Addressing Cash Management Complexity in Turkey through a One Bank Strategy

Published: January 01, 2013

Addressing Cash Management Complexity in Turkey through a One Bank Strategy

by Jennifer Tan Sue Een, Treasury Manager, Europe & Africa and Mario Del Natale, Director Treasury Operations, Systems & Applications, Johnson Controls

ING Awards 2012

At Johnson Controls, Inc. we have been through a period of geographic expansion and financial process optimisation, including establishing regional shared service centres (SSCs). As part of this strategy, we made the decision to appoint one bank per country for cash management, whilst aiming to reduce our total number of banking partners overall. We use a variety of criteria when choosing a bank according to our requirements in each country, but they should be part of our lending syndicate (i.e., a relationship bank) and we will review each bank relationship in depth every five years. Our EMEA treasury department in Belgium is responsible for 47 countries across Europe, Middle East and Africa (EMEA). In some cases, we need to work with a local bank for domestic cash management purposes but ideally we try to work with our relationship banks wherever possible.

Optimising bank communications

While a one bank per country strategy met our relationship banking and cash management requirements, there was a risk of fragmentation and replication of banking technology. Consequently, we made the decision in 2008 to migrate to SWIFT, leveraging XML to standardise communication formats at a global level. We have now implemented SWIFT in most countries of operation, enabling us to achieve our banking strategy whilst maintaining a high degree of efficiency, control and standardisation in our bank connectivity.

Relationship banking with ING

We work with ING in multiple countries in EMEA. In each case, ING provides domestic as well as international cash and treasury management services, which include FX, commodities (e.g., base metals), derivatives, cash management and notional pooling through Bank Mendes Gans (BMG), a subsidiary of ING. ING is a strong SWIFT partner, so we have implemented SWIFT and XML formats in each country, most recently Turkey.[[[PAGE]]]

Supporting business growth in Turkey

Turkey has been an important growth region for JCI in recent years. Before 2011, we had an existing business through two fully-owned subsidiaries and a joint venture. Since then, these have continued to grow, fuelled by a series of mergers & acquisitions. In addition, we have set up a new plant in Turkey that we expect to fuel further growth. Cash management in Turkey can be complex and in the past, we had multiple local banking partnerships. In 2011, however, we decided to implement our one bank strategy in Turkey, so we launched a request for proposal (RFP).

Based on a rigorous analysis of a shortlist of banks, we made the decision to appoint ING as our partner bank in Turkey. There were a variety of factors that contributed to this decision. We were impressed by ING’s depth of presence and range of services that the bank provides locally at a competitive price, including local financing. In addition, we were confident in the bank’s professionalism and experience based on our relationship in other countries, including the bank’s support and expertise in SWIFT connectivity.

A local and regional banking partnership

Although we launched our RFP late in 2011, we were not able to migrate our banking relationships immediately due to changes in the local funding situation which we needed to address first. However, we are now actively engaged in the implementation with ING. We maintain our relationship with ING at both a treasury and local level: activities such as account opening and setting up credit facilities take place locally while treasury ensures that the JCI’s overall financial and efficiency objectives continue to be achieved. This combined regional and local approach enables us to maintain operational efficiency, control and policy compliance whilst ensuring that we have the local presence and expertise to optimise our local cash and treasury requirements.

Turkey is one of the last countries to be connected to SWIFT. ING has an existing SWIFT hub in Belgium to which JCI is connected, and Turkey will be part of this infrastructure in the same way as every other country in which JCI works with ING. This includes a variety of different payment types.

Looking ahead

Over the next year, we will complete the migration of cash and treasury management in Turkey to ING. This requires a flexible approach as our business activities in the country continue to expand. More generally, we are also reviewing bank relationships in a limited number of countries where it has proved difficult to work with a relationship bank in the past. We are working with all of our relationship banks to clarify our exposure to country risk in each country. This is becoming more important as the economic situation both regionally and globally continues to be fragile and our business increases in emerging markets where risk exposures may be more difficult to quantify. In addition, we continue to standardise fee structures across our banking partners to make it easier to compare and reconcile bank charges.

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Article Last Updated: May 07, 2024

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