Centralizing and Automating Treasury in the Name of Visibility and Control

How Kongsberg Automotive married treasury technology with process transformation

Company and starting point

Kongsberg Automotive (KA) was founded in the late 1950s and has since developed from a Scandinavian automotive parts supplier to a global leader in the international vehicle industry. Their products enhance the driving experience and make it safer, more comfortable and sustainable. The group consists of 3 business segments: comfort and safety related products for vehicle interiors, powertrain and chassis products as well as specialty products. The group is active in 19 countries, incl. the USA, Canada, Mexico, South Korea, India and China and has over 11,000 employees.

The challenges

When Group Treasurer Abraham Geldenhuys joined Kongsberg Automotive in 2017, he found himself in the following situation: Much needed global cash visibility was patchy, and across the group there was little control over payments and liquidity. The day-to-day treasury responsibilities were tedious and involved many administrative, often manual tasks. Both meant that Abraham and his 2-person team neither had a sound data foundation nor the time for a more strategic approach. Refinancing the group was an additional priority.

Kongsberg Automotive went in search of a solution that would combine technological support with a process overhaul to centralize, standardize and automate treasury in a number of different challenging areas.

1 Cash management and financial instruments

Despite a clear need for treasurers and CFO to have complete cash visibility, this data was only partially available. Bank reporting was tedious and difficult. There was no transparency or overview of group-wide financial instruments as well as intercompany trade and loans, adding to the confusing cash reporting situation.

Kongsberg Automotive struggled with:

  • Lack of visibility/transparency across banks and entities
  • No daily cash reporting
  • Managing financial instruments and intercompany loans
  • Completely manual process in the ERP system with no access to statements
2 Banking and global payments

Kongsberg Automotive’s existing banking setup consisted of a notional pool not including all countries, yet covering multiple jurisdictions. In the absence of group-wide collaboration, standards or automation, insecure payment processes were an issue, as was the lack of control and payment validation against global liquidity, currency positions and planning.

Kongsberg Automotive struggled with:

  • Finding the optimal banking approach and partners
  • Lack of payment standardization
  • Lack of payment automation
  • Insecure payment processes
  • Decentralized payments not being validated against global liquidity, FX positions and planning
  • Maintaining control over cash pooling involving different jurisdictions
3 Planning and risk management

In addition to short-term cash visibility, Kongsberg Automotive’s treasury department lacked detailed insight into more long-term cash needs and liquidity planning data, for example per currency. What’s more, the treasury team had no efficient means of comparing actual data from bank statements with planning data, which resulted in a lack of accountability. Manual, unconnected efforts kept them from better anticipating how much cash would be needed and where. It also made it difficult to monitor and manage risks and secure and manage financing.

Kongsberg Automotive struggled with:

  • Non-standardized, fragmented forecasting and liquidity planning
  • Trade finance
  • Supply chain financing
  • Intercompany financing
4 Intercompany reconciliation and netting

With its decentralized and non-standardized setup, Kongsberg  Automotive was up against many barriers when it came to intercompany trade. The existing reconciliation and netting process wasn’t meeting requirements, and some entities were not even involved.

Kongsberg Automotive struggled with:

  • A reconciliation and netting process not fit for purpose
  • Some entities excluded from the netting process
  • Lack of intercompany rating and pricing

The solutions

Kongsberg Automotive approached their treasury transformation methodically and holistically. With the support of BELLIN, they worked out a 3-year strategic treasury transformation roadmap including vision, function, building blocks, time line and risks.

Through the implementation of the BELLIN tm5 treasury management system and a significant process overhaul, KA pursued better cash visibility, cash flow forecasting, control over payments and liquidity and more automation. They established the following solutions.

1 Cash management and financial instruments

Kongsberg Automotive abandoned their manual processes and implemented the BELLIN tm5 treasury management system with the BELLIN SWIFT Service. This gave them access to the powerful SWIFT banking network and enabled automated import, processing and reconciliation of bank statements. By using a central group-wide platform containing all data from across the group rather than fragmented bank websites, they achieved complete cash visibility and enabled daily cash reporting. In addition, KA set up a new, more suitable cash pooling structure with JPM and Danske Bank and one global zero balance cash pool. It also achieved a comprehensive overview by recording and managing all financial instruments in the tm5 system.

Kongsberg Automotive took the following steps:

  • Automated import and processing of external bank statements
  • New cash pool structure with one global zero-balance cash pool
  • Bank reporting with BELLIN SWIFT Service (end-of-day statements + intraday statements for the cash pool)
  • Automated reconciliation
  • Daily cash reporting based on improved cash visibility
  • In-system recording and management of financial instruments, incl. intercompany loans and bank guarantees
2 Banking and global payments

As part of the comprehensive treasury transformation project, Kongsberg Automotive decided to reorganize its banking setup and chose JPM and Danske Bank as strategic banking partners. With BELLIN tm5 and its integrated global payments platform, the group centralized and standardized payments, including the introduction of the XML format (Fin and FileAct). Straight-through processing significantly improved security, as did the centralized releasing of payments, which also enabled validation against global liquidity, currency positions and planning. Additional checks, including vendor verification have been implemented. KA Group also introduced an in-house bank with payments on behalf of (POBO).

Kongsberg Automotive took the following steps:

  • Bank reorganization
  • Strategic banking partners (JPM + Danske)
  • Introduction of the tm5-integrated payments platform and the BELLIN SWIFT Service
  • Payments in standardized XML format (Fin and FileAct)
  • Introduction of straight-through processing (STP)
  • Introduction of an in-house bank with POBO
  • Centralized releasing of payments after validating against global liquidity, currency positions and planning
  • Ban of manual/single payments via e-banking platforms
  • Introduction of vendor verification
3 Planning and risk management

Prior to reorganizing their planning and risk setup, KA Group refinanced the group by issuing a corporate bond and implemented supply chain financing. To better anticipate cash needs and manage risks, they introduced the following liquidity planning setup:

  • Liquidity forecasts consisting of:
    • Short-term liquidity reporting (5 days)
    • 15 weeks rolling forecast

Risk management was also optimized in the tm5 treasury management system. FX deal confirmation was automated. The introduction of an in-house bank helped alleviate issues in connection with intercompany financing.

Kongsberg Automotive took the following steps:

  • Refinancing with corporate bond issue
  • Introduction of liquidity planning (Short-term Liquidity Positioning, CFF and Actuals)
  • Automated FX deal confirmation
  • Introduction of an in-house bank
  • Intercompany loan documentation and administration and automated settlement of interest over in-house bank as well as IC accrual bookings
4 Intercompany reconciliation, netting

Kongsberg Automotive left behind its decentralized and non-standardized setup in intercompany trade. It used the tm5 treasury management system’s reconciliation and netting functionality, leveraging the unique agreement-driven netting approach, to streamline the process and include all entities. It also introduced an intercompany rating and pricing tool and set up an in-house bank to further standardize intercompany trade.

Kongsberg Automotive took the following steps:

  • Improvement of intercompany reconciliation and netting process
  • More legal entities included in the netting process
  • Set-up of in-house bank
  • Introduction of Zanders intercompany rating and pricing tool
Special challenge: SAP integration

Kongsberg Automotive uses SAP as their ERP system and needed to ensure direct integration and straight-through processing from the tm5 TMS. This enabled:

  • Automated import of internal bank statements from treasury management system
  • Reconciliation and cash application (FEBAN) implementation
  • Lockbox reconciliation – FEBAN Lockbox
  • All local and international payment types including check payments with off-site printing of checks
5 Treasury process transformation

Any tool is only ever as good as the processes that carry it. This is why Kongsberg Automotive did not simply throw technology at their challenges but also took a good hard look at their processes. In a comprehensive scoping workshop with TMS provider BELLIN, they worked out what would be needed to marry functionality and workflows in an optimal way and to get all stakeholders involved.

As part of their change management strategy, Kongsberg Automotive developed:

  • Manuals for new processes
  • Training videos
  • Microsoft Stream videos for tm5 treasury management system and SAP processes

The results

Through the introduction of the tm5 treasury management system, Kongsberg Automotive was able to use technology as an enabler to centralize, automate and combine cash data and payments. In addition, optimized process design and effectiveness were equally important to leverage this functionality in the best possible way and to carry the treasury transformation. Having built a solid foundation, Abraham Geldenhuys and his team can now approach treasury with strategic foresight.

Kongsberg Automotive achieved:

  • Group-wide and bank-wide cash visibility
  • Centralized workflows and control
  • Automation and efficiency

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