Published: January 01, 2000
In March 2010, leading forestry and paper company Fibria appointed Bank of America Merrill Lynch as its international banking provider. This article looks at the background behind this decision and some of the achievements that the company has accomplished so far.
Although proud of its Brazilian heritage, Fibria has become a truly international organisation, with over 90% of its sales outside of Brazil. As the business grew, with group companies established in North America, Europe and Asia, Fibria appointed a variety of banking partners, whereby business units worked directly with local and regional banks to satisfy specific local requirements. As the company embarked on a series of acquisitions, these relationships multiplied, resulting in a large, disparate banking panel. Furthermore, the group companies had their own treasury and ERP systems, resulting in a lack of visibility, integration and automation across the business, and no ability to create economies of scale.
Prompted by a significant merger in 2008, and a desire to demonstrate treasury best practices, Fibria made the decision to centralise and rationalise its treasury activities and banking partners. The objective was to appoint a single bank to enable processes, connectivity and service levels to be standardised globally. Having issued a request for proposal (RFP) and conducted an extensive analysis of five potential banking partners, Fibria appointed Bank of America Merrill Lynch in March 2010 to provide all aspects of its international treasury activities outside of Brazil, including regional treasury services for group companies. There were various reasons for this decision. Firstly, the bank’s global presence supported Fibria’s activities in each region. Secondly, the company was impressed by Bank of America Merrill Lynch’s consultative approach. For example, although the decision was taken in Brazil, the bank provided the team with insights into global best practices and suggested innovations that would enable the company to optimise treasury and cash management activities in each region, as well as achieving its head office objectives. Thirdly, Bank of America Merrill Lynch provided extensive implementation support for the initial implementation and handover, both in Brazil and in the company’s international offices.
Since the appointment was made, the implementation of banking services is nearing completion and all international cash flows pass through Fibria’s accounts with Bank of America Merrill Lynch. The bank provides Fibria with an extensive range of services including: electronic payments; short term investments; cash sweeping; tax transactions; lockboxes and collections. SAP is in place across the business, which is integrated with Bank of America Merrill Lynch’s CashPro® Online for automated transaction and information processing.
The project has been highly successful in its outcomes and completed within projected timescales, not least because of the commitment by both Fibria and Bank of America Merrill Lynch personnel’s disciplined approach to project management and communication. “We understood from the start,” states Carlos Hawthorne, Vice President, Treasury Sales Officer at Bank of America Merrill Lynch, “that Fibria was looking for a long-term banking partner, therefore we knew that we needed to design a comprehensive treasury and trade solution that could attend to both their short-term project goals as well as support the company’s growth strategy.”
One of the advantages of the new relationship that Fibria’s treasury team had not expected was the quality of Bank of America Merrill Lynch’s client services capability. Although client service is an important requirement, it is difficult to evaluate until the implementation has actually taken place and the services are used in a live environment. [[[PAGE]]]
Cash flow processes are now conducted very rapidly, with full visibility and integration of information and processes across the business. Bank charges have also been reduced by around 30%, which represents a major achievement. As Fibria’s head office has enjoyed advantages, the business units have also been very satisfied with the project outcomes as they have been closely involved throughout and received excellent local support.
In addition to achieving the project objectives, Fibria has derived some unexpected additional benefits. For example, while it was intended that CashPro® Online should be integrated with SAP, the level of integration has exceeded the company’s expectations, and Bank of America Merrill Lynch has provided considerable expertise and support to ensure that processes are conducted according to industry best practice, delivering an exceptionally high degree of automation. The bank has also proved to be very flexible in terms of its support for different file formats, which is particularly important when operating internationally, and enabled the project to be conducted rapidly without the need to make changes to the ERP.
Based on the experience that Fibria has gained so far, there are various factors that other companies seeking to centralise their cash management activities and rationalise their banking partners may wish to consider. Firstly, cash management systems provided by the top five banks are largely comparable in terms of functionality. Therefore, it is important to consider the expertise provided by the bank in integrating the system with the internal systems environment. Secondly, the bank partner needs to provide excellent implementation and post-implementation support for project success and ongoing benefit from the bank’s services. Finally, a project of this sort is an opportunity to enhance processes and implement industry best practices. Choosing a bank with the right international capabilities and expertise in treasury and cash management is a vital way of achieving this and delivering considerable benefit to the business. Based on the success of the project to date, a second phase is already anticipated, including additional services such as payroll and trade services.
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