Building a Global Treasury Enterprise

by Kathy Hiebert, Senior Finance Manager, International Treasury, General Mills, Inc.

General Mills has enjoyed a long and illustrious history as a producer of favourite brands across the United States, but its international activities were relatively limited until two major acquisitions. The French company Yoplait, which sold yoghurt products across 70 countries, was acquired in 2011, and Yoki Alimentos, originally a multi-brand family-owned business from Brazil in 2012. Prompted by these acquisitions, General Mills has created a global treasury organisation that is equipped to support both its current international activities and future aspirations, as Kathy Hiebert, Senior Finance Manager, outlines. 

Original treasury structure

Before embarking on our global treasury project, our treasury comprised 10 full-time equivalents at our Minnesota headquarters. We relied heavily on local finance teams who performed treasury activities locally with group treasury support, but we did not have a treasury centre outside the United States to support our international operations. Domestically, we utilised a treasury management system (TMS), but managed international treasury operations manually using spreadsheets.

Although treasury was a dedicated function, the international treasury manager role was part of a finance rotation. Following the acquisition of Yoplait, we recognised the need to bring specialist treasury expertise on board to manage the increased scale and complexity of our treasury activities, which was the point that I joined the company.
 
 

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Creating a world class global treasury organisation

Embarking on a global treasury journey is challenging, not least because it is not easy to know where to start. Our first step was to develop a blueprint to outline what our future treasury organisation would look like, which would ultimately take a ‘follow the sun’ approach to managing liquidity and FX risk, and provide back-up support across regions for business continuity. In addition to defining an organisational structure, we also needed to refine and standardise our policies and controls, and maximise visibility over cash and risk globally.

From an organisational perspective, our corporate treasury function would be responsible for setting global policy, providing oversight across our global treasury activities, and act in an advisory capacity to the business. Our regional treasury centres, initially in Switzerland but ultimately in Asia and Latin America will support treasury activities in the relevant region, consolidate data and provide local treasury advisory. Given the combination of finite treasury resources and local regulatory challenges, we will continue to work with local finance teams to perform local cash management activities in some countries, such as India, and leverage our shared service centre for transaction execution.

Building a European treasury centre

We adopted a phased approach to building our organisational structure. In 2013, we set up our Geneva treasury centre, building an organisational structure that created regional presence, subject matter expertise, and centralisation of activities.

Having established our European treasury centre, we then developed a more robust cash management structure, and latterly implemented SAP treasury module to provide a global treasury technology framework. Our Geneva treasury centre now manages more than 100 bank accounts in 12 currencies. We have one primary bank relationship with multiple local bank relationships. We use a combination of physical pooling with a multi-currency notional overlay to optimise our balances in Europe and concentrate our FX risk in one legal entity.

Alongside our cash pooling structure, we implemented an in-house bank, building on SAP’s functionality in this area, and then added further capabilities including loan management, accounts payable and FX risk management. We have also implemented SWIFT to provide a single communication channel to our banks, including account statement retrieval and electronic funds transfer. Implementing SWIFT in conjunction with SAP has helped tremendously by creating a global technology and communications framework to provide a consistent, harmonised and highly efficient base for each of our treasury centres worldwide.

Quantifying the benefits

Establishing our European treasury centre has already proved enormously successful with considerable value to the business. We have reduced our local banks by a third, and accounts by around half. We are also centralising approximately 30% more of our cash, allowing us to leverage surplus balances more effectively across the business. Just as importantly, we now have visibility over 90% of our cash and our external bank charges have been reduced. By automating, harmonising and centralising our treasury processes, we can channel more efforts into value-added tasks. There are also less tangible, but equally important benefits. For example, we have raised awareness across the business of the importance of FX risk and engaged in constructive discussions on how to manage this effectively. As a result, we are now working with local teams to better understand and be able to hedge FX risk.

Extending the value

Looking forward, we will continue to refine our treasury activities in Europe, and we are considering techniques such as payments on behalf of (POBO), collections on behalf of (COBO) and netting to further rationalise our external bank account structures. We are also looking to the next stage of our global treasury organisation, namely our regional treasury centre in Asia. We are expecting to achieve comparable benefits in Asia to those we have achieved in Europe, such as enhancing governance and control, managing cash and risk more actively and making better use of technology. Issues such as navigating complex tax and regulatory conditions, and mitigating the impact of regulatory change are also very important in Asia, and by centralising treasury expertise into a dedicated treasury centre, we will be in a better position to do this.
 
 

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We have gained considerable experience during the European phase of our project which will be very valuable as we progress to Asia and subsequently to Latin America. As a predominantly US-focused business in the past, developing our international footprint has required considerable education and communication to make sure that our internal and external partners understand our strategy and how our risk profile differs from the past. In addition, it was important to explain to the business the reasons behind centralising the treasury function, and demonstrate the value that we can bring to them. This was not always easy in practice, particularly as people are naturally reluctant to accept change.

A cross-continent project also introduces the issue of managing a project and co-ordinating resources across multiple time zones. For example, we had people located in four different countries involved in the systems enhancement project stream, which required a disciplined approach to project planning, monitoring and documentation as well as a concentrated effort to clearly communicate utilising various tools.

Global treasury, international identity

Developing our international footprint, and building a treasury infrastructure to support it, is a unique and exciting opportunity for our business, but it exposes people to new issues and challenges, such as understanding and complying with local regulations and customs in the markets in which we now operate. As we globalise our business, we need to balance the need to harmonise and standardise our treasury with the reality of disparate regulatory conditions, and adapt accordingly.

Building a global treasury that is equipped for the challenges of the future is not an overnight process. Every corporation has a different perspective of what a centralised treasury should look like: what works best for one is not necessarily the right organisation for another, so it is essential to understand the business, its needs, ambitions and constraints, and build a treasury organisation that meets current requirements and anticipates the future.