SWIFT CORPORATE FORUM 2015-2016

L eading steel and mining company, ArcelorMittal, which has amarket presence in more than 60 countries globally, has aculture of quality and innovation that extends across the

business, including its treasury and finance processes. As a result,ArcelorMittal was as an early adopter of SWIFT, and is now workingwith partner banks to take the next steps in achieving harmonised,streamlined, automated financial processing. In this article, LaurentGuillouet, Head of Back Office and Cash Management, discussestreasury’s experiences so far and expectations for the future, incollaboration with Jérôme Cavaliero, Head of Cash ManagementFrance, UniCredit.

Treasury organisationOur treasury function is organised on two levels: firstly, treasurydepartments within each business unit, and secondly, our group treasurydivision. Business unit finance and treasury teams manage day-to-daycash management activities, and connect to treasury for financing,investment, market risk hedging (e.g., FX, commodities etc.) and cashpooling.

At group treasury, we manage all centralised treasury activities, suchas global financing, liquidity and risk management. We connect to our

business unit treasuries through a sophisticated intranet-based solutionthat allows them to request or offer cash, which are then managedautomatically through our treasury management system (TMS).

Banking relationshipsWe have a panel of partner banks with whom we work wherever possible.As ArcelorMittal has operations in over 60 countries, however, we alsoneed to work with local banks in many cases, either for regulatory reasons

by Laurent Guillouet, Head of Back Office and Cash Management, ArcelorMittal

ArcelorMittal was an earlyadopter of SWIFT.

Pioneering BankCommunication andProcess Automation

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SWIFT CORPORATE FORUM 2015-2016

and/or where our partner banks do not providethe depth of in-country solutions, localpresence or expertise that we require. With alarge number of banking partners, andtherefore bank accounts globally, we made thedecision to centralise liquidity directly, ratherthan outsourcing this to a bank through anautomated cash pool solution. By doing so, weare able to pool cash across multiple banks, andbe more precise in meeting our group liquidityrequirements. In addition, we are able torespond more quickly to changes inorganisation or bank account structures.

Another implication of working with a largenumber of banking partners was the difficultyof managing bank connectivity in a consistentand efficient way. We had a large number ofbanking systems in place, with differentsystems for each bank, and in some cases foreach country, with these systems managedboth by group treasury and business units. Eachof these systems needed to be maintainedindividually, with different security and userrequirements, formats and integrationrequirements. The exception was in France andBelgium where we used single domesticsystems for all banks, which led us to seek amulti-bank solution that could be rolled outglobally.

The decision for SWIFTIn France, ETEBAC was not designed as a globalsystem (and has since been discontinued) so weneeded to explore other potential options.SWIFT was an obvious contender, even thoughwe would be a very early adopter, and one ofthe first corporations. In particular, no othersolution offered the global multi-bankcoverage, security and scalability that werequired. Our objective was to create a singleconnectivity channel between ArcelorMittaland our banks, including messages originatingfrom group treasury or our business units. As acorporation that is committed to maintainingour best-in-class position and contribute toconstant improvement across the financialcommunity, we were keen to leverage theopportunities that SWIFT presented.

Making the connectionIn 1997, when we first connected to SWIFT,service bureaus did not exist, so we had nooption other than to connect directly, andtherefore maintain the SWIFT infrastructure

in-house. Since then, there have beensignificant developments in the ease andconvenience with which corporations canaccess SWIFT services, including outsourcingconnectivity to a service bureau. Outsourcedconnectivity offers some advantages,including lower costs and access to specialistexpertise, but although we have reviewed ourconnectivity mechanism regularly, we havedecided so far that we will continue tomanage SWIFT infrastructure in-house.

In addition to different ways of connecting

to SWIFT, banks also have differentmechanisms for supporting customers indifferent countries. In some cases, banks enablecustomers to send financial messages and filesthrough a single hub, and the bank then sendsinstructions to the relevant subsidiary. In othercases, the corporation needs to sendinstructions directly to the relevant banksubsidiary. A few banks, such as UniCredit, offertheir customers the choice of either approach.From our perspective, so long as processingefficiency is maintained and we receive a

We have decided so far that we will continueto manage SWIFT infrastructure in-house.

UniCredit Corporate & Investment BankingUniCredit is a leading European commercial bank with c. 3,500 professionals in 50countries. The bank has one of the largest networks in Europe with over 7,900branches and leadership positions in Italy, Germany and Austria and a strong presencein high-growth central and eastern European (CEE) countries. UniCredit is committedto long-term partnerships with clients across all sectors, and relationship managers andproduct specialists create tailor-made solutions in a strategic dialogue with clientsacross three pillars that comprise the bank’s Core Client Offer:

� Corporate Banking and Transaction Services� Structured Finance, Capital Markets and Investment Products� Access to Western, Central and Eastern Europe

Global Transaction BankingUniCredit’s Global Transaction Banking (GTB) combines local expertise of more than2,000 professionals in over 20 countries with the knowledge and experience of asophisticated global transaction bank. Its diverse and proven set of core competenciesin the fields of Cash Management and eBanking, Trade Finance, Supply Chain Finance,Structured Trade & Export Finance and Global Securities Services has won widespreadrecognition as shown by the many international awards it regularly receives.

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comparable level of service, we have noparticular preference; however, there can becontractual complications if communicating ata subsidiary level, so in general it is easier for usto use a single connection to each bank.

Over the years, we have connected to eachof our partner banks via SWIFT, and at thesame time, connected each of our businessunits in turn into our central TMS infrastructureto allow them to leverage the SWIFTconnection. The only exceptions, therefore, arebusiness units that are not yet connected to ourTMS, but we have a rollout programme in place.We use SWIFT to exchange a wide variety ofmessages with our banks, from treasurytransactions such as FX confirmations throughto centralised, high-value payments andaccount statement reporting.

Harnessing standardised formatsImplementing SWIFT has been a major stepforward in resolving our connectivitychallenges, and we have been successful inachieving a secure, robust and scalable channelfor multi-bank communication. While SWIFToffers considerable opportunity for corporationsto connect more efficiently with their banks, weare now looking for our banks to support ourharmonisation and efficiency objectives moreproactively. For example, at present, we havedifferent cut-off times for each of our banks, sowhile we have a single communication channel,our processes are often different. It wouldtherefore be very helpful to have very clear,

standard cut-off times to allow us to define ourprocesses more precisely and cohesively.

Similarly, we are seeking greaterstandardisation and better quality of formatssupported by, and provided by each bank. Thisis essential for multinational, multi-bankedcorporations like ArcelorMittal to enable us tostreamline and simplify processes, and buildbusiness rules for automated processes suchas reconciliation. While the widespread use ofXML-based ISO 20022 is an excellent theory,for example, and we are using it atArcelorMittal, its value is limited unless it isused in a consistent way by all of our banks.This includes ensuring that all data ispresented in a structured format, as withoutthis, we are unable to use it to build

automated processes.Finally, data needs to be of a quality that is

at least comparable with existing formats.This is not yet the case, and in fact, we arestill receiving better quality data throughlegacy formats, even though these aredifferent across banks and across countries inmany cases. Linked to this, we are currentlyexperiencing difficulties with intra-daystatements in that some banks do not includea unique key on each account entry, whichmakes it impossible to use these statementsfor reconciliation as our automated processesreconcile statements incrementally. However,if this functionality was offered as a standardprocess by every bank, it would make anenormous difference to both our processefficiency and liquidity management.

Collaboration and partnershipsFor corporations such as ArcelorMittal,simplicity, security and reliability of informationare essential to achieving our financialprocessing objectives. Leveraging SWIFT is amajor step forward, but a singlecommunication channel alone is not enough.Banks need to focus on creating a morecohesive experience for their corporatecustomers by being more consistent andtransparent in their use of formats, and providericher data in a way that is meaningful andvaluable. To encourage and facilitate this, weare working proactively with our partner bankssuch as UniCredit to allow us to leverage ourinvestment in SWIFT more fully, and automateand streamline processes as seamlessly aspossible. �

SWIFT CORPORATE FORUM 2015-2016

Laurent GuillouetHead of Back Office and Cash Management, ArcelorMittal

Laurent Guillouet is head of both Cash Management (cashcentralisation for ArcelorMittal and cash operations for morethan 100 companies in Europe) and Financial Back Office(including funding, hedging of commodity, FX and energy). Hismanagement is based on an IT background combined withexperience in financial market valuation and control.

“At UniCredit, we are proud of our pioneering heritage bysupporting early adopters of SWIFT such as ArcelorMittal. Byworking with innovative, early users of SWIFT andcontinuing our investment over many years, we have becomea market leader in promoting standardisation andcollaboration across the banking industry. Today, we arehelping companies of all sizes to achieve efficient,streamlined connectivity both through SWIFT and ourproprietary communication channels, with security, reliabilityand high-quality, harmonised data at the core of ourstrategy.”

Jérôme Cavaliero, Head of Cash Management France,UniCredit CIB France

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