Cash & Liquidity Management

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Cash Pooling in CEE at Hoval Hoval is a relatively small, family-owned company based in Liechtenstein that provides sophisticated traditional and renewable heating and ventilation technology. Until recently, Hoval had a decentralised treasury approach, with each business unit managing its own cash and treasury management requirements. In recent years, however, it has undertaken a major project to centralise and optimise its cash and treasury activities. The company appointed regional banking partners with which it could work across the group, and successfully implemented overlay cash pooling (cash concentration) arrangements in all the countries in CEE where it operated. Hoval now intends to extend its core cash management structure more widely in CEE and beyond.

Michael Walser, Head of Treasury at Hoval, explains the decision to centralise, the implementation and outcome of overly cash pooling arrangements, and the company’s future initiatives. He also gives details as to what lessons can be learnt from the experiences of Hoval’s cash management project.

Cash Pooling in CEE at Hoval

by Michael Walser, Head of Treasury, Hoval

Hoval is a family-owned company based in Liechtenstein, providing sophisticated traditional and renewable heating and ventilation technology. Although relatively small in size, the company has distributorships delivering products to over 50 countries globally, with branch offices in more than 12 countries in Europe and Asia. Until recently, Hoval had a decentralised treasury approach, with each business unit managing its own cash and treasury management requirements. In recent years, however, it has undertaken a major project to centralise and optimise its cash and treasury activities.

The decision to centralise

In the past few years, Hoval’s management team has increasingly recognised the potential benefits of centralising its treasury operations as a way of reducing both internal and external costs, including netting deficit and surplus balances across the business to decrease external borrowings. About three years ago, we took the first steps towards achieving this. Firstly, we needed to appoint regional banking partners with which we could work across the group, including all the countries in which we operated. In Germany and central and eastern Europe (CEE) which is one of Hoval’s most important growth areas, we appointed UniCredit. We already had some experience with the bank having worked with them in Germany and Austria, so we had confidence in their approach and capabilities, and we were impressed by their experience in CEE which was critical to supporting our ongoing business growth in the region.

Cash pooling in CEE

Working with UniCredit, we implemented overlay cash pooling (cash concentration) arrangements in all the countries within the region in which we operated. Wherever possible, we implemented zero balancing, but where this was not feasible we put in place target balancing. Therefore, our cash management solution is based on a combination of zero balancing between Hovalwerk AG Vaduz and Austria, Italy, Czech Republic and Slovakia, together with target balancing between Hovalwerk AG Vaduz and Czech, Switzerland, Germany and United Kingdom. In the future, we aim to migrate to a zero-balancing arrangement in all countries, but there is no overwhelming reason for doing so at this stage.

There were various reasons for structuring our cash management solution in the way that we did; in particular, we wanted to implement the most straightforward solution that would allow us to achieve our liquidity management objectives quickly. Therefore, we decided not to change our local banking relationships, many of which had been in place for a number of years and worked very successfully.

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