Implementing a Global Cash Pool: Dresser-Rand Group's Approach
Dresser-Rand Group’s recently implemented global cash pool is designed to increase the availability and liquidity of previously trapped cash. Robert Schur, assistant treasurer at the US heavy duty equipment manufacturer, outlined the objectives of the project.
Firstly, the treasury department wanted to obtain access to cash for corporate working capital needs within the Dresser-Rand family without adverse foreign exchange (FX) or tax effects. The second objective was to concentrate the organisation’s cash on one platform. Finally, the company wanted to use the funds to eliminate local subsidiary borrowing and pay down corporate debt.
The corporate treasury team had a variety of roles and responsibilities as part of the move to establish the new global cash pool. Jonathan Hauser, director, global treasury with Dresser-Rand Group outlined the following steps that the treasury department undertook:
Adding some flesh to the bones of this checklist, Hauser said that there were some challenges when managing decentralised subsidiary cash forecasts. Common forecast requirements and rules had to be implemented across all subsidiaries. Treasury also faced the tricky task of changing the way that the subsidiaries had always done business and, even more critically, to get the subsidiaries to let go of the cash. An additional challenge here was to establish reasonable cash levels and automating as much of the process as possible.
Hauser was also clear on how important it is for treasury to get participation and buy-in from the tax, legal and accounting departments for a project such as this. He said that the tax team should decide the home jurisdiction of the top legal entity or pool owner in the cash pool structure. The legal team has to decide on the type of legal entity structure and opine on the agreement between the parent company and subsidiaries, as well as the banks involved in the cash pool. Hauser added that the accounts team has to understand all of the cash flows and how to define and make the correct entries into the company’s books.