The challenge

Following its formation, the company faced a complex FX environment. FX risk management was performed separately at legacy Mylan and legacy Upjohn entities with each process relying upon different systems and inputs. The global treasury team immediately kicked off a project to redesign the FX risk management framework and leverage technology to create a thorough, efficient and fully integrated risk management process.

Three key challenges were identified:

1. Resourcing: treasury had a single resource dedicated to the end-to-end FX risk management process.

2. Data:

   • Exposure reporting was decentralised and manual. Multiple teams across the globe sent balance sheet information several times per month in various excel formats.

   • Six ERP systems across the organisation added complexity to gathering balance sheet data.

   • Treasury individually calculated each entity’s FX exposures based on the format of the data and timing of when the data was provided before manually executing FX hedges.

3. Back office processes: back office processes relied on manually confirming trades and manually booking individual close out tickets for non-deliverable forwards (NDF) hedges. This was manual and time consuming. The manual nature of these critical activities needed to be updated to scale up.

The solution

Viatris Treasury took a holistic approach to redesign the risk management process addressing each issue with different approaches.

Resourcing: as part of broader finance transformation, Viatris built a shared services treasury centre of excellence (COE). Within that organisation two full-time employees were hired to focus on exposure reporting.

Data: to address data issues, treasury implemented FiREapps. This software links directly to multiple ERP systems that Viatris operates across multiple entities. This permits treasury to access data in a consistent format at scheduled intervals. The exposure reporting team then uses Alteryx to compare prior data sets against the current data set. This identifies which entities/currencies/GL accounts have changed. Where there is a significant delta, analysis is done with the entity’s finance team to investigate drivers and confirm validity of the exposure. Once the data is validated, existing hedges are imported to FiREapps and the tool compares the exposures against the hedges, identifying where additional hedges are required. Treasury reviews the data and proposes new hedges, FiREapps outputs the data to FXall for execution. FX hedges STP via file transfer to the TMS system FIS Integrity.

Back office processes: Viatris worked with its TMS provider FIS and FXall to create an automated confirmation process, moving from a one-way to a two-way STP process where FXall and FIS communicate directly. FXall trades STP to Integrity which sends confirmation details to FXall settlement centre then back to Integrity indicating if trade confirmation is matched.

Best practice and innovation

Treasury built a risk framework that utilises best practices to enable Viatris to transition from a manual, decentralised process to an automated, centralised risk management framework. The company has:

• Updated its FX risk management policy to reflect the significant changes to its processes and operating environment.

• Centralised FX risk management and trade execution.

• Automated real-time ERP data access providing accurate and timely information.

• Automated exposure data analysis and validation via Alteryx analysis.

• STP of FX trades and confirmation matching, ensuring automated trade flows and validity of hedge data in the TMS.

• Significantly enhanced its ability to analyse P&L on exchange, including identifying drivers of FX gain and loss and taking action, where necessary, to reduce future volatility.

This innovative solution created a scalable process suited to the transformational change Viatris was undergoing through the combination of Mylan and Upjohn. Viatris Treasury partnered with IT, shared services and other functions to implement FiREapps for legacy Upjohn entities alongside their migration from Pfizer’s ERP onto its own. By implementing FiREapps alongside the ERP migration, treasury had input to the migration process and could leverage work done by the IT and finance/accounting teams mapping GL accounts for each entity. This permitted Viatris to integrate the Upjohn entities into the exposure reporting process immediately upon cut-over.

Key benefits

• Risk mitigation.

• Cost savings.

• Headcount savings.

• Process efficiencies.

• Increased automation.

• Improved visibility.

• Errors reduced.

• Manual intervention reduced.

• Increased system connectivity.

• Scalable for future.

• Exceptional implementation (budget/time).

• Improved key performance indicator (KPI) metrics.

“Our FX risk management solution is unique in terms of the scale of the solution as well as the magnitude of change we were going through. The combination of the two large multinational companies to create Viatris and the risk complexities created for our treasury demanded a best in class solution,” explains Arijit Dasgupta, Assistant Treasurer.