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Treasury innovation at Alphabet, Dräger, and Peloton recognised by AFP

Alphabet, Google’s parent company, Dräger, and Peloton are finalists for the Association for Financial Professionals’ 2020 Pinnacle Award. Sponsored by Mitsubishi UFJ Financial Group (MUFG), the Pinnacle Award was established in 1997 to recognise excellence in treasury and finance.

Finalists were selected by a jury of treasury and finance professional peers. Decisions were based on innovative solutions that progress the efficiency and effectiveness of their organisation’s treasury and financial operations. Voting is currently open for the submissions, and the Grand Prize winner will be announced during the AFP 2020 Virtual Experience, which takes place in October. MUFG will make a US$10,000 donation to a charity of the winner’s choice. 

“These submissions by Google, Drager, and Peloton speak to the ingenuity of the finance profession,” said Jim Kaitz, president and CEO of AFP. “AFP is honored to recognize the 2020 Pinnacle Award finalists.”

Automating FX and optimising hedging

Dräger, a manufacturer of medical and safety technology products, manages a large foreign exchange portfolio that requires reliable data processing. Until the end of 2019, FX exposures were computed in a highly manual and time-consuming, spreadsheet-based process. To improve data availability and reliability, Dräger worked with TIPCO to implement an FX management tool to automate data processing and the calculation of exposures. Additionally, the company automated the exposure planning process and created a cost-efficient hedging portfolio. 

CTMfile covered this project with a detailed case study earlier in the year. The case study covers the design, scoping and implementation of the entire FX automation project, and outlines how the system now works and the benefits that Dräger has now achieved. If you have any interest in optimising FX management, the case study is well worth a read, just click the link at the start of this paragraph.

A gem of a treasury technology project

Alphabet, Google’s parent company, is a rapidly growing and dynamic, entrepreneurial business. To support this growth, Alphabet recognized the need to re-engineer its treasury function. Speaking on episode 212 of the AFP Conversations podcast, John Clarke, assistant treasurer at Alphabet, pointed out the need for a technology structure that bridged the gap between treasury and the rest of the organisation:

"What we could see very clearly as we needed a comprehensive treasury platform that could support a lot of the critical treasury processes that we operate. But more than that, we wanted something that could become a foundation layer and integrate with the rest of the business." 

Partnering with SAP, Alphabet launched Project Emerald - a state-of-the-art, non-custom solution that migrated treasury’s processes to the company’s SAP treasury workstation. With large operating cash balances around the world due to the sheer scale of its fund flows, and with a large portfolio of investments, the company wanted to implement an in-house bank in order to simplify its operating processes and put a lot more cash to work overnight.

"One of the key criteria for selecting a solution was the ability to natively support an in-house bank," Clarke explained to AFP. "Obviously, we had a lot of work to do to stand up the entities and set up the account structures. Partnering closely with our primary international bank, Citibank, and our primary US bank, Wells Fargo, we were able to implement those liquidity structures and integrate them into SAP as part of Project Emerald. 

The success of this in-house solution has paved the way for Alphabet to implement SAP as a single global ERP system for not just treasury, but all corporate functions. The project has produced benefits across the treasury function, such as with integrated hedge accounting and automated tax management. The supported in-house bank structure has also come into its own.

"The in-house bank and related liquidity structures have meant that we've been able to push multiple billions of dollars out of cash accounts and put that money to work," Clarke told AFP. "Also the netting arrangements and the zero base account structures has meant that the amount of manual day to day cash management has significantly reduced, meaning that our cash management team are much more focused on business support and growth rather than on day to day operations. We've been really pleased with those results."

Pedal to the metal

Peloton, the world’s largest interactive fitness platform, lacked a formalised treasury operation and needed to quickly build infrastructure to support its rapid growth, increased complexity and upcoming public offering. Dana Laidhold, Peloton’s first treasurer, joined the company in 2018 and embarked on a journey to build a treasury team from the ground up and implement technology and business processes. In Episode 210 of the AFP Conversations podcast, Laidhold explained the approach:

"We were looking at every single function [of treasury] and going down to the core functionality of what we needed and building that in a way that it could be scalable, adjustable over time to adapt as the business was adapting, and then able to layer on additional components over time." 

The result for Peloton has been a treasury operations centre with a seamless end to end process, all the way from procurement through to payments.

"We're using Coupa to interface with our vendors, collect our vendor profile information, collect our invoices, and draft our purchase orders and then do all of our workflow all the way to receipt and final confirmation of the goods and services," Laidhold told AFP. "From there, that data will then feed as a valid payable into our ERP system, where we house our master vendor data, and also our AP ledger. We're using the ERP as the hub for all of our different systems. Then on the outside, as we do our twice a week AP runs, the invoices that are then coming up due, we can then push to Kyriba which we have interfaced host to host with our primary cash management bank, which is JP Morgan."

The level of automation that Peloton has been able to achieve across its newly built treasury operation is impressive and highlights why the company's treasury has made the awards shortlist.

"By our latest stats, a little above 50% of our payables are touchless, where they're coming in from the vendor, they're getting approved by the procuring party. They're moving them through the AP ledger, they're then moving them to payment and moving out to our bank," Laidhold explained to AFP. "We have people doing reviews and approvals to pass the data, but we're not having to do any key entry. They're touchless all the way through. We've also found is by adding all this automation, it is really institutionalising the steps of the process. Of the things that are requiring a manual touch, we're seeing about 110% increase in efficiency, in terms of the volume of data that a single person is able to work with in a day." 

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