Global Cash Manager: A Case Study
AB Electrolux’s group treasury (GT) is a centralised group function, which adds value to the business through improvements in net profit and also by reducing the cost of capital of the group. Increased efficiency and lower costs for handling of funding, liquidity and transactions have all contributed to improved results for treasury.
Global cash management (GCM) is an integral part of GT and is responsible for ensuring that Electrolux has the optimal bank relations to serve the local business. The GCM team is also responsible for the transaction and liquidity infrastructure of the group, including procurement, implementation and the management of local, regional and global cash pools. Plus, GCM is responsible for developing ‘best practice’ methods to make collections and disbursements as cost efficient and secure as possible.
In 2005, GT undertook a review of the global bank relations and discovered that the company was operating over 1000 bank accounts with over 140 banks. With different local banks in every country it was a challenge to have transparency of the whole company’s liquidity. Although GCM had implemented overlay cash pool solutions, this was managed manually in different ways by each entity and in each country. Due to these inefficiencies, GT lacked transparency of the total transactions flows, available liquidity and the true cost of our banking relationships.
A two-person project team was formed in order to implement a new infrastructure, to deliver the company’s new objectives that included:
Following initial bank evaluations, GCM then issued a request for proposal (RFP) for Europe in the second half of 2006 to 10 banks to provide a pan-European cash management solution covering 25 countries. GCM realised its ambitions to consolidate the number of banking relationships and the team chose two relationships banks, with Deutsche Bank providing a single solution for the EMU/CEE region covering 12 countries.
The project team’s evaluation of the RFP response clearly found that Deutsche Bank met key requirements for the EMU/CEE region, including:
Another important consideration for Electrolux was knowing that its banking provider had not just invested in its infrastructure to be able to adapt to the coming changes in the market, for example the single euro payments area (SEPA), but had demonstrated a long-term investment commitment to their transaction banking infrastructure. It was this investment that proved to the project team that Deutsche Bank would meet the company’s current and future expectations to have a common approach to communicate with our banks.
A dedicated implementation manager, assigned by Deutsche Bank for the duration of the project, worked exclusively with the Electrolux team to create an agreed detailed project plan in order to meet our implementation timeframe. The implementation began in January 2007 and was completed in June 2008.
During the 18 months, GCM opened 180 accounts across 14 Deutsche Bank branches for more than 50 legal entities. It set-up five different currency pools (euro, pound, Czech koruny, Hungarian florint, and Polish zlotych) of which the euro pool is the largest, comprising of more than 120 accounts linked together via domestic zero balance account (ZBA) structures and cross-border cash sweeps from country header accounts to GCM’s target in London. Furthermore, GCM implemented specific local cash management requirements, such as petty cash, collections, cheques, credit cards, etc, in each country.
The detailed implementation plan was an essential ingredient to ensure that both parties knew what their exact roles and responsibilities were in order for the implementation to succeed in an efficient and smooth process.
GCM firmly believes that the reason the project was so successful is solely due to the collaboration between Electrolux and Deutsche Bank. Throughout the project, GCM has built upon the strong relationship, one where both parties share the same long-term commitments and objectives to meet the challenges of the changing European landscape.