IR reincorporated as a Bermuda company on 31^st December 2001. The company employs about 56,000 people in 130 manufacturing facilities worldwide. The company had worldwide sales of $9.7 billion, of which about $3 billion originate from 50 different entities in Europe

Colin, what are your responsibilities?

I am responsible for strategically managing the treasury needs for the whole organisation across Europe. This includes:

• Liquidity management and the arrangement of inter company loans.
• Raising local funds from banks that are in the U.S committed credit facility.
• Managing bank relationships. Since IR has a strong relationship banking philosophy, I am responsible for evaluating the options and selecting the line bank that best matches the needs of our business units, before handing over the operational control to the business unit manager.
• The use of technology within the treasury operation.
• To act as an internal consultant on treasury issues to all parts of the company and to identify new areas into which to introduce improvements.

As well as these ongoing tasks, I am also responsible for managing particular projects. Recent examples include:

• The establishment of the treasury processes for the shared service centre (SSC) in the UK, which was implemented between 1999 and 2001. Initially SSC Treasury replaced the local cash management and treasury operations for selected UK business units. It was then expanded to cover six additional European countries.
• The provision of banking services for our businesses in the Czech Republic. As a result of Czech Republic expansion, we required full cash management services including, for example, cash pooling. After analysing the responses to a full treasury RFP, the business was awarded and implemented within six months.
• By year-end, I will have finalized our cross-border cash pooling process.
• My other ongoing project is to establish treasury processes in a Global Trading Company operation in Ireland. For this operation, we expect to maximise the opportunities from employing new technology and realising the benefits of centralising activities such as liquidity, accounts payable and accounts receivable management.

These developments fit with the overall business objectives of the company. The Corporate Center, of which I am a member, is strategy and policy driven in order to service the needs of the SSC and business units. The aim is to transfer any transaction-based activity, whether treasury-related or not, into a shared services centre in order to maximize the efficiencies across our business units.

How are you held accountable?

I report to the Assistant Treasurer (International), one of two assistant treasurers in The Corporate Center. I establish, prioritise and weight annual goals that are set at the beginning of every year. These goals can be modified if the business unit treasury requirements evolve during the year, as happened when the Irish project [to set up the Global Trading Company] was introduced in February.

Another example was the reincorporation of the company in Bermuda. Given its confidential nature, I only became aware of this in October 2001. This gave me three months in which to implement the treasury strategy that would meet the needs of the new legal structure. This required resolving a number of treasury issues that were quite challenging and included having to reposition some pieces of our debt portfolio.

So, did the company decide to implement an SSC in the UK?

Many of the businesses whose functions were migrated to the SSC were long-established, mature businesses. This meant that in order to increase their profitability, we needed to cut costs. A full range of services was transferred to the SSC, taking in everything from accounts receivable and accounts payable right through to logistics and legal support.

We chose the UK as its location for several reasons. We already had an operation at the site we selected (Horwich, near Bolton). There were other advantages too – the UK offers costeffective labour, with good technical and language skills in the immediate area, and the site is close to an airport with good transport links.

Which countries did you incorporate into the SSC?

As well as the UK, we brought in Belgium, France, Germany, Italy, the Netherlands and Spain. After these were incorporated, we also integrated our Swiss international trading company, which had been operating as a mini-SSC, providing services to companies in Latin America, Asia Pacific and the Middle East.

In contrast to some companies, we decided to implement the SSC on a country-by-country basis, rather than on a regional business unit basis. This allowed all functions within the country to migrate to new, compatible systems straightaway, resulting in immediate and larger cost reductions. Personally, this afforded me the opportunity to stay one country ahead of the implementation schedule and initiate an in-depth study of the attributes of each country’s cash management system in order to establish the appropriate structure for the SSC.

How did you decide in which order to implement the countries?

We implemented those countries that we perceived to be less challenging, such as France and Germany, followed by those where we anticipated more difficulty, such as Italy and Spain. This proved to be a good decision as we could apply the lessons learnt from our experiences in those relatively easy countries to the more complex ones. In the more complex countries, the main issues were the fiscal treatment of non-resident companies and the central bank reporting requirements.

We are now working to set up a Global Trading Company in Ireland which will continue our strategy of centralisation, but expands and increases the operational model of the UK SSC. We want to improve the automation of treasury processes within the company. I was transitioning into my position when the UK SSC was set up. Treasury was implemented after the accounting, ERP and other systems were already in place, which caused us to miss several opportunities for straight through processing due to the lack of interfaces between the various systems. With treasury as an integral part of the Irish Service Centre from the beginning this time, we will not miss the opportunity to implement a treasury management system in such a way as to facilitate straight-through processing.

How does your European liquidity management structure work?

Our aim when establishing our liquidity management structure was to at least replicate, if not improve, our service to third parties.

For collections, we have a centralised cash management structure from JP Morgan. We have local bank accounts in every country where we have a major sales operation. Our customers then pay into these local accounts utilizing the local clearing systems. At the end of every day, JP Morgan then sweeps these balances to a single account in London.

At the moment, this system runs for about 1/3 of the total European turnover. It is efficient because all accounts are in the name of the SSC, meaning that all cash can be pooled without the need to set up inter-company loans. This is in contrast to many SSC’s, which act as commissionaires for the companies they serve.

When making payments, we prepare a consolidated payments file in the SSC. This is processed through the JP Morgan system, which has direct access to all the local clearing systems throughout Europe. This method can cope with all types of payment so that our suppliers receive payment by the method they prefer. So, if a French supplier wants to receive a cheque payment, then they receive a cheque payment.

How difficult was it to establish your cash pooling structure?

The main difficulty was that it was administratively onerous. We had to get a legal opinion for every jurisdiction that we wanted to add to the pool. When a legal opinion required us to change something within the operation of the pool, this caused difficulties because every business unit within the pool has to agree to the same documentary terms and conditions.

In some countries, local legal advice prevents incorporation of our entities directly into the cash pooling. In these cases, we create quasi inter company loans, using a reference structure. JP Morgan then notionally pools this cash.

Do you have any responsibility for funding?

Typically most funding comes from the banks that participate in our syndicated credit facility that was drawn up in the US, and in which there are eight or nine European banks. We actively manage these banking relationships, because we feel very strongly that if a bank is providing us with funding, then we should reward it with some other business. As a result, one of my responsibilities is to channel fee income to partner banks wherever possible.

I believe that with the current desire of companies like ours to consolidate cash management into service centres, the environment for cash management banks has become very competitive. I am sure that each company has its own individual response to managing its bank relationships, upon the migration to shared service centres. In IR’s case, I am now looking at all the areas where we might be able to change the mix and distribution of business between banks whose traditional source of income has been from local cash management.

How do you replace a bank that withdraws from your facility?

As the person with the local knowledge, I select the candidates, draft the RFP (with some additional input) and then make a recommendation to my superiors. In most cases, they will go with my decision, unless it conflicts with something they have planned.

In addition, I have to understand how the banks’ strategies fit with the objectives of IR. For example, a couple of years ago it was clear that one bank’s strategy had altered so that IR would no longer be a target client. This intelligence allowed us to find a replacement bank in advance of the resignation of the former.

How do you use technology?

Since setting up the SSC, we have used a Citrix server, which allows remote access to treasury information and systems from anywhere in the world. This has provided the solution to the problem of distributing bank reporting, for example. Data is published on an intranet, which is then accessible to anyone who needs it. This system also allows people to dial into the system to release payments, even when they are out of the office.

I am also in the process of evaluating the benefits of using a treasury management system. Until the establishment of the UK SSC, no individual IR business had sufficient treasury business to justify investment in a TMS. The Irish Services Company will also be large enough to justify a TMS. I am looking to identify the suitable system by the end of the year. So far, I have had demonstrations from four vendors, as well as discussions with two more. When selecting the potential vendors, I looked at the technical capabilities of each system. TMS’s vary in terms of their product offering, ranging from those which specialised in sophisticated FX, commodity and fund management systems to those which have concentrated on building payment factory and full internal intercompany trade flow systems. We need a system that can provide both of these functions, although the balance is on the payment factory side. The next process is to issue an RFP before making a recommendation.

What are the costs and benefits of being the sole strategic treasury professional within your European organisation?

The role I perform had not existed previously, which meant that very few people within the business looked to me for help when I started. My first task was to raise the visibility of treasury with the business units in Europe and educate them to the way in which I could help them. In successfully achieving this objective, I have seen a dramatic increase in the volume and variety of issues that I have to get involved in from all of our business units across Europe.

I also have to spend a lot of time developing understanding of the rest of the business. For example, I may need to know who does what in the IT department, as there are several overlaps between the departments. In cash management, I need to know the controllers of the businesses around Europe – who has cash, who has debt and what their personnel issues are – should we need something done at short notice.

The main advantage is the variety of work. I have information on and knowledge of most treasury issues. In many companies, a lot of treasury activity is very specialised, with some people only concentrating on cash management or raising debt. I have a flavour of everything.

The other benefit is that I work for a dynamic organisation and I am set goals at the beginning of the year anticipating they will change and evolve. Also, because I do work on my own, I can’t blame anybody else if things go wrong. More importantly, my superiors know whom to credit when things work out.