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Cash & Liquidity Management

Implementing a Best Practice Treasury at Richemont Richemont Group Treasury faces similar challenges in treasury and cash management to those of many other companies which have a decentralised structure. A key challenge is the number of accounting and electronic banking systems used by the Group operations as well as the high number of payment centres. In Europe alone, the Group has 14 electronic banking systems and 30 payment centres. The mission of Group Treasury is to find the right balance between the business strategy of the Group as a whole and the treasury strategy.

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Implementing a Best Practice Treasury at Richemont

by Vassilina Lapteva Walford, Group Treasury Projects Manager, Richemont

Centralisation of liquidity and funding is bringing to the Group significant annual savings.

Richemont Group Treasury faces similar challenges in treasury and cash management to those of many other companies which have a decentralised structure. A key challenge is the number of accounting and electronic banking systems used by the Group operations as well as the high number of payment centres. In Europe alone, the Group has 14 electronic banking systems and 30 payment centres. The mission of Group Treasury is to find the right balance between the business strategy of the Group as a whole and the treasury strategy.

Richemont Group Treasury was created in 2000 when the Group’s Board of Directors took the decision to centralise treasury and cash management activities with a view to achieving visibility over cashflows, managing liquidity more effectively, leveraging assets and improving management reporting. The centralisation process can be summarised in four main phases (fig 1).

Between 2001-2003, the focus was on implementing the treasury module of SAP at a Group level, establishing local cash pools and core banking relationships, and designing a centralised strategy for foreign exchange risk management. 2004-2006 were the years of further centralisation of treasury activities, including the introduction of a intercompany netting system to automate and centralise the settlement of intercompany transactions. Liquidity and funding were further centralised and automated with the implementation of the notional multi-currency overlay cash pool and a centralised electronic balance reporting was implemented which improved significantly the ability for Group Treasury to have a real time view on its cash positions. In 2007, the Group launched another important project, with the objective of centralising external payments by implementing a payment factory.

Centralising FX management

Since 2004, with significant currency volatility, the Group has set a policy of hedging its net currency flows. The main objectives of this hedging policy are:

1) to reduce volatility in operating results

2) to reduce volatility of net cash flows and

3) to minimise transaction costs

The main benefit of centralising FX management is to net the exposures of Group entities and implement a consistent hedging policy. Richemont Group Treasury hedges 70% of its expected net flows in foreign currencies relative to its functional currencies CHF and EUR, twelve months in advance. Centralisation of FX activity also allows the Group to leverage natural hedges and to respond rapidly to major adverse currency movements.

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