Sandra Uddbäck’s (from Atlas Coco Group Treasury ) presentation at Eurofinance October Conference in Barcelona provided some fascinating insights into the transformations that are happening to corporate treasury department’s around the world. Group Treasury in Atlas Coco has a mission to “provide treasury services, in all relevant areas, that exceed the expectations of our stakeholders.” The areas are very wide-ranging including: financial strategy, customer finance, supply chain financing, bank infrastructure, currency management, trade finance, financial investment & pensions, group funding, treasury control & accounting, group tax, cash management, corporate finance support, intra-group funding/bank funding and netting. The problem was to deliver these services consistently across the globe as Atlas Coco has customers in 90 countries, 270 subsidiaries,  and 400 operational entities. Nevertheless, there are only 20 people in the treasury department.

The problem
Group Treasury only had proactive coverage in North America and Asia Pacific (from hubs in New Jersey and Shanghai). The contacts with subsidiaries in the rest of the world occurred on an ad hoc basis and also the scope of the coverage was not defined. This resulted in: losses at the subsidiary level on derivative instruments; too high banking costs; poor image among banks; potentially subs-standard business code of practice; and unnecessary tax costs and risks as well as inadequate accounting and reporting of taxes.

The solution
First, they made a policy decision that all countries should be covered pro-actively from regional treasury hubs. And defined the scope of subsidiaries responsibilities and the support central treasury would provide.

The full details of how they would operate and work with their banks were then thrashed out in a ‘Boot Camp’. The new bank strategy is a good illustration of the approach adopted:

• approved Banks = Core Banks + Relationship Banks
• banks and Atlas Copco agreed a Code of Conduct including a commitment to comply with Atlas Copco’s gift and entertainment policy
• commitment from Atlas Copco that they will give preference to doing business with the Approved Banks
• subsidiaries are not allowed to do derivative transactions without checking with Treasury first
• yearly relationship review meetings where the banks specify all business in order of importance to them.

Results
Atlas Copco found that the new policy, structure and support created many cost savings. Inevitably, there was some non-compliance with policies and guidelines, but overall it was generally welcomed. 

Sandra finished saying that there is much more to do, and “We should have done it earlier.”

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It’s always a question of balance between local and global support. The emphasis definitely varies between different industries, and also it seems to change depending on what is the ‘latest’ approach. 

Don’t you just love a Swedish company insisting on their preferred banks signing up to their code of conduct including the commitment to comply with their gift and entertainment policy!! Also I’d love to hear the banks having to ‘specify all business in order of importance to them’.