The treasury department at Dover Corp., a diversifiedmanufacturing company, has spent the past couple of yearscentralizing foreign exchange (FX) trading and rationalizing itsnumber of bank accounts and its use of banking services. Theresults are noteworthy.

“Between the things that we've done on the bank account side andon the currency side, we've saved a significant amount of money,”said Brian Moore, treasurer and vice president at Dover. “And we'vedone that without sacrificing internal controls or increasing risk.In fact, we've instituted some foreign currency hedging programsthat have helped reduce Dover's risk profile.”

Better Banking

Dover, which had $8.5 billion in revenue in 2012, has 32operating companies around the world that provide communicationtechnologies, energy, engineered systems, and printing andidentification. Much of the organization's treasury work isperformed within the operating companies. Dover is also a frequentacquirer.

After Moore joined Dover in late 2011, he focused onstreamlining treasury processes and reducing costs. “When we lookedat the treasury processes done by the operating companies, weidentified opportunities to decrease costs and we helped themimprove those processes,” he said.

Treasury began to interview each of Dover's operating companies,starting with those in the United States, about their treasuryprocesses and use of banking services.

Robert Chan, now the company'sEuropean treasurer, led the effort. He and his colleagues foundthat many of the U.S. operating companies were paying for bankingservices they no longer needed, said Chan, pictured at left. “Whenwe went out and talked to the operating people and asked, 'Do youneed this?' they often said, 'No, we don't.'”

They identified as superfluous services such as paper bankstatements, whose contents now can be downloaded online, and paperconfirmations of transactions, which arrived days after the companyreconciled the transactions. “By turning those services off, wesaved a significant amount of money and improved the efficiency ofthe operating companies,” he said.

Moore noted that the company had also been able to close “arather significant number of bank accounts.” Treasury worked withthe operating companies to refine a definitive list of bankaccounts, which allowed them to track their progress.

Consolidation and Netting for ForeignExchange

The interviews with the operatingcompanies also looked at their foreign exchange transactions. “Wewanted to get an aggregate amount of currency flows that wereoccurring for all of our operating companies worldwide,” saidMoore, pictured at right, noting that treasury was looking at thepotential risks of those flows and also assessing whether there wasa way to improve the company's foreign exchange transactions.

In the summer of 2012, Dover's treasury embarked on a project tocentralize FX trading and hedging, starting with a month-long pilotprogram in which it conducted transactions for one operatingcompany to test the process.

The pilot produced “substantial savings,” so treasury movedahead, said Garrett Jenks, the treasury risk manager. It selected amultibank electronic trading platform for foreign exchange, FXall,and began executing trades in September 2012. “At this point, asubstantial majority of all material foreign exchange-relatedtransactions from U.S.-based companies have been centralized,”Jenks said.

Treasury set up an FX email inbox to which operating companiessend their transaction requests. Once a transaction has beenexecuted, treasury emails the settlement details to the operatingcompany.

Dover's operating companies have large intercompany trade flows,and treasury is now working on implementing netting across theoperating companies, starting with a pilot that involves twocompanies. It plans to roll it out across the rest of its operatingcompanies next year, using a netting program from Bank MendesGans.

The companies will input all their intercompany transactionsinto the program each month, either manually or using export filesfrom their ERP systems. Then the bank will net the transactions andinform each operating company of its net position, positive ornegative. Bank Mendes Gans will also facilitate trading the netcurrency positions and make the payments to each operating companywith a positive position. If the operating company has a negativeposition, it will send a SWIFT message to the operating company'sbank and debit the amount owed.

Chan said the netting program will eliminate a lot of wires thatthe operating companies are sending back and forth, as well as someforeign exchange transactions.

Making the Case

Moore noted the importance of making a strong case fortreasury's proposals to the operating companies.

At the start, Moore said, he set four goals: improving theefficiency of processes around cash and financial transactions;strengthening internal controls around cash and financialtransactions; lowering the cost of financial transactions; andmanaging Dover's financial risk profile. Treasury talks about thosegoals when it does internal presentations as part of its effort toensure that Dover's operating companies understand what treasury isdoing and understand that “our goals are aligned; we're notopposite,” Moore said.

He said that being able to demonstrate the savings that the FXpilot had produced was a key element in convincing the operatingcompanies of the plan's value. “By doing a pilot, we got a lot ofbuy-in quickly,” Moore said.

“Much to our operating companies' credit, they saw the valuethat Garrett [Jenks] and Robert [Chan] can bring,” he added. “Ourcompanies have been great to work with.”