In House Bank - · PDF fileService Bureau Payment Batches & Manual payments SAP Cash and...

In House Bank

2

Agenda

Introduction to AkzoNobel

Introduction to Treasury in Asia Pacific

Alignment of In House Bank to corporate strategy

In House Bank (IHB) concept, structure and system:

Liquidity Management

Payment Factory

Corporate Finance

FX Hedging

Project timelines

Cost Savings

Conclusion

Q&A

3

AkzoNobel today

4

Our end users

5

Treasury in Asia Pacific

Head of Treasury

(1)

Cash Management,

Operations (IHB), Trade Finance

(3)

Corporate Finance, Risk

Management and M&A

(1)

Projects & IT

(2)

6

Treasury in Asia Pacific

New Markets:

• Philippines

• Myanmar

• Cambodia

• Laos

7

How does Treasury fit into the new group strategy

Service

Bureau

Payment Batches &

Manual payments

SAP Process Integration

Treasury Applications from SAP

SAP Treasury and Risk Management

SAP Bank Communication Management

SAP Cash and Liquidity Management

SAP In-House Cash

External Bank

Statements

Integrated Statements

Automated Cash Apps

Exceptional

Payments

Payment

instructions

Intraday info

EB solution

Payment

Instructions

Daily Rates

External Deal Request

Treasury System Architecture

8

IDO

C C

on

nec

tivity

XML/MT 101

MT 940

9

Global Design Approach to Liquidity Management (open economies)

Operating Entities

Treasury

Treasury

Regional Cash Pool Header

Entity

External Bank Accounts

Entity

External Bank Accounts

C

oll

ec

tio

ns

Co

lle

cti

on

s

P

AY

RO

LL

PAYMENTS ON BEHALF

P

AY

RO

LL

P

AY

ME

NT

S

Treasury

Local Cash Pool Header

In-house Bank (Treasury)

Internal Netting

Payment Factory

Bank Statements

FX Hedging

Internal Funding

Cash Forecasting

ST

AT

EM

EN

T

ZBA ZBA

ZBA

Entity

In-house Bank Accounts

Overlay Bank

Enhanced Yield

Standardized Processes

Reduced e-Channels Bank Dependency

Simplified Structure

Improved Cash Visibility and Control

Centralized Bank Relationship Management

Reduced Charges

Liquidity Management in AkzoNobel

10

Domestic

Entity

Domestic

Entity

Domestic

Pool

Global

Pool

Domestic

Entity

Domestic

Entity

Global / Regional

Pool

Restricted Economies Open Economies

Co

lle

cti

on

s

Pa

ym

en

ts

(‘forw

arding’)

Co

lle

cti

on

s

Co

lle

cti

on

s

Co

lle

cti

on

s

Payments

(‘POBO’)

2way ZBA

2way ZBA

Corporate

Finance

initiatives

Pa

ym

en

ts

(‘forw

arding’)

Collections

(‘COBO’)

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Due to the regulated landscape of Asia, the region is split into Open and Restricted Economies:

• Australia, New Zealand, Singapore, Hong Kong

• In open economies, it is allowed to „pay on behalf of‟. This means that payments will be paid from an Akzo Nobel NV account, and settled internally (via an In-House Bank account in SAP Treasury) from the original paying entity‟s account.

Open:

• China, India, Thailand, Taiwan, Malaysia, Indonesia, Sri Lanka, Vietnam, Korea, Philippines, Bangladesh, Pakistan, Papua New Guinea, Japan **

• In restricted economies, “payment on behalf of” is either not allowed or highly regulated. In these countries, PF will essentially be payment forwarding. Payments will be made from an external bank account in the name of the local entity and the payments will be mirrored on an internal account in SAP („payment forward‟).

Restricted :

Payment Factory (PF)

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• Payment factory functionality allows to centralize AkzoNobel‟s transaction flow and bank connectivity, while

keeping the responsibility for the individual transactions with the local entities.

• One of the key benefits of PF implementation is enhanced cash management due to more efficient

utilization of global currency pools. Other major advantages includes process standardization, cost

savings, flexibility and control of the payment and receipt process (smart routing), including netting

and processing of internal payments.

Payment Factory (PF) cont.

• Payment factory

and collections

factory and the

ability of payment

warehousing will

also improve the

ability of accurate

short term cash

flow forecasting

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Internal funding / corporate finance mainly for open economies

Treasury In House Bank

•Domestic Entity virtual bank account

•Domestic Entity virtual bank account

•Domestic Entity virtual bank account

•Domestic Entity virtual bank account

Domestic Entity

Domestic Entity

Domestic Entity

Domestic Entity

Downstream:

• OWC facility

• Term Loan

• Permanent Loan

(Equity)

Upstream:

• Positive IHB

balance

• Term deposit

• Dividend

All in line with „at arms length‟-principle and agreement with tax authorities

on transfer pricing, using to intercompany loan pricing model

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FX hedging

Daily Rates Upload SAP Treasury Risk Management

AkzoNobel Central and Regional Dealing Room

Domestic Entity

Domestic Entity

Domestic Entity

Domestic Entity

Domestic Entity

Restricted Economies Open Economies

Internal hedging /

Pricing

Consolidation

Net external hedging

FX trading on behalf of

Domestic Entity

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Blueprint, realization, acceptance, testing and go-live ±12 months

Global roll out (80/20 rule) ±12-18 months

Currently at consolidation stage working on continuous improvements

Project timelines

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Estimates yearly cost savings ±EUR10mio:

Centralization of liquidity, less overdrafts, negotiated improved

debit/credit rates, elimination of float

Eliminated local cash pools, activities and Fte (less business people

doing treasury activities)

Reduced the number of bank accounts and electronic banking

systems, resulting in lower bank fees and IT costs

Conversion of (cross border) payments: smart routing eliminates the

number of cross border payments and FX spot conversion

Standardization of payment process, bank statement upload and

reconciliation reduces error and less Fte

Cost Savings

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A true In House Bank gives:

Standardized and simplified processes and discipline

Full control, access and visibility over the groups cash, including better

cash flow forecasting

Full control, access and visibility over FX risk footprint

More efficiencies: consolidation, intercompany netting, FX position

netting, flexibility in smart payment routing, optimizing corporate

finance agenda

Cost savings

Conclusion

18

Q&A