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

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

Connections and conversions

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

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

New for corporates

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

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

Fully-fledged tool

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

Change of format

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

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

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

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

Business as usual

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

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

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

Three phases

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

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

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

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

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

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

Jaap Karelse, Partner at Zanders.

Comprehensive

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

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

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

Turkish differences

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

Conservative approach

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

Future steps

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

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

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

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

The early crowd-funders

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

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

As first university

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

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

Hanco Gerritse, financial director at the VU

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

Seven Projects

The projects that fall within the project financing are:

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

Long-term partnership

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

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

Hanco Gerritse, financial director at the VU

The most expensive sports fields

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

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

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

Phased approach

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

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

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

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

Better positioned

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

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

The St Jacob Foundation provides care and services to the elderly in the Dutch South Kennermerland area, aiming to give them control over their own lives for as long as possible.

Quality of life is key to home care concepts, as St Jacob showed in their business case which was presented in March 2012. The traditional ‘old people’s home’ has given way to a totally different form of care for the elderly. “Most of our premises stem from the early 1970s,” says Rob van der Hulst, program director of Real Estate and Development at the St Jacob Foundation. “With the type of client we have nowadays this is not sustainable. When the premises were built our target client base was the over 65s who liked to be cared for. In the prosperous areas of Haarlem and the surrounding areas there were often no health issues but rather a preference for a worry-free existence coupled with keeping the luxury they were used to. The domestic assistant sometimes moved with them, for example to an attic in the same building.”

External partners

The foundation’s history goes back a long way, as far as the Middle Ages. The current St Jacob arose from the merger of a number of independent residential and care homes in the Haarlem, Heemstede, and Bloemendaal areas. The latest amalgamation dates from early 2000 and today the foundation has nine premises. Anita Louwers has been the director of the St Jacob’s board of trustees since 2006, when they took their first steps towards a marketing approach to care. “From that time on, care and nursing of the elderly has become faster, more intense and more complicated,” she says. “For that reason, we have opted to find partners to deal with everything which is not directly connected to that complex care, such as help within the home and cleaning, but also the expertise we need in the areas of finance and property. We are becoming a leaner organization: in-depth care with a thin layer of overhead for the relevant support personnel.”

This is a significant difference between St Jacob and other institutions in the country, many of which are more autonomous. Van der Hulst adds: “As an organization we want to stay close to our core function; we are good at intramural and extramural complex care, but other parties are better at what has to be done on the sidelines. The target group has changed considerably over the past few years. The senior citizens, those above 65 years, still live at home, travel and play golf twice a week. Those who now occupy our premises are the over-85s, who are also less mobile, but even in this age group we are noticing changes and, with support, a number of them can still live at home. This group of ‘light clients’ no longer use intramural care facilities, so only the clients who require dedicated nursing remain. “And this group is increasing constantly. People are getting older and the numbers with dementia are increasing as well. We are focused on this growth, but also on recovery and revalidation of the aged,” says Van der Hulst.

Living career

The fact that the aged are requiring more complex care has consequences for the employees of care agencies. “We used to be able to employ semi-skilled people but nowadays care is no longer so lightweight,” says Louwers. “Last year we retrained 500 employees to a higher level of competence. Today, employees have to have specific knowledge about various illnesses and they have more to do with psychiatric problems. Also, care at home is much better organized; people who have had treatment in a geriatric revalidation center go home far earlier and doctors and physiotherapists can also provide care at home.” The trend towards more specialized care was already evident to the foundation in 2007.

Louwers explains: “Since then we already started thinking in terms of housing ladders for our clients. Renovations are often more expensive than new buildings so we began to look at properties more as investors; the properties had to keep their value, we had to build to fulfill market demands and we didn’t want to run any risk. We want to own all properties geared for specialized care, whereas for homes with their own care facilities we want to find investors or co-operate with housing corporations.” These objectives were set out in the Strategic Property Plan which was written in 2007 but which has been modified in certain areas in the meantime. All types of accommodation have to be flexible so that if one target group declines in number another group can live in the same building.

Business case

Between 2007 and 2010, St Jacob developed a multiyear management model in which all future income, property transitions and care programs were covered, from the current to the new situation. Following the real estate plan, St Jacob decided to (re)develop several locations for revalidation care, small-scale group housing and care flats. For the benefit of the financing application, the foundation also prepared a detailed business case which was completed at the beginning of 2012. In the meantime, the foundation started looking for an external expert. “A recommendation and a number of positive references led us to Zanders,” says Louwers.

We already have quite good financial know-how in-house for presenting a business case, but they (Zanders) were able to fine-tune it.

Anita Louwers, Director of the St Jacob’s board of trustees

According to Zanders consultant Hendrik Pons, St Jacob’s business case was convincing. “And above all it was explained very clearly by the foundation. Together this immediately gave the banks a positive impression,” he says. Van der Hulst adds: “Zanders reviewed the multiyear management model and sat down with us round the table during discussions with financial institutions. I am convinced this helped considerably and of course being safely in the black helped as well. We own almost all of the properties and were also able to sell one at quite a favorable moment in time. From three banks and the Guarantee Fund we finally got positive reactions.” The Care Guarantee Fund (Wfz) gave us a 100% guarantee on our new application,” added Pons “and that gave us a significant interest advantage.”

Differentiation

The financing application resulted in St Jacob obtaining a loan of €30 million. Louwers says: “This is rather unusual at the moment for a turnover of €60 million. And it is fantastic since we need property for new clients – often those with severe dementia – to be housed in a way that best suits them.”

Financing is agreed and will be used in 2014. A number of building plans are ready, including Overbos and a building with room for 100 clients with dementia and a revalidation center. Van der Hulst explains: “We are spread over three different towns and that means that we have to have different types of facilities available. With homes where people pay their own living costs they can start working on their own housing ladder earlier and can stay in their own home if their need for care increases. A good example is Nieuw Overbos, which will be opened in a year’s time. Here there are lovely flats for people aged 75 and above. There are many care facilities, such as a doctor and round-the-clock services. But we are here for all senior citizens; on the Aziëweg we are building a complex for council rental.”

By separating housing and care there is a lot more differentiation, according to Louwers. “Many people are prepared to pay for what they want. The Netherlands is a country where the AWBZ (National Act on Exceptional Medical Expenses) is too general and uniform in its coverage and this doesn’t suit everyone. I think it’s good we are a forerunner in the developments.”

More efficient

Louwers also thinks that this new approach will mean resources are used more efficiently. “We started the transition phase with a turnover of €60 million for a large category of quite easy clients. When we are finished we will have a turnover of just under €50 million for a group of difficult clients and we will have €10 million left over for care at home – which is quite a lot. Someone who lives at home is still responsible for the accommodation component and that makes long-term care more affordable.”

So the St Jacob Foundation is becoming more like a company, adapting to and playing on the market forces we are experiencing. However, St Jacob is suffering from the consequences of governmental intervention and the health insurers’ shortsighted policies. Louwers adds: “You can’t really talk about market forces because they are controlled by legislators and insurers. However, if we function well as a care provider by adapting to the needs of our client base, then our buildings will fill up of their own accord.”

How did Zanders work with the St Jacob Foundation?

• Help in preparing the business case
• Participation in talks with the banks and the Care Guarantee Fund (Wfz)
• Various memos on internal decision making
• Continuous treasury support in the form of a service subscription from early 2013; preparation of the annual treasury plan, participation in the treasury committee (strategic), participation in the monthly treasury meeting, treasury tools (loan module, liquidity forecast model).

In 2012, FrieslandCampina was given an honorable mention at the internationally renowned Adam Smith Awards for its bank relationship management. The global dairy company was recognized for its successful refinancing program. This article looks at how ‘wallet distribution’ and strategic bank relationship management allowed the company to maneuver with agility during the financial crisis.

In January 2009, Friesland Foods and Campina, the two largest dairy cooperatives in the Netherlands, merged under the name Royal FrieslandCampina N.V. and Dairy Cooperative FrieslandCampina U.A. The company’s stock is owned by nearly 20,000 members of the merged dairy cooperative – dairy farmers in the Netherlands, Belgium, and Germany. The company is located in 28 countries worldwide, and FrieslandCampina’s dairy products are exported, particularly from the Netherlands, to more than 100 countries.

Growing markets

Several international brands are owned by the dairy cooperative. The biggest Dutch brand, Campina, is the cooperative’s fifth-largest brand. FrieslandCampina’s impressive turnover and growth is particularly noticeable in Asia and Africa. The biggest brands in these continents are Frisian Flag in Indonesia, followed by Peak in Nigeria, Dutch Lady in Vietnam and Malaysia, and Friso – the fastest-growing brand – which is sold in China, Malaysia, and Vietnam, as well as other countries. Next to Peak, the Friso brand recently started selling baby and children’s food in Nigeria, where the number of babies born equals the total in Europe, making it an extremely attractive market.

This year, FrieslandCampina acquired a majority interest in Alaska Milk Corporation, one of the largest dairy cooperatives in the Philippines, with a turnover of EUR 250 million. In the Philippines, too, where the economy and the population continue to grow, the dairy cooperative intends to sell baby and children’s food. These are mouthwatering prospects as far as investors are concerned. FrieslandCampina’s figures also confirm the security that dairy produce offers: turnover grew from EUR 8.3 billion to EUR 10.3 billion during the first four years of their existence.

Visible banking services

However, the merger began at a time when insecurity reigned supreme. The merger between the two dairy producers entailed a change of control situation that called for refinancing: the existing bank financing needed a make-over. This was quite a challenge, coming straight after the fall of Lehman Brothers and the start of the financial crisis. The banks weren’t exactly lining up to offer refinancing of this kind. For this reason, FrieslandCampina started negotiations with a wide selection of banks.

“The size of our wallet was important to the banks,” says Klaas Springer, FrieslandCampina’s director of corporate treasury. “They were perfectly happy to join FrieslandCampina’s group of financiers and commit themselves to our balance sheet, but they also wanted to earn money from the services that our internationally operating business needed. That was when we made a clear commitment: if you come on board, we’ll have a ‘best efforts’ obligation to reward you proportionally. After all, one bank’s service is better than another’s. If you finance 100 out of the 1,000 as a bank, it doesn’t necessarily follow that you will always get 10% of the wallet; the only guarantee that you have is that you will get the opportunity. A bank that has slightly more to offer FrieslandCampina, for instance, may get 12%, but if you’re offering less, then you may only get 8%.”

To be able to prove what the bank and FrieslandCampina had to offer each other, the relationship needed to be quantified. This is a considerable challenge given the various banking services that the organization needs – from ordinary payment traffic to cash management services, to setting aside deposits, foreign currency transactions, interest rate derivatives, and advice about acquisitions.

In order to make this complicated set-up more transparent, we looked for a model, an approach that we could ultimately manage properly ourselves. This is how we ended up with Zanders in 2010.

Klaas Springer, Director of Corporate Treasury at FrieslandCampina.

Wallet Distribution

An important part of the financing is done through private placements, including insurers in the United States. “In addition to this, we need bank financing to be the ‘flexible shell’ in our financing set-up,” says Springer. “We need the availability of large sums to deploy flexibly as working capital, for acquisitions or investments – i.e., for general corporate purposes. We try to cover virtually all our needs with this banking group that has provided us with EUR 1 billion. This doesn’t work with banks that only want to give you money but have nothing extra to offer."

“As a business, you have key relationships: the banks that you see as trusted advisors and that you are in touch with on an almost daily basis. Besides this, we also want a diverse group of banks that have a moral commitment to one another. They must all be prepared to stick their necks out so that it all goes well in the long term.”

With Zanders, it was down to the Wallet-Distribution model when FrieslandCampina divided their portfolio across the banks they had selected. “That model was workable for us,” Springer says. “We were looking for a reliable Golf, not a Rolls Royce. We had to get the model up and running before entering all the data. Some banks are quick to give you insight into what they’ve done for you, and are quite open about it. But others are not so easy or flexible. Large international banks, for instance, don’t always have insight into what they’re doing for FrieslandCampina worldwide.”

Sander van Tol, partner at Zanders, adds: “They can’t consolidate all the internal information the way you want it, for example. Besides that, they don’t have sufficient insight into the overall portfolio of banking services that you use as a company. As far as that goes, to them, it’s like a game to see how they feature in the overall picture.”

FrieslandCampina used its own data for those banks that couldn’t supply the necessary information. Once everything had been processed in the model, it showed how much they were each entitled to on the basis of their contribution. Logically, some banks were happier with the results than others, but for most of them, expectations were met.

Open attitude

At the beginning of 2011, before the refinancing took place, FrieslandCampina approached its banks to discuss the results. Springer says: “At the time we said to our key partners: ‘This is how we see our relationship, how do you see it?’ The banks really appreciated this open attitude. They proposed the following: ‘We think we have X percentage of your FX management, is that correct?’ We didn’t give them an exact answer to that question – it’s all about the big picture, after all. The point of our story was that they would have to be happy with the information we shared with them and that FrieslandCampina had stuck to its side of the bargain. Apart from one or two, all the banks were satisfied. And we were able to explain to those few where the problem lay. To give an example: when we looked at cash management in the US, some of the banks fell by the wayside because cash management wasn’t part of their package – there was no point in inviting them. In this case, it’s not the Friesland Bank, but Citi, RBS, or HSBC who are invited. And that’s when there’s a winner. If a bank keeps missing the boat, then they get less than their share, proportionally. We say that something is not quite right: in the breadth, they simply don’t have enough to offer.”

Renewal

Shortly after the feedback from the banks, financial markets came under pressure once again in the summer of 2011, this time through the Greek debt crisis. In August, financing was discussed once more: the then EUR 1 billion facility was due to expire in 2013. “We approached the banks again and told them we wanted to refinance or renew the existing financing – but this time at a better rate.”

The banks recognized that they could benefit from a well-balanced cooperative relationship with the international dairy enterprise: the price wasn’t a major stumbling block for them. “It was more a question of timing, making an offer in a volatile market. All the big banks but one were with us in this respect. For us, renewing the financing until 2015 was better than new financing. We suggested that one bank join the rest. In the interim, we had two dark horses: banks that were keen to join the group. But, in the end, one bank agreed to the proposal.”

Apart from removing insecurity, the renewal proved to be a good solution from a cost point of view as well. Springer notes: “In 2009, we had to pay fairly high fees; it was a difficult market. By renewing now, we spread the costs that we incurred then over several years. In retrospect, the financing turned out to be cheaper than expected.” It won’t be possible to renew again, though. The firm will have to make a new deal. “A disadvantage of this is that you have to include all the costs that you incurred in the old transaction in your profit and loss account in one go,” Springer explains.

Highly commended

Every year, Klaas Springer sees the Adam Smith Awards announced in trade magazine Treasury Today. “And that’s when you think: have we got anything special to contribute this time round? This time we had a combination: throw the spotlight on portfolio management as a banking service and managing a refinancing project under very difficult market conditions. We decided to compete: we didn’t quite win, but we got a ‘highly commended’. The silver medal – enough to put us on the list of honors.”

An even better example is FrieslandCampina’s member bonds. “This is a financial instrument that is counted as stockholders’ equity from an accounting point of view. We pay interest on it that’s tax-deductible and it gives our members registered bonds that they can trade with one another. It gives a good return and has been accepted. We have now issued more than a billion, but it seems that the demand is greater than the supply – it’s an extremely successful instrument. Other cooperatives are asking us for advice on how these bonds are issued.”

Corporate treasury is not alone in feeling proud of the honorable mention; the corporation as a whole is, too. Springer sums it up, saying: “Wallet sizing put the ball in our court. We used it to get the signatures we needed for the refinancing. We managed to achieve something that doesn’t happen very often in the current market.” In 2012, FrieslandCampina passed the EUR 10 billion turnover mark. “We’re playing in the Champions League, our CEO is now saying. We’re no longer low-profile; we can’t hide anymore.”

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

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

Too slow

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

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

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

Radboud van Delft, organization director of Greenpeace International.

Cleaning up

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

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

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

Green and healthy

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

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

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

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

Radboud van Delft, organization director of Greenpeace International.

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

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

Looking further

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

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

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

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

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

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

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

Other Organizations

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

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

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

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

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

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

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

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

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

Designing project TaO

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

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

Creating a bespoke but balanced system

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

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

The ‘fit-gap’ analysis

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

Ironing out the bugs

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

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

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

Team work

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

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

Ambitious plans

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

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

TP Vision was founded on the combined assets and skills of two prominent players in the TV business: based in Amsterdam, it is 70% owned by TPV and 30% by Royal Philips Electronics. TP Vision is the exclusive brand licensee of Philips TV in Europe, Russia, Middle East, Brazil, Argentina, Uruguay, Paraguay, and selected countries in Asia-Pacific, excluding China, India, and North America. It is now engaged in developing, manufacturing, and marketing Philips branded TV sets.

“TP Vision is creating a profitable and focused TV company by combining the design expertise and innovative Philips TV heritage with the operational excellence, flexibility, and speed of TPV,” explains Simon Karregat, head of treasury and credit & risk management at TP Vision. Having worked for Philips as head of the dealing room, Karregat really understands the new company’s TV business, which was previously part of Philips Consumer Lifestyle.

He continues: “As fierce competition in the TV market put pressure on margins, TVs were an unprofitable business over the last couple of years. We intend to change this by creating a lean and agile company that is solely focused on TVs.”

Separate entity

To make TP Vision successful and profitable, the company needs to go through a comprehensive transformation process, which had already started long before the official birth of the joint venture on 2nd April, 2012. “In preparation of the joint venture, we separated the TV business from Philips Consumer Lifestyle first. From 1st January, 2012 we reported ‘TV’ as a separate entity,” Karregat says. “It is important for treasury activities that such a fundamental change takes place in a smooth and controllable way. The early measures ensured a hassle-free transition when TP Vision finally took over the TV business from Philips and operated as an independent stand-alone company as of 1st April, 2012.”

Decoupling from a big corporate like Philips was, and still is, a complex process for TP Vision. The disentanglement of the TV business from Philips was a tough challenge because it had been fully integrated into the Philips Consumer Lifestyle business all over the world. This applied to all areas including sales, finance, and IT. One of the most important constraints in the disentanglement was that the operation had to be realized within a very short time frame but with strict cost management. From the beginning of the joint venture, the top priority was cost efficiency and continuing to reduce the breakeven point of the global company. Additionally, achieving Philips’ target gross margin had to be achieved in a highly competitive TV market. This was done by closely managing product costs while selling an improved mix of products (more high-end and larger screen sizes).

New banking infrastructure

To overcome all the challenges related to finance, TP Vision engaged Zanders to support them in setting up a new treasury organization and separating the television business from Philips’ integrated in-house banking structure. This meant that, in a short time frame, not only did Philips’ treasury have to implement and test a new banking infrastructure, but also a new payment infrastructure and a treasury management system (TMS).

At the beginning, TP Vision could take over some elements from Philips and use them right away, such as production units, IT infrastructure, and distribution centers. Other solutions and systems needed to be set up from scratch. “Because of the time pressure, the complexity of the process, and the kernel versions in the original system, we decided to retain the Philips kernel for the time being and to migrate to the leaner TPV kernel later,” Karregat explains. The kernel is the main component of most computer operating systems and thus builds the backbone of most business and finance applications. Karregat continues: “We couldn’t copy the treasury system from Philips because the payment infrastructure of TPV is different.” The company selected IT2 as their TMS. In some countries, however, certain processes (e.g., invoice booking, entering payment proposals, reporting) are outsourced to third parties, such as Infosys. Karregat adds: “We were fully aware that such a complex migration process would cause some initial difficulties as people had to get used to a completely new way of working. This took some time and required a lot of training.”

Bank selection

The selection of a banking partner was another important step in the joint venture’s financial formation process. Karregat says: “After a thorough selection procedure, two banks remained on the list of bank candidates. As we didn’t want to delay our transformation process until the final signing of a contract with one of the two candidates, we started to set up our internal financial structure simultaneously. We created two groups to work on this: one for each of the two banks.”

Karregat had to consider many different factors when building TP Vision’s new treasury, including credit limits and FX limits: “You have to operate differently, with different interfaces and different restrictions for the different countries. We chose Bank of America as our bank because of their global network, and they are providing the necessary limits for us. However, as they do not offer services in all the countries that we operate in, another party sometimes has to be involved. Multiple banks mean multiple sources, whereas with one bank you can use just one banking tool. It all looks standardized but, in reality, it is not: banks have their own policies and procedures, their own formats. Your treasury system must be able to absorb this.”

TP Vision decided to take over the in-house banking concept of Philips. Karregat explains: “With in-house banking you can manage your own internal payments, it provides a better insight into your liquidity, and you can better manage and fund your entities. It is definitely very efficient.”

Zanders assisted Philips in the set up of a stand-alone treasury for the new joint venture. In order to disentangle the treasury and cash management operations for TV, the assistance included:

• The set-up and implementation of a global bank account infrastructure;
• The creation and implementation of a cash management structure;
• Arrangement of local working capital facilities for entities with legal restrictions on setting up cash pools;
• The set-up of an in-house bank;
• The set-up of a cash flow forecasting methodology company-wide;
• Selection and implementation of a TMS;
• The identification and implementation of a hedge strategy;
• The set-up of a proper treasury policy, processes and procedures

Fewer organizational layers

As a big organization, Philips is used to working according to clearly defined standards. However, as they don’t fit TP Vision’s lean treasury structure, the joint venture is now creating its own processes and standards.

“Adequate cash-flow forecasting is essential for our company and we have to manage our treasury exposures thoroughly. The smaller the company, the bigger the risks. We definitely have to trigger a change in employee mindsets. They have to pay more attention to treasury and cash-flow forecasting than before,” says Karregat. In addition, people are more involved in treasury now as there are fewer organizational layers. “For example, we are now much closer to the countries’ treasury. Therefore, treasury has become much more tangible for them. This effect is perceptible throughout the entire organization.”

New IT infrastructure

In parallel, preparations to migrate to a new IT system are in full swing. TP Vision will use the Philips’ IT system for 12 months after the disentanglement and will get its own IT infrastructure in place very soon. This transition will affect both the treasury management system and payment system. “To prepare for this fundamental change, we are running numerous workshops to identify all possible impacts and to find appropriate solutions,” says Karregat.

Karregat concludes: “We have encountered many difficult challenges, but have now reached a phase where many ‘to do’ items have disappeared from the list. While a major renovation was going on in the back of the store, the front needed to remain open and give the impression that there was nothing going on. I believe that we have been successful in achieving this.”

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

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

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

Jean-Daniel Millasson (Corporate Treasurer at Sulzer)

Need for a treasury realignment

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

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

Cash pool implementation project

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

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

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

Gaining visibility and control

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

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

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

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

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

Continuous improvements

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

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

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

Jean-Daniel Millasson (Corporate Treasurer at Sulzer)

Future support for a developing business

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

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

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

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

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

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

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

Isabelle Badoux, European treasury & credit leader at Owens Corning

Local knowledge

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

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

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

For several years

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

In-house bank

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

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

The same language

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

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

Change and training

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

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