Cash & Liquidity Management
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Managing Cash as a Corporate Asset

by Ernie Caballero, Vice President, Eurasia Treasury and M&A, UPS

Founded in 1907 as a messenger company in the United States, UPS is now the world’s largest package delivery company and a leading global provider of specialised transportation and logistics services. Every day, more than 425,000 UPS employees manage the flow of goods, funds, and information to nearly 8 million customers in more than 215 countries and territories worldwide, supported by a network of over 95,000 vehicles and 216 UPS jet aircraft and 296 aircraft charters across over 1,800 operating facilities. Headquartered in Atlanta, Georgia, UPS’ revenues in 2009 reached $45.3bn with $3.7bn in free cash flow. The company is rated Aa3 by Moody’s and AA- by Standard and Poor’s.

A global treasury organisation

Until 2002, UPS’ treasury organisation had essentially reflected a US company with international operations. We recognised we needed to undertake a major shift in vision and strategy, in order for UPS to build a world class treasury infrastructure around the globe. While establishing a new centralised infrastructure represented a significant organisational change, the business justification was compelling and senior management were highly supportive of our ambitions. At that time, we had a large number of banking partners and bank accounts, with limited visibility over cash and difficulties in accessing it. It was clearly recognised that cash was a valuable corporate asset, and by centralising control over cash management through global and regional treasury centres, treasury was in a far better position to protect this asset and to utilise it to enhance shareholder value.

Corporate treasury is now responsible for establishing a consistent strategy and policy across the group, while execution is conducted regionally in treasury centres in London, Singapore and Miami. By centralising cash management in this way, operating units no longer have to deal with liquidity, investment and borrowing issues, and only manage day-to-day account management, collections and supplier payments.

The business strategy is structured around four connected pillars (figure 1) of operational success: visibility and transparency; control; centralised liquidity management and information technology. This article outlines our approach in each of these key areas.