WASHINGTON, D.C. – Dresser-Rand Group presented treasury and finance professionals with a look at how it implemented a new global cash pool Monday at the 2014 AFP Annual Conference. Dresser-Rand’s pool is designed to increase the availability and liquidity of previously trapped cash.

First, the treasury department wanted to obtain access to cash for corporate working capital needs within the Dresser-Rand family without adverse foreign exchange (FX) or tax effects, explained Robert Schur, assistant treasurer at Dresser-Rand. The second objective was to concentrate the organization’s cash on one platform. Finally, the company wanted to use the funds to eliminate local subsidiary borrowing and pay down corporate debt.

The corporate treasury team had a variety of roles and responsibilities as part of the move to establish the new global cash pool. Jonathan Hauser, director, global treasury with Dresser-Rand outlined the following steps that the treasury department undertook:

• Define the need and develop the criteria for the possible solution.
• Manage the internal process to coordinate the contribution of all the required constituents.
• Obtain buy-in and approval from senior management.
• Compose and issue the request for proposal (RFP) and manage the decision as to which partner banks to invite to the contest.
• Evaluate the responses and select a partner.
• Manage and coordinate the implementation process.
• Deliver and manage the promised results.
• Evaluate the global cash positions.
• Establish thresholds and manage subsidiary cash forecasts in a decentralized treasury environment.
• Obtain buy-in from important internal constituents such as tax, legal and accounting.
• Maximize working capital across borders, currencies, time zones and subsidiaries.
• Assess the realities and lessons learned from implementing a complex global account structure.

Adding some flesh to the bones of this checklist, Hauser said that there were some challenges when managing decentralized subsidiary cash forecasts. Common forecast requirements and rules had to be implemented across all subsidiaries. Treasury also faced the tricky task of changing the way that the subsidiaries had always done business and, even more critically, to get the subsidiaries to let go of the cash. An additional challenge here was to establish reasonable cash levels and automating as much of the process as possible.

Hauser was also clear on how important it is for treasury to get participation and buy-in from the tax, legal and accounting departments for a project such as this. He said that the tax team should decide the home jurisdiction of the top legal entity or pool owner in the cash pool structure. The legal team has to decide on the type of legal entity structure and opine on the agreement between the parent company and subsidiaries, as well as the banks involved in the cash pool. Hauser added that the accounts team has to understand all of the cash flows and how to define and make the correct entries into the company’s books.