Processing to Treasury Centralization



Three years ago, Oracle Chairman and CEO Larry Ellison challenged the company to save US$1 billion by improving operations and standardizing processes to increase efficiency. The finance organization began to contribute to this initiative through the set up of regional shared service centers, which provided not just the standard finance services, but also included treasury operations.

While most shared service center functions are centralized to achieve cost savings, the main driver for centralizing treasury functions is increased control and efficient use of capital. With more than 70 subsidiaries world-wide, treasury centralization was not an easy task for Oracle, but it has turned us into a world-class treasury organization, and we have realized significant benefits.

Background

Prior to Oracle’s centralization efforts, treasury activities were decentralized and managed as one of the many responsibilities of local finance directors. Bank accounts, credit lines, investments, and foreign exchange were managed from a country perspective and were not high priorities relative to other "above the line" revenue and expense items. Treasury expertise was limited, and decisions made were based largely on local bank recommendations. The result: over 180 banking relationships, and even more bank accounts, world-wide.

Centralization via Delphi

In 2000, Oracle centralized its treasury function by setting up Delphi Asset Management, a wholly owned subsidiary of Oracle, based in Reno, Nevada. Concurrent to founding Delphi, Oracle introduced the Oracle Treasury product, allowing Delphi to begin the migration to one treasury management system, on one database, which would ultimately allow for centralized management of all treasury activities.

Executive support, coordination with banking partners, and standard policies and procedures are key in undergoing a successful centralization process. As part of that process, Oracle partnered with two banks to provide global cash management support. The Corporate Treasurer and Assistant Treasurer were given access to open and transact on bank and investment accounts world-wide (or delegate). Online banking platforms allowed Delphi staff to view and transact on bank accounts with banking solution providers. Legacy bank accounts were closed, unless granted exception status, and subsidiaries were no longer authorized to make foreign exchange or investment decisions.

Policies Standardized

Corporate Treasury policies and procedures were published, complete with templates for subsidiary requests for bank guarantees, credit lines, bank accounts, and more. Corporate policies dictated such things as criteria for investments, cash at the subsidiary level, credit profiles, and managing foreign exchange. All treasury-related activity was now owned centrally, at the corporate level. Guidelines were in place, and so was the ability to monitor and control the activities to assure compliance.

Results

Centralization enabled treasury to benefit from the control, expertise, and visibility gained to make the best use of Oracle’s capital. We now have fewer banking relationships and bank accounts, which has allowed us to use cash pooling and to limit the credit exposure of the company. We have also gained control over our credit lines and bank guarantees, which has allowed us to eliminate unused credit lines and to manage the use of global corporate credit facilities.

We have gained visibility and control over foreign exchange exposures and excess cash, and we have employed staff with the experience necessary to make the best decisions for Oracle Corporation as a whole, on how to manage exposures and investments.

The Treasury group has become a corporate partner and is regularly consulted regarding other financial SSC functions, such as purchasing, accounts payable (AP), and accounts receivable (AR). All treasury activities are centrally reported to upper management and use the standard market data sources, Reuters and Bloomberg, to obtain foreign exchange and interest rate data. This data is used corporate-wide for interest on intercompany loans, foreign exchange revaluations, remeasurement of nonfunctional currency activities, foreign AP payments, and AR invoicing and cash application.


About the Author

Leslie Roulias is Director of International Finance for Oracle Corporation - Delphi Asset Management. Her primary responsibilities include the management of foreign exchange trading and hedging operations and strategy; regional shared service center banking solution set up and migration; inter-company loans and dividend and capital injection transactions. Prior to joining Delphi, she was with Bank of America and American Express, where she was responsible for fixed income and mutual fund portfolio management and analysis.