Photo of Gary Minoletti of J.P. Morgan, John Coon of Dow Corning and Pascal ter Haak of Bank Mendes Gans.

Many treasury departments claim they can view their global cash balances and they utilise one system to manage their treasury activities, but many fall short of delivering on this statement. That is what separates Dow Corning’s cash management solution from the others. The group now operates on one system that has been deployed at both its corporate headquarters and its regional treasury offices. This provides visibility to 98%+ of its cash and 100% of its debt with the comfort of knowing where its cash is located, enabling the company to better manage its liquidity.

The challenge

After operating for many years in a very manual-intensive environment with several stand-alone one-off systems, the treasury department decided that in order to improve its ability to manage liquidity and properly support the company, it needed to change how it administered its treasury operations. “Our company’s primary treasury management tool was MS Excel. Other systems used included several bank proprietary cash management and investment portals, an online foreign exchange (FX) trading platform, MS Access for trade confirmations, MS Outlook for communicating FX trade net settlements and trade initiations, and Bloomberg,” explains Global Cash Manager, John Coon.

None of the aforementioned systems communicated with one another, resulting in manual keying of data multiple times, creating data integrity concerns and requiring additional resources. Due to the disjointed technology infrastructure, management had limited ability to obtain and analyse key treasury data and it was time-consuming to do so.

The solution

The company has transformed from a regionally focused function to a streamlined global treasury operation through:

• Implementation of a treasury management system (TMS) – IT2, providing one data source for all treasury-related information, eliminating data re-keying.
• A trading platform (360T) with the ability to perform both FX and investment trades.
• Joining SWIFT, which has enabled the company to standardise its bank information reporting and payment functionality – both of which have significantly reduced its need to access cash and investment portals – and decreased overall bank dependency.

“Not only did we implement new systems, we selected top providers for every facet of our treasury operation and implemented best-in-class processes each step of the way,” remarks Coon.

All of the group’s systems are integrated, enabling straight through processing from trade initiation to accounting. The company restructured its bank accounts, employing a single high-order prefix controlled disbursement account for the payment of multiple subsidiaries’ disbursements, and implemented a global multicurrency hybrid cash pool. The multicurrency hybrid pool, which is also an overlay structure, incorporates the benefits of both physical and notional pooling while leveraging both existing and new bank relationships, greatly improving liquidity management and cash forecasting capabilities.

“Our ability to reduce external debt levels is also greatly facilitated by borrower access to this larger group liquidity pool. In addition, the jurisdiction of the overlay bank substantially reduces withholding taxes paid on pool earnings,” explains Coon.

Best practice and innovation

Many treasury departments claim they can view their global cash balances and they utilise one system to manage their treasury activities, but fall short of delivering on this statement. That is what separates Dow Corning’s cash management solution from the others. The group now operates on one system that has been deployed at both its corporate headquarters and its regional treasury offices. This provides visibility to 98%+ of its cash and 100% of its debt with the comfort of knowing where its cash is located, enabling the company to better manage its liquidity.