Learnings from Diversey: Why Treasurers Should Adopt Multilateral Netting

1. Why Treasurers Should
Adopt Multilateral Netting
Learnings from Diversey

2. Webinar Logistics
• Listen only mode during the webinar
• Questions can be submitted at any time via the webinar console
We will do our best to address all of the questions at the end of the session
• Any technical issues, please place in the ‘chat’ via the webinar console
• The webinar is recorded and we will send it to all registrants after the event

3. Today’s Presenters
MARK LAYTON
Global Treasury
Manager, Diversey
CRAIG CHAPMAN
Manager, Treasury &
Capital Markets,
Actualize Consulting
SAMUEL GUILLON
SVP Strategy,
Kyriba

4. Our Partnership
Actualize Consulting is
a long term Kyriba
implementation
partner that are well
skilled in treasury
management &
payments
Kyriba’s Multilateral
Netting Modul
Implementation

5. What are the different types of netting?
Bilateral Netting Multilateral Netting
Payment Netting
Sub A owes B $50K
Sub A Sub B
Sub B owes A $200K
Sub A Sub B
Sub B pays A $150K

6. What type of organization would benefit
from multilateral netting?
Large multinationals with complex legal
structures with intercompany balances
across many countries and currencies
High volume of internal invoices
Significant number of subsidiaries
Extensive number of banking relationships
Significant amount of foreign exchange activity
High volume of cash kept at local subsidiary
banks

7. Benefits of multilateral netting
Reduction of
Operational Risk
Reduction of
Bank Charges
Increased Transparency
into Settlements
Increased Process
Efficiencies
Minimizes cross
border flows
Minimizes errors
prevalent in manual
processes
Integration with ERP
and TMS
Wire transaction fees
FX transactions
Capital market
borrowings
Float / Overdraft
charges
Greater visibility into
payments
More predictable cash
forecasting
Reporting and
analytics
Minimizes funding
requests
Minimizes manual
wire transfers
Eliminates manual
netting and balance
reconciliation
Ability to define and
ensure participation

8. POLL Q1

9. Common challenges prior to implementing netting
Large payment
volumes
Inefficient use
of resources
Tax and legal
compliance
High bank
transaction fees
Settlement risk
FX payment costs
High manual effort to
enter and release
payments
Time consuming GL
posting
Error prone
Intercompany invoices
not settled within
payment terms
FX payment costs

10. Choosing your netting center location
Considerations
● Tax implications
● Legal structure
● Existing entities
● Main treasury entity

11. Payables vs. receivables netting
Payables-based
Netting
Most netting centers are run on a payable's
basis because it is simple and effective in
reducing the cost of making external
payments.
The payer usually has the option to block
any invoice they do not want to pay in the
current cycle.
Receivables-based
Netting
The payer is the one inputting or interfacing
the invoices, so they control what is settled
in the netting cycle.
Receivables based will usually get invoices
paid quicker and reduces the time spent on
intercompany reconciliation.
When running a receivables-based netting
there needs to be a process to allow the
payer some ability to control and potentially
block any invoices that they are not ready
to pay yet.
vs. The payee (receiver) is the one that is
inputting or interfacing the invoices, so they
control what is settled in the netting cycle.

12. Internal or External settlement?
Special circumstances for
Mexico, Taiwan, Singapore and
China
A number of entities do not
permit settlement on the in-house
bank accounts. In these cases
the payment must be made
physically. Kyriba supports this
functionality.
We are reviewing the list of non-
participating entities to determine
if they can be included.

13. Overview of Diversey’s current netting workflow
Open the Netting Cycle
Import or Input Invoices
Import or Input Preliminary FX Rates
Generate Preliminary Statements
Distribute Preliminary Statements
Resolve any disputes and make
final adjustments
Process Intercompany and External
Settlements
Import or Input Preliminary FX Rates
Release Payments
Distribute Final Statements
Close the Netting Cycle
Processing the Netting
Cycle
Closing the Netting Cycle

14. Sample monthly netting cycle
Data Collection Netting Calculation Settlement
SD-5:
• Payers manually input payables
ore receivables invoice details
into netting module (or provide
spreadsheet to Treasury for
import)
Netting Calendar
SD = Settlement Day; assume last business day of month typically
SD-3:
• Treasury conducts trial run to
determine net payable / receivable
position by currency using
estimated FX rates
SD:
• Payments settle with netting
center in local currency
• Treasury settles FX spot trades
with 3rd parties for net position of
each currency
• Treasury reconciles activity
• Payers / Receivers will book
accounting entries
Report of approx.
gross/net positions
and settlement
instructions
Report of final.
gross/net positions
and settlement
instructions
SD-4-3:
• Receivers check the invoice
positions in netting pool and
conduct necessary dispute
process (additions, deletions,
amendments)
SD-2 (Netting Day):
• Treasury obtains market rates
from bank
• Treasury conducts final run to
determine net currency
positions using actual FX rates
• Treasury executes FX spot
trades for net positions
• Treasury advises participants
of final net amount to be paid
• Net Payers execute payments
for value date SD
SD-5 SD-4 SD-3 SD-2 SD-1 SD

15. POLL Q2

16. Key considerations when starting a netting program
Technology Netting Center Location Tax
Impacts
Regulation

17. POLL Q3

18. Getting the right people involved early is key to a
successful netting program
Treasury
Accounting
Legal
Corporate &
International Tax
Financial Operations
&
IT/ERP Team

19. Tips to help you implementing netting
Coordinate with internal accounting, tax
and legal teams
Establish clear project roles and
responsibilities
Set a clear roadmap, project plan and stick
to deadlines and due dates
Implement a standardized process across
all entities
Integrate with your ERP to eliminate or limit
manual input
Netting is a tool that can be rolled out country by
country across a group. It does not require any change
to banking arrangements, so netting can be rolled out
purely internally.
Netting generates substantial savings to groups with
large intercompany invoicing, and it makes an easy first
step towards payment factory and eventually an in-
house banking structure.

20. Key decisions and actions to get started
Tax and Legal Technology Structure Operational
Involve tax and legal
early in the process
Evaluate netting
participants allowed
Internal or External
Settlement
Gather business
requirements
Evaluate netting
system vendors
Perform final vendor
selection
Decide on netting
driver: Payables vs.
Receivables
Third-party or strictly
internal participants
Finalize participants
and location
Develop netting
calendar
Establish settlement
accounts
Any restricted
currencies?
Will disputes be
managed in the netting
software or externally
Determine Location
of the Netting Center
Determine functional
currency of the
Center
Finalize functional
currency for all
participants

21. Q&A

22. Thank you!
www.kyriba.uk
contactus@kyriba.com