Photo of Mark Grant, Bank of America Merrill Lynch, Mike Cassidy and Frank Sassano, Wyndham Worldwide Corporation.

Wyndham has undertaken a treasury transformation programme which includes optimising the company’s liquidity management structure, putting in place a netting programme and improving FX risk management practices. The company has seen significant improvements in its FX Scorecard metrics.

The challenge

In July 2012, Wyndham embarked upon a treasury transformation project with the goal of optimising operations in the areas of cash management, intercompany netting and FX risk management. The goal of the treasury team was to get as much idle cash as possible out of the business and to build a central hub for all of its international cash outside of the US in support of the company’s expanding international operations. To achieve this objective, a more robust in-house bank (IHB) was required to support the daily movement of cash in place of the twice-weekly movements of the legacy set-up.

“At the same time, we were looking to implement a new netting programme while also setting up best-in-class processes and tools to manage FX exposures more effectively,” explains Mike Cassidy, Corporate Treasury Director, EMEA.

The lack of visibility over the company’s FX exposures proved to be one of the biggest issues. These were reported manually via a push methodology, resulting in missed exposures and unnecessary profit and loss volatility. Something had to change.

The solution

A critical first step in the transformation project was the creation of the new in-house bank, as well as the implementation of the single-entity multicurrency notional pool. This enabled the establishment of a formalised netting and settlements policy, as well as a more focused, centralised approach to the company’s FX risk management decision-making.

In doing so, Wyndham has undertaken a treasury transformation programme which includes optimising the company’s liquidity management structure, putting in place a netting programme and improving FX risk management practices. It has now achieved realtime visibility over its global cash balances as well as real-time access to liquidity held by various legal entities around the world.

During the project, the company has worked with various counterparties, most notably Bank of America Merrill Lynch (BofAML), and has implemented technology provided by Kyriba and Reval.

Best practice and innovation

Despite having a team of only two EMEA-based treasury professionals at the time, Wyndham has successfully undertaken a highly ambitious project replacing the legacy outsourced IHB with a more flexible and innovative solution managed internally, a project normally reserved for large corporations. Wyndham’s treasury team, however, identified an opportunity to overhaul existing processes and technology. And while the timeline for the project may have appeared challenging at the outset, the highly disciplined approach, weighing up different potential approaches and making strategic decisions quickly and effectively, meant the team was able to meet its original deadlines.

Overall, the project has allowed Wyndham to put in place a scalable structure which will enable the company to make the best use of internal cash in order to move forward with acquisitions when required. In addition, given the company’s acquisitive nature, the new in-house bank also provides a plug-and-play vehicle to absorb future M&A integrations.

Meanwhile, risk was also reduced and yields were enhanced. “We’ve seen significant improvements in our FX Scorecard metrics. Coverage levels are in tighter tolerance to policy. And by going through the exercise of extracting exposures from the ERP systems, we have found and corrected cases where FX exposures were incorrectly reported and calculated,” notes Cassidy.