In the case of multinational companies, there is an unceasing juggling act of foreign exchange (FX) in the management of a network of global subsidiaries. The bank accounts in various jurisdictions, variations in exchange rates and manual reconciliation processes may result in treasury teams being overwhelmed with the complexities. These subsidiaries tend to negotiate FX separately, and this generates hidden costs, disjointed visibility and increased exposure to unstable currency markets.

These issues are not simple operational painkillers, but have a direct impact on profitability and cash flow. Contemporary treasury heads must find a means of streamlining the structures, consolidating control and ensure that there is a declining tax of bad FX management.

Connect Currencies is a holistic solution. Consolidation of FX management across subsidiaries into one technology-based platform enables corporates to reduce costs, achieve real-time visibility, and integrate international strategy.

At Connect Currencies, we work with corporates to simplify multi-subsidiary FX operations, reduce costs, and improve visibility across global entities.

Understanding The Complexity Of Multi-Subsidiary FX

In the case of individual operation of every subsidiary, the challenges are multiple:

• Isolated banking relationships: Local entities have a tendency to have independent banking relationships with domestic banks whereby each bank negotiates individual FX rates and settlement terms.
• Ineffective pricing: The absence of group-level coordination means that subsidiaries have different exchange rates, concealed spreads and inexplicable charges. In the long run, this diminishes margins.
• Inefficiency of operation: Various systems and handwritten reconciliations cause bottlenecks. Treasury teams waste hours on accumulation of information and payments, rather than on strategic endeavors.
• Cash flow risk: Lack of group-wide control implies that abrupt shifts in the market may damage cash positions without the parent company being able to respond to them.

These are not merely inconvenient problems to CFOs and treasurers, but are a material financial risk. Streamlining this structure and implementing a single FX policy has become a strategic imperative by looking ahead corporates.

How Connect Currencies Streamlines Accounts with Multi-Currency Solutions

Connect Currencies addresses these issues by going against the grain with a centralized multi-currency product aimed at corporate treasury requirements.

• Centralized multi-currency accounts: As opposed to having dozens of local accounts, companies will have a single platform where they can store and manage various currencies in all their subsidiaries. Such consolidation enhances visibility and liquidity.
• Local currency receipts: Subsidiaries are able to bill and get payment in its local currency without forced conversion and enhance customer experience.
• Direct supplier payments: Pay the suppliers in their favorite currency to save on costs as well as establishing better relationships. Reduced FX conversion requirements imply reduced fees and improved terms.
• Cash pooling: Group treasury can consolidate the funds of various entities and have funds consolidated at one point so that capital can distributed where it is most required and lead to minimizing idle balances.

Such features enable companies to be a seamless financial entity and at the same time observe the special needs of the local markets. To illustrate this, a global manufacturer which has some of its operations in Asia, Europe as well as North America can easily receive euros, dollars and yen as it plans the liquidity at a group level.

How Connect Currencies Enhances FX Risk Management

Rapidly falling profit margins can caused by currency volatility, and with disjointed management, it is hard to control risks. Connect Currencies brings risk management as a strategy, a proactive process:

• FX policy consistency across the group: A single centralized policy substitutes different decisions on a subsidiary level. Treasury leaders are able to implement a hedging approach on the group so that everyone is geared towards the same goals.
• Exposure aggregation: When inflows and outflows are brought together and considered across all subsidiaries, corporates obtain a net exposure perspective which enhances hedging effect and decreases volumes of transactions.
• Tactical application of forwards and hedging instruments: Firms can hedge or hedge at rates or develop customized hedge to iron out a cash flow and cushion a budget.
• Better predictability: The transparency and real time availability of exposure information will allow closer budgetary and long term planning and the CFOs are confident even in volatile markets.

Connect Currencies provides corporates with the tools and expertise to consolidate subsidiary exposures, align FX strategy, and safeguard margins from volatility.

How Connect Currencies Delivers Visibility Through Technology

The offering by the Connect Currencies is based on technology. A centralized online service provides treasury departments with the simplicity and speed to make informed choices:

• Single platform operation: Group treasurers will have access to all subsidiaries transactions and balances in real time whether they are in London, Singapore or New York.
• Automated reporting: Inbuilt reporting will help bring together data to used in compliance audits, management reporting, and board-level insights without manually introducing spreadsheets.
• ERP/finance system integration: Smooth integration with mainstream enterprise resource planning systems will decrease on the entry of manual data and on the possibility of human error.
• Complete transparency: In contrast to the conventional model of the bank, the exchange rates, fees, and exposures in the model of connections are fully disclose. And the corporation can always be aware of the actual cost of their FX operations.

This real-time transparency also makes FX management more of a strategic action rather than one that is reactionary.

How Connect Currencies Supports Treasury Operations in Practice

The advantages of the Connect Currencies are industry and corporate wide:

• Exporters: Combine the USD, EURE, or GBP receipts of various subsidiaries into one account and cash management and hedging are easy.
• Importers: Pay international suppliers directly in their local currency worldwide, avoiding the conversion expenses and building up relationships in the supply chains.
• Multinationals: Facilitate the central treasury team that has the ability to view liquidity, forecast cash flow and control risk across all the entities irrespective of geographical location.
• Professional services firms: Bill customers in their currency, and bring funds together at a central point to make efficient operations at a group level.

With Connect Currencies, corporates can centralize global FX management, simplify subsidiary operations, and free up treasury teams to focus on growth. Finance teams are no longer tied up with doing daily reconciliations, and they are able to focus on strategic activities such as mergers, acquisitions or expanding the market.

Compliance & Security

Trust and regulatory compliance cannot compromised in the case of big firms. Connect Currencies is fully regulated by the FCA and governed by high standards in the world. Anti-money-laundering mechanisms, stringent data protection regulations, and frequent audits are use to ensure that the ease of operation does not come at the cost of security.

Treasury teams will assured that all transactions, regardless of whether they are small supplier payments or multimillion-dollar hedge transactions, are of the highest governance and risk control standards.

Conclusion

Multi-subsidiary FX management is also complex to handle, yet it does not necessarily need to be a burden to the company in terms of resource usage and unwarranted risk. Connect Currencies enables corporates to manage global FX by consolidating accounts, exposures and offering real-time visibility so that they gain control over it.

It has led to a more agile, cost-effective treasury operation, one that is able to pay growth even in a volatile market. A competitive advantage to companies involving specialist FX providers is the fact that foreign exchange ceases to be a challenge, but rather a strategic opportunity.

If your business is seeking to simplify multi-subsidiary FX management, Connect Currencies can help. Speak to our corporate FX specialists today to explore tailored solutions for your treasury operations.