The strategic objective of Project Griffin, the name given to the implementation of a new European treasury centre at the multinational brewers, SABMiller, was to leverage the scale of the corporation to deliver improved control and cut costs and risk exposures, including on its foreign exchange (FX) activities. Working in partnership with partners at IT2 and Citi, the project was started in 1 November 2010 and completed on time and on budget in April 2012.
The aim was to establish best practice treasury operations throughout the region, centralised on the UK offices. The key requirements in the project plan were to:
- Transition from decentralised to centralised treasury management at SABMiller by establishing a European treasury centre in the UK.
- Introduce an IT2 treasury management system (TMS) to the European business units, providing dependable FX exposure and cash forecast management capabilities.
- Ensure risk management centralisation.
- Introduce European bank rationalisation, reducing the number of local banking partners, and make Citi SABMiller’s European regional bank.
- A simplified banking landscape was also targeted, allowing for an easier rollout of SWIFT FileAct/XML capabilities for operational banking purposes, covering accounts payable (A/P) and accounts receivable (A/R).
- The project aims, described above, were delivered over an 18 month deployment, across 12 countries and 14 businesses.
The Griffin team’s approach to project management was central to achieving a superior result in terms of completeness, quality and timeliness. All 12 countries are now completely migrated to the new system, meaning that in excess of US$1bn in FX exposure is now under central treasury management at SABMiller.
The on-time execution of the project plan was thanks to the hands-on approach taken by SABMiller senior treasury executives and staff, allied to strong central management and scope discipline. A transparent project methodology, clear management lines of responsibility and escalation paths were also important.
No extra resource was needed beyond the original plan. The successful implementation of the new TMS and centralised European treasury centre involved diplomatic negotiations with the existing European business units’ finance management structure, while enforcing SABMiller’s standardised treasury operations model.
Obstacles and Difficulties
The excellence of the SABMiller treasury team’s project management minimised the obstacles and difficulties encountered when implementing Project Griffin. The team worked collaboratively with a diverse group of finance executives, from countries including the Czech Republic, Poland, Hungary, Switzerland, Slovakia and Romania. The education, planning and rollout processes needed to achieve the local business units’ buy-in, in order to ensure that the project benefits were worthwhile, realistic and deliverable.
The centre might enjoy the benefits of cost savings, banking efficiencies and improved controls, but the local business units needed to understand and accept the real overall corporate value of making cuts to their budgets. This required creativity and flexibility.
SABMiller treasury also successfully managed the substantial workload of financing the simultaneous Foster’s beer acquisition, worth AUD$10bn (USD$10.1bn), without disrupting Project Griffin – a major achievement considering the amount of work involved in both initiatives.
The precision of Project Griffin’s planning left little room for achieving benefits beyond the original project scope. There was one such benefit, however, relating to accommodating a much more granular approach to hedge accounting than was originally envisaged. This takes advantage of IT2’s in-house bank (IHB) facilities to allocate external hedges to more specific accounting categories, such as inventory, capital expenditure and operational expenditure. As a result, the actual deal volume is approximately double what was originally planned, and has been managed without cost or timetable slippage.
Project Griffin has already yielded a number of other, expected benefits. The advantages of the new TMS, harmonised banking infrastructure and new centralised European treasury operation are quantifiable against the previous situation at SABMiller, delivering:
- On-going FX and full time equivalent (FTE) benefits estimated to be worth US$1m per annum.
- Pooling and central funding benefits far exceed the original business case estimate of US$1m.
- There has been a reduction from 25 banks to one regional European bank, namely Citi.
- Bank fees have been reduced by approximately US$0.5m per annum.
- A simplified banking landscape allows for an estimated one-off deployment cost saving to be achieved for the installation of SWIFT FileAct/XML capabilities (still to be deployed).
Regional cash visibility via SWIFT messaging into IT2 and concentration had already been optimised through an earlier phase of the Citi multi-currency cash pool implementation.
Technology and Centralised FX Dealing
Technically, the results have been achieved using the web-based IT2 .NET module to intercommunicate between the business unit network and the centralised European treasury centre in the UK, producing the required robust, cost effective 24×7 service needed for proactive treasury management. There are about 40 IT2 .NET users supporting this part of the business.
FX pricing performance has been optimised through leveraging the efficiencies and added value of centralisation via a straight-through processing (STP) link between IT2 and 360T, compared with the business units’ pre-project performance with their local banks.
In Europe, SABMiller can now concentrate FX exposures in the IHB, and execute securely with the most competitive counterparty. The centralisation of FX dealing brings the additional benefit of broadening the scope of counterparty risk management; this enables the treasury team to manage this kind of risk more effectively, with the efficient use of dealing lines and transparent exposure management.
The estimated deployment cost savings are based on the completion of a standard SWIFT FileAct/XML interface between Citi and SAP, meaning it is no longer necessary to build and support a series of one-off interfaces, enhancing the control quality and efficiency of A/P workflow on a continuous basis.
The SABMiller brewery now enjoys the dual benefits of SAP-based enterprise resource planning (ERP) and management, plus IT2’s value-adding cash, treasury and financial risk management facilities.
Centralisation has generated many benefits through the concentration of front and back office professional resources and expertise, versus the preceding localised arrangement. The highly automated IT2 workflow integrates the information flows for SWIFT (for statement and payment management and deal confirmation), SAP (for G/L), 360T (for dealing) and the subsidiary network via IT2 .NET (for FX exposure and cash flow forecasting), reducing manual effort and error potential, and significantly enhancing transparency and control. The critical mass of headcount now allows best practice segregation of duties.
Forecasting frequency has now been upgraded to weekly for cash flows, on a 12-week rolling basis, and quarterly for FX exposures, on a rolling 18-month basis. The new environment now allows material forecast changes to be made on an ad hoc basis, at the business units’ discretion. The centralised organisation also provides a future platform for the development and deployment of forecasting performance measurement and management tools at SABMiller.
• 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 winning SABMiller entry is shared here from the Foreign Exchange (FX) Project of the Year 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.
Both 2017 and 2018 have been predicted to be years that blockchain breaks through to the mainstream in fintech, but as of today businesses are still floundering when it comes to finding use cases for the innovative technology.
Tim de Knegt, treasurer for the Port of Rotterdam, discusses how he is looking to bring more value to the Port's clients using blockchain.
Regulation technology is fast gaining currency by transforming how financial institutions can tackle compliance in a swift, comprehensive and less expensive manner.
Many banks around the world, large and small, continue to experience major security failures. Biometric systems such as pay-by-selfie, iris scanners and vein pattern authentication can help.