Ingram Micro and Bank Mendes Gans Co-Create Global Liquidity Backbone

Ingram Micro was looking to set up a global notional cash pool that would give treasury the flexibility to move funds between entities without intercompany loans. While the obvious solution may have been to centralise all of the company’s cash management with one global bank, treasury was looking for an altogether different solution. The answer came in the form of an innovative – and now award-winning – global overlay structure from Bank Mendes Gans.
 

As Erik Smolders, Treasurer, Ingram Micro, neatly summarises: “The global notional pooling solution we have implemented helps the company to reduce cash while allowing all our operating entities full and immediate access to liquidity at all times. It replaces a system of intercompany loans that was not very flexible and required a significant amount of currency swaps to avoid currency exposures created by loans between legal entities in different countries and different functional currencies.”  

By using bank accounts at Bank Mendes Gans (BMG), and the notional pooling structure offered by the bank, Ingram Micro can very quickly move cash collected from customers across countries and currencies to make payments to suppliers and keep idle cash as low as possible. Says Smolders: “With more than 200,000 customers across 160 countries, it is important for Ingram Micro to maintain access to in-country collection accounts with many global and regional banks. The BMG structure acts as an overlay structure, allowing us to perform global cash centralisation, while continuing to benefit from the collection and disbursement services of in-country bank partners.” 

In addition, “The cross-border notional pooling structure also helps us to incorporate newly acquired legal entities into our cash pool structure very quickly, post-acquisition, as all a new entity needs to do to join the structure is to open a bank account with BMG.”

Through the solution, almost all of Ingram Micro’s local cash pools and non-pooled bank accounts are integrated into one global pool.

And while most global notional cash pools use cross-guarantees, BMG’s pool does not. This means that credit facilities are not needed and that subsidiary surpluses may be offset with borrowing needs within the group without creating an intercompany loan – while still remaining compliant with all rules and regulations.

These stand-out characteristics of the solution made it an indisputable winner of the Best Multi-Currency Liquidity Solution accolade in TMI’s Awards for Innovation & Excellence 2018. But, of course, this is not just innovation for innovation’s sake. The benefits of this solution speak for themselves. Smolders says that the company now has far fewer pockets of surplus cash, which is a big working capital benefit and the solution has enabled treasury to free up around USD$500m to date – which is equivalent to a sizeable revolving credit facility.

“Furthermore, I can keep all of my relationship banks happy because they continue to get the flows that they are entitled to as part of our bank structure, and yet we have a highly effective overlay structure through the BMG model – it’s like a global cash management backbone that underpins everything that we do in treasury.”

Bertie Sanders, Managing Director, Clients & Products USA, Bank Mendes Gans, went on to explain: “The global cash pool is also extremely flexible, meaning that cash-poor entities can be funded quickly as and when needed – without being held up by cumbersome intercompany loan paperwork, or having to undertake FX swaps. Essentially then, what BMG is providing is a way for Ingram Micro, and any other organisation using this solution, to act as their own bank. Why borrow funds when you can use your own internal funds in a better way instead?”

Other treasurers are already starting to explore the possibilities of this approach, taking advantage of what Smolders describes as: “The enormous flexibility to move funds quickly and efficiently around the globe, on a same-day-value basis.” The solution itself is also inspiring further innovation among the treasury community – another good reason why the judges awarded it first place.

Says Sanders: “After implementation of the pool, customers still find new ways to use it, such as adding holding entities, captive insurance entities, settling intercompany traffic within the group and synthetic FX hedging purposes” And commenting specifically on the Award win, he notes: “We are delighted to have collaborated with Ingram Micro on this bank independent solution on top of their local/regional banking partners and to be inspiring other corporates to follow suit. We are a trusted business partner and are proud to have helped Ingram Micro win this Award by being consistent in our behaviour, delivering exceptionally high service levels and being very flexible, all while playing it by the rules.” Our ambition is to design tomorrow’s open treasury platform supporting all treasury functionalities.