How To Transform Treasury

Transcription

1 Treasury Transformation How BAT achieved treasury efficiency Jaap Nooij (BAT) Judith van Paassen (Zanders) November 2013

2 Agenda Introducing BAT and Zanders Triggers for treasury transformation Zanders approach - 7 steps to transforming treasury Drivers for treasury transformation at BAT BAT s steps for treasury transformation Treasury transformation at BAT day to day and lessons learned 1

3 BAT Facts and Figures Formed in 1902, as a joint venture between the UK s Imperial Tobacco Company and the American Tobacco Company World s second largest quoted tobacco group by global market share Operating in over 180 markets Market leader in over cigarette factories in 39 countries Group volumes 694 billion Employs over 55,000 people British American Tobacco (BAT) p.l.c 2

4 ...and the financials*? BAT is a top 10 FTSE100 company Market capitalisation 70bn (30 May 2013) 45.8bn in gross turnover 5.4bn profit from operations Net debt of 8.6bn and cash of 2.1bn Annually paying 30.7bn in taxes (incl. excise duties) * 2012 financial year 3

5 Introduction to Zanders Zanders is an independent European consulting firm specialized in the area of Treasury and Finance Founded in 1994 by Chris J. Zanders, currently with offices in the Netherlands (HQ), Belgium, Switzerland and the United Kingdom Because of successful growth, Zanders has become the leading consulting firm in Europe and thought leader in the area of Treasury and Finance 4

7 Some triggers of transformation 1. Organic growth of the organization 2. Desire to be innovative and best-in-class Technology driven opportunities Efficiency pressure 3. Event-driven (merger, acquisition, spin-off) 4. External factors (financial crisis, regulation) 5. The changing role of corporate treasury 6

8 Expanding Role and Complexity of Treasury Volatility in Financial Markets Expanding Role Technology & Communication Regulation Globalization Traditional Role Risk Intelligence CFO & Business Relationship Increasing external complexity: Financial crisis is causing volatile financial markets (FX, interest and commodity) Introduction of new regulation (IFRS, FASB, SOX, Dodd-Frank, EMIR, Basel 3) Globalization (G20) and emerging markets (BRIC, MIST) Many global treasury organizations reached high level of internal complexity: Mergers and acquisitions resulted in complex treasury organization, systems and processes Drive for centralization of operational tasks, however lack of automation and system integration Increased focus on cash visibility and working capital, however lack of real-time information Increased control and reporting requirements (CFO dashboard) 7

9 Expected Trend in Next Decade: Back to Productivity Working Better Working Cheaper Working Elsewhere Working Simpler Reengineering Outsourcing Globalization Simplification 8

10 Strategic Opportunities for Simplification Treasury Area Trend Recent Past Near Future Treasury Organization - Virtualization - Centralization - Local empowerment - Decentralized - Local services - Virtual global organization - Centralized (IHB/PF) - Enhancement of SSC concept - Maintain company culture Banking Landscape - Independence - Rationalization - Balancing bank fees vs. credit commitment - Multiple banks - Multiple bank accounts - Multiple EB tools - Multiple single cash pools - Balanced banking wallet - Simplified account structure - Independent bank connectivity - Multi-currency overlay cash pool System Infrastructure - Automation - System integration - STP - Stand-alone system landscape - Non-automated interfaces - One global portal - Integrated best-of breed TMS vs. full ERP solution - Seamless interfaces Treasury Workflows & Processes - Simplification - Standardization - Enhance compliance - Many different processes - Not very standardized - Labor intensive - Uniform processes - More with less - Dematerialization of paper 9

12 Zanders 7 Steps to Transforming Treasury Idea Generation 5. Selection 6. Execution 1. Review and Assessment 4. Business Case 7. Post-Execution 2. Solution Design 3. Roadmap 11

14 Drivers for treasury transformation Roll back to

15 Drivers for treasury transformation Impact Bank credit and liquidity Began to be constrained FX Significant impacts. For example (all vs. USD): Currency Jul / Aug-08 Dec-08 / Jan-09 % change KRW (Korea) % BRL (Brazil) % UAH (Ukraine) % RUB (Russia) % Key question: What was the expected impact of FX on 2009 performance? 14

16 Drivers for treasury transformation The answer Lack of reliable data: - No consistent definition of FX exposures - No standard analysis of FX impact - No regular reporting BUT: impacts were potentially BIG. Reliable and regular visibility of cash, liquidity and FX an essential starting point to manage the risks 15

18 Steps for treasury transformation A longer term chronological evolution Period Treasury service centres established Centralised dealing of FX and expanded cash pooling Some rationalisation of banking and some technology standardisation. Some automation ( H2H banking interfaces, Fxall ) New Treasury policy and Treasury operations manual Identified requirement for better technology in order to expand TSC s scope, improve management reporting, improve efficiency, reduce costs. All small but important incremental steps towards.. 17

19 Steps for treasury transformation The starting point: A new Target Operating Model across all functions to be enabled by a globally standardised ERP, OneSAP A robust blueprint describing the end game model for BAT s Treasury operations. Standardisation and simplifications of Treasury processes. Tactical alignment opportunities ( close the gap towards the end game ) Standardised cash forecasting (Definitions, Process, Reporting cycles) enabled by a dedicated cash forecasting system Expanding intercompany netting Bank rationalisation ( closing bank accounts, concentrate liquidity ) 18

20 Steps for treasury transformation 1. Define the Target Operating Model the goal 2. System design, configuration and development to enable the TOM 3. Improve ability for planning and control the Forecast ( cash, FX, liquidity risk). 4. Treasury Tactical alignment: Back to Basics - FX Optimisation - Cash management and banking efficiency - Bank account rationalisation - Inter-company netting 5. Go live 6. Global deployment and Treasury transformation 4 3 Tactical alignment BATCASH 5 SAP Go-Live Execution change 1 Define TOM 2 OneSAP development OneSAP Deployment

21 BAT s SAP deployment Overview Programme TaO, covering: - Operations, Marketing and Finance, including Treasury - In 100+ countries - Roll-out completed in 3 years Pilot completed: Malaysia market + Global Treasury. Live in Sept-2012 Subsequent deployment in five waves, complete by end-2015 Using IBM as the system integrator. For Treasury, Zanders was contracted For quality assurance, Treasury supported by e5 20

22 Treasury organisation Evolution from 2008 onwards De-Centralised Centralised Automated Manual Tactical alignment opportunities TOM TaO Interim GTO To-Be 21

23 Potential benefits Overview Potential benefits tracked from the outset of Treasury Transformation - Essential to support change management Categorised across a range of areas: - Banking - Funding costs - Insurance - Overheads Doing the basics well realises value: 60% of total benefits realised before system roll-out. The low hanging fruit picked as result of tactical alignment. More ambition = more effort = more benefits! - The more you look, the more benefits you find - Potential benefits now more than 8x s the initial estimate 22

25 Treasury change management - day to day 1. Explain new operating mode and system functionality. 2. Collect information from Business units. 3. Match against Target Operating model and System template design. 4. Discuss with and challenge end markets where required. 5. Define the Fits, Fits with Change and Gaps. 6. Only accept GAP in case of true Legal, Fiscal or Regulatory requirements. 7. Build and implement solution. 8. Adopt new operating model. This is the real change management. Converting theory into practice. The tough job. 24

26 Lessons learned 1. Define your goal ( Target operating model). Explain to and convince your key stakeholders. 2. Build your business case. Know your stuff! 3. Delivering without investing makes your case more credible. Pick the low hanging fruit. 4. Once you start, the thinking on scope and potential benefits evolves and expands. 5. Doing the basics right will realise tangible benefits, both monetary and in preparation for system deployment. 6. After a while, people forget what it was like before and accept the new ways of working. 7. For the system development, an experienced consultant is essential. Push thinking hard for maximum benefit. Second opinions are helpful. 8. People don t like change. Selling tangible benefits helps. - Senior management buy-in is key to success - Having a mandate for change is essential 9. And remember : the change is on the work floor. Change is about people and people s jobs. 25

27 Thank you and questions Judith C.M. van Paassen Partner T: E: Jaap Nooij TaO Treasurer Banking and IHC T: +31 (0) E : jaap_nooij@bat.com 26