Cash Centralisation to Support Strategic Expansion
by Riccardo Santoro, Group Treasury Director and Dania Gregorat, Corporate Finance Manager, Giochi Preziosi, with Massimiliano Cirelli, International Cash Management Sales Italy, UniCredit
As the company grew, we had a number of cash management banks in place, which led to a lack of visibility and control over cash, which became fragmented across different banks and accounts. While treasury acted as an in-house bank using intercompany loans, this was inefficient from a cash management perspective, with capital invested at a local level. Furthermore, this approach was administratively intensive with a great deal of legal documentation and board resolutions required for each loan. As the business matured, a growing number of subsidiaries had moved from a cash negative to a cash positive position, so the total amount of surplus cash across the business was growing. However, with an aggressive growth strategy in place, we wanted to use this cash to fund new subsidiaries in an efficient way, which in turn prompted our decision to seek a new, efficient international cash management solution.
Devising a solution
We already had a domestic cash pool in place with UniCredit in Italy, which had proved successful in allowing us to take greater control over our cash, so our aim was to extend the same model on an international basis. We also had an overlay relationship with the bank in Germany. We approached each of our major banks to tender for an efficient cash management solution that would meet our initial needs and our future requirements. Ultimately, we made the decision to pursue our relationship with UniCredit further, based on our confidence in the relationship and the quality of the solution that the bank proposed. We therefore launched a pilot project in Germany. This involved setting up a new credit facility and header account in Germany, into which all flows in Germany were zero balanced each day. This was supported by an electronic banking system that was accessed from both Germany and Italy, with appropriate user profiles. Given the complex partnerships’ scenario the group has, and the heavily seasonal business which involves a few months of peak financial needs, we still work with different banks depending on the country; however, we certainly appreciate the benefits and efficiency of working with one primary banking partner. The success of the pilot quickly suggested to us to expand this solution across other subsidiaries.