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Corporate View: 
Sonia De Paolis, TomTom

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TomTom is a global supplier of location and navigation products and services. The company provides consumers and enterprise, government and automotive industry customers with digital maps, traffic intelligence, navigation software, portable navigation devices, automotive systems, fleet management services, smartphone apps, fitness devices and speed cam intelligence.

Sonia De Paolis

Head of Treasury

Sonia De Paolis became Head of Treasury in January 2011 after a six month stint as Treasury Manager. Before joining TomTom, Sonia spent five years in the treasury department of Nike’s European headquarters with responsibilities in all main departmental activities including cash management, FX risk, treasury control and global projects.

Prior to that, she worked for five years in the European headquarters of Cisco Systems, covering various roles in the credit and collection organisation and within the treasury unit. Sonia’s career began in Italy, where she worked at Orbit Communications for six years as Corporate Treasury and Financial Planning analyst.

Sonia has a PhD in foreign languages (English) from the University of Rome ‘La Sapienza’ and an MBA (International Finance) from St. John’s New York. She has completed Level 1 and 2 of the CFA Programme, and is qualified as a Lean Capabilities Coach.

Headquartered in Amsterdam, TomTom employs over 3,500 employees and operates from 50 locations in 35 countries. In 2010 TomTom had revenues of €1.5 billion and a net profit of €108m. The company’s net cash flow from operating activities was €210m. TomTom has been listed on NYSE Euronext Amsterdam since 2005.

Founded in 1991, TomTom’s origins lay in the development of business-to-business applications for hand-held mobile devices and consumer digital assistant devices (PDAs). By 2003, the company had recognised the potential for portable navigation devices (PNDs) and it sought to fill the market gap for affordable, consumer-friendly all-in-one systems.

As at the end of 2011, 1.5m people around the globe actively use TomTom’s LIVE Services (real-time connection to the latest route information), including TomTom HD Traffic. Rising from a figure of 690,000 users at the start of 2011, TomTom’s continuing growth reflects the ongoing expansion of a worldwide local partner network to sell and support TomTom’s systems, and the establishment of the company as a blue-chip multinational corporate.

“My ambition is to make the TomTom treasury function a top of the class organisation. I think we have good people in the right places to get there.”

Located in Amsterdam, TomTom’s treasury department is a corporate treasury covering global activities in EMEA, the Americas, Asia and Australia. Moving from large multinational companies (MNCs) Sonia joined TomTom one and a half years ago. One of her goals within the first 12 months in her role has been to develop the treasury function in Amsterdam and to make it accountable for all the treasury operations globally. Sonia’s future designs are geared towards taking the company’s whole treasury function on board by the end of 2012. “My ambition is to make the TomTom treasury function a top of the class organisation. I think we have good people in the right places to get there,” says Sonia.

Over the last year, the team has expanded from two to four people: besides Sonia, there is a treasury manager, a cash analyst and a treasury control analyst. A close-knit unit, the concept that has been applied in strengthening the treasury organisation goes in quite the opposite direction to outsourcing. Currently, colleagues from the finance departments in Asia and the Americas are helping out by acting as intermediaries for the local banking relationships while the company completes the centralisation of the banking infrastructure in each region.

In this interview, Sonia De Paolis tells us more about TomTom’s treasury and the future she has envisioned for the unit.

With a product that makes an attractive Christmas gift, is the business very cyclical? If so, in what ways does this affect cash flow and how do you remedy this?

More than cyclical, I would say that the consumer electronics business has been quite changeable, especially with the introduction of smartphones and tablets. In a recession where there is less liquidity around, we are facing competition from products that are perceived as perhaps more ‘attractive’ by the consumer on the street. In terms of seasonality, there are peaks before Christmas or before the summer holidays – but, for the most part, it is the general trends of the consumer electronics industry that have the most significant impact on profits.

From a treasury and cash flow forecast standpoint, it is a combination of understanding the industry that we work in and getting continuous updates from the business units. We know the history of our peaks and troughs and we plug that seasonality into our budgeting and forecasting process so that, when it comes to comparing the actual versus the forecast, it is a less surprising result.

“Treasury sits on the monthly forecast meeting with the CEO, the CFO, and the business unit controllers, to be on top of what is going on in the market and what is going to happen for the remainder of the year.”

Of course, it is not 100% accurate – as a forecast is by definition a ‘forecast’ – but we try to be as close as possible to the business to understand what is going on and if there are significant changes month over month. Also, treasury sits on the monthly forecast meeting with the CEO, the CFO, and the business unit controllers, to be on top of what is going on in the market and what is going to happen for the remainder of the year.

What other external risks globally do you feel have had/has an impact on TomTom’s performance and strategies?

Consistently, we watch the euro-dollar given that we purchase our product in US dollar and therefore are subject to considerable exposure. We also need to watch out for the banking environment and recognise what is going on with our banking counterparties. TomTom has a policy whereby we only bank with partners that are rated above a certain safety level and we constantly watch their CDS movements. In terms of investment, we are very conservative – we will always go with term deposits or AAA MMFs – not a very high yielding strategy, but we go for capital preservation, of course.

“As regards liquidity, we refinanced the last tranche of our loan facility at the beginning of 2011. It was a somewhat prudent approach to secure this almost two years in advance.”

As regards liquidity, we refinanced the last tranche of our loan facility at the beginning of 2011. It was a somewhat prudent approach to secure this almost two years in advance. We did not foresee the euro crisis nor do we believe that it would be so difficult if we were to refinance today, but the terms and conditions may very well have changed. In general, the whole company is re-organising and building a structure that will enable us to be more efficient and to go faster to market with innovative products.

What risk management strategies does your treasury department employ?

In general, we try to bank with a main banking counterparty for each region (EMEA, the Americas, Asia Pacific). We try to centralise as much as much as possible but we also need to look at local requirements. In addition, we maintain the level of business apportioned to our banking partners on a monthly basis to avoid over-exposure to any one institution.

In terms of risk management strategy, we do what I am sure many treasuries do: we hedge FX risk with forwards and options; interest rate risk with interest rate swaps; counterparty risk is managed by looking at the credit rating of major parties and monitoring CDS levels and trying to allocate the business so that we are not particularly skewed towards one or the other.

“From an operational standpoint, we have an internal control framework in place whereby we have identified the risks in each activity we perform and set up the right controls to manage those risks, ensuring segregation of duties, business continuity, and compliance with policies and procedures.”

From an operational standpoint, we have an internal control framework in place whereby we have identified the risks in each activity we perform and set up the right controls to manage those risks, ensuring segregation of duties, business continuity, and compliance with policies and procedures.

Do you pool your cash?

Yes, centralisation and integration were our focus in 2011 and will continue to be in 2012. One of the tools to centralise cash is the pooling structure, which we implemented in 2011 in the Eurozone. The next currency we will look into is the US dollar.

How does TomTom finance its supply chain?

What we have is a loan facility that was taken at the time of the Tele Atlas acquisition in 2008. We are currently financing ourselves with our cash cycle and the facility that we are repaying. In general we aim to pay our suppliers swiftly and without any delay, while closely monitoring our customer payments and maintaining an active dialogue with their accounts payable (AP) departments.

What other projects do you have underway in your treasury at present?

In the coming year we will focus on finalising the centralisation of the treasury function as well as the enhancement of our treasury management system (IT2) and the automation of the data feed into and from SAP. During this process we will start preparing for SEPA, ensuring full compliance is achieved in 2013 – before the deadline in 2014.

We will also work on improving our forecasting models and back-testing of actual results versus forecast as well as strengthening controls and reviewing our policies and procedures.

Overall we are continuously driving initiatives whose ultimate goal is to set best practices, not only specific to treasury, but that have cross-functional reach throughout the organisation.

What green strategies does your treasury department employ to adhere to the eco-friendly standards that TomTom is well known for?

The company policy is to encourage everyone to have a paperless desk so we try to minimise the paper flow using digitalised documentation as much as possible. Unfortunately, sometimes, you cannot get away from the paperwork.

I would like to see the banks more equipped from an eBAM perspective, so that we could, for instance, work with electronic signatures. The banks all say that they are working on this but I have yet to see it.

“I would like to see the banks more equipped from an eBAM perspective, so that we could, for instance, work with electronic signatures. The banks all say that they are working on this but I have yet to see it.”

Finally, if you had to choose a voiceover for your TomTom, who would it be?

That is an interesting one. We have all sorts, like Yoda, Darth Vader and Bert & Ernie. I think it has leant towards the male gender though, so I would choose a female voice just for a change – maybe the Queen?