Treasury Today Country Profiles in association with Citi

Nidec Corporation, Highly Commended, Best Liquidity Management Solution

Photo of Minako Stryer, J.P. Morgan and Shimizu Ichiro, Nidec Corporation.

In partnership with its bank, Nidec designed a treasury centralisation roadmap and established a regional multi-entity, multi-currency notional pooling platform based in Singapore. The initial phase, which was implemented in February 2017, included the opening of ten accounts across the company’s subsidiaries in Hong Kong, the Philippines, Singapore and Thailand.

Photo of Minako Stryer, J.P. Morgan and Shimizu Ichiro, Nidec Corporation.

Tomomi Watanabe

Assistant Manager, Finance Department

Japan’s Nidec Corporation is the world’s number one manufacturer of comprehensive motor application products. The company has 308 subsidiaries spanning Asia Pacific, Europe and the Americas and generated revenues of US$11bn in the year ended March 31st 2017.

in partnership with

Regional solution gets approval from Bank of Thailand

The challenge

A dominant player in the market for spindle motors, Nidec not only grows organically but is also well-known for its acquisitive business strategy. Over the past 30 years, the Kyoto-based company has acquired 56 companies in local as well as overseas markets, as it looked to inorganic growth to boost its revenues.

Nidec has worked to strengthen its financial governance by implementing cash pooling structures at both a country and/or regional level. At the same time, Nidec has addressed management’s concern over the company’s ability to utilise a larger portion of its cash in Asia notwithstanding some of the regulatory challenges it faces.

The solution

Nidec, in partnership with J.P. Morgan, designed a treasury centralisation roadmap and established a regional multi-entity, multi-currency notional pooling platform based in Singapore. The initial phase, which was implemented in February 2016, included the opening of ten accounts across the company’s subsidiaries in Hong Kong, the Philippines, Singapore and Thailand.

The new account structure incorporates the bank’s cross-border sweeps solution, allowing surplus cash from overseas subsidiaries to be automatically swept to the master account in Singapore. The solution gives Nidec’s Kyoto headquarters as the pool leader, complete access to the surplus cash, up to the total cash levels placed by its subsidiaries. The net balance of the pool across different entities and currencies across the region is automatically drained on a daily basis in the preferred currency of choice to invest in higher yielding instruments, eliminating manual processes.

Best practice and innovation

As part of its consultative approach, the bank shared treasury best practices with key stakeholders and decision makers within Nidec and involved them at every stage of the implementation process.

The bank also facilitated discussions with the central banks in Thailand and the Philippines to ensure the regulatory feasibility of the proposed cash pooling structure, including obtaining special approval from the Bank of Thailand to allow Nidec’s subsidiaries in Thailand to open accounts in Singapore to participate in the liquidity structure. Nidec is the first Japanese corporate supported to automate the transfer of excess cash from Thai subsidiaries under a regional multi-currency notional pooling structure.

The collaborative approach also led to the development of:

  • An implementation roadmap to further rationalise Nidec’s account structure and optimise their treasury and finance organisation.

  • Corporate policies and procedures that support treasury’s objective of centralising the company’s surplus cash.

The bank continues to build on the strong partnership as Nidec seeks to extend the solution to their operations in EMEA and the Americas, with the aim of establishing a global cash concentration structure.

“We have successfully navigated the complex regulatory landscape in Asia Pacific and held discussions with the central banks in Thailand and the Philippines to ensure feasibility of implementing the solution in these highly regulated countries. With special approval from the Bank of Thailand, our subsidiaries in Thailand are able to participate in the liquidity structure too,” concludes Tomomi Watanabe, Assistant Manager, Finance Department.

Key benefits

  • Significant reduction in external debt at the headquarter level, as the company leverages on surplus funding within the group. Since implementing the notional pooling structure, Nidec recorded an estimated US$380m reduction in its consolidated balance sheet as of March 31st 2017.

  • Improved visibility and controls by mobilising cash positions in real-time across its global banking relationships – in both local and equivalent base currencies.

  • Reduced operational risks and administrative costs as the platform allows cross-border payments to be automated and standardised.