Since 2004, Roche’s treasury team (Treasury) has been on an ambitious journey which has since proved a model for treasury functions around the world (see Figure 1). The team first centralised and optimised its banking and cash management operations with a focus on operational efficiency and automation, implementing a highly sophisticated and automated in-house bank, including intercompany netting, and payments on behalf (POBO) of group entities. A key next step in this process was the implementation of virtual accounts for collections on behalf (COBO), laying the foundations that have enabled Roche’s treasury to become group subsidiaries’ banking partner, and expand its role as a strategic partner to the wider Group.

Centralising and harmonising its treasury operations positions the team to realise emerging opportunities to add value to the business and supports the company’s strategic direction and growth plans. Christof Hofmann, Global Head of Corporate Cash Management at Deutsche Bank reflects, “Realising Roche’s successful treasury transformation has been the outcome of a long-term vision and partnership, combining a sustained commitment to innovation, extensive collaboration and a relentless focus on adding value to the business.”

“Virtual accounts were the missing element to close our local banking infrastructure.”
Martin Schlageter, Head of Treasury Operations, F. Hoffmann-La Roche Ltd

As Figure 1 illustrates, each phase of Roche’s transformation has delivered incremental benefits. For example, 2023 will be a significant milestone, marking 10 years since treasury pioneered Deutsche Bank’s virtual IBAN (or virtual account) solution. Roche’s aim was to rationalise banking relationships and accounts, reduce the KYC burden, minimise fraud potential and improve security by centralising payment and collection processes (see Figure 2). As Martin Schlageter, Roche’s Head of Treasury Operations comments, “Virtual accounts were the missing element to fully replace existing local banking infrastructure with a completely centralised one.”

This was a significant undertaking given that the pioneering virtual IBANs needed to support ideally the full breadth of Roche’s payment and collection requirements, including supplier payments, salaries, tax and bank guarantees on behalf of group companies. Furthermore, 10 years ago, the simplicity of the technological solution to integrate virtual accounts was not comparable to today’s status.

However, over the years, Roche and Deutsche Bank have, as part of their partnership, progressively expanded the set-up in line with prevailing market trends and client needs. Through continuous extension of the Virtual Account offering and a growing range of supported transaction types, Roche could reap further benefits over time. Beyond reducing the number of external bank accounts for group companies strongly, Roche has successfully accomplished the closure of all external bank accounts for around a third of group companies by now. As a result of this, Treasury has nowadays better oversight over bank account opening and signatory management, resulting not only in improved security but also less fragmentation of cash across accounts.

Treasury now has visibility and control over 100% of cash flows that are part of the OBO structure. All payment instructions, including both manual and file-based payments, are known in advance of execution, enabling better cash positioning and forecasting. The team has automated and standardised its cash management processes, with less manual process intervention. At the same time, subsidiaries continue to enjoy comprehensive insights and reporting of incoming and outgoing flows across their account with the in-house bank.

Although there are some European and Asian countries in which regulations prevent subsidiaries to be integrated into the group’s in-house banking model, treasury has still rationalised and centralised its cash and banking model substantially in these locations. For example, more than 186 group entities use the Roche in-house e-banking solution for manual payments, an unparalleled achievement in corporate treasury.

The result is reduced operational costs, financial benefits through economies of scale and a harmonised, robust process and technology infrastructure that enable the team to respond quickly to strategic changes to the business and wider market developments.

Building internal relationships and enhancing standards

Roche’s strategic advisory and business partnering function extends both ‘upwards’ to senior management and the CFO by providing better strategic insights into liquidity and risk, and across the wider Roche group. Treasury now delivers a full range of treasury and banking services to the group and provides a single connection between the organisation and its banks. Group companies approach treasury for support on how to optimise their payments, collections and wider supply chain operations, which helps to cement best practices across the group.

“Such a transition journey requires not only a strategy but teamwork”
Stefan Windisch, Senior Cash Manager, Roche Finanz AG

Treasury is also focused on adding value to the organisation in other areas, including through programmes such as supplier (and purchase order) financing, that offers financial, procurement and supply chain benefits.

As an example of a more recent joint innovation between Roche and Deutsche Bank, Treasury added the ability to receive and process multiple SWIFT MT940 statements per day. While the MT940 message, or CAMT53 for that matter, is ordinarily used for end-of-day processing, this innovation has introduced the capability to perform effectively intra-day reconciliation. This, in turn, expedites cash application to debtor accounts, much to the delight of both group companies and ultimately end customers, as debtor limits are freed up faster towards new sales. As instant payments continue to proliferate around the globe, Roche has already taken here another forward looking step in creating a capability to process bank transactions intra-day, away from the prevalent batch processing that often occurs on a next day basis only.

This is a key example of how treasury can achieve better credit management for its group companies than they would be able to achieve independently. This additional service has been very well-received, providing group companies with better visibility over cash and liquidity, and an enhanced ability to manage customer credit risk in near real-time. Roche’s Windisch reflects, “Such a transition journey requires not only a strategy but teamwork. It would not have been possible without the support of colleagues in the in-house bank team, treasury IT and collaboration and co-creation with our bank partners.”

Transformation at Roche’s Treasury has been a long-term, and continuous process, delivering incremental benefits that strengthen operational and strategic foundations. This has not been a linear process, however, and Treasury has adapted its priorities in line with changing market and organisational conditions. For example, while the shift to remote working was straightforward, collections management became a more significant priority; likewise, there was more demand for Roche’s supplier financing programmes.

The range of technology opportunities available continues to expand, which in turn will shape Roche’s ongoing priorities. Schlageter and his team have already played a major role in the realisation of key initiatives in recent years, such as the rollout of the ISO 20022 standard, which will help increase payment efficiency. Roche was also a pilot organisation for SWIFT gpi/G4C to streamline cross-border payments. The work that Roche had already done to optimise its systems and process meant that treasury could quickly adapt to send and receive gpi tracker information. The team is now in a position to look at, and analyse how gpi data can be used proactively, for example to benchmark speed of payment execution in particular currencies, or to support their shared services accounts payable (AP) teams when vendors claim non-receipt of funds. Windisch continues, “Our internal solution will extend the value of transparency gained from a treasury initiative to AP colleagues in our shared service centre to track where payments are, and what deductions or conversions were applied."

Looking ahead, the development of blockchain – or distributed ledger technologies – is becoming an increasing area of focus in financial services, including corporate treasury. Blockchain technology can be particularly helpful for digitising and automating processes that extend beyond the finance and treasury function and involve multiple stakeholders, such as global supply chain management.

Roche has an active blockchain project underway to digitise order, invoice and payment processing, bringing together the different components of the purchase-to-pay process. The aim is to increase process automation and integration, reduce resource requirements, and minimise the risk of error or fraud. As with previous milestones in Roche’s journey, this is not just a technical project; rather, the team is looking at the initial benefits, and how these can be both sustained and extended beyond treasury and more widely across the supply chain.