Discover how we helped a multinational enterprise optimise group-wide liquidity through a physical multi-region cash pool. Expert guidance on arm’s length substantiation, benchmarking, legal implementation, policy design, and stakeholder alignment to ensure OECD-compliant transfer pricing and sustainable liquidity management.
A large multinational enterprise with group companies across Europe, Asia and the Americas sought to optimise its liquidity management. Historically, each subsidiary managed its own bank accounts and external financing, leading to fragmented cash positions, excess idle liquidity in some jurisdictions, and unnecessary external borrowing costs in others.
The treasury function identified the need for a physical multi-currency, multi-region cash pool in order to centralise liquidity, reduce financing costs, and optimise interest results on a group-wide basis. However, two key challenges arose: (i) the arm’s length substantiation of the cash pool structure and intercompany flows, and (ii) the legal documentation and policy framework required to ensure compliance, consistency, and transparency towards both tax authorities and internal stakeholders.
Given the cross-border nature of the pooling, it was crucial to account for differences per cash pool participant, FX exposures, and transfer pricing requirements.
Substantiating the arm’s length nature of the cash pool, including benefit analysis, option realistically available, remuneration of the cash pool leader and treatment of participants.
Designing and implementing a consistent policy framework, including intercompany agreements and internal treasury policies.
Accounting for differences across jurisdictions, FX exposures, and transfer pricing requirements to ensure compliant and efficient cash pooling in a multi-currency, multi-region context.
The Process
Functional & economic analysis – Assessed the roles of the cash pool leader and participating entities, identifying benefits, risks, and appropriate transfer pricing remuneration.
Benchmarking – Determined arm’s length interest spreads and cash pool leader fees using market data, cross region and multi-currency.
Legal implementation – Drafted intercompany cash pool agreements (participation agreements, cash pool master agreement, and ancillary documentation).
Policy design – Prepared internal treasury and cash management policy documents, ensuring consistency with OECD guidance and internal governance standards.
Stakeholder alignment – Coordinated with treasury, finance, legal, and local management to secure alignment on operational and accounting implications.
Outcome – Successful roll-out of a physical multi-currency, multi-region cash pool with substantiated arm’s length conditions, legal enforceability, and a robust internal policy framework. The client achieved significant interest cost savings, improved liquidity visibility, and reduced reliance on external financing.
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