Swatch Group - Watch Power

With TRINITY, Swatch Group keeps the corporate finances steadily in view
If the Swiss were not so level-headed, they would canonise their Nicolas G. Hayek. The white haired visionary enjoys in the alpine country an unequalled prestige that he actually fairly earned, since without him the rich-in-tradition Swiss watch-and-clock-making industry would likely not exist any more. And the world would be many beautiful, useful and innovative inventions worse off – whether it’s the Swiss watch, the Swatch-car or the Swatch Internet Time, a new concept of time measurement.

In the seventies, the Swiss watch-and-clock-making industry was heading in a single direction : steeply downhill. It had definitely missed the connexion to the world market. Switzerland produced at a too high cost and didn’t want to abandon its high price strategy, which called the survival of the whole industry into question. The two big watch-and-clock-making groups in Switzerland, SSIH and ASUAG Group, were in the early eighties on the verge of bankruptcy and even the banks didn’t want to back them anymore.

„If Nicolas Hayek had not had at that time a consulting mandate and if he had not committed his own capital, the whole watch-and-clock-making tradition in Switzerland would have get lost”, says Andreas Wälti, describing this horror scenario again. The manager, as a financial controller, makes sure that cash resources are always available for the whole group – today’s Swatch Group. From the very first, the “Patron” paid not only attention to the appearance of the products and their commercialisation but also concentrated on the financial fundamentals of success. “This gave him the reputation of a rescuer – he is still considered today as one of the three economic leaders in Switzerland, whom people more trust and respect. One can say that without blushing”.

Creativity and centralism
The secret of his success ? Nicolas Hayek is not only a marketing genius, but also – and primarily – a rehabilitator. This is reflected in the organisation of the Swatch Group. It is today a corporate group which subsidiaries have in addition to 17 worldwide known watch brands like Omega, Longines or Tissot, a global sales structure and a multitude of factories, which cover the whole value creation chain of the watch-and-clock-making industry. The “Patron” takes care that the top-management doesn’t loose touch with the rank and file – flat hierarchies and open doors encourage a regular communication. “The production line worker knows that his proposals to optimise the work sequences will be taken seriously into account”, explains Andreas Wälti, “and that the higher levels won’t simply sell his propositions as their own. of course, This strongly motivates people to think about what they can improve in the company and to do their best.”

Each subsidiary is fully autonomous in its creative development. What hold them together indeed, is a tight finance management which is domiciled in the Global Treasury Centre in the Swiss head office. A weekly liquidity check, a comprehensive risk management and a particular corporate culture ensure that nothing changes. The Swatch Group’s Treasury Centre could also be characterised as a bank within the group. The task of these finance specialists consists in having funds at the right time and at the right place – there where they generate earnings. Thereby, billions of Swiss Francs are at stake. “We relieve the subsidiaries of this task: we tailor for them a “credit dress”, audit their balance sheets, their financial needs and their budget” says Andreas Wälti, describing his role as a financial controller.

For this task was used a system especially developed for the group which had proved itself, but which limits became ever clearer over the years. Out of two trends was one single solution searched for. Andreas Wälti, as financial controller of the group, wanted to reform the grown structures in the field of Treasury management because the proprietary developments weren’t commensurate with the complexity of the subject. A software, Interplex, existed already for Treasury Management and served its purpose. But it was technically obsolete and not being enhanced anymore. Felix Knecht was hence looking for a solution which would at the same time satisfy the demands of the treasurer and embrace the corporate structure and its philosophy. Already in the middle of the nineties began the exhaustive search for this system – but it simply was not found. Other worldwide operating Swiss groups had to face the same problem which resulted in regular contacts between colleagues.

Between position-keeping and accounting
“The difficulty in the market of Treasury softwares, is that there are two trends” says Felix Knecht explaining the dilemma: “Some people come from Position-keeping – that is the trader-approach in which all kinds of financial products must be taken into account. Other people want to have as many synergies as possible: for instance when you can record transactions of the treasury at the same time in the accounting system. However, the treasurer is rather considered, with this solution, as a better accountant”. So the group was looking for an all-in-one software suitable for both areas and even compatible with different databases. Furthermore, it had to be a “ready-made” product.

Since 1995 we have sift through more than 100 providers and a dozen more closely examined – “and we always came to the conclusion that revenue and expense were not compatible. Many systems were on the one hand over-dimensioned for the purposes of the Swatch Group, but on the other hand did not cover large areas which were important for an industrial group” says Knecht, describing the awkward position.

With TRINITY, Swatch Group has at last found a firm that seems – with its system for corporate treasury, TMS – to satisfy its needs properly, and which offers a very attractive price compared to the other providers. TMS assists the treasurer in the development of a consistent and company-wide financial database, automates and structures the process of data collection and classification of currency-differentiated payment flows and helps to identify and manage financial risks on a time-oriented basis, and to evaluate most different financial instruments.

„In November 1999, I was of the opinion that we had to buy two different solutions“ remembers Andreas Wälti, “one for treasury management, that is Forex and interest rates management, and one for controlling and liquidity planning. After we had looked at the TRINITY solution, we realised that we could merge the two projects.” The advantage: you only need a common database, so you avoid redundancies and thereby failures. In march 2000, a workshop with presentation was organised in the Swatch Group and also convinced the management. With some small adjustments the two projects could be effectively covered with a single solution that was fed since the beginning of July with some raw data. During two months the systems were running parallel in order to catch possible difficulties. Since 1st September 2000, the Swatch Group uses exclusively the TRINITY system.

Weekly reports and semi-annual preview
The treasury is the financial position of the group that reports critical data to the Top-management. Nicolas Hayek wants to observe the cash situation on a weekly basis – after all, this can change within a week by 100 Millions.
The 14 employees from this division, which is led as a profit center, have to master daily financial transactions of approximately 700 to 800 Millions Swiss Francs, the Asset Management administers more than one billion Swiss Francs.

Besides the weekly liquidity report was developed, before the introduction of the TRINITY System, on an Excel basis. The positions of the about 100 subsidiaries were collected through email or even through fax and consolidated into a corporate-wide cash position. The data collection partially occurred manually in an all-embracing Excel file with 25 tables, that was becoming difficult to master. Till the time when the report was completed, it was already out of date. This complex and besides error-prone process could be to a large extent automated now, owing to the openness of the TRINITY Solution. The reports of each subsidiary are laid on the platform of the Swatch’s own intranet and from there, after a plausibility check, transferred in TRINITY through the push of a button. Besides, the link-up of the 100 subsidiaries could be completed within two months.

The economy of time is now used by the employees of the Treasury Center for a more precise analysis of the data. “Three man-days were previously necessary to manually enter the data of all subsidiaries in the system – today, it is less than one man-day and the error probability is substantially lower”, explains Andreas Wälti. “The solution is more user-friendly because the Financial Controlling now works with the same user-interface as the Treasury Management – It considerably facilitates Controlling and reduces the training costs.”

Overview and communication
From These technical ameliorations result a series of tangible advantages for the management of the whole group, recapitulates the Financial Controller of the Swatch Group: “The management doesn’t want to see 150 individual risks, but to be able to appraise the overall sensitivity of our risk portfolio. They have now – faster than ever before – an overview on all the risk and cash positions of the group. Contrary to most of the other solutions, TRINITY is also in a position to calculate simulated transactions through the comprehension of genuine internal and external data, in order to be better prepared for the next three or six months.

An example shows in which extent the system facilitates the treasurer’s work and the communication between the single firms. If one of the subsidiaries needs a credit, the Financial Controlling should research all relevant data concerning the firm and its needs. Amongst them are for instance maturity structures, limits with individual banks or limits between firms, account data and signature authorisations (which is no banal thing with such a multitude of subsidiaries). Today, it’s possible to recall this data extremely fast because they are centrally saved and don’t feature any redundancies anymore.

The collaboration with TRINITY has convinced Andreas Wälti and Felix Knecht. “The technology satisfied us from the very beginning. Furthermore, the competence was from the outset clearly visible - TRINITY has always been straightforward and absolutely open to our input. The motto was clear: when the customer wishes it, then we have to develop it in such a way that it becomes a standard. I have never seen that in this extent!”


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