download of rates without from internal or external help. Zanders wanted to team up with Brisken, so it came out that Zanders could offer us the software that we would have chosen anyways. It was the perfect edge for us.”

Solution

How to share the data

Market data often is retrieved from external sources, so an interface needs to be built and maintained. Then, these raw data cannot be used directly in applications and needs transformation into the right formats. Sika selected Bloomberg to provide all market data. “The data we need is interest rates, FX rates and VOLA rates,” he explains. “A data provider like Bloomberg can supply us with these data. We have been partners of Bloomberg since many years and as we are used to the terminals, we decided to go for the Data License as well. Best price, easiest logic and one partner for market data were the factors that made the decision.”

First, Sulzer checked with Bloomberg how to share the data and to discuss how it would be visualized. “That’s when we reached out to Zanders and Brisken to set up the strategy; this is what we want, and this is how we’ll set it up,” notes Sika. “We rolled out the project plan and coordinated between Bloomberg, Zanders and ourselves to set up the cloud and its users. It was a rather hands-on approach in which we designed our needs; what data do we need, when do we need it, how should it be checked and when should it be sent to whom? The timeline was pushed a little, but that was no problem. In October, we did the final tests to see whether all data was activated well and integrated with our treasury management system (TMS) IT2 and other system elements. These tests were all successful, so we then implemented the Zanders Market Data Platform, went live and completed our first month-end process in November.”

It was a rather hands-on approach in which we designed our needs.

Alexander Sika, Senior Treasury Manager

Performance

System independency

The data from Bloomberg can now be collected from the cloud platform that was designed and developed by Brisken. “As we were building our partnership with Zanders, it was a great opportunity to become part of this,” says Dirk Neumann, executive director at Brisken. “It’s good to hear that all features of the portal and the needs for the customer are identical. Zanders has shown to be very good at sourcing and managing data and to bring it into place with this system. They offered the flexibility; the market data pool is always well managed. There may be other parts in the organization that can benefit from this too. And with the system it can grow further into the future.”

On behalf of Zanders, Joanne Koopman joined the project in early 2019 to support on the system tests and choices. Then the set ups took place to give an impression of the data flows via the new platform.

“We needed specific data from Bloomberg, which formed a very technical part of the project,” says Sika. “Zanders arranged the data on the platform. In August, Zanders started training sessions to show us the new system and all possible data flows on the new platform.”

The aim of the training was to increase the system independency, Koopman explains: “When the company wants to make any changes, it should be able to deal with them itself. But advice is, of course, always available if needed.”

SAP integration

So, what are the next steps? “So far we have loaded the rates into the system, making them ready to be sent to target systems,” says Sika. “We receive all data daily via the cloud platform, which works on a very stable process. During the last six years, we have strengthened our treasury strategy and systems, working towards the basic goals of providing the service that we should provide as a treasury department. First, we didn’t have a real treasury roadmap, now we have one and we are thinking about making a new one. We now want to extend what we have been doing already, with a new system, new functions for a broader user base. We plan another update of our IT2 TMS – we expect to enhance our system in terms of function and user accessibility. As an organization, we were early in developing our treasury. But now, in terms of technical level and straight-through processing (STP), we have quite some more treasury ambitions.”

To standardize banking connectivity worldwide, record all financial instruments and increase cash visibility, Takeda implemented Kyriba Treasury as its TMS back in 2019. Subsequent to this initial implementation, a second phase of the project – to implement the Payments module of the TMS – was embarked upon in 2022. For this, Takeda enlisted the help of Zanders.

Takeda has a long history, dating back to 1781 when its founder Chobei Takeda I began selling traditional Japanese and Chinese herbal medicines in Osaka’s medicine district, Doshomachi. He quickly gained a reputation for business integrity and quality products and services, values that have continued through the years and are now integral to Takeda’s corporate philosophy.

Today, Takeda is a patient-focused, values-driven biopharmaceutical company committed to improving the lives of patients worldwide. The company has six key product areas: Oncology, Rare diseases, Neuroscience, Gastroenterology, Plasma-derived therapies, and Vaccines. With approximately 48,000 employees across 80 different countries, Takeda operates in Japan, the USA, Europe & Canada (EUCAN), and Growth and Emerging Markets (GEM). These four regions are responsible for providing access to Takeda’s entire portfolio in the countries where it operates. In terms of revenue split, half of the revenue comes from the US market, 21% from EUCAN, 18% from Japan, and 12% from GEM.

“Our company is values-based,” explains Fiona Foley, VP and Assistant Treasurer, Treasury Operations at Takeda. “We are guided by the principles of what we call Takeda-ism, which incorporates four tenets: integrity, fairness, honesty, and perseverance. These values are brought to life through our actions which are based on patient, trust, reputation, and business – in that order.”

The project was a combination of various specialties, including treasury, IT, languages, and process and cultural alignment.

Fiona Foley, VP and Assistant Treasurer

Challenge

Integrating treasuries

In January 2019, Takeda acquired Shire PLC, a UK-founded and Irish-based pharmaceutical company specializing in rare diseases. With the earlier acquisition of Swiss pharmaceutical company Nycomed in 2011, Takeda now has three treasury centers located in Tokyo, Zurich, and Dublin.

Foley explains that they have a three-pillar treasury approach. “The first pillar is the Treasury Operations team which looks after all the day-to-day cash management, intercompany liquidity, pooling, cash centralization, and cash forecasting. The Financial Risk management pillar is responsible for all financial risks, such as FX, interest rate, credit and counterparty risks, and also manages trade finance and bank guarantees. Finally, the Capital Markets pillar is responsible for new sources of funding and managing the company’s significant debt portfolio.”

Before the merger, Takeda and Shire were very different companies in terms of operational culture and functional structures. Foley notes that both companies had different degrees of centralization. “Shire was much more centralized in terms of its Treasury, while Takeda was more decentralized. As a combined company there were many fragmented and non-integrated data sources for treasury, particularly in the areas of bank accounts and cash visibility, leading to poor forecast accuracy. Furthermore, there were numerous banking connectivity routes, different electronic banking systems, and a large number of applications.”

Neither company used a TMS for day-to-day cash management, and the TMS systems that were in place hadn’t been updated in quite some time and were only used for recording a specific set of financial instruments. The newly formed treasury team recognized the need to address these issues and began preparing a request for proposal (RFP) for a new TMS. Foley: “We wanted to move away from an overreliance on Excel for cash positioning, forecasting and reporting which exposed us to the risk of input error and manipulation of data by different users.”

Given the company’s size and the complexity of the challenges they were facing, they needed a TMS that was adaptable, met their requirements, and future-proofed them for integrated activity. As a result, Takeda implemented Kyriba Treasury, including the Payments module, to standardize banking connectivity globally, increase cash visibility, and centralize its payments. Zanders was asked to help with the Payments implementation which followed after all other modules.

Solution

Creating visibility

Takeda’s implementation of Kyriba Treasury was done in a modular manner, with the first phase focusing on banking and cash management to create visibility. Kyriba was able to gather bank statements, enabling the company to manage their cash on a day-to-day basis. The subsequent modules involved integrating investments, risk management (FX, interest rate and counterparty risk), and managing debt portfolio and capital market activity. Payments settlement was not included in the initial implementation scope.

To address this as part of a second project phase, Takeda moved into the lifecycle of the Payments module, explains Meliosa O’Byrne, Associate Director Treasury Operations at Takeda. “We recognized the need to standardize and harmonize payments for all the banks. We faced challenges due to the lack of connectivity and the absence of a standard approval process in place. To address these issues, we decided to use Kyriba and organized a workshop with the Zanders team to gain better understanding. This was followed by a phased approach to implement the Payments module with seven key global core cash management banks.”

Specific challenges per phase

The first phase started with Deutsche Bank – the primary bank in Europe – as pilot. The focus was to understand the Payment module in Kyriba, processes, and flows. O’Byrne: “A key decision factor to start with Deutsche bank was that our hedging program was migrating to our Treasury entity in Zurich and the volume of payments to support this being the most significant Treasury flows each month.”

Phase two involved Citibank, which covered all Takeda regions (EUCAN, Japan, USA) and Sumitomo Mitsui Banking Corporation (SMBC) which was Japan-centric. During this phase, training sessions were provided by Zanders in local language for the Japanese users, which was key element to the success of the project. The EUCAN team was already trained during phase one.

O’Byrne explains: “We started from Europe and then engaged Japan team for phase two. They were working with our back office team to make sure we continued the standardization and harmonization approach identified for Deutsche Bank. SMBC is one of the main banks for Japan and Zanders’ Katsuo Sekikawa became part of the team that managed the implementation from Japan.”

Keisuke Suzuki, Lead Treasury Solutions of Takeda Japan: “With Katsuo Sekikawa, Zanders offered solid practical experience in the banking sector in Japan and knowledge of the Kyriba system – a great contribution with respect to the Japanese banks going live with Kyriba Payments.”

With the implementation of Kyriba, Takeda was able to fully automate the process of treasury payments, explains Suzuki: “This allowed us to have improved treasury payment automation. The centralized data provided by Kyriba enabled us to easily track our transactions, which was particularly important due to our significant amount of external debt, bonds, derivative and ICO contracts.”

We faced challenges due to the lack of connectivity and the absence of a standard approval process in place.

Meliosa O'Byrne, Associate Director Treasury Operations

Performance

Successfully live

During the user acceptance testing (UAT) and penny testing for Citi and SMBC, phase three was initiated in the background, specifically for the remaining four banks – Mizuho Bank and MUFG (both for Japan), Nordea (Europe) and JP Morgan (USA). Each bank encountered its own challenges in terms of time perspective, but all followed the agreed-upon eight-stage process with Kyriba and Zanders.

O’Byrne: “Upon completion of each phase, there was a hypercare period of five days after going live, which was supported by Zanders. By the end of September, all phases were successfully live, with a few minor bumps along the way. All stakeholders were extremely happy with the results.”

The comfortable and confident relationships built between Zanders and the various teams in Europe and Japan were an important foundation for the success of the project, according to Foley: “With three project phases focusing on different parts of the world, the project was a combination of various specialties, including treasury, IT, languages, and process and cultural alignment. Working with multiple internal and external stakeholders, and different banking partners, made the project complex. Despite the challenges posed by different time zones, the project was successfully completed in the timeframe agreed at the outset.”

Takeda now has a bank-agnostic approach to deliver the benefits of automated payments workflow while addressing local operating requirements. Foley: “The standardization and alignment of processes from all regions has been tremendous with respect to the overall Takeda approach. Kyriba allows for fully integrated payment systems, enabling Takeda to make large transactions with the security of robust system support. This allows us to turn all our attention to our day-to-day cash & liquidity planning to ensure that funds are in the right place at the right time and all risks are properly hedged.”

In 2020, the company decided to automate this process, successfully reducing the time spent on it from three days to within one day.

Headquartered in Tokyo, MODEC is a general contractor for the engineering, procurement, construction and installation (EPCI) of floating systems for deep-sea oil production. These systems include FPSO (floating production storage and offloading) units, FSO (floating storage and offloading) units, floating liquefied natural gas (FLNG) facilities, tension-leg platforms (TLPs), semi-submersible platforms, mooring systems and new technologies to meet the challenges of gas production floaters.

As largest independent operator of FPSO’s in the world, MODEC specializes in units for offshore deep sea oil production. “Then we either sell it to our clients or own and operate it on client’s behalf for 20 to 25 years,” says Qiurong Chong, Financial Planning & Treasury Manager at MODEC. Her business unit is located in Singapore and handles the conversion and EPCI of the FPSOs. From there, majority of the constructed FPSOs are handed over to MODEC’s business unit in Brazil responsible for the operations and maintenance of the vessels. “Our operations are therefore substantially in Brazil. But we do have presence in Australia, Ghana and Vietnam too.”

Since our functional currency is US dollars, we are exposed to a significant FX risk.

Qiurong Chong, Financial Planning & Treasury Manager

Challenge

Need for automation

As a global company, MODEC deals with a lot of vendors and major equipment suppliers. Chong: “Our vendors are located everywhere. Some are in China, where we usually do our transactions in US dollars. The major equipment vendors are located in Europe, such as Italy, Germany and The Netherlands. Therefore, the euro is one of the main foreign currencies. And since our functional currency is US dollars, we are exposed to a significant FX risk.”

MODEC’s finance department was managing the FX hedging process manually with the use of spreadsheets. By the end of 2019, there were approximately 350 outstanding FX forwards hedging the future cash flows of the purchase orders (POs) associated with MODEC’s projects. “The POs contain the information we need from the vendors for the FX process, including the cost in dollar value, the breakdown of the payment milestones and the expected payment date,” Chong explains.

The PO information was extracted from its system to be incorporated in an Excel overview driving their hedging activities. This was a labor-intensive process and since the expected number of FX transactions increased, MODEC decided to automate this process. Chong: “With Excel you have less control over the data integrity and only a few people had access to the account data. There were quite some governance concerns on this manual spreadsheet. We wanted to improve this process. And as our company grows, with an increasing number of projects running at the same time, the effort that we spend on updating and maintaining hundreds of transactions was too much.”

SAP TRM for straight-through-processing

Previously, all FX forwards were communicated via email, letter or phone and processed through a single cash centre between two banks. Bank accounts exist within each bank for all the currencies transacted, which total around eight for each bank. Monthly valuations are provided by the banks and upon settlement the bank automatically debits and credits MODEC’s bank accounts accordingly. GL journal entries were manually created in SAP. In the coming years, the number of FX forwards is expected to grow to 500 or more. 

In the summer of 2020, MODEC Finance decided to implement SAP TRM for the straight-through-processing of FX forwards. Chong: “We asked around in the market about what system they used for their FX transactions. Our accounting migrated to SAP in 2017, which is quite recent. And since our information on vendors and POs are all in SAP, we thought: why not integrate everything together? That is why we decided to choose SAP TRM.”

Solution

Meeting the requirements

Thereafter, the new system needed to be integrated and automated. “We had been working with SAP successfully for some time and they recommended Zanders to support us. We reached out and asked Zanders for a demo. During that demo the team showed us the flow and functionalities that the TRM module in SAP could offer. It met our requirements, and we felt comfortable as Zanders could explain what we did not understand. It is important to be able to communicate with consultants in very simple terms and things that our department could understand. That is why we chose Zanders to support us in this project.”

Chong then asked Zanders to customize a program that could correctly capture the exposure positions and hedge relationships with the FX forward contracts. “Once a new PO is created, it can read that information and integrate it into the treasury module. We had quite some difficulties in trying to make the program to what it should be. The way we use SAP is not very standard, at some points, things got quite complex, but Zanders was able to resolve the complexities. Now the program is running very well. This process is expected to provide hedge accounting documentation under IFRS 9 and generate GL journal entries for monthly valuations and settlement.”

We thought: why not integrate everything together?

Qiurong Chong, Financial Planning & Treasury Manager

Performance

Connected

“We kicked off the project in August 2020 with a key user training, which was very useful – it prepared us well for the whole process. After that we had four weeks of requirements gathering, which was quite intensive but very productive. We had a few challenging areas that required additional effort by Zanders to do some research. Eventually all challenges were resolved, and we went live in February this year, so the project took about a half year.”

The systems are now connected. “So far, the systems are running well. There have been some small issues here and there – then we reached out to Zanders to resolve it. Zanders consultants Michiel and Mart were really very helpful throughout the whole process. Even our hedge accounting entries are done by the system. The automation reduces the processing time from an average of three days to within one day. The main beneficial part for us is that the business has the hedge documentation available from the system. In the past, we spent hours on computing effectiveness for the hundreds of transactions. When we were using Excel, we were only doing this on a quarterly basis. Now we can do it every month.”

Next steps

Are there still any challenges to be met for MODEC Finance? Chong: “We are still trying to stabilize the work process and get the hang of the new system. Once everything is more stable, there are some things we may explore. Automating this FX transaction was a first step for us in the treasury department. We are still doing many other reports manually for our headquarters in Japan. By bringing our HQ onboard this TRM module, we can have a seamless flow of information between us and them, which reduces any lag time and the need for us to extract the reports for them.”

So how exactly did the European market leader in bicycles achieve these goals? Accell Group is the European market leader in the mid- and upper-segments for high-quality bicycles and associated parts and accessories (XLC). Employing over 3,000 people across 18 countries, Accell Group manages a strong portfolio of national and international (sports) brands, each with its own distinctive positioning.

In 2018 the company sold 1.1 million bicycles, realizing a turnover of €1.1 billion and a net profit of €20.3 million. The bicycle brands in the Accell Group stable include Haibike, Winora, Ghost, Lapierre, Babboe, Batavus, Sparta, Koga, Diamondback and Raleigh. They are manufactured in several locations in the Netherlands, Hungary, Turkey and China. 

Bicycles, and particularly e-bikes, are increasingly being seen as a key contributor in addressing issues such as urban congestion, hazardous city traffic, rising CO₂ emissions and our desire to live healthier lifestyles. For this reason, the bicycle market represents excellent potential for further worldwide growth. 

“Given that we focus on new, clean and safe mobility solutions, we are certainly in the right business in terms of market potential,” agrees Jonas Fehlhaber, Treasurer at Accell Group, “Furthermore, there is a growing trend for large cities to adapt their infrastructures to offer cyclists more space and make them safer.”

Given that we focus on new, clean and safe mobility solutions, we are certainly in the right business in terms of market potential.

Jonas Fehlhaber, Treasurer at Accell Group

Omnichannel approach

Initially, Accell Group was a small holding company with decentralized management. Fehlhaber joined the Group in 2013 as its first treasurer, but his responsibilities soon expanded to encompass cash management, currency risk management and credit insurance. At the same time, the structure of the company changed. Based on a new strategy defined in 2016, the most important change was that the company wanted to shift from a manufacturing-driven approach to a consumer-centric one. In other words, everything must revolve around the consumer. 

“In the past our sales channel was mainly defined by the dealers but now, thanks to experience centers and the use of e-commerce, this is changing into an omnichannel approach,” says Fehlhaber. “The dealers still play the most important role, but with more and more functions being provided centrally, the size of the holding has grown substantially. For the past two-and-a-half years we have had a strong supply chain organization, and our finance team, just like the Treasury, has expanded.”

Challenge

Treasury roadmap

After centralizing several components and rationalizing the bank portfolio, Accell asked Zanders to carry out a quick scan of the Treasury department. In the context of this scan, the treasury function was examined and several potential risks and possible improvement areas were identified. 

“To further professionalize the Treasury, we worked with Zanders to start a project in 2017 to establish a treasury roadmap,” adds Fehlhaber. “In this project our strategic goals, along with what we wanted to achieve with them, were laid out. All in all it was an intensive undertaking in which all the respective processes were documented.”

The outcome was reconciled into three pillars: organization, systems and treasury policy. To limit the organizational vulnerability of what would otherwise have been a single-person department, Accell used Zanders’ Treasury Continuity Service (TCS) and appointed an additional treasury employee. An element of the Treasury Continuity Service is a TMS, Integrity, with which processes can be automated and standardized, while risks are simultaneously minimized. 

“The Treasury Continuity Service allowed us to implement the system quickly, without the need to go through an RfP [Request for Proposal] process,” says Fehlhaber. “Zanders had already made advance agreements with the supplier, FIS, giving us a partially pre-configured system that could be quickly implemented. Moreover, the support days that we are allocated can be used for advice, for example, or if there is temporary understaffing. We acted on the advice to start up our new payment hub, from the RfP to the actual selection and, if necessary, the implementation too.” 

The final improvement was to set up a comprehensive treasury policy, which has injected more structure and transparency into the daily treasury activities. 

Solution

More Complete and more interactive

The new TMS and the extra support have meant that Accell’s treasury department is now less vulnerable. “While Excel allows you to work flexibly, sharing information is more difficult because it is much more personal,” continues Fehlhaber. “The owner of the Excel file will be aware of all the details, but issues can quickly arise during transfer. A complicating factor is that there is no audit trail in Excel, making it generally more risky to work with. A TMS, on the other hand, is more complete and interactive, and the transfer is much easier. It has more functionalities and provides daily bank updates, so you always have a good overview of your latest cash positions. What’s more, it records all transactions, such as FX instruments and bank- and inter-company loans, with settlements being done from within Integrity. Above all, though, the TMS offers the option of creating bespoke reports, which in itself saves a lot of time.”

Payments via TIS

A key requirement of Accell was for the payment landscape to be organized more efficiently and controlled more centrally. What we tend to see is that corporates have masses of bank cards, for everyone involved in the authorization of payments. Not only is this very inefficient, it also makes it difficult to effectively manage these processes centrally. This is why Accell decided to implement a payment hub solution [TIS; Treasury Intelligence Solutions]. The payment hub serves as an interface, to replace the banking applications. A further advantage is that TIS offers the option of single sign-on, greatly improving the on-and off-boarding process for users.

Rolling out a TIS project takes between 18 and 24 months. It is a separate system to FIS Integrity, but they are connected in terms of infrastructure. “Bank statements arrive through the payment hub and then interface software distributes them to the systems that need the information, such as the ERP system and Integrity,” explains Fehlhaber. “Furthermore, all systems are fed current market data from our terminal, while payment files, for example, are sent from Integrity via TIS to the bank.”

The once-humble bicycle has evolved into a true lifestyle product.

Tjitze Auke Rijpkema, Treasury Team

Performance

The road to the future

The increasing need to reduce exhaust emissions in major urban areas is fuelling further growth potential for the bicycle market. “The market is still growing,” agrees Fehlhaber, “especially when it comes to e-bikes. We are focusing on the mid- and upper-market segments and doing particularly well with the so-called e-performance bikes, the power-assisted mountain bikes catered for by brands such as Haibike, Ghost and Lapierre.”

In 2018, Accell acquired Velosophy, a fast-growing innovative player in e-cargo biking solutions that serves both consumer and business markets. The Velosophy stable includes Babboe, the market leader in Europe for family cargo bikes, CarQon, the new premium cargo bike brand, and Centaur Cargo. The latter of these three is a specialist in B2B cargo bikes for the so-called ‘last-mile deliveries‘. These are typically to locations that are either impossible or very difficult to reach by car, such as city centers, for example. The acquisition of Velosophy has enabled Accell Group to accelerate its innovation strategy, which is focused, among other things, on the development of urban mobility solutions.

Bicycles are becoming increasingly bespoke products, reveals Fehlhaber. Mobility as a service (offering a service concept rather than just a bicycle), lease options or special, self-selected elements are all maintaining the current momentum in the bicycle market. 

“The once-humble bicycle has evolved into a true lifestyle product,” insists Tjitze Auke Rijpkema, who joined the treasury team in 2018. “Smart internet technology and handy connectivity apps are further enriching the cycling experience and making bicycles better and safer in all kinds of ways. Just like treasury, the bicycle is constantly moving with the times.”

The CSP helps reinforce the controls protecting participants from cyberattack and ensures their effectivity and that they adhere to the current Swift security requirements.

*Swift does not certify, warrant, endorse or recommend any service provider listed in its directory and Swift customers are not required to use providers listed in the directory. 

Swift Customer Security Programme 

A new attestation must be submitted at least once a year between July and December, and also any time a change in architecture or compliance status occurs. Customer attestation and independent assessment of the CSCF v2023 version is now open and valid until 31 December 2023. July 2023 also marks the release of Swifts CSCF v2024 for early consultation, which is valid until 31 December 2024.   

Swift introduced the Customer Security Programme to promote cybersecurity amongst its customers with the core component of the CSP being the Customer Security Controls Framework (CSCF).​ Independent assessment has been introduced as a prerequisite for attestation to enhance the integrity, consistency, and accuracy of attestations. Each year, Swift releases an updated version of the CSCF that needs to be attested to with support of an independent assessment.  

The Attestation is a declaration of compliance with the Swift Customer Security Controls Policy and is submitted via the Swift KYC-SA tool. Dependent on the Swift Architecture used, the number of controls to be implemented vary; of which certain are mandatory, and others advisory.​ 

Further details on the Swift CSCF can be found on their website:

• https://www.swift.com/myswift/customer-security-programme-csp 
• https://www.swift.com/myswift/customer-security-programme-csp/find-external-support/directory-csp-assessment-providers

Our services 

Do you have arrangements in place to complete the independent assessment required to support the attestation?  

Zanders has experience with and can support the completion of an independent external assessment of your compliance to the Swift Customer Security Control Framework that can then be used to fully complete and sign-off the Swift attestation for this year.​  

With an extensive track record of designing and deploying bank integrations, our intricate knowledge of treasury systems across both IT architecture as well as business processes positions us well to be a trusted independent assessor. We draw on past projects and assessments to ask the right questions during the assessment phase, aligning our customers with the framework provided by Swift.  

The Swift attestation can also form part of a wider initiative to further optimise your banking landscape, whether that be increasing the use of Swift within your organisation, bank rationalization or improving your existing processes. The availability of your published attestation and its possible consultation with counterparties (upon request) helps equally in performing day-to-day risk management. 

Approach 

Planning 

We start with rigorous planning of the assessment project, developing a scope of work and planning resources accordingly. Our team of experts will work with clients to formulate an Impact Assessment based on the most recent version of the Swift Customer Security Controls Framework. 

Architecture Classification 

A key part of our support will be working with the client to formulate a comprehensive overview of the system architecture and identify the applicable controls dictated by the CSCF.  

Perform Assessment 

Using our wide-ranging experience, we will test the individual controls against specific scenarios designed to root out any weaknesses and document evidence of their compliance or where they can be improved.  

Independent Assessment Report 

Based on the evidence collected, we will prepare an Independent Assessment report which includes status of the compliance against individual controls, baselining them against the CSCF and recommendations for improvement areas within the system architecture.  

Post Assessment Activities 

Once completed, the Independent Assessment report will support you with the submission of the Attestation in line with the requirements of the CSCF version in force, which is required annually by Swift. In tandem, Zanders can deliver a plan for implementation of the recommendations within the report to ensure compliance with current and future years’ attestations. Swift expects controls compliance annually, together with the submission of the attestation by 31 December at the latest, in order to avoid being reported to your supervisor. Non-compliant status is visible to your counterparties. 

Do you need support with your Swift CSP Independent Assessment?  

We are thrilled to offer a Swift CSP Independent Assessment service and look forward to supporting our clients with their attestations, continuing their commitment to protecting the integrity of the Swift network, and in doing so supporting their businesses too. If you are interested in learning more about our services, please contact us directly below.  

Remote offers global employment services for internationally distributed workforce. It takes care of payroll, benefits, compliance, taxes, equity incentives and more, so that companies can employ someone internationally as easily as they do at home. The company’s vision is to make it simple to manage, employ, and pay anyone, anywhere. Founded in 2019, Remote is growing quickly and expanding into different markets. In 2022, Zanders supported the company to accelerate the onboarding of new banks. Ana de Sousa, Director and Global Head of Treasury at Remote, explains the collaboration in this Q&A.

"We tackle some of the biggest challenges involved in building distributed teams, which are the risk, cost, and complexity of employing international employees and contractors,” De Sousa clarifies. “Our customers include GitLab, DoorDash, Loom, Paystack, and thousands of other companies around the world.”

You have been Director Global Treasurer at Remote for a year now. What attracted you to join the company?

“At Remote we often say that ‘talent is everywhere, but opportunities aren’t.’ I grew up in a very small village in Portugal so I personally identify with this. I saw that Remote is changing the world and I wanted to be part of this change. Beyond the mission, it’s also exciting to be part of a company that is applying technology and automation to bring efficiency to an area as complex as global employment. I am also very aligned with Remote’s values. The value of kindness is very special for me, as I believe that we can always make extraordinary things when we are kind.”

How would you describe the company’s corporate culture?

“Because Remote is a fully distributed virtual company with no offices, most roles are country-agnostic and our employees can work from their chosen locations around the world. That means we have Remoters from 75+ different nationalities, coming from all different cultures, backgrounds and experiences. This contributes to a diverse work environment where everyone is encouraged to share their culture and interests with everyone.”

What would you say drives the need for remote work/remote hiring and remote services in general?

“Over the past few years, many companies turned to remote work as a solution to a problem. What they are discovering now is that it can provide significant business advantages as well. Remote work enables you to build a team without being constrained by geography, meaning companies can tap into wider pools of talent while also supporting greater flexibility and work-life balance.”

What is your experience within different regions/markets?

“Remote has a global presence with around 80 legal entities on six continents. I started my career overseeing cash management for the EMEA region. Later, I moved to a new job with a global scope. Here at Remote, every single member of the Treasury team has global coverage. This means we can leverage asynchronous and flexible work for the entire team to be effective.”

You are working completely remotely, without having a physical company office. What has been your experience with this setup and do you miss meeting your colleagues in person?

“I do miss team birthday parties with cake sometimes. I advocate freedom of choice, based on whatever is best for you. Working from an office is still offered by plenty of companies. For me, remote work has allowed me to keep my career in an international environment while prioritizing family and flexibility. It’s certainly still possible to meet up with colleagues without a company office. I recently met one of my team members in person for the first time, and it was just like catching up with a friend.”

In terms of managing family/work time, are there days where you would prefer to work in a physical company office?

“No, I manage my time according to my priorities. If my kids need me, I will be available for them. If my work is my priority, that is my focus. It is not a physical place that defines my commitment or my capacity of producing results. It is important to have the right structure that supports your professional career independently of the place.”

What are the communication tools you use internally and externally?

“We use tools like Slack, Notion, Loom, and Asana for communication and documentation. Beyond the tools, Remoters are trained in asynchronous communication, documentation, inclusive language, meeting best practices, and even to use the UTC time zone companywide. These are all essential for a team that is as distributed as ours.”

What would you say are treasury-specific challenges when working remotely?

“The biggest challenges of remote work arise when we try to take the old office-centric methods of doing things and expect them to work just as well in a remote setting. Remote work does require some different considerations. Treasury teams in particular need to be rigorous about documentation and practicing ‘overcommunication’ given the critical nature of our work.”

What is the company’s approach for creating an integrated team and what is your personal approach to build a team spirit while working completely remotely?

“As a fully remote company, Remote works hard to build belonging and a sense of community throughout the company. There are numerous opportunities for social connection, including bonding times, games, and even virtual reality time. We have more than 1,700 Slack channels including channels for music, TV, pets, food, sports and much more. At the same time, our culture is asynchronous, so people can participate on their own time and all scheduled events rotate across time zones.”

Expanding into new markets is part of Remote’s core strategy. What role does Treasury play to enable new country operations?

“At Remote, Treasury is part of the backbone of our operations and an enabler of international growth. In the majority of cases, without a bank account, we cannot launch in a country. In addition, domestic bank accounts are also critical to offer better experience to our customers.”

How did Zanders support you to accelerate the onboarding of new banks?

“Zanders helped streamline what could be a very complicated process with banking partners. We appreciated their continuous communication and follow-up on progress, as well as their advocacy on our behalf to challenge some of the requirements we faced and even get a few of them waived.”

How did you perceive the collaboration between Remote and Zanders, given the project was delivered on a fully remote basis?

“It worked very well. We would not have been able to work with a partner that didn’t know how to collaborate remotely. Working with the Zanders team, we were able to apply the same operating principles we use internally – clearly defining guidelines and expectations, overcommunicating, and building a high degree of trust between our teams.”

To round off, what advice would you give anyone starting to work 100% remotely?

“Life is too short to waste time commuting. Remote work is all about freedom, flexibility and happiness. When we do what we like, we’ll get great results, regardless of where the work is done.”

The collaboration between Remote and Zanders

Viktorija Janevska, manager at Zanders: “Account opening and KYC has been a challenge for many corporates in recent years, given the increasing KYC requirements and rather cumbersome onboarding experience. We at Zanders have been happy to support Remote with this interim project, taking the workload from the team and being the first point of contact for the banks with regards to the account opening and onboarding documentation requests. Key success factors for the project were the open and transparent communication between the two teams, regular update calls and priority setting.

Remote not only demonstrates an innovative working approach when it comes to working remotely, but also by using chats for most of their internal communication rather than email communication. During the project, the transition from email to chat communication required some adaptation and from time to time a reminder to use the preferred channel. It has been a great experience to accompany Remote on its journey and are looking forward to see the company’s further success.”

The most popular financial instruments in this regard are sustainability-linked loans and bonds. But more recently, corporates also started to focus on ESG-related derivatives. In short, these derivatives provide corporates with a financial incentive to improve their ESG performance, for instance by linking it to a sustainable KPI. This article aims to provide some guidance on the impact of regulation around ESG-related derivatives.

As covered in our first ESG-related derivatives article, a broad spectrum of instruments is included in this asset class, the most innovative ones being emission trading derivatives, renewable energy and fuel derivatives, and sustainability-linked derivatives (SLDs).

Currently, market participants and regulatory bodies are assessing if, and how new types of derivatives fit into existing derivatives regulation. In this regard, European and UK regulators are at the forefront of the regulatory review to foster activity and ensure safety of financial markets. Since it’s especially challenging for market participants to comprehend the impact of these regulations and the valuation implications of SLDs, we aim to provide guidance to corporates on these matters, with a special focus on the implications for corporate treasury.

Categorization & classification

When issuing an SLD, it’s important to understand which category the respective SLD falls in. That is, whether the SLD incorporates KPIs and the impact of cashflows in the derivatives instrument (category 1), or if the KPIs and related cashflows are stated in a separate agreement, in which the underlying derivatives transaction is mentioned for setting the reference amount to compute the KPI-linked cashflow (category 2). This categorization makes it easier to understand the regulations applying to the SLD, and the implications of those regulations.

In general, a category 1 SLD will be classified as derivative under European and UK regulations, and swap under US regulations, if the underlying financial contract is already classified as such. The addition of KPI elements to the underlying financial instrument is unlikely to change that classification.

Whether a category 2 SLD is classified as a derivative or swap is somewhat more complicated. In Europe, this type of SLD is classified as a derivative if it falls within the MIFID II catch-all provision, which must be determined on a case-by-case basis.

Overall, instruments that are classified as derivatives in Europe will also be classified as such in the UK. But to elaborate, a category 2 SLD will classified as a derivative in the UK if the payments of the financial instrument vary based on fluctuations in the KPIs.

When a category 2 SLD is issued in the US, it will only be classified as a swap if KPI-linked payments within the financial agreement go in two directions. Even if that is the case, the SLD may still be eligible for the status as commercial agreement outside of swaps regulation, but that is specific to facts and circumstances.

Apart from the classification as derivative or swap, it is also helpful to determine whether an SLD could be considered a hedging contract, so that it is eligible for hedging exemptions. The requirements for this are similar in Europe, the UK, and the US. Generally, category 1 SLDs are considered hedging contracts if the underlying instruments still follow the purpose of hedging commercial risks, after the KPI is incorporated. Category 2 SLDs are normally issued to meet sustainability goals, instead of hedging purposes. Therefore, it is unlikely that this category of SLDs will be classified as hedging contracts.

Regulation & valuation implications

When issuing an SLD that is classified as a derivative or swap, there are several regulatory and valuation implications relevant to treasury. These implications can be split up in six types which we will now explain in more detail. The six types (risk management, reporting, disclosure, benchmark-related considerations, prudential requirements, and valuation) are similar for corporates across Europe, the UK, and the US, unless otherwise mentioned.

Risk management

As is the case for other derivatives and swaps, corporate treasuries must meet confirmation requirements, undertake portfolio reconciliation, and perform portfolio compression for SLDs. Additionally, regulated companies are required to construct effective risk procedures for risk management, which includes documenting all risks associated with KPI-linked cashflows. While these points might be business as usual, it must also be determined if and how KPI-linked cashflows should be modeled for valuation obligations that apply to derivatives and swaps. For instance, initial margin models might need to be adjusted for SLDs, so they capture KPI-linked risks accurately.

Reporting

Corporate treasuries must report SLDs to trade repositories in Europe and the UK, and to swap data repositories in the US. Since these repositories require companies to report in line with prescriptive frameworks that do not specifically cover SLDs, it should be considered how to report KPI-linked features. As this is currently not clearly defined, issuers of SLDs are advised to discuss the establishment of clear reporting guidelines for this financial instrument with regulators and repositories. A good starting point for this could be the mark-to-market or mark-to-model valuation part of the EMIR reporting regulations.

Disclosure

Only Treasuries of European financial entities will be involved in meeting disclosure requirements of SLDs, as the legislation in the UK and US is behind on Europe in this respect, and non-financial market participants are not as strictly regulated. From January 2023, the second phase of the Sustainable Finance Disclosure Regulation (SFDR) will be in place, which requires financial companies to report periodically, and provide pre-contractual disclosures on SLDs. Treasuries of investment firms and portfolio managers are ought to contribute to this by reporting on sustainability-related impact of the SLDs compared to the impact of reference index and broad market index with sustainability indicators. In addition, they could leverage their knowledge of financial instruments to evaluate the probable impacts of sustainability risks on the returns of the SLDs.

Benchmark-related implications

In case the KPI of an SLD references or includes an index, it could be defined as a benchmark under European and UK legislation. In such cases, treasuries are advised to follow the same policy they have in place for benchmarks incorporated in other brown derivatives. Specific benchmark regulations in the US are currently non-existent, however, many US benchmark administrators maintain policies in compliance with the same principles as where the European and UK benchmark legislation is built on.
Prudential requirements

Since treasury departments of corporates around the world are required to calculate risk-weighted exposures for derivatives transactions as well as non-derivatives transactions, this is not different for SLDs. While there is currently little guidance on this for SLDs explicitly, that may change in the near future, as US prudential regulators are assessing the nature of the risk that is being assumed with in-scope market participants.

Valuation

The SLD market is still in its infancy, with SLD contracts being drawn up are often specific to the company issuing it, and therefore tailor made. The trading volume must go up, trade datasets are to be accurately maintained, and documentation should be standardized on a global scale for the market to reach transparency and efficiency. This will lead to the possibility of accurate pricing and reliable cashflow management of this financial instrument and increases the ability to hedge the ESG component.

To conclude

As aforementioned, the ESG-related derivatives market and the SLD market within it are still in the development phase. Therefore, regulations and their implications will evolve swiftly. However, the key points to consider for corporate treasury when issuing an SLD presented in this article can prove to be a good starting point for meeting regulatory requirements as well as developing accurate valuation methodology. This is important, since these derivatives transactions will be crucial for facilitating the lending, investment and debt issuance required to meet the ESG ambitions of Europe, the UK, and the US.

For more information on ESG issues, please contact Joris van den Beld or Sander van Tol.

Developing a data strategy depends on using the various types of payment, market, cashflow, bank and risk data available to a treasury, and then considering the time implications of past historical data, present and future models, to better inform decision-making. We provide a roadmap and ‘how to’ guide to becoming a data-driven organization.

Next to sustainable funding instruments, including both green and social, we also see that these KPI’s can be used for other financial instruments, such as ESG (Environmental, Social, Governance) derivatives. These derivatives are a useful tool to further drive the corporate sustainability strategy or support meeting environmental targets.