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In House Bank
2
Agenda
Introduction to AkzoNobel
Introduction to Treasury in Asia Pacific
Alignment of In House Bank to corporate strategy
In House Bank (IHB) concept, structure and system:
Liquidity Management
Payment Factory
Corporate Finance
FX Hedging
Project timelines
Cost Savings
Conclusion
Q&A
3
AkzoNobel today
4
Our end users
5
Treasury in Asia Pacific
Head of Treasury
(1)
Cash Management,
Operations (IHB), Trade Finance
(3)
Corporate Finance, Risk
Management and M&A
(1)
Projects & IT
(2)
6
Treasury in Asia Pacific
New Markets:
• Philippines
• Myanmar
• Cambodia
• Laos
7
How does Treasury fit into the new group strategy
Service
Bureau
Payment Batches &
Manual payments
SAP Process Integration
Treasury Applications from SAP
SAP Treasury and Risk Management
SAP Bank Communication Management
SAP Cash and Liquidity Management
SAP In-House Cash
External Bank
Statements
Integrated Statements
Automated Cash Apps
Exceptional
Payments
Payment
instructions
Intraday info
EB solution
Payment
Instructions
Daily Rates
External Deal Request
Treasury System Architecture
8
IDO
C C
on
nec
tivity
XML/MT 101
MT 940
9
Global Design Approach to Liquidity Management (open economies)
Operating Entities
Treasury
Treasury
Regional Cash Pool Header
Entity
External Bank Accounts
Entity
External Bank Accounts
C
oll
ec
tio
ns
Co
lle
cti
on
s
P
AY
RO
LL
PAYMENTS ON BEHALF
P
AY
RO
LL
P
AY
ME
NT
S
Treasury
Local Cash Pool Header
In-house Bank (Treasury)
Internal Netting
Payment Factory
Bank Statements
FX Hedging
Internal Funding
Cash Forecasting
ST
AT
EM
EN
T
ZBA ZBA
ZBA
Entity
In-house Bank Accounts
Overlay Bank
Enhanced Yield
Standardized Processes
Reduced e-Channels Bank Dependency
Simplified Structure
Improved Cash Visibility and Control
Centralized Bank Relationship Management
Reduced Charges
Liquidity Management in AkzoNobel
10
Domestic
Entity
Domestic
Entity
Domestic
Pool
Global
Pool
Domestic
Entity
Domestic
Entity
Global / Regional
Pool
Restricted Economies Open Economies
Co
lle
cti
on
s
Pa
ym
en
ts
(‘forw
arding’)
Co
lle
cti
on
s
Co
lle
cti
on
s
Co
lle
cti
on
s
Payments
(‘POBO’)
2way ZBA
2way ZBA
Corporate
Finance
initiatives
Pa
ym
en
ts
(‘forw
arding’)
Collections
(‘COBO’)
11 11
Due to the regulated landscape of Asia, the region is split into Open and Restricted Economies:
• Australia, New Zealand, Singapore, Hong Kong
• In open economies, it is allowed to „pay on behalf of‟. This means that payments will be paid from an Akzo Nobel NV account, and settled internally (via an In-House Bank account in SAP Treasury) from the original paying entity‟s account.
Open:
• China, India, Thailand, Taiwan, Malaysia, Indonesia, Sri Lanka, Vietnam, Korea, Philippines, Bangladesh, Pakistan, Papua New Guinea, Japan **
• In restricted economies, “payment on behalf of” is either not allowed or highly regulated. In these countries, PF will essentially be payment forwarding. Payments will be made from an external bank account in the name of the local entity and the payments will be mirrored on an internal account in SAP („payment forward‟).
Restricted :
Payment Factory (PF)
12 12
• Payment factory functionality allows to centralize AkzoNobel‟s transaction flow and bank connectivity, while
keeping the responsibility for the individual transactions with the local entities.
• One of the key benefits of PF implementation is enhanced cash management due to more efficient
utilization of global currency pools. Other major advantages includes process standardization, cost
savings, flexibility and control of the payment and receipt process (smart routing), including netting
and processing of internal payments.
Payment Factory (PF) cont.
• Payment factory
and collections
factory and the
ability of payment
warehousing will
also improve the
ability of accurate
short term cash
flow forecasting
13
Internal funding / corporate finance mainly for open economies
Treasury In House Bank
•Domestic Entity virtual bank account
•Domestic Entity virtual bank account
•Domestic Entity virtual bank account
•Domestic Entity virtual bank account
Domestic Entity
Domestic Entity
Domestic Entity
Domestic Entity
Downstream:
• OWC facility
• Term Loan
• Permanent Loan
(Equity)
Upstream:
• Positive IHB
balance
• Term deposit
• Dividend
All in line with „at arms length‟-principle and agreement with tax authorities
on transfer pricing, using to intercompany loan pricing model
14
FX hedging
Daily Rates Upload SAP Treasury Risk Management
AkzoNobel Central and Regional Dealing Room
Domestic Entity
Domestic Entity
Domestic Entity
Domestic Entity
Domestic Entity
Restricted Economies Open Economies
Internal hedging /
Pricing
Consolidation
Net external hedging
FX trading on behalf of
Domestic Entity
15
Blueprint, realization, acceptance, testing and go-live ±12 months
Global roll out (80/20 rule) ±12-18 months
Currently at consolidation stage working on continuous improvements
Project timelines
16
Estimates yearly cost savings ±EUR10mio:
Centralization of liquidity, less overdrafts, negotiated improved
debit/credit rates, elimination of float
Eliminated local cash pools, activities and Fte (less business people
doing treasury activities)
Reduced the number of bank accounts and electronic banking
systems, resulting in lower bank fees and IT costs
Conversion of (cross border) payments: smart routing eliminates the
number of cross border payments and FX spot conversion
Standardization of payment process, bank statement upload and
reconciliation reduces error and less Fte
Cost Savings
17
A true In House Bank gives:
Standardized and simplified processes and discipline
Full control, access and visibility over the groups cash, including better
cash flow forecasting
Full control, access and visibility over FX risk footprint
More efficiencies: consolidation, intercompany netting, FX position
netting, flexibility in smart payment routing, optimizing corporate
finance agenda
Cost savings
Conclusion
18
Q&A