Equinor is one of the world’s leading energy companies and is present in more than 30 countries around the globe, employing over 20,000 people. As the largest operator in Norway and the biggest company traded on the Oslo stock exchange, Equinor has been providing energy since 1972, now increasingly from renewable sources.
Nordea is the largest bank in the Nordic region and has been working closely with Equinor since 1997. For a long time Equinor has been considered an innovator in treasury management and was one of the first companies in the Nordics to implement an internal bank set-up as far back as 1999.
Time for action
In response to the changing digital landscape and advances in technology, Equinor embarked on a thorough analysis of their treasury set up to identify the improvements they would need to make in order to reach the goal of becoming future proof, effective and more efficient, both in terms of processes and cost efficiency. As a key partner with a strong ambition to embark on the change journey with Equinor, Nordea put together a group of product specialists and cash management advisors to support Equinor during the process.
Øystein Lode, Global Cash Management Adviser and project manager for Nordea deliveries to Equinor, says: “The relationship between Nordea and Equinor goes back a long way, we know each other well and trust and respect each other. Both Equinor and Nordea have successfully completed large change projects together before, and this was the largest project carried out with Equinor’s treasury since they established their internal bank set-up almost twenty years ago. Equinor have always been ahead of the game in the way that they organise and run their treasury.”
The relationship between Nordea and Equinor goes back a long way, we know each other well and trust and respect each other.
In order to achieve the new future proof treasury, Equinor aimed to implement a higher degree of automation as well as simplifying and standardising processes wherever possible. Alongside technical improvements, they also set out to rationalise their number of cash management banks and move more volume into core banks such as Nordea, keeping other banks where needed to meet local requirements.
Equinor’s main SAP platform was upgraded to the SAP solution S4/HANA. A further re-design of internal processes required the implementation of Payment-on-behalf-of (POBO) and Collection-on-behalf-of (COBO) solutions, as well as a Virtual Accounts set up and a redevelopment of bank interfaces.
By implementing POBO, a treasury is able to make payments on behalf of subsidiaries using a single external account, usually per currency, with the payments logged in the relevant subsidiary’s internal account in the in-house bank. COBO allows a treasury to collect incoming payments on behalf of the subsidiaries using a single account, usually per currency, with the payments also logged in the relevant subsidiary’s internal account in the in-house bank.
Faster and better reconciliation of incoming customer payments also has potential benefits for Equinor’s energy trading business by providing up-to-date credit limits and enabling a straight through trading process.
Hallvard Bokn Eikeland, Head of Cash Management Infrastructure at Equinor and part of the project core team, adds: “A number of tailor-made solutions had emerged with Equinor’s existing platform over a period of 20 years so converging towards a new cloud-based SAP platform as a next step would allow for a more standardised solution. This would be more efficient to operate and maintain in the coming years.”
A number of tailor-made solutions had emerged with Equinor’s existing platform over a period of 20 years so converging towards a new cloud-based SAP platform as a next step would allow for a more standardised solution.
Making it work
As one of Equinor’s core cash management banks, Nordea continues to handle all of the company’s flows in Norwegian Krone as well as Swedish Krona and also some of the flow in Russian Rubles.
With the improvement project underway, the Nordea team held bi-weekly meetings with Equinor for almost two years in order to manage the implementation process. As a result of the project, Nordea introduced a POBO solution through the bank’s existing e-gateway interface and a COBO solution via a new Virtual Account Management system for the majority of incoming transactions. During the implementation phase, Nordea also provided advice and expertise to support Equinor on their change management journey.
Øystein Lode explains: “The virtual accounts that have been opened enable the mother company to collect money on behalf of all subsidiaries in the scope. Equinor designed a system that dedicates a virtual account to each customer. When money is received on the particular virtual account, the internal bank in Equinor knows exactly which subsidiary that money belongs to and where it should be allocated. This new system will enable Equinor to eventually reduce the amount of their external bank accounts by almost 50%.”
After another very good and fruitful cooperation, Equinor and Nordea are again at the forefront in the market, this time due to the new Virtual Account Management solution.
The future now
In the summer of 2019, POBO, COBO and the new Virtual Account set-up with Nordea went live. Equinor are now switching their treasury processes over to the new system in a step by step progression. Equinor have managed to deliver the project according to the defined schedule and Nordea have been able to deliver the required support and solutions.
Øystein Lode concludes: “Equinor is a customer that always keeps us on our toes. After another very good and fruitful cooperation, Equinor and Nordea are again at the forefront in the market, this time due to the new Virtual Account Management solution. During the project lifecycle, both partners have been faced with numerous challenges. Trust, transparency, open communication and skilled resources on both sides have enabled us to find good solutions to all of those challenges. We have delivered!”
Hallvard Bokn Eikeland concludes: “It has been a pleasure working with a professional partner like Nordea in this project. Based on our previous experience with Nordea, we did not expect anything less. We are very happy that Nordea once again have managed to deliver according to our expectations.”
For more information write to Øystein Lode at oystein.lode [at] nordea.com.