Progress report on setting up a Treasury organisation | KPMG | DE

Progress report on setting up a Treasury organisation

Progress report on setting up a Treasury organisation

An interview with Jeremy Hamon and Miljenko Solje


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In spring/summer 2014, Siemens AG resolved to contribute the Austrian plant construction subsidiary, VAI Metals Technologies, to a joint venture with Mitsubishi Heavy Industries (MHI) subsidiary, Mitsubishi Hitachi Metals Machinery. As part of this project, Miljenko Solje, as future head of Finance, and Jeremy Hamon, as future head of Treasury, were given the task of setting up a new Treasury organisation for the future joint venture, Primetals. Both report on the challenges and key success factors in the following interview:

What was the time frame to setup the Treasury function?

Miljenko Solje: The spin-off of the companies from the existing organisation structure started in spring/summer 2014. At this time, we kicked off the process by opening bank accounts, thus securing the ability to pay.

Jeremy Hamon: A very tight schedule of just 2 1/2 months was given for the actual setting up of the Treasury organisation.

What were the major challenges en route to an independent Treasury organisation?

Miljenko Solje: Without question, the greatest challenge was the lack of internal staffing. The complete Treasury team needed to be initially specified and then recruited. For the first two months, Primetals project team consisted solely of Jeremy Hamon and me.

Jeremy Hamon: One point not to be underestimated was incorporating the topic "Treasury" into the new organisation. The background to this is that all significant Treasury functions were undertaken by Siemens Financial Services or MHI in the old organisational structure. It was particularly challenging to define the interfaces to related departments and to incorporate the Treasury view in minds.

What were the significant challenges in securing payment and financing capability?

Jeremy Hamon: In addition to the timely opening of accounts, the provision of financing lines by banks was a significant challenge. This was particularly due to there being only very limited 'financials' for the joint venture being newly set up and the time for contractual negotiations being extremely limited.

Miljenko Solje: On that point I still clearly recall that the final credit line agreements were signed shortly before Christmas. That was the green light for the go-live.

How were you able to ensure implementation of a Treasury IT solution in this short time period?

Miljenko Solje: Due to the very short project period, it quickly became clear that we could only meet this ambitious target by using an SaaS solution. This solution made a rapid project start possible, enabling an uncomplicated and fast roll-out of the solution to global subsidiaries.

Jeremy Hamon: An additional factor was to set up a solution and IT structure that was equal to the high internal demands of IT security. Use of the SaaS solution, for instance, made it possible to ensure that interfaces to market data or trading platforms could be implemented directly by the IT service provider.

Miljenko Solje: In the context of selection and implementation, excellent support by the external consultant is certainly worthy of mention. This was reflected in an extremely efficient and rapid RfP process as well as in the role of the person implementing and taking care of the overall project.

Liquidity plays an important role, especially in newly established companies. Which measures have you taken to obtain transparency on liquidity and to improve this?

Jeremy Hamon: From day one of the project, the issue of liquidity planning was at the top of the agenda. In the very first week, a provisional Excel-based tool for liquidity planning was rolled out to subsidiaries to obtain the first indications of liquidity requirements. In parallel, a robust system solution was implemented in the selected Treasury Management System (TMS).

Miljenko Solje: This very rapid start made a considerable contribution to shaping group-wide consciousness of liquidity as a topic right from the outset. In addition to budgeting, the issue of liquidity and cash was regularly carried by various communications channels as the number 1 priority issue. The Treasury Project Newsletter was a very effective and important instrument for this. This was sent every 2 to 3 weeks to the global finance community and contained valuable information about all current and pending issues.

In view of the very short project period, certain issues must have been prioritised and others put off to a date after Day 1. Could you cite a fitting example of this?

Miljenko Solje: Ensuring the capacity to pay was the main priority, along with the provision of financing lines. A similar priority was attributed to hedging global foreign currency risks at the date when the existing internal hedging with Siemens was terminated. The implementation of the TMS was thus the top priority issue in this regard.

Jeremy Hamon: By contrast, issues such as cash pooling, guarantee management, credit risk management, centralised payment transactions or hedging accounting had downstream priority. These issues were all implemented after Day 1 from January of this year.

What were the main change or project management challenges?

Jeremy Hamon: Creating an awareness of the necessity of a central Treasury function was certainly one of the biggest challenges in the change management process.

Miljenko Solje: A further significant item was 'right-sizing' the processes and systems to the new group of companies. This included the breakup of existing structures, getting away from oversized system solutions as well as continuous change management at the personnel level.

Looking back, what were the critical success factors for this ambitious project?

Miljenko Solje: Critical to success was cooperation based on trust between all participants, in other words Treasury, Accounting, Controlling, Procurement, IT, the management level with the CFO and external consultants. The good project structure and methodology prepared by external consultants assisted us with a targeted working through of tasks to be overcome.

Jeremy Hamon: In addition, it was very important to include the worldwide local units. Internal communication was decisive for project success.


Source: KPMG Corporate Treasury News, Edition 50, December 2015

Author: Harald Fritsche, Senior Manager, 

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