Listed in Switzerland and in the US, Logitech designs and manufactures peripheral products for PCs and other platforms. We talk to Paulo Mueller, Corporate Treasurer, about becoming Sarbanes-Oxley compliant and the projects and challenges of the past year.
Paulo Mueller
Corporate Treasurer
Paulo Mueller is responsible for Logitech’s worldwide treasury activities. He joined Logitech in December 2005. Previously, he was with the Ahold Group for three years in the Treasury department located in Geneva. Prior to joining Ahold, Paulo was with Adecco International SA for 10 years in different finance and treasury roles and started his career in private banking and the risk management area. Paulo holds a degree in economics (lic. oec.) from the University of Lausanne, Switzerland.
Logitech is a world leader in personal peripherals, driving innovation in PC navigation, internet communications, digital music, home-entertainment control, gaming and wireless devices. The company’s products combine essential core technologies, continuing innovation, award-winning industrial design and excellent price performance. Some of its more recognisable products are the QuickCam Sphere webcam with its iconic ‘eyeball’ shape and the MX Revolution laser mouse and its unique scroll wheel.
Founded in 1981, Logitech celebrated its 25th anniversary this past year. Logitech International is a Swiss public company traded on the SWX Swiss Exchange (LOGN) and on the Nasdaq Global Select Market (LOGI).
How are the treasury operations structured?
Logitech’s Global Treasury has a centralised structure based at our European head office which is based in Romanel, Switzerland. From here, we cover cash management worldwide, as well as risk management in relation to FX, interest and counterparty exposures. We act as an in-house bank for the company, concentrating our cash worldwide and funding our subsidiaries’ working capital needs. We are using cash pools in EUR and USD with a core global bank. Our objective is to build a worldwide US dollar pool centralised in Europe, where our local existing US dollar pools (Asia and Americas) will be zero balanced into this super USD pool. Our strategy is to work with a limited number of banks to harmonise the processes, the communication and the reporting.
What is your role?
My role as corporate treasurer obliges me to be conversant with most aspects of the discipline to a large degree of complexity. I manage Logitech’s investments, our risk and our working capital, according to the Global Treasury policies. Treasury is not profitcentre oriented, so our mandate is to reduce the volatility in the P&L from either FX or interest exposures.
Because Logitech is almost debt free, our challenge is to invest our excess cash according to the risk profile and the appropriate time horizon. An important use of our cash is investing in our $250m share buy-back program. Treasury is also responsible for the management of the employee stock purchase plans and the share registrar.
Another key priority for treasury is to track and manage the company’s cash conversion cycle. We are working on a global basis to reduce our cycle, setting aggressive internal regional targets for the company. Payables are managed on a centralised basis, and processed by our shared service centre in Europe for EMEA. The same approach is in process for Asia and the Americas.
Treasury has an active role with operations, analysing and anticipating changes that might impact the operating cash flow of the group.
How does Logitech’s continuing expansion affect the treasury and how do you manage this?
Logitech is growing at a double-digit rate year on year and has done so for the past eight years. This rapid growth means the treasury function must adjust the structures and systems to support a much larger organisation, bringing scalability to the organisation. Our growth means dealing with additional countries and additional currencies; this adds complexity to treasury particularly in new emerging markets.
Treasury must also cope with higher volume and keep control on treasury operations. A good mix of what is outsourced and what is kept in-house is periodically under review, taking into account cost/benefit analysis.
The implementing of a new treasury management system (TMS) is critical to ensure the quality and the control of the treasury processes. The integrated TMS provides global coverage and scope with automated controls and the segregation of duties. The implementation of the TMS is a new project – we are currently in a test phase – the goal is to have it implemented with an accounting ledger link with our accounting ledger system. Until now, we have been using a combination of reporting provided by the banks and a lot of manual reporting handled through spreadsheets.
What other developments have you been working on in the past year?
The past year has been extremely rich in terms of projects and accomplishments. There were three main projects that had to be managed and coped with:
- Implementing and going live with the EMEA shared service centre.
- Upgrading our ledger system worldwide.
- Working on becoming SOX 404 compliant by our fiscal year end.
What impact has Sarbanes-Oxley had from a treasury point of view?
SOX has been an opportunity for the company – identifying areas for improvement, key measurements and reassessing processes that allow us to stay ahead of the competition. For example, SOX has encouraged the introduction of documenting processes that identify key controls and making sure there is the right segregation of duties within treasury processes and also that all key controls are documented and successfully performed.
A key challenge will be to move from manual controls to automated controls. Within treasury, for example, this has not been working until now. Because we are not yet live with the treasury management system, we still have a high number of manual controls that need to be performed. The objective here is to automate these controls with the use of the treasury management system. The challenge is that the volume of treasury – which was relatively small – is growing with the business, so we have to make sure we’re building a structure that will be suitable for the future. Today, we can still meet our needs using very manual processes, but at a certain stage we will not be optimal if we continue to work that way. That’s why now is the right time to implement a system that will help us to cope with a much higher volume in the future.
What is still left to do?
In terms of SOX, we are at the very end of the process. The target is to be SOX compliant at the end of the fiscal year 2007, March 2007. We are now in the final phase, the heavy part of the work is behind us. The challenge for the future will be to continue to optimise the processes. The good part of SOX is that it builds controls and identifies weaknesses in the organisation which you fix, and you mitigate deficiencies by adding controls in the processes. On the other side, it also gives you the opportunity to optimise processes. And that’s where the exercise adds value.
Overall it sounds like a positive experience.
I think it is. It is fundamentally an exercise that can be positive and add value for the company – because it almost forces you to optimise your processes. If you don’t have optimised processes, you have to have so many controls that your work gets much heavier and you lose efficiency and flexibility. The bottom line is we have no choice – we have to go through that like any other company that has to be SOX compliant. But the conclusion is, if we have to do it, let’s do it in a smart way and benefit from this exercise.
What projects will you be focusing on in 2007?
2007 will be a year where the company will optimise the processes that were implemented in 2006. For example, in terms of the shared service centre, the first phase is implementing it – then you stabilise it – then you optimise it. You fine-tune the processes to make them more efficient, and then you customise the processes to improve the quality of the reporting and services. So we’re seeing 2007 as an opportunity to optimise what was implemented in 2006.
