re-inventing global liquidity management: can a ... · 120k+ employees $86b+ in annual revenue...
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Re-inventing Global Liquidity Management:
Can a multinational operate with minimal bank
accounts?
Jim Scurlock
Senior Manager
Parimal Hemkar
Director
Agenda
Microsoft Overview
Life Cycle of the $
In House Cash Center
Pay on Behalf
Multi-country ZBA
Bank Rationalization
Summary
120K+ employees
$86B+ in annual revenue
$86B+ in cash & Investments
300+ operational subsidiaries
Presence in 126 countries
100+ banking relationships
Our mission is enable people and businesses throughout the world to realize their full potential by creating technology that transforms the
way people work, play, and communicate.
Microsoft
Before In-House Cash Center
5
Cash required for intercompany
settlements
Repatriating cash was time
consuming
Too much cash held in local bank
accounts
Unfavorable interest rates on
local investments
Increased risks
In House Cash Center (IHCC)
Manage intercompany loans
Centralized clearinghouse
Automated accounting
Balances invested in Treasury-
managed portfolio
Participation depends on tax &
local regulations
Centralized Treasury Portfolio
MSFT #1
MSFT #2
MSFT #3
MSFT #4
MSFT #5
MSFT #6
MSFT #7
The In House Cash Center is a virtual in-house bank
Objective: Implement a just-in-time process to centralize
A/P disbursements from treasury bank accounts on behalf
of subsidiaries.
Pay on Behalf (POB)
Invoice received
& payment approved
ERP chooses cheapest payment
Payment file sent to
bank
Bank debits
account
Vendor receives payment
Simplified bank account structures
Reduced cash at subsidiary
Increased cash in portfolio
Reduction of transaction costs
Consolidate invoices by company
Consolidate invoices across companies
Reduced FX fees
Benefits of Pay on Behalf
Pay on Behalf Lessons Learned
Vendor Master File
Engage Stakeholder
Change Management
• Review VMF • Standardization
• Treasury • Accounts Payable • IT • Subsidiary • Accounting
• Payment frequency • Strategic vendors
Multi-Country ZBA
Objectives
1. Reduce bank account balances to zero
2. Automate subsidiary funding process
3. Automate cash sweeps to portfolio
4. Automate subsidiary cash concentration
Inter-company ZBA structure is the most optimal
solution to manage bank account balances
100%
automated
accounting!
ZBA Considerations
11
International ZBA availability
Limited customizable text
Manual accounting for ZBA
Company tax structure
Cash forecasting
Resident/Non-resident
Central bank restrictions or reporting
ZBA Scope & Benefits
Scope
• More than 30+ countries
• Hundreds of bank accounts
• Multiple currencies
Benefits
• Just-in-time subsidiary funding
• Automation of collection sweeps
• Reduced average daily balance
• Improved operational efficiency
• Increase in monetary gain
• Decrease in sovereign risks
• Decrease in bank fees
ZBA is the most optimal solution
Strategizing Banks
Identify statutory or regulatory banking requirements
Identify the right partner regionally or globally
Identify the right bank per country
Strategic customers
Banking capabilities
Focus on long term automation
Create scalable solutions
Engage internal business partners
Develop a clear roadmap
Change management
Rationalization your banks
Summary - Leverage Technology
How a Bank Can Help?
Bank View: Citi
How bank can help?
Global network
Enhanced capabilities
Customized tools
Regulatory requirements
Better Controls
Citi: Moving $1.5 T in 45 countries
North America
Canada
United States
Abu Dhabi’
Bahrain
Dubai
Israel
Kuwait
Lebanon
Qatar
Sharjah
Middle East
Australia
China
Hong Kong
Indonesia
Japan
Korea
Malaysia
New Zealand
Singapore
Taiwan
Asia/Pacific
Europe
Africa
Algeria
Tunisia
Latam
Puerto Rico
Austria
Belgium
Bulgaria
Czech
Republic
Denmark
Finland
France
Germany
Greece
Hungary
Ireland
Italy
London PLC
Luxembourg
Netherlands
Poland
Portugal
Romania
Romania
Russia
Slovakia
Spain
Sweden
United
Kingdom
Global Concentration Service:
Moving Every Last Dollar!
• Difference in time-
zones
• Back Valued
transactions
• Holidays
With the Sun
Against the Sun
Additional Challenges
Pre-set rules
Customized
tags
Comply with
Regulations
Tools for Client Customization
Assist clients in:
• Moving exact amounts that they need to
• Auto reconciliation
• Keep track of inter company loan movements
• Comply with country specific regulatory requirements
How Proprietary Network Helps Below example shows cost savings when funds are moved through Citi’s Network
Multi-Bank Structure Bank’s Branch Network
# of A/Cs Number Number
# of A/Cs in 3rd party bank 80 0
# of A/Cs at Citi- in ZBA 40 100
Cross Border A/Cs 20 40
Cross Regional A/Cs 2 2
MBTBA A/C Fee $265 0
Domestic Sweep Fee $25 $25
Cross Border Sweep Fee $100 $100
Cross Regional Sweep Fee $500 $500
In & Outgoing Wire Fees $2 per wire 0
Monthly Cost $23,700 $7,500
Yearly Cost $284,400 $90,000
Help Address Regulatory Requirements
Central
Banking
reporting
Limits to
inter company
lending /
periods
Tax approvals for
specific amounts /
periods
Regulatory
Requirement
Compliance
Examples:
• China
• Israel
• Russia
• Singapore
• Taiwan
Better Controls & Risk Management
Interest
Reallocation
Services
Limits on
movements to
conform with tax
requirements
Dynamic Limits
to subsidiary
lending or
borrowing
Leaving zero
balance in
certain
jurisdictions
Enhanced Risk Management
Assist clients :
• Provide exact amount of funding required – no excess balance
• Control and monitor inter company loan movements
• Fund movements subject to tax considerations
• Optional: Keep track of inter company loan positions and interest on
arm’s-length pricing
How Does a Bank Facilitate In-House Banks?
Seamless Domestic / X-border
Sweeps
Assist auto-reconciliation
between legal entities & IHB
Efficient / Robust Technology
platforms
Sharing intra-day Liquidity or
DOLs
Support global network /
accounts for subsidiaries
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