Expanding Cash and Banking Standardization from Europe to Asia

Transcription

1 SEPTEMBER 2012 CASE STUDY Global Integrated Energy Company Expanding Cash and Banking Standardization from Europe to Asia Table of Contents EXECUTIVE SUMMARY Building on organizational knowledge...2 Working efficiently across countries and continents..2 Putting global best practices to work...3 Solving regulatory challenges...3 Delivering in tune and on time...4 Realizing measurable benefits... 4 Making treasury excellence standard... 4 What can you learn from successfully standardizing the broad European cash management and banking activities of one of the world s largest and most sophisticated oil and gas companies? Having integrated more than 300 different European accounts encompassing many different payment types, different clearing systems and multiple currencies into a single platform simultaneously, the Energy & Power group at Bank of America Merrill Lynch developed a blueprint for assessing, solving, communicating and implementing global best practices across multiple countries. This unique experience, combined with extensive oil and gas industry knowledge and a close client relationship, was critical to modeling the successful approach in a new initiative to standardize the company s vast Asia Pacific operations.

2 Expanding cash and banking standardization from europe to asia 2 BUILDING ON ORGANIZATIONAL KNOWLEDGE Based on in-depth discussions with key contributors across multiple functions and countries, Bank of America Merrill Lynch assigned an Implementation Project Consultant (IPC) to serve as global project coordinator of the Asia phase. The IPC worked side by side with the client to facilitate discussions, address issues, streamline decision-making and oversee all aspects of the implementation. The complex global operations and diverse interests of major oil and gas companies requires a well coordinated global cash management and banking solution, says Carrie Moore, managing director in the Energy & Power group at Bank of America Merrill Lynch. Bringing all the moving parts together in the form of standardized processes and systems depends on having an intimate knowledge of the company, the industry, and the changing regulatory requirements within each country, adds Moore. The first phase of the Asia integration effort began with gathering knowledge and learning from the experiences of the broad client and banking team involved in the company s European initiative. Engaging our European teams upfront and building on their insights enabled us to hit the ground running in terms of having the right expertise in place and presenting a highly thoughtful solution and implementation plan, says Donald De Crescenzo, Global Treasury Services fulfillment consultant at Bank of America Merrill Lynch, who served as implementation project consultant for the Asia initiative. WORKING EFFICIENTLY ACROSS COUNTRIES AND CONTINENTS Assessing the company s Asia operations, they faced a significant challenge in trying to manage funds held in 81 separate accounts in six countries while coordinating 6,000 payments of various types originating within the region all while working to gain a macro view and centralized control over its global positions. As was previously the case in Europe, some of the client business units in Asia were manually uploading files from SAP into the bank system. Although this allowed them to process late same-day payments, it also led to the occasional input error, which meant bank reconciliations were executed manually or through third-party software. This process was out of step with their global protocols. Bringing all the moving parts together in the form of standardized processes and systems depends on having an intimate knowledge of the company, the industry, and the changing regulatory requirements within each country. Carrie Moore Managing Director Energy & Power Group Bank of America Merrill Lynch In addition, each Asia business typically relied on its finance groups to approve payment transactions prior to sending to the bank. Ideally, that responsibility should rest with the business unit s employee who input the transaction into SAP. To mitigate this issue, Bank of America Merrill Lynch proposed a tiered effort to centralize all of the company s cash and banking activities in the region into their Asia financial shared services center, starting with Singapore and Australia.

3 Expanding cash and banking standardization from europe to asia 3 PUTTING GLOBAL BEST PRACTICES TO WORK Modeling the company s solution in Europe and a leading best practice for multinational companies globally, Bank of America Merrill Lynch implemented straight-through payment processing using host-to-host rather than manual uploads. Along with the host-to-host solution, the client implemented an exception process for same-day payments, which significantly reduced the number of same-day payments and resulted in fewer errors. Not only could fewer people now handle a significantly larger number of transactions, but bank reconciliations were automated using SAP electronic bank statement functionality to upload previous day bank account activity for daily account reconciliations. The solution also reduced and streamlined the number of payment runs by identifying opportunities for consolidation based on payment deadlines and multiple currency requirements. This enabled the client to discontinue the use of third-party software for reconciliations and also improved SOX compliance as a result of documented processes and increased automation. How Host-to-Host Transactions Work Following is a general depiction of a typical host-to-host transaction solution. Payment types will vary based on country regulations and restrictions. Client ERP System Consolidated AP File(s) Flexible Communications AS2, FTP, FTPS, SFTP, VPN Acknowledgement , Fax, web and EDI Remittance Key benefits of the Asia standardization initiative: Faster processing, fewer errors and reduced costs using straight-through payment processing via host-to-host instead of manual uploads Automated daily bank Bank of America Information Reporting Services Account Information Check Printing Corporate Checks, Bank Drafts High-Value Clearing Systems RTGS, Urgent Payments Low-Value Clearing Systems Vendor, ACH, Payroll, Direct Debits SWIFT International Payments FX Foreign Exchange Payments reconciliation Fewer and larger payment runs through consolidation Beneficiary/Receiver Improved SOX compliance through documented SOLVING REGULATORY CHALLENGES One unique challenge the team had to address was a new regulation by the Indonesian government requiring all energy and power companies to use a local state-owned bank for issuing payments to vendors in Indonesia. This would require the company to maintain a local banking account, preventing total integration and efficiency in Asia. To overcome this issue for the company as well as other oil and gas clients operating in Indonesia, Bank of America Merrill Lynch established a local bank relationship. This solution enables the bank to make Indonesian vendor payments on behalf of the client through the local bank provider, eliminating the need for the company to maintain a separate account at a state-owned bank. processes and more automation All primary countries operating on the same SAP platform Successful implementation delivered ahead of schedule

4 Expanding cash and banking standardization from europe to asia 4 DELIVERING IN TUNE AND ON TIME The first wave of standardization in Singapore and Australia was completed within 14 months, which was critical given the company s narrow annual window for implementing technology changes. Effective communication between client and banking teams in both the U.S. and in multiple Asia locations was critical to navigating multiple time zones and languages while addressing unique country requirements. Success also hinged on a commitment to rigorous testing, which enabled the project team to minimize any issues. REALIZING MEASURABLE BENEFITS In addition to reducing operational costs as a result of a more automated approach in Asia, the company now has far less people coordinating much greater payment volumes, resulting in fewer errors and faster processing globally. An important global benefit of the company s standardization and improved performance in both Europe and Asia is that its U.S.-based corporate treasury has a broader view and greater control over its organizational liquidity. As challenging economic conditions continue to affect corporate cash flows and create market volatility globally, having a total view into global cash position is how companies keep their capital working most efficiently everywhere they do business. The successes in Europe and Asia also give senior management added flexibility and confidence when considering strategic growth opportunities. Looking ahead, the company expects to continue to reap benefits in the event it decides to pursue any complex merger activity to acquire additional oil and gas assets. In such a scenario the company has new, well-defined cash and banking standards already in place. This will help allow it to integrate new accounts seamlessly and, in all likelihood, without any increase to headcount. While every global energy firm and region has unique requirements that require original thinking and tailored strategies, the experience gained through leading multinational efforts such as this one have enabled Bank of America Merrill Lynch to hone a welldefined process that can benefit other global clients. MAKING TREASURY EXCELLENCE STANDARD Having implemented world-class treasury practices across Europe and now Singapore and Australia, our team is on track to complete similar efforts for the company in Indonesia and Malaysia by mid-2012, before turning our attention to its operations in China. While every global energy firm and region has unique requirements that require original thinking and tailored strategies, the experience gained through leading multinational efforts such as this one have enabled Bank of America Merrill Lynch to hone a well-defined process that can benefit other global clients. The process

5 Expanding cash and banking standardization from europe to asia 5 can be emulated, but the solution is always customized. Ultimately, it s all about aligning the cash and banking function with the organization s broader business objectives. By extracting all efficiencies and implementing standardized processes, corporate treasury is in position to provide critical support for broader strategic initiatives globally. The success of this initiative demonstrates that multinational companies seeking to standardize cash management and banking activities benefit from having a team with the direct experience, proven talent and broad infrastructure. For more than a decade, Bank of America Merrill Lynch has invested significantly in its global treasury services in order to deliver on the most complex and sophisticated objectives across borders and continents, says Moore. Our coverage model ensures that clients have dedicated operational team members on the ground in each region with country-specific expertise, as well as a go-to industry expert for strategic guidance and answers, with knowledgeable backups at every level. That s why we re uniquely equipped to coordinate large, missioncritical projects at the local, regional and global levels. Bank of America Merrill Lynch is the marketing name for the global banking and global markets businesses of Bank of America Corporation. Lending, derivatives, and other commercial banking activities are performed globally by banking affiliates of Bank of America Corporation, including Bank of America, N.A., member FDIC. Securities, strategic advisory, and other investment banking activities are performed globally by investment banking affiliates of Bank of America Corporation ( Investment Banking Affiliates ), including, in the United States, Merrill Lynch, Pierce, Fenner & Smith Incorporated and Merrill Lynch Professional Clearing Corp., both of which are registered broker-dealers and members of FINRA and SIPC, and, in other jurisdictions, by locally registered entities. Investment products offered by Investment Banking Affiliates: Are Not FDIC Insured May Lose Value Are Not Bank Guaranteed Bank of America Corporation