From Cash Management to Inhouse Bank
UBS Treasurer Summit
October 2014
Brice Zimmermann, Head Treasury Control & Reporting
Agenda
Novartis Treasury & Finance Transformation Program
Business rationale and implementation project
Benefits and Lessons learned
Why and how should your company engage in such a project
22 | UBS Treasurer Summit | October 2014 | From Cash Management to Inhouse Bank
Callout
Novartis Treasury & Finance Transformation Program
The Company / Treasury
 Novartis
 Healthcare company headquartered in Basel, Switzerland
 Net sales of USD 57.9 bn in 2013
•
•
•
•
•
Pharmaceuticals
Alcon
Sandoz
Consumer Health
Vaccines & Diagnostics
USD 32.2 bn
USD 10.5 bn
USD 9.2 bn
USD 4.0 bn
USD 2.0 bn
 Treasury operations
 Corporate Unit within Group Finance
 3 Departments (International Treasury, Capital Markets, Control & Reporting)
Main Objectives:
• Effective financial risk management
• Provide financing and financial services to the operating business of Novartis
3 | UBS Treasurer Summit | October 2014 | From Cash Management to Inhouse Bank
Novartis Treasury & Finance Transformation Program
Objectives of the Finance Transformation Program
Overall
Treasury &
Cash
Management
• Have full control and visibility over the financial risk within the Group
• Have full control and visibility over the liquidity of the Group
• Maintain global Cash Pool structures wherever appropriate
• Concentrate Cash Management to a selected number of core banks
• Develop and streamline the payment infrastructure
• Introduce Centers of Competence within Financial Service Centers
4 | UBS Treasurer Summit | October 2014 | From Cash Management to Inhouse Bank
Conceptual solution
From a local approach...
• Local country management of short term cash
and funding
• Multiple banking partners – approx. 60 in
Europe
• Periodic interaction between affiliates and
Group Treasury; monthly visibility through
reporting
• Limited automation or standardization –
inconsistent approach to controls
• Heterogeneous approach to bank interfaces, file
formats
5 | UBS Treasurer Summit | October 2014 | From Cash Management to Inhouse Bank
Conceptual Solution
... To vertically integrated operational treasury activities
Group
Treasury
InHouse
Bank
Payment
Factory
FSC
CH
XX
DE
XX
ES
XX
IT
XX
• Central management of affiliates’ cash and liquidity by Group Treasury
(20 countries, approx. 150 legal entities in Europe, of which 33 entities in Switzerland only)
• 3 main banking partners in Europe – BNP Paribas, HSBC, UBS
• Improved cash forecasting through system based processes
• Standardized bank interfaces and file formats
6 | UBS Treasurer Summit | October 2014 | From Cash Management to Inhouse Bank
Conceptual Solution
Standardize, simplify, and automate processes
Finance Service
Centers
Invoice
Processing
Divisional pillars
FI - AP & AR Sub-Ledgers
Payment
Files
Statement
Files
IHB / Payment
Factory
Cash Pooling,
Optimal Payment Routing
Central system
In-House Cash module
Cash Management module
7 | UBS Treasurer Summit | October 2014 | From Cash Management to Inhouse Bank
.
Finance Service
Centers
Cash Application,
Reconciliation
Divisional pillars
FI module - General Ledger
Business rationale
Key factors
Completeness
Can I access all my banks ?
Instant Accessibility
Can I move / use my Cash ?
Instant Visibility
Where is my Cash ?
8 | UBS Treasurer Summit | October 2014 | From Cash Management to Inhouse Bank
Business rationale
Instant Visibility
Completeness
Instant Accessibility
Instant Visibility
Where is my Cash ?
• Automated link to 3 main banks via SWIFT
• Generation of global accurate position reports
available on a daily basis
• Cash forecasting capabilities are a prerequisite
for investment opportunities
9 | UBS Treasurer Summit | October 2014 | From Cash Management to Inhouse Bank
Business rationale
Instant Accessibility
Completeness
Instant Accessibility
Can I use / move my Cash?
Instant Visibility
• Automated Zero-Balancing – funds concentrated
at the end of day
• Simplified foreign exchange currency
management (due to concentration on master
accounts at In-House Bank level)
• Basis for Payment Factory implementation
• Standardized execution of payments via SWIFT
(FileAct / FIN)
10 | UBS Treasurer Summit | October 2014 | From Cash Management to Inhouse Bank
Business rationale
Completeness
Completeness
Can I access all my banks?
Instant Accessibility
Instant Visibility
• Transparency on all cash positions across all
banks (incl. legacy bank accounts kept as
exceptions)
• Complete and timely information on currency
and counterparty exposure
11 | UBS Treasurer Summit | October 2014 | From Cash Management to Inhouse Bank
Lessons Learned & Next Steps
Next Steps
 Roll-out of cash pooling concept to new regions (Americas & Asia)
 Completion of Payment Factory / implementation of Payment Factory «light»
 Account statements collected «on behalf» and pushed to various backends
 Conversion to SEPA-compliant master data and file formats
 Improving auto-allocation process
 Embedding AP and AR processes into Financial Service Center environment
 Study feasibility of Collection Factory
 Replace current netting system with netting within IHB wherever possible
12 | UBS Treasurer Summit | October 2014 | From Cash Management to Inhouse Bank
Lessons Learned & Next Steps
Critical factors to be considered
 Legal issues
 What are the no-gos for your legal department?
 Do the Partner Banks apply the same contracts as the main bank?
 Specific requirements in certain countries
 What payment/collection methods & legal requirements are unique?
 Can the chosen bank support these requirements if not a retailer?
 Compatibility of payment files and account statements with standard Electronic Banking
System (EBS)
 What file formats are supported in each country by local EBS?
 Is the bank’s standard EBS the most suitable in each country?
 Has an end-to-end testing been carried out before go-live?
 Internal issues
 Monitoring of closing of local legacy structures required
13 | UBS Treasurer Summit | October 2014 | From Cash Management to Inhouse Bank
Lessons Learned & Next Steps
Implementation Scope and Timeline
2013
•
Swiss cash pools
•
Eastern European
cash pools
•
Payment Factory Pilot
(France)
•
Payment Factory
(Europe)
2014
2015
CH, BE, FI
DE, AT, NL, SLO, SLV
IT, ES, PT, UK, IRL
PL, CZ, HU, DK, NO, SE
•
Cash Pools / Payment
Factory Americas
Assessment / Scope / RFP
•
Cash Pools / Payment
Factory Asia
Assessment / Scope / RFP
Completed
Implementation
Implementation
Go-Live
14 | UBS Treasurer Summit | October 2014 | From Cash Management to Inhouse Bank
Started
Why should your company engage in such project
 Benefits brought by such project (both qualitative and quantitative) don’t
depend on the company’s size
 Many such projects have been implemented already by other corporates –
You are not the «pilot client» anymore
 Implement latest technologies available, leverage bank systems
 Follow-up projects likely to arise during «core project» implementation (SEPA
implementation, payment terms, payment / collection methods)
 Enable the review and consolidation of processes linked to cash management
and payment execution
 Improve quality and transparency of information, making comparisons across
divisions and/or countries possible / more accurate
 Replace lower value-added activities (bank reconciliation) with higher value
added activities (cash forecasting)
15 | UBS Treasurer Summit | October 2014 | From Cash Management to Inhouse Bank
How should your company engage in such project
 Share best practices with peer corporates, but define your own best practices
(corresponding with your company culture and treasury organisation)
 Organize alignment meetings to ensure that all stakeholders have a common
understanding on objectives and milestones. Involve senior management and
ensure their buy-in / sponsoring
 Get the input from local entities / countries on business specifics (e.g.
confirming in Spain, RIBA in Italy). The project is centrally-driven, not
imposed. Involve Tax / legal at an early stage to validate pooling structures
and intercompany relations.
 Make best use of the knowledge brought by the bank (pooling structure) and
system providers (Swift, ERP)
 Always allow for learning curve, but implement measurement mechanisms
(KPIs) to ensure the success of the project
16 | UBS Treasurer Summit | October 2014 | From Cash Management to Inhouse Bank
Trends & Developments in Treasury- and Cash- Management
Different levels in the ongoing centralization
Shared Service Center (SSC)
Value proposition / complexity
Cash Management models

Centrally administered Incoming- and Outgoing Payments

Steering of entire Payments Flows through a central hub
(operational and financial Cash Flows)

Group Treasury as IHB und Counterparty with market
appearance

Settlement through intercompany
accounts
Manage
Cash & Bank
Infrastructure
Centralized Treasury & Cash
Management
Liquidity
Management
(Solutions)
Visibility / Cash
Flow Reporting
Payment- and
Collection
Factory


In-house bank
Central handling of
Risk-, Liquidity-,
Cash FlowManagement and
Group Financing
Integrated Finance & Treasury
organization and In-house banking
Group Treasury "defines" the Group's Cash Pooling
structure as well as the local banking landscape

Cash visibility and concentration of group liquidity through pooling
(manual or automated cash pool / concentration schemes)

Intercompany financing as well as offsetting of internal accounts
payable and receivable (Netting)

Increased transparency of Cash-Flow positions

Integrated Cash-Flow Reporting & Forecasting
Level of centralization
Where in the process does Your Organization stand?
17