A global manufacturer of optical lenses required support in setting up cash pools in various currencies. The requirement for managing cash more effectively arose because while it had borrowings under its expensive working capital facility, it also had significant trapped cash.
- Perform a review of bank balances for the previous six to nine month period which showed that substantial balances in USD and EUR were not being utilized effectively;
- Also, long cash positions were not invested and an infrastructure to offset short positions in one jurisdiction, with long positions in others, was not in place;
- Execute a cost benefit analysis for setting up cash pools in different currencies.
Results & Recommendations
The cost benefit analysis concluded that while cash volumes were sufficient to justify establishing automated pools for EUR and USD, other cash management techniques would need to be introduced for other currencies.
After we helped management to define cash pooling objectives, banks in Europe and the US were invited to individual kick-off meetings followed by an RFP process. After a thorough review, two banks were invited for a final presentation. At the end of this process, one bank won the USD pooling business and another was awarded with the EUR pool.