J.P. Morgan provided a global, scalable liquidity infrastructure needed to help NTT DATA EMEA concentrate its cash and facilitate FX, investment and internal financing efficiently. It also offered cutting-edge back-end technology to automate new processes. An important component of the solution is the bank’s multi-currency notional pooling structure. NTT DATA EMEA was able to reduce high interest bearing debt by 47% through this solution.

Multi-entity, multi-currency notional pooling key to treasury transformation

The challenge

After joining NTT DATA EMEA Ltd in 2015 as EMEA CFO, Mark Baker set out on an ambitious campaign to transform the treasury operation to support the business’ organic and inorganic mid-term objectives. Within a few months he had recruited a small treasury team and set out to transform its treasury operations in order to facilitate greater liquidity, while at the same time optimising its ability to pay off debt to banks and investors. The existing decentralised nature of treasury operations and multitude of banking partners created tremendous inefficiencies that didn’t adequately support business goals.

The solution

As part of the transformation process, the treasury team set out to consolidate its banking partners, moving from decentralised banking relationships to a single, global banking provider. After a rigorous selection process, J.P. Morgan was appointed as a trusted advisor.

The primary objectives of the transformation initiative were to put in place a best in class global cash management and liquidity solution to:

• Optimise capital (optimise cash buffers for investment and working capital by lowering funding requirements).
• Mitigate risks (FX, interest rate and counterparty).
• Establish efficient, streamlined treasury operations and initiate processes to maintain adequate controls.

Operational funding for NTT DATA EMEA’s many subsidiaries throughout Europe had historically been through inter-company, long-term financing and reliance on capital markets and interest-bearing debt issued by banking partners in Japan. Since finance support issued out of the company’s headquarters was on a long-term basis, each subsidiary needed to maintain a cash contingency to avoid expensive overdraft charges with the added downside of not being able to leverage the NTT Groups high credit rating.

Hirotoshi Yoshida, Director, Business Finance & Treasury commented, “Given the autonomous nature of treasury operations, as a result of the company’s many acquisitions, it was decided that a multi-entity, multi-currency notional pool would be the ideal solution to meet our liquidity/investment needs.”

NTT DATA EMEA worked with J.P. Morgan to implement an innovative multi-entity, multi-currency notional pool for all of NTT DATA’s EMEA entities, including those in the Nordic region, Eastern Europe and UAE. As a result of this forward-thinking implementation, each participating entity now enjoys investment opportunities, as well as same-day funding at competitive costs without the need for more costly foreign exchange (FX) swaps.

Best practice and innovation

Leveraging the new treasury team’s experience and that of J.P. Morgan the combined implementation team achieved:

• Swift implementation to the all notional pool participants within one year, with average three-four months’ timelines with each participant.
• Centralised cash achieving 75% cash pool target ratio.
• Streamlined workflows through the use of sophisticated technology upgrades.
• Contributed to the parent company to optimise the D/E ratio.
• Enhanced risk management of interest/FX/credit exposures.

Mark Baker, EMEA CFO concludes, “One of the key factors in the success of this initiative was the extensive level of communication among EMEA treasury team, the business stakeholders across the region and our partner bank. Project management teams from every organisation were in nearly constant communication to troubleshoot problems and meet the aggressive timetable for completion of the project.”