How Fitch upgraded cash management processes to global pool
Published: Sep 2024
Best Cash Pooling Solution
Highly Commended Winner
Fitch Group (Hearst Corporation)
Photo of Charlotte Thorogood, Bank of America and Kevin Gaulton, Fitch Group (Hearst Corporation).
Kevin Gaulton
Head of Treasury
Fitch Group is a global leader in financial information services with operations in more than 30 countries.
in partnership with
The challenge
Fitch has made its business out of evaluating risk. But when it came to its own legacy cash management processes, they were clunky, fragmented and limited. Turning its analysis skills in-house, Fitch rewrote its approach to liquidity, cash visibility and management.
Key goals in the transformation included reducing intercompany loans between entities and consolidating FX to drive price consistency. Reducing counterparty risk and splitting core operational cash from strategic investment cash, was also front of mind. The transformation was complicated by the fact the company operated three single-entity multi-currency notional cash pools in the UK, one for each of Fitch’s three business groups.
The solution
Fitch worked with Bank of America (BofA) to design a global overlay structure, based in the Netherlands, to automatically concentrate US$480m+ of surplus balances to the MCNP. Two-way same-day zero balance sweeps to/from their existing in-country third-party bank accounts were established for 46 entities (135+ accounts), across three regions (EMEA, APAC and the Americas).
The purpose of implementing the global pool was to centrally manage the investment of surplus cash and entity currency exposures on a global basis. The global pool also allows Fitch to fund short-term working capital deficits with instant access to cash across 16 currencies and across a broader number of entities and available currencies than their previous set-up allowed. Fitch needed a provider with strong modular liquidity solutions that would allow future scale (opportunity to scale across the Hearst relationship) and the geographical reach of supporting entities domiciled in 18 jurisdictions.
Given changes in Canada’s banking landscape, Fitch also needed a dual global relationship bank. Fitch leveraged BofA’s presence in Canada to support its operational business. In addition, Fitch will extend its BofA operational presence in Mexico and benefit from same day sweeping of Mexican Pesos and US dollars to the pool.
Further, Fitch used the project as an opportunity to setup host-to-host ERP connectivity with SAP which it will later again do with the future planned Oracle ERP project, currently used by the parent company Hearst. Treasury needed all bank statement transactions to automatically reconcile in SAP on a daily basis. Treasury also needed a global view of all balances on all accounts from statements with BofA globally to feed into the treasury management system, GTreasury.
BofA supported automated reporting and linking of all accounts to an existing profile – benefiting from lowering cost, time and effort to set up the reporting feeds. BofA customised the reporting for their Brazilian auto investment account to be sent in BAI format through host-to-host connection to improve visibility of cash and achieve global consistency of reporting.
Best practice and innovation
The centralisation of three multi-entity pools to simplify operations and optimise liquidity, and the establishment of a global pool, enables Fitch to maximise the availability of surplus cash and improve the rate of return in a dynamic rate environment for all 16 currencies within the pool.
Fitch will recognise economies of scale benefits from cash consolidation. Refusing to stop there, Fitch also improved cash forecasting by implementing a new treasury policy driven by the pool to prevent same-day payments, other than by treasury.
Fitch will also recognise key FX benefits – the global pooling structure allows all FX exposures for international entities to be hedged without the need to purchase forward FX contracts, removing the risk of FX fallout and manual intervention. The company also harmonised FX pricing across all 16 currencies, moving all FX payment inputs to an automated payment file upload transmission, instead of manual input.
Finally, Fitch recognised risk management and operational benefits, such as onboarding its Canadian entities quickly despite banking changes in the Canadian market, and by consolidating its multiple legacy global CashPro instances and moving forward with a single, global CashPro instance with 80% of its global cash visible.
Key benefits
Cost savings.
Process efficiencies.
Return on investment (ROI).
Increased automation.
Risk mitigated.
Improved visibility.
Errors reduced.
Manual intervention reduced.
Increased system connectivity.
Future-proof solution.
Bank of America congratulates Fitch Group for its exceptional cash pooling solution that has garnered recognition from Treasury Today. The multi-dimensional impact this project will have on the Fitch business is enormous and will be experienced globally across multiple areas. The leadership of Kevin Gaulton and his team’s attention to detail has been crucial to the project’s success and sets them apart, particularly the way they have managed multiple stakeholders. Bank of America is proud to be a key partner of Fitch Group.
in partnership with
The Adam Smith Awards are the industry benchmark for best practice and innovation in corporate treasury. The 2024 awards attracted 389 nominations. To find out more please visit treasurytoday.com/adam-smith-awards
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