Established in Sweden in 1873, Atlas Copco is the world leader in compressed air and gas equipment, generators, construction and mining equipment, industrial tools and assembly systems. The group reported revenues of €6.0 billion in 2009. Atlas Copco entered the Chinese market in the 1920s and currently has 19 entities located in eight cities across China. As of July 2009, over 3,600 employees are working for Atlas Copco in Greater China, which makes China the biggest employee base for Atlas Copco.
Audrey Deng
Manager, Group Treasury Asia Pacific
Audrey Deng has been the Treasury Manager in Asia Pacific Region at Atlas Copco since 2007. Her responsibilities include providing treasury services to Atlas Copco subsidiaries in Asia Pacific region and customer financing support to the sales companies in China.
Audrey has more than ten years’ related finance and accounting experience in various companies in China and Australia. Audrey got her Masters Degree from the University of Sydney and Bachelors Degree from Shanghai University of Finance and Economics. She is a member of ACCA and CFA.
Could you briefly describe your role?
As the treasury manager for Asia Pacific, I am responsible for providing treasury support to Atlas Copco subsidiaries for their business needs and growth. This includes optimum funding options, swaps, cash pooling and customer financing support and also guiding all Atlas Copco companies in the region to follow group treasury policy. Treasury is a centralised function in Atlas Copco. It provides treasury services to all subsidiaries within the region.
How is cash managed between Chinese entities?
RMB cash pooling was established in 2008. Before the RMB cash pool was established, each company had its own bank account in different banks. Cash rich companies used an entrusted loan facility to fund the cash poor companies. This caused a lot of administration work as it could only be done on a deal-by-deal basis. With limited visibility of the real cash position of each company, this made it difficult to ensure the best use of the cash and to keep track of group cash positions efficiently. To achieve the cash management goal, group treasury launched the cash pool project to centralise the RMB funds in 2007.
Our treasury team was responsible for leading the partner bank and the participating subsidiaries for the implementation. The project was successfully implemented on schedule in 2008. From then, all Atlas Copco China subsidiaries have been able to achieve RMB liquidity optimisation and cost reductions, as well as improved cash visibility and enhanced end-to-end processing efficiency.
The target implementation timeframe was only three months. I must say, it was a challenge to have the pool established in such a tight schedule. We accomplished bank account opening, integration of the internet banking platform with our ERP system and funds switching from legacy bank account to the new cash pool account for 15 entities.
We also co-ordinated all subsidiaries to open an account in the cash pool bank. There is a lot of documentation transfer and administration work for bank account opening in China. Besides, more than half of Atlas Copco (China) companies are located in different cities across the whole country. Remote control requires us to put more efforts into ensuring the communication running smoothly and on time. The bank we selected for the cash pool was not an existing partner bank for any Atlas Copco company in China. There are 15 companies participating in the cash pool, which means almost 100 users will use this totally new internet banking system after the pool is fully established. We invited some bank experts to provide onsite training for all entities so that the new cash pool account could be operated successfully once the pool went live.
Another challenge was the ERP system integration. To have high transaction processing efficiency, we decided to have our ERP system integrated with the internet banking system. There are quite a number of different ERP systems used by our subsidiaries in China. We co-ordinated with the cash pool bank’s technical expert to discuss with our different technical teams in Atlas Copco about the system integration.
Are there any other challenges you face at a day-to-day business level?
Some of the entities make the selection of their partner bank mainly for their own interest, for example by location, local relationship, etc. However, this can dilute our company bargaining power on a group level – some deals deemed best on a local level may not be a good deal from group level. Our responsibility is to guide all subsidiaries to think from the group angle and persuade them to make the selection which is in the best interests of Atlas Copco. It is not an easy job, especially when the selection requires a sacrifice from the local subsidiary.
How can these challenges be overcome?
We have a core bank policy to address such issues. However, it was poorly followed by the subsidiaries in the past. With the strengthening of treasury function in Asia, this policy has been managed strictly. Treasury participates in all major bank negotiations and makes the final call on bank selection.
What role does technology play within the treasury department?
One example is that Reuters and Bloomberg provide real-time financial information including currency, interest and other macro information. Also, to have payment instructions processed quickly, we have the internet banking system integrated within our ERP system. This means we can have payment files uploaded to the internet banking system automatically. In the coming months, we are planning to investigate whether it is worthwhile to have the collection account integrated into the ERP, so that the payments we receive can be reconciled with the accounts receivable automatically.
Is cash flow forecasting a challenge for the company?
Yes, this is something we haven’t started to address yet. Currently, cash flow forecasting is handled by subsidiaries. Treasury is notified in advance if any big payment is scheduled. Any tool to support cash flow forecasting will be sorted out by group treasury.
How did the company cope with the global financial crisis?
The global financial crisis in 2008 hit many multinational companies. Atlas Copco also felt some negative impact. But we did very well on the treasury side. Thanks to the ongoing good treasury management, on a group level we are in a good shape, ie no short-term funding needs, and deposits with strong banks. We also took quick action to guide the subsidiaries to cope with the crisis. We collected the bank deposit information from all the subsidiaries in the region within two days and gave advice and suggestions accordingly. We have been paying close attention to the market and keeping frequent contact with group treasury every day. Should any unexpected problem arise, we discuss with the group and take action immediately.
Will treasury be undertaking any specific projects within the next 12-18 months?
This is quite an early stage to talk about this now. However, we have some general plans:
- We will shortly conclude a Japanese cash pool project and review its operating status with participating subsidiaries and our partner bank.
- As a result of China liquidity policy moving from ’loose’ to ’tight’, we anticipate that some of our suppliers may face funding difficulties. We are planning to gather more information from the production subsidiaries in China to evaluate whether any supply chain finance solution will bring benefits to Atlas Copco.
