Virtual account and OBO solutions key to working capital improvements at Viacom
For several years, Viacom had concentrated its cash from physical bank accounts throughout Europe into a multi-currency notional pool arranged by European banks.
Increasingly, however, the international treasury team at Viacom had been looking at ways to reduce costs and increase efficiency in this key area. With multiple legal entities each having several bank accounts, the structure was complex and costly.
In one example, the UK subsidiary had a home entertainment division, a theatrical division and a digital division, with multiple company codes and multiple bank accounts for each of these divisions.
Viacom’s track record in adopting effective treasury technology was already impressive: the company was one of the earliest users of SWIFT for Corporates and had leveraged its IT2 treasury management system to give excellent cash visibility across the business. Additionally, it adopted an in-house bank (IHB) structure for the international media networks group, which allowed for cash concentration for 25 entities and a payment-on-behalf-of (POBO) structure. The POBO structure enhanced working capital and reduced transaction costs.
The result was a switch to Bank of America Merrill Lynch (BofAML) and the implementation of a single entity multi-currency pool with a VAM structure, which replaced the vast majority of local physical accounts with virtual accounts for each entity. By using on-behalf-of (OBO), Viacom can run just one physical bank account in EUR, GBP and US dollar, but multiple virtual accounts, each assigned to a subsidiary and with its own company code in Viacom’s SAP system.