Photo of Matt Foreman, Tina Bateman, Jessica Collins, DS Smith and Paul Greenhalgh, J.P. Morgan.

Multi-entity, multi-currency pool positions DS Smith to expand even further

The challenge

The business has experienced significant growth in recent years following multiple acquisitions and the growth of e-commerce, with the COVID-19 pandemic providing an additional surge in demand for online shopping. DS Smith’s focus on sustainable packaging has become increasingly important, as clients increasingly adopt reusable and recyclable packaging as part of their commitment to sustainability.

DS Smith issued a request for proposal (RFP) in 2019, the objective of which was to deliver an efficient centralised cash management structure that would standardise treasury processes, simplify the banking structure and provide improved visibility of the Group’s cash, whilst also addressing several challenges including:

• Integrating multiple acquisitions.
• A lack of central visibility of accounts globally.
• Inherited legacy banks and account structures from acquisitions.
• Inefficiencies caused by manual activities in existing treasury processes.

The solution

The chosen bank’s bespoke solution involved the creation of a multi-currency, multi-entity notional pool structure based in DS Smith’s London HQ. The solution centralised key operating currencies in a single location while providing a scalable solution that adapts to DS Smith’s requirements as it continues to expand in a dynamic operating environment. The solution also benefits from the bank’s global connectivity and reach, maximising book transfers for reduced costs, enabling faster settlement across an expanded settlement window, and greater connectivity across the board delivering comprehensive reporting, visibility and centralisation. Whilst the business was awarded on the basis of an RFP in 2019, implementation took place through 2020 with a phased go-live which continues to this day. The pool reached critical mass with major ‘cut-overs’ in early 2021.

Best practice and innovation

DS Smith has established a core, UK based multicurrency treasury liquidity structure to seamlessly consolidate its treasury and operational transactional flows and global liquidity positions across key currencies. They have automated a true end-of-day cash concentration structure, supported by J.P. Morgan’s single global liquidity platform, creating greater cash visibility, control, which optimises working capital.

Given the global nature of its operations, the Group generates most of its revenues in EUR, GBP and USD, but has production facilities, as well as suppliers, throughout Europe and Scandinavia. The centralised funding pool allows DS Smith to fund these currency accounts on an automated basis as required, without the need to execute foreign exchange transactions. This enhanced automated solution provides full visibility, control, and optimisation over DS Smith’s currency positions, which are the pillars of efficient cash management. The solution is already generating significant savings per year, due to automatic offsetting and automatic sweeping into the pool.

DS Smith is now implementing an inter-company netting programme to reduce inter-company transactions and improve strategic FX management further still. This will include the use of automated transactional FX payments functionality, which will reduce DS Smith’s need to hold bank accounts in non-strategic currencies.

Key benefits

• Cost savings.
• Number of banking partners/bank accounts reduced.
• Process efficiencies.
• Increased automation.
• Risk mitigated.
• Improved visibility.
• Errors reduced.
• Future proof solution.

Putting together a multi-entity, multi-currency notional pool is challenging. DS Smith’s bespoke solution was particularly ambitious because of its size and scope, covering 13 entities, 38 accounts and 17 different currencies – this represents what has been implemented so far, with the rollout ongoing.

“As the pool continues to scale up, we are confident that the benefits will continue to grow. Having a streamlined, efficient, and automated pooling structure will enable us to better manage risk exposure and focus on our strategic priorities,” explains Matt Foreman, Head of Treasury.