Setting up a treasury function
Managing financial exposures arising from growth
The rapid growth of an international retailer had outpaced the development of its treasury function, resulting in de-centralised cash and risk management, and significant lost opportunity costs.
Deloitte supported the business in analysing and identifying treasury requirements, and implementing a treasury management system. As a result, borrowings have been reduced, risks are better controlled and hedged and banking transaction costs have nearly halved.
This $3bln international retailer and distributor of luxury goods had grown rapidly over the previous two years and treasury management had not followed pace. Treasury issues such as funding, cash investment and hedging FX risks were handled by the individual operating companies spread over six countries. As a result, Management had no central visibility of cash and financial risks; inconsistent and sometimes contradictory approaches were used by different entities; banking costs were higher than they should be; and the company suffered significant interest opportunity costs.
We performed an “As is” assessment and Gap analysis of the business, to identify treasury requirements and gaps in current practices. We subsequently developed the vision for a Treasury Operating Model, supported by a Roadmap to implementation. This included a business case which estimated the pay-back period of the investment at 16 months. This vision was approved by the Board and we were subsequently retained to drive the implementation which included the selection and implementation of a treasury management system; centralised FX hedging policies and procedures; and selection of a global cash management bank.
The project has successfully completed and the company now has a fully functional treasury set up and the business case benefits have been met and in certain cases exceeded. Bank accounts are reported automatically and real time to the central treasury team; cash balances are centralised, resulting in reduced borrowings and hence interest cost; FX exposures are centralised, netted internally and only then hedged in the market. And all activities are supported by a dedicated system which creates straight through processing as well as strong controls.