Adam Smith Awards 2018 Client Casebook

OVERALL WINNER Treasury Today’s Top Treasury Team concentration risk while meeting cash investment policy parameters regarding credit, safety and liquidity. This strategy generated over US$2m in interest income. APAC: banking consolidation Digital Realty changed its cash management bank in Asia Pacific, resulting in multiple banking partners, which increased complexity and costs. A host-to-host solution was set up between its ERP system and the new banking partner, Bank of America Merrill Lynch. When the new solution was stabilised, Digital Realty closed old accounts and took the opportunity to review and close other accounts which were no longer in use. Because of legacy banking arrangements, funding of its accounts was managed via multiple internet banking platforms. This created multiple manual processes, all data being managed in Excel. To address this issue, a host-to-host connection was set up between Digital Realty’s Kyriba TMS and its cash management banks. This streamlined the funding process for domestic and cross-border transfers and now enables statements to be sent directly into Kyriba for forecasting. A further challenge came as Digital Realty entered into a joint venture in Japan in November 2017. Treasury needed to obtain documentation from its lending banks in both US and Japan as part of the loan agreement within a short time frame. The solution here was to obtain all the necessary consent documents from the lending banks in different time zones, the treasury team working in a carefully coordinated way through its strong lender relationships to meet the deadline. Measuring benefits The treasury team at Digital Realty has made significant changes and gained notable advantages in doing so. As examples, inter-company settlement has been simplified, reducing time spent on administration, and it has increased streamlining and automation, removing the need for additional headcount and enabling treasury to be run with just six people. Today, the firm’s treasury in any region can continue their business as usual in any circumstances as a result of the global business continuity plan developed in 2017. By resolving trapped cash issues, financing capex in growth markets is now easier, borrowing costs have been reduced by an estimated US$500,000 – US$1m per annum, and by carrying low global cash balances it has minimised negative interest exposure. What’s more, the team has reduced the number of EMEA bank accounts by 33% and reduced its EMEA banking partners from four to one. In APAC, bank accounts have been reduced by 43%. This has helped increase visibility of bank fees, resulting in an improved ability to monitor services and reduce fees. Financial risk management (FX and interest rate) strategies have to date delivered more than a US$65m benefit. The Treasury Today view Digital Realty’s cash management projects in 2017 prioritised coordination, automation, visibility and control as assets grew from US$12bn to US$21bn. Its EUR and GBR notional pool implementation was challenging but cut borrowing costs and cash balances, minimising interest on negative-yielding currencies. Overdraft limits have been increased worldwide, improving flexibility. Following large acquisitions in EMEA and the US, accounts were swiftly integrated in line with best practice. Excess cash required for a forthcoming acquisition was invested to ensure safety and liquidity while generating interest income. And treasury has successfully automated domestic and cross-border payments via the company’s TMS. The team constantly strives to streamline processes using intellect and technology, freeing up their time for value-added activities. These achievements are possible because of the resolute commitment and family-like bond of Digital Realty’s treasury team, which has just six members worldwide. It is truly a worthy winner of the Treasury Today Adam Smith Top Treasury Team Award 2018. Keys to success • Communicate candidly and often. Build strong internal and external relationships through open and transparent dialogue. • Above all else, get the basics right. Understand and support the business, ensuring liquidity at all times from day to day operations to major acquisitions. • Design holistic, global processes and systems that are flexible, scalable. This will greatly impact the speed and effectiveness of M&A related integrations. • Continuously assess risks from every angle (financial, market disruptions, resources, systems, etc). Expect (and plan for) the unexpected. • Cross-train to build key skill and process redundancies in the system. • Embrace technology to automate and streamline processes. Continuously challenge the status quo. • Reach out and connect with professional peers. treasurytoday Adam Smith Awards © August 2018 | 7