Adding value to operations is a key goal for the treasury team at Microsoft, as well. As the company shifts its focus to smaller customers and to Asia, treasury is responsible for ensuring that these transitions go smoothly. "Moving into these markets is very complex because, in areas like accounting processes or tax logic, there are differences from the way Western countries do things," says Jose Luis Marti, group credit manager for international markets for Microsoft's Worldwide Online Credit Services group. To ensure that credit and collections is both effective and efficient around the world, Marti and Gladys Jin, group credit manager for North America, revamped the way the function operates. The project has been highly successful, and the mind-set behind it demonstrates the attitude that the Alexander Hamilton Awards are designed to recognize. "The treasury and finance teams at Microsoft are constantly re-creating ourselves," Marti says. "If you stop innovating and changing, and always looking for what you can do differently and better, you are at serious risk of losing ground in today's always-changing global marketplace."

Global corporate growth presents a company's treasury team with both challenges and opportunities to innovate. When the business is starting to sell in a new market, treasury needs to make sure the company will get paid, and that it will be able to get its money out in a reasonable time. When the company is sourcing from a new geographic region, treasury needs to make sure that procurement staff understand, and are appropriately managing, the currency risks presented by different payment options. And for a company looking to open a business unit in a new market, treasury needs to develop a clear view of the banking landscape in that region.

All of these are crucial areas in which treasury supports a company's pursuit of globalization. But a winning treasury team adds even more value, making major contributions in areas such as risk management and pricing, and perhaps even providing insights into whether the transaction is worth undertaking in the first place. Following are the stories of three treasury organizations that have risen to the challenge and excelled in supporting their organization's global growth.

(To access an archived version of the Treasury & Risk webcast in which this year's winners described their projects, click here.)

Far Removed from the Status Quo

Iraq's rapidly expanding oil industry is a natural target for the "high growth regions" strategy of technology and manufacturing behemoth Honeywell. That's why in 2012, despite the nation's political instability, Honeywell began laying the groundwork to open legal entities within Iraq—one in Baghdad and one in Erbil, in northern Iraq's Kurdistan region.

Part of that groundwork involved establishing banking relationships, so Honeywell treasury got to work. The function's policy is to standardize banking structures whenever possible. But "Iraq is a very challenging environment, and we need to be flexible," says Ciar Timon, the company's senior regional treasury manager for the Middle East.

Ongoing war activities and the ISIL insurgency pose obvious, major challenges. Timon says another challenge is presented by antiquated practices in Iraq's banking sector. Employees must often go to the bank in person to handle tasks they could, in other places, handle online or over the phone. "Banking rules in Iraq issued by the Central Bank of Iraq or the Ministry of Finance can be confusing and sometimes appear to be conflicting," Timon says. Additionally, rules in Kurdistan can differ from rules in Baghdad.

Moreover, Iraqi law can sometimes conflict with Honeywell treasury's banking policies. For example, Iraq (like some other Middle East countries) allows a company's legal representative sole signature powers. In contrast, Timon says, Honeywell treasury has a two-signatory policy for everything related to banking. "We need a secure control environment in Iraq that is in line with our corporate compliance policies," she says.

These challenges are compounded by the fact that Iraqi banking regulations are always subject to change. "They're small things," Timon says, "but they can cause a lot of delays. We have to be agile, and be able to respond quickly when an issue presents itself." The country's trade landscape is also in perpetual motion. "The situation in Iraq can change from week to week," Timon says. "We just have to keep on top of it. In particular, we need to keep abreast of the ever-changing correspondent bank relationships."

Letters of credit (L/Cs) can be problematic for multinationals. The Iraqi Ministry of Finance has dictated that L/Cs for transactions worth more than US$4 million can go through the Trade Bank of Iraq, but L/Cs for transactions under $4 million must be handled by local banks. Few large global banks work with local banks within Iraq, and Timon says local banks can sometimes take months to process an L/C. "That's been one of the headaches we've faced over the last couple of years," she says.

Honeywell treasury is also working with its business units and banks on the wording of bank guarantees in Iraq. As it does throughout the Middle East, Honeywell treasury promotes the use of standard wording in Iraq and strongly encourages the businesses to discuss the wording with their Iraqi customers in order to avoid some of the issues Honeywell has faced in other Middle East countries. "One of the main issues," says Timon, "is that our customers sometimes want open-ended guarantees which expire either upon the issue of the completion certificate or upon the issue of a letter written by the beneficiary to the guarantor bank." This type of language could result in a business having to continually chase down a customer to get a bank guarantee formally canceled. 

"Another thing, which is much more problematic, is the assignment of guarantees," Timon says. "Certain customers want open assignment. Honeywell would prefer to have no assignment at all, but we are particularly opposed to open assignment. If a customer can assign the guarantee to just anybody, a year or two down the road we might find that it's assigned to someone on the OFAC [Office of Foreign Assets Control] list. This is a very real possibility when you're doing business in this part of the world—for example, almost every bank in Iran is on the OFAC list. For this reason, we do not allow open assignment on guarantees."

Accordingly, Honeywell treasury was very careful in selecting a banking partner for its new Iraqi business units. "We needed a bank with a good credit rating that would be forward-looking and efficient, and could give us a cost-effective cash management infrastructure," Timon says. "At the same time, we needed access to an adequate bank guarantee credit line to support our expected growth in Iraq. Our choices were limited." The company's global partner bank in the Middle East no longer maintained SWIFT connectivity into Iraq and had severed its ties with its Iraqi subsidiary. And local Iraqi banks could not meet Honeywell's needs.

Then in June 2013, Standard Chartered Bank, one of Honeywell's global partner banks, advised Timon that it was opening branches on the ground in Iraq. "We work with them in other countries, and they're one of our revolving credit providers," she says. "The timing was perfect." Timon was able to negotiate bank fees significantly lower than those other Honeywell subsidiaries had previously been charged by Trade Bank of Iraq.

Now Honeywell has opened accounts with Standard Chartered Bank in Baghdad, and they're ironing out some corporate governance issues in anticipation of opening an account in Erbil. "Our objectives in Iraq are to provide the best possible banking services for our Iraqi entities, in line with Honeywell treasury's strategic themes of globalization, automation, standardization, and simplification," Timon says. "But we had to take a flexible approach to reflect the realities of the situation in Iraq. We standardize when possible, but we always have to take the local environment into account."

Legal teams from Honeywell and Standard Chartered are working on a compromise solution to the conflicting signatory rules. Honeywell has likewise developed compromise wording for bank guarantees in the event that a customer won't accept the company's standard language. And the company's country manager recently obtained a green light from the Iraqi Ministry of Finance for Honeywell to use Trade Bank of Iraq for L/Cs on contracts worth less than $4 million.

The key to effectively supporting the company in an unfamiliar and unstable banking environment is constant communication, Timon says. "In a place like Iraq, it's crucial to share best practices with your banks and with your businesses. In Iraq, more than anywhere else, we need excellent communication between the various parties." To further this approach, Honeywell treasury provides regular training for Honeywell staff on topics such as bank guarantees and documentary letters of credit.

The move into Iraq demonstrates why Honeywell treasury is so successful in supporting the company's business units. "We consider a winning treasury organization to be one that adds real value to the operational activities of the company," Timon says. "We don't just wait for people to come to us when they have problems. We take a proactive approach, and we don't necessarily accept the status quo."

Innovation and Change in Credit and Collections

The Worldwide Online Credit Services (WOCS) team at Microsoft handles credit, collections, cash application, accounting, reporting, and bank reconciliations for the company's online advertising and cloud-based businesses, including Office 365, Microsoft Intune, and Microsoft Azure. It's an area of the company that's growing very quickly, nearly doubling revenue year-over-year. It's also an area in transition.

At the corporate level, Microsoft is transforming itself from selling software licenses primarily to large enterprises, to becoming mainly a devices and cloud-based services company focused on small and medium-sized businesses, and consumers as well. One online service the company is launching is a new sales channel so that resellers and distributors can sell Microsoft Cloud services and bundle Microsoft services with their own offerings. "It is very promising," says Jose Luis Marti, group credit manager for WOCS International. "We are on-boarding partners to sell our products. In two years, we'll have thousands of partners in nearly every country."

This shift has major implications for Microsoft treasury and for credit and collections. "We needed to change completely the way we were doing things," Marti says. "Our collections processes have to be very different from what we've done in the past. Our credit analysis has to be different as well."

The WOCS team has also been working to support Microsoft's increasing focus on Asia. One challenge it's facing is that many smaller companies in the region can pay only in their local currency. In addition, "moving into these markets is very complex because, in areas like accounting processes or tax logic, there are differences from the way Western countries do things," Marti says. "And in some countries, certain activities must be handled from within the country itself. To do business in China and India, for example, we had to set up local companies. Our WOCS team has worked closely with Microsoft's compliance, tax, legal, operations, and treasury groups to make that happen."

To meet these needs while supporting the business's rapid growth, the WOCS team launched Project Andromeda, a complete redesign of credit and collections processes for Microsoft's online businesses. One major change was that duties were segregated into pre-collections, collections, and post-collections, and different people were assigned to handle each segment. This allows the WOCS teams to specialize in specific tasks, providing higher levels of service to top-tier accounts and acting more quickly on past-due accounts. In addition, the collectors are working off of a work list that prioritizes which accounts the collections team should focus on, instead of assigning a fixed and permanent portfolio to each collector. The results include a huge gain in efficiency, fewer errors, and faster training time. 

"For legal reasons, our front-line collections team for Asia is based in Singapore, and collections for EMEA [Europe, Middle East, and Africa] is based in Dublin," Marti says. "But Singapore and Dublin are extremely expensive. The collectors in these locations have to perform the customer-facing activities, calling customers and so forth, but it doesn't make sense to have the same people performing 30 other tasks. So we moved all the non-customer facing tasks—such as application of cash, dispute management, write-offs, etc.— to a shared service center in the Philippines. That resulted in a huge reduction in collections costs."

The initiative has also helped the WOCS team provide better service to customers because now collectors can specialize and master a few processes, rather than being jacks of all trades. "We are unique in the finance function in that we interface with customers," says Gladys Jin, Microsoft WOCS's group credit manager for North America. "We hear feedback from customers on Microsoft products and services, and we bring that feedback back to the appropriate internal teams. We also collaborate with other teams to improve customer satisfaction. Rather than just collecting cash, we are very focused on helping improve the customer experience."

Project Andromeda also revamped the WOCS team's technology infrastructure. "Our goal is to make the end-to-end, order-to-cash process as efficient as possible," Jin says. "One way we're doing that is by automating cash application. We receive more than 25,000 payments each month, so every day around 1,000 payments come into SAP from our bank statements. We worked closely with our SAP team to set up auto-matching rules. Our target is for 80 percent to 90 percent of our invoiced payments to be automatically applied." The WOCS team also revamped their reporting process to ensure that reports keep each team focused on their most important tasks.

Project Andromeda's results speak for themselves. The proportion of accounts receivable that are more than 60 days past-due has fallen consistently for the past year. Costs for the WOCS function have stayed flat, even as Microsoft's online businesses have continued along their rapid growth trajectory. Today the WOCS team's cost for managing collections on invoices is considerably lower than its cost would be if the same customers paid by credit card.

But the WOCS team is not resting on their laurels. They're now in the throes of Project Rio, an initiative that consolidates some collections activities with a single global service provider, Accenture. The idea is to increase localized service for customers while continuing to reduce costs. In addition, the WOCS group is planning to launch 15 IT innovation projects within the next two years, to keep bringing the best of Microsoft technology to its treasury functions.

"Treasury and credit and collections teams need to look beyond their own function," Jin says. "We need to always be considering the end-to-end process. We need to look at long-term strategy and figure out how we can innovate to provide the best service to the company."

"Projects Rio and Andromeda exemplify how the treasury and finance teams at Microsoft are constantly re-creating ourselves," Marti adds. "If you stop innovating and changing, and always looking for what you can do differently and better, you are at serious risk of losing ground in today's always-changing global marketplace."

Dover Dives into Cross-Border RMB Pooling

The treasury team at Dover Corporation is well-versed in the complexities of managing a global organization. Headquartered in Chicago, the company operates in the engineered systems, energy, fluids, and refrigeration and food equipment sectors, manufacturing products at more than 200 facilities around the world. Despite its many successes running diversified global operations, three years ago Dover—like other companies—had to manage around Chinese currency restrictions to access its cash in China.

The company's global treasury processes typically consolidate cash from its 30 operating companies into a header account in each geographic region where Dover operates. Then, for the cash generated outside the United States, the funds from the header accounts periodically flow up to a global cash pool, where they're held in multiple currencies. This system allows Dover to source and deploy cash from almost everywhere—but not China, where Dover sells around US$300 million a year in products and services.

"In China, we primarily use U.S. dollars for imports and exports, but we use renminbi [RMB] for domestic transactions," explains Rachel Miao, Dover's finance director for Asia. "We have a renminbi-denominated cash pool that links together the Dover subsidiaries in China, but it couldn't link to our global pool. We had only two ways to move cash out of the Chinese pool: One was via dividend repatriation, and the other was company liquidation. If things were going well in our businesses, then we would repatriate the dividends. We would have to get the tax authority's approval before we could take the dividends out, so it would usually take three months. It wasn't an efficient process at all."

The Dover finance team started looking for a creative alternative for moving excess funds from the Chinese market into the corporate global cash pool. They submitted a proposal to the People's Bank of China (PBOC) describing a system they would like to set up to sweep renminbi out of the country.

"The PBOC wants the renminbi to become a stronger currency globally," Miao says. "In August of 2012, they were considering a pilot project to try a new approach to let multinational companies move their cash out quickly and efficiently. They asked several multinational companies, including Dover, to submit proposals." When the Dover proposal was shortlisted, Miao and Brian Moore, the company's vice president and treasurer, met with PBOC officials to explain the company's vision for cross-border sweeping of RMB.

"We communicated to the PBOC that we wanted to use the renminbi just like every other currency," Moore says. "Before, we had to manage Chinese cash separately. What we wanted was to be able to have access to our cash, and to be able to redeploy our cash throughout our system whenever we wanted. We explained to the PBOC that we would maintain the appropriate amount of working capital for our operating companies in China, but we would use excess renminbi to fund Dover operations in other parts of the world—in the same way we use euros, dollars, and other currencies everywhere else."

The PBOC was open to the idea, Miao says, "but they were considering whether they should keep a quota on how much cash moves in and out. That discussion lasted a couple of months. In mid-2013, the PBOC decided they would not limit how much money companies moved in and out, which meant the pilot project would allow true two-way cash sweeping."

That was good news for Dover, but shortly thereafter, the project hit another delay when China announced the Shanghai Free Trade Zone. "Our Chinese cash pool sits in the Free Trade Zone," Miao says, "so we revised the proposal very quickly to fit into the Free Trade Zone program. We submitted the new proposal in two weeks' time."

In January 2014, Dover's pilot program was approved. The company immediately began working with HSBC to open RMB-denominated bank accounts in Shanghai and Singapore and to set up two-way cash sweeping between the accounts. Partly because of technology, and partly because of jurisdictional issues, configuration of the accounts required a good deal of behind-the-scenes work by the bank. But HSBC put in the requisite effort, and now the system runs smoothly.

Dover set a target balance for the Shanghai account, an amount of cash that is appropriate to fund the company's Chinese operations on a daily basis. When Dover's businesses in China need more cash to fund operations than the target balance, renminbi sweep from the Singapore account into Shanghai. When the businesses in China generate cash and the Shanghai account exceeds its target balance, the excess funds above the target balance move to Singapore. Once the cash is in Singapore, there are no restrictions on its use. Thus, since the cross-border sweeping structure went live in April 2014, Dover no longer has cash trapped in China, increasing its flexibility for efficiently funding operations around the world.

Moreover, because the company can more effectively utilize RMB funds, Dover is starting to conduct more business in renminbi. It expects this transition to substantially reduce the banking fees it pays in China. "Needless to say, it can be expensive to convert U.S. dollars into renminbi through cash management banks in China," Moore says. "It can cost more than 1 percent of the value of the transaction." Miao and her team are working with Chinese suppliers and customers to determine which transactions might make sense to migrate from dollars or euros to RMB.

Moore attributes the initiative's success to several factors. First, he says, "Dover has been in China for a long time. We have assets in the country, and we're committed to long-term growth in China. That was the starting point for us." Then, when the company saw a chance to pursue cross-border cash pooling, it jumped straight in. "We could see the project would take a fair amount of work, but that the end result would be worth it," Moore says. "You have to be open-minded and creative to take advantage of an opportunity like this."

The treasury team sold their colleagues across the company on the prospective benefits of the project. "We had a shared vision," Moore says. "When the pilot project became a possibility, we talked about it with our colleagues in leadership in Dover and pointed out the benefits so that they saw the compelling reasons to move forward. We worked closely with Dover tax and accounting functions, in the United States, Singapore, and China. The quality and commitment of these teams helped us immensely."

The PBOC is so pleased with the project that in December it opened up cash sweeping as an alternative for every organization doing business in China if certain criteria are met. That move points to another key factor in Dover's success: The company's proposal for this project sat at a point where the interests of Dover intersected with the interests of the PBOC. "With this project, what would benefit Dover happened to align with what the PBOC wanted to do," Miao says.

And that's an important factor to consider anytime a company is pushing for regulatory change. Chances of success are better when you build a comprehensive business case for the change, and make very clear to regulators how your suggestions would further their agenda as well as your own. "We found an intersection and acted on it," says Moore. By pursuing the opportunity to innovate, Dover helped to create a new tool for cash management in China, one from which companies may be benefiting for decades to come.