| Status | Approved |
| Owner | Antonio Zappone |
| Stakeholders | Gilles Madjarian, Selim Ulhasan |
Issue
A decision is required as to whether to transition Treasury operations from Quantum to SAP S/4HANA, and whether a change in scope should be requested in order to bring Treasury operations into the ERP Project.
Recommendation
Background & Context
Quantum
Quantum is an application owned by FIS, as is a common application in the market to manage Treasury operations.
The Quantum system was implemented for Treasury operations as follows, wave 1 = Q2 2019, wave 2 = Q2 2020, and the existing 5 year license expires on 14th June 2028.
The Treasury organization are unsatisfied with the Quantum system functionality and the support from FIS is also unsatisfactory.
- Dissatisfaction with FIS, the supplier of Quantum, due to operational challenges and support issues.
- The current treasury processes are heavily reliant on manual interventions and face significant challenges due to system limitations and supplier issues.
S/4HANA
The Treasury Operation modules in S/4HANA are;
- TRM: Treasury Risk Management
- CM: Financial Cash Management
A scope review was performed to determine whether S/4HANA has the functionality to manage Syensqo Treasury activities. The outcome of the review highlighted that SAP has a high fit level, along with the opportunities to make improvements.
Refer to the Scope & Analysis section for for details on Treasury activities
License Costs
Quantum
- License Acquisition, Once off every 5 years 300k
- Annual Hosting Cost of 100k per annual
- Support cost of 70k per annum.
SAP ECC (existing Licenses utilized by Treasury)
- TRM
- Open action with IT
S/4HANA
- TRM License Cost (perceptual license in place): 20k per annum.
300k upfront, plus 73k annual maintenance fee. - CM License Cost: Already in place.
Implementation Costs
Quantum:
Cost to improvement and close gaps for Option B
Cost TBD
S/4HANA Implementation Cost
Estimate: 4 Resources (Lead, Functional Consultants, Data Consultant) over 36 months = 3.3m.
Scope and detailed assessment between Quantum and S/4HANA
Scope and analysis
Summary from Scope analysis:
- Standard S\4HANA functionality can effectively meet Syensqo treasury business requirements
- Quantum:
- Effective: for FX transactions overnight loans (Thailand)
- Sub-Optimal for;
- non-FX deals
- medium level of effectiveness for accounting and reporting
- very poor for Cash Management. Management
- Inter-Company loans is complex and semi-manual due loan management SAP and not fully integrated with Quantum
- Confirmations are not fully automated
Instruments: FX
| Instrument | Details | Type | Source | Scope Yes\No | Frequency
| In Quantum Yes\No | Quantum Effectiveness
| S4 Functionality
| S4 Module | ||
|---|---|---|---|---|---|---|---|---|---|---|---|
| FX Spot | Set-up: Foreign Exchange - FX: FX Spot An FX spot transaction is entered into between two parties where both parties agree on exchanging two currencies at an agreed exchange rate on a spot value date (as defined by market standards - D+1,+2 or +3) . | External Internal Mirror | 360T | Yes | High | Yes | High | STD Easy | TRM | ||
| FX Forward | Set-up: Foreign Exchange - FX: FX Forward An FX Forward contract functions as an FX Spot contract but with a settlement date that is in the future (later than the spot date) | External Internal Mirror | 360T Bloomberg Manual | Yes | High | Yes | High | STD Easy | TRM | ||
| FX Swap | Set-up: Foreign Exchange - FX: FX Swaps A transaction where both parties agree on the trade date to enter into an FX spot transaction (@ spot date and spot rate) and to enter into an FX forward transaction that mirrors it (@ forward date and Forward rate equal to the same spot rate + forward points). | External Internal Mirror | 360T Bloomberg Manual | Yes | High | Yes | High | STD Easy | TRM | ||
| Non-Deliverable Forward | Set-up: Foreign Exchange - FX: FX NDF A transaction where both parties agree on the trade date to enter into an FX forward transaction @ a specific forward date and commit to perform an FX spot transaction that mirrors it @ the same forward date at a spot rate defined by a pre-agreed fixing rate (usually covered by a Master Currency Agreement). | External Internal Mirror | 360T Bloomberg Manual Request | Yes | Medium | Yes | High | STD Easy Fining Automation Non STD Easy | TRM | ||
| FX Request | Set-up: Foreign Exchange - FX: FX Request When Affiliate doesn’t know target instrument in FX | Internal | Request | Yes | Medium | Yes | High | STD Easy | TRM | ||
| Participating forward | Set-up: Foreign Exchange - Currency Option: Participating Forward A transaction where both parties agree on the trade date to enter into an FX forward transaction @ a forward rate (which is out of the market) and with a pre-agreed percentage of participation. At maturity, if the market spot rate is more favorable than the agreed Forward rate, the participation percentage of the nominal amount is not exchanged. If the market spot rate is less favorable than the agreed Forward rate, the full nominal amount is exchanged. @ Solvay, this instrument being an option strategy, it is registered as two vanilla options as follows (example: Solvay Sell USD buy EUR with 30% Participation): - Solvay Buy Put USD call EUR at 100% of nominal amount @ strike X and premium -Y - Solvay Sell Call USD Put EUR at 70% of nominal amount @ strike X and premium +Y Both options have the same value date | External Internal Mirror | Manual | Yes | Low | No | NA | STD Easy | TRM | ||
| Currency options (Vanilla) | Set-up: Foreign Exchange - Currency Option: FX Option Vanilla See Participating Forward | External Internal Mirror | 360T Manual | Yes | Low | No | NA | STD Easy | TRM | ||
| Zero cost collars | Set-up: Foreign Exchange - Currency Option: Zero cost collars This is an option strategy which is traded as follows (example: Solvay Sell USD buy EUR): - Solvay Buy Put USD call EUR @ strike X and premium -Y - Solvay Sell Call USD put EUR @ strike Z and premium +Y Both options have the same value date | External Internal Mirror | 360T Manual | Yes | Low | Partly | Low Accounting is manual | STD Easy | TRM | ||
| Interest rate swaps | Set-up: Open (FIS/ Solvay Phase 2) An interest rate swap is a derivative in which Solvay Agrees with a counterparty to exchange Floating Interest rates (of a specific loan) for a Fixed interest rate. At each interest maturity, Solvay would pay the counterparty the agreed-upon fixed rate and the Counterparty would pay Solvay the Floating rate as per loan agreement fixing definitions. | External | Manual | Yes | Low | No | NA | STD Easy For Instrument STD Complex For Valuation | TRM | ||
| Cross currency swaps | Set-up: Open (FIS/ Solvay Phase 2) A cross currency swap is a derivative contract in which Solvay agrees with a counterparty to exchange principal and interests in different currencies over the lifetime of a loan. This type of derivative is used to hedge exposure linked to a loan in foreign currency. Both parties agree to exchange notionals (at inception and at maturity) and to exchange interest payments at each interest term. | External | Manual | Yes | Low | No | NA | STD Easy For Instrument STD Complex For Valuation | TRM | ||
| FX Order SELL | Set-up: Dealing: FX Order SELL Only for reporting purposes: OCO (Order cancel Order) left with a bank (or not) requesting them to execute Sell Currency vs Currency 2 if the spot rate reaches one of two pre-defined levels (Take profit or Stop Loss) | External | Manual | Yes | Low | No | NA | STD Easy (the use of this is not clear, but an FX order or Option is std). more details req'd | TRM | ||
| FX Order BUY | Set-up: Dealing: FX Order Buy Only for reporting purposes: OCO (Order cancel Order) left with a bank (or not) requesting them to execute Buy Currency vs Currency 2 if the spot rate reaches one of two pre-defined levels (Take profit or Stop Loss) | External | Manual | Yes | Low | No | NA | STD Easy (the use of this is not clear, but an FX order or Option is std). more details req'd | TRM | ||
Instruments: Money Market
| Instrument | Details | Type | Source | Scope Yes\No | Frequency
| In Quantum Yes\No | Quantum Effectiveness
| S4 Functionality
| S4 Module | ||
|---|---|---|---|---|---|---|---|---|---|---|---|
| Overnight Deposit | Set-up: Money Market: O/N Deposit Overnight investment with counterparty for pre-defined fixed interest rate. Template defined as: Fixed rate Interest payment at maturity | External | 360T Manual | Yes | High | Yes Thailand & India only | High | STD Easy
However need to understand the Complexity for Thailand | TRM | ||
| MM Fixed | Set-up: Money Market: MM Fixed <= 3m, MM Fixed > 3m <= 1y, MM Fixed > 1y Money Market Instrument with Fixed interest rate that can be: Borrowing or Investment Intercompany or External 3 subtypes by maturity (for accounting purposes): Up to 3 months Between 3 months and 1 year More than 1 year Interest calculation formula defined as periodic, can be set to interest paid at maturity. | External Internal Mirror | 360T Manual | Yes | Medium | No | ? | STD Easy | TRM | ||
| Call/Notice accounts | Funds are deposited on an account with a counterparty for a given interest return but with no specific time period. Funds can be withdrawn with a pre-defined notice period | External | Manual | Yes | Low | No | NA | STD Easy | TRM | ||
| Investment bonds | External | Manual | Yes | Low | No | NA | STD Easy | TRM | |||
| I/C Draw-down Facilities | Multiple MM can be linked to one Draw-down Facility | Internal | Manual | Yes | Low | No | NA | STD Easy | TRM | ||
| Credit Lines | External | Manual | Yes | Low | No | NA | STD Easy | TRM | |||
| Money Market Funds | External | Manual | Yes | Very Low | No | NA | STD Easy | TRM | |||
| MM Float | Set-up: Money Market: MM Float <= 3m, MM Float > 3m <= 1y, MM Float > 1y Same as above but floating rate. | External Internal Mirror | Manual 360T | Yes | NA for now | No | NA | STD Easy | TRM | ||
Instruments: Money Market
| Instrument | Details | Type | Source | Scope Yes\No | Frequency
| In Quantum Yes\No | Quantum Effectiveness
| S4 Functionality
| S4 Module | ||
|---|---|---|---|---|---|---|---|---|---|---|---|
| Commercial Paper | Set-up: Securities: Commercial Paper A short-term funding instrument. Commercial paper can be issued by the company within the framework of a program. Issuance is performed through an Agent and Dealers who are the intermediary between the company and the investors. Amount (1.0 B€) and max maturity (12 months) are defined by the program and the interest rate is pre-agreed before each issuance. | External | Manual | Yes | Low | No | NA | STD Easy | TRM | ||
Bonds / EMTN (issues) | One template by Issue: For Fixed rate: Fixed Periodic For Floating rate: FRN CGL Periodic | External | Manual | Yes | Low | No | NA | STD Easy | TRM | ||
| Hybrid Bonds | External | Manual | Yes | Low | No | NA | STD Easy | TRM | |||
| Security Identifiers | Security Identifiers will have to be created for each ISIN code. It can then be linked to one or multiple Commercial Papers. Naming convention: Maturity date as the name and ISIN Code as description. | External | Manual | Yes | Low | No | NA | STD Easy | TRM | ||
| “Funding pre-hedge instruments | External | Manual | Yes | Low | No | NA | ? More details Req'd | TRM | |||
Instruments: Working Capital
| Instrument | Details | Type | Source | Scope Yes\No | Frequency
| In Quantum Yes\No | Quantum Effectiveness
| S4 Functionality
| S4 Module | ||
|---|---|---|---|---|---|---|---|---|---|---|---|
| Bank draft | Exclusively used in China: Bank drafts are commitment issued by a financial counterparty for the benefit of a Solvay Client. The client uses this bank draft as a payment method to Solvay. Once received by Solvay, a bank draft can be either used as a payment method to one of Solvay's suppliers, kept until maturity (at which point it can be settled for cash with the issuing counterparty) or it can be discounted. | External | Manual OR Interface for electronic SAP? | Yes | High | No | NA | ? More details req'd. Is this a pmt process | ? | ||
| Supply chain & reverse factoring | Confirm if in TMS and which purpose (reporting only?). Review with BW current report also - Currently done through a development in PI1 for IFRS postings at month-end, invoice by invoice | External | Manual | Yes | Med\High | No | NA | ? More details req'd. Is this a | ? | ||
| Sale of Receivables | Set-up: Money Market: Sales of Receivable | External | Manual | May not be worth it | Medium | Yes | Not Utilised | Non STD Complex | TBD | ||
Instrument Guarantees
Currently out of scope and done manually.
Instruments Equity Derivatives
| Instrument | Details | Type | Source | Scope Yes\No | Frequency
| In Quantum Yes\No | Quantum Effectiveness
| S4 Functionality
| S4 Module | ||
|---|---|---|---|---|---|---|---|---|---|---|---|
| LT options (calls) on Solvay share (Bermuda) | circa 8 years maturity (traded on SSOM) => those options may be exercised or resold | External | Manual | TBD Check with Gerald | Medium | No | NA | More details req'd | |||
| Total return swaps (TRS) | External | Manual | TBD Check with Gerald | Medium | No | NA | More details req'd | ||||
| LT options (calls) on Eurostox50 index (US) | External | Manual | TBD Check with Gerald | Medium | No | NA | More details req'd |
Interfaces & Communication
| Function | Details | Scope Yes\No | Frequency
| Quantum Connectivity Yes\No | Quantum Effectiveness
| S4 Functionality
| S4 Module | ||
|---|---|---|---|---|---|---|---|---|---|
| Deals | 360T Bloomberg | Yes | High | Yes | High | STD Easy | TRM | ||
Correspondence Confirmations | Misus Finastra | Yes | High | Yes APAC, EMEA, NA FX Trades Manual | Yes | STD Easy or STD Complex Via SWIFT | TRM | ||
| Market Data | Refinitiv Icon | Yes | High | Yes | High | STD Complex | TRM | ||
Treasury Payments & Bank Statements
| Function | Details | Scope Yes\No | Frequency
| Quantum Connectivity Yes\No | Quantum Effectiveness
| S4 Functionality
| S4 Module | ||
|---|---|---|---|---|---|---|---|---|---|
| Treasury Payments | Treasury payments related to instruments managed in Quantum. Complexity - Quantum send payments to SAP BCM for payment (double check this) | Yes | High | Yes | High | STD Easy | BCM | ||
| Bank Statements | Bank statements are imported in SAP, then interfaced from SAP to Quantum | Yes | High | Yes | Medium Some statements are missing | STD Easy | BCM |
Cash Management
| Function | Details | Scope Yes\No | Frequency
| Quantum Connectivity Yes\No | Quantum Effectiveness
| S4 Functionality
| S4 Module | ||
|---|---|---|---|---|---|---|---|---|---|
| Cash Position | Treasury payments related to instruments managed in Quantum. Complexity - Quantum send payments to SAP BCM for payment (double check this) | Yes | High | Yes | Medium | STD Easy | CM | ||
| Short-term Cash Forecast | We can use Quantum to generate a ST cash forecast, but the data on WC is poor and not interfaced - to be investigated | Yes | High | Yes | Medium | STD Easy Accuracy is dependent on the end-to-end process | CM | ||
| Bank Fee Analysis | No proper data / report to analyze bank fees today - everything is manual, full reconciliation with P&L is almost impossible | Yes | Medium | No | NA | STD Complex CAMT86. Not all banks can provide this. Could be beneficial for the main accounts | CM |
Reporting
| Function | Details | Scope Yes\No | Frequency
| Quantum Connectivity Yes\No | Quantum Effectiveness
| S4 Functionality
| S4 Module | ||
|---|---|---|---|---|---|---|---|---|---|
| FX Exposure | Automatic for WC BS Hedge, Manual requests for the rest of BS Hedge, manual input for Cash Flow Hedge | Yes | High | Yes | High | STD Complex Possibly Non STD Easy | TRM | ||
| Counter Party Risk | Yes | High | ? | ? | STD Complex | TRM | |||
| Cashflow Hedging | Issues when exposures are switching signs, report difficult to maintain | Yes | High | Yes | Medium | STD Complex | TRM | ||
| Spread Analysis | Used to compute interest rates on IBAs / Intercompany funding | Yes | High | No | NA | Possibly to the process is outside of the system. |
Accounting
| Function | Details | Scope Yes\No | Frequency
| Quantum Connectivity Yes\No | Quantum Effectiveness
| S4 Functionality
| S4 Module | ||
|---|---|---|---|---|---|---|---|---|---|
| Accounting Entries | Need to qualify how the postings are done for each instrument above, some are fully automated, some are fully manual | Yes | High | Yes | Medium Some Auto Some Manual | STD Easy | TRM | ||
| Hedge Accounting | For FX Hedge accounting | Yes | High | Yes | High | STD Complex | TRM |
Assumptions
Additional review and assessment will be conducted for the implementation timing after the decision of the KDD is concluded. However, it is assumed that if Treasury operations are to transition to S\4HANA, it will likely occur beyond the group 1 go-live.
Constraints
Impacts
If Treasury operations are to transition to S\4HANA, the intercompany loans will transition fully to TRM. There is an integration impact on IHB, and the associated loans with the affiliates.
Business Rules
Not applicable at this point of the decision making process
Options considered
Option A: Continue Treasury Operations activities in Quantum, "As-Is"
Option B: Continue Treasury Operations activities in Quantum, but set-up a project to improve the functionality
Option C: Transition from Quantum to S\4HANA as part of the ERP Rebuild project - "like for like" Scope
Option D: Transition from Quantum to S\4HANA as part of the ERP Rebuild project - Increased scope to meet business needs
Evaluation
Option A | Option B | Option C | Option D | |
|---|---|---|---|---|
Front Office: Instruments
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Front Office: Placing Deals
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Middle Office: Reporting
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Back Office: Confirmations
|  Pro | Con | Confirmations can be automated | Confirmations can be automated |
Back Office: Accounting
| Pro | Con |
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Cash Management
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Market Data
| ||||
| License Cost | 100k per annum | 100k per annum | 20k per annum | 20k per annum |
| Support Level | FIS Quantum support level in poor | FIS Quantum support level in poor | Opportunity to improve support level with Syensqo IT resources | Opportunity to improve support level with Syensqo IT resources |
| Implementation Cost | No Implementation Costs | Implementation Costs Required. Value to be determined. | Implementation Cost Required. Refer to the details and background section | Implementation Cost Required. Refer to the details and background section |
| Simplification Level |
Integration and interfaces are required between SAP and Quantum. Some integration is automated, some manual postings are required. Integration for Cash Management in complex Quantum in not operating in a Optimal manner |
The integration for effective Cash Management would continue to be complex. |
Include FI for accounting, and APM\BCM for payments and statements, and Cash Management Report are also produced on data with the one system |
Include FI for accounting, and APM\BCM for payments and statements, and Cash Management Report are also produced on data with the one system |
See also
Change log
Workflow history
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