The Asia Pacific region is key to GE’s growth strategy so the treasury structure comprising three complementary Centres of Excellence is pivotal. The journey they have been on has been transformational covering 439 entities across 25 geographies and 127 banking partners with 1,911 bank accounts. From a pioneering cross-border liquidity structure, automated single platform solution for FX payments and working capital efficiencies to a centralised transaction processing centre, the team at GE has excelled and is a most deserving winner of our Top Treasury Team Asia this year.
Photo of KK Wong, GE, Saurabh Gupta, Citi, Brenda Oh, Shilpa Narula, Kevin Voong, and Vincent Liu, GE.
Operating in approximately 180 countries, General Electric (GE) is a diversified infrastructure and financial services company well on its way to its transformation into a digital industrial company. The company’s products and services range from aircraft engines, power generation and oil and gas production equipment to medical imaging, business financing and other industrial products.
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Asia Pacific is the key region for GE and is an important part of GE’s growth strategy with over US$20bn of regional industrial orders.
In the region, GE’s treasury structure consists of three complementary Centres of Excellence (CoE) – the corporate treasury team, the business treasury team and the shared service centre (SSC). They all function as a whole to define and execute GE’s treasury vision and goals.
Regional corporate treasury
GE has always been amongst the leaders in treasury management practices, covering a large franchise in Asia with diversified business requirements and geographies.
With a presence in five countries across eight cities in Asia, the regional corporate treasury team has been providing critical support in assisting GE businesses overcome complex cross-border rules and regulatory challenges in this part of the world. With the recent divestment of a significant portion of the GE Capital business and the strategic acquisition of Alstom’s thermal, renewables and grid businesses, the company has had to relook at simplifying their treasury management practices and embark on a transformation journey from 2015 through 2016 and beyond. The goals are to enhance cash planning, forecasting and reporting; simplify banking through consolidating partners and enhancing bank infrastructure; streamline collections and disbursements.
Of notable mention, GE treasury operations oversee centralised account opening platform and cash flow management for all GE offices in the region to streamline and improve efficiencies. They provide support for end-to-end oversight over all treasury operations across the region and are particularly focused on increasing cash management efficiencies for the Group. The Global Banking Solutions (GBS) team within Treasury Operations plays an important and strategic role within GE’s cash transformation strategy, of which they are chiefly responsible for centralising and standardising bank services management and processes. To put it into perspective, GE in Asia had over 400 entities covering 25 geographies with 2,000 bank accounts housed across 127 banking providers. The end state calls for managing business requirements with a much simpler, more manageable infrastructure.
Located in Singapore in support of ASEAN markets, the Business Treasury function started in Asia as a niche unit and has, over time, gained experience to become a cohesive part of the treasury management. This team is a specialist group with experts from each of the business lines that GE operates: oil and gas, power, healthcare. It also has a presence in other key Asia markets, and exists in different shapes depending on business scale. Given the unique cycles and requirements of each business line, this particular team supports the Group in areas such as FX exposure identification and analytics, counterparty risk assessment, customer cash flow as well as support on commercial opportunities. The specialised knowledge this team brings, along with the information sharing, is important in order to identify and develop treasury practices that address the nuances of each business line for a cohesive and real-world treasury team.
Shared Services Centre
GE has recently established their Asia Shared Services Centre (SSC) in Shanghai, China with a scope covering all of Asia Pacific. GE’s SSC, including Global Operations Finance, is an important component of GE’s treasury ecosystem. They have, during the last 12-18 months, driven synergies to centralise processes. They now oversee all payment processes across the Group’s businesses in the region as well as collections and reconciliation. This team is the backbone to everyday treasury management and is tasked to enhance efficiencies within a centralised architecture.
On the whole, GE’s multi-faceted treasury structure makes certain the design and execution of innovative and scalable treasury solutions. In the past two years, GE has witnessed a transformation of its treasury ecosystem, resulting in enhanced simplicity and improved visibility for their treasury operations across the globe. In fact, Asia Pacific was chosen as one of the pilot regions for the treasury transformation project, which encompassed new initiatives in liquidity concentration, single pipe for cross-border settlements, setting up of Centres of Excellence, account rationalisation and growth support in a period of restructuring.
Between 2015 and 2016, GE’s treasury team undertook and implemented several projects, incorporating industry standards for integrated treasury management. Among them are:
Pioneered cross-border liquidity structure
With over 400 entities across multiple markets in Asia Pacific, GE faced challenges to adequately and efficiently gain visibility of their cash flows across the region. GE worked on a two tier approach, with the first tier being domestic in-country consolidation of LCY and USD balances across entities as permissible in some of the ASEAN markets. The second tier, GE implemented a regional USD pooling structure for their business entities as overlay for consolidation of USD balances. This pooling structure has enabled liquidity consolidation and automated forecasting with reduced cost of funding. As a result, GE estimated cost savings of up to US$5m and cash flow consolidation of US$1.2bn. Following the success of these structures, GE is looking to scale the solution globally to reap the benefits of greater cash consolidation and centralisation.
Automated single platform solution for FX payments
Before 2016, GE’s cross border payment processes looked very different. Previously, over 11,000 cross border payments were manually booked through an in-house data entry platform per year. This data was then consolidated by the regional treasury centre team in India for FX transaction booking across various maturities and currencies. In tandem, the physical underlying documents required for these transactions were moved between banks before final payment. GE recognised an opportunity and partnered with its chosen banks in the regulated markets in Asia to create a dedicated pipe to route all cross border payments. This enabled an automated and digitised single platform solution for foreign exchange, documentation, payment as well as reporting. This helped GE save resources, reduce overall turnaround time by 50%, as well as simplifying their documentation process and streamlining their cash flow forecasting capabilities.
Working capital efficiency
As GE continues to pivot towards its industrial roots, it has doubled up its efforts to focus on working capital to support business growth and P&L. Given the long cycle nature of some of their underlying business lines, wherein sales collections could spread over several months and years, GE has tailored innovative solutions to support ongoing cash flows and to accelerate their business cycles.
Centralised transaction processing centre
The year 2015 marked the beginning of migration of treasury processes to GE’s SSC in Shanghai. In its current form, the SSC supports payments processing for all countries in Asia Pacific. The journey to centralise payables functions within the SSC began with domestic payments and has now evolved to also include cross-border payments. GE leverages XML file formats with SWIFT connectivity for their payments processes; being a fully end-to-end digitised process, this has freed up local finance resources to focus on other value-add tasks for the business.
Vincent Liu, Asia Treasurer, Managing Director, comments, “In the last couple of months, the account management processes for all markets in Asia Pacific ranging from bank account opening, KYC repository and ongoing maintenance have been moved to the SSC team. Banking on these success stories, GE is looking to launch the next phase of our treasury centralisation initiative to cover cash applications and possibly other treasury areas within the region.”
Growth in a period of restructuring
Identified as a systemically important financial institution (SIFI) just after the global financial crisis, GE was resolute to pivot towards its industrial roots and focus its financial business capabilities in support of these industrial businesses. To date, GE has sold off nearly US$200bn of financial assets and continues to deliver its promise to its shareholders. GE’s treasury played a pivotal role by ensuring the financial health of the company during the transition. In the same period, GE expanded its industrial footprint by strategic acquisitions such as Alstom, Baker Hughes, and Doosan, amongst others. As a result, GE underwent a vertical and horizontal integration which witnessed Alstom’s complete banking structure integration with GE’s in just 30 days, powered by a single treasury platform.
“Our treasury transformation journey over the past two years has shaped a differentiated and purposeful regional treasury structure built upon capabilities. In many ways, the treasury team has shaken up GE’s legacy platforms to create best-inclass, sophisticated treasury management solutions to drive business growth.”
Vincent Liu, Asia Treasurer, Managing Director
Best practice and innovation
GE’s treasury is at the forefront of innovation through market-leading solutions, logical execution and business ownership. GE’s new multi-faceted treasury structure paves the way for a more robust, nimble, and agile treasury function to support the wider GE enterprise on an ongoing basis.
Some of the pioneering best practices demonstrated by GE’s treasury team include:
GE’s treasury framework defines both operational and business level considerations to support revenue as well as P&L objectives. For example, a fully automated domestic (LCY as well as USD) as well as regional USD pool solution in Asia Pacific not only serves to enhance operational cash flows and business growth funding in the region, but also serves to support the various GE businesses.
Establishment of the SSC covering payments, receivables, account management and other common treasury functions synchronises GE on a path of scalability, mirroring GE’s growth ambitions. Treasury activities in the SSC have become operational in the last 12-18 months, which is above industry standard given its swift execution in a highly heterogeneous and regulated Asian environment.
Metrics driven treasury:
Setting a benchmark for creating sustainable streams of cash flows vis-à-vis its operations by targeting metrics such as its days sales outstanding (DSO). As business growth is linked to both revenue appreciation as well as speed of monetisation, GE has leveraged highly evolved and advanced treasury tools to optimise its working capital.
Pioneering market solutions:
The complexities around ever evolving regulations, physical documentation and the need for a single end-to-end platform have convinced treasuries to continue on with legacy systems and processes. Bucking the trend, GE pioneered a solution to consolidate and automate FX booking for all its cross-border transaction FX payments by leveraging a single digitised platform for documents and common SSC team to process said payments. This has created efficiency gains as well as cost savings to the company.
Distinctive change management:
Strategic planning is an important part of GE’s treasury, in addition to execution proficiency. As part of their internal processes, the treasury team observes “90-day sprints” during the course of their change management cycle. In the last 12-18 months, the team successfully executed several projects, from initiation to implementation to deliver differentiated treasury management to support GE’s growth objectives.
Liu concludes: “Our treasury transformation journey over the past two years has shaped a differentiated and purposeful regional treasury structure built upon capabilities. In many ways, the treasury team has shaken up GE’s legacy platforms to create best-in-class, sophisticated treasury management solutions to drive business growth.”
These new treasury solutions have resulted in operational cost savings vis-à-vis the centralisation of payments, collections, reports, and account management platforms and processes. In addition, GE benefited from a reduction of bank fees due to a 30% reduction in accounts via account rationalisation exercises. Lastly, GE saw financial cost savings via liquidity concentration initiatives resulting in US$1.2bn of additional liquidity and reduction in funding costs.
The GE treasury team in Asia has been on a truly remarkable journey and is a most deserving winner of the Top Treasury Team Asia Award in 2016.
Keys to success
Simplification, standardisation and digitisation have resulted in increased sales orders, enhanced customer experience, and improved efficiencies.