The challenge
Dentsu Aegis Network Group (DAN) India has 26 operating entities in India, which have varying cash positions with changing surpluses and deficits, leading to significant debit interest loss because of overdraft borrowing and loss of investment opportunities due to idle balances. Given the volume and value of underlying transactions, DAN India was looking for a bespoke automated pooling solution, which would help it to achieve optimal cash positions across entities and be compliant with pooling regulations in India by restricting the number of pooling transactions.
The solution
DAN India worked with Citi to launch a market-first dynamic header pooling solution, which automates liquidity management along with integrated transaction initiation workflow. The highly customised dynamic header pooling structure involves multiple borrowers and lenders with assigned priorities for fund flows to meet specific cash concentration requirements of DAN India. The solution delivers end-to-end automation via host-to-host integration for automated reconciliation of accounting entries and interest allocation between entities.
In this solution, the bank developed a comprehensive platform and customised algorithm, which analyses the fund positions of all entities. This then enables automated funds transfers to achieve optimal liquidity across all entities, based on multi-layered funds flow rules defined by DAN India. This focused on priority-based target balancing with customised pooling limits across entities.
Unlike a regular pooling set-up, DAN India’s solution does not have a dedicated header and thereby has a dynamic header based on the fund position of all entities. This unique feature limits the number of pooling transactions which was a specific requirement of DAN India to avoid classification of entities as NBFCs as per pooling regulations in India.
The solution also provides DAN India with visibility of balances across multiple entities with cash forecasting and analysis capabilities via dashboards.
Best practice and innovation
The dynamic header pooling solution is unique, being a market first in India, demonstrating real innovation. While multi-entity pooling has been prevalent in India, the solution implemented by DAN India is unique such that there is no dedicated header in the pooling structure and the funds transferred between entities follow a multi-level complex rule set.
Advertising agencies in India traditionally have multiple operating entities with varying cash positions and therefore efficient and optimal liquidity management across entities is a primary objective of the group treasury team. Cash pooling in India is mandated by multiple regulations, making it more complex.
This customised solution is specialised and involves development of a platform with an underlying smart algorithm, enabling a dynamic header structure with automated pooling, reconciliation and interest calculation. DAN India’s objective of a fully optimal liquidity management structure across all entities has been achieved and is fully compliant with local pooling regulations.
Key benefits
- Optimal liquidity position across all DAN India entities leading to financial saving of ~ US$600,000 per annum.
- Automated fund transfers and complex interest reconciliation leading to increased efficiency and savings of four FTE.
- End-to-end visibility and control of liquidity via expansive dashboards.
- One-stop liquidity management solution with capability of complex interest calculation for multiple modes of investments including term deposits and inter-company deposits.
- Real-time accurate data availability.
“This innovation solution was the result of effective collaboration between us, Citi and Omniscient Software. It was our first foray working with a fintech company and it reaped the dividends we were seeking in terms of significant efficiencies achieved in working capital and liquidity management,” says William Vaz, Director, Operation Finance and Group Treasury, Dentsu Aegis Network Group India.
