Strategic Treasury

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In-house Banking: The Ultimate Treasury Centralisation Model? The treasury team at Orange are well-known across the treasury profession for the pioneering approach that they have taken towards centralisation and optimisation of liquidity and risk.

In-house Banking: The Ultimate Treasury Centralisation Model?

In-house Banking: The Ultimate Treasury Centralisation Model?

by Raffi Basmadjian, Deputy Treasurer, Orange and Filipe Simao, Head of Client Advisory & Strategic Marketing, BNP Paribas Cash Management


Another of the Open Stage workshops at the 2016 Cash Management University featured Raffi Basmadjian, Deputy Treasurer of Orange, who is well-known across the treasury profession for the pioneering approach that he and his team have taken towards centralisation and optimisation of liquidity and risk. He was joined by Filipe Simao, Head of Client Advisory and Strategic Marketing, BNP Paribas Cash Management who provided expert insight into in-house banking best practices.

Filipe Simao began by describing how the in-house bank is often the culmination of treasurers’ centralisation journey. In-house banks typically support the group either at a regional or global level across a range of activities that mirror those of a bank, including: netting; intercompany finance; cash and liquidity management; financial risk management; centralised payments and centralised collections (figure 1). He emphasised, for example,

“By implementing an in-house bank that incorporates functions such as centralised payments and collections, companies can implement ‘in the name of’ or ‘on behalf of’ structures which enables them to streamline processing and reconciliation, minimise the number of external bank accounts and simplify cash and liquidity management. In-house banks also offer significant advantage in managing operational and financial risks. For example, companies can net their FX exposures to create a group risk position, identify natural hedges, and hedge risks in the market more cost-effectively.”

Fig 1
 
  Click image to enlarge (opens in new window)


A mature in-house banking operation

Orange was an early adopter of in-house banking, a major element of which has been intercompany netting. In 2003, for example, when the in-house bank was first established, 12 entities located in one country participated in the netting process in one currency. In 2016, this had grown to 184 subsidiaries across 44 countries and 20 countries, totalling over 350,000 invoices and €3bn by 2015.

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