Re-inventing Global Liquidity Management:

Can a multinational operate with minimal bank

accounts?

Jim Scurlock

Senior Manager

Parimal Hemkar

Director

Agenda

Microsoft Overview

Life Cycle of the $

In House Cash Center

Pay on Behalf

Multi-country ZBA

Bank Rationalization

Summary

120K+ employees

$86B+ in annual revenue

$86B+ in cash & Investments

300+ operational subsidiaries

Presence in 126 countries

100+ banking relationships

Our mission is enable people and businesses throughout the world to realize their full potential by creating technology that transforms the

way people work, play, and communicate.

Microsoft

Risk Management

Treasury Operations

Life Cycle of the $

Before In-House Cash Center

5

Cash required for intercompany

settlements

Repatriating cash was time

consuming

Too much cash held in local bank

accounts

Unfavorable interest rates on

local investments

Increased risks

In House Cash Center (IHCC)

Manage intercompany loans

Centralized clearinghouse

Automated accounting

Balances invested in Treasury-

managed portfolio

Participation depends on tax &

local regulations

Centralized Treasury Portfolio

MSFT #1

MSFT #2

MSFT #3

MSFT #4

MSFT #5

MSFT #6

MSFT #7

The In House Cash Center is a virtual in-house bank

Objective: Implement a just-in-time process to centralize

A/P disbursements from treasury bank accounts on behalf

of subsidiaries.

Pay on Behalf (POB)

Invoice received

& payment approved

ERP chooses cheapest payment

Payment file sent to

bank

Bank debits

account

Vendor receives payment

Simplified bank account structures

Reduced cash at subsidiary

Increased cash in portfolio

Reduction of transaction costs

Consolidate invoices by company

Consolidate invoices across companies

Reduced FX fees

Benefits of Pay on Behalf

Pay on Behalf Lessons Learned

Vendor Master File

Engage Stakeholder

Change Management

• Review VMF • Standardization

• Treasury • Accounts Payable • IT • Subsidiary • Accounting

• Payment frequency • Strategic vendors

Multi-Country ZBA

Objectives

1. Reduce bank account balances to zero

2. Automate subsidiary funding process

3. Automate cash sweeps to portfolio

4. Automate subsidiary cash concentration

Inter-company ZBA structure is the most optimal

solution to manage bank account balances

100%

automated

accounting!

ZBA Considerations

11

International ZBA availability

Limited customizable text

Manual accounting for ZBA

Company tax structure

Cash forecasting

Resident/Non-resident

Central bank restrictions or reporting

ZBA Scope & Benefits

Scope

• More than 30+ countries

• Hundreds of bank accounts

• Multiple currencies

Benefits

• Just-in-time subsidiary funding

• Automation of collection sweeps

• Reduced average daily balance

• Improved operational efficiency

• Increase in monetary gain

• Decrease in sovereign risks

• Decrease in bank fees

ZBA is the most optimal solution

Strategizing Banks

Identify statutory or regulatory banking requirements

Identify the right partner regionally or globally

Identify the right bank per country

Strategic customers

Banking capabilities

Focus on long term automation

Create scalable solutions

Engage internal business partners

Develop a clear roadmap

Change management

Rationalization your banks

Summary - Leverage Technology

How a Bank Can Help?

Bank View: Citi

How bank can help?

Global network

Enhanced capabilities

Customized tools

Regulatory requirements

Better Controls

Citi: Moving $1.5 T in 45 countries

North America

Canada

United States

Abu Dhabi’

Bahrain

Dubai

Israel

Kuwait

Lebanon

Qatar

Sharjah

Middle East

Australia

China

Hong Kong

Indonesia

Japan

Korea

Malaysia

New Zealand

Singapore

Taiwan

Asia/Pacific

Europe

Africa

Algeria

Tunisia

Latam

Puerto Rico

Austria

Belgium

Bulgaria

Czech

Republic

Denmark

Finland

France

Germany

Greece

Hungary

Ireland

Italy

London PLC

Luxembourg

Netherlands

Poland

Portugal

Romania

Romania

Russia

Slovakia

Spain

Sweden

United

Kingdom

Global Concentration Service:

Moving Every Last Dollar!

• Difference in time-

zones

• Back Valued

transactions

• Holidays

With the Sun

Against the Sun

Additional Challenges

Pre-set rules

Customized

tags

Comply with

Regulations

Tools for Client Customization

Assist clients in:

• Moving exact amounts that they need to

• Auto reconciliation

• Keep track of inter company loan movements

• Comply with country specific regulatory requirements

How Proprietary Network Helps Below example shows cost savings when funds are moved through Citi’s Network

Multi-Bank Structure Bank’s Branch Network

# of A/Cs Number Number

# of A/Cs in 3rd party bank 80 0

# of A/Cs at Citi- in ZBA 40 100

Cross Border A/Cs 20 40

Cross Regional A/Cs 2 2

MBTBA A/C Fee $265 0

Domestic Sweep Fee $25 $25

Cross Border Sweep Fee $100 $100

Cross Regional Sweep Fee $500 $500

In & Outgoing Wire Fees $2 per wire 0

Monthly Cost $23,700 $7,500

Yearly Cost $284,400 $90,000

Help Address Regulatory Requirements

Central

Banking

reporting

Limits to

inter company

lending /

periods

Tax approvals for

specific amounts /

periods

Regulatory

Requirement

Compliance

Examples:

• China

• Israel

• Russia

• Singapore

• Taiwan

Better Controls & Risk Management

Interest

Reallocation

Services

Limits on

movements to

conform with tax

requirements

Dynamic Limits

to subsidiary

lending or

borrowing

Leaving zero

balance in

certain

jurisdictions

Enhanced Risk Management

Assist clients :

• Provide exact amount of funding required – no excess balance

• Control and monitor inter company loan movements

• Fund movements subject to tax considerations

• Optional: Keep track of inter company loan positions and interest on

arm’s-length pricing

How Does a Bank Facilitate In-House Banks?

Seamless Domestic / X-border

Sweeps

Assist auto-reconciliation

between legal entities & IHB

Efficient / Robust Technology

platforms

Sharing intra-day Liquidity or

DOLs

Support global network /

accounts for subsidiaries

Thank you!!!

Jim Scurlock

Senior Manager

Microsoft Corporation

Ph: (425) 538-2980

jamscur@microsoft.com

Parimal Hemkar

Director

Citi

Ph: (212) 816-5208

Parimal.hemkar@citi.com