Best Liquidity Management Solution Winner: Jabil Circuit
Published: Jan 2016
Photo of Aman Chadha, Citi and Fam Han Feng, Jabil Circuit.
Fam Han Feng
Treasury Director
Headquartered in St. Petersburg, Florida, Jabil Circuit Inc. (Jabil) is an electronic product solutions company providing comprehensive electronic design and manufacturing product management services to global electronics and technology companies. Operating in 24 countries in the Americas, Asia and Europe, Jabil designs and manufactures electronics for original equipment manufacturers (OEMs) in industries spanning from healthcare, life sciences, clean technology, instrumentation, defence, aerospace, automotive, computing, storage, consumer products, networking to telecommunications.
in partnership with
In-house bank solution to optimise global liquidity uses against-the-sun sweeps
This company operates in over 90 locations in 24 countries across the Americas, Europe and Asia. They have established an in-house bank structure in Singapore. The solution they have implemented with the help of Citi is a sophisticated multi-bank, multi-entity and multi-currency notional pooling mechanism with against-the-sun sweeps; a most innovative liquidity management solution.
The challenge:
Providing a seamless and efficient international liquidity infrastructure to support the business operation is always a challenging proposition for every MNC. With Asia being an important part of the company’s operations, Jabil decided to establish an In-House Bank (IHB) in Singapore and put in place a centralised treasury structure that will allow the company to optimise global liquidity and support the company’s strategic and operational growth.
The key objectives for Jabil to set up an IHB were to optimise its credit line requirements, minimise funding costs and increase control over its international liquidity positions. “In addition, Jabil was also looking to reduce FX exposure and risk by allowing our group companies to offset matching internal positions prior to hedging the net remaining currency positions with external banks,” says Fam Han Feng, Treasury Director.
The solution:
In 2014, Jabil established its Singapore IHB, enabling the implementation of a best-in-class global liquidity management structure. The sophisticated set up is fully automated, allowing Jabil to concentrate liquidity positions into a multi-currency notional pooling mechanism with against-the-sun sweeps. In partnership with Citi, the first and second phases of the project went live in September and December 2014 respectively, involving over 20 entities across multiple countries in Asia, Europe and North America, with capabilities to settle seven currencies.
Diagram 1: JABIL liquidity structure
One of the aims of the solution is to enhance returns on operating account balances. Using a combination of domestic, cross-border and multi-bank sweeps, Jabil moved the liquidity positions of its key operating entities via against-the-sun sweeps into non-resident accounts held with Citi Singapore. These accounts participate in a multi-entity, multi-currency notional pool, structured with a ‘drain-the-pool’ feature, to optimise notional pool surplus into a higher-interest yielding account.
Best practice and innovation:
This global liquidity structure stands out in the market as the first of its kind in Asia Pacific, with the following key features working in tandem:
Multibank, against-the-sun sweeps.
Multi-entity, multi-currency notional pool with drain-the-pool functionality.
It enables automated, seamless execution of highly complex and sophisticated requirements involving multiple entities, banks, and geographies. In turn, Jabil’s treasury is able to optimise negative and positive positions across multiple currencies, and provide liquidity, financial and operational efficiencies across its positions. The solution is also tailored to deliver higher returns on the overnight USD position.
It is recognition for the accomplishment of the company and everyone involved in the project…the Jabil team, which includes Treasury, Accounting, Tax, IT, Legal and Participating Entities, as well is testimony to our great partnership with our banking partner.
By using the IHB in Singapore to host FX transactions executed with banks, Jabil is able to consolidate and reduce its global FX exposure. The company also reduced its reliance on external FX hedging transactions with banks by maximising internal FX exposure offsetting. FX settlement for hedges is now conducted through the IHB platform.
Fam comments: “For this project, Jabil selected Citi, based on the bank’s existing support network for many of Jabil’s IHB-participating entities, thus its ease of overlay integration with our existing cash management processes, its robust liquidity management capabilities and the strength of its global and regional relationship.” He continues: “Citi’s expertise and experience with multiple existing structures equipped with against-the-sun sweeps into Singapore, and 65-plus multi-currency notional pooling structures already in place, helped our implementation process.”
Key benefits:
Increased automation.
Interest savings.
Process efficiencies.
FX exposure offsets.
Key learning points:
Implement a clear strategic objective, solid framework and value proposition for the company – and know that every company is different.
Establish a robust and fair RFP process with detailed design elements.
Encourage excellent teamwork in project execution, both within the company and with the banking partner.
The Adam Smith Awards Asia is the industry benchmark for best practice and innovation in corporate treasury. To find out more please visit treasurytoday.com/adam-smith-awards-asia
