Published: May 01, 2009
The UniCredit Group is one of the leading financial groups in Europe, with a strong presence in 22 European countries and a depth of capability across Eastern Europe and Central Asia, totalling 49 countries globally. UniCredit is now amongst the top 10 of European banking groups by market capitalisation and top 12 globally. UniCredit Group has garnered a remarkable reputation as a provider of cash management and eBanking solutions, focusing on the individual approach to the customers’ requirements. The Group has a first mover advantage in the European market and Cash Management and eBanking constitute two of the core business activities.
A vital element of the services UniCredit provides their corporate customers is the ability to centralise liquidity, enhancing visibility and control over cash flow and enabling treasurers to manage their cash according to the global needs of the business. In the case study that follows, Mr Silvano Riboni, Corporate Treasurer of Italian firm Mapei Group gives an insight on how his company has worked with UniCredit in practise and some of the advantages that the relationship with UniCredit has brought to the business.
Silvano Riboni, Corporate Treasurer, Mapei Group
Mapei was founded in 1937 in Milan and has since become the world’s largest manufacturer of adhesives for the construction industry. The company has pursued a global strategy with manufacturing facilities around the world to cater for the needs for its customers in all regions and reduce transport costs. The group now consists of 51 companies including 47 production facilities, across 5 continents and 23 countries.
At Mapei, we have a small, focused treasury department of two people. Until quite recently, the group’s financial activities, including bank relationships, were decentralised, with each business unit managing its own cash. An important objective in recent years has been to centralise the group’s financial activities to create better economies of scale and create visibility and control over group cash. This is not an easy objective to achieve when business units have had a long history of managing their cash independently. However, by working closely with each subsidiary, and seeking management support to sponsor the project, we have achieved a high degree of co-operation and support for the project globally.
The first step to achieving our centralisation objective was to rationalise our banking relationships, replacing the local banks in each country with a small number of group banks. We started working with ABN AMRO, now RBS, but as we needed significant geographic coverage in regions such as Central and Eastern Europe (CEE) we then introduced UniCredit based on the group strategic presence in the regions in which we do business and the long standing relationship between Mapei and UniCredit in Italy. Although our original intention when working with UniCredit was to support our business requirements in CEE but we have since extended the relationship to include other countries.
Having streamlined our banking relationships, the next step was to concentrate our cash flow to allow greater visibility and access to cash. In CEE, we started with countries in which we already had accounts with UniCredit, including Hungary and Poland, and then extended to additional countries such as Germany and Italy. Austria will follow shortly. In each country, we have defined common conditions for both domestic and cross-border EUR pooling in order to maintain consistency across the group. As examples, in Hungary, we have set up a cross border zero balancing arrangement which we launched in July 2008. Poland followed in October 2008 with a domestic cash pool, and in Germany, we have set up both domestic and cross-border pooling which went live in December 2008. [[[PAGE]]]
An inevitable challenge when setting up cash pooling arrangements in different countries is that different regulatory and fiscal conditions exist. For example, in Poland it took a year to address all the relevant fiscal issues. We approached the statistical and tax offices to confirm the setup of our proposed domestic and cross-border cash pools. This process needed to be repeated for each one of our Polish subsidiaries and it was not always easy to reconcile the advice given across different regions and different offices. However, despite the expense of both internal and external resourcing, the result has been very positive. With the cooperation of the UniCredit people, in addition to domestic pooling with an international entity as the pool owner, we have also achieved cross-border cash pooling in Poland which is still unusual. Consequently, we are now sharing our experience with other international corporates, supported by UniCredit.
Another element of our cash centralisation project was to ensure that we had the tools internally to manage our cash and the means to connect with our banking partners for exchanging information. We selected XRT as our technology partner, having reviewed both global and Italian providers of cash management and bank communication software. In addition, we decided to connect to our banks using SWIFTNet as opposed to using banks’ proprietary connectivity tools. With over 50 business units, most of whom use the banks’ proprietary software to connect to their bank, we wanted to standardise how we communicated with our banks as part of our centralisation and rationalisation project. This would reduce the cost and effort of maintaining multiple systems and make it easier to update our internal software without having to amend each interface. We selected a service bureau through which to connect with our banks, and have now been live with both UniCredit and RBS. We use FileAct at present, for both incoming statements, both intraday (MT 942) and end of day (MT 940) and outgoing messages, including payments, and we will ultimately also use FIN payments.
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Since the centralisation project first started 2-3 years ago, we have achieved substantial benefits. For example, although we have only focused on Europe at this stage, we have already made savings of €1.5m in finance charges in 2008 compared with 2006. Since 2000, the company has experienced considerable growth so the business units have been cash-generative. By centralising this cash, we are in a better position to invest it appropriately and finance strategic activities. We have closed over 50 bank accounts which makes it easier to manage bank mandates and reconcile our accounts.
With the cash concentration project now completed in Europe, including CEE, we are in a position to extend our centralisation objectives further afield. We anticipate having a domestic cash pool in the United States, and we are working with UniCredit to assess this at present.
In the Far East, we do not yet have a great enough presence to set up regional cash pools, but we are working with UniCredit to look for a solution to centralise our USD in the region.
Russia will also be an important area in which we develop our cash management capabilities in the future. In 2008, we made a strategic investment in Russia by building a manufacturing plant, and also started developing our customer base in Russia. Looking ahead, we anticipate further investment, so we are seeking the most efficient cash management structures possible.
In the Gulf, we have created a subsidiary in Dubai and we are now developing our customer base in the region, which will create cash pooling needs in due course.
In addition to organic growth, we are continuing to look at acquisition opportunities globally. Most recently, we acquired businesses in Italy and North America, which in both cases will have cash pooling implications.
ConclusionOur objective has been to manage our group liquidity in a centralised way, working with the banking partners best positioned to meet our needs, and making use of the most appropriate technology tools. We have been absolutely successful in achieving these objectives in Europe, with considerable savings in both bank charges and IT costs, as well as the wider benefits of cash concentration. Many of the initiatives on which we have embarked so far, such as our technology implementation and bank rationalisation, have set the groundwork for similar success in other parts of the world.
Over the course of next year, we will also be looking at the Single Euro Payments Area (SEPA) with the aim of achieving greater straight-through processing (STP) through better standardisation of information, such as more automated reconciliation and accounting of incoming cash. Using SWIFTNet will also facilitate greater standardisation by exchanging a wider range of messages through a single entry point.
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