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Best Cash Management Solution Winner: Merck KGaA

Published: Jan 2020

Photo of Jörg Bermüller, Merck KGaA and Mahesh Kini, BNP Paribas

Photo of Jörg Bermüller, Merck KGaA and Mahesh Kini, BNP Paribas.

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Jörg Bermüller

Head of Cash & Risk Management, Group Treasury

Darmstadt, Germany

Merck KGaA is a German multinational pharmaceutical, chemical and life sciences company headquartered in Darmstadt, with around 50,000 employees in around 70 countries. Merck was founded in 1668 and is the world’s oldest operating chemical and pharmaceutical company, as well as one of the largest pharmaceutical companies in the world.

in partnership with

Centralising end-of-day liquidity with minimal resources

The challenge

Merck KGaA set out a strategic roadmap for the company transformation from 2016 to 2020 to achieve its target organic growth for its three key businesses.

As its business continued to grow exponentially in Asia Pacific, it was imperative that the company drove further improvements to the treasury infrastructure to ensure overall sustainability, whilst at the same time supporting the growing aspirations of the company in its key regions and markets.

Merck KGaA identified Korea as the key market to focus their growth expansion in 2018 and 2019, which it looked to further pave the way for growth and enhancement efforts for the rest of the markets in Asia Pacific.

To support the expansion plan to increase its presence in Korea from four to six entities, Merck KGaA decided to embark on a treasury transformation initiative for Merck Korea. With the current increase in business volumes, there was clear pressure to optimise their financial processes with minimal resources and limited budget.

However, Merck Korea faced various challenges. A huge amount of manual support was needed to reconcile incoming credits through multiple banks, whilst automated processing of bank statements was also not possible. Because non-standard connectivity protocols were in place, it meant Merck had to maintain disparate systems and convoluted processes, resulting in high IT maintenance costs. Due to the local culture and financial infrastructures, some of these practices were simply considered to be the unchallenged ‘market norm’ for Korea.

The solution

In partnership with BNP Paribas, Merck was able to successfully map out a process that fully automated the reconciliation process for all incoming credits, irrespective of which bank and payment types the local customers were using.

The partnership co-developed a simple solution that gathers all necessary information, distilled into a global standard MT940 format. These included all transactions occurring in Korea, even at the local banks (and even those coming in through the local banks’ virtual accounts).

As well as the 100% automation, it also meant that Merck’s customer base remained unaltered throughout the whole transformation period. Thus, a painful and lengthy account changing process for Merck’s customers and customer service departments was avoided.

Best practice and innovation

Merck Korea demonstrated market leadership and excellent best practice by its proactive approach and active engagement with its service provider to co-create a solution that meets the company’s requirements fully and holistically.

There is currently no similar solution in the market that is 100% automated, integrated and all-encompassing to include multiple solutions ranging from virtual accounts and multi-bank sweeping. BNP Paribas was instrumental in this transformation journey from advisory, co-designing, project management and execution to client servicing. The outcome has been revolutionary, being the first in the market and has reshaped how Merck’s treasury operations can most effectively function and deliver more value to the business.

Merck Korea is now able to leverage technology to integrate multiple local banks’ virtual accounts, which was essentially a tripartite integration implemented seamlessly without any involvement from local banks. This customised connectivity of the multi-bank sweeping mechanism facilitates access to the local collection banks’ virtual account repository directly.

Key benefits

  • Facilitates efficient liquidity management – consolidates cash flows and optimised interest earnings with concentration of funds.

  • Achieved processing efficiency.

  • Enhanced productivity.

  • Improved visibility and control.

  • Minimal disruption or no changes in ERP systems for Merck Korea.

  • Increase of straight through processing rate due to access to timely and higher quality of information.

  • Achieved standardisation and harmonisation with an all-in-one solution.

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