The challenge

Following the consolidation of its global trading activities and the inception of JERA Global Markets Pte Ltd (JERAGM), the newly-appointed Head of Treasury – Siang Chew – conducted a thorough review of the group’s overall liquidity management, treasury funding, business operations and treasury systems.

As JERAGM expanded its business, the company had accumulated accounts held globally with multiple banks that had incompatible platforms and formats. This created significant challenges for JERAGM’s treasury, finance accounting and IT departments, particularly around liquidity management, cash visibility and the ability to deploy treasury funding in support of its growing business.

Key concerns included the inefficient processing of payments and expensive overdraft fees, not to mention the absence of a global liquidity management solution and platform.

JERAGM therefore needed a global liquidity solution to help optimise cash across multiple entities and multiple currencies across different jurisdictions in Asia Pacific, the US and Europe.

The solution had to be integrated with JERAGM’s SUN accounting system (with a longer-term view to migrate to global SAP) to drive operational efficiencies, reduce IT costs, and, more importantly, provide scalability as its business continues to expand.

The solution

In partnership with new banking partner J.P. Morgan, JERAGM embarked on a treasury transformation codenamed ‘Project Thunder’. It undertook a three-phase approach to establish a fully automated global liquidity solution within 12 months from inception.

The first phase was to implement a multi-entity, single-currency notional pool across its Singapore global headquarters and its US entities. This entailed opening accounts and setting up the USD notional pool within one month.

For the second phase, JERAGM partnered with J.P. Morgan to establish a multi-entity, multi-currency notional pool (MEMCNP) for all of its key European participating entities, with a hub in Luxembourg.

In the final phase, both Asia and Europe notional pools were further integrated via a cross-border follow-the-sun sweeping arrangement to enable a global automated liquidity structure.

The final liquidity management construct effectively provides JERAGM’s treasury a one-stop cash visibility of all participating entities’ accounts and balances. The Asia pool fully optimises its group-available cash for payments during Asia operating hours, before sweeping over to the Luxembourg (Europe pool) in support of European time zones, before sweeping the funds back into Asia.

Best practice and innovation

The fully-automated global liquidity solution went live within 12 months from project inception. It centralised global liquidity among participating entities and empowered those in need of cash with an automated global liquidity solution to draw from the pool.

Previously, entities that required cash had to establish intercompany loans via manual transfers which often caused tax problems related to interest income and interest expenses.

In addition to this, it enhanced efficiency by sweeping excess cash during Asia operational hours into Europe, facilitating a robust group cash optimisation for JERAGM’s global liquidity. This delivered improved returns on investment (ROI), a key performance indicator measured by JERAGM treasury.

Key benefits

• Total benefits of US$1m per annum for JERAGM’s group treasury, accounting finance and IT teams.
• A truly global and scalable liquidity solution across multiple jurisdictions.
• Increased straight through processing rates from manual to almost 100% for all payments generated from its current SUN accounting system.
• Increased security when initiating and transacting payments.
• Enhanced operational efficiency – with almost 100% of payment flows now automated and secure, the need for manual intervention has been eliminated.