Sony Pictures Entertainment is part of Tokyo-based Sony Corporation and is involved in film and television production and distribution. The company reported sales figures of JPY 717.5 billion ($7.2 billion equivalent) for the year ending 31st March, 2009.
With operations in many different territories, achieving centralisation is a key objective for the treasury department at Sony Pictures. Sandra Ruckdaschel, Director of Treasury for Sony Pictures explains: “We want to streamline our cash operations worldwide in order to achieve centralisation. At the moment we use a zero-balance cross-border sweep within the Eurozone to centralise all our net credit balances and allow us to invest the surplus with Sony Global Treasury Services – the in-house bank. Other priorities for us include optimising the value of balances across the company, improving collections and payables efficiency, reducing costs and standardising payment processes across Europe.”
Working towards this aim, the company decided to pioneer a SEPA solution for its third-party vendors across Europe. “We started out using a more expensive wire transfer method, but over time, we switched to domestic ACH solutions in various countries. Now we are trying to streamline processes further by using cost-efficient solutions such as SEPA. We implemented a J.P. Morgan host-to-host File Management Services (FMS) solution approximately five years ago, which gave us a single submission channel with multiple country coverage. Now it’s simply a case of changing our payment methodology to use IBAN and changing the configurations in our systems. We are currently rolling this out across Western Europe,” says Sandra.
The solution has streamlined the company’s payment processes and reduced the costs involved in paying third-party vendors. “SEPA is definitely going to have a big role in our company. We may also find the SEPA Direct Debit of use in the future for business-to-business collections, and we intend to explore this further in 2010.”
“Relationship was key to implementing this solution”, remarks Sandra. “If J.P. Morgan has the capability, or even has the willingness to work with us to create that capability, we will always be open to partnering with them.” An added benefit of working with J.P. Morgan has been the file conversion service offered by the bank across the different countries in which Sony Pictures operates. “It helped us minimise man hours in IT and SAP support by standardising payment instruction formats, because there is one solution and not a multi-bank solution.”
In addition to SEPA, Sony Pictures is looking at using SWIFT SCORE in the future. “We see a definite trend here. We’ve contacted our peers that are using SWIFT and they say that it is beneficial. We would like to be able to get our banking information from all over the world in one consistent format, to help with positioning, forecasting and accounting entries.” Sandra sees technology as being critical to treasury operations going forward, particularly as many companies are reducing headcount.
Liquidity management
Optimising liquidity should always be a core discipline within treasury strategy. But at times when access to credit is severely reduced and borrowing costs are far greater than those corporates have become accustomed to, companies are looking to their internal cash reserves to ensure that these are being used as efficiently as possible. This can be a difficult task:
Challenges
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Managing multiple accounts.
Running an organisational structure across different countries with varying legal and tax regimes usually means a large number of bank accounts and therefore banking systems. This in turn makes consolidating account balances tricky, leading to impaired visibility at a regional and global level, particularly for companies operating on a decentralised basis.
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Maximising yield.
With interest rates at record low levels, finding the right liquidity management tool is crucial. Corporates want security – with minimal counterparty risk – but they also need yield. How can this be achieved efficiently?
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Administration.
Manual processes surrounding account opening and closing as well as security measures, such as signatory updates, are extremely time consuming. There is also significant margin for human error here. What is the role of banks in helping their clients to reduce account administration?
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Visibility.
Using multi-bank reporting to give visibility of cash no matter which currency, bank or location.
Solutions
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Cross-border cash concentration.
Although concentrating cash in one place may not provide the yield benefits of yesteryear, it can provide optimal use of liquidity by reducing the need for bank funding as inter-company loans are leveraged. Moreover, online portals can provide real-time updates for corporates, not only on specific transactions but also on the status of their overall liquidity structures. This means improved visibility, which can in turn lead to more efficient investment of surplus cash.
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Pan-European notional pooling.
The local cash balances of each subsidiary – concentrated by relationship banks in country – can be centralised automatically using an overlay structure run by the pooling bank. Notional pooling reduces the interest paid on debit balances and increases the interest received on credit balances, thereby optimising yield. Notional pooling also allows for local control of cash, which helps to overcome the tax and legal obstacles involved in pan-regional cash management.
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Revisiting the basics.
“On a day-to-day level, the majority of administration issues arise from simple tasks such as security entitlements. It’s important not to get distracted by the seemingly more important things and to make sure reporting is accurate and systems are operating at optimal levels, with the highest degree of automation. Banks need to help their clients to gain control over the fundamentals and to access as near to real-time data as possible,” says Ponsford.
Innovation
Aside from providing these core solutions, banks are the key innovators in this space. J.P. Morgan for example recently developed a rules-based investment programme called Cash Trade Execution (CTE) with another client Google Inc. Through the solution, Google transfers excess operating cash into a J.P. Morgan investment account, which is swept into time deposits with a broad range of pre-screened bank counterparties. CTE also tracks the counterparty exposures and ensures these stay within pre-agreed limits, thus enabling adherence with risk policies and diversification in investment, whilst freeing up treasury staff.
Looking forward
J.P. Morgan’s CTE solution also demonstrates a new mode of thinking among banks – that is the collaborative effort. Banks are increasingly recognising the need to provide a service to their customers; not everything revolves around price anymore. “On the back of this, we have also seen increased openness of the banks towards bank agnostic channels. I believe it’s a natural evolution of the industry,” remarks Ponsford. SWIFT is one of the major players in the bank agnostic space. SCORE (Standardised Corporate Environment) for example allows corporates to exchange files with any registered bank through a single SWIFT interface. This essentially means independence from bank proprietary connections and greater straight through processing. Moreover, SWIFT has developed messages in line with the XML standards which also underpin SEPA. The solution supports centralisation initiatives, creating greater efficiency, visibility and control over cash flow: the ultimate goal.
Electronic bank account management (eBAM) is another initiative launched by SWIFT that is designed to standardise and streamline the account opening, closing and maintenance procedures between corporates and banks. This initiative again highlights the themes of increased customer focus, compatibility and collaboration. “From our perspective, we think it’s an absolute step forward,” concludes Ponsford. “Since it helps our clients spend more time and resource on the real business of treasury, it is something that we are actively encouraging.” The task that remains for the corporate is to choose a banking partner that can service their needs with appropriate solutions, whilst evolving with their company and the industry.
Glossary
- SEPA Direct Debit Core
- SEPA Direct Debit Business to Business
- International Bank Account Number
- Basic Bank Account Number
- Enterprise Resource Planning
- Electronic Data Interchange
- Pan-European Automated Clearing House
- Central Bank Reporting
- Standardised Corporate Environment
- Cash Trade Execution
- File Management Services
SDD Core
SDD B2B
IBAN
BBAN
ERP
EDI
PE-ACH
CBR
SCORE
CTE
FMS
J.P. Morgan
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