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TMI218 Unicredit RP1 P1_Layout 1 20/08/2013 10:03 Page 45
UniCredit in
East and West
F
ew companies today can afford to ignore the opportunities for both for solutions both within and beyond the Eurozone”. He notes that companies of
sourcing and sales that China represents, says Jürgen Lutz, Head of Cash all sizes are feeling the pressure as their migration projects move towards
Management Asia Pacific region in UniCredit‘s Shanghai Branch. His conclusion, and shows how UniCredit partners with key solution providers to
article, ‘Steps Towards Operational and Financial Efficiency in China’, explores the deliver the advice, expertise and implementation support that corporates require.,
role of treasury and finance in facilitating general activities and strategic growth as well as solutions “to ease the migration process”, such as mandate
in China, where companies typically set up a separate treasury and finance management solutions. He itemises the key opportunities that SEPA offers,
function even though in many cases they are otherwise centralised at either a including centralisation of payments, collections and cash management,
global or a regional level. This is largely due to regulatory demands and the fact standardisation of processes and formats and simplification of accounts and cash
that RMB is not a fully convertible currency, making the treasury environment in management structures, noting that larger companies in particular recognise
the country substantially different from those of Europe and North Africa. Lutz these opportunities, and that SEPA is proving a catalyst for centralising processes
describes the challenges and opportunities corporates face here, with bank into shared service centres (SSCs). In answer to a question from the Editor as to
relationships posing particular issues as entities in the country have to run a what he thought treasurers’ priorities would be in a year’s time when SEPA will be
number of different accounts for specific purposes, some of which must be held established across the Eurozone, Straussfeld replied that they are likely to be
with local banks. But as he notes, the faster China moves towards a fully focusing and consolidating and improving processes and replacing ‘workarounds’
convertible currency the more companies will be keen to move their regional that they might have implemented to meet the deadline, with more permanent
finance headquarters to Mainland China, and UniCredit is excellently placed to solutions.
help its clients take advantage of these emerging opportunities. Finally to complete this collection of recent UniCredit articles in TMI we have
Global supply chain finance is the subject of the article by Dr Sebastian Hölker, an interesting case study from Georg Fischer, a company headquartered in
UniCredit’s Head of Global Innovative Trade Products, and he sees the date of April Switzerland that comprises three core businesses; GF Piping Systems, GF
17 this year as having marked the start of a new era. This was when, at the ICC Automotive and GF AgieCharmilles. The study is written up by Andreas Müller and
Banking Commission meeting in Lisbon, the Uniform Rules for Bank Payment Atul Malhotra, respectively CFO and Head of Procurement at Georg Fischer, and
Obligation (URBPO) were unanimously agreed. A Bank Payment Obligation (BPO) describes how the company worked with UniCredit, one of its primary
is an irrevocable undertaking given by one bank to another concerning payment relationship banks at a corporate level, to establish a supply chain finance (SCF)
on a specified date after a pre-agreed event has taken place, and Hölker says that programme which would offer working capital benefits to GF Automotive and
this “can be considered as the most promising instrument to bridge the gap also support the firm’s liquidity position and thus increase the resilience of its
between the technological and regulatory momentum”, giving supply chain supply chain. The authors show how the programme was implemented, a process
finance activities an entirely new perspective and impetus. He describes the which also involved implementing UniCredit’s SCF platform, which is used by
working of the BPO in detail, claiming that it could be “the long-desired missing suppliers to discount their receivables, and they list the main benefits of the
link” enabling true multi-party supply chain finance solutions to which every programme both for their own company and for their suppliers. GF Automotive
player, be it bank or corporate, is able to contribute its own individual strengths. has now onboarded 20 of its main suppliers, resulting in a 10-15% impact on days
In an interview by TMI Editor Helen Sanders with Markus Straussfeld, Head of payable outstanding (DPO) and a positive balance sheet impact. ■
International Cash Management Sales with UniCredit, Straussfeld reviews the
progress of SEPA migration to date and explains how SEPA is proving “a catalyst Robin Page, Chief Executive, TMI
2 Steps Towards Operational and Financial 8 SEPA Migration: Compliance and Catalyst
Efficiency in China for Financial Optimisation
Jürgen Lutz, Head of Cash Management Asia Pacific Interview with Markus Straussfeld, Head of International
Region,UniCredit S.p.A. Shanghai Branch Cash Management Sales, UniCredit
April 17, 2013: The Start of a New Era in Closing the Funding Gap at Georg Fischer
5 Global Supply Chain Finance?
10 Automotive
Dr Sebastian Hölker, Head of Global Innovative Andreas Müller, Chief Financial Officer, and Atul Malhotra,
Trade Products, UniCredit Head of Procurement, Georg Fischer Automotive
TMI218 Unicredit RP2 P2-4 217_Layout 1 20/08/2013 10:04 Page 2
Steps Towards Operational and
UniCredit has
more than 30
years’
Financial Efficiency in China
experience in
Asia and we
have always
been
proactive in
supporting
our
customers.
by Jürgen Lutz, Head of Cash Management Asia Pacific Region,
UniCredit S.p.A. Shanghai Branch
W
ith China’s position as the world’s second largest sent from treasury organisations from overseas are surprised
economy firmly established, few companies can when they first start working in China how different it can
afford to ignore the opportunities for both be to organise automated day-to-day cash and treas ury
sourcing and sales that China represents. UniCredit has processes in a regulated market. In this article, we offer
more than 30 years’ experience in Asia and we have always some realistic insights into the challenges and opportunities
been proactive in supporting our customers in both their for companies s eeking to enhance their operational and
day-to-day and strategic operations. Indeed, many people financial efficiency.
2 Reprinted from TMI | www.treasury-management.com
TMI218 Unicredit RP2 P2-4 217_Layout 1 20/08/2013 10:04 Page 3
insight
environment differs substantially from reporting is becoming a higher priority
those of Europe and North America. for local management. Secondly, the
Despite this, it may still seem surprising scale and value of companies’ activities
that so few companies have achieved a in China have reached a level that senior
comparable level of operational management outside China are seeking
efficiency in China to their treasury greater visibility over positions and
operations in other parts of the world. processes, and greater confidence in the
After all, the country-wide clearing quality of the control environment.
system in China (CNAPS) is efficient and Finally, while the regulatory
automated, for the purpose of domestic environment remains challenging, the
settlement. And for better pace and nature of liberalisation are
interoperability between domestic and gaining significant international
international clearing system, PBOC has attention, so there is now a greater
announced the development of a new awareness at head office of the
China International Payment System opportunities to enhance both
(CIPS) which aims to overcome manual operational and financial efficiency.
overheads between SWIFT and CNAPS While the regulatory environment is
due to local language requirements for becoming more liberal in China, it is
RMB cross-border settlement. The becoming more stringent globally.
banking sector in China is extensive, with Senior finance executives therefore need
a variety of full-service domestic and the same degree of confidence in
international banking partners. compliance and controls in their China
Electronic banking tools are widely business as in other parts of the world.
available from domestic and This is prompting many treasurers and
international banks and major finance managers, both in-country and
technology vendors provide local at the company’s group treasury, to
capabilities and support in China. focus on rolling out the corporate ERP
There are, however a variety of reasons and/or TMS to standardise processes and
why levels of efficiency and automation reporting, and achieve greater visibility
amongst corporate treasuries remain low. over financial positions in China. While
Many corporations launched their treasury and finance processes may need
business in China a number of years ago, to be adapted to local conditions in
often on a small scale initially. Legal and China, a common platform enables a
regulatory requirements were (and often consistent approach to control and
still are) challenging. For example, reporting and oversight over cash and
supporting documentation for risk at a global level.
transactions needed to be submitted to In addition to implementing internal
banks, and this remains an obligation for systems, the need for integrated, secure
most companies. ERP (enterprise resource bank connectivity is as compelling in
planning solutions such as SAP and China as in any other region to optimise
Oracle) and TMS (treasury management payment efficiency and security, to
systems) were not used extensively in ensure prompt access to balance and Secure bank
China and therefore these systems did transaction information and enable connectivity
not necessarily support local processes such as cash positioning and
is as
instruments. In addition, the initially reconciliation to be automated. Some
small scale of some cash and treasury local banks are not yet in a position to compelling
management functions did not justify an fully understand this integrated in China as
The efficiency challenge investment in automated systems, approach and respective communication
in any other
Treasury and finance has a major role in particularly when labour costs were low. with corporate overseas HQs, but these
facilitating both day-to-day activities capabilities are typically an essential region to
and strategic growth in every part of the element of most international banks’ optimise
world, including China. Although in Building momentum offering in China.
payment
many cases, treasury is centralised at Despite the challenges, both historic and
either a global or regional level, current, treasury and finance managers efficiency
companies typically set up a separate are becoming increasingly motivated to Challenges of
and security.
treasury and finance function in China. improve the automation of their centralisation
The primary reason for this is regulatory: operations and visibility over cash and While process automation and control
RMB is not a fully convertible currency, risk. Firstly, with the increasing cost of are becoming a little easier, treasury
and the cash and treasury management labour, automation of processes and centralisation and rationalisation of
Reprinted from TMI | www.treasury-management.com 3
TMI218 Unicredit RP2 P2-4 217_Layout 1 20/08/2013 10:04 Page 4
insight
banking relationships remain external financing is often still required. they will increasingly be able to meet
challenging. Entities in China are obliged During periods of constrained market their operational and financial
to maintain a variety of bank accounts liquidity, it can be difficult to access efficiency objectives.
for specific purposes, some of which local financing, so companies need to There are some opportunities that are
must be held with local banks. look beyond China for credit. At other currently available to all companies that
We fund our Supporting documentation for cross- times too, locally-incorporated banks, may offer considerable benefits. The
customers in border trade transactions still needs to which includes many of the major most significant of these is RMB cross-
be submitted physically to the banks. On international banks, need to comply with border settlement for trade and capital.
China
the other hand a pilot programme was a formal loan-deposit ratio, which ties The potential to settle international
through an launched in July 2012 that aims to lending closely to the level of deposits. trade in RMB brings commercial
integrated streamline and simplify the need for UniCredit, operating as a branch, rather opportunities when dealing with both
supporting documentation. This is than a locally-incorporated bank, is not suppliers and customers in China, as
approach
currently only available to a limited subject to the loan-deposit ratio, and we these companies can reduce FX risk.
between our number of organisations; however it has fund our customers in China through an Furthermore, with an active offshore
headquarters the potential to make centralisation integrated approach between our RMB market, particularly in Hong Kong
easier once the programme is rolled out headquarters and operations in China. and increasingly Singapore and London
and
more widely. This is of considerable value to our among other places, and frequent
operations in customers, as we can leverage our opportunities for companies that both
China. existing relationship and therefore the source and sell in China to net RMB
Financing the business in process of obtaining financing is more exposures, RMB trade settlement can be
China rapid and straightforward. very advantageous. The liberalisation of
Financial efficiency is just as important To limit the need to borrow externally, RMB cross-border transactions does not
as operational efficiency, if not more so, working capital optimisation is a parallel extend only to trade transactions but
to treasurers and finance managers priority for treasurers and finance also to the movement of capital. For
operating in, or responsible for China. managers of companies domiciled example, overseas companies can now
For example, financing local entities outside China. There is a growing fund their start-ups in China not only in
remains a major priority. The rules for awareness of this, as it is for example foreign currency but also in RMB raised
intercompany lending are very tight and brought in from group treasury as a vital offshore.
many companies do this through company policy. It needs also education
bilateral or multilateral entrust loan of local employees in the importance of
arrangements; however, obtaining working capital and the ability to A pragmatic approach to
question existing workflows. Efficient innovation
and well-integrated processes and Some banks are discussing the potential
information flows are therefore essential for treasury centres in Shanghai or
in order to ensure visibility and control Beijing to become regional treasury
over working capital. centres for Asia Pacific as a whole. There
Jürgen Lutz
are examples amongst the largest
Head of Cash Management
multinational corporations that have
Asia Pacific Region, Evolving regulation had extensive involvement in pilot
UniCredit S.p.A. Shanghai
Regulatory change in China is taking programmes and other regulatory
Branch place steadily, not least due to the concessions where this is feasible. The
Jürgen Lutz is a senior cash government’s publicly announced more and faster China is moving
management specialist with objective for Shanghai to become an towards a fully convertible currency, the
UniCredit and has more than fifteen years’ experience international finance centre, targeted to more companies will be attracted to
in cash management with a profound knowledge of be by 2020. Typically, regulatory change move their regional finance
client requirements in this area. From 1998 to 2001 he is introduced through pilot programmes headquarters to Mainland China. At
was responsible for cash management sales at that involve three or four banks and 15 UniCredit, we are proactive in
HypoVereinsbank, where he oversaw multinational and
or 20 corporations, typically in understanding our customers’ business,
institutional clients. From 2001 to 2004 Jürgen was the
head of a small sales team with focus on insurance Shanghai or Beijing. As this represents a and their needs and constraints. We help
companies and European headquarters of US based very small minority of the total our clients understand the evolving
corporates. From 2004 to 2009 he focused on the commercial population, and it can often regulatory environment and ensure that
industrial sectors telecommunication and energy and take many months before a pilot is our customers are able to take
he also took on responsibility for all international cash expanded universally, most treasurers advantage of emerging opportunities
management-activities of mid-sized corporates. In
and finance managers cannot benefit that impact them positively. In some
2009 he served as the Head of Cash Management Sales
immediately from emerging cases, these are strategic developments
Global Business. Since 2011 he has been the Head of
Cash Management Asia Pacific Region, located in developments. However, these initiatives that bear fruit over the longer term,
Shanghai. demonstrate the government’s while in others we enable improvements
Jürgen graduated from the University of Bayreuth in commitment to market and currency in day-to-day efficiency and control
1995 with a degree in Economics. liberalisation, and should give treasurers that have an immediate benefit to the
and finance managers confidence that business. ■
4 Reprinted from TMI | www.treasury-management.com
TMI218 Unicredit RP3 P5-7 FSC_Layout 1 15/08/2013 15:28 Page 5
Working Capital Optimisation
April 17, 2013:
The Start of a New Era in
Global Supply Chain Finance?
by Dr Sebastian Hölker, Head of Global Innovative Trade Products, UniCredit
the word as very often, the delivery of
services and goods has already taken place
R
ecently, a German newspaper published an article about innovations in payments. whilst the corresponding financial
It started with the provocative assertion that whilst we are quite advanced when it transaction is far from being completed.
comes to the management of transportation, warehousing and the like (RFID chips, But do such observations reflect the true
GPS trackers, real time access on all relevant data), it seems that nothing really significant status quo of the interaction between the
has happened in the last 30 years regarding payments. The parties are still left more or physical and financial supply chain?
less in the dark about a payment’s status while it is being processed and have little or no In the last couple of years, technology and
influence on the exact speed and detail of execution. standards have made enormous progress.
Reasonably up-to-date supply chain
management applications (both for the
physical and the financial supply chain) as
well as ERP systems have no problems
One may doubt whether the world truly is so trade: The physical supply chain and its understanding and processing different file
clearly divided into black and white, but it is management have currently outrun the formats and data structures – with the
obvious that this is only one of many recent financial supply chain and the services added ability to convert formats and
examples that all point in the same direction provided therein. Outrun in this context can structures and keeping data losses and
if put into the wider context of international by all means be read in the literal sense of truncations to a minimum. Communication
Fig 1
Physical
Supply
Chain
Purchase 1 The recipient bank may offer pre-
Production Shipment Delivery shipment finance to the exporter based
Order
on a PO commitment to pay
Invoice
2 The recipient bank may offer post-
PO shipment finance to the exporter based
on approved payables
Financial
Supply
Chain
BPO 3 The obligor bank may offer extended
Data payment terms to the importer
Baseline 1 2 3 Payment
match
Payment Irrevocable but Irrevocable and
obligation conditional due
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Working Capital Optimisation
standards have overcome the barriers to bridge the gap between the technological BAFT-IFSA definitions on open account trade
between different industries – in particular, and regulatory momentum and give supply finance – as “a combination of technology
the SWIFT MT 789 has facilitated the chain finance activities a completely new and services that link buyers, sellers, and
corporate-to-bank and the bank-to- momentum. finance providers to facilitate financing
corporate communication quite significantly. during the life cycle of the Open Account
Thanks to this recent progress both in How so? trade transaction and repayment”.
technology and standard setting, the stage is It is undisputed that today more than ever, “Cooperative” in this context
set for the financial supply chain to catch up corporate customers are asking for acknowledges the fact that corporates have
and match speed with the physical supply cooperative supply chain finance solutions. fully understood that they benefit most if
chain. Supply chain finance in this context is not each party in the value chain contributes
On the other hand and as a consequence limited to the notion of so-called reverse what it is most suited to provide – not only
of the global financial crisis in 2007/08, factoring programmes, but - in line with the in terms of the goods and services offered,
national and supranational regulators have
tightened the regulatory framework
especially for banking activities; impacting
also neighbouring areas like factoring and
credit insurance. So, whereas financial
services could significantly pick up speed
where pure technology, processing and
service is concerned, activities have been
slowed down especially in the international Corporates have fully understood that they benefit most if
arena as soon as financing components each party in the value chain contributes what it is most
come into play. It is no coincidence that suited to provide.
the supply chain finance industry still lacks
standardised and easy-to-use multi-entity
solutions that span the world. From the
corporate perspective, it is hardly
acceptable that bankers become very
evasive when asked about a truly
harmonised, worldwide supply chain finance
solution. Given the current regulatory Fig 2 - "4 corner" interoperable model model
"4 corner" interoperable
framework, however, it becomes evident
that banks will have to cope more and more
with local, un-standardised laws,
regulations and reporting standards – in
terms of both providing liquidity and Seller’s
complying with KYC / sanctions Seller
Bank
requirements. Does this mean that
corporates have no chance but to be locked
into fully proprietary banking solutions?
Trade contract
Multi-bank
standards
Approval of the URBPO
Seller works with own
At the ICC Banking Commission meeting
bank
held in Lisbon on April 17 this year, the
URBPO (Uniform Rules for Bank Payment
Obligation) were approved with no country
voting against their adoption. A Bank
Payment Obligation (BPO) is an irrevocable
undertaking given by one bank to another
Buyer’s
bank that it will pay on a specified date Buyer
Bank
after a pre-agreed event has taken place.
This event is evidenced by an automated
matching of data in a so-called Transaction
Matching Application.
This straight forward concept can be Source: Swift, A New Start for Supply Chain Finance, 2013
Source: Swift, A New Start for Supply Chain Finance, 2013
considered as the most promising instrument
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Working Capital Optimisation
but also with regard to their role in much earlier as the examples of evidencing model, the cross-border part of the supply
financing the whole value chain. production start, production end, dispatch chain finance programme takes place
Thus, large and well-rated buyers no and the like show. In this context, the BPO exclusively between the banks. Neither of
longer leave their suppliers alone in their offers great flexibility; the parties can agree the corporates is concerned with the
efforts to acquire reliable and affordable quite freely upon which event the BPO shall implications of cross-border finance
funding. These companies are willing to switch from a conditional to an activities that I described earlier.
contribute by enhancing their suppliers’ unconditional obligation to pay. The advent of the BPO could be the long-
financing options. In the most typical case Equipped with this knowledge, the desired missing link that enables true multi-
this happens by approving invoices, but also supplier can agree with his local bank on party supply chain finance solutions in
by giving payment commitments if certain various financing options: Either he uses the which every player – regardless of whether
pre-requisites are met, e.g., the production BPO as a credit enhancement for simple it’s a bank or a corporate – can contribute
or the shipping of goods has been evidenced working capital lines or he sells his BPO- by concentrating on its local, well-
in a pre-agreed way. supported trade receivables to his local bank established strengths. Still, important
– enabling it to offer attractive pricing as questions remain unanswered (especially the
The BPO kicks in the BPO completely eliminates any supplier- acceptance of a risk-adequate capital
Instead of letting one bank or financial related risk: treatment of the BPO by the regulators).
institution take care of a complex, multi- Whilst not far away from traditional Given the current activity on these matters
party international supply chain end-to-end, supply chain finance offers, the beauty of and the attention the BPO has in the finance
the BPO enables banks to cooperate in a way this concept is that each party (both industry, though, chances are good that
that each party of the supply chain can be corporate and bank) acts locally- profiting answers to the open questions will be found
serviced by the bank that is suited best for from its local footprint and experience in quickly.
this task: Its local bank – ideally equipped regulatory and legal, but also service-related So, it is not unlikely that April 17, 2013
with a longstanding track record and deep matters. will be remembered as the dawn of a new
knowledge of its local client’s business In this so-called four-corner interoperable era in global supply chain finance. ■
needs.
And this is how it works in practice: So
far, a supplier who wishes to join a supply
chain finance programme will conclude an
agreement with the buyer’s bank. The
buyer’s bank typically is located in a country
foreign to the supplier. He thus has no
choice but to use the terms and conditions,
the technical infrastructure, sometimes the With the BPO, however, the buyer can agree with his local
language of a foreign bank. He will also have bank at what stage in the value chain he is willing and ready
to comply with the foreign bank’s KYC - and to undertake payment.
other regulatory requirements that in many
cases significantly differ from the standards
he is familiar with.
Also the buyer’s bank has many
challenges to overcome with the foreign
supplier: Not only has it to make sure that it
complies with compulsive laws and
regulations of the supplier’s country, but –
and that is even more of an impediment – it Dr. Sebastian Hölker
has to provide complete customer service to Head of Global Innovative Trade Products, UniCredit
a typically small corporate that is not
Sebastian is responsible for Global Trade & Supply Chain Finance
located anywhere in the buyer’s bank’s Innovative Products in Global Transaction Banking at UniCredit. He
network. Many large multinational supply oversees the management, innovation and further development of
chain programmes that have started innovative trade products offered by UniCredit worldwide.
promisingly have failed because of these Additionally, he is responsible for structuring deals for trade and supply chain finance
seemingly trivial aspects. products in Germany and selected European countries. Before taking over this role,
With the BPO, however, the buyer can Sebastian led various national and international supply chain finance implementation
agree with his local bank at what stage in projects within GTB, where he contributed to the structuring, implementation and
the value chain he is willing and ready to marketing of integrated SCF solutions. Prior to working in the banking sector,
undertake payment. This can – as in the Sebastian was a solicitor in an English law firm and an in-house lawyer with a fund-
traditional approach – be after approval of initiator.
the supplier’s invoice, but it can also be
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Companies
are at
different
stages in
their SEPA
migration
projects,
and
inevitably,
some are
better
prepared
than others.
SEPA Migration:
Compliance and Catalyst
for Financial Optimisation
An Executive Interview with Markus Straussfeld, Head of International Cash
Management Sales, UniCredit Bank AG
With only a few months now remaining until
the SEPA deadline, how far have corporate
W
hile it may appear that SEPA
dominates the treasury media as we treasurers and finance managers progressed
lead up to the final migration towards migration?
deadline to SEPA, treasurers and finance Companies are at different stages in their SEPA migration projects,
managers have different levels of awareness and inevitably, some are better prepared than others. Some still
about its implications and the opportunities that underestimate the scale of the project and have not yet prioritised
SEPA is creating. In this Executive Interview, SEPA migration, and this is clearly a cause for concern. Mid-cap
Markus Straussfeld reviews progress to date, and companies in particular may be less familiar with the nature and
how SEPA is proving a catalyst for new solutions scope of SEPA than their larger peers: in some cases, for example, we
both within and beyond the Eurozone. have found that finance managers were not aware that SEPA applied
to domestic as well as cross-border transactions.
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executive interview
Companies of all sizes are feeling the structures. These are already familiar in counterparty for Europe, particularly
pressure, however, and treasurers are countries such as United Kingdom and we Germany, we have invested significantly in
seeking clarity on what needs to be done to are now seeing greater adoption in our capabilities, and collaborated with
meet the deadline and to find out the ways Germany to facilitate automated other banks and SWIFT, so that our
in which we can support them and alleviate reconciliation and posting of collections. A customers can integrate Russia into a
pain points. This includes seeking our virtual account number is held on each wider cash management framework. As a
advice, expertise and implementation customer record so that although result, customers can now include Russia
support, but also solutions to ease the collections are received into a single into physical cross-border cash pools and
migration process, such as mandate account, the virtual account number, which also use MT101 messages for initiating
management solutions, so we partner with is included in the remittance data, can then payments. These are valuable initiatives in
key solution providers to deliver this. SEPA be matched with the customer record. This supporting greater centralisation and
Direct Debit (SDD) implementation is allows the convenience of a single account, standardisation, but also making better use
particularly challenging, especially for but permits a high level of automation, so of liquidity.
companies with a large volume of direct amounts can be reconciled and posted This type of initiative is not restricted to
debits under existing domestic schemes. promptly to customer accounts. This Russia: we are also engaged in collaborative
SDD is less mature than SEPA Credit enhances working capital management by efforts to enhance opportunities for cash
Transfers (SCT) and there is a lack of clarity reducing days sales outstanding (DSO), frees and liquidity management in countries such
over legal and operational issues such as up customer credit limits more quickly and as Ukraine, Croatia, Romania and Bulgaria
mandate management and handling, reduces the administrative burden with considerable success.
particularly when converting from well- considerably.
established local schemes such as in
Netherlands, Austria etc. The final format By this time next year, SEPA
specifications for SDD hav not yet been For what other innovations will be established across the
released by CGI (Common Global is SEPA a catalyst? Eurozone: what do you think
Implementation) Group which is adding to One of the most significant opportunities treasurers’ priorities will be a
the pressure on corporates as the 1 that SEPA has opened up is the ability to year from now?
February 2014 deadline approaches. standardise the format of information that Once treasurers have achieved SEPA
is exchanged between financial compliance and crossed the migration
counterparties. SEPA payment methods use deadline, they are likely to be focused on
To what extent have XML-based formats (ISO 20022) which is consolidating and improving processes and
companies been able to emerging as a global standard, not only for replacing workarounds that they may have
leverage the benefits of payments, but other financial messages implemented to meet the deadline with
SEPA so far, in addition to too. At UniCredit, we see this as major more permanent solutions. We also see
focusing on migration? opportunity for banks and corporates alike, companies looking beyond the Eurozone to
Centralisation of payments, collections and so supporting XML messaging is a priority determine how a centralised and more
cash management, standardisation of for us. By standardising financial efficient infrastructure can be leveraged to
processes and formats, and simplification of messaging not just regionally but globally, optimise their payments, collections, cash
accounts and cash management structures companies can rationalise their systems management and liquidity management in
are amongst the key opportunities that and the range of formats they need to other regions and currencies. While
SEPA offers. Larger companies in particular support, interfacing with bank services is treasurers have focused on SEPA, they may
recognise this, and SEPA is proving a more straightforward. Reporting can be not have been aware of some of the other Customers
catalyst for centralising processes into produced consistently from different bank opportunities that have emerged in recent
can now
shared service centres which permits further systems and integrated into the ERP or year that have the potential to enhance not
efficiencies, such as implementing TMS in a consistent way, so decisions can only their operations in the Eurozone but include
consistent payment and authorisation be made based on complete and more widely. Understanding and Russia
controls and automating processes. The trustworthy information and processes implementing these techniques could bring into physical
challenge, however, is how to both ensure such as reconciliation automated more considerable benefits. For example, we now
compliance and implement the benefits of fully. XML is also opening up new offer cross-currency, cross-border notional
cross-border
SEPA given the shrinking timescales. While opportunities in financial messaging. For pooling from Germany. In the past, cross- cash pools
compliance must be achieved by the example, camt.086 offers a consistent view currency pools are typically located in and
February 2014 deadline, companies can over bank fees so that these can be Netherlands or United Kingdom, which is
also use
continue to implement efficiencies and take compared and reconciled more easily. not necessarily attractive if a company does
advantage of the resulting opportunities We work with customers to implement not have significant financial operations in MT101
beyond this date. Consequently, many XML formats in both SEPA and non-SEPA these locations. Furthermore, as the messages for
companies still have a mix of local and countries, and convert messages into local extended period of economic uncertainty initiating
centralised activities and the process of formats where necessary. For example, it continues, many companies see the benefits
payments.
centralisation and optimisation will be a has been difficult in the past to of working with UniCredit Bank AG which
gradual one. incorporate Russia into a regional or global is highly-rated with a remarkable core tier 1
A valuable opportunity that SEPA opens payments and cash management ratio >18 % and reliably headquartered in a
up is the introduction of virtual account infrastructure. As Russia is a major trading stable economy. ■
Reprinted from TMI | www.treasury-management.com 9TMI218 Unicredit RP5 P10-1 Germ_Layout 1 15/08/2013 15:38 Page 10
A Treasurer's Guide to Corporate Treasury in Germany 2013
Closing the Funding
Gap at Georg Fischer
Automotive
A UniCredit Case Study
by Andreas Müller, Chief Financial Officer, and Atul Malhotra, Head of Procurement,
Georg Fischer Automotive
L
ike many organisations, Georg Fischer Automotive, one of the
three core businesses in the Georg Fischer group, was Georg Fischer
experiencing working capital challenges caused by the timing
Georg Fischer comprises three core businesses: GF Piping
mismatch between customer collections and supplier payments. To
Systems, GF Automotive, and GF AgieCharmilles. Founded in
address this, Georg Fischer Automotive made the decision to implement
1802, the corporation is headquartered in Switzerland and has
a supply chain finance programme with UniCredit. This article outlines
125 companies, 48 of them production facilities, in 30
some of their experiences and the outcomes of implementing the countries. Its approximately 13,500 employees generated sales
programme so far. of CHF 3.6bn in 2012.
Working capital challenges
Although the Georg Fischer is made up of three core business divisions, benefits to Georg Fischer Automotive, but also support our suppliers’
treasury is managed at a corporate level and manages the cash, treasury liquidity position, and therefore increase the resilience of our supply
and risk management requirements of the group as a whole. Specific chain (figure 1). A number of banks had approached us to offer a SCF
divisional needs are managed by the divisional CFO, supported by treasury. programme, but ultimately we made the decision to appoint UniCredit,
One of Georg Fischer’s most significant treasury challenges is to one of our primary relationship banks at a corporate level, based on the
manage working capital effectively. Before implementing the supply chain quality of our existing relationship. As an early adopter of SCF
finance programme, there was significant divergence between inflows and programmes, we recognised the potential to shape the way in which
outflows with a timing gap of 20-25%, which was expensive to finance. our programme operated.
Consequently, our aim was to narrow this gap as far as possible. In
addition, the 2008-9 crisis encouraged the group to optimise its net
working capital, including suppliers, inventory and customers. One of the
Implementing the programme
outcomes of this was to renegotiate payment terms wherever possible, We worked with UniCredit to identify initial target suppliers. These
but this was not sufficient in itself to resolve the funding gap, not least as were our key suppliers with which we do business regularly, with
many of our suppliers were experiencing similar liquidity challenges. whom we had a long-standing relationship, and which amounted to
around 35% of our total creditor volumes. We embarked on the
project in February 2012, and commenced an onboarding process for
The decision for supply chain finance these key suppliers. As many of these companies were not familiar
We therefore made the decision to establish a supply chain finance with SCF, we spent considerable time explaining the way in which
(SCF) programme, recognising that it would offer working capital the programme would operate, the benefits, and the terms and
10 Reprinted from TMI | www.treasury-management.comTMI218 Unicredit RP5 P10-1 Germ_Layout 1 15/08/2013 15:38 Page 11
A Treasurer's Guide to Corporate Treasury in Germany 2013
conditions, which then enabled them to
decide whether or not to participate. In Figure 1 - Benefits of Georg Fischer Automotive’s
some cases, companies already participated Supply Chain Finance Programme
in similar programmes, while others,
particularly larger suppliers, decided not to
participate as they were able to source BUYER SUPPLIER
finance more competitively, or for balance
sheet reasons; however, overall there was Uploads confirmed
Receives indicative
1 invoices and credit Trade 2 purchase price for the
widespread acceptance of the programme. Purchase receivables
notes
The project also involved implementing Platform
Offer to sell selected
UniCredit’s SCF platform, which is used by 3 receivables
suppliers to discount their receivables. We put
in place a process where suppliers send invoices
to Georg Fischer Automotive, which are then 4 True sale of
approved and passed to the SCF platform, at receivables and
5 Pays at maturity
immediate payment
which point suppliers can choose to discount
invoices as required. The processes and
technology were easy to implement,
particularly as we had already centralised our For Georg Fischer Automotive For suppliers
accounting and payments processing in a
shared service centre (SSC). ● Extend days payable outstanding ● Obtain access to financing at
(DPO) competitive rates
● Address the timing mismatch ● Improve days sales outstanding (DSO)
Project outcomes between customer collections and and free up customer credit line with
We have now onboarded 20% of our main supplier payments Georg Fischer Automotive more
suppliers, resulting in a 10-15% impact on ● Reduce working capital financing quickly
our days payable outstanding (DPO) and a costs ● Avoid the use of credit lines for
positive balance sheet impact. The ● Increase supply chain resilience working capital financing
programme is now being extended to a wider through a more stable supplier base ● Gain greater predictability of cash
group of suppliers, which we anticipate will ● Improve negotiating terms flow for enhanced cash positioning
cover about 50% of our total creditors and forecasting
volume. While we had hoped to onboard For both
suppliers more quickly, the time taken to ● Strengthening relationships
educate suppliers cannot be underestimated.
The competitiveness of the SCF programme is
essential to its success, which requires
dialogue between the purchaser, suppliers
and the SCF bank. Andreas Müller
The successful introduction of the SCF Chief Financial Officer, Georg Fischer Automotive
programme at Georg Fischer Automotive is
an important means for us to continue Andreas Müller has been the CFO of Georg Fischer Automotive for
closing our funding gap and optimising the past five years and is in charge of Finance, Controlling and IT of
the entire Automotive Division. He has 17 years of professional
liquidity. We have been very fortunate in the
experience as Financial Executive in various functions, mainly in the
successful collaboration with UniCredit
Georg Fischer Piping Systems Division.
throughout this project, with excellent
support, proactive ideas and very strong
personal relationships. Looking ahead, not
Atul Malhotra
only will we seek to onboard more suppliers,
Head of Procurement, Georg Fischer Automotive
but we will also seek additional means to
manage working capital and liquidity Atul Malhotra has been the Head of Procurement for Georg Fischer
successfully. We are also aware that as the Automotive for the past nine years. In this capacity he is responsible
SCF programme is a long-term initiative, it is for the worldwide sourcing and procurement activities of this
likely to become more or less competitive as Division with an annual procurement spend totalling around EUR
funding conditions evolve; consequently, we 1bn. In all, he has over 30 years’ professional experience as a business executive in
will need to review it regularly to ensure varied functions, mostly with international groups such as Continental, ABB, Adtranz
that it continues meeting our liquidity and GF.
needs, and those of our suppliers. ■
Reprinted from TMI | www.treasury-management.com 11SEPA isn’t just
somewhere down
the road
Better start
now!
Beginning 1 February 2014 all national and
international payments will be permanently
switched over to SEPA. Why not deal with
this topic right now so that you’re ready to
go by the start date? Our specialists are at
your service ready to help you in any way –
Let’s talk about it!
www.gtb.unicredit.eu
This material has been prepared solely for information purposes. The products and services featured above are offered by a network of banks and representative offices of UniCredit S.p.A. or its affiliates
(the “UniCredit Group”) in accordance with appropriate local legislation and regulation. UniCredit Corporate & Investment Banking is a trademark of UniCredit S.p.A.
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