Editorial Consultant, Treasury Management International (TMI)
Specialising in providing pedestrian and vehicle access automation systems, FAAC Group has operations and customers all over the world. As a result of this global footprint and legacy banking arrangements, the group’s cash management landscape was fragmented. Here, Francesca Benassi and Ezechiele Galloni, FAAC Group’s Treasurer and CFO and Laura Milani, Liquidity Management Marketing Director, BNP Paribas, explain how the two companies solved this dilemma. By participating in a pilot project across BNP Paribas’ international network, FAAC has now created a global, fully automated and harmonised, end-to-end liquidity structure that will grow with the group as it continues to expand.
Ezechiele Galloni CFO, FAAC Group
With a presence in 24 countries and generating revenues of €427m per annum, FAAC Group’s cash flows are highly international. Today, the Group has central visibility and control over its global cash, but turn the clock back to 2011, and it was a very different story.
As Benassi explains: “We’ve been on an exciting journey over the last seven or eight years, completely revamping our cash and liquidity management structure. It started back in 2011, when we embarked on a project with our domestic bank in Italy, Banca Nazionale del Lavoro (BNL), which is part of BNP Paribas Group, to centralise our European subsidiaries’ liquidity.”
During the course of that project, FAAC started to discover more about the BNP Paribas network. And soon, the bank began providing the Group with support in many other European countries for daily transaction banking activity, as well as liquidity management.
Having successfully centralised its euro liquidity, the project was then extended to non-euro currencies within Europe and to non-European subsidiaries as well. “At the end of 2016, we launched a liquidity management centralisation project to include all countries in our scope, where cash pooling is allowed,” says Galloni.
Milani, Liquidity Management Marketing Manager, BNP Paribas adds: “BNP Paribas offered advisory support at this stage, helping FAAC to liaise effectively with the company’s external legal and tax advisers and to receive appropriate detailed external and independent legal opinions about the cash pool.”
The main objective of the project was to centralise liquidity at the headquarters, so that pooled cash could be put to work to support the strategic growth and investment plans of the FAAC Group. “We wanted to make sure that, by means of a single, central treasury mandate, we could manage short-term investments and financing – across different currencies – for the whole Group. Unlocking idle cash was also high on the to-do list,” notes Benassi.
Expanding horizons
FAAC, therefore, decided to extend its existing cash-pooling structure into the Asia Pacific region, (including Australia) and crucially, the US, where the company has two legal entities, based in Florida and Pennsylvania. As Milani notes: “Sales and market penetration in the US was becoming – and remains – very important for FAAC. Treasury therefore wanted to make sure the US operations were fully integrated into the cash-pooling structure, whilst maintaining access to best-in-class banking solutions in the US as well as across the Atlantic.”
Francesca Benassi Group Treasurer, FAAC Group
By integrating the US entities into a seamless structure, the hope was that management of the group’s overall cash flow needs would become easier, especially since – due to different business models – the financial needs and cash cycles of the European and North American entities are very diverse. “We saw great potential to tap into internal financing sources and leverage synergies across the Group, such as giving European subsidiaries access to Group USD cash, thereby reducing the need for FX transactions,” Benassi comments.
At this point, FAAC shared its centralisation roadmap with BNP Paribas to see how the two organisations could work together to achieve the Group’s aims, with a particular focus on the US. “Our global footprint was a great match for this project,” says Milani. “We were able to introduce FAAC to Bank of The West (BoTW), which is a wholly owned subsidiary of BNP Paribas, to take care of the US side of things. BoTW has solid domestic roots but is also fully integrated within the BNP Paribas Group, meaning that we knew we could support FAAC’s goals in a seamless manner, domestically and globally.
“In addition to adding the US entities to the cash pool, FAAC wanted to set up a global e-banking system that would enable treasury to have central visibility and control over all of their accounts through a single tool – and we knew that we could offer this through BNP Paribas’ Connexis ® Cash platform,” Milani adds.
FAAC agreed and, in September 2017, mandated BNL to handle its US cash management business through BoTW. Although the choice of partner bank was obvious for FAAC, there were further decisions to be made. Benassi explains: “We were given two options of how to manage the set-up with BoTW. The first was to open a non-resident account in the US at BoTW held by FAAC SpA and remotely manage the pre-centralised USD domestic liquidity. The second was to participate in the BoTW pilot project for a fully automated end-to-end zero balancing solution, which would allow ‘against-the-sun’ sweeping and centralisation with same-day value. The ‘child’ accounts would be held by our subsidiaries at BoTW and the parent account to be based in Italy, at BNL,” explains Benassi.
Uncharted territory
Given the challenges around opening a non-resident account, FAAC opted to join the pilot project instead – realising that this would enable the company to manage its liquidity in the US in exactly the same way it does in Europe. Since the pilot project was not due to begin until Q1 2018, however, plans were hatched for an interim solution, thus dividing the global centralisation project into two steps.
Laura Milani Marketing Director, Liquidity Management, BNP Paribas
The first step involved setting up a domestic zero-balancing cash pool in the US with pre-centralisation in Florida, linked to a target-balance cash pool between Florida and the parent account in Italy. “Then, in Q1 2018, participation in the pilot began, allowing us to zero balance and streamline liquidity directly from the North American subsidiaries to the FAAC SpA parent company in Italy,” says Benassi. “The implementation was successfully completed in May 2018, with just a small delay, which is impressive for such an ambitious timeframe!”
One of the main reasons why the implementation was able to take place so quickly was the deep level of collaboration and communication between BNP Paribas and FAAC. As Cash Management Senior Implementation Project Manager Alexandra Oberheid recalls: “The implementation kicked off with an international conference call involving all stakeholders from the bank and from the client side, so FAAC SpA, the two US subsidiaries, BNL, BNP Paribas Paris and BotW. The purpose of the call was to clearly define the project’s milestones, outline the implementation steps, and determine relevant deadlines.”
The bank allocated a dedicated project team to take care of every aspect of the agreed milestones. And weekly calls took place between FAAC and the project team to discuss progress made and to highlight any issues that needed to be addressed. “Since this was a pilot project, tweaks were inevitably required along the way,” says Oberheid. “But we were able to swiftly respond to any issues – as the short implementation time demonstrates.”
Thanks to the regular updates between the bank and FAAC SpA, it was also possible to keep the rest of the Group up-to-date. “As such, the subsidiaries felt fully engaged and truly part of the project,” says Benassi.
Hard work pays off
As a result of the combined efforts of FAAC and the team at BNP Paribas, the company now has a global, fully automated and harmonised, end-to-end liquidity structure. It is a true against-the-sun sweeping solution too, since FAAC can transfer its USD funds back to its accounts held at BNL, with overnight, automatic same-day-value cash sweeping.
And as a pioneer of the first fully integrated liquidity solution, which extends the cash-pooling system of BNP Paribas to BotW, FAAC has reaped impressive benefits. Says Benassi: “The inclusion of North America into the cash pool has tremendously increased the amount of cash positions being centrally controlled and managed. In fact, centralised liquidity rose from 45% in 2016 to 69% in 2017 and up to 85% as of June 2018.”
Since almost every FAAC subsidiary generates excess cash – the Group is cash rich, with a net financial position of €131m at the end of 2017 – these centralised cash volumes enable the group to better negotiate global conditions through central treasury control. Treasury can also seize better investment opportunities across different currency balances.
Fig 1 2016
Fig 2 2017
Fig 3 2018
Furthermore, thanks to this optimised liquidity structure, central treasury can directly support strategic growth. “By putting internal and ‘ready-to-invest’ financial resources at the group’s disposal, the need for bank financing has been significantly reduced,” Benassi observes.
Alexandra Oberheid Cash Management Senior Implementation Project Manager, BNP Paribas
In addition, with the simultaneous roll-out of Connexis ® Cash as a global e-banking platform, the “possibility to manage a harmonised bank account structure with the same partner bank across all geographies has delivered greater visibility and control over cash, eliminated fragmentation and enhanced processes and procedures. All of which has led to important cost savings,” outlines Benassi.
“Last but not least, being introduced to BotW by BNL made our banking journey to the US smooth and easy. The BNP Paribas Group’s global footprint perfectly matches ours, and the team at the bank has been very efficient throughout the liquidity centralisation project. From the advisory support at the start of the project to the step-by-step roll-out, support after the go-live, and now in our daily commercial business life, BNP Paribas is always a true business partner.”
And as in any good partnership, there are mutual benefits. Thanks to FAAC’s willingness to participate in the pilot, more corporates are now able to benefit from BNP Paribas’ global cross-border cash management capabilities, since this solution is now live and scalable. There will doubtless be more innovations coming out of this partnership in the future, too.
As Benassi notes: “FAAC’s journey to treasury centralisation and the partnership with BNP Paribas is certainly not stopping here. We are currently extending the cash pooling to Bulgaria and exploring options together for unlocking trapped cash in China and Russia, taking into consideration all of the local requirements, for example.” And Milani adds: “We have developed online reporting and cash forecasting solutions to help support real-time cash visibility, identification of the best short-term investment opportunities for the centralised cash positions, and cross-currency hedging. So, watch this space.”
