Company insight > Treasury & cash management
Pooled resources
After deciding to optimise its cash management strategy,
Golder Associates appointed UniCredit as its cash pooling
partner. FDE finds out about the project from Davide Raviola
(centre) of Golder Associates in Europe, UniCredit SpA’s Sergio
Dalla Riva (near right) and Thomas Kunz of UniCredit Bank AG.
O
ver the past five years, the importance of
managing risk and improving financial efficiency
has become more apparent than ever before.
With uncertainty around Europe’s common currency and
volatility across global stock markets, corporates have had
to rethink the way their cash is managed.
“Any system that is driven by the aim of optimising a
position, in this case treasury and liquidity, is a system that
works well in good times but even better in times of
difficulty,” says Davide Raviola, European chief financial
officer at Golder Associates. “The more you have in the
market in terms of interest and currency exchange rates,
the more systems like this are seen as beneficial by
corporations. The financial crisis has pushed companies
into understanding, analysing and using these tools.”
Things have improved considerably since 2010−11, but
taking a real-time view of a company’s cash position remains
fundamental; it also remains problematic. In many large
corporations, the treasury function is extremely fragmented;
subsidiaries have their own different domains with cash
sitting unused and the cost of interest piling up.
Innovative pooling structure
UniCredit, a leading European commercial bank, has
developed a pan-European notional pooling structure that
can manage liquidity using a centralised system.
The product was introduced after a stream of requests
from UniCredit customers.
“There was a certain moment when we realised that
almost 50% of requests for proposals included questions
about the capability of UniCredit to provide cross-currency
notional solutions,” says Sergio Dalla Riva, global head of
cash management projects and support at UniCredit. “We
developed the concept and designed the technical part, and
started the implementation after we found a pilot. Now, we’re
ready to propose these solutions to all international clients
that want a centralised, multicurrency treasury centre.”
With so many different cash pooling solutions on the
market, creating a product with competitive advantages
was never going to be easy.
“Our advantage was not being the first mover,” says
Dalla Riva. “After looking at what the customers were
asking for, we realised that under the name cross-currency
notional pooling, there are actually several options that
banks were offering. We tried to find a solution that could
optimise the most relevant issues that customers usually
find when deciding to use cross-currency notional pooling
– things like inter-company tax and legal issues – while
also providing a good environment in terms of the
business and legal framework.”
Golder Associates have over 8,000 employees in 180 offices around the world providing design, consultancy and construction services in a number of markets.
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Finance Director Europe | www.the-financedirector.com
Company insight > Treasury & cash management
One of the first firms to utilise this solution was
Golder Associates, an employee-owned company that
operates across six different business areas. Over the
years, Golder amalgamated with more and more
companies under the same umbrella. Many of these
group businesses had local funding and cash management
structures that hindered the treasury’s ability to see and
control the wider cash position.
Things began to change once Golder’s clients asked
for a more uniformed service delivery and point of contact.
A more centralised approach to cash management was
included as part of a broader shift within the company.
For the treasury, much of this move had already been
achieved before migrating to UniCredit, although the
simplicity of the bank’s framework was an extremely
attractive proposition.
We realised that almost 50% of
requests for proposals included
questions about the capability of
UniCredit to provide cross-currency
notional solutions.
“We tried to create a way of reducing our number of
bank partners,” says Raviola. “In Europe we came across
UniCredit because of a good past relationship we had in
Italy. We are not a public company, so we aren’t interested
in the next quarter’s earning announcement. We think
long term to build value for our shareholders and that’s
why we wanted a reliable partner like UniCredit.”
Golder Associates Europe was awarded second place in
the cash forecasting project category in the 2013 Global
Corporate Treasury Awards organised by the Association
for Financial Professionals. Its entry chronicled Golder’s
pan-European multicurrency liquidity centralisation
programme that was completed in April 2013.
Golder was recognised for its efficient cross-border
cash-concentration structure, which involved accounts in
14 jurisdictions, nine banks and eight currencies in
Europe, and provided the foundation for an efficient
payment factory. A strong banking partnership was noted
as one of the key reasons for its success in achieving
centralised multicurrency treasury and cash management.
Centralising the treasury function
Golder had a number of objectives going into the project with
UniCredit. As CFO, Raviola was asked to optimise short-term
financing and investing across Europe by centralising as
much of the treasury function as possible. This meant various
things in reality, including sweeping the liquidity position on
non-euro subsidiaries, leveraging euro credit lines, taking
central control of non-euro liquidity positions, designing
bank accounts consistent with the future payment factory
and minimising corporate guarantees.
“The UniCredit solution allows us to notionally take
advantage of a basket of different currencies and balances,
both positive and negative,” Raviola says. “It gives us
flexibilities when we’re using all the currencies available
in Europe. We were really thinking about a product to
replace one we used in the past. We wanted something
that allowed us to reduce interest cost on one side and, for
the operations we have in Europe, maintain a good degree
of flexibility in their use of bank balances.
“We were looking for an instrument that could offer us
flexibility in terms of liquidity, short-term investment and
our hedging positions in different currencies. These were
our main goals.”
The project was a major challenge for UniCredit, and
Thomas Kunz, head of cash pooling product development
at UniCredit Bank AG, is positive about its success.
“In Munich, we have opened a range of current
accounts in euros and several different currencies,”
he says. “Every day these accounts in Germany have
movements. There is a zero-balance cash pooling market
mechanism in place that sweeps the liquidity position
of the subsidiaries and transfers that position to the
accounts structure in Munich. The balance of all these
accounts in UniCredit Bank AG is then notionally
converted into euros, so that we have different currencies
but one liquidity position defined in euros.
“From our point of view, what we have created is
the combination of a cross-border cash pooling and
notional cash pooling. All these features allowed Golder
to achieve better results.”
Building business relationships
On top of new business and the success of the Golder
project, UniCredit’s new cash consolidation product
offered a number of benefits for the bank itself. Instead
of a situation where services for several currencies in
different countries are delivered without a pooling
structure, the bank can utilise a cash-concentration
solution to truly optimise its credit lines.
“This means the risk-weighted assets of the bank are
optimised and we have reduced capital absorption on
the bank’s side,” Kunz says. “In addition, by having
a better knowledge of the customer and a wider range of
transactional products that are considered risk-free on the
bank’s side, we’re in a much better position to provide
something that on one hand serves better the customer
and widens our business relationship, and on the other
hand optimises our own capital structure. In times of the
financial crisis, this is a great way to serve customers.”
Further information
UniCredit Bank AG
www.gtb.unicredit.eu
[email protected]
Finance Director Europe | www.the-financedirector.com
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