Flextronics, Highly Commended, Best Liquidity Management/Short-Term Investing Solution

Published: Aug 2015


Photo of Barbara Harrison, Citi and Petra Rosenaur, Flextronics.


This is a smart multi-currency pooling solution across 84 operating accounts spanning ten jurisdictions within EMEA including Israel. The London-based overlay structure is then automatically drained in US dollars to a New York account.

Petra Rosenauer

Director Corporate Treasury

Flextronics is a globally operating supply chain solutions company that offers design, manufacturing, distribution and aftermarket services to original equipment manufacturers (OEM). Flextronics has manufacturing operations in over 30 countries and 200,000 employees.

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The challenge:

Flextronics had an existing off-shore pooling arrangement in Europe which concentrated funds from different jurisdictions into single currency pools in London. These funds were manually converted to US$ and transferred to the US as part of a ‘follow-the-sun’ approach. While this structure achieved its original aims, the pooling structure required funds to be manually converted into US$. “Given the length of time it took to manually convert and transfer funds – and the need to make funds available to the US by 4pm London time – significant cash balances that arrived in the single currency pools after this cut-off time often remained in the London-based pools,” says Petra Rosenauer, Director of Corporate Treasury. “In addition, our Israeli account balance was not included in the pool.”

As a result, not all EMEA funds were available to the US to meet its needs and the solution did not optimise use of cash. Flextronics wanted to introduce a new multi-currency pooling arrangement to minimise cash left in Europe and maximise cash available to the US. Crucially, the company also wanted to include Israel in the pool, which few companies have been able to achieve given local regulations.

The solution:

Flextronics devised a multi-currency notional pool based on its existing zero-balancing account structure for ten jurisdictions. The solution eliminates the need to manually convert funds into US dollars and enables automatic draining of the multi-currency pool to the US.

Accounts are automatically swept on an end-of-day basis to a London-based multicurrency pool. Flextronics is not required to give pre-advice to move balances. Funds are pooled in their existing currencies, which include US$ (drawn from 38 accounts), euro (29 accounts), sterling (six accounts), Hungarian forint (eight accounts), Swedish krona (one account) and yen (two accounts). As funds are notionally pooled rather than physically swept, Flextronics no longer has to manually convert FX (which is managed by the bank through the notional pool), helping to reduce economic risks. The aggregated notional balance in the pool is then automatically drained in the equivalent amount of US$ to a New York account every evening, where it can be used for operations or for other purposes.

Best practice and innovation:

In just six months from scoping-out to go-live, Flextronics created a multi-currency pool for its EMEA operations. Uniquely, the solution incorporates US$ balances in Israel, producing the deepest possible pool with 90% of all cash in EMEA now used effectively. In the past, manual FX conversion and transfer of balances to the US meant that some funds remained in EMEA. Consequently, the US operation sometimes had to borrow funds to meet its needs, reducing cash efficiency. By automating the FX conversion and draining of pool funds to the US, 90% of the cash in Europe is now available to the US – including US dollars in Israel for the first time.

The solution delivers a number of operational efficiencies. The concentration of funds into the London overlay structure, and the draining of the pool in US dollar is fully automated, which eliminates manual transfer of funds from local countries, thereby removing the potential for human error.

In addition, the FX conversion to repatriate the funds to the US is also automated. “The solution has consequently reduced the workload for Flextronics’ European treasury team tremendously,” says Rosenauer.

“The high level of automation offered by the solution reduces the potential for human error and enables us to manage 84 accounts across EMEA efficiently, which is critical given our EMEA treasury team consists of just three people,” adds Rosenauer.

Financial efficiencies are achieved through various solution components:

  • Local operating accounts are zero balanced at the end of the day.
  • No spread is taken on FX, maximising the daily funds that are automatically swept to the US.
  • The full value of funds after payments and collections is included in the pool.

Key benefits:

  • Reduced reliance on bank credit lines.
  • Reduction in bank charges/cost savings.
  • Time taken to implement solution and realise benefits.
  • Process efficiencies.
  • Interest savings.
  • Pricing enhancements.
  • Foreign exchange gain(s).

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