Treasury of the Year Award

Apr 15th 2015 |

A good treasury delivers best practice in the vanilla services: funding, payments, risk and cash management. A great treasury provides all this while developing the next generation of processes and systems it needs to cope with today’s volatile and ever-changing environment.

SAP’s global treasury, led by Matthias Heiden, senior vice president and a member of SAP’s global leadership team, has certainly had a noteworthy year in delivering the basics. In the course of 2013, treasury realised that there was a strategic opportunity to refinance the company’s five-year revolving credit facility early. The refinancing gave a larger credit line on significantly improved terms. “The company enhanced its financial flexibility and lowered financing costs from 45 basis points to 22.5 basis points,” says Heiden. The refinancing transaction was self-arranged and included a two-tier bank structure that allowed the company to reshape its bank portfolio to provide global coverage and support the company’s growth strategy.

The team has been similarly proactive in payments. Unlike many companies SAP started its Single Euro Payments Area (Sepa) efforts early and went beyond the regime in its work with XML. After becoming Sepa compliant, the team has continued to pursue its XML efforts by moving the format beyond the Sepa countries into additional areas. A notable benefit of this enhanced and streamlined process has been that innovative technology allows global treasury easily to integrate new acquisitions into its payment factory.

Other key projects have been in risk management with the design and implementation of an interest rate risk management strategy last year to reduce P&L volatility and to create a balanced structure of fixed and variable cash flows. The team executed receiver interest rate swaps to convert certain fixed rate financial liabilities to floating in order to match the interest rate risk from financing transactions to investments. So far this has generated significant interest expense savings. Treasury has also refined its hedging approach in FX risk management. The previously applied rolling hedging approach was replaced by a layered one (including a standardised deduction of 30% of forecast provided by subsidiaries). That was to increase the exchange rate smoothing effect. Hedging of remaining exposure is effected in two layers with 12 and six months maturity, respectively.

But what truly marks the team out as this year’s EuroFinance Award for Treasury Excellence winner is the way in which the group embraces technology to maximise the value it can provide to the business and enhance the efficient and effective operation of treasury.

First, the team has helped develop the treasury application of HANA, the company’s super-fast in-memory database. This means treasury itself is more efficient. For example, the calculation of the group’s balance sheet exposure is now more than five times faster than it was as a result of using the technology. It also means treasury innovation and best practice itself is pushed forward. In addition, treasury is a key partner in the development of new products and new ways of thinking. It acted as co-innovator in the development of the SAP Financial Services Network in the Cloud and the SAP Smart Cash Management system powered by HANA.

It is this combination of great execution of the basics, continuous refinement of core treasury functionalities, a strategic focus at the core of corporate growth and cutting- edge technological innovation that has made SAP this year’s award winner.

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