From good to great: How Danone transformed its treasury in Asia Pacific and the Middle East

At the start of this process, Danone’s treasury operations in Asia Pacific and the Middle East were highly decentralised with diverse processes and systems. Operationally, there were three layers:

Central treasury team - Located in Europe, this layer was responsible for Danone’s group-wide treasury policies, including financing and hedging. They managed strategic activities such as large merger and acquisition financing as well as global risk oversight and overall treasury governance.

Regional treasury team - Located in Asia, the regional team played an intermediary role between the central and local teams, largely responsible for ensuring global policy implementation in local markets, coordinating regional treasury projects and managing relationships with regional banking partners. Notably, while the regional team supervised local market treasury activities, they were not involved in daily operations.

Local treasury teams - These teams managed day-to-day treasury operations, covering everything from cash flow forecasting and liquidity management to FX exposure and hedging. Until the transformation, they maintained autonomy over transactional activities, resulting in varied practices and processes across markets.

Danone wanted to optimise its treasury to support rapid business growth and modernise its processes for greater efficiency. The resulting transformation revolved around three pillars:

Overarching Danone’s treasury transformation was the Group’s implementation of a Shared Services hub, a centralised operating model designed to consolidate and streamline a range of finance and business support functions – including treasury – across the company’s global footprint. There are three hubs, one for Asia Pacific and the Middle East, one for the Americas, and one for Europe.

The Shared Services hub for Asia Pacific and the Middle East is in Malaysia, and the teams there directly handle cash management, banking connectivity and yield enhancement across the region – a significant shift from the prior approach where local teams independently managed these functions. Regional treasury continues to be based in Singapore with a focus on FX execution, policy making, strategic projects and overall oversight across Asia Pacific and the Middle East.

The implementation of Shared Services reflected Danone’s desire to move from a decentralised to a centralised model, and to standardise its approach to treasury processes. It’s also important to note why Malaysia was chosen as the hub – which is due to the country’s competitive labour costs, high quality infrastructure, overall market stability, advantageous time zone coverage and access to a skilled, multilingual workforce.

Danone’s ambition was to overhaul how its treasury was structured, who was responsible for what and the technology that would drive the function into the future.

A structural shift - One of the biggest impacts of Danone’s Shared Services model was providing local teams as opposed to regional treasury, direct control and responsibility over day-to-day treasury operations.

More effective FX execution - Through Shared Services, Danone classified countries as Central Cash Management (CCM) or Local Cash Management (LCM) countries. CCM is distinguished as markets that have convertible currencies – for example, Singapore, Japan, Australia, New Zealand, etc., while LCM refers to markets with restricted currencies.

For CCM markets, FX exposures were netted and hedged centrally, while local teams continued to handle these activities in LCM countries directly with their banks due to the non-convertible nature of the currencies.

Leaning into treasury technology - Critical to Danone’s transformation was the priority put on digitisation. To this end they deployed a new treasury management system across 17 markets to automate and standardise processes, providing visibility over bank balances, streamlining bank statement uploads and fee analysis, and centrally managing bank access and controls. Local teams could now submit FX requests through the system, routing them to the regional front office and then to their banks via a platform for FX transactions.

Banking in-house - Another important part of the transformation was increased activities with Danone’s in-house bank, Danone Finance International, or DFI. For example, all CCM countries maintained accounts with DFI, enabling exposures to be netted internally and reducing the need for external FX deals. DFI, incorporated in France, also provided a tax-efficient and streamlined solution for group-wide cash and risk management that cascaded down to the regional level.

Any treasury transformation requires careful coordination and collaboration with a banking partner. For our part, HSBC played an important role in Danone’s transition in a variety of ways.

On the back of the transformation, Danone’s treasury is now set up to properly support its ambitions for the region. It also meant better collaboration across treasury teams and more robust operations. The major benefits include:

Standardised processes - Danone now enjoys more consistent controls and practices across all markets, reducing operational risk.

Enhanced visibility - With real-time access to cash positions and exposures, Danone can be more proactive in its decision-making.

Efficiency gains - Automation and centralisation removed duplication and manual tasks, freeing up resources for value-added activities.

Improved risk management - Centralised oversight strengthened policy compliance and improved coordination in this area between the central, regional and local teams.

Essential to the long-term success of Danone’s treasury transformation was a clear and actionable KPI measurement framework. In line with their Central treasury team’s policies, hedging, funding, transaction volumes and core activities were segmented into key measurements: invoices paid on time, number of manual, urgent and rejected payments, monthly placements versus available cash, level of month-end balance in local countries, and level of hedging versus exposures.

These metrics are designed to help Danone’s treasury function better support the company’s broader growth and sustainability goals in the region and around the world.

Treasury transformations are involved processes, and care must be taken at each stage to ensure success. Danone’s experience has several best practices to take away.

Building and defining a core model - Clearly outline the list of tasks under treasury, aligning execution with global policies and ensuring buy-in from regional treasurers. Then assess each country against the core model to identify organisational gaps and develop actionable plans to standardise processes.

Putting people at the centre - Ensuring the right team and resources is key to centralisation efforts and requires adequate resources upfront to avoid delays and manage various stakeholder expectations on timelines.

Communicating effectively with stakeholders - Proactively engage with local markets to ensure transparency around actions for all stakeholders and ensure regular communication to keep service levels up throughout the transformation.

Putting in place robust systems - Identify and implement necessary systems to support daily treasury operations and minimise manual work.

Treasury transformation is not a one-time event but rather a process that allows the function to adapt to new market developments and business needs. It is for this reason that Danone is continuously looking at ways to refine processes and expand automation for even greater efficiency.

It is this spirit of that will ensure that Danone maintains a fully integrated, technology-enabled treasury function to drive its growth and resilience across Asia Pacific and the Middle East and beyond.