Photo of Lesley White, Bank of America Merrill Lynch and Szilvia Zacsovics.
With Diageo’s European business generating £2.8 billion of its net global sales, the company was looking to enable instant access to cash across the region. Diageo also wanted to adopt seamless payables and receivables management, in order to minimise potential disruptions to its supply chain.
Szilvia Zacsovics
Treasury Cash Manager
Diageo is the world’s leading premium drinks business with an outstanding collection of beverage alcohol brands across spirits, beer and wine. In approximately 180 markets, Diageo plc employs over 20,000 people around the world. With offices in 80 countries, Diageo also has manufacturing facilities across the globe including Great Britain, Ireland, United States, Canada, Spain, Italy, Africa, Latin America, Australia, India and the Caribbean.
in partnership with
In search of a reliable and risk-managed solution to do this and enable the consolidation of cash flows in the UK while establishing centralised control out of London, Diageo chose to partner with Bank of America Merrill Lynch (BAML). This relationship allowed the company to run through a variety of different cash management scenarios and structures. In addition, BAML assisted in putting in place the right contingency measures to make sure the company was able to minimise any supply chain threats.
“Diageo can configure the parameters of the real-time sweep solution according to our exact requirements to provide control over our in-country cash positions. We also benefit from the ability to seamlessly move funds during the day, helping to reduce intraday liquidity risk,” says Szilvia Zacsovics, Treasury Cash Manager at Diageo.
Through the joint project, the company has managed to refine existing sweeping functionality to incorporate real-time benefits, as well as automatically calculating and pulling balances from third-party bank accounts in target countries. Funds can then be repatriated to the UK. Moreover, solutions such as multi-bank cash concentration and real-time sweeping mean that Diageo can consolidate and manage its cash in a central location (the UK), but also continue to maintain local bank relationships in operating countries.
“To ensure that cash is in the right place at the right time, the inter-bank liquidity structures were set up to work cohesively with automated real-time sweeps across BAML accounts in various countries,” explains Zacsovics. “Using an innovative combination of features, such as uni-directional timed movements, minimum/reverse sweeping, and percentage incremental sweeping amounts, we are now able to efficiently control the movement of cash as required.”
Post-implementation, Diageo has successfully managed to enhance control over its cash, while delivering significant returns for the business. Local payments are now funded by the centralised liquidity structure in London, on an ‘on demand’ basis so that little or no funds are held locally.
“This solution is highly scalable and can easily be extended to the entire cash pool, offering the company long-term protection during a period of economic instability. Already, the implementation has helped us to eliminate €25m intraday exposure on a monthly basis in the pilot-country where the solution was implemented first,” says Zacsovics. But there are bigger opportunities in the wider euro cash-pool. Given the successful roll-out in selected European jurisdictions, Diageo is actively working with BAML to extend the solution to other countries.
The company’s innovative liquidity structure enables mobility and availability of company cash through multi-bank, multicurrency solutions; providing enhanced visibility, control and efficient risk management. In these unprecedented economic times, Diageo’s foresight provides a good example of a smart solution that can help treasury teams to protect their funds in the event of a crisis.
