Headquartered in South Carolina, USA, AVX Corporation (AVX) is a leading manufacturer and supplier of advanced electronic components with 29 manufacturing facilities in 16 markets globally.
AVX employs more than 15,000 full-time staff globally and reported revenues of $1.8 billion in 2019, with over 30 percent attributed to the Asia Pacific (APAC) region.
Having gone through multiple rounds of acquisitions, AVX’s banking and treasury organization had become highly decentralized. Without a central structure in place, cash balances were scattered across the various markets that it operated in, resulting in poor visibility and control of its liquidity. Its operations in APAC were particularly sub-optimal, with the firm facing the following challenges:
AVX set out on a treasury transformation journey to support the firm’s ongoing expansion needs, including identifying a single banking partner to provide a full spectrum of cash, liquidity and FX services.
Collaborating with J.P. Morgan, AVX implemented a multi-entity, multicurrency notional pool in Hong Kong to centralize liquidity across 26 entities in 10 markets through an automated two-way cross-border sweep structure. To ensure restricted markets were included, the bank worked closely with the U.S.-based manufacturer in obtaining regulatory approvals from the China and Korea central banks to integrate AVX’s local entities into the cross-border liquidity solution; making AVX one of the first companies to connect a Korean entity into a regional notional pool through automated sweeps.
The regional solution is also equipped with multi-bank sweeping and reporting capabilities to facilitate the movement of funds between in-country third-party banks into the pool, while ensuring AVX has complete visibility into residual balances across its accounts. AVX is looking to further leverage J.P. Morgan’s Follow-the-Sun mechanism to fully integrate liquidity in the Hong Kong pool with the firm’s EMEA cash pool in Luxembourg, which will enable the team to seamlessly utilize balances across regions within the same day, and eliminate any loss of value of funds.
With J.P. Morgan’s support at both the regional and global level, AVX can now also seamlessly execute capital injections from its notional pool in Hong Kong or the U.S. into restricted markets in APAC to effectively manage working capital. One such case was when AVX needed to urgently move a large sum of funds to support a manufacturing project in Thailand – a highly restricted market. AVX worked closely with J.P. Morgan to ensure proper regulatory documentations were in place to execute the cash injection seamlessly, while also determining the right timing to conduct the transaction to effectively reduce FX risks.
Aside from the liquidity structure, AVX also deployed several digital solutions to overhaul its manual workflows including:
The execution of this project was first-class, and it made a big bank feel small. The end-to-end implementation was extremely well-coordinated, the transition from implementation to go-live was seamless, and completed in time, enabling us to mobilize cash across markets during the peak of the COVID-19 pandemic
The solution has been truly transformational for AVX, generating significant benefits in terms of cost savings and efficiencies for the firm. The success was the made possible as a result of the tremendous efforts and coordination between AVX and J.P. Morgan’s working groups.
AVX Corporation was recognized as the overall winner in the Best Cash Management Solution category at the Treasury Today 2020 Adam Smith Awards Asia – widely known as the industry benchmark for treasury excellence. Listen to episode 4 of the Adam Smith Awards Asia podcast series to learn more.
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