Headquartered in Dubai, United Arab Emirates (UAE), the Al-Futtaim Group comprises more than 200 companies and 42,000 employees. The group is present in 25 countries, and while it has a strong presence in the Middle East, it can also be found across Southeast and Central Asia, and some countries in Africa as well.
The group mainly focuses on five core divisions: automotive, retail, real estate, construction and financial services. The growth of the company over the past decade, in terms of companies and geographical scope, posed a challenge to Al-Futtaim Group’s treasury function.
“We had high-complexity manual processes and little automation,” explains Benjamin Koch, finance transformation and digitalisation lead at Al-Futtaim Group. “There were many different banking partners globally, all of which used different online banking platforms and portals.”
Due to all the different companies in the group, there are more than 1,000 bank accounts to be managed, with a large number of banking partners. “One of the key challenges we faced was that all treasury activities were recorded in Excel,” Koch says. “For an organisation of the size and complexity we have, it was very challenging to run all of this from Excel. It required a lot of manual work and wasn’t up to standard any more.”
As such, the treasury team decided to embark on a treasury transformation project to simplify some of the complexity and automate time-consuming manual processes.
The starting point for Al-Futtaim’s treasury transformation was a material analysis of the function and processes that connect to it in any way.
“We set up a multi-year transformation agenda, focusing on key areas of improvement, with the strategy as a starting point,” says Koch. “We wanted to define the role of treasury globally – who we are, what we do and how we support the businesses.”
From that, a target-operating model was developed. This comprised components that established the right personnel set-up and the right organisational set-up for treasury. This confirmed where treasury teams might need to be set up and ensured that capacity and capability was established.
A similar process was worked through on the governance side, where specific policies that needed strengthening or needed to be aligned with the new set-up were established, while the responsibilities between group treasury and division treasuries were agreed.
One of the key challenges we faced was that all treasury activities were recorded in Excel
“We clearly established the front office, back office and mid office notion, which is a standard concept for most treasuries of this size,” says Koch. “This was not an entirely new concept for us, but it wasn’t very formal in the governance until this point.”
That also went hand in hand with the third area of focus: system implementation. This represented one of the single-biggest changes to treasury operations, moving away from an Excel way of doing things to choosing a system. Al-Futtaim chose SAP and implemented the treasury management system as a foundation for the group treasury in the UAE to capture all treasury activities from the different divisions in the group.
“Part of the strategy was to strengthen the divisions’ capabilities in dealing with treasury activities,” explains Koch. “The treasury centre has been set up for a little while, but there were some missing links both in terms of interaction points and counterparty management.
To support the scope of the treasury transformation, it was important that the project was staffed appropriately.
“There was a large IT team that supported the transformation and helped us to implement both the system and the new processes,” says Koch. “We had the full support of the CFO, the group treasurer, IT and divisions, which is incredibly important. If you don’t have that support and sponsorship, you are not going to get very far.”
With such a big project impacting treasury staff in divisions and businesses all over the Al-Futtaim portfolio, a certain level of change management was required in order to get everybody on the same page.
“On the technical side, there were quite a few calls in the beginning for customisations of the system, from those that initially could not see the benefits of a standardised system,” explains Koch. “There was also a change in the way we work together. Everyone needed to stick to the process and how the system operates, or the transaction doesn’t get completed or recorded. This was a change management task, and it took a fair amount of time to operationalise this.”
When examining the benefits of the treasury transformation project at Al-Futtaim, it is clear that transparency over treasury transactions and cash is key. This is particularly timely given the Covid-19 pandemic.
“Having transparency at the push of a button is essential,” comments Koch. “A few months ago, this functionality might have been seen as nice to have, but maybe only needed every six months or so. Today, the net financial position really matters again to enable timely decision-making on loans, deposits and financial risks. Having balance information readily available is a great advantage.”
The treasury’s analytical abilities have also been transformed by the project, with various analytical reporting dashboards implemented. For the first time, treasury can analyse aspects such as the group’s entire cash positions and understand how they move over time.
On the technical side, there were quite a few calls in the beginning for customisations of the system
“For our 500 bank accounts in the UAE, for example, after six months worth of daily bank statements, we were able to analyse the actual cash movements and where optimisations are possible,” explains Koch. “On the back of that analysis, with selected banks we were able to implement credit interests and mini cash-pooling arrangements that yield interest benefits for us.”
Another benefit can be seen in treasury’s FX trading. Before the transformation, the company’s large number of annual FX trades went into Excel and manually into the enterprise resource planning for accounting purposes. Now, straight-through processing is utilised, with Bloomberg connected to the treasury system, which itself is connected to the accounting system. This opens new opportunities for tracking and analysing FX trade data.
“We were also able to put some robotic process automation solutions on top of that, for example, which enables senior management to approve major FX deals directly on mobile phones,” says Koch.
A treasury gap analysis was carried out to get a clear picture of how what had been implemented compared to Al-Futtaim’s foundational target-operating model. A key insight from that analysis was that while the group had a large community of treasury people globally, most were not full-time treasury staff.
“We realised the potential for treasury trainings to strengthen the community’s capabilities, and support development over time,” says Koch. “This was something we wanted to tackle, to ensure skills were improved and standardised.”
In early 2020, Al-Futtaim set up its Finance Academy, which is the umbrella for all financial management training in the group.
“For treasury trainings, we wanted to go through a proven framework, which is something that The Association of Corporate Treasurers [ACT] provides,” explains Koch. “We got accredited with the ACT and then started a journey to eventually offer these trainings globally in the organisation on a needs basis.”
In March 2020, Al-Futtaim was awarded the SAP Certificate for its outstanding performance and contribution in implementing and integrating S/4 HANA Treasury & Cash Management as a cornerstone of its treasury transformation journey. Beyond the roll-out, there’s still more innovation planned by the treasury team.
“On the structural component, we’re in talks with SWIFT and are further automating our payments landscape,” says Koch. “This also ties in with areas like the bank account structures, and potentially rationalising some accounts.”
Treasury has been a trailblazer for transformation at Al-Futtaim – so much so that the wider finance function has embarked on a transformation project of its own.
“The treasury transformation continues as one of the central work streams in the finance transformation,” concludes Koch. “With changes in other areas of finance, we keep a keen eye on the treasury target operating model to make sure it evolves and fits with the wider finance transformation.”
Treasury transformation team players:
Olivier Boutet, group treasurer
New role
I’ve been group treasurer for around two months as we’re speaking, but I’ve been working for Al-Futtaim group treasury for more than four years. Previously, I was responsible for corporate funding and was exposed to the transformation process from that side.
New benefits
Cash visibility has been a life-changer. Now we can come up with some strategies around cash management and cash pooling, and are in a much better position to have some interesting discussions with all stakeholders, creditors, banks and others.
A bright future
There is more functionality to come, in terms of an in-house bank, with payments, and for cash-flow forecasting – we are close to realising the ability to forecast on a 13-week basis. So there is more to come, and that’s going to be under my oversight, which I’m very excited about.
Treasury transformation team players:
Gerhard Roux, CIO
Identifying the right external partners
We appointed PwC to help with the operating model and the business case, and also as the architects of the piece. With them, we worked through what the vision for the project was – where we wanted to get to and what the target operating model was. This then related back to the technology, and we selected SAP Treasury as the solution.
Agreeing the road map
The business set out that eventually it would like to get to an in-house bank stage, and we documented the steps to get there. Cash visibility was critical, but we had hundreds of bank accounts. You can only gain that visibility if you start from scratch, with all transactions transparent, integrating with the banks and then building from there.
Introducing standardisation
Standardising the operating model across the globe was a challenge. The UAE is properly organised and has a proper treasury function. But that’s not the case in some of the other regions. We did a good job in bringing everybody together, designing and giving input to a single operating model. From a technical perspective, we’re running SAP, and the treasury solution we implemented is the next-generation S/4 HANA.
Treasury transformation team players:
Ismail Al Khatib, CFO of real estate
The divisional treasury perspective
The real estate treasury team is essentially an extension of the group treasury, due to the nature of our long-term projects and large capital management needs. We work closely through an operating model to meet real estate business needs.
Project input
My role was primarily participating in steering strategy formulation, ensuring alignment and connectivity of the various finance transformation strategy objectives with each other’s and with the treasury transformation objectives. I also ensured that the overall finance objectives and capabilities fit the needs of the real estate business.
Visibility over cash and risk
A key benefit of the transformation has been the ability to create more accurate cash-flow forecasts. As well as providing value for decision-making, these also anticipate and flag risks, particularly those to do with capital and facilities management. The re-engineering of internal process, supported by the right systems and tools, has greatly helped in creating consistency across business units and providing a focus on information analysis, interpretation and decision support.
Ben Poole is a freelance journalist specialising in treasury and banking
This article was taken from the August/September 2020 issue of The Treasurer magazine. For more great insights, log in to view the full issue or sign up for eAffiliate membership
