Stefan Windisch, Sr. Cash Manager - EuroFinance€¦ · 15/05/2019 · −Treasury function covers Cash Management, Asset & Liability Management, FX Management, Affiliate Financing

Full InHouse bank - Roche journey towards bank-free entitiesWhen will virtual accounts get real?

Stefan Windisch, Sr. Cash ManagerEuroFinance, Miami 15.05.2019

Roche is a global pioneer in personalized healthcareInnovation: it’s in our DNA

CHF 11.0 billion R&D investment

30 R&D sites worldwide *

CHF 56.8 billion sales

26 manufacturing sites worldwide

*Pharmaceuticals and Diagnostics ** Strategy & Global Innovation 1000, Winter 2017

94,442 employees worldwide

#1 R&D investor in healthcare**

Among top 10 R&D investors across industries

Roche Group Treasury & In House BankCentralized Setup

• Centralized organization in Basel, Switzerland− No regional Treasury Centers− Treasury function covers Cash Management, Asset & Liability Management, FX Management,

Affiliate Financing and Pension Management− Headcount 25 people

• One core treasury system− Supported by one dedicated Treasury IT-team− Sole link to external banks (in & out)− Our “Center of Excellence” and leading system for A/P, A/R and EBS

è The In House Bank covers all aspects of Treasury within the Group

Architecture of Roche In House BankSystem centralization established over the past 15 years

4 Cash Management Banks

Cash Management

In House Banking

Treasury Processing

Risk Management

Accounting & Reporting

19 ERP Systems «+»

Roche In House BankFacts & Figures

• Cash Pooling: 232 participants, 48 countries, 46 currencies

• Intercompany Settlement: 3.03 Mio. invoices

• Intercompany FX-Hedging: 122’218 transactions

• Payment Factory: 2’670’000 payments

• IHB Automation Rate: > 98.9%

• Treasury confirmations: 99.5% automated (47’451 transactions)

• Affiliates without external bank accounts: 48

More than a Decade of TransformationFrom a profit center to a service provider

20042005

20062007

20082009

20102011

20122013

20142015

20162017

20182019

CENTRALIZEDTREASURY

PAYMENTFACTORY

BANK-FREEAFFILIATE

• Core Bank principle

• Regional CM banks

• Cash Pooling

• Central EBS

• Intercompany Settlement

• Intercompany FX

• Harmonized paymentformats

• Swift for Treasury Payments

• Swift for all low valuepayments

• Swift for Treasuryconfirmations

• Payments on behalf (FX)

• Compliance Filtering

• Supplier Financing

• Payroll Factory

BEYONDTREASURY

• Full on behalf in EU &APAC

• SWIFT GPI Pilot

• CLS FX settl.

• TIN pilot

• Receivables onbehalf

• Payments on behalf(local)

• Salaries, taxes o.b.

• Guarantees, LCs o.b.

Virtual accounts - Definition

According to Accenture*:

«Virtual IBANs are a mechanism to improve straight through reconciliation of receivables

for corporate clients. Under such an offering, a bank would open a series of dummy IBANs

for its client. Underlying each of these virtual IBANs is a real physical account (held in the

bank’s ledger) to which the payments made to these virtual accounts are routed. With this

arrangement in place, the client then has the flexibility to assign these IBANs to its

individual suppliers, so that when a supplier makes an electronic payment it would

automatically go into the relevant virtual IBAN.»

*Source: “Virtual Accounts and Virtual Account Management”, 2016 Accenture

Virtual accounts - Characteristics

Link to physicalaccount

Link to physicalaccount

MulticurrencyMulticurrency

Self-servicingSelf-servicing

Opening &closing balance

Opening &closing balance

AccountnamingAccountnaming

Bankstatements

Bankstatements

Collections &payments

Collections &payments

Online accessOnline access

What is your business case for virtual accounts?Follow your strategy when selecting your provider

What benefits do you want to realizewith virtual accounts?

• Centralisation and standardisation

• Increase cash transperancy

• Automation of IC netting

• Reduction of bank accounts or banks

• Change of account ownership– On-behalf structures

• Reflecting divisional structures through virtualaccounts

• One-multicurrency account

But consider...a

• Dependency on providers & banks

• ERP system / InHouse bank– Automation is key

• Compliance & regulations– KYC criteria for virtual accounts– Tax implications

• Business process improvement– Auto-hedgeing vs. FX strategy– Accounting in the HQ and on affiliate level

Roche strategy to CentralizationBank account structure

Rocheentity 1

Rocheentity 2

Rocheentity 6027

Pre-Cash pooling Zero balanced Cash Pooling

Bank AAccount 1

Bank CAccount 3

Bank BAccount 2

Rocheentity 1

Rocheentity 2

Rocheentity 6027

Bank 1Account 1

Bank 1Account 3

Bank 1Account 2

Roche CPL/ IHBBank 1

Account CPL


Zero balanced Cash Pooling

Rocheentity 1

Rocheentity 2

Rocheentity 6027

Bank 1Account 1

Bank 1Account 3

Bank 1Account 2


Account CPL

• Cash pool account structure– Main CPL account with cash balance

used for “on behalf of” payments outof the Group entities as fx payments

– All accounts in the cash pool in thename of the respective entity used forpayments and collections

– Sweeps to CPL accounts reflected inInHouse bank statements to Rocheentities

– Additional funding account forfinancial activities (FX, MM, etc.)


IHB with virtual account structure

Rocheentity 1

Rocheentity 2

Rocheentity 6027

Virtualacct 1

Virtualacct 6027

Virtualacct 2


Account CPL

• Virtual account structure– Main real CPL account with cash balance

used for “on behalf of” payments for allentities in the respective currency

– Virtual accounts used mainly for collectionsand assigned to a Group entity forcollections

– All collections instructed to virtual IBAN,but appearing in real CPL accountstatement

– IHB to allocate the collection entries torespective Roche entity ICN statement /cash pool

Payments and collections in «Full on Behalf of» setupPayments

• Payments– Each payment applied with

unique reference and exectuedthough CPL account forrespective currency

– Each payment executed as «onbehalf of» payment

– CPL clears payment order withbank debit

– CPL issues ICN or InHouse bankstatement (FINSTA) to Rocheentity to clear vendor

Payments «on behalf of»E.g. Roche DIA Belgium, cc6027

Payment order withreference


Debit in EBS withpayment reference


InHouse statementwith payment

reference to clearvendor on affiliate

level.

Payments and collections in «Full on Behalf of» setupCollections with virtual IBAN

• Payments– Each payment applied with

unique reference and exectuedthough CPL account forrespective currency

– Each payment executed as «onbehalf of» payment

– CPL clears payment order withbank debit

– CPL issues ICN or InHouse bankstatement (FINSTA) to Rocheentity to clear vendor

• Collections– Each entity invoices with virtual

account and CPL as account holderè Collection «on behalf of»

– CPL / IHB receives bank statementwith mirror transaction of eachcredit with virtual IBAN

– CPL / IHB allocates credits toultimate creditor Roche entity usingVIBAN as reference

– CPL / IHB issues ICN or InHousebank statement to Roche entity toclear customer

Collection «on behalf of» with virtual accountsVirtual IBANs introduced in 2013

Collection «on behalf of» with virtual accountsString recognition based on virtual account details

Credit in EBS withvirtual IBAN


String recognition ofVirtual IBAN to allocateto InHouse account of

cc6027


InHouse statementissued to clear

customeron affiliatelevel

Payment & Collection Factory - full on behalfInHouse Bank offers multiple services

Vendors

Customers

• Payment Factory (incl. salaries)

• Collection Factory

• Cash Pooling

• IC settlement & IC transfer

• Central EBS

• IC FX

• IHB e-banking

Benefits of Full InHouse bank…and bank-free entities

• Security / Risk mitigation– Access to bank accounts decommissioned locally– Compliance to Internal rules applied

• Bank account / signatory authorization

• Transparency– Liquidity Management of 100% of transactions

• Standardization– Single point of contact: between Affiliate and Treasury, and between Treasury and commercial bank

• KYC or any documentation requirements covered by Treasury

• Cost reduction– Financial gain through realized economies of scale– Pricing with commercial banks done globally

Documents

Stefan Windisch, Sr. Cash Manager - EuroFinance€¦ · 15/05/2019 · −Treasury function covers Cash Management, Asset & Liability Management, FX Management, Affiliate Financing