Combining new processes with state-of-the-art technology

The challenge

As a worldwide supplier in the vehicle industry, Kongsberg Automotive (KA) operates in 19 countries. Three years ago, when a new treasury function was established, there was only patchy visibility over the company’s cash, and little control over payments and liquidity across the group.

Day-to-day treasury responsibilities were tedious and involved many administrative, and often manual, tasks. There was a clear need for treasury transformation with the aim of better cash visibility, cash flow forecasting and control over payments and liquidity.

The main objective of the transformation was well-defined: to establish a best in class treasury focusing on long-term value creation, and to become a strategic business partner for the whole group.

The solution

KA worked out a three-year strategic treasury transformation roadmap including vision, function, building blocks, timeline and risks. There were three main pillars:

• Group-wide and bank-wide cash visibility for better decision-making and risk management.
• Centralised workflows and control with optimised banking set-up and an in-house bank.
• Automation and efficiency with one group-wide, integrated treasury management system (TMS).

The absence of a legacy treasury IT landscape gave KA the opportunity to design a brand new treasury function from scratch. Rather than simply developing and implementing strategies over time, Kongsberg Automotive used a scoping workshop to come up with a best-in-class, ‘big bang’ approach that would optimise its treasury holistically and as part of a concerted project.

Best practice and innovation

Working with Zanders, KA accomplished its goal of adopting a single TMS and a new banking structure, which included a new physical zero-balancing cash pool and two strategic banking partners.

It chose BELLIN as the TMS provider, using the tm5 treasury management system alongside the BELLIN SWIFT service which gives access to the SWIFT banking network and enables automated import, processing and reconciliation of bank statements. By using a central group-wide platform containing all data from across the group, rather than fragmented bank websites, KA achieved complete cash visibility and enabled daily cash reporting.

When reorganising its banking set-up, KA chose J.P. Morgan and Danske Bank as its strategic banking partners. Along with the new TMS, payments were centralised and standardised with straight through processing significantly improving the security of payments. KA also established an in-house bank with POBO capabilities, which improved global visibility and control over cash flows, as well as overcoming intercompany financing challenges.

A tool is only as good as the processes that carry it – and KA not only implemented state-of-the-art technology, but also took a good look at its processes. This meant taking part in a comprehensive scoping workshop with BELLIN, and working out what would be needed to marry functionality and workflows in an optimal way, with involvement from all stakeholders involved.

Key benefits

As a result of this ambitious transformation, group treasury has become the strategic business partner for the whole of KA.

There has been a reduction of bank account related fees through bank consolidation, economies of scale and transparent fee monitoring. KA has achieved significant cost savings through its in-house bank – and thanks to global cash pooling, centralised payment management and cash flow forecasting, there has also been an interest expense reduction.

In addition, KA now has 100% global daily cash visibility, with intra-day visibility into cash pools, and monthly reconciliation and settlement of intercompany invoices through the in-house bank. KA also has automatic generation and posting of interest on in-house bank accounts, intercompany loan interest accruals and settlements, and realised FX gain and loss.

Additionally, operational risks have been largely mitigated, due to new controls and automation which have decreased risk of fraud by vendor verification and strengthened relationships with partner banks.

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