Photo of Steve Elms, Citi and Adam Ben Boukadida, Etihad Airways.

This is a classic lesson in how to issue a Global Cash Management Request for Proposal (RFP) to accommodate the company’s requirements across 71 countries. Having selected two key partner banks, one to cover the Middle East and the other as international partner, some impressive benefits accrued.

The challenge

Implementing the right solution to meet a company’s cash management requirement is one of the key challenges treasuries face – and Etihad’s is no different. Factors such as pricing, structure, system complexities and timelines are key. Such considerations might be reasonably simple to resolve at smaller businesses, but large international businesses like Etihad face much bigger challenges.

As the airline has been growing at an average annual rate in excess of 20% for a number of years, this has resulted in an increased number of geographical locations, transactional banking partners, bank accounts and additional complexity in emerging market countries. Etihad group treasury decided nothing less than a complete reengineering of its cash and banking structure across 71 countries was needed to support the company’s ambitious expansion plan. The objective was to implement a best-in-class solution to promote centralisation and improve control by establishing strategic banking partners, best-in-class cash management structures, increased payment straight-through processing (STP) rates and improved account visibility.

The solution

In June 2015, Etihad’s group treasury initiated a global cash management RFP which was sent to 14 banks. After evaluating the submissions by a formal RFP process, the second round resulted in five banks being shortlisted.

The second round consisted of a lengthy evaluation process where the five banks were invited to Abu Dhabi to present their regional or global proposals at a workshop. After comprehensive evaluation, the RFP was closed in January 2016 with mandates being awarded to National Bank of Abu Dhabi (to cover the Middle East) and Citi (as the international partner bank).

Best practice and innovation

The solution implemented addressed the following shortfalls which existed prior to the RFP being issued:

• A high number of relationship banks (44 banks) and bank accounts (>300).
• Visibility of bank balances: some of the current banking partners are unable to offer SWIFT MT940s, therefore many manual and time-consuming processes existed in certain countries.
• Payment STP in a number of locations was inconsistent due to the file development involved.
• Transactional banking costs: the costs were not transparent and varied from city to city and country to country.
• Interest returns: the interest rates varied, and were on a country by country basis.
• Decentralisation of bank account administration: some banks were managed by group treasury’s systems team and others by the counterparty bank.
• Limited cash and liquidity management structures: there was only a domestic sweeping structure in place, whereas physical transfers were initiated by the teams to fund accounts.

The project was undertaken during a very busy and successful year for Etihad’s treasury team, which included an extensive investment in replacing its entire treasury systems and the implementation, globally, of SWIFT for corporates. In a year of continuous pressures and uncertainty in the financial markets, Etihad also executed an award winning group partnership bond issuance.

“Etihad Airways has always strived to be the best-in-class in all areas of global finance and treasury,” says Adam Ben Boukadida, Deputy Treasurer, Etihad Airways. “The company is clearly committed and we have demonstrated our ambition to implement treasury best practices with this project.”

Key benefits:

• Greater than 50% reduction in transactional banking partners.
• Greater than 20% decrease in the number of bank accounts.
• A net cost benefit of $1.4m per annum.