Cash & Liquidity Management

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Creating Competitive Advantage through Cash Management In 2007, Istanbul-based Arçelik decided to implement a new banking and cash management structure. At the time the household appliances and consumer electronics company had 14 operating subsidiaries and over 25 banking relationships globally. After an extensive evaluation process it chose ABN Amro, now the Royal Bank of Scotland, to be its cash management partner. The acquisition of Grundig Multimedia emphasised the need to centralise cash, which the company achieved via a cross-currency notional pool. In this article, Arçelik's Finance Director provides a summary of the challenges the project presented and the resulting benefits of the project. Future plans include centralising financial operations, possibly within a shared services environment.

Creating Competitive Advantage through Cash Management

by Turkay Tatar, Finance Director, Arçelik

Owing to the international nature of the Arçelik business, we have over 30 subsidiaries involved in both production and distribution across a wide variety of locations. Each subsidiary is responsible for its own payments and collections, while treasury activities and strategic decision-making is undertaken in treasury. From a cash management perspective, we were concerned that treasury lacked visibility over transactions undertaken locally, and it was difficult to manage the company’s overall cash position. This problem was exacerbated by the large number of currencies and bank accounts that we had to manage.

We made the decision to implement a single banking relationship to replace our existing bank relationships in order to monitor and control our cash flow globally.

In 2007, we reviewed our cash management activities and decided to put in place a new banking and cash management structure to support our evolving needs. At that time, we had 14 operating subsidiaries with over 25 banking relationships globally. This resulted in a lack of visibility and control over cash flow and severely restricted the mobility of cash. We made the decision to implement a single banking relationship to replace our existing bank relationships in order to monitor and control our cash flow globally. This would provide us with a common banking platform across the business on which we could standardise our cash management transactions and achieve visibility across all subsidiary companies.

Business rationale

There were a number of reasons for seeking to replace our disparate banking relationships with a single banking partner. In particular, a single bank would enable us to:

  • Achieve visibility over all of our bank accounts through a single banking platform, including inflows and outflows
  • Make it easier to reconcile bank charges and deposit rates by having standard fees across all accounts
  • Enable us to design bank reporting in a consistent way
  • Ensure a consistent approach to security and control over internet banking and user controls
  • Make it easier to implement new financial structures in the future with a bank which understood our business well
  • Set a firm basis for future growth

A banking partnership

Our project to appoint a partner bank took three months, including an extensive evaluation process of seven banks. We had a range of selection criteria, including technology, presence in the relevant countries, depth of cash management products, operational capabilities, costs and cut off times, and willingness to take on the credit risk of Arçelik. Having shortlisted three banks, we finally invited ABN Amro (now The Royal Bank of Scotland [RBS]) to be our cash management partner. The shift from multiple banking partners to a single bank created huge efficiencies from both a cash management and risk management perspective, even before embarking on the next stages of the project.

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