Cash & Liquidity Management

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Cash Management Transformation in Asia Following a period of rapid growth, Asia has become more important than ever for AkzoNobel. The most recent phase of their transformation project a project which has been well documented by TMI is the optimisation of their cash management processes in Asia.

Cash Management Transformation in Asia

by Peter van Rood, Corporate Director, Treasury, AkzoNobel

Readers of TMI will be very familiar with the treasury transformation project undertaken by AkzoNobel following the series of interviews in 2010 featuring various aspects of the project. One major element of the project was cash management, with an optimisation project starting in Europe and rolling out to other regions. Several months later, we now return to Peter van Rood, Corporate Treasury Director at AkzoNobel who describes the most recent phase in this part of the transformation project, specifically relating to cash management in Asia.

Complexities in Asia

Following a period of rapid growth, Asia has become more important than ever for AkzoNobel, accounting for 21% of 2010 revenues, second only to the company’s traditional home markets in western Europe. Consequently, managing cash effectively in the region is essential to fulfilling both our current objectives and future strategy. Our aim is to double revenues in China, for example, to €3bn p/a in the medium term and expand our footprint in India to achieve revenues of €1bn p/a. We are also constantly challenged to reduce overheads and expand margins. We operate a combination of B2B and B2C models in Asia, with USD the primary currency for imports and exports. With over 130 legal entities, and no holding companies at a country or regional level, together with 22 joint ventures and two listed companies, our legal structure is complex, which is particularly challenging in a diverse regulatory environment

Our legal complexity, rapid growth and largely decentralised structure led to a range of cash management challenges that we were seeking to address. With over 60 banks and 460 bank accounts in the region, cash was fragmented with limited visibility and control at a central treasury level, with only limited in-country cash pooling to centralise cash. Trapped cash was a significant problem, and with a large number of different systems and formats in place we had little opportunity to automate processes and achieve straight-through processing. We were also aware that by negotiating credit terms, conditions and bank charges at a local level, there was a lack of consistency and visibility and we were not able to achieve economies of scale. Furthermore, in an environment where the reliable provision of credit is essential for every treasury, there was often a lack of credit commitment at a local bank level. We have now introduced a regional treasury centre that works seamlessly with group treasury in the Netherlands, with matrix responsibilities at a geographic, functional and business level.

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