Atlas Copco (China) wanted to set up an RMB cash pool that would centralise group operations and consolidate banking relationships – all in three months. Deutsche Bank’s solution was a perfect fit for its requirements.

Problem…

Having acquired a number of entities during the company’s history in China, the treasury structure at Atlas Copco (China) had become extremely decentralised. This legacy structure was making it difficult to ensure the best use of company cash and to keep track of group cash positions efficiently.

Audrey Deng, Manager, Group Treasury Asia Pacific, explains: “We had more than 15 entities in different cities throughout China. We were operating using an entrusted loan facility, through which cash rich companies could fund the cash poor companies. However, it was not possible to do this automatically and it could only be done on a deal-by-deal basis, which meant a lot of administrative work. We also wanted to improve group visibility.”

In order to achieve this, Atlas Copco (China) wanted a solution that would have strong interfacing capabilities with a range of ERP (Enterprise Resource Planning) systems, as there was virtually no integration between the existing entities’ various ERP systems. In addition, Deng says: “Each entity had its own payment and collection accounts with different banks, some with local banks and some with international banks. So we dealt with all kinds of banking partners and paid different fees, which was quite complicated.”

A more streamlined solution was, therefore, required.

…Solved

With this in mind, the company looked into setting up an RMB cash pool that would not only meet all its requirements but also centralise group operations and consolidate banking relationships. As an additional challenge, all this had to be achieved within a three-month implementation timeframe because Atlas Copco (China) wanted to have the cash pool in place as early as possible and completed before quarter-end closing. “We sent out RFPs and six banks gave us proposals,” comments Deng. “Then we evaluated and judged the proposals one by one and conducted a cost-benefit analysis. We shortlisted some of the banks and carried out a thorough customer reference check, whereby we asked for a few references from each bank. This was not included in the three-month implementation timeframe, of course.

“Although the main reason we chose Deutsche Bank was that their solution was a perfect fit to our requirements, I think dealing with a bank has to have some kind of personal element to it. No matter how good its service level looks on paper, this must be realised by the bank employees. Throughout the process, Deutsche Bank’s professionalism, efficiency and level of service really impressed me.”

The RMB cash pool that was proposed and set up by Deutsche Bank is a fully automated bespoke solution with pan-China cash sweeping using entrusted loans. “It has some innovative options such as sweeping reversal, maximum cover limit and interest allocation,” says Deng. The solution also includes straight-through processing capabilities for payments and collections, and the host-to-host connection with CNAPS (China National Advanced Payment System) facilitates extremely quick processing times. Through this solution, Atlas Copco (China) has been able to achieve RMB liquidity optimisation and cost reductions, as well as improved cash visibility and enhanced end-to-end processing efficiency.

In terms of the implementation, one of the main challenges was the variety of ERP systems in use across the company’s different entities. Deutsche Bank’s electronic banking platform, db-direct internet, enabled the company to overcome this hurdle as the platform offers universal ERP integration. Deng adds: “We can run a payment through our ERP system and it is automatically uploaded to db-direct internet.” The other main challenge was the three-month implementation timeframe. “Before we started, someone at the company said ‘We can never finish this within three months’, but we did – we made it,” says Deng. “Of course, Deutsche Bank helped us a lot; they showed their commitment to the project. They are definitely result-orientated people.”

Since setting up the RMB cash pool in 2008, Atlas Copco (China) has established two additional entities, one of which has been incorporated seamlessly into the cash pool with the other to follow in the near future.