Case Study: Henkel Gains Global Bank Account Visibility

Henkel operates worldwide with leading brands and technologies in three business areas: laundry and home care, cosmetics/toiletries and adhesive technologies. The company, headquartered in Düsseldorf, Germany, has some 47,000 employees, more than 80% of whom work outside of Germany, and counts among the most internationally aligned German-based companies in the global marketplace. Henkel has production sites in 57 countries. In fiscal year 2011, the company generated sales of €15bn and operating income of approximately €2bn.

The company wanted to improve its visibility of all bank account details and balances on a daily basis in order to improve its risk management, including counterparty, liquidity and foreign exchange (FX) risk, across the enterprise.

Project Objectives

Henkel decided to apply the global principles that drive its international expansion with the same rigour to its finance department. Specifically, the company wanted to solve the seemingly obvious problem of having visibility of all bank account details (including authorised signers, business purpose, etc) and account balances on a daily basis in an automated fashion.

Henkel’s objectives were four-fold:

  1. To comply with internal audit guidelines to have proof of cash balances on all of its bank accounts globally.
  2. To consolidate and optimise its bank account structure and banking relationships globally, and have this information readily available in internal reporting systems.
  3. To improve management of counterparty risk and in the company’s ability react to changes in the financial industry.
  4. To effectively manage currency exposure (by bank, region and entity) and sudden market swings.

As a by-product of these objectives, Henkel also wanted to achieve transparency across its bank accounts and their operational requirements, authorised signers, attached overdraft lines and other attributes. This information could then be displayed in different ways, which were adjustable to fit Henkel’s own organisational structure.

Project Execution

Before selecting Citi’s TreasuryVision system, Henkel’s team analysed available systems in the market for functionality and cost. The objective was to choose a provider with a proven capability and track record in global implementation. In addition, the provider was required to have direct relationships with the majority of banks used by Henkel around the globe.

These requirements were necessary to ensure Henkel could meet its internal objective of completing implementation in less than a year. The vendor selection process began in December 2010 and the selection of Citi’s TreasuryVision was made in March 2011. Just eight weeks after the implementation kick-off call, Henkel had uploaded its data (accounts, subsidiaries, organisational and reporting structures) and Citi had customised the reports to mirror Henkel’s requirements and structure.

Obstacles and Difficulties

As expected, the biggest challenge in the project implementation phase was to get all of Henkel’s banks to send MT940 statements to Citi on a daily basis. Banks in frontier markets, on occasion, were slow to process these requests due to not fully comprehending the requirement. To compensate, TreasuryVision allows Henkel (or its local subsidiary) to manually input balance information (or use file upload) to assist those banks unable to send MT940 messages to Citi.

The project was sponsored internally by senior management, with day-to-day implementation being carried out on a ‘one-by-one’ basis, with each subsidiary working to prompt each bank to send the MT940 to Citi.

Benefits Beyond the Project Scope

The project enabled the reduction of external bank fees for the provision of multiple MT940s. When the project was initiated subsidiaries received an MT940 and head office requested that it also be sent to Citi’s TreasuryVision bank identifier code (BIC) address. Towards the end of the main project, Henkel launched a pilot project with Citi to distribute the centrally-received MT940 (in TreasuryVision) to each subsidiary where this information is required. This is significantly more cost-effective than requiring multiple MT940s from the third party bank.

Another unexpected benefit of the project was that dormant and unnecessary accounts were closed during the implementation, which is expected to further reduce the number of operating accounts in use globally and result in additional cost savings.

Results

Henkel has achieved full visibility on a daily basis of all the accounts that were in the scope of the project. With this information, head office can have meaningful dialogues with each subsidiary. For example, if there are no movements on an account for a month, the business reason for maintaining the accounts can be discussed. The daily visibility of available liquidity has become a useful tool for managing counterparty and currency exposure. It enables Henkel to see instantly with which banks it holds euros, or what its exposure to a particular bank may be at that time.

  • This case study is based upon an entry into the gtnews Awards for Global Corporate Treasury 2012, sponsored by Bank of America Merrill Lynch (BofA Merrill). The winners of this year’s annual awards, now in its third staging, were only revealed at a gala dinner on 24 May at the Sofitel Grand Hotel in Amsterdam, the Netherlands, after the opening of the two-day gtnews Forum for Global Corporate Treasury. To see a full report on all the Awards winners and the gala dinner on 24 May please click here.

 

 

 

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