There was a time when AkzoNobel’s treasury department lacked vision and focus. It had a fragmented infrastructure in which there were a large number of cash management banks and as a consequence bank wallet dispersion. It had an essentially manual processing and operational focus, where technically obsolete systems and endangered day-to-day operations were the rule, not the exception. To add to the department’s problems, a diffused credit rating strategy caused a downgrade in Q1/09. The difficulties the department faced were compounded by suboptimal partnering with consultants. As a result, staff became demoralised, which gave rise to a culture of distrust and infighting.

In 2009, the treasury department decided it was time for a change. The company devised a transformation programme that sought to introduce a much needed sense of professionalism and contemporary processes into the function. The transformation rested on five building blocks:

1. Organisation

   The completion of reorganisation, turning over 70% of staff and reducing by Q2/10 31% of overall FTEs. It resulted in an organisation staffed with highly motivated professionals with contemporary treasury experience.

2. IT systems

   Going live with a complete suite of SAP ECC 6.0 treasury software by April 2010. The six modules, as well as SwiftNet and FXAll were implemented in 13 months, on time and within budget. Zanders & Partners were used for the implementation. Later in 2010, the software suite was extended with an SAP cash allocation solution, MyTreasury for liquidity management and Guardium for safeguarding the integrity of data on servers operated by third party service providers. These systems have allowed the company to set up a payment factory, a cash allocation facility and supports straight-through-processing (STP).

3. Transaction banking infrastructure

   Treasury completed the tendering process for cash management for its four regions in Q4/2010. New banks were appointed during 2010 for North America (BAML and TD Banken) and Asia (HSBC and Deutsche Bank). The new infrastructure resulted in an average price reduction of some 70%, material balance sheet allocation and significantly increased bank service professionalism. As a result AkzoNobel expects to reduce its cash management banks from 130 to 20.

4. New treasury policies

   These were issued, which are a step change improvement in terms of completeness and contemporary financial risk management thinking from what was in place before. The policies are more comprehensive and support understanding of treasury in and partnering by treasury with the businesses.

5. Capital structure

   A revised credit rating and funding strategy were applied in 2010. This captured the different components of the AkzoNobel capital structure strategy and put them into context. It resulted in, amongst other things, stabilising the AkzoNobel rating by both credit rating agencies that service the Group – Moody’s and Standard & Poor’s, by Q3/2010.

The solution overhauled much of the old department. From staffing, systems, bank relationships and accounts to policies and funding strategies, the treasury transformation project left no stone untouched. It was brought about by turning threats into opportunities. So for example, the ICI integration was seen as an opportunity to retain good ICI staff. The transformation has operated as a catalyst for a wider finance transformation, with purchase-to-pay and order-to-cash identified for global standardisation.

“This transformation is a rare example where the various aspects that demonstrate success are evidenced. The cultural change we introduced saw the function move from depressed towards an ethos of pride in performance, team work and flow. It is managing the complexity of the interdependent parts that was the challenge,” says the company’s Group Treasurer, Peter van Rood.