Westinghouse Electric Company, a group company of Toshiba Corporation, is one of the world’s largest nuclear energy companies and a leading supplier of nuclear plant products to electricity utilities throughout the world. Its technology underpins half of the world’s operating nuclear plants so it is truly a global organisation with more than 150 bank accounts spread between 18 banks in sixty countries around the world, and a notional value of nearly US$1.25bn for its foreign exchange (FX) programme.
Treasury wanted to gain better oversight of this significant FX exposure, improve its cash and risk oversight, and enhance its efficiency so that better strategic forecasting and business continuity planning was possible. Westinghouse decided last September that the best way to do this was to install a new treasury and risk management system (TRM) from Reval that would integrate and automate its treasury functions. Reval operates on a Software-as-a-Service (SaaS) basis in the cloud with on-going operational fees and future scalability benefits, rather than an upfront capital expense and in-house technology architecture.
The all-in-one SaaS treasury and risk management (TRM) solution from Reval was up and running by Q1 2013 and has allowed Westinghouse to meet its key project objectives, which were to optimise its treasury cash and risk management procedures, improve cash management and liquidity forecasting, and enhance strategic planning and business resiliency.
The project aims as set out in September 2012 when the technology initiative started were to enable:
- Improved decision-making with advanced analytics.
- Enterprise-wide collaboration with treasury access to better data and intelligence.
- Greater operational efficiency, control and compliance via the establishment of a transparent, interconnected workflow.
- Immediate and swift responses to regulatory changes and market information should be possible.
- Robust liquidity risk management for optimised funding and cash positions was essential.
- Accurate measurement, analysis, accounting and reporting of FX and other hedge performance metrics was crucial.
Westinghouse’s central treasury controls 20 entities globally with four employees. It manages global liquidity, intercompany loans, assists in setting capital and debt levels and manages risk for FX and commodity exposures. The majority of records were previously maintained on spreadsheets.
The treasury controls 150 bank accounts and 18 bank relationships around the globe and has approximately US$1.25bn in notional value of FX hedges, managing three-to-four-hundred contracts at any one point in time. Its hedges extend from several months up to eight years in tenure, making the mark-to-market an important component of its activity, and the ability to get accurate information to its accounting teams at closing on time crucial.
As with FX, Westinghouse’s Letters of Credit (LCs) were also managed on spreadsheets as the company’s various contracts and projects can run from three months up to multiple years in length. Securing and actively monitoring utilisation of its credit facilities was complicated as its management of approximately $0.5bn in LCs on spreadsheets was cumbersome and invited human error.
The process to get entities that span the globe to report their cash balances and get that information into a spreadsheet was previously painful and time-consuming. An ‘on demand’ view of true bank balances at any given time was impossible without a dedicated full-time equivalent (FTE) person in-situ, which it did not want to introduce. The manual process of moving cash across numerous bank platforms, and between over 150 global bank accounts, meant keeping up with multiple tokens in order to access the various platforms.
Westinghouse’s notional global pool structure increased this complexity still further. Added to this the central treasury also received its forecasts from around the globe in different formats, so messaging and technology integration was needed to get the desired efficiency and standardised workflows.
To meet the project aims and overcome the challenges outlined above, Westinghouse decided to install Reval’s TRM solution after examining other TMS technology solutions available on the marketplace. The corporate now runs both its cash and risk activities on Reval’s integrated cloud-based SaaS solution after first implementing its risk module last year. Having demonstrated efficiencies from running FX risk management in the cloud during Q3 2012, Westinghouse was then confident enough to move its entire cash and liquidity processes off spreadsheets and onto the same all-in-one TRM solution. By doing so, the corporate not only gained further process, cost and time efficiencies, it also mitigated the risk of ‘fat finger’ human error to its operations and introduced better modelling, analytics and planning that will enable the business to handle treasury challenges more easily in the future.
Westinghouse also improved its communication across functions, geographies and timezones, and it believes it now has the ability to scale and grow its infrastructure to meet future operational and business challenges. The claimed benefits include:
- Cost savings.
- Significant risk reduction.
- Improved treasury efficiency and productivity.
- Improved compliance and control capabilities.
With the ability to access market data directly built into its new treasury technology solution, Westinghouse achieved straight-through processing (STP) of its mark-to-market activities, reducing human error and the time to closing. By documenting details in Reval’s TRM software that cannot easily be captured in spreadsheets, Westinghouse also satisfies auditor reporting requirements in an environment of increasing regulatory strictness.
The major benefit comes from introducing automated cash management, liquidity planning, intercompany loans and cash pooling on the same SaaS platform, capturing time and productivity efficiencies for the corporate. The treasury can also now see its true balance at any given point in time, and it has achieved this without adding a dedicated FTE person.
With global visibility Westinghouse can now analyse trending data in less time than it took to simply report historical numbers in the past. The new system provides strategic insight to the chief financial officer (CFO) and other senior managers. The corporate also saves time and avoids errors by eliminating manual processes for moving cash across numerous bank platforms.
The SaaS delivery mechanism for the technology overhaul improved Westinghouse’s business contingency plan by mitigating the operational risk of possible damage to on-premise systems should a natural disaster occur and given the firm more flexibility for the future, admittedly for an on-going fee. But the corporate has saved money elsewhere by not requiring internal IT staff, upfront equipment expense and set-up, hosting and disaster recovery facilities – the secure data services aspect of Reval’s offering having been activated by Westinghouse. The more integrated treasury expects to gain more benefits throughout this year as new uses and capabilities are found for the system.