The challenge Sony Ericsson addressed was how to build an efficient treasury from scratch and decide what they should handle internally and externally with a clear focus on their core business. They were looking for the optimal solution to integrate Trade Finance and Cash Management and to optimise working capital and risk management.

As Håkan Lundgren explains, “We recognised that our shareholders were not looking to Sony Ericsson to create profits through financial trading, but instead for treasury to support the company in excelling at its core business activities.”

Sony Ericsson has re-built treasury which is now a small, highly specialist function with graduate-level employees resulting in a dynamic treasury with a real focus on tasks that deliver specific value rather than spending time on repetitive tasks. Standard processing has been outsourced to SEB. The Sony Ericsson treasury solution is based on strategic decisions that were made when Sony Ericsson was formed as a joint venture in 2001. And the key decision was based on the question of how to be as efficient as possible and how does treasury add most value to the company? Sony Ericsson decided to outsource all standard/basic processing, all the day-to-day business. They also decided to abandon the model with a separate Trade Finance unit and instead treat all payments as payments, irrespective of whether it was a payment under an invoice, a collection or a Letter of Credit. And since 80% of Sony Ericsson’s invoicing is done from Sweden they decided to concentrate liquidity handling, and risk management to a multi-currency cash pool in Sweden, again managed by SEB.

“We recognised that our shareholders were not looking to Sony Ericsson to create profits through financial trading, but instead for treasury to support the company in excelling at its core business activities.”

SEB is also their cash management bank which makes it easier to align information and processes. As outsourcing provider, SEB handles all the back office activities related to each financial transaction, including confirmation, settlement and payment. The bank also manages collections and cash concentration, with surplus cash balances being swept into an account in Sweden. They have a cross-currency cash pool which is highly efficient and cost-effective as they no longer have to exchange their 20-25 currencies forward. Furthermore, it avoids the need to borrow in foreign currency and enables them to borrow and invest centrally.

Another activity which they decided to outsource was cash investment recognising that they could not try and compete with fund managers with dedicated credit resources, so SEB invests cash on their behalf into money market funds (MMFs) and on a proprietary basis. This is a very low cost investment option whilst enabling their investment process to be conducted rigorously. As a result of outsourcing many of their cash and investment-related activities, their technology requirements are relatively simple, which further reduces costs. They therefore use their ERP for treasury and have web-based access to monitor credit limits in the system. The benefits of the solution include:

• The integration between cash management and trade finance has brought about more efficient processes and a clear focus on working capital and risk management – for example, Sony Ericsson has drastically reduced the average length of the their trade cycle, from 40 days to just 11 days.
• Sony Ericsson has significantly reduced fixed costs for their treasury department (moved to variable cost).
• They have no problem handling workload peaks and troughs since all standard processing has been outsourced to SEB.
• They have reduced operational risks.

Håkan Lundgren concludes, “Our working capital management solution continues to evolve. Today Sony Ericsson’s treasury and trade finance activities are managed by just seven people. Old thinking was cash and trade were handled separately, where closer cooperation, like an outsourcing solution, demanded large investments. This has been replaced by new ways of thinking, working together and creating value. A continuous development towards treasury excellence that takes on the challenge to meet the growing needs of speed, accuracy, streamlined processes and the freeing up of working capital that are so vital to corporates such as Sony Ericsson.”