The challenge

Element Solutions Inc (ESI) was formerly part of Platform Specialty Products Corporation (PSP), a global and diversified producer of high-technology speciality chemical products. Between 2013 and 2015 PSP went through a period of rapid growth, making six acquisitions totalling US$9bn. In July 2018, PSP announced its separation into two units: Arysta, which was sold to UPL, and the remaining PSP performance materials business, which was renamed ESI. The split was completed in early 2019.

This activity created major challenges for efficient bank account management, cash visibility and liquidity management. Prior to the split, the company had some 250 bank accounts in Asia Pacific (APAC) across 13 markets and 70 different banks, with some entities having multiple redundant accounts with various banks. The two immediate objectives decided upon to address this situation were to rationalise the bank account structure to a single regional provider, and then to build upon this with regional cash pooling.

The solution

The solution was split into two phases to address these two objectives. In the first phase, after various discussions and RFPs, ESI awarded its APAC cash management mandate to HSBC.

The bank account rationalisation process in APAC started in mid-2017, with the new account structure completed in early 2018 and migration of balances from legacy accounts, which was completed four months later. Through this process, both bank account numbers and bank fees were reduced by around a third.

Implementation of the second phase of the solution started in the first quarter of 2019 and consisted of centralising liquidity through a regional structure in Singapore. In addition to including the various APAC countries where participation in pooling is permissible, this implementation also migrated an existing notional pool in Hong Kong, specifically for China. This involved extensive discussion and negotiation with Chinese regulators to obtain approval and the necessary quota.

Best practice and innovation

The solution gives ESI treasury complete visibility on all APAC bank balances via a single interface. No manual intervention is required to operate the pooling structure or to run balance reporting. In addition, approximately two thirds of ESI’s APAC liquidity is now concentrated in the Singapore pool, from whence it can be quickly redeployed regionally/globally.

Previously the very large number of bank accounts, coupled with no standardised controls on payment authorisation processes and limits, made compliance with legislation such as Sarbanes-Oxley extremely challenging. The restructuring of ESI’s APAC banking (coupled with an earlier European bank account restructuring) now means that it is far easier to ensure compliance.

Key benefits

• Far greater control of its APAC liquidity, which can be quickly mobilised to best effect, be that investment or US repatriation.
• Cash and liquidity management processes have become far more efficient and automated.
• Productivity of finance personnel has substantially improved, with more resources now available for value-added activities.
• Regulatory compliance is no longer a major concern or overhead.
• Surplus cash now earns a solid return.
• Bank charges reduced by 35% in APAC by rationalising redundant accounts/features.
• 30% reduction in the number of APAC bank accounts was achieved.
• APAC balance reporting previously took 24-48 hours; it now takes five minutes.
• 60% of ESI’s APAC surplus cash is now centralised in the Singapore pool.
• The need for cash in a particular location can now be fulfilled within 30 minutes, versus days beforehand.