Cash & Liquidity Management

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A Virtual Approach to Treasury & Payments Centralisation Pierre Fabre made the decision to centralise its treasury activities whilst implementing a virtual payments factory to support local payments and collections. To achieve this, the company has implemented SWIFT connectivity and XML-based messaging formats to achieve the degree of standardisation that was required. This included appointing HSBC as its service bureau partner. The project has proved positive both in terms of increasing efficiency and control, but also in enhancing both internal and external relationships.

A Virtual Approach to Treasury & Payments Centralisation

by Yann Guengant, Assistant Group Treasurer, Pierre Fabre Laboratories

Pierre Fabre’s Group Treasury is made up of five people, who manage the treasury requirements for France, which includes both the holding company and 40 subsidiaries. The company is also present in a further 35 countries which have not historically been covered by Group Treasury. 

Project objectives

We recognised that our decentralised approach to treasury and cash management made it difficult to apply consistent policies and procedures globally, which in turn restricted our visibility and control over cash, cash management efficiency and ability to monitor and manage risk proactively. We therefore made the decision to centralise and standardise our approach to treasury and cash management at a global level. This comprised two key objectives:

Firstly, to establish a global centre for treasury and cash management and optimise treasury operations. Our aim is to accelerate the velocity of the cash by extending the reach of treasury so that although in-country finance teams will continue to perform local payments and collections within a global framework, other financial activities such as cash management, FX, interest rate and counterparty risk management, trade finance, financing and investment, will be conducted directly by Global Treasury. 

Secondly, to leverage SWIFTNet to achieve standardised connectivity between our entities and the banks, essentially creating a virtual payment factory. We made the decision not to relocate our finance teams into a central shared service centre as we recognised that we could leverage our existing physical infrastructure and use technology in a way that permits our people to spend time on value-added functions versus transactional ones. One important aspect of this was to rationalise the number of banking partners and standardise financial messaging using international financial message formats, such as SEPA Credit Transfers for mass payments (vendor payments and payroll) in the European Economic Area, and XML ISO 20022 for mass payments outside Europe.

Having fully centralised our treasury activities across our entities in France, the centralisation project is now under way for our 70 overseas subsidiaries.

Treasury technology

Before embarking on our transformation project, our treasury technology framework was relatively fragmented. We have now centralised our treasury systems infrastructure to reduce the number of systems and data silos currently in operation and leverage the standardisation that SWIFT offers. In treasury, we use Reuters’ Kondor for transaction processing and cash management. We work with seven banks in France with which we used to communicate through ETEBAC before implementing SWIFT. Outside France, we have a multitude of different systems and means of communication in place at a local level, including fax, email, electronic banking and a plethora of spreadsheets. Without a standardised approach to technology, it is difficult to implement and monitor global treasury policies and processes, to manage risk, to strengthen security or to leverage shared investments in technology.By rationalising and standardising our technology and communication infrastructure, our people will be able to spend time analysing rather than inputting information in order to make better and faster decisions.

An important element in achieving this objective was to implement a central systems infrastructure to enable consistent processes across the company and to facilitate a global approach to reporting and real-time information-sharing. We have therefore implemented a third-party system which will act as the internal communication highway for connecting the various applications across the group. Information is then consolidated within the system and consolidated files are transmitted through to HSBC. HSBC then sends the relevant messages to the appropriate banks.

The decision for SWIFT

We looked at various connectivity solutions for communicating with our banks to assess geographic range, range of services, support for XML-based standards and protocols. We included our banks’ proprietary web-based electronic banking and host-to-host systems in this analysis. We quickly recognised that proprietary electronic banking tools would not support our requirements; not only are they inconsistent in their formats and security protocols, but we would need to replicate our systems infrastructure across each of our 60 banks. Similarly, there were limitations with host-to-host systems as again, they were proprietary and were not standardised; furthermore, as they would be ‘hard coded’ into our business, our ability to flex our banking relationships in the future would be compromised.

While ETEBAC had served our cash management needs in France, its coverage extended only across France and Germany so it was not a viable global solution for us. In contrast, we recognised that SWIFT was a global solution with a growing range of services available. SWIFT both provides a communication network (SWIFTNet) and acts as a standards body, so it is in a position to drive standardisation and international adoption of common formats. The security provided through SWIFTNet is best in class and provides users with significant protection through authentication, non-repudiation and message delivery guarantees.

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