Implementing SWIFT Connectivity with BNP Paribas at Lafarge
by Valérie Sainsaulieu, Head of Treasury Control and Administration - Project Manager, Lafarge
Corporate Treasury at Lafarge acts as an in-house bank to the Group and implements centralisation of the key treasury functions (cash management, financing and financial risk management) as far as possible. The Corporate Treasury team consists of 20 people split between Paris and Brussels. In addition, there is a treasury function in all of the significant business units (BUs), whose treasurers have a strong functional link with corporate treasury.
Corporate Treasury acts as the centre of expertise for the group, publishing policy, guidelines and financial best practices. It assists and supports BUs for all treasury related issues where appropriate. All major external financing is carried out by Lafarge SA, which then provides intercompany financing to group companies as needed. Other external financing to access local currencies and/or local lenders can be made directly at BU level with mandatory and strong support from Corporate Treasury. Cash management is conducted centrally when feasible, with dedicated cash pools in France, UK, US and Canada and also a pan-European, multi-currency cash pool for most other European countries. In total, we work with around 10 cash management banks, with some 200 accounts. There is currently no daily cash centralisation in Asia, Africa Middle East or South America. In these environments Corporate Treasury manages cash recycling and short- to medium-term financing based on a monthly net debt report. Treasury is also the primary counterparty for business units’ hedging requirements. We combine exposures across the business and conduct external hedging transactions, and then perform back-to-back intercompany hedges.
The decision for SWIFT
From a technology perspective, we used to have local treasury systems in most of our business units that are linked with local banks and support the relevant domestic formats. While this arrangement satisfied our requirements, it was resource-intensive to maintain different systems and formats. We therefore launched a project in 2007 to select and implement a standard cash and treasury management system across the group, and as part of this project, we made the decision to implement SWIFT connectivity.
Following an extensive review process, we chose Kyriba as a standard system based on a number of criteria such as functionality, user-friendliness, the system’s ability to integrate our banking partners through SWIFT, cost of the solution and other factors. In reality the need to move to the SWIFT connectivity for communicating with our banks had been identified early in the process. Consequently, we made the decision to start connecting all our banks at corporate level with SWIFT, which we could then roll out more globally as a second phase. We spoke to other corporate treasurers who had already made the decision for SWIFT, some of whom managed the SWIFT gateway directly, and others who connected indirectly through a service bureau’. Based on their advice and our own research, we recognised that direct connection to SWIFT would be too complex to administer and maintain, and we lacked sufficient in-house resource and expertise to do this.
We combine exposures across the business and conduct external hedging transactions, and then perform back-to-back intercompany hedges.
Selecting a service bureau
We issued a request for proposal (RFP) for a service bureau, and based on an in-depth evaluation, we made the decision to appoint BNP Paribas to provide service bureau services, which are separate from the transaction banking business. We have enjoyed a long and successful relationship with BNP Paribas, and had already been through a major technology project with the bank in the past, migrating from fax-based communication to electronic banking. This project had been a very positive experience and we had confidence that the implementation of SWIFT connectivity would be similarly successful. We were also impressed by the clarity of BNP Paribas’ proposal, the quality of the service, the dedication and expertise of the team and reliability of the technology products and support we had received from the bank over the years.