Cash & Liquidity Management

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CAREful Approach to Cash Management For CARE, a leading humanitarian organisation fighting global poverty worldwide, the way they manage their cash is a vital way in which they can demonstrate accountability. We explore the reasoning behind their current and planned initiatives and how they aim to achieve them.

A CAREful Approach to Cash Management

by Steve Zaubi, Director, Global Treasury Services, CARE USA

At CARE, we take very seriously our responsibilities to recipients of support and assistance, and the donors who make it possible for us to fulfill our humanitarian objectives. A vital way in which we can demonstrate accountability is the way that we manage our cash. We aim to demonstrate the highest levels of reporting and control, manage counterparty and operational risk, maximise the value of cash we hold, and ensure that funds are liquid and accessible to fund our projects worldwide. This article explores some of the current and planned initiatives that are helping us to achieve these objectives.

Centralising bank relationships

We have a central treasury function in Atlanta, Georgia; however, many cash and treasury-related activities had developed organically in-country, and bank relationships were often being managed locally. We recognised that this approach had limitations in terms of both counterparty and liquidity risk. Consequently, we have gradually been centralising bank relationships over the past few years, and we now have several banking partners covering each region. Some regions present more barriers in terms of pursuing a regional banking strategy because the projects we are involved in are often in the least developed (and least accessible) parts of the globe. We may therefore have several banking partners within a country, which can be challenging. For example, some of the small, local banks with which we work may not have electronic banking capabilities, which makes it difficult to automate payment processes and obtain account information easily.

Rationalising accounts

Some donors have mandated that their funding should be held in separate bank accounts, in order to ensure full transparency over how cash is used. It is important to us that our donors maintain complete confidence in the management of their funding, so we have been willing to do so; however, the result is that we now hold many hundreds of bank accounts globally. This adds to our costs substantially, and it requires significant resourcing to administer and maintain accounts. Furthermore, this concession has led to large amounts of idle balances, i.e., cash that is yielding minimal returns while often subject to counterparty risk, sovereign risk, and, in the case of local currency balances, significant foreign exchange volatility. Security and liquidity of cash are very real concerns in volatile parts of the world. For example, during the on-going political upheavals in Cote d’Ivoire, the central bank, stock exchange and many international banks closed down for 10 weeks between February and April 2011, leaving organisations such as CARE unable to access cash to support operations in the country.

We have been pursuing an active strategy to address the cost and risk associated with our complex bank account structure, whilst fulfilling our obligations to donors and supporting CARE’s mission in each country. Firstly, we have stipulated that no new accounts should be opened, with few exceptions. Alongside this, however, we recognise our stewardship role over funds donated by individuals and institutions worldwide. Therefore, we are working closely with donors to demonstrate the level of reporting detail that we can provide, without the need for a separate account, and illustrate the financial controls under which we operate.

Strategic bank relationships and connectivity

As a related initiative, we are seeking ways to consolidate accounts, as well as banking relationships, wherever possible. We are exploring how we can use branch banking in order to access one account from multiple locations, leveraging situations in which a bank’s footprint has a considerable overlap with our own. As every transaction is reported and accounted for in the same way, we benefit from greater consistency as well as improved visibility and control over cash.

Having achieved a streamlined account structure, we can then integrate bank accounts globally with our ERP (PeopleSoft Financials), to provide straight-through processing for both account information and payments or transfers. CARE is a SWIFT member, so we will be using SWIFT Corporate Access to achieve this integration through our service bureau, Expertus. The advantage of this approach is that we can leverage a single channel to access multiple banks, we benefit from robust security and we are able to support the reporting and financial control requirements of our donors. Achieving straight-through processing of transactions reduces manual tasking, supports financial controls through workflow-driven transaction authorisations, and facilitates exception-only account reconciliation.

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