The Flavor of Treasury
Mövenpick is a brand with positive associations that stands for indulgence and quality. Founded in Switzerland in 1948, the family-run business is steeped in tradition. Today, the group is known all over the world, and their products and services tempt customers around the globe. One of the pioneers of Sunday Brunch, Mövenpick’s core business is in the hospitality sector but they’re also active in many other areas. The group is divided into four business segments that operate independently: Mövenpick Hotels & Resorts, Marché International and Mövenpick Restaurants, Mövenpick Wine and Mövenpick Fine Foods. The group’s main markets are Europe, the Middle East, Africa, Asia and Canada. In 2015, around 20,000 employees achieved an annual turnover of over CHF 1.5 billion.
Put in a nutshell, Mövenpick’s “recipe for success” is a portfolio made up of high-quality products and services that meet customers’ needs. Mövenpick aims to address customer requirements as comprehensively as possible. This allows them to enhance their portfolio and to leverage success in some sectors in others. For example, salmon proved a particularly popular Sunday Brunch item, so Mövenpick made it available to buy to enjoy at home, recreating the brunch experience. This illustrates that even though the business segments operate independently, they’re not isolated. The global hotel group, the traditional restaurants, wine trade and fine foods are closely interconnected. For example, the hotels offer a large selection of Mövenpick wines in all countries. Rooms feature Mövenpick-branded coffee, and other licensed products are served at breakfast, such as salmon or jelly. Management makes use of the hotels for conferences and many employees stay there in their free time.
Intricately woven, group-wide portfolio
The interconnected products and services in the different business units are mirrored in the treasury department. The treasury team settles licenses and services between the business units, and between the central purchasing department and business units. Systems support Mövenpick in this complex process, and it has become manageable: the group has introduced an efficient reconciliation process and centralized settlement by means of a structured netting process. Looking back, this has been one of the biggest and most important steps towards increased efficiency in the financial setup in the last few years.
A little over ten years ago, Daniel Kretschmer, treasurer at Mövenpick, received a “cry for help:” intercompany account reconciliation wasn’t working, and there were unexplainable discrepancies. It was thanks to the treasury team that a local accounting department was alerted to the fact that interest for intercompany clearing accounts hadn’t been paid in months, but had been directly charged to the clearing account. It wasn’t until then that the local entity understood the role of revenues managed via the in-house bank. For Daniel Kretschmer, whose background isn’t in banking but who has great experience in treasury and other areas of corporate financial management, this was a defining moment. It made him realize just how important it is to raise awareness across the entire group. Creating a common mindset in a decentralized organization is one of the biggest challenges. Treasury needs to foster identification, and they can only do that if they can point out the real added value of specific service functions for the group. This maxim not only applies to netting but also to other projects, from reorganizing the banking landscape to supporting the purchasing and sales departments with their activities. It will probably take another few months or even years until these changes, engineered largely by Daniel Kretschmer, will have properly taken hold in the group.
320 entities, 35 subsidiaries, 1 treasurer!
Providing support to the entire group is crucial for Mövenpick’s lean treasury department – not just when it comes to netting. Daniel Kretschmer is the only treasurer group-wide, based in the holding company. His impressive range of responsibilities includes anything from providing entities with loans to managing the group-wide cash pools in EUR and CHF. Daniel Kretschmer is the main port of call for all group entities. Mövenpick comprises 35 subsidiaries, which in turn are made up of over 320 entities that can be considered independent. It is usually the individual entities, such as specific hotels, rather than legal entities (i.e. subsidiaries) that are of most relevance in a treasury context. Each location has their own P&L, and independence is considered very important. In the hotel segment for example, each hotel needs to be treated separately, not least because they also have different management concepts. One option is to run a Mövenpick hotel as an independent entity; another option are so-called “managed contracts.” While Mövenpick does offer several centralized services and also financing to the latter, the actual running of the hotel is done independently. Mövenpick has been growing globally: over 30 projects are in the pipeline or in the pre-opening stage. In line with the corporate strategy, the group plans to expand in the core markets of Europe, Africa, the Middle East and Asia.
“Check, please!” – In nearly any currency
For Mövenpick, operating worldwide entails a large number of FX deals. EUR in particular is an important foreign currency for the Swiss group. Wherever possible, Mövenpick uses natural hedging. For example, cash flows from hotels to the parent company in EUR are used as payment elsewhere, such as for the purchasing of wines all over Europe within the framework of wine trade. Ideally, risk positions cancel each other out. This leaves as little as 20 to 30% of FX cash flows to be converted to CHF at the end of the day – the currency exposure that needs to be hedged by treasury. Treasury always offers support in connection with FX risks that individual entities have to deal with internally (for example a hotel charging in AED but being charged in USD for many services), helping ensure the entity has hedged their P&L in the best possible way.
Another key treasury issue is liquidity planning. When Daniel Kretschmer took up his position as treasurer, the “legacy” of Excel-based planning was still prominent. Today, the process is fully integrated in the centrally used, web-based system, where planning is conducted twice a year. All group companies “fill” the system with their local data. The first round of liquidity planning in the fall is dedicated to planning the cash flows for the upcoming business year, and the second round mid-year represents an update on this plan. The next step involves turning the existing planning data into a rolling, quarterly forecast, with a particular focus on optimizing data quality and the reliability of the forecast. Entities connected to the cash pool are also expected to provide a short-term forecast to enable active and time-sensitive cash management. Short-term forecasts are mainly created via the now established platform for processing payments, which is currently in use in Switzerland, Germany and parts of the Netherlands and Austria. This also means that planning data needed for cash positioning is automatically available in the system – a “side effect” of payments so-to-speak – and no manual intervention is required. This highly efficient result has allowed Mövenpick to integrate additional countries in the payments platform at short notice. The group currently works with a total of 25 banks and over 200 bank accounts, but the plan is to reduce this to a more manageable number. This consolidation process is a very important development for the group, in particular since the continued centralization of the financial administration in Europe has also had a positive effect outside of the treasury department, and has impressed both internal and external partners.
Exotic indulgence in exotic countries
It will likely not be a walk in the park to complete this journey towards more centralization and standardization in the group. Mövenpick is active worldwide, including in locations that even treasury would consider a bit more “exotic:” Yemen, Egypt, Tunisia, Morocco, the West Bank and Palestine, Ghana, Qatar, Bahrain, Indonesia, Pakistan or the Philippines. This has repercussions for workflows and framework conditions, and one can safely assume that neither netting nor centralized payments will be implemented “by the by.” Add to this very specific requirements in connection with compliance, sanction screening and fraud prevention, and you can see why the drive towards more centralization is very pronounced at Mövenpick.
With credit card – or maybe not?!
Mövenpick’s treasury not only needs to deal with more unusual countries but also with particular business models. For example, credit card payments are commonplace in the group. Greatly simplified, the hotel section of the business makes approx. CHF 1 billion in turnover by way of credit card payments. It literally pays to take a closer look and monitor changes in the provider landscape brought about by the Internet and technology. Saving as little as 0.8% in fees would translate to as much as CHF 8 million per year for Mövenpick. This justifies testing alternative payment methods at check-out, for example in a hotel in Dubai. Maybe the guest could simply pay on Mövenpick’s website, which is administered and settled in Switzerland? This would save credit card fees that are higher in Dubai than in Switzerland. New payment ideas raise new questions: what actually counts as “abroad” and “domestic” when it comes to doing business online? When will Mövenpick be charged which fees, and what are the consequences for treasury and cash positioning? This is but a small sample of issues that are only relevant to companies that need to deal with end consumers and a large volume of credit card payments. For these companies, however, finding answers to these questions can be the key to success.
Banking relationships: security or efficient solutions?
While credit card fees and payment methods are very particular issues, Mövenpick also has banking relationships on the agenda – a topic that is of key importance to all businesses. Mövenpick’s treasury is no different in aiming to find banks that provide a reliable and functioning payments setup. CFO Frank Brinker even raises the question of how secure banks still are. Even the credit ratings of traditional banks in Switzerland and Germany have recently dropped – all the more reason for a cash-rich and privately-run group such as Mövenpick to exercise caution. Frank Brinker sums up the issue: “We need to constantly balance efficient processing with a banking partner’s credit rating. We need to decide what takes priority. Do we rate an efficient solution for payment processing higher than someone maintaining the highest possible credit rating?”
Living up to the dynamic nature of responsibilities
Given the broad scope of responsibilities, it is not easy to describe a typical day in the treasury life of Daniel Kretschmer. While there are some routines, essentially every day is different. It starts off with a moment of indulgence in true Mövenpick style with a cup of their own-brand coffee while the computer boots.
The way Daniel Kretschmer manages everything as a “one-man show” is truly impressive. Equally impressive is the Mövenpick holding company which consists of only five people (in a setup very typical for Switzerland) and comprises the centralized responsibilities of group management, brand management, auditing, financial administration and treasury. Reporting to the owner is to the point and sees quick results. The team is encouraged to work efficiently and use automation extensively to meet the ambitious goals with the limited resources available. Daniel Kretschmer sees it as his responsibility to look after payment processing, intercompany financing, capital management as well as FX risk management. This makes him the central port of call for any treasury-related questions in the group. This is an interpretation of the role of group treasurer that CFO Frank Brinker, who is proud of the achievements since he took up office, shares completely: We’ve achieved a great many thingssince we initiated ‘project treasury’,” explains Frank Brinker. “We still have great ambitions but we shouldn’t forget where we came from.”
In the beginning, having a daily financial status was nothing more than a dream, liquidity planning an unpopular “Excel adventure,” and no one would’ve dared to envisage netting or even centrally managed payments. “A lot of things have changed. We’re no longer concerned with the general setup of processes and structures but with group-wide optimization. The financial status – nowadays always complete – is at the heart of everything we do, and even more importantly, it is absolutely reliable. For me as the CFO, this is absolutely crucial.
Structure and TMS: the basis for Mövenpick’s high ambitions
The restructuring of Mövenpick’s treasury in the last few years was a challenge from both a technological point of view and a staffing point of view – maybe even more so than Frank Brinker would’ve expected. He has a background in banking with a particular focus on electronic banking. After a number of years in corporate banking he swapped sides and became the CFO of an online payments start-up in Germany. Dealing with structuring and financing growth to the point of becoming market leader prepared him for his role as CFO of the Mövenpick Group. This professional background explains why Frank Brinker still has a close relationship with systems and payments.
He considers the treasury management system the foundation of the group’s ambitious treasury goals – the backbone so to speak. Netting in Excel – impossible! The introduction of the TMS has eased treasurer Daniel Kretschmer’s workload and also that of the local accounting departments considerably. They all benefit from increased visibility when it comes to internal reconciliation of invoices and accounts. The established cash pools help consolidate liquidity, and not only is group-wide reconciliation with a structured netting process much faster, internal FX risk is transparent at all times.
Enjoying a restructured treasury!
Frank Brinker and Daniel Kretschmer called for a restructuring of the treasury setup because such a process is not always simply a question of technology. People also account for an important success factor. For the future, it is Frank Brinker’s explicit aim to further strengthen Mövenpick’s position in dealing with the outside world by making a difference on the inside, by optimizing financial management processes. This support and optimization across the whole group is needed to future-proof the Mövenpick brand. Further optimization efforts, for example in connection with the order-to-pay process, are to follow in order to achieve optimum and paperless processes in the group.
Daniel Kretschmer has a definite maxim for the future: first the concept, then the necessary instrument to create the structures for the in-house bank that Mövenpick is working towards. He enjoys his work and has done since he joined the world of treasury early on. The flavor of treasury has him captivated!
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