Photo of Dimitris Papathanasiou, Coca-Cola HBC and Peter Reynolds, Reval.

Dimitris Papathanasiou explains the background to this project. “We really had to manage our input costs. If we hadn’t done this we would have seen a significant negative impact and wide P&L fluctuations from increasing input costs. The volatility of recent years meant we wanted to have a more robust system in place.”

Now, Coca-Cola HBC has developed a holistic and centralised financial risk management framework covering all aspects of financial risk to which this 28-country, multinational company is exposed. Treasury is now responsible for all financial risks of the company and manages those risks in a monitored environment with a structured approach. Leveraging Reval´s software-as-a-service (SaaS) treasury and risk management (TRM) system solution for commodity risk management, the company now enjoys an automated, continuous lifecycle approach to capturing, analysing and mitigating exposures from sugar, aluminium and oil, and for aligning hedging activities and hedge accounting.

The main achievements are:

• A common approach on the risk management of input costs (FX and commodities). Hedging is done according to the risk appetite of senior management.
• Best execution across all asset classes. Reduces execution costs by applying a number of techniques.
• Commodity hedging with financial derivatives; hedge accounting for commodities as well.
• All the monitoring of the company’s commodity exposures is happening within the TRM solution.
• A strict control framework: monitoring by a committee, limits approved by the Board and operational risk mitigated by the introduction of a number of controls.
• Transparency both for the countries and senior management by quantification of the risks.
• More accurate exposure reporting.

Coca-Cola HBC was trying to integrate its risk management activities across financial risks in the company. This process starts from the moment it agrees with suppliers to buy something that includes financial risk, to the exposure capture reporting process, the consolidation of the financial risk at a Group level and its analysis to the results of the decision-making process and execution/monitoring of the transactions.

In order to undertake this major project, treasury split the project into three main parts:

Change management.

The main goal of this part of the project was to integrate their processes mainly with procurement in order to ensure that there is a clear separation where treasury manages the financial risk while allowing procurement to concentrate on the conversion costs.

System implementation.

Coca-Cola HBC implemented Reval´s comprehensive and integrated SaaS solution for TRM to capture commodity exposures and execute commodity trades, hedging and hedge accounting in order to reduce the significant P&L volatility the organisation was experiencing.

Internal reporting.

The main goal was to provide more transparency to senior management and to the countries about the transactional impact of the financial risks.

As Papathanasiou explains, “we have achieved integration of our commodities hedging activity in the group treasury operations. Now all our market risks are managed by a single team that is monitored by the Financial Risk Management Committee.”

“Furthermore, we now have straight through processing (STP) to our existing ERP (SAP) for postings, cash flow information and settlements. We have global access and because of Reval’s SaaS delivery, Coca-Cola Hellenic´s subsidiaries and corporate treasury are working on the same platform. The solution, accessed via the internet, was easily rolled out to 11 countries,” says Papathanasiou.