For a business that generated revenues of US$4.91bn in 2018, this global leader in life sciences, diagnostics and applied chemical markets certainly knows how to employ a successful business formula.
The story of Treasury Today Asia’s Top Treasury Team 2019 began back in 2014, when Agilent Technologies was split into two pure-play businesses; Keysight and Agilent. As soon as the corporation was split, Agilent redoubled its efforts to research, develop and acquire products and technologies that would allow it to meet its strategic objectives, as well as the needs of its clients.
Since 2014, Agilent has completed a number of acquisitions, namely Multiplicom, Cobalt, iLab Solutions, Seahorse Bioscience, Luxcel Biosciences, ACEA Biosciences and BioTek. All of these were part of its strategic plans to grow the business.
The Agilent treasury, along with the rest of the finance organisation played a critical role in ensuring the company optimised the synergies and integration benefits of the new acquisitions. To support the dynamic business challenges, the treasury team underwent a series of significant transitions as well.
Geographically, Agilent currently operates a two-centre treasury hub after a centralisation initiative. The treasury centre based in Singapore, comprising 12 team members, manages treasury operations and advisory matters for both Asia and Europe regions.
Earlier, Agilent’s Singapore treasury hub was primarily a cash management function, covering cash and liquidity management, bank account management, governance and control, and bank relationship management.
The role was expanded to cover working capital management, investments, foreign exchange (FX) and insurance risk management. This was achieved with the existing team members enhancing their skillset and diversifying to successfully manage the increase in scale, complexity and scope of its activities. There were no headcount increases or specialist hires.
To achieve this, the Singapore team focused on simplification and automation. Through partnership with their key banking partners and collaborations with the other finance teams, they were able to successfully simplify and improve job efficiencies.
The science behind the success
These transformational changes and new set of objectives resulted in the treasury team embarking on a variety of initiatives. Firstly, the team rationalised and optimised its bank relationships and structures in order to align with industry best practices and to optimise working capital. This included reviewing and revising account structures, cash pooling, payment and collection methods, as well as new techniques such as virtual accounts and enhanced connectivity.
With an efficient account structure in place, the team actively contributed to meeting the global strategic goal of continuous cash repatriation to the parent company, whilst reducing interest expense at a corporate level through better use of surplus cash.
Given the number and breadth of entities that the team manages through its Singapore treasury centre, the team realised that it was not feasible to finance each entity manually. Agilent therefore developed a sophisticated, highly automated in-house bank (IHB).
In countries where there are no restrictions on cross-border flows, the team put in place a defined liquidity account structure. This was setup at both the domestic and the cross-border level.
The team worked closely with its partner, Citi, to review the scope and structure of the IHB and cash pooling structures regularly, with further rationalisation as the objective.
As a result of simplifying the account structures and increasing the reach and automation of the cash pooling arrangements, Agilent has been able to reduce the amount of time spent on cash and liquidity management activities, whilst automating resource-heavy activities such as inter-company financing and account reconciliation.
As a result, there was a reduction of bank accounts by 5%, and this has achieved daily visibility of roughly 90% of global cash, excluding only those accounts the company is obliged to hold for tax and payroll purposes with minimal flows.
Digitisation, automation and leveraging expertise and experience both within the business and from Agilent’s banking partners were essential to achieving the efficiency, control and scalability that was needed to deliver key business objectives.
Earlier this year, Agilent’s treasury management system (TMS) also got an upgrade to a global web-based environment, with enhanced reporting and user capabilities connected to banks via SWIFT. Coupled with new functionalities, such as bank fee management and real-time dashboards, the team has also been able to take advantage of the global SAP migration project to adopt XML ISO 20022 to standardise the exchange of data with counterparties.