Strategic Treasury

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Optimising Treasury through Centralisation and Standardisation Nordea recently hosted a panel discussion involving three leading corporate treasurers. The aim was to outline the ways in which they have added, and are continuing to add value to their organisations, and some of the ways in which their banking partners can support them in achieving this.

Optimising Treasury through Centralisation and Standardisation

An Executive Panel Discussion

Although liquidity and risk management remain the core responsibilities of treasury departments worldwide, the past few years have witnessed an expansion in the treasurer’s role, and indeed the profile of treasurers within their organisations. As a bank, Nordea is committed to maintaining a clear and detailed understanding of changing customer needs in order to develop solutions and services that meet and anticipate these evolving requirements. To support this objective, and facilitate closer dialogue amongst the corporate treasury community, Nordea recently hosted a panel discussion involving three leading corporate treasurers. The aim was to outline the ways in which they have added, and are continuing to add value to their organisations, and some of the ways in which their banking partners can support them in achieving this.

Participants first described and discussed some of the characteristics of their treasury functions.

Ulla Nurminen, Metsä

“Metsä Group centralised its treasury function in 1997 to serve the various Group companies on financial issues. The business areas were largely decentralised until 2005, since which time there has been a change in strategy. There is now an emphasis on achieving synergies across the business which has enabled treasury to centralise its functions further. We first implemented a payments factory in the late 1990s, one of the first companies to do so, and this has subsequently been expanded to include Group-wide cash pool structures, centralised trade finance support and a collection factory.”

What prompted the decision to expand into a collections factory?

Ulla Nurminen, Metsä

“The two main drivers were cost savings and the ability to achieve common processes. Cost savings were realised by an efficient collection account structure, reduced external banking costs and a global, transparent view of accounts receivable which enables better liquidity planning. Centralising collections has been one of the important means of harmonising business functions. ”

Centralising collections can often be quite challenging. How have you overcome this?

Ulla Nurminen, Metsä

“As we had introduced centralised liquidity management quite widely already, and we had an overall business strategy to achieve synergy and harmonisation across the group, we had senior management support for centralising collections, leading to fewer political challenges than in other organisations. Consequently, the primary difficulties we experienced were mostly technical rather than organisational.”

How did you ensure the organisation was ready for centralisation?

Ulla Nurminen, Metsä

“Since 2005, we have restructured the business substantially, which has resulted in a more focused and profitable company. Having undergone this process, the overall business strategy is now better aligned, which has made it easier to further centralise activities such as cash and treasury management.”

Lars Hove-Nielsen, Grundfos

“Treasury centralisation has proved far more challenging at Grundfos. We are currently engaged in a project to implement an in-house bank in SAP, which has required a change management process. We have a decentralised culture, with considerable autonomy amongst group companies, so it has been important to convince local management of the benefits of transferring some responsibilities to head office.”

Ulla Nurminen, Metsä

“In contrast, we had already implemented an in-house bank and centralised liquidity, so it was easier to centralise functions such as collections.”

Joakim Flinck, Paroc

“We have a financial shared service centre (SSC) in Lithuania into which we have transferred payments, collections and cash management. Consequently, we now have very few local finance staff except to co-ordinate between the SSC and the local business. By 2002, we had a single ERP in place across the business, which made it far easier to migrate activities from local businesses to the SSC. In order to alleviate any organisational concerns, directors of business divisions were appointed to the steering committee, and we engaged in an active communication programme from the start.”

Ulla Nurminen, Metsä

“In addition, senior management support is essential to overcome any organisational hurdles.”

As a largely decentralised organisation, what prompted your decision to centralise cash and treasury management?

Lars Hove-Nielsen, Grundfos

“We have taken the first steps towards centralisation over the past three or four years. We recognised that to grow in the future and retain our competitive position, we needed more consistent processes and reporting to facilitate decision-making. We were also seeking to reduce costs, and a shared services model offers a proven approach to achieving this.”

Gunnar Berger, Nordea

“From our experiences of working with other corporate treasuries, we see that gaining buy-in from local business units can be extremely challenging and should not be underestimated as a major project task, and risk, as part of any centralisation initiative. As Ulla explained too, the technical side of a project may also be considerable, and it is important to ensure that the technology requirements do not take over from the overall business objectives.”

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