Photo of Heiko Stangenberg and Franca Aeby, Roche.

Franca Aeby

Senior Cash Manager

Swiss-headquartered Roche is the world’s largest biotechnology company and the global leader in in-vitro diagnostics. Roche employs more than 100,000 people and sells its products in over 100 countries.

Roche cracks cash pooling with solution in KSA

The challenge

Roche has an industry-leading treasury set-up; innovation, automation and digitisation are top priorities. Cash pooling is an important component of how the company finances its operations. However, in Saudi Arabia, where Roche has had a sales affiliate since 2017, this has long been a challenge. Until recently, cash pooling was not a common practice in Saudi Arabia, largely because of a lack of regulatory clarity. With cash pooling not explicitly mentioned in the relevant regulation, banks were left to follow their own interpretation of the rules. As such, Roche, like other companies operating in Saudi Arabia, initially used a technical solution to achieve some of the benefits of cash pooling. This involved implementing a one-way sweep using a standing order variable amount (SOVA) arrangement, with liquidity above a certain threshold swept into a header account in the name of a Swiss entity held outside of Saudi Arabia. Seeking to make better use of its liquidity in the region, Roche was proactive in communicating the importance of cash pooling in Saudi Arabia to its banking partner.

The solution

BNP Paribas had already been in exchanges with the regulator for several years presenting in-depth explanations of how cash pooling works from a legal, technical, and operational perspective, and was able to demonstrate there was strong demand from its multinational clients, including Roche. In 2021, the regulator granted BNP Paribas’ request to roll-out a cash pooling solution; an outcome which was welcomed by Roche. To access the cash pooling solution, Roche first had to obtain a legal opinion stating that the proposed cash pooling arrangement would not contravene the company’s internal rules and policies nor would breach any local law/regulation. With this in place, the implementation proceeded. This included necessary changes to contracts and opening additional accounts. The resulting arrangement is a cross-border zero balancing SAR cash pool with a master account in Bahrain. The new cash pool is part of ongoing efforts within Roche to have the most efficient solutions in all countries, which has also seen Roche implement a payment-on-behalf-of (POBO) structure; among the first of its kind to be adopted in the region. Further, Roche took the opportunity presented by the regulator’s non-objection to link its Saudi Arabia accounts to its central SWIFT contract. The resulting arrangement, which makes use of SWIFTNet without 3SKey, has resulted in further efficiency and centralisation as payments can be instructed in the company’s ERP system and is in line with the global set-up.

Best practice and innovation

The efficient use of cross-border cash pooling represents best practice in cash management. However, true cross-border cash pooling was not previously practiced in Saudi Arabia due to a lack of clarity on its regulatory status. Roche played a pivotal role in encouraging its bank to address this with the local regulator and, ultimately, put in place a true cash pooling arrangement that has enabled the company to reduce costs, increase automation and make better use of the company’s liquidity. This project demonstrates Roche’s commitment to embracing best practice wherever possible, even when existing obstacles need to be addressed. By engaging in co-creation with the bank, the company has not only been able to optimise its own liquidity in the region, it has also played a significant role in moving treasury forward in Saudi Arabia.

Key benefits

• Cost savings.
• Process efficiencies.
• Increased automation.
• Improved visibility.
• Manual intervention reduced.

Implementing cash pooling in Saudi Arabia was not an easy journey, but an initiative that took considerable time, effort, and perseverance and Roche has seen a significant transformation of its treasury operations in the Middle East.