Open Text has achieved a remarkable turnaround of its treasury function. In terms of its bank account activities, it managed to open resident/non-resident bank accounts in each country in scope. Across EMEA, NA and APAC, it opened 116 new strategic bank accounts and set up delivery of bank statements for all new accounts daily in current BAI or MT940 formats.

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Treasury transformation on a grand scale

The challenge

Open Text was approaching 400 group bank accounts with 92 banks across 35 countries covering 122 entities. On average, it had five banks per country (except in the USA where there were 16 banks) and four accounts per bank. This created a number of challenges.

On an administration front, it presented issues around bank access, opening, closing and amending accounts, people changes, signatory management, and banking services and system connections. In addition, it was facing significant KYC demands and was clearly not able to leverage banking systems to their full extent.

The time and resources available to manage the busy function were found to be lacking. Treasury was running the risk of inefficient processes, especially around payments (it was running multiple systems) and investments (where there was no liquidity pooling capability).

Treasury woes did not end here. It also had to endure a lack of visibility and transparency around key data sources, and was facing a higher risk of security breaches and potential fraud. On top of this, the structure and disparate nature of its systems were simply becoming too expensive to maintain.

“We had an unsustainable banking network and historically, most of our acquisitions were not fully integrated into the global treasury centre in Canada,” said Jonathan Burkhead, Director Global Treasury. Moreover, the treasury centre lacked the resources required to manage the scale and complexity of transactions, he added. “We reached a tipping point with the acquisition of GXS; something had to change.”

A benchmarking report prepared by Citi, positioning Open Text relative to its peers, indicated the extent of its problems but also highlighted key openings for improvement. Indeed, an opportunity was identified to implement an efficient and integrated banking network. This would enable the firm to consolidate its banking network to five primary relationship banks and take a similar stance in the consolidation of its bank accounts. Across this significantly simplified set-up it would be able to implement strategic and efficient cash management and liquidity structures, notably with the addition of a cash pooling facility.

The solution

Between January 2016 and April 2017, Open Text achieved a remarkable turnaround of its treasury function. In terms of its bank account activities, it managed to open resident/non-resident bank accounts in each country in scope. Across EMEA, NA and APAC, it opened 116 new strategic bank accounts and set up delivery of bank statements for all new accounts daily in current BAI or MT940 formats.

Open Text has developed H2H (host-to-host) connectivity with three strategic banks through the TMS and through Open Text Managed Services. Open Text offers treasury products and services to third party customers that the treasury team was able to utilize. The team also determined the availability of accounts on payment processing platforms in each country in scope and ensured appropriate solutions were in place for incoming/outgoing payments. The company further implemented best practices where opportunities permitted, for example opting for electronic over paper payments and collections.

Direct debit and SEPA direct debit payments/collections also came under the microscope. Treasury identified current users and either cancelled or set them up on new accounts. It also established appropriate blocks, filters and mandates where available and rolled out a new direct debits policy globally. In moving transactions to new accounts, it managed to significantly reduce the number of challenging direct debits by vendors that had existed for some time. Depending on countries and payments types in scope, the team also made a point of registering with local automated clearing houses.

Under the banner of payroll and accounts payable payment processing, Open Text identified and established connectivity types and file formats depending on the country. It was necessary to register new IDs with a local automated clearinghouse, as appropriate. This continues to be ongoing for some countries. It was also necessary to integrate payment uploads with the TMS where payments were previously manual, and rigorously test all payment files.

A multibank reporting solution has since enabled balances held with third-party banks to be fully integrated into a single reporting solution. This necessitated the identification and implementation of all relevant legal entities and accounts, and the capturing of details of all in-scope third-party banks and accounts.

In terms of tackling project and professional management services, the treasury team worked to develop a standardised documentation and approval strategy, and provide a regional coordinator to support documentation. For this to be executed effectively, a project manager was allocated to manage the banks and project plan according to a rigorous Statement of Work.

Best practice and innovation

For this broad sweep of improvements to reach a satisfactory conclusion, it is clear that sound principals of project management had to be employed. These principals had distinct objectives, scopes and timelines. The project itself was driven by a strong leader in treasury management, bearing a clear vision of process improvement and enhanced controls. Furthermore, robust senior and executive management support on the governance committee was in evidence, with active and positive participation throughout.

The reduction of manual paper-based payments is a simple example of best practice for collections and payments. More complex, but nonetheless achievable, was the implementation of best practice for liquidity management through the adoption of physical pooling rather than notional pooling. Treasury, working with tax, legal and its banking partners determined that a physical pooling set-up would be a more transparent and cleaner approach, especially with rising tensions on intercompany flows between government jurisdictions around the world. The EMEA pool uses bank accounts in London to maximise efficiency and minimise paperwork. Entities in each of Open Text’s four lines of business now pool to a single header account (one for each currency) to ensure optimisation of cash.

As part of the bank account opening process (which involved intense KYC and account opening documentation), the team standardised signatures, general banking resolutions and banking-incumbency certificate templates for use worldwide.

Technology has played a key role in all of this. The project uses a third-party TMS connected to the Open Text Trading Grid, an Open Text cloud-based hosted B2B integration platform, to connect directly with the company’s five major banks: Citi, J.P. Morgan, Bank of America Merrill Lynch, RBC and HSBC.

Other banks are connected to the Open Text Swift Service Bureau, giving treasury a single way to connect with banks, suppliers and customers.

“As you can imagine, there was a lot of additional analysis required to complete these activities,” noted Burkhead. “And keep in mind that all of this was accomplished while executing several acquisitions, legal entity rationalisation, and preparing for the implementation of SAP on 1st July 2017.”

Key takeaways

• Improved visibility of global cash, liquidity, and control over cash assets.
• Enabled easier acquisition integration and aggregation of excess cash for acquisition.
• Reduced costs.
• Leveraged transactional volumes and eliminated fixed costs across fewer banks.
• Streamlined transactional processes (ERP system integration and straight through processing for balances, transactions, and payments).
• Implemented best practices utilising electronic payments vs paper.
• Achieved higher returns on excess cash (leveraging liquidity pools for short-term investment purposes).
• Reduced administration effort.
• Significantly reduced documentation requirements, signatory mandates, KYC needs and bank access for users.
• Improved controls environment (reduced bank accounts, segregated cash flow for payroll).
• Reduced counterparty credit risk.

Key learning points

It’s vital for a project of this scope to get senior management support. Everyone is busy and it’s difficult to find time to support other department’s initiatives. Our Treasury Transformation Project brought significant benefits and efficiencies to other groups but it would not have been something they would commit to help us with without the management team’s support. In addition, nothing is ever as easy as it seems so you have to consider the extra time, resources, and efforts to complete a project like this. Understanding local markets and practices can be complex so having the right bank partners to support the knowledge transfer and implementation process was key too.