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Rene Bustamante
Staff Vice President & Assistant Treasurer, Global Cash Management, Treasury
FedEx Corp. (NYSE: FDX) provides customers and businesses worldwide with a broad portfolio of transportation, e-commerce and business services. With annual revenue of US$92bn, the company offers integrated business solutions through operating companies competing collectively, operating collaboratively and innovating digitally under the respected FedEx brand.
Consistently ranked among the world’s most admired and trusted employers, FedEx inspires its nearly 600,000 team members to remain focused on safety, the highest ethical and professional standards and the needs of their customers and communities. FedEx is committed to connecting people and possibilities around the world responsibly and resourcefully, with a goal to achieve carbon-neutral operations by 2040.
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Game-changing overlay solution at FedEx following TNT acquisition
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The challenge
In 2016, FedEx, a then US$50bn corporation acquired European delivery company TNT Express. Today FedEx is a US$92bn company (annual revenue). FedEx faced the huge challenge of integrating two legacy global cash management structures with the objective of attaining visibility and control of global liquidity and laying the foundations for automated and scalable cash management processes globally.
The solution
The team put together a request for proposal (RFP) to find the right global liquidity overlay provider. J.P. Morgan was chosen to provide an automated global liquidity overlay structure comprising two multi-entity, multi-currency pools in Luxembourg and Hong Kong, interconnected via end-of-day US dollar sweeps. Each of the regional pools centralise the relevant region’s excess liquidity via automated multi-bank sweeps from in-country accounts. The solution resulted in the simplification, integration and automation of FedEx’s various legacy cash management structures into one globally connected cash management solution.
As Rene Bustamante, Staff Vice President & Assistant Treasurer, Global Cash Management, Treasury explains, “The solution enables us to consolidate our net excess global liquidity in a USD position within an account in Luxembourg from which the liquidity can be deployed for a variety of uses, investments or funding. The overlay solution also provided a flexible, globally consistent, and scalable platform for subsequent enhancements of our cash management structure down the road.”
Solution timeline
- FedEx acquires TNT in May 2016.
- Because this was a global, very complex acquisition, across various countries and regions, the integration was scheduled to take several years.
- The two treasury groups continued to operate independently for another two years.
- In early 2018, FedEx rolled out a treasury operating model (TOM) that called for a push towards treasury transformation and technology.
- As part of that effort, FedEx rolled out a new treasury management system (FIS-Quantum) in March 2020, a new FX/Derivatives programme in December 2020, and the Global Liquidity Overlay in January 2021.
- With the overlay, work began in late 2019, and the first accounts were opened in February 2020. A month later, the pandemic hit. Throughout 2020, FedEx continued building out the connectivity, adding more entities from across the globe, and the overlay reached full scale in the early part of 2021.
- Once FedEx reached critical mass of entities plugged into the overlay and liquidity, they added and went live with the new Global Clearinghouse process out of Luxembourg in January/February 2021.
- Throughout 2021 and into 2022, they have realised and leveraged the full potential of the overlay. It allows FedEx to have a central view of cash for the first time as legacy FedEx and TNT entities were added, and the team connected as one on a global scale.
Best practice and innovation
FedEx also embarked on a Legal Entity Simplification (LES) project to integrate the legacy structures of FedEx and TNT while simultaneously creating a global clearinghouse to facilitate the consolidation of their global cash. They staffed up a Luxembourg office to manage the liquidity, and also successfully released valuable liquidity from other markets such as Japan, the UAE, Mexico, and Southeast Asia. Another achievement of their efforts was simplifying the settling of intercompany settlements.
Key benefits
- Number of banking partners/bank accounts reduced.
- Process efficiencies.
- Increased automation.
- Improved visibility.
- Manual intervention reduced.
- Future proof solution.
- Exceptional implementation (budget/time).
“Research, vision, timing, tax considerations, accounting issues, staffing, FedEx costs, and inaccessible cash. All were resolved with the help of J.P. Morgan on the implementation of this successful overlay solution,” concludes Bustamante.
