1 1 2 2 In House Bank Facts and Figures 3 3 Firmenich Who are we 4 4 LARGEST PRIVATELY OWNED FRAGRANCE FLAVOR HOUSE NUMBER 2 WORLDWIDE COMPANY FOUNDED 1895 in Geneva Switzerland GLOBAL TURNOVER ID: 834973
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1 1 1 2 2 Firmenich Finance SA In House Ba
1 1 2 2 Firmenich Finance SA In House Bank Facts and Figures 3 3 Firmenich Who are we? 4 4 LARGEST PRIVATELY OWNED FRAGRANCE & FLAVOR HOUSE NUMBER 2 WORLDWIDE COMPANY FOUNDED 1895 in Geneva, Switzerland GLOBAL TURNOVER 2.95 bn Swiss Francs (June 2014) AVERAGE GROWTH PER YEAR 7% Since 1989 GLOBAL PRESENCE 100+ markets FACILITIES 64 countries MANUFACTURING 28 sites PATENTS PRESENTLY IN FORCE 2000+ R&D
2 AWARDS 35 including Nobel Prize in chem
AWARDS 35 including Nobel Prize in chemistry IMPACT THE LIVES OF 1 mio children through improved hygiene & nutrition COMMUNITY DAY 1964 participants in 35 projects # OF EMPLOYEES 6500 CLIENTS 3 000+ around the world INGREDIENTS #1 Portfolio of Naturals & Molecules PERFUMERY #1 in Fine Fragrance FLAVORS #1 In citrus, vanilla & seafood INVESTED IN R&D 10% of the annual turnover 5 5 Vision 6 6 In House
3 Bank â Change Vision Charter KEY PRO
Bank â Change Vision Charter KEY PROJECT because it capitalizes on SAP investment by: ⢠pooling, harmonizing and standardizing Treasury processes worldwide, ⢠while reducing costs and improving risk management. + Clear move towards Best Practices! As Is (Initial Stage) ⢠Multiple Banks, e - Banking connection and too many Bank Accounts ⢠Non standardized payment process ⢠Multiple ext
4 ernal IG payments ⢠Decentralized cont
ernal IG payments ⢠Decentralized controls ⢠Lack of discipline; Painful reconciliation ⢠Heavy support and maintenance ⢠Unnecessary transactions costs ⢠Complex identification of cash flow and currency exposure ⢠Incomplete cash pool structure To Be (Final Stage) ⢠Same connectivity for most affiliates ⢠Centralized process for most affiliates ⢠Internal IG settlement ⢠Minimize
5 risks ⢠Automatic IG reconciliation â
risks ⢠Automatic IG reconciliation ⢠Optimize bank structure How do we get there? ⢠Selection of best cash management banks ⢠Standardized Connectivity (1 - 3 interfaces) ⢠Rely on SAP as the backbone of the project ⢠Revisit the Organization What changes does this require ? ⢠New Entity to head the InHouse Bank ⢠Whole Payment process has been redesigned ⢠Roles & Respons
6 ibilities of all stakeholders ⢠New
ibilities of all stakeholders ⢠New Organization ( centralized and specialized ⢠SAP Upgrade (ECC 6.0) + IHB and BCM Modules + Host - to - Host interfaces with Banks ⢠Reporting / Visibility of Affiliates Positions Who will be involved and affected by the changes? ⢠Regional & Local F&A Organization ⢠Treasury ⢠Tax & Legal ⢠Purchasing (suppliers) ⢠Customers ⢠Group Reporting
7 and Consolidation ⢠IS and Business
and Consolidation ⢠IS and Business Process Excellence Team 7 7 Pillars of the Project 8 8 ï New Legal Entity ï Fully dedicated to: CaPo, ICo, PoBo today and Forex tomorrow ï New Organization ï Revisited Bank Network: ï§ 3 Cash Management Bank Partners selected ï New Back Office Organization: ï§ Centralized and Fully Dedicated to Treasury ï§ Outsourced to Xerox in Barcelona ï New
8 Processes: ï§ Standardized and Automat
Processes: ï§ Standardized and Automated Processes ï§ Daily Internal Bank Management (Bank Accounts balances, Bank Statements, transfers, payments,..) ï Infrastructure/Configuration d eveloped to support the In House Bank activity: ï Single Instance of SAP - ï§ Complemented by 2 new modules: IHC and BCM ï Host - to - host connections with banks ï E - banking tools (as a back - up) ï Elec
9 tronic Bank Statements, Payment Files an
tronic Bank Statements, Payment Files and Payment Status Reports ï XML ISO 20022 The Pillars of our In House Bank Project 9 9 Steps 10 10 SEPA Oct 2013 - Jan 2014 CaPo Oct 2013 â May 2014 ICo Oct 2013 - May 2014 PoBo 1 - 2 - 3 Jan 2014 - Sep 2015 PiNo Sep 2015 - Jun 2016 Main Steps of the Project 11 11 ï Started in Oct 2013 and Live on January 6th, 2014 ï 8 participating Affiliates having t
10 o comply with SEPA rules ï Implemented
o comply with SEPA rules ï Implemented with a Bank selected to cover the full scope of the In House Bank project (CaPo, PoBo and PiNo) ï§ BNP Paribas ï Set - up of electronic payment file: ï§ Host - to - Host Connection ï§ Validation of instructions in eBanking tool SEPA SEPA 12 12 ï Live since May 6th, 2014 ï Daily ZBA ï Replacing RBS Cash Pooling (luckily!!!) ï Extended Scope : ï§
11 27 Affiliates ï§ 10 Currencies ï Volu
27 Affiliates ï§ 10 Currencies ï Volume of Cash Pooled ï More than 80% of the cash of the Group ï Cash Management Banks ï Reshuffling of Bank Network : selection of 3 banks + closing others ï§ BNP Paribas for Europe ï§ Citigroup for the rest of the World ï§ UBS for CHF ï Bank Conditions negotiated and close monitoring of the respect of conditions ï Integration and automation ï Da
12 ily automated upload of electronic bank
ily automated upload of electronic bank statements in SAP for 27 affiliates ï Customized MT940 for Master accounts enabling automatic postings in SAP GL and IHB Global Cash Pooling (CaPo) CaPo 13 13 ï Live since May 6th, 2014 ï Replacing RBS External Netting tool ï Scope: 25 Affiliates ï Full Internal Process ï Internal Settlement â No Physical Transfer of Cash ï Weekly Run vs. mon
13 thly previously ï Main Benefits: ï S
thly previously ï Main Benefits: ï Saving on cost of Netting Tool ï Zero Transfer Cost ï Elimination of FX transactions Costs for IntraGroup Transactions ï Automated Reconciliation ï Settlement at transaction level, no grouping ï No Rejection Inter Company Netting (ICo) ICo 14 14 ï 23 Participating Affiliates Implemented in 3 Phases: ï§ 12 in December 2014 ï§ 8 in July 2015 ï§ 3 in Se
14 ptember 2015 ï Volumes: ï 62% of Pay
ptember 2015 ï Volumes: ï 62% of Payments (equiv. ~CHF 2bio) going through Payment Factory ï Number of Payments per Month: ï§ PoBo I: ~2â500 ï§ PoBo I + II : ~18â000 ï§ PoBo I + II + III: ~21â000 ï Payment Rule: ï On Due Date ï Payment Process: ï Payment Request at Affiliate Level (F110) ï Payment Execution at IHB level (F111) ï Release of Payment at Group Treasury level (BCM
15 module) ï Other : ï No Manual Payme
module) ï Other : ï No Manual Payments, only Electronic ï Payment Remittance Advice sent to Suppliers including list of invoices paid ï Payment done at individual invoice level, no grouping ï Information of invoice number and ultimate debtor transmitted to vendor ï Payment Status Report: immediate notification of payment acceptance or rejection Payment on Behalf of (PoBo) PoBo 1 - 2 - 3 15
16 15 PoBo Statistics â Volumes AUD AED
15 PoBo Statistics â Volumes AUD AED INR CAD NZD SGD HKR SEK JPY DKK NOK GBP CHF EUR USD 0 10 20 30 40 50 60 70 Dec.14 Feb.15 Apr.15 Jun.15 Aug.15 AUD AED INR CAD NZD SGD HKR SEK JPY DKK NOK GBP CHF EUR USD POBO Values in Mio CHF / split by currency 0 5000 10000 15000 20000 25000 Dec.14 Jan.15 Feb.15 Mar.15 Apr.15 May.15 Jun.15 Jul.15 Aug.15 ICO volume POBO Processed ICO / POBO volume (No of tran
17 sactions settled) 16 16 PoBo Statistics
sactions settled) 16 16 PoBo Statistics â Rejections 0 10 20 30 40 50 60 70 80 Dec.14 Jan.15 Feb.15 Mar.15 Apr.15 May.15 Jun.15 Jul.15 Aug.15 Other Error in beneficiary name Invalid USD ACH format Invalid KID number Invalid BIC/Swift Invalid Bank Account number Reasons of rejections 0.00% 0.50% 1.00% 1.50% 2.00% 2.50% 3.00% Dec.14 Jan.15 Feb.15 Mar.15 Apr.15 May.15 Jun.15 Jul.15 Aug.15 ICO Rejectio
18 n Rate POBO Rejection Rate Rejection Rat
n Rate POBO Rejection Rate Rejection Rate (%) 17 17 ï Objectives = move Affiliates unable to join PoBo towards New Standards ï§ Standardization of the payment process ï§ Use of Core Banks (close other banks) ï§ Use same connection channel with banks ï§ Same Process (as for PoBo) to generate the payment file ï§ Optimize the Security of the Payment Process Payment In the Name Of (PiNo) Pi
19 No 18 18 Benefits and Lessons 19 19 ï
No 18 18 Benefits and Lessons 19 19 ï Tangible Benefits ï Savings on Bank Fees ï§ Closure of Bank Relationships (around 30 at this stage) ï§ Closure of Bank Accounts (around 115 out of 300 at this stage) ï Savings on Services ï§ Netting Service offered by RBS replaced by IHB Internal process ï§ No more Service Fee ï Savings on Transactions ï§ International/Cross Border replaced by Domestic
20 or SEPA transfers ï§ Volume of FX trans
or SEPA transfers ï§ Volume of FX transactions linked to Netting reduced to ZERO ï§ Reduced FX Spreads further to Centralization of FX activity ï§ IntraGroup Transfers in the context of Netting reduced to ZERO ï Intangible Benefits ï A true Global End - to - End process benefiting from: ï§ Standardization ï§ Integration ï§ Ease of control on Execution ï Trans - divisional project enabling ï
21 § Collaboration spirit ï§ Knowledge sha
§ Collaboration spirit ï§ Knowledge sharing Benefits 20 20 Lessons learned ï Business case: ï§ Key to define the right budget with the right consultants ï Project Management: ï§ Team: Importance of including various skills and expertise ï§ Defining clear roles and responsibilities ï Communication: ï§ With external banks: regular meetings and thorough follow - up of pending issues ï§ Inter
22 nal communication and change management
nal communication and change management with a sponsor at top level ï Network: ï§ Get input from other corporates, share experience and challenges ï Test before Implementation: ï§ For PoBo: Penny tests is a mandatory step in the preparation phase however the best penny test is with the go - live ï Be prepared for surprises, impossible to tackle all potential issues on the testing phase 21 21 22