Photo of Peter Lay, British Council.

Several years ago, the British Council had 15 people working in the treasury department as everything was very manual, with treasury essentially a support function to the payables department. Cash investments were held short-term and a highly manual FX purchasing function, with a lack of visibility on cash flows, meant that natural currency hedges were not optimised.

Over the past five years, the British Council’s treasury hub has been modernised and it now supports more effectively the company’s banking and treasury activities across 110 countries. The front office (of which there are four people) is based in London and the back office is located in the shared service centre (SSC) in Noida, Delhi – a consolidation of five different SSCs over the last four years.

Accuracy remains a key objective for the British Council, as does the continued engagement of non-finance staff worldwide to inform and improve financial data. This gives the treasury team the best opportunity to effectively manage cash, working capital needs overseas, investments, FX exposures and counterparty risk. In a mere 24 months, the running costs of the company’s UK treasury site have been reduced by two-thirds. Automated dealing solutions have been implemented and cash flow returns are now activated for all countries with a 100% monthly return rate and forward FX management has been introduced.

“Just a year ago we were buying around £75m in foreign exchange to fund our overseas countries and this year the figure is just over £50m. This is a consequence of a combination of more effective local currency cash management and growing local cash generation funding out in-country currency expenditure needs,” according to Peter Lay, Head of Treasury and Banking, the British Council.

Interest returns on cash have been more than doubled in a flat short-term interest rate environment for sterling and euro funds, whilst rigorously managing and monitoring counterparty and sovereign risk. At the same time, the British Council’s treasury has been able to release in excess of £35m of cash previously considered trapped overseas by working with banks and central banks to significantly reduce the exposure of currency deposits to sterling.

The British Council’s three big banks are HSBC, Standard Chartered, and Citi. These three act as the company’s virtual host-to-host banking providers for the ERP system (SAP). With up to 80% of bank balances reporting into SAP, there is impressive visibility on the cash balances across the bank accounts, readily available. These banks are the payment and electronic statements channels into domestic ACH processing for each of the countries in which the company operates. In terms of recognising and determining the best banks for its central treasury operations, the British Council aims to ensure that its solutions for operations globally are provided by key participant banks for its London treasury needs. “Ensuring strong relationship ties and cultivating a holistic banking relationship has become very important to the company’s treasury team,” Lay adds.

Prior to the 2008 crisis, the company’s cash was actually concentrated with fewer banks, albeit all with an A1/P1 rating but a tip off led them to transfer their cash, before the financial crash, to more secure institutions. By investing over a longer-term horizon with better visibility over liquidity, the British Council has established a layered investment approach following a rising yield curve. This has effectively enhanced yield returns from £275,000 to £800,000 in 2010/2011. The charity also sees significant opportunities in making sure working capital held overseas works equally as hard in 2012/2013, in addition to realising a vanilla TMS to further automate and improve current treasury activities.