This is a global cash management solution covering all 28 affiliates able to join the company’s global cash pooling solution as well as the inter-company netting process. This was completed by the implementation of a ‘PoBo’ structure serving more than 20 affiliates. In less than two years, Firmenich has set up a Global In-House-Bank (IHB). This was made possible by the preliminary implementation of a single SAP instance (ECC6 version) and two new SAP modules (IHC and BCM) to run the IHB.

The challenge:

Firmenich was undergoing a global financial transformation project to ensure that it had the necessary structure and governance to operate with rigour and discipline moving forward. As part of this process the company was looking to replace its traditional decentralised cash management solution by a global solution.

The company’s requirements were as follows:

• To replace the previous cash management set-up by a global solution.
• To deliver uniform payment and security processes.
• To set up a standardised way of communicating with their external banks.
• To reduce the number of external banks used by the affiliates to one core bank when offering, at the same time, the possibility to opening internal bank accounts with the in-house bank.
• To increase business process outsourcing (BPO) capabilities through the establishment of a payment factory.
• To ensure compliance with their risk management and internal control standards.

On the technical side, the company wanted to:

• Set up a stable host-to-host connection between the company and their external counterparties.
• Deliver true automation.
• Get standard text on tag 86 of MT940s from three banks.
• Deal with country specifications on XML payment files.

It was a big project for the company and as Philippe Farine, VP Group Treasurer explains: “the challenges we faced were at the level of project management; first to determine the accurate budget and timeline of a project that would last two to three years; second, defining the right time to spend in development and testing and; third, internal resources: we had only a single resource located in Europe, dedicated to the set-up and the testing of the module in SAP, who had to deal with all time zones during the implementation.”

The solution:

After putting the mandate out to tender Firmenich selected BNP Paribas for Europe, Citi for the rest of the world with the exception of the CHF covered by UBS to be their partners for the new solution. Working together with the banks Firmenich implemented a global cash management solution covering all 28 affiliates allowing them to join their global cash pooling solution as well as their inter-company netting process. This was completed by the implementation of a payment-on-behalf-of (POBO) structure serving more than 20 affiliates.

In less than two years, Firmenich has set up a global in-house bank (IHB). This was made possible by the existence of a single SAP instance (ECC6 version) implemented earlier to which two new SAP modules (IHC and BCM) were added to run the IHB. Today, the IHB is:

• Heading a true global cash pooling structure (26 affiliates zero balanced on a daily basis on master accounts held in Switzerland and UK), offering full control on the cash around the globe.
• Running an internal netting (ICO) process to settle the payables and receivables of 25 affiliates.
• Paying on behalf of (POBO) 22 affiliates today using only three banks.
• Providing a complete change in the payments process of the company, transforming inter-company payments into internal settlements with no cash transfer and cross-border payments into domestic payments.

Best practice and innovation:

The solution implemented has fulfilled the objectives set at the beginning of the project, contributing to the implementation of treasury best practices. It has also accelerated the centralisation trend initiated a few years ago, and contributed to compliance with Firmenich’s corporate objective to excel in executing their operations. In addition to this, it offers the ideal architecture to extend this towards other treasury practices, like eBam or a collection factory.

This solution also evidences the importance of a strong project team. “We have been able to gather internally (not only at corporate level, but also including affiliates’ representatives) a range of complementary competencies/talents,” explains Farine. “Commitment, accountability and excellence in execution were the values that the team shared during the project. We also had great interactions with our banks and were able to build intimacy between the project team and the banks’ team.”