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Challenge Solution ‘‘ This 2009 client casebook stands as a testament to the possibilities of partnership.” Michael Guralnick Global Head of Client Sales Management, Treasury and Trade Solutions Michael Guralnick Managing Director Global Head of Client Sales Management, Treasury and Trade Solutions welcome This 2009 client casebook stands as a testament to the possibilities of partnership. The solutions described in the case studies that follow are, when it comes to treasury management, the fruits of our collaboration with some of our most innovative and creative clients. Standard products are rarely a perfect fit for today’s business challenges. Instead, the baseline solution components form the basis of that new innovative solution that is shaped by a firm understanding of the client’s business issues, our expertise in local and global banking environments and our continuous investment in the latest technologies. This interaction is reflected in the sheer diversity of solutions we have implemented together with our clients over the past 12 months. Much of the variety contained in the client casebook stems from the changing global business dynamics and reflects how we partner to design the optimal solution to meet our clients’ requirements. Against a backdrop of increasing global competitiveness, our clients’ treasury and finance teams are being asked to support business growth and reduce operating costs while guaranteeing security and control over key financial processes. We hope you are as inspired as we are by the case studies contained within, and we look forward to discussing the possibilities of partnership with you. Managing payment and receivable flows 4 Air New Zealand Nigerian Bottling Company Xafinity Paymaster Freescale Semiconductor Unilever Bharti Airtel GE Money India Hewlett Packard Hutchison Essar Ltd ASIA EMEA EMEA Asia EMEA ASIA Asia NORTH AMERICA ASIA Integrating ERP with offshore payments Automated payment processing enables “sensitive” severence deal Enhancing and expanding cross-border payment capabilities Global role for a Chinese SSC Single platform paves way for shared service centres Comprehensive collections and cash management solutions Reducing collections risks Eliminating risk through continuous linked settlements Large scale collections solutions Working capital and supply chain management 6 12 16 20 24 26 32 38 42 Liquidity and Investments 46 Tyco International Ltd Roche Halliburton Lenovo ASIA ASIA GLOBAL ASIA Financial visibility for the Asia-Pacific region Regional in-house bank solution Cash optimization through effective structure and pooling Chasing the sun for global liquidity 48 52 58 62 LG NXP SABMiller Turkish Airlines Intercontinental Tourism Australia EMEA EMEA EMEA EMEA EMEA ASIA Capturing global liquidity through a multi-currency pool Mission possible: a stand-alone treasury in three months Liquidity structuring delivers cost-of-capital savings Target-balancing structure launches visibility and cost benefits Streamlining short-term investments for global hotel group Transparency and efficiency in liquidity management. 66 68 70 74 78 80 104 84 Global GLOBAL EMEA GLOBAL Standardization of connectivity transforms global cash management Centralizing the treasury Post-merger centralization that allows local flexibility Digital identity management: a next generation solution 86 88 92 94 SAP Wipro GLOBAL ASIA Delivering end-to end payments automation via swift Automation of payments and reconciliations at a SSC 98 100 LATAM EMEA ASIA EMEA ASIA EMEA Partnering to provide clients with tailor-made sales finance solutions Supporting expansion in adverse market conditions Trade solutions in China Tailored trade solution reduces portside delays B2B channel finance solution in South Korea A flexible approach secures multi-jurisdiction financing 106 110 112 118 120 122 NORTH AMERICA GLOBAL NORTH AMERICA ASIA NORTH AMERICA Boosting referrals with prepaid incentives Virtual credit card program improves efficiency Citi Prepaid drives sales performance Corporate card solutions Employee awards “Thrive” with Citi Prepaid 130 134 138 140 144 NORTH AMERICA Taking the paper out of payroll with Citi Prepaid ASIA White-label solutions for postal agencies ASIA Online customs tax payments 150 154 158 Card Solutions 128 Cavalier Telephone Continental Airlines Mazda USA McGraw - Hill VeriSign 148 The Chicago Park District Kiwibank The Royal Thai Customs Public Sector Connectivity and Information Services Merck Nabors Pfizer — Case Study I Pfizer — Case Study II BASF OGK-4 Shanghai Pharmaceutical Nigerian Shipping SK Corporation Awilco AGENCY AND TRUST SERVICES 164 Philips EMEA Seal the deal: the critical role of settlement and execution 166 Managing Managing 4 payment and payment and receivable receivable flows flows Introduction copyincreasingly about Mangaging payment and receivable flowscash here,flow As businesses focus on ensuring efficient introduction about Mangaging payment receivable flows here, to and fromcopy locations across the world,and they are also adjusting to introduction copy about payment and receivable an environment that Mangaging offers greater flexibility in howflows andhere, where introduction copymanaged. about Mangaging payment receivable flows here, processes are At Citi, we canand offer a global solution introduction copy about Mangaging payment and receivable here. that integrates domestic and cross-border payment,flows direct debit introduction copycapabilities about Mangaging receivable flows here. and and collection intopayment a single,and standardized offering, centralize these functions to optimize processing efficiency. The challenge 6 With business spanning the globe, Air New Zealand makes thousands of payments annually to its international suppliers. Payments vary in size from in excess of USD100,000 to below USD10. Air New Zealand was keen to look for new payables solutions that could help it reduce costs and increase efficiencies in its offshore Air New Zealand Integrating ERP with offshore payments payment processes. The crux of the issue was obvious: Air New Zealand could streamline its payment process by integrating its ERP system (PeopleSoft ) with ® a global payments supplier. In doing so, Air New Zealand would Air New Zealand is New Zealand’s national airline and a member of Star Alliance. It has a fleet size of 97 aircraft and flies to 51 destinations in Australasia and the Pacific, as well as in Europe, Asia and North America. country in which Air New Zealand SGD, CAD, USD, GBP, and EUR. For operates. The solution involved a countries which do not support ACH combination of Citi File Xchange infrastructure, payments can still (CFX), GXS Enrichment, CitiDirect® be made via other means included Online Banking, WorldLink ACH, in the same payment file. Through WorldLink Wires, WorldLink Remote CFX and CitiDirect, Air New Zealand Check and, in Asia, PayLinkSM. Wires is able to investigate the progress and remote checks are required in and details of payments. Moreover, countries where ACH infrastructure CitiDirect provides Air New Zealand is not available, and for more exotic with comprehensive reporting and payments requiring the use of reconciliation ability at the country intermediary banks. as well as headquarters level. ® ® ® ® ‘‘ The whole process has been a huge success.” Many aspects of this groundbreaking solution had to be negotiated from scratch where Citi customized the solution for Air New Zealand. Notes Paul Kelway, Treasurer of Air New Zealand, “The The solution has many attractive whole process has been a huge features. A single file format for all success. Once we had done the hard payment types allows a one-time yards — setting up the unified file interface with Air New Zealand’s format — it became relatively easy PeopleSoft platform. High volume to bring on new currencies. Citi had non-critical payments are handled the technical ability and the coverage Citi’s team provided a low cost at low cost through an automated of currencies and countries. They solution, using a single file format to clearing house (ACH) in many and offered low cost per transaction and deliver payment transactions into the an expanding number of currencies capacity to handle strong growth local clearing system in almost every which currently include AUD, HKD, in volumes.” 4 obtain access to a straight-throughpayment capacity that enables it to make payments to its many offshore suppliers at a lower cost. The solution The result 8 By working with Citi, Air New Zealand has achieved savings in reconciliation costs and processing costs. Says Paul Kelway, “It took around three months to get the new system up and running. Already we are handling 95 percent of our AUD payments, for instance, electronically, and many USD payments as well as EUR and GBP. The benefits are significant.” Air New Zealand was very impressed with the solution that had been designed and implemented for it. The airline has implemented the solution for its Engineering Division — a separate organization with similar requirements that uses SAP as its ERP. Citi provided a unique solution that enabled Air New Zealand to achieve significant cost savings in its global payments system. ‘‘ The whole process has been a huge success. Once we had done the hard yards — setting up the unified file format — it became relatively easy to bring on new currencies.” Paul Kelway Treasurer, Air New Zealand The challenge The solution The result Coca-Cola Hellenic Bottling NBC approached Citi Nigeria By 3.30 p.m. on the day that the Company S.A. Nigerian Bottling for an automated solution. Citi severance process was executed, Company plc (NBC), a subsidiary of recommended use of the advanced Citi had processed, printed, sorted Coca-Cola® Hellenic, the producer secure file import capabilities of by location and delivered all 1,250 and distributor of Coca-Cola its electronic platform, CitiDirect , checks to the customer, thus beverages worldwide, had to pay to ensure that the checks could exceeding NBC’s management goal severance package to a total of be processed automatically on of distributing final payments to 1,250 staff across the various plants a same-day basis. On the day of severed staff on a same-day basis. As and depots in Nigeria. NBC, the the severance, NBC informed Citi a result, NBC was able to carry out market leader in three out of four at 11.30 a.m. of the need to issue the severance exercise efficiently and Nigerian Bottling Company non-alcoholic categories in the 1,250 checks at varying face values. with minimal disruption. Moreover, Nigerian market, was aware that the The Company then delivered the NBC was sufficiently impressed to severance exercise would need to be instructions and schedule for the sanction a trial to explore CitiDirect’s handled sensitively and executed payments in both soft (diskette) and uses and benefits. Automated payment processing enables “sensitive” severence deal flawlessly to avoid adverse social signed hard copies by around consequences. A key part of the 12.00 p.m. Using the advanced file execution of the severance process import functionality of CitiDirect’s was the successful delivery of USD7 payment module, Citi was able to million in final emoluments by check process and print the 1,250 checks across the country on the same day. within three hours of the schedule However, NBC’s standard process for being received. 12 Nigerian Bottling Company is the market-leading soft drinks manufacturer in Nigeria. submitting, printing and distributing checks took between four and five days. ® ‘‘ Citi recommended use of the advanced secure file import capabilities of its electronic platform, CitiDirect®, to ensure that the checks could be processed automatically on a same-day basis.” Nigerian Bottling Company 16 The challenge The solution With an increasing number of UK Recognizing the combined power pensioners spending their retirement of Citi’s global reach, WorldLink® years in various destinations around Payment Services and CitiDirect® the world, Xafinity Paymaster Online Banking platform, Xafinity (Xafinity) needed to find a faster, more efficient way to deliver pension payments to retirees in the currency of choice. Each year, Xafinity administers approximately £10 billion ‘‘ chose Citi to create a cross-border payment solution that would both enhance its current capabilities and enable it to realize new business opportunities. in payments to two million pensioners, Xafinity Paymaster more than 30,000 of whom now Enhancing and expanding cross-border payment capabilities abroad by 2050. As a third-party request payments in foreign currency. Looking forward, an estimated 3 million UK pensioners will be living pension administrator, Xafinity’s cross-border payment capabilities London-based Xafinity Paymaster, a premier provider of pensions administration, collections, and payments, handles more than £2 trillion in transactions annually for 150 UK public sector and private organizations. are determined in large part by the global reach, payment processing, and data management capabilities of its banking partner. It approached Citi to help it expand and streamline its Xafinity chose Citi to create a cross-border payment solution that would both enhance its current capabilities and enable it to realize new business opportunities.” Xafinity with the ability to make electronic or paper-based payments in 180 countries and 137 currencies. The flexibility and ease of integration of the Citi solution enabled Xafinity to smoothly migrate cross-border payments to 24,000 pensioners to the new platform in less than three months. This transition was invisible to payment beneficiaries and required no changes to Xafinity’s host system. Plus, straight-through processing resulted in faster execution of payments, in some instances 20 percent faster. And, one-stop web-based access to transaction information has given Xafinity more control over both its transactions and information about them. Whereas in the past Xafinity relinquished much of this control to its previous payment provider, it can now access real-time transaction information and reports to provide foreign currency payment offerings and gain better access to — and As one of the most comprehensive control over — critical data related to cross-border payment portfolios in its cross-border payments. the marketplace, WorldLink provides better service to its customers and more timely responses to pensioners’ inquiries about the status of their payments. 4 The result 18 Bottom line, by partnering with Citi for its cross-border payment needs, Xafinity is reaping the benefits of increased automation, reliability and security. Equally important, it can leverage its new flexible and expanded cross-border payments capabilities to both grow its business with existing clients and attract new ones. David Nunn, banking service director at Xafinity compliments Citi’s solution, describing it as “a market-leading international payments service that is fully integrated with the services that we offer to public and private sector clients.” As one of the most comprehensive cross-border solutions in the marketplace, WorldLink provides Xafinity with the ability to make payments in 180 countries and 137 currencies. The challenge 20 Freescale Semiconductor established shared service centers (SSCs) in China, Europe and the US in 2000 to help improve its productivity, service and quality. ‘‘ Initially mandated to provide services for nine Asian countries, the China SSC would ultimately serve 39 Freescale entities worldwide. The select a banking partner to support Citi is the leading the growing range of financial banking provider to SSCs functions handled by the Tianjin COE. in China and held two proprietary SSC Best The solution In 2004, Freescale appointed Citi to Practice Forums for clients in 2006 in China.” install a global file delivery platform that facilitated international foreign and local currency payments. from Motorola two years ago. Motorola Freescale’s systems were interfaced Tianjin-based “Center of Excellence” had developed a presence and strong with Citi® File Xchange (CFX), Freescale Semiconductor (COE) was launched with 14 staff relationships in China. As part of that enabling Freescale to access payables providing inventory and cost company, we had two major facilities information on a global basis. The accounting services. Accounts located in Tianjin — our fabrications site new platform meant that payments payables and procurement were as well as our major assembling test were sent to Citi in a single file, Global role for a Chinese SSC added following the implementation site — and really we were leveraging off which was separated into different of the SAP general ledger in 2001. that, since we had the infrastructure transaction types and processed there already.” accordingly. At this point, services Divested from Motorola in 2004, Freescale Semiconductor is a global manufacturer of semiconductors with 22,000 employees and operations in 39 entities worldwide. Asia, and China in particular, are including Tax and Payroll and certain strategically important to Freescale. SSCs in China can be set up as The company felt that China’s business non-financial services such as Legal financing companies or holding opportunities made it an attractive were transferred from Motorola companies. Current regulations location for the COE. The choice of to the Tianjin COE. Following the stipulate companies need USD30 Tianjin was based largely on historical successful integration of CFX, million in capital to set up a holding reasons. Explains Alan Campbell, Freescale was able to implement a company. Alternatively, an existing Senior Vice President and Chief global system for travel, netting, local entity can be used to provide the Financial Officer of Freescale, “The and foreign currency payments and shared services. Freescale chose the semiconductor business was spun out management reporting in 2005. 4 latter option: it therefore needed to Citi is the leading banking provider to SSCs in China and held two proprietary 22 SSC Best Practice Forums for clients in 2006 in China. A key emerging theme during the forums has been the blurring of the distinction between SSCs and treasury centers. SSCs are increasingly able to offer services usually handled by treasury centers. The result The ability to centralize the company’s entire payment outflows on a single platform enabled Freescale’s Tianjin COE to make a significant step forward in fulfilling its global as well as its regional remit. Plans are in place to further expand the shared service functions for finance and non-financial activities. The COE has gone a long way towards meeting its goals. Notes Alan Campbell, “It’s extremely successful, but we haven’t yet leveraged enough on that success and moved forward fast enough. The success of this Center of Excellence feeds itself.” Citi’s platforms and solutions support the increasing numbers of financial functions handled by Freescale’s Center of Excellence in Tianjin. The challenge 24 As part of a company-wide initiative to standardise processes, delayer structure and increase use of shared service centres, Unilever sought banking partners to help standardize its treasury operations across Africa, Middle East and Turkey. Achieving best practice through streamlining was considered particularly difficult in Unilever the region because of the unstable IT infrastructure in some countries and high levels of country-specific and manually intensive processes. Single platform paves way for shared service centres worked to reduce the range of payment instruments used and streamline local cash and payments processes. Physical cheque issuance was replaced by electronic methods in several countries, for example, to improve control. Citi recommended a flexible technology infrastructure to handle the region’s variety. In more sophisticated countries, Unilever deployed Citi File Xchange (CFX) to achieve high levels of STP and host-to-host connectivity. Unilever also installed Citi’s online banking The solution Unilever is a global manufacturer of leading brands in foods, home and personal care. implementation managers then Although Unilever initially planned a multi-bank approach, Citi’s flexibility, product capabilities and presence in 17 countries led to its appointment as a single partner. To complement its own services, Citi sought – and implemented back-office system integration with – additional local counterparties. On a country-bycountry basis, Unilever and Citi platform, CitiDirect®, to provide continual payments processing through a simple, web-enabled interface to provide essential back up in the event of infrastructure failure. With migration to SSCs now started, Unilever is building on its centralized infrastructure to improve liquidity management and visibility across the region. The result Standardization of Unilever’s treasury processes in Africa, Middle East and Turkey has generated both cost and strategic benefits. By leveraging Citi’s extensive regional coverage, Unilever has been able to create a harmonized, single front-end system servicing the entire region. The progress toward a single banking platform and the streamlining of treasury processes has simplified the migration of finance processes to a shared service centre structure, thus contributing significantly to Unilever’s overall financial strategy and best practice goals. Even in countries not scheduled to migrate to SSCs until 2010, cost savings from the streamlining process have exceed expectations. The challenge Bharti’s client base is large, rapidly 26 growing and geographically dispersed. These factors resulted in inefficient payment collection relationships between Bharti and provincial banks, which have since been difused. Many of these banks did not have the geographical reach, nor the reliable collection arrangements that Bharti required. Most importantly, accounts Bharti Airtel Comprehensive collections and cash management solutions held at these provincial banks could not be pooled together due to the distinct systems and reporting methods at each institution. Given the massive amounts of payments that Bharti receives, it Bharti Airtel Limited (Bharti) is India’s first private telecommunications firm and now stands as the country’s largest integrated services provider. With annual revenues averaging USD4.6 billion, Bharti has approximately 50 million mobile telephone customers and nearly two million telephone and broadband customers across India. was critical for the company to implement a cash management system that could effectively manage its payables, realize credit and effectively utilize its liquidity. The solution results necessitated an overhaul of System (MIS) to support the finance its treasury management strategy. teams, and a single operational The first step undertaken by Bharti point of contact for escalations was to evaluate the coverage of across its 40 operating entities. the provincial banks and to sign Says Vishal Dua, Bharti’s Head consolidated agreements with a of Group Banking and Liquidity few major providers with a strong presence across India. Management, “Within a year Following its initial step, Bharti implemented the new model engaged Citi as a trusted partner across 80 percent of our operating to design an integrated cash branches. We achieved 100 percent management model. As a part of integration of our mobility and landline the design process, Citi identified a set of benchmarks that could be applied by all business units to create uniformity in processes and efficiency. Citi also installed an advanced netting and pooling structure in order to ensure that accurate fund sweeps occurred in a timely manner. For Bharti, an important part of of partnering with Citi, we had ‘‘ Citi’s solutions was a comprehensive collection channel that composed The challenges faced by Bharti to of pick-up services, eBox and kiosks, achieve optimum cash management a timely Management Information operations. We were also successful in completing 95 percent of end-of-day (EOD) sweeps, which was well ahead of our target of 90 percent.” 4 Within a year of partnering with Citi, we achieved 100 percent integration of our mobility and landline operations.” The result 28 By working with Citi, Bharti achieved three outcomes. First, efficiency was improved. Bharti gained the benefit of uniformity of collection processes, agreement and pricing across all operating units. In March 2006, when the model was introduced, Bharti had approximately 450 bank accounts — many were not getting pooled. With the process enhancements, Bharti subsequently closed around 200 bank accounts and applied an EOD sweep to all but 30 accounts. Bharti’s remaining accounts are currently being reviewed for implementation of sweeping or closure. Secondly, through its partnership with Citi, Bharti developed better relations with the key banks across India to provide location coverage to Bharti and its distributors of pre-paid telephone services. The financial consequence of this is that Bharti saves about USD1 million each year by carrying a smaller float than with its previous arrangement. In addition, Bharti identified saving of around USD6.1 million annually from post-paid and pre-paid collections. Equally important, Bharti lowered its operational risk through reduced reliance on small third party vendors for processing. Finally, the increased coverage of the banks meant more convenience for customers to pay and that Bharti could update its receivable data more quickly for better customer service. Says Bharti’s Vishal Dua, “We believe that, over the year to March 2007, no other company of our size in South Asia has done as much as we have to improve cash management.” Citi’s cash solutions improved efficiency, improved the level of service that Bharti could provide its customers and generated considerable cost to the company. ‘‘ Bharti saves about USD1 million each year by carrying a smaller float than with its previous arrangement. In addition, Bharti identified saving of around USD6.1 million annually from post-paid and pre-paid collections.” Bharti Airtel The challenge 32 GE Money Financial Services Limited (GE Money) is a leading provider of risks that emanate from the storage, customers after seven or fourteen sorting and banking of vast numbers days (depending on the location of low value checks. and/or the number of checks that must be handled). Citi works with retail loans in India. Each month, it receives literally hundreds of The solution thousands of checks from its In 2001, GE Money engaged Citi to customers. The checks have to be process the majority of the checks banked on or before the dates that that it receives from its customers. GE Money’s customers are due to GE Money undertakes pre-processing make payment in order to minimize of the checks at a central facility delinquencies. Furthermore, the in Chennai. Citi produces a listing GE Money India checks must be returned to the of all the checks that have been relevant clearinghouse — of which received. Citi then coordinates the there are hundreds across India, physical transportation of checks before GE Money’s accounts can be in bulk to the respective clearing- Reducing collections risks credited with the payments. houses. Once the checks have been As a result, GE Money faces a huge GE Money Financial Services is one of the leading non-bank financial companies in India, with customers across the country. logistical challenge that has several facets. GE Money needs to bank the checks that it receives as quickly as possible in order to minimize its cleared, and amounts credited to the account of GE Money, Citi passes the information on to GE Money. Citi also coordinates the physical return of the checks to GE Money. net interest costs. It needs accurate Currently, Citi is processing over information about payments so that 500,000 checks monthly for GE it can maintain correct records of Money. As a part of its Service Level what it has received from each of Agreement (SLA) with GE Money, its own customers. GE Money also Citi accepts that no debit will be needs to mitigate the operational made to the accounts of GE Money’s GE Money in 33 locations across India and maintains a dedicated processing team in Mumbai. There is a single point of contact with Citi for all communications and queries, the handling of which is also governed by the SLA. Says Manish Goel, Assistant Vice President with GE India Business Services, “We partnered with Citi because they offered us a very good overall package. It helped that we were able to deal with one bank across most of the locations in which we are operating. Citi’s pricing was attractive. They also offer a Day-One credit facility across all locations — which reduces our risk profile. The Indian operations of GE Commercial Finance and GE Money were already using Citi for all their debt services. Finally, we were reassured by the SLA that they were ready to sign with us.” 4 The result 34 By working with Citi, GE Money has been able to bank the vast numbers of checks that it receives from its clients on time. The collection report tailors to specific time lines not only facilitate reconciliation and tracking, it also helps to reduce risks and uncertainties. The solution that GE Money implemented has enabled them to gain operational efficiency and cope with rapid growth in its own business. Says Manish Goel, “The SLA really defines the time it takes us to respond to our own customers’ needs. Accurate reporting is particularly important when a customer is making a final loan payment to us.” Citi provided GE Money with a solution to a massive logistics challenge, which reduced GE Money’s risks and increased its ability to better serve its own customers. ‘‘ We partnered with Citi because they offered us a very good overall package.” Manish Goel Assistant Vice President, GE India Business Services 38 The challenge The solution In the aftermath of decades of As a result of Citi’s CLS organic growth and merger activity, implementation for HP, they have HP’s Global Treasury Group was enjoyed significant benefits. To faced with complex and decentralized enhance its highly customized operations. Treasury was tasked with treasury management system, HP integrating numerous legacy systems decided on a Continuous Linked and accounts, while managing global Settlement (CLS) solution. CLS is a cash flows on a daily, if not hourly basis. specialized payment process that HP’s treasury team was challenged Hewlett-Packard Eliminating risk through continuous linked settlements Hewlett-Packard (HP) is among the world’s largest IT companies, operating in more than 170 countries around the world. HP offers consumers a wide range of products and services from digital photography to digital entertainment and from computing to home printing. to re-define its goals and develop a vision for how the company would operate on an increasingly broad geographic scale. Optimizing global liquidity management and replaces the traditional FX settlement process of establishing a trade, awaiting receipt of a confirmation and transmitting a payment. Through the CLS process, payment initiation is integrated with FX settlement. minimizing risk were among the After a thorough selection process, primary objectives. Treasury also HP chose Global Transaction Services needed a solution that would be to implement its CLS initiative. The compatible with the company’s cornerstone of this strategic solution advanced treasury and ERP systems. included Citi Treasury Services Overall, HP needed to increase control over its processes and reporting, streamline operations, manage available lines of credit, and reduce costs associated with settlement. Integration’s (CTSI’s) direct linkage with Citi that established a messaging and communication protocol between HP and the bank. Using a direct informational flow from HP’s treasury management system to CTSI, the overall reporting, confirmation, and settlement process was streamlined and the probability of an error in the report significantly decreased. In addition, the solution allowed HP to monitor the status of its trades within CLS through it treasury management system. HP’s transactions are submitted directly to Citi, the company’s CLS Settlement provider. HP receives confirmation of transaction matches from the CLS Bank, while retaining the existing external matching services for non–CLS transactions. The result HP has been able to eliminate over 85 percent of its multi-billion-dollar settlement risk. By moving the company’s settlement process into the CLS environment, HP gained access to expanded clearing cycles, thus eliminating the need to increase lines of credit. 4 Citi helped HP increase the efficiency of its FX settlement process 40 through the automation of the acknowledgement and release of deals. CLS also enabled real-time status updates on settlements and matching, and improved payment accuracy and timeliness. This technology streamlined operations to the point where 50 percent of the resources HP had allocated for FX back-office support were no longer necessary for settlement and could be applied to other activities. In short, this innovative settlement solution has been successfully integrated into HP’s business processes, helping to drive positive operating results. CLS solution increases control over processes and reporting, streamlines operations, manages available lines of credit, and reduces costs associated with settlement. The challenge 42 Hutchison Essar Ltd (Hutch) needed innovative solutions in order to collect payments due from customers. It needed to be efficient and customer-friendly in the Hutchison Essar Ltd is the fourth largest provider of wireless telecommunications services in India, with 25 million subscribers across the country. processing of checks collected via drop boxes. There are over 2,000 to make available information about drop boxes across 15 major cities. billing units as soon as possible. Large-scale collections solutions with collecting and expediting the collection process. Hutch also needed collections to its customer service/ Hutchison Essar Ltd ‘‘ Citi has the technology, people and processes.” India is a country in which many customers of telephone companies Some drop boxes have been installed on buses in Mumbai, so • Automatic Self-Service kiosks. Known as Citibank® Easy Payment Centers, these are independent collection centers at Hutch’s own facilities, and are available to customers on a 24 x 7 x 365 basis. They accept both checks and cash and are linked directly to Hutch’s own central database. • E-Box. This is a portable check-only that customers can literally make payment box. Unlike a conventional payments while they travel to work. drop box, it can accept high volume check payments. It periodically and utilities pay by check or cash for Although the drop boxes are sends clients’ payments the services that they receive. 56 convenient, they do not provide the information to Hutch. percent of Hutch’s monthly paying customer with instant collections are in cash. However, confirmation that he/she has made a when payment is made by check, payment. Citibank® Easy Payments is the check must be returned to the the receivables management solution relevant clearinghouse — of which to meet this challenge. Easy Payments there are around 1,000 across India accepts payments in checks and cash, — before Hutch’s account is credited. and includes a Management Information System (MIS). When a The solution payment is made, Hutch is advised Hutch engaged Citi to undertake the quickly and the customer gets an physical collection and banking of instant acknowledgement. Easy cash. In addition, Citi was tasked Payments includes: A Hutch spokesman said, “We needed to collect cash and checks and get amounts credited to our account as soon as possible. We wanted a reliable partner who could handle both the physical collection of cash and checks as well as the MIS requirements. Citi has the technology, people and processes to do this.” 4 The result 44 By working with Citi, Hutch has a solution that enables it to collect and process payments in the most efficient way. Hutch also has a solution that is flexible in that it allows for ongoing strong growth of its own business. The various kiosks attract customers away from the manned payment counters, and free up Hutch’s personnel to focus more on service issues. Notes the Hutch spokesman, “In Citi, we have a long-term partner who is proactive in meeting our needs and amenable to our specific requirements.” Citi’s network of drop boxes, kiosks and e-boxes provided an innovative collections solution that helped Hutch and its customers. Liquidity and 46 investments Today's complex environment makes it essential for corporations to extract greater value from one of their most precious assets: cash. At Citi, our global liquidity and investment solutions deliver clients enterprise-wide access, visibility, and control over cash. With structures to unlock liquidity from even the most complex environments, and tools to track, analyze and invest cash, we help our clients to optimize their cash efficiency globally. The challenge 48 Tyco International Ltd Financial visibility for the Asia-Pacific region lack of visibility, Tyco did not have global liquidity and risk across Tyco International operates through sufficient insight into several the enterprise. TreasuryVision over 200 legal entities in 18 critical metrics, including liquidity provides multi-bank, multi-currency, countries across Asia. These entities management, country exposure, multi-asset information aggregation. have over 600 bank accounts in currency exposure, and bank exposure. It also delivers powerful analytic ‘‘ different currencies. We worked with Citi to replicate our Asia Pacific organizational structure.” Tyco aims to be best-in-class in understanding of what it needed, but lacked the tools to execute its objective was hampered by the limited visibility of, and control over, cash balances, and accounts. Reporting was completed quarterly and, even then, was primarily a manual process. Risk reporting was also compiled quarterly, thus limiting regional control over corporate cash. Because of the reporting and workflow tools such as cash flow forecasting and account management. strategy. Tyco needed a solution TreasuryVision gave Tyco the tools that was capable of facilitating if needed to achieve its strategic immediate access to timely, objectives. Tyco sought regional centralized information, even though monitoring and control. It wanted to this information was to be sourced centralize its cash surplus and make from disparate systems, data and the surplus available to the group on processes. A lengthy and costly a global basis. Tyco also wanted to implementation was not an option. reduce its administration costs. With terms of its treasury management strategy. Its attainment of this Tyco International Ltd is a USD41 billion global diversified company with 240,000 employees. In Asia, it has sales of over USD6 billion per annum. In essence, Tyco had a clear TreasuryVision Tyco has improved The solution Tyco chose Citi’s TreasuryVision® to achieve regional financial visibility and to monitor consolidated cash balances on a daily basis. TreasuryVision is a web-based information and analytical service that enables corporate treasuries to more effectively manage visibility to idle cash and can review the performance of its pooling structures. Tyco was able to improve its oversight of currency exposures. The company was able to monitor its exposures to different banks and, thereby, ensure that it complied with its policies governing exposures to 4 50 individual banks. In addition, Tyco need to spend time obtaining that was able to reduce the operational information. Tyco is able to use risk that is associated with the cash more efficiently in funding its aggregation of information from operations in Asia Pacific. This has diverse sources. translated into significant financial A Tyco spokesperson said, “we worked with Citi to replicate our Asia Pacific organizational structure in TreasuryVision. This enables savings for Tyco through more efficient use of our cash resources, besides embedding superior control and financial discipline. us to organize information in line with our reporting and monitoring requirements. We are collaborating to use alternative electronic channels for sourcing information in cases where standard sources like SWIFT are not available.” The result By using TreasuryVision, Tyco has daily visibility of over 90 percent of its regional cash balances. Tyco’s treasury staff in Singapore is now able to focus time and efforts on value-added analytical activities, because they have access to actionable information and do not By using Citi’s TreasuryVision, Tyco is able to manage its liquidity and investments more efficiently and realize significant savings. The challenge In late 2005, Roche sought to 52 implement one of the largest and most comprehensive cash management solutions ever undertaken in Asia Pacific. The solution had to cover 17 of the 18 countries in which Roche operates within the region. The solution had to recognize the scope and ‘‘ Citi has a most experienced implementation and operational support structure.” worked across the region to one or two. It aimed to improve liquidity IHB itself is the header account and holds the balances. Citi maintains USD domestic ZBAs in Singapore and Hong Kong. There are several Cross Border Sweeps. Cash is moved from the Hong Kong header account to Singapore. Another cross-regional sweep links the Singapore header account with a global USD header account with Citi in New York. complexity of the Asian regulatory management. It desired a regional Citi® File Xchange is used to send Roche environment. It had to embrace pricing scheme for all payment, payables, receivables and liquidity payment files from Roche to Citi and collection, liquidity management management. Finally, the solution for reports in the opposite direction. and account services fees. It wanted had to accommodate Roche’s own Citi can accept SAP iDoc payment improved payments and collections, Regional in-house bank solution corporate structure: the company files in each country, providing Roche foreign exchange services, and has two operating divisions — the opportunity to use a single file overdraft/credit/guarantee facilities. Pharmaceuticals and Diagnostics — format for the entire region. Citi Finally, Roche required working capital which, in most countries operate as sends daily SWIFT MT940 bank facilities in a variety of countries. statement reports to Roche’s Roche is one of the world’s leading healthcare companies. Globally, its turnover in 2006 was over CHF42 billion. Within Asia Pacific, Roche has turnover of CHF5 billion from 18 countries. separate legal entities with their own organizations and regional IT infrastructure. outsourced aggregation service. The solution In early 2006, Roche engaged Citi to Regionally standardized SWIFT transaction codes ensure that debits and credits to the accounts can be The size and scope of the project support its In House Bank (IHB) in 17 was such that the potential gains in countries across Asia Pacific. Citi efficiency — and savings — were provides local currency Zero substantial. Roche wanted to reduce Roche selected Citi as its IHB support Balance Account (ZBA) structures in the number of banks with which it partner because of a number of six countries. Where possible, the key strengths. 4 automatically reconciled. Citi has a strong presence across the region, in countries which 54 Roche operates. Citi has the widest network of clearing memberships of any bank in Asia Pacific. Services from Citi are standardized across countries, to the extent that local regulations permit. Similarly, liquidity management platforms and ZBA documentation are standardized across the region. Adds Martin Schlageter, Head of Global Cash Management with Roche’s Group Treasury, “CitiDirect has been used by many of our operations in Asia Pacific and has been confirmed by our subsidiaries to be industry-leading. In addition, Citi has a most experienced implementation and operational support structure. Citi’s senior management gives us very strong assurances in relation to support.” The result Roche now has the benefits of a sophisticated IHB solution across the region. Roche is leveraging Citi’s strong and consistent technology backbone and Citi’s standardized SAP integration and pooling capabilities. Notes Martin Schlageter, “To us, what really stood out in the implementation was Citi’s strength in supporting a technologically complex project like SAP integration. We were also impressed by the proactive communication of the Citi people involved, and by the knowledge and experience of the Citi staff.” By partnering with Citi, Roche was able to gain the benefits of a large and complex in-house Bank solution across the entire Asia-Pacific region. xx ‘‘ Citi has a most experienced implementation and operational support structure. Citi’s senior management gives us very strong assurances in relation to support.” Martin Schlageter Head of Global Cash Management, Group Treasury, Roche The challenge 58 Halliburton is committed to helping quench the world’s insatiable thirst for energy. As their business has grown, so too have the challenges faced by the company’s treasury group. To meet the expanding has been to reduce human take advantage of leading-edge intervention in its payment files, solutions such as CitiDirect and whether for AP invoices or payroll WorldLink® has enabled treasury to payments, in order to achieve streamline its operations. straight-through processing efficiencies and to meet corporate compliance responsibilities. cash management needs of the organization, Halliburton’s treasury began to put a complex global cash pooling structure in place over the Halliburton past two decades. Cash optimization through effective structure and pooling having excess cash trapped at the “One of the primary reasons for setting up a cash pool is to avoid country level,” explained Edward Eichelberger, treasury manager, Cash Halliburton is a leading provider of energy services to the oil and gas industries. With operations in approximately 70 countries, Halliburton has grown into a multinational corporation with close to 50,000 employees and revenues totaling more than USD15 billion in 2007. As an industry leader, Halliburton offers a broad array of products and services to oil and gas customers worldwide. Operations for Halliburton. “From a cash repatriation standpoint, a pool lets us get the cash out quickly and efficiently, which is key to our overall liquidity strategy.” However, due to local jurisdictions and currency controls, Halliburton is not able to operate cash pools in every country it does business. Another challenge for Halliburton The solution He added that Citi’s ability to provide a single global point for customer service, client management and account management, has greatly simplified their banking relationships. To meet these challenges, And that Citi’s global footprint has Halliburton has set up a unique proven to be a significant advantage global pooling structure, which in achieving Halliburton’s current sweeps funds based on local time treasury success. zones and cut offs to maximize investment opportunities. For Another major factor in Halliburton’s countries where cash pools can’t be success has been the implementation operated, such as Malaysia, Thailand of shared-service centers for making and China, Halliburton relies on third-party payments. The company global banking partners, such as Citi. operates two transaction centers, one located in the U.S., and the In addition to providing a robust other in Dubai, United Arab Emirates, remote capability for managing their making payments around the world. pooling structure, Halliburton has As Halliburton’s Dubai Transaction turned to Citi’s Web-based platform, Center’s largest provider/partner, Citi CitiDirect, for improved visibility has been instrumental in helping them into their accounts. Eichelberger achieve a greater level of efficiency, explained that as Halliburton’s as they reduce paper processing and business has grown, being able to become more automated. 4 The result 60 Halliburton’s treasury has reaped enormous benefits from its global countries,” said Stuart Heath, head of Halliburton’s Dubai Transaction Center. “By issuing files that are pooling structure. compliant with our banks, we In addition, Halliburton is able to funds to the end-beneficiary.” Heath manage all of its fund movements further stated that the success of from the US. In fact, Halliburton’s Halliburton’s transaction centers treasury group, which consists of just has resulted from a combination of four treasury professionals, manages process focus and a solid technology all of its domestic and international solution that has allowed for a sweeps activities from Houston, consistency in operation. which has resulted in tremendous facilitate faster transmission of efficiency for the company. As the company continues to “Citi has a local presence in more world, an elite team of treasury countries we do business than any professionals have put in place a other bank, and they provide us with global pooling structure that is the innovative services we require both nimble and highly effective to satisfy local liquidity needs in achieving Halliburton’s cash outside of our pooling structure,” management goals. And with the added Eichelberger. implementation of its shared-service expand its operations around the centers, Halliburton has reduced Citi has also been a key partner costs through the offshoring of back in helping Halliburton’s Dubai office functions, thereby allowing the shared-service center achieve company to drive greater efficiencies payment efficiencies. “We send out in its payment processing. a large volume of unique payment instructions to more than 50 Citi’s global footprint has proven to be a significant advantage in achieving Halliburton’s current treasury success. The challenge 62 When Chinese company Lenovo acquired IBM’s PC business at the end of 2004, it faced a daunting task in terms of cash and liquidity “But while the situation was clearly The attraction of this model — in a challenge, it was also an amazing addition to it meaning that no opportunity: we got to design a cash local funding is required — is that and liquidity management structure it is based on the sale of goods, on a blank piece of paper.” therefore any funding element is on trade terms, and less affected management. “We had four months to devise and build a global treasury solution to serve 66 countries,” recalls Damian Glendinning, Vice President and Treasurer at Lenovo, which is headquartered in Lenovo Chasing the sun for global liquidity Singapore. “And, outside China, we had no treasury staff, no systems and no banking relations.” The result was a strikingly simple and almost uniform model based on a centralized global treasury in Singapore. The treasury is set-up as a re-invoicing centre so payments for every PC sold outside China — where they are manufactured and where there was a pre-existing The solution Lenovo’s options were to try and Lenovo is dedicated to building exceptionally engineered personal computers. Lenovo's business model is built on innovation, operational efficiency and customer satisfaction as well as a focus on investment in emerging markets. The result establish banking relations in each of the 66 countries — practically impossible given the time frame — or to create a new centralized model. “In the event, centralization was the only feasible option. And an internet-based model was also inevitable given that the company outside China had no existing systems,” says Glendinning. liquidity and cash management structure — is sent to Singapore (once local costs, such as wages — which usually represent around 8% of revenues — are deducted). The structure is known as "against the sun" because all surplus funds are sent to Singapore. Funds are transferred on a daily, two-daily or weekly basis depending on the scale of sales in a given country. by exchange controls. Turkey, which requires inter-company invoices to be settled before goods clear customs, is the only country where this model does not work. In India and a handful of other countries, the requirement to present full documentation when making remittances slows down the centralization process – but the principle remains the same. ‘‘ We had four months to devise and build a global treasury solution to serve 66 countries.” Damian Glendinning Vice President and Treasurer, Lenovo The challenge 66 LG Electronics historically supported subsidiaries’ cash processes through its network of regional treasury centers, but decided in 2005 to migrate to a global treasury center to achieve a more coordinated, end-to-end approach to liquidity management. The firm wanted to reduce interest costs, optimize cash balances, and establish common LG processes to leave subsidiaries Capturing global liquidity through a multi-currency pool and established its Global Treasury “cash free” and able to concentrate on core tasks. Having installed a global treasury management system Center as an in-house bank, LG electronics needed a solution to LG Electronics is a global manufacturer with 82 subsidiaries across four core businesses. optimize their liquidity globally. The solution The solution, starting in Q4 2006, allows for funds to be swept automatically on an end of day basis from subsidiaries’ target balance accounts to corresponding treasury accounts in London for notional offset. Balances at third-party banks are automatically swept via a SWIFT message-based platform. So far, 41 subsidiaries from 23 countries pool balances denominated in 12 currencies. Citi achieves the multi-currency notional offset by creating synthetic FX swaps that use an interest-parity framework. While notional pools typically consolidate liquidity in a single currency, e.g. EUR or USD, LG Electronics has incorporated cash flows in many more currencies (including HUF, PLZ, CZR) in a single “pot”, thus capturing a much larger percentage Following a benchmarking project of surplus funds globally. Citi and RFP, Citi was selected to supplies all balance information implement an end-to-end solution directly into LG Electronics’ concentrating liquidity on a global treasury management system. basis into a multi-currency notional pool held in London. The result LG Electronics’ new treasury structure has achieved its initial objectives, while also creating a solid, standardized platform for future efficiencies. As well interest savings through cash optimization and improved cash flow forecasting through greater visibility, cost reductions have accrued from common processes that have increased automation and reduced banking interfaces. “Only now that we are following common processes company-wide, can we make decisions — such as our use of communications networks — based on a global strategy. Moreover, we work more effectively with the businesses, because we’re all using the same processes and tools,” says Sang Hoon Koo, Global Treasurer. The challenge 68 NXP’s acquisition timetable gave its treasury team barely three months to establish fully functioning cash and treasury processes. As Philips Semiconductors, the business had used the shared resources of Philips’ central treasury and payment factory. As NXP, it required collection and disbursement accounts in 35 countries and a centralized liquidity NXP Mission possible: a stand-alone treasury in three months NXP (formerly Philips Semiconductors) was divested in October 2006 to a private equity consortium. management structure, supported by standardized connectivity to provide visibility and control. The solution communication, file testing, and integration with NXP’s ERP and treasury management system; close liaison with legal departments was needed to meet account opening documentation requirements. For each country, NXP outlined its preferred account structures and worked with Citi to address any local restrictions, particularly in certain Asian jurisdictions. Using target balance accounts, domestic and cross-border cash pooling structures were established to coordinate liquidity management. Strict deadlines were set for account opening to enable NXP and Citi to Citi was mandated NXP’s global cash conduct the necessary systems management business on the basis of testing and to communicate account its global reach and a track record of changes to business counterparties. meeting tight deadlines. Once To provide standardized connectivity deliverables were scoped and agreed, and visibility, the CitiDirect® Online in July 2006, NXP and Citi appointed Banking electronic banking platform dedicated teams to ensure a was rolled out in all countries. A disciplined, on-schedule centralized payments structure was implementation, tapping additional implemented in which NXP’s ERP resources as necessary. Technical system sends payment files via support was required for Citibank® File Services for routing establishing host-to-host and in-country execution. The result On, October 2, 2006, the deadline for completion of the spin-off process, NXP’s treasury function went live with a fully-integrated, single bank cash management solution across all regions. “Tight coordination between implementation teams was critical to achieving our goal,” said Luc de Dobbeleer, Head of Cash and Risk Management, NXP. With the backbone of NXP’s cash and treasury processes now in place, the next step is to refine and optimize the infrastructure through further automation and process standardization. The challenge 70 With brewing interests or major distribution agreements in over 60 countries — in both cash generative developed markets and fast growing developing markets, process standardization, and risk decentralized company. Instead reduction. The company also aimed of local business units borrowing to establish an infrastructure for against short-term deficits and future treasury projects, such as depositing short-term surplus cash inter-company netting and foreign with local banks, they now borrow or exchange centralization. deposit with the group treasury. The solution The result Having appointed Citi in May 2007 “Implementation was tricky — the on the basis of its geographic complexities of achieving buy-in coverage, capability for multi-currency from local businesses cannot be cash pooling and competitive underestimated — but worth it,” says pricing, SABMiller embarked on Giles Newell. “SABMiller has greater phase one of the multi-currency clarity in its liquidity management and cash pooling project in January this centralized balances mean improved year, covering all Europe (except rates for deposits or the ability to Russia) and USA — nine currencies, repay external borrowings. By netting 10 business units and 10 countries. balances we avoid paying overdraft Future phases covering Latin America, and deposit margins. Overall, the Africa and Asia are being explored. savings are considerable.” such as China and Russia — its liquidity management structure is necessarily complex. Moreover, having grown largely SABMiller Liquidity structuring delivers cost-of-capital savings by acquisition — its most recent purchase is Dutch brewer Grolsch — SAB Miller’s operational and liquidity management structures are highly irregular. “We wanted to address the problems posed by our structure and reduce working capital requirements SABMiller is one of the world’s largest brewing companies, with a portfolio of 200 beer brands and revenue of USD23.8 billion for the year ending March 2008. while ensuring sufficient liquidity for our business units,” explains Giles Newell, deputy treasurer at the company, based in the UK. In addition, SAB Miller wanted to align its treasury strategy with its broader finance strategy and achieve the holy trinity of liquidity management: cost reduction, Citi’s solution to SABMiller’s challenges is a pragmatic mix of cash concentration and notional cash pooling, where funds stay in the name of the business unit — an important consideration in a ‘‘ We wanted to address the problems posed by our structure and reduce working capital requirements while ensuring sufficient liquidity for our business units.” Giles Newell Deputy Treasurer, SABMiller The challenge 74 After a period of ongoing business growth, cash flow visibility by Turkish Airlines’ head-office treasury department was severely restricted. The firm held 250 bank accounts with 91 banks in 69 countries and commonly used manual processes to transfer cash between its 107 offices. Cash reporting relied heavily on phone communication and Turkish Airlines faxed spreadsheets. But following Target-balancing structure launches visibility and cost benefits global cash management business, its stock listing, a company-wide cost-control drive led Turkish Airlines to issue a tender for its aimed at improving payment process efficiency, increasing cash Turkish Airlines flies 20 million passengers annually to 138 cities in 69 countries. flow visibility through real-time electronic reporting and reducing transaction charges. The solution expertise. To improve the efficiency customized formats. At the client’s of Turkish Airlines’ cash flows, Citi specific request, the new structure began a phased implementation is supported on a 24/7 basis by a of a regional cross-border target customer service team based in balancing structure that would Istanbul in coordination with staff sweep the vast majority of the across Citi’s global branch network. firm’s balances into Citi London. Because most of Turkish Airlines’ sales were euro-denominated, these were centralized in phase one, with euro balances swept automatically from Citi or third-party accounts. In phase two, selected additional currencies, including US dollars, were introduced to the structure, while phase three saw the rationalization of currency balances that could not participate for legal or other practical reasons. In addition to implementing CitiDirect®, Citi’s electronic baking system, to eliminate manual payment initiation, Turkish Airlines also became the first Turkish customer to install Citi was awarded the tender on the Citi’s transaction flow analysis tool, basis of its matching geographic TreasuryVision®, which provides footprint and its combination of real-time balance information global and regional capabilities and on accounts across the world in The result Turkish Airlines has benefitted from a streamlined account structure and reduced banking costs, an elimination of manual payment processes and significantly enhanced visibility and control over its cash flows. And although many of the benefits accrued from being the first Turkish multinational to implement a regional cross-border target balancing structure, balances in currencies that remained outside the structure have achieved improved investment rates. ‘‘ Turkish Airlines has benefitted from a streamlined account structure and reduced banking costs, an elimination of manual payment processes and significantly enhanced visibility and control over its cash flows.” Turkish Airlines The challenge 78 Having moved from an ownership model to managing and franchising hotels, InterContinental Hotels Group (I