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Soaring to New Treasury Heights

by Marco Tierno, Head of Group Treasury & Short Term Financial Planning, Alitalia Compagnia Aerea Italiana

Since the new Alitalia business was launched in 2009, the management team, combining both existing and new senior executives, has focused on repositioning strategy and modernising processes, creating synergies and efficiencies and streamlining the organisational structure. From a treasury perspective, we had already made progress towards transformation and modernisation, but the reorganisation acted as a catalyst for delivering a highly efficient, centralised treasury structure.

Consequently, we now have a re-engineered and automated treasury function. We have eight treasury personnel and we have focused heavily on centralising and rationalising bank relationships, cash flow, treasury processes and financial control reporting. For example, we have centralised the management of our six primary currencies, and ten of our banking relationships, which amounts to 90% of cash flow. This article outlines the treasury transformation at Alitalia, and the achievements so far.

Treasury challenges and priorities

I first became involved with Alitalia’s treasury in 2005 as a consultant, and therefore developed a detailed understanding of the challenges and opportunities that existed before taking on leadership of the treasury function. The bankruptcy and subsequent restructuring of the company was, in reality, a major catalyst for finance transformation, with a strong management appetite for enhancing operational and financial efficiency.

The reorganisation acted as a catalyst for delivering a highly efficient, centralised treasury structure.

There was a wide range of challenges that we sought to address, derived primarily from fragmentation of the treasury operation and a lack of automation. For example, we maintained hundreds of bank accounts globally. We had several separate treasury functions and foreign subsidiaries managed their cash and treasury management requirements independently, preventing cash surpluses being netted against deficits in other parts of the business and without reference to central treasury policies. From an operational perspective, we lacked a central treasury management system, leading to fragmentation of data and irregular, manual processes such as reconciliation. Payments were also conducted manually, with the potential for error or fraud. Similarly, approval authorities were dissipated across the business.

From a strategic point of view, these issues led to a variety of limitations. Costs were high due to the predominance of manual processes and replication of tasks. Data on which reporting was based lacked integrity, and it was impossible to gain a complete, up-to-date picture of the company’s cash and risk position.

Consequently, in 2005, we launched the Financial Process Optimisation (FPO) programme which defined the objectives, tasks and timescales for creating a new treasury function. This programme comprised five main project areas:

• Centralise the treasury function
• Streamline the banking infrastructure
• Define a new organisational structure
• Implement a new reporting model for cash forecasting and control
• Create a new treasury technology infrastructure based on SAP R/3

Having benchmarked our treasury activities against other airlines, there was scope for improvement in our performance ratios. We recognised that in a highly competitive environment with narrow margins, it was important to enhance our performance to improve our competitive advantage.

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