This solution leverages several technology components in an integrated fashion to provide 100% daily cash visibility on all Honeywell’s 2,000 plus bank accounts and all cash investment transactions around the globe.

The challenge:

Honeywell had built up substantial cash reserves since the beginning of the financial crisis in 2008, reaching over $8.4bn today. Counterparty risk had also been a growing concern as banks were hit by junk portfolios, new regulations and ensuing credit downgrades. Honeywell therefore determined it needed to completely revamp its counterparty risk management process.

The type of solution the company opted for was shaped by a number of other shortcomings. Firstly, the process used to control compliance with their global investment policy was inefficient and had a number of pitfalls (tracking of counterparty ratings and limits for each party were not, for instance, reported in the TMS).

They were also missing a number of analytics to manage their cash proactively and efficiently. For their 43 cash pools, they had no visibility of the cash pool balance of each entity towards its header account. Neither did the treasury department have any automated process to assess and monitor country or currency risk. Instead, these activities were being performed manually. “We therefore needed to completely revamp our counterparty risk management process to be able to cope with a new world of lower limits and higher levels of cash,” explains Séverine Le Blévennec, Director EMEA Treasury.

The solution:

The solution leverages technology to provide 100% daily cash visibility on all Honeywell bank accounts and all cash investment transactions around the globe. The output reconciles substantially all of the bank accounts to the accounting records, while requiring minimal manual intervention.

It includes access at any time to accurate and relevant management reports and metrics such as, for instance:

• A summary exposure report by country, which provides per country, the cash in each currency with the associated investment products (bank deposits, commercial papers, money market funds, active investment accounts, operational accounts), average yield, average tenor.
• A summary counterparty exposure report that provide for each of the 143 banking group and 182 corporates they have a relationship with, the short-term and long-term ratings of the three major rating agencies, the calculated investment limit as defined by their Global Investment Policy, the utilisation of the limit and the remaining free limit (or breach).
• A deployable cash report, that provides at any time the total cash available to finance any acquisition, taking into account regulatory constraints (whether country or transaction specific) and working capital requirements.
• A bank accounts report that provides amongst other metrics, the number of bank accounts closed in a country, a region, or globally during a specific period of time, and/or concerning a specific pool of entities, for instance in relation with the treasury integration of an acquisition.
• A maturity profile report that displays all investments of a selected entity (eg the in-house-bank) or in a selected country (eg China), sorted by their maturity date, calculating a running total to provide the availability of cash over time.

Best practice and innovation:

The solution is unique as it integrates the best of several technologies (including the Swift network and Honeywell’s Swift connection) with added customisation to perfectly fit the company’s needs. The automation achieved allowed the treasury staff to concentrate on strategy and value-add projects in an environment of stretched resources and strong organic growth. They use the TMS as the ultimate data repository for all treasury-relevant information which enabled them to design sophisticated reports to manage their cash in a proactive and efficient manner.

“The above project was a long journey for a company the size and complexity of Honeywell,” Le Blévennec concludes. But now having access to real-time accurate data on cash and investments for 855 affiliates in 77 geographies, holding approximately 2,000 bank accounts – a few mouse clicks away – is helping the company to take the right investment decisions and outperform their interest income forecast for 2014 by 50%. “For most of the treasury staff, the system is now our central tool and we wonder how we used to do before having those robust processes and superb reports,” she adds.