Sony Global Treasury Services Plc Cash Management Operation SGTS History Sony Global Treasury Services (Plc) was incorporated in 2001. SGTS branches in London (HQ), Tokyo, Singapore and New York branch. Prior to this each region had an independent financial centre with little co-ordination and offsetting of cash positions. Central aim was to consolidate Sony Group’s cash position. This was achieved via setting up a cash management service to the Sony group companies throughout our regions (“C3 operation”). To record transactions between group companies and SGTS, an internal web-based global system was set up (“e-cube”). Objectives & Expected Effects of GTS Services Subject of Each Effect Objective Expected Effect Global Cash Management Reduction of Interest Cost Introduction of Intercompany Cashless Settlement Saving of Interest/ Commission to Banks Reduction of Settlement Risk Operational Efficiency on Sony Group Treasury Functions and Upgraded Customer Service Improvement of A/P & A/R Reconciliation Workload Operational Efficiency in Payment / Settlement / FX deal Minimizing FX exposures Facilitating Accounting Consolidation Work Workload Reduction of AP/AR Reconciliation All of the Group Finance Accounting SONY Companies Dept. Dept.of group of SONY SONY SGTS Cash Management Sony Group companies, hold collection accounts. Zero balanced each day Funds received in SGTS Header A/C SGTS provides this service for all major currencies Sony Group companies are provided with a RAS account (Running Account service) enabling “cashless settlement” with SGTS. RAS Account records: -Zero balance sweeps credited to the RAS account. -RAS customer enters payments in SAP system, and this interfaces to E-Cube. These payments (“proxy payments”) are made by SGTS. Each proxy payment debited from customer’s RAS account. -inter-company cashless payments/receipts -all FX transactions transacted on behalf of group companies are settled across the RAS account. - SGTS will credit/debit interest to RAS account depending upon whether credit/debit balance. Overview of Automatic Sweeping Service and RAS Customers’ Bank Account Customer’s Sub Account (JPY) •Payment to each Customer GTS Bank Account GTS Head Account (JPY) Customer’s Sub Account (USD) GTS Head Account (USD) Customer’s Sub Account (EUR) GTS Head Account (EUR) … … I//F via MT940 Msg Customer’s Account In GTS(=RAS) As well as 3 currencies above, operate sweeps for AUD,GBP,HKD,MXN,NZD, SGD and THB. Account Monitoring Customer A Customer B Customer C Overview of Proxy Payment Service and RAS GTS Bank Account JPY Account • Proxy payment to third parties USD Account • Proxy payment to third parties EUR Account … As well as main 3 currencies proxy payments for AUD,GBP,HKD,MXN,NZD, SGD and THB I/F Proxy Payment Request I/F Customer’s Account In GTS(=RAS) Account Monitoring Customer A Customer B Customer C Cash Management C3 RAS customer keys in daily forecast ZBA flow into Golfer Cashflow forecast summary File exported from Golfer to internal drive, is then uploaded into Treasury system as Projected Cashflows Based on Cash positions in Cash Xplorer the Cash Management team will make their funding/investment decisions Surplus cash invest in Money Market Funds. Deficit funded by ECP or USCP market FX / MM deals Treasury system Proxy payments entered by C3 customers, approved by SGTS , and uploaded into Treasury system as actual cashflows. MT940 statements received from Banks uploaded into Treasury system. A/c bank balances are reconciled using system’s Bank Rec function. Cash Xplorer is run to determine current positions by currency. The projected cashflows are incorporated into current balances Internal Sony G.Co. Account Entries for RAS Account Deciding on Partner Bank for Cash Management Likely to already have a relationship (credit facilities)- ongoing commitment to Sony. Global presence, wide branch network to provide consistent cash management services. Dependency on one bank Vs additional work if cash management is tendered on a regional basis. Cost-proxy payments vol. 23,000 payments/mth Reputation/customer service levels. IT support to develop interfaces with RAS. Advisory role-regulations/solutions relating to cash management (Tax/banking regulations etc.) SGTS Experience of Partner Bank Reputation of SGTS within Sony Group is on the line: -Sony group companies want to view accurate RAS accounts, relying on efficient banking operation as well as reliable IT interface. Quality of service diluted if cash management provider uses a partner bank. Fine to have a solutions/queries centre but one main point of contact important. Effort/cost of set-up means only poor client service would lead to termination. Ancillary Benefits for Partner Bank Cash Management Bank is termed “relationship bank” internally Regular contact with SGTS could lead to new opportunities. Same day FX transactions will be dealt with the partner bank so that settlement can go across the accounts. SGTS is funding USA West coast payments based on a forecast. Therefore, we leave a minimum cash balance with the partner bank. Investment/Funding of Cash Position Lack of technology!! Surplus cash investment Current procedure for investment ++$$$ ++EUR ++££ Money Market Funds SGTS holds target balance of USD 500 mil. Treasury system Settlement diary for maturing MMFs Monitor yield/outstandings daily via email and excel Overnight investment with good liquidity/generally AAA credit rating Contact MMFs via telephone/ Bank website for subscription/ Redemption to the fund Treasury system Treasury system Input MMF investment Back office settles MMF and makes payment System constraints of current procedure for investment Time consuming Redeeming/subscribing to all funds that have an outstanding balance/day Monitoring fund performance/outstandings via email and updating excel sheet (human work) Settlement risk Receiving/paying to a number of different funds Reconciliation problem Interest, including rebate, paid monthly. Reconciliation issue as to interest received, and impact on both Accounting and other issues such as SOX Money Market Fund Portals SGTS is currently considering using an electronic Money Market Fund’s portal. Advantages: Reporting Centralises transaction data for immediate access. Monthly statement provides information as to fund balances and accrued interest Internal compliance Enables internal guidelines to be met, for example fund concentration/fund ownership Reduced settlement risk-one payment Straight through processing Downside……………Loss of rebate???????? ECP/USCP Issuance SGTS uses ECP/USCP for short-term funding needs. All contact/dealing done via the telephone Time-consuming from issuance decision to finalising funding. 2 1 Decide on funding target to Libor. Instruct CP dealers to work an order Contact CP dealers With funding needs. Receive update on market conditions 3 CP dealers call to confirm issuance. Update dealers on Issuance amount Consider electronic dealing such as Bloomberg General Conclusions Cash Management is a key focus for Corporate Treasury department. Accounting regulations/internal compliance making FX hedging less of a priority. Cash management services viewed as a partnership with the bank to provide Sony group companies a high level of service. Bank derives additional revenue streams from having cash management platform. Opportunities exist for developing a dealing platform for widely-used money market products.