Questions asked throughout the webinar

• Why did you opt for multiple platforms? Are there benefits to be gained there? (10:07)
• Is the in-house bank a part of the Quantum solution? (11:36)
• Do you have your own SWIFT BIC code? (18:51)
• Do all of your 2,400 accounts report balances via SWIFT? How is this managed with all your banks? And any accounts that do not report via SWIFT, how do you capture this? (19:08)
• Has triparty repo been considered as an investment option for your cash, alongside MMFs and unsecured depos? (31:55)
• Do you use Crystal reporting tool within Quantum to do this? (32:38)
• Does Honeywell benchmark SAP enhanced capability to do more of the technology delivery for Treasury? (40:50)
• Do you foresee a change in the upload and collection procedure of bank statements, if the new Payment Service Directive (PSD2) goes live? And will this act as a competitor to SWIFT/FIDES? (41:27)

Additional questions answered by Honeywell since the webinar

Why is your treasury set up in Belgium?

This is an historical location. We used to be a ‘coordination center’, a Belgium special status set up to attract treasury centers, until Belgium was forced by the EU to end this status. We are now a ‘financial company’ and this status works well for us too. Belgium has double tax treaties with multiple jurisdictions to obtain WHT exemptions, has a rich pool of treasury talents, and enjoys a reasonably transparent and stable regulatory environment. For employees, you have many peer networking possibilities, it is close to other bank hubs such as London, Paris or Amsterdam, and the quality of living is high for a European, truly multicultural, capital city.

Is Honeywell an NFC+ institution and do you have a need to post any collateral for your derivatives portfolio?

No, we only do hedging and so we are a NFC.

Given the current regulatory climate for both the banks and the Money market funds (ie MMF reform) are you looking at Triparty repo as an alternative secured form of investment for your cash deposits?

We have been considering it since 2011, but have not managed to dedicate sufficient resources (especially legal support). Now, we have a pretty rich acquisition pipeline ($5.5bn solely in December, with more to come), so the need is less pressing.

How do you handle local companies that claim to need a local bank because that bank supports local customers? I’m thinking specifically of times when the local bank preference differs from HQ’s wishes?

Treasury selects the bank, taking into account all local needs. We work with our relationship banks to address our needs in a cost-effective manner. We may for instance negotiate fixed FX spreads to decrease the needs of a FX account. We also have a global netting in place (to settle intercompany invoices). Nevertheless, when integrating new companies it does happen that we need to keep legacy bank accounts for a certain period of time; it is often BG related. It is also more common in certain countries such as China or India (contract related). In this case all regular activity will go through the relationship bank account and the use of the legacy bank account will be limited to the strict minimum…until later closure. Our new affiliates enjoy steep bank fees reduction which does highlight the role of treasury in selecting and negotiating with our banking partners.

Do all your 2,400 accounts report balances via SWIFT? How was this managed with all your banks. And any accounts that do not report by SWIFT how are these balances captured. And how are your deposits covered?

Ninety-eight percent of our bank accounts report balances via the SWIFT network, either directly to our BIC or via the BIC of Fides bank which acts as a consolidator (a process in place for the last 12 years). Only rare banks in the world do not have access to the SWIFT network. The other 2% of accounts balances, for instance upon an acquisition (awaiting for MT940 reporting to be set up) are reported weekly by the business in a in-house developed webtool, for further upload to our TMS.

All our deposits and any other investment transactions are entered in the TMS at the latest on their value date, by the person who closed the deal, with an automatic reconciliation via MT940 the day after. Our cash exposure reports displays both information (investments and cash on bank accounts), in many different sort orders and aggregation levels.

Do you have your own SWIFT BIC code?

Yes, we do.

Do all accounts report by MT940? Some banks cannot for technical reasons or cost. Do you have any issues with this?

Only rare banks in the world do not have access to the SWIFT network. The other 2% of accounts balances, for instance upon an acquisition (awaiting for MT940 reporting to be set up) are reported weekly by the business in a in-house developed webtool, for further upload to our TMS. If cost of daily MT940 reporting is prohibitive (not with our relationship banks), we may elect to report only on days where there are transactions.

How many banks do you have your accounts in? And are all banks able to provide standard mt940s, especially the ones operating in emerging markets?

As of today (following our $5.1bn large acquisition on 29^th December), we hold bank accounts with 382 different banks (ie a banking group in a certain city), belonging to 118 different banking groups in the world.

Is SWIFT managed by IT or a service bureau?

We do not use a service bureau.

Are bank mandates (authorised signers) also managed electronically?

Unfortunately not yet. This is a 2016 project.

Does your solution also offer to some extent the possibility for all local entities to do liquidity forecasting, which is then automatically consolidated on a global level?

No, because our treasury system is not linked to SAP (further than an interface to book the head office and in-house bank transactions). Not all our entities are yet on SAP, and the ones on SAP do not all have the same version. We are just too big and always growing.

Since we are cash rich outside the Americas, and that funding is automated largely, it is not an issue. We only forecast the month-end cash, a few days before month-end – and we have an over 99.8% accuracy.

What are your minimum rating requirements for banks? How do you cope with the negative interest rates?

At least A2/P2/F2 if there is no better rated option. We nevertheless do hold some legacy bank accounts with lower or non-rated banks, when we may not close those accounts for contractual reasons. We do not close active investment transactions (TD or others) with banks rated lower than A2/P2/F2.

If credit rating of a bank drops what is the action plan to switch banks?

It depends of the extent of the rating drop. If the bank is still at least A2/P2/F2 and we think we still bank with the best bank in country, we’ll work at limiting our exposure, eg by automating external investments. If we doubt of our bank abilities and want to benchmark them again, we analyse our business needs and do a RFP to select the best bank for our business in that country.

Does Honeywell benchmark SAP enhanced capability to do more of the technology delivery for treasury?

No. Not heard of it. Looking forward to receiving any related information.

How long does it take from decision making to realising the results?

Not sure which decision making you refer to, but we typically have a very short implementation time eg three months is the typical timeframe to reach over 80% of acquisition integration or switch bank, and such projects rarely last more than six months.

How do you forecast the cash balances within existing platform?

We do not forecast, our balances, to the exception of the in-house bank for the daily investments.

What’s the key driver in deciding on which treasury system to invest in? Do you have dedicated IT team?

We have two persons dedicated to treasury, but they are more operational/technical than strategic. The selection is made by looking at demos, benchmarking with other alternative systems, asking peers, challenging the solution providers, comparing cost and service.

You spoke about a 50% above target on interest income. What type of product do you invest in?

The increase in interest income is not only linked to products, as we are extremely conservative. It is a matter of understanding both your constraints (first of which, your company investment policy!) and the market offer. To summarise, I’d say:

1. First you need to unlock idle cash and make sure you invest any USD that can be invested.
2. Second, you estimate your cash needs (and cash generation) for different periods in the future to determine the optimal investment horizon for each investment.
3. Third, you do not necessarily do a single investment for any investor (frequent mistake if treasury is not involved in investing the cash). It often makes sense to break your cash into smaller tickets and build a maturity profile to extend the maturity of the investments while preserving regular access to liquidity.
4. Fourth, we look at all product opportunities in each country: TD, structured deposits, active investment accounts (with or without a notice period to access funds), yield on operational bank accounts, AAA MMF etc. No repos yet, but could make sense. No non-rated funds yet, but can make sense.
5. Fifth, you analyse the banking market in each country to select banks with attractive risk/return profiles, and establish a relationship when needed
6. Sixth, you may consider to invest cash generated in one region to be invested in another region (non-resident transactions). Be patient to fulfill all KYC.