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Cash & Liquidity Management
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Etex’s Approach to Cash Centralisation

by John Holmes, Group Treasurer, Etex Group SA

Corporations typically adopt quite different approaches to cash management according to their business activities and the culture of the organisation. Over the past 15 years, Etex has engaged in a considerable number of mergers and acquisitions, resulting in a decentralised, ‘multi-domestic’ business; i.e., although the group operates in many countries, most subsidiaries are active in one country rather than conducting significant cross-border business. The traditions and business culture in each country can be quite different, so there have been advantages to adopting a local cash management approach. 

Our overall objective was to reduce the amount of cash management at a local level, including limiting local borrowings and investments.

Like many organisations, we recognised the benefits of centralising cash management into group treasury. In particular, we had substantial debt resulting from acquisitions which we wanted to pay down quickly, so we had to be able to access cash easily from across the group. The need for cash also meant that we had to reverse the arrangement whereby business units effectively decided how much cash they would pay to headquarters in the form of dividends or loans; instead, we wanted to upstream as much cash as possible in order to have cash available for fulfilling our obligations at group level.