In liquidity management, as in most treasury activities, centralization and standardization can improve both efficiency and outcomes. Companies operating through multiple lines of business and across national borders are especially likely to benefit from bringing disparate cash oversight tasks under a single roof.
This was the experience of both of this year’s Alexander Hamilton Award winners in the category Liquidity Management.
- Silver Award: Zero-balance account (ZBA) pioneer Microsoft has long focused on centralization as a driver of efficiency in treasury and finance, but as its ZBA and multi-bank target balance agreement (MBTBA) structure grew, the company allowed for lax management of the intraday credit facilities linked to these accounts. This award-winning project developed a model and processes by which treasury staff now routinely evaluate the level of credit required for each account in the ZBA and MBTBA structure, then provide access to an appropriate facility to meet each account’s changing needs.
- Gold Award: The liquidity management function at Transamerica had become decentralized after numerous acquisitions over the years. An initiative designed to centralize various treasury responsibilities determined that the insurance company’s liquidity buffers were higher than they needed to be. The company established new funding sources, and it developed a framework and detailed playbooks for identifying and responding to impending liquidity challenges. As a result, Transamerica has increased investment income by millions of dollars a year.
For both companies, the key to success was taking a close look at processes that were working all right but had room for improvement. “What I found most interesting on this project is seeing the degree to which people take things for granted,” says Edda Kuhlmann, treasury manager at Microsoft. “Oftentimes, everyone just assumed our previous ZBA-liquidity process was working. It was working to a degree, but when we looked a little closer and started asking a bunch of questions, we found ways to do things better.”
Congratulations to Microsoft and Transamerica for their outstanding initiatives! And thank you to the judges of this year’s competition: Jean-Francois Heitz, former deputy CFO and treasurer of Microsoft; Erik Smolders, former treasurer of Ingram Micro and a vice president in Deloitte’s Global Treasury Advisory Services practice; Craig Jeffery, managing partner of Strategic Treasurer; and Marie Hollein, former president and CEO of Financial Executives International.
Finally, thank you very much to ION for sponsoring this year’s Alexander Hamilton Awards program!