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Corning’s Treasury: Best in Class

Featuring Bengt Elvinsson, Assistant Treasurer Global Operations, Corning Incorporated

Bengt Elvinsson, Corning Treasury explains, “We have achieved considerable efficiencies by working with regional banking solutions including Bank of America Merrill Lynch as our treasury outsourcing provider. In particular, we have been able to streamline and enhance efficiencies across our activities, increase visibility and control and fulfil our cash and other treasury strategies more effectively.”

Goals and challenges

In 2003 Corning had an established global in-house banking operation but remained dependent on an inefficient, outdated banking structure at the legal entity level globally. The company aspired to transform the treasury centre into an industry-leading, centralised and globally structured service solution that met specific requirements from internal corporate stakeholders, including integration with three regional shared service centres (SSCs), and was accountable to individual business units for its performance by achieving key metrics. However, the company recognised that without implementing a more efficient, integrated banking infrastructure, it would be difficult to eliminate the existing inefficiencies and achieve these goals. There were various challenges:

Firstly, there were myriad banking relationships within countries and across the geographic regions, with a multitude of legal agreements, processes and technology platforms.This presented fragmented and non-standard business processes causing significant inefficiencies, further challenging the objective of a centralised and integrated banking operation. These local banking relationships were also, in many cases, no longer part of the group’s credit panel.

Secondly, the fragmentation also limited treasury’s visibility and access to surplus funds in subsidiary accounts, which made it difficult to establish a more optimal and efficient cash and liquidity management strategy.

Thirdly, the existing architecture was a material impediment to full integration and regionalisation of transaction processing into their shared service centre operations.

The solution

Corning made the decision to centralise, rationalise and simplify its banking and cash management infrastructure, with a view to increasing visibility and control over cash, enhance financial processes and reduce costs. To achieve this, the company launched projects in Asia and EMEA during 2005, with the Americas to follow in 2011, to achieve a variety of objectives that have transformed the treasury centre into a highly effective, best-in-class function:

• By selecting a primary banking partner for each region capable of fulfilling the majority of the company’s banking requirements; Corning was able to affect significant cost and complexity reductions associated with multiple partners. This allowed the number of bank accounts and technology platforms to be reduced, fee structures to be simplified, and documentation standardised.
• Adapting and enhancing the existing overlay cash and treasury management infrastructure allowed for a mechanised integration of daily cash operations including full visibility over cash balances, while enhancing its ability to manage working capital. In doing so, Corning minimised ‘idle’ cash balances and improved the use and control of excess cash. Centralised payables and receivables on a common platform improved efficiency and control over processes, and delivered cost reductions.
• Rationalising technology solution platforms, reduced cost and complexity, and enabled greater automation and control. This included establishing a single interface to Corning’s banks that eased integration and enabled the company to add new banking solutions more easily.

Outcomes

Corning now has a primary banking partner in each of EMEA and Asia, with a limited number of domestic banking services where appropriate, and a streamlined, bank-neutral connectivity platform. Communication is easier to manage and control, with a standardised approach to interface formats and reporting. Operational bank accounts have been reduced by approximately 50%, under a single set of legal documentation for each region, enhancing reconciliation, and increasing control and standardisation of account management, authorities, fees and service delivery.

Treasury now has full visibility and control over cash, enabling a more flexible and strategic approach to both transaction execution and the use of excess cash. Payments  and collections can now be efficiently centralised into the shared service centres: for example, while in the past, there were multiple payment cycles for the individual entities/banks in each country, these have now been replaced by a single, centralised payment run, enabling greater visibility and control over cash and working capital. Straight-through processing has been enhanced considerably, leveraging industry best practices and simplified processes, with a significant reduction in both internal costs and bank fees.

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