UniCredit: Central to success – Stefano Gemelli

Present in nearly 50 countries, UniCredit offers a wealth of on-the-ground expertise to companies that are looking to centralise their cross-border cash management capabilities. Stefano Gemelli, head of international cash management sales Italy, talks to FDE about how it goes about partnering with clients such as Calzedonia Group to help them better manage liquidity.

n light of the current economic climate, the importance of a well-organised cash pooling scheme cannot be underestimated. By effectively centralising the treasury function, corporates can make better use of cash, improve efficiency, enhance reporting and drive down costs.

However, implementing the right strategy can be a complex process, particularly among decentralised organisations housing an assortment of subsidiaries and stakeholders diffused across several countries. As a result, liquidity management decisions are often contingent on the respective business's culture, structure and long-term objectives.

In order to better streamline the process, most companies choose to avail themselves of the service of banks with specialist, cross-border cash management expertise.

Armed with one of the largest corporate and investment banking networks in the high-growth region of central and eastern Europe (CEE), UniCredit has long been regarded as an attractive partner for companies looking to simultaneously bolster their geographic footprint and centralise the treasury function.

"Being strong in central and eastern Europe is something that makes us particularly attractive for customers looking
to gain access to a lucrative market," says Stefano Gemelli, head of international cash management sales Italy. "Depending on the size and annual turnover of the business, we are able to offer several cash concentration schemes and flexible pooling techniques."

Zero balancing, global reach and IBOS

Arguably, UniCredit's most sought-after service is its ability to offer efficient, pan-European zero balancing, by which the cash surplus in a company's pool can be transferred to and from a central master account on a daily basis.

"This is usually the approach of choice for companies with sizeable revenue, as it is the easiest to implement," says Gemelli. "However, the system can be customised to suit your specific needs - for example, if a company has to pay taxes on a certain day and requires the sufficient funds in the master account. This is particularly useful for businesses looking to transfer currencies abroad, but who need a certain level of control on their cash."

UniCredit's network of 10,000 local branches on the continent also means it has the sufficient geographical presence and reach to help companies looking to infiltrate new markets, which often necessitates adapting to differing national banking conventions and legislations.

This has also been leveraged by UniCredit's participation in the IBOS association, an international banking alliance with a focus on cross-border cash pooling solutions that encourages inter-bank cooperation between each of its 12 members and their subsidiaries.

"Through operating within IBOS, we are able to offer our customers cheap, fully automated transfers with uniform pricing and later cut-off times," explains Gemelli. "UniCredit is a European bank with leadership position in our home markets and local banks in 22 countries. Therefore, if you compare us with a big global player, we have the advantage of having a lot of people on the ground with local knowledge, as opposed to having just one single branch in each country."

Yet, cash centralisation projects are rarely realised overnight. Ultimately, success is reliant on a close and flexible partnership between treasurers and banks. According to Gemelli, by partnering with UniCredit, companies can expect a two-way dialogue and an incremental approach designed for the long run.

"What we are able to do is coordinate our activities and centralise the relationship," he says. "And the project doesn't just end as soon as we initiate the first transfer. Instead, there is a continuous effort in meeting our customers' needs - this is really the main benefit we bring to the partnership."

Case study: Calzedonia Group

Based in Verona, north-east Italy, Calzedonia Group is a leading supplier and manufacturer of hosiery, swimwear, underwear, lingerie and clothing distributed through its Calzedonia, Intimissimi, Tezenis and Falconeri brands. The company has 3,200 shops in 32 countries, manufacturing activities in Italy, Sri Lanka, Croatia, Bulgaria, Romania and Serbia, and an annual turnover of €1.3 billion.

"Through operating within IBOS, we are able to offer our customers cheap, fully automated transfers with uniform pricing and later cut-off times."

Looking to implement a pan-European cash pooling project in 2010, Calzedonia selected UniCredit as its banking partner. Here, Stefano Gemelli explains how the collaboration came about and its critical success factors. Calzedonia Group has long been focused on increasing its geographical diversification. Subsequently, its business model is in constant development, using logistics investments and the integration of a production structure to achieve symmetries in levels of quality, efficiency and flexibility.

Given the diversity of these locations, as well as the different currencies and missions of each local company, achieving streamlined cash pooling poses a difficult task. In some locations, where the group has production facilities, the issue concerns covering local payment needs, managing intercompany payments and efficient invoicing.

Furthermore, where the group has commercial activity, local cash and credit card collections have to be harmonised with liquidity swept back to the group's treasury. All investments need to be organised centrally, as efficient liquidity management is crucial to improving efficiency and reducing costs. Moreover, commercial locations need to use local financial partners with strong roots in the respective country in order to support local shops.

Calzedonia was also one of the first groups to identify huge business opportunities in central and eastern Europe. However, it is a region where currency diversity and country-specific rules often bring about additional complexities to the day-to-day job of the central treasury department. Management of FX risk is also a hurdle for local companies, which are often more geared towards efficiency and their core mission, rather than to these challenges.

Cash concentration

Having decided that currencies had to be managed at the central location only, leaving to each subsidiary a pure local currency business, the logical decision for Calzedonia was to adopt a cash concentration scheme.

The company found in UniCredit a logical partner, given its presence across Europe. The plan undertaken by both companies involved integrating the largest number of countries in the shortest period of time. The project started with the incorporation of Slovakia in February 2010, Austria and Czech Republic in May and Romania in February 2011. All these countries are connected through a zero balance scheme, which is euro-denominated.

For this reason, local accounts have been opened in each country in the name of the local entity, with each drawn-down on the account to cover their local needs; the amount is converted into local currency if needed. In the case of excess liquidity, the same account is used to repatriate funds.

Local challenges, global solutions

The key success factor of the project has been the strong coordination between the Calzedonia group treasury and UniCredit, which has managed the entire project from Italy. As head of cash management sales for Italy's international customers, I have been the contact person for the company, liaising frequently with all the local teams and managing the project centrally.

One of the most challenging tasks was to harmonise and synchronise all the different customary ways of business in the local countries with a coherent global practice that could be understood and accepted at a central level. Calzedonia also wanted to simplify the communication process, with one single reference name in charge of all activities so as to smoothen out the process on an ongoing day-to-day basis.

With our global transaction banking product line, UniCredit is specifically organised with a single point-of-entry concept, which worked flawlessly during all phases of the project.

Stefano Gemelli, head of international cash management sales Italy, UniCredit.