Case Study: Realising Celio’s Treasury Dream through Technology

Celio, the French international clothing retailer, developed a centralised treasury department from scratch in response to intensifying financial risk management demands caused by the company’s sustained, rapid and profitable expansion. This has been the result both of strong organic growth and through acquisition. The group now employs about 7,500 people globally, operates 1,450 stores across 70 countries, and recorded €1bn in sales in 2011. Celio’s stores are primarily located in western Europe and manufacturing takes place in east Asia. The central treasury team is comprised of three professionals.

Key Project Objectives

The construction of a greenfield treasury operation addressed three high-level objectives set by the group chief financial officer (CFO) in a ‘big bang’ treasury transformation:

  1. Bank account optimisation.
  2. Implementing a single treasury management system (TMS).
  3. Implementing a single banking communication channel.

The practical technology elements comprised installing an IT2 TMS, developing an in-house bank (IHB) and implementing a payments factory based around SWIFTNet bank communications. All of this was achieved within a very demanding timetable, with stringent resourcing and cost constraints.

In addition, the project delivered a radical transformation of finance business culture from a traditional French model to an international organisation, with the separation of treasury and accounting functions across the group. All the project’s business solution objectives were successfully met within timetable and budget, transforming an inefficient decentralised precursor into an efficient, transparent and robust centralised treasury operation, distinct from accounting. The project had already delivered tangible net savings in fees and other costs by its second year.

Project Planning and Execution

The project was planned and executed by the Celio finance team, with the participation of PricewaterhouseCoopers (PwC). It was very complex given the business objectives’ diverse nature, the involvement of a large number of stakeholders and the extent of the necessary shift in business culture. Around 30 Celio group staff were involved, including treasury and finance executives, IT, legal and audit, while the external participants included banks, IT2, PwC and SWIFT.

The key challenge was to keep the various stakeholders fully informed about the objectives and benefits of the project, to receive their expert input and to secure their enthusiastic buy-in for timely and accurate execution. The plan included monitoring and review processes whose importance was validated in managing various difficulties and obstacles successfully. Evidence of the plan’s quality is that its execution managed to deliver all the strategic project objectives as originally scoped, within a very tight and ambitious timescale.

Overcoming Difficulties and Obstacles

The fundamental project difficulty was presented by the complexity of separating treasury from accounting, with an initial situation that involved multiple and often incompatible enterprise resource planning (ERP) systems, TMS, commercial business systems, reconciliation tools and bank communications (such as ETEBAC and Isabel). Agreeing and implementing the new solution working with a large and diverse group required a combination of persuasiveness and tact. IT2 implementation provided the structure and discipline to transform treasury’s culture and processes into a standardised international model.

The frequent and unpredictable hold-ups that occurred through several of the banks’ inefficient processing of account opening paperwork required significant additional clerical effort for resolution. This involved firm negotiation with the banks to facilitate the removal of those obstacles that were beyond Celio’s direct control.

Benefits Beyond the Project’s Original Scope

Celio’s project has exceeded expectations by eliminating much unproductive manual effort, enabling the team to grow professionally and focus on value-added analytical and risk management actions; a benefit that’s still continues to increase.

Results Summary and Comparison

The completed treasury project yielded the following tangible percentage savings:

  • Improved cash management structure, accounts and pooling: 26%.
  • Cash centralisation: 15%.
  • Trade finance: 14%.

The project covered all costs in its second year.

The implementation of the IT2 TMS provides a robust and transparent control hub, with secure workflow management, full cash and treasury management support, and timely and dependable operational and management reporting. IT2 supports SWIFTNet by interpreting and acting on incoming MT94x balance and transaction statements, and creating and managing MT10x payment exports.

Implementation of the IT2 IHB has led to various benefits being realised. There is now an efficient single channel for all inter-company payments. A substantial saving in bank fees has been achieved via internal clearing and the reduction of expensive cross border payments. The IHB has extended value-added treasury services to the whole Celio group, including pooling, cash concentration and cost reduction through minimising external dealing.

Efficient cash concentration has optimised interest income/expense performance. The whole organisation enjoys the IHB’s provision of complete, cost-effective commercial banking facilities. Float and value date losses were reduced.

The IT2 payments factory has fulfilled the project’s goal of optimising bank relationship and account numbers, using a single system and SWIFT-based channel to communicate with Celio’s global banking network. The former total of 62 banking relationships has been reduced by 85% to just nine and bank account numbers cut from 1,450 to only 35. The payments factory provides a scalable solution that will accommodate future expansion of Celio’s global banking network cost-effectively and with low operational risk, using robust, proven technology. This will generate continued resourcing efficiencies into the future.

The end result is that treasury now operates smoothly on an international, centralised model. Treasury and accounting are distinct, and can focus on their different professional roles. The powerful, integrated treasury, IHB and payment factory solution provide a robust and secure platform for future growth. Treasury can concentrate on its core mission of optimising cash and financial risk management, secure in the quality of its cash visibility, reporting and performance. Now that banking communications have been standardised and costs have been radically optimised, bank relationship management can focus on longer-term relationship issues to support future growth combined with continued profitability.

This ambitious, value-adding technology project, coupled with a radical business culture transformation, was successfully accomplished by a three-person treasury team in a truly outstanding performance.

This case study is based upon an entry into the gtnews Awards for Global Corporate Treasury 2012, sponsored by Bank of America Merrill Lynch (BofA Merrill). The winners of this year’s annual awards, now in its third staging, were only revealed at a gala dinner on 24 May at the Sofitel Grand Hotel in Amsterdam, the Netherlands, after the opening of the two-day gtnews Forum for Global Corporate Treasury conference. This entry, which was highly commended, is shared here from the Treasury Technology category as a best practice guideline and commentary. To see a full report on all the Awards winners and the gala dinner on 24 May please click here.  

 

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