Published: January 01, 2000
Bengt Elvinsson, Corning Treasury explains, “We have achieved considerable efficiencies by working with regional banking solutions including Bank of America Merrill Lynch as our treasury outsourcing provider. In particular, we have been able to streamline and enhance efficiencies across our activities, increase visibility and control and fulfil our cash and other treasury strategies more effectively.”
In 2003 Corning had an established global in-house banking operation but remained dependent on an inefficient, outdated banking structure at the legal entity level globally. The company aspired to transform the treasury centre into an industry-leading, centralised and globally structured service solution that met specific requirements from internal corporate stakeholders, including integration with three regional shared service centres (SSCs), and was accountable to individual business units for its performance by achieving key metrics. However, the company recognised that without implementing a more efficient, integrated banking infrastructure, it would be difficult to eliminate the existing inefficiencies and achieve these goals. There were various challenges:
Firstly, there were myriad banking relationships within countries and across the geographic regions, with a multitude of legal agreements, processes and technology platforms.This presented fragmented and non-standard business processes causing significant inefficiencies, further challenging the objective of a centralised and integrated banking operation. These local banking relationships were also, in many cases, no longer part of the group’s credit panel.
Secondly, the fragmentation also limited treasury’s visibility and access to surplus funds in subsidiary accounts, which made it difficult to establish a more optimal and efficient cash and liquidity management strategy.
Thirdly, the existing architecture was a material impediment to full integration and regionalisation of transaction processing into their shared service centre operations.
Corning made the decision to centralise, rationalise and simplify its banking and cash management infrastructure, with a view to increasing visibility and control over cash, enhance financial processes and reduce costs. To achieve this, the company launched projects in Asia and EMEA during 2005, with the Americas to follow in 2011, to achieve a variety of objectives that have transformed the treasury centre into a highly effective, best-in-class function:
Corning now has a primary banking partner in each of EMEA and Asia, with a limited number of domestic banking services where appropriate, and a streamlined, bank-neutral connectivity platform. Communication is easier to manage and control, with a standardised approach to interface formats and reporting. Operational bank accounts have been reduced by approximately 50%, under a single set of legal documentation for each region, enhancing reconciliation, and increasing control and standardisation of account management, authorities, fees and service delivery.
Treasury now has full visibility and control over cash, enabling a more flexible and strategic approach to both transaction execution and the use of excess cash. Payments and collections can now be efficiently centralised into the shared service centres: for example, while in the past, there were multiple payment cycles for the individual entities/banks in each country, these have now been replaced by a single, centralised payment run, enabling greater visibility and control over cash and working capital. Straight-through processing has been enhanced considerably, leveraging industry best practices and simplified processes, with a significant reduction in both internal costs and bank fees.[[[PAGE]]]
Corning had outsourced a variety of its daily treasury operations to a third-party outsourcing provider. These included daily cash positioning and management, treasury management systems, transaction execution, settlement, confirmation, in-house banking and accounting. At the end of 2008, the original bank provider announced its decision to discontinue these services. Consequently, treasury had to revisit its decision whether to in-source these activities, or replicate the outsourcing arrangement with an alternative provider, or to establish a new arrangement that provided the benefits of outsourcing. A key element of the project’s success was to ensure that no disruption of service quality occurred during the transition and that the selected replacement solution was aligned with the project objectives.
There were a variety of perceived advantages and disadvantages of managing treasury and in-house banking activities internally as opposed to working with a third-party provider. For example, while a third-party provider could provide the scale of resourcing and systems infrastructure for transaction processing to permit the necessary control and segregation of duties, there were issues that needed to be addressed with regards to accountability and governance. Moreover, while treasury recognised that there were some benefits to maintaining skills and infrastructure internally, the data processing skills required in the SSC would not necessarily have material synergies with those required in a highly sophisticated, strategic treasury centre. While the initial inclination was to in-source treasury operations, the company decided to explore the issue more fully.
Corning had already during 2006 appointed Bank of America Merrill Lynch as its regional cash management bank in Europe and based on a detailed understanding of Corning’s treasury objectives and strategy, the bank was able to design an integrated solution encompassing the company’s regional (EMEA) cash and liquidity management requirements, together with outsourced treasury operations (both US and EMEA), from cash positioning through to transaction execution and processing, in-house banking and accounting. Following a detailed due diligence process, Corning reconfirmed the advantages of a comprehensive outsourcing solution encompassing cash management, transaction services and in-house banking. The solutions review also included an assessment of the skill and resource levels and other related expertise that the bank was able to offer, which would in turn help to enhance the ongoing efficiency of its operations and deliver the highest level of visibility and control, whilst ensuring that its activities remained fully aligned with the company’s overall treasury strategy.
Bank of America Merrill Lynch has now been successfully providing treasury outsourcing services to Corning since September 2009, in addition to providing regional EMEA cash management services. A key factor in the ongoing success of the relationship with its treasury outsourcing and banking service provider is the commitment to mutual objectives and working together to ensure that the banking solution and outsourced treasury continue to meet both operational and strategic objectives. There is an ongoing focus on optimising processes, enhancing global reporting and reducing bank accounts further. SWIFT Corporate Access and SEPA rollout is under consideration but not for immediate implementation as the overall benefits to the company would be marginal at this point in time.
Bengt Elvinsson, Corning Treasury, concludes, “I would now consider us positioned as best-in-class in our industry and beyond and treasury continues to pioneer new techniques, efficiency levels and its strategic contribution to the business.”
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