Published: November 04, 2013
Corporate treasury departments operating in the evolving and dynamic African marketplace are seeking the tools to give them improved control and transparency in their cash and liquidity management. And they are doing so against a backdrop of cost, risk and regulatory pressures while managing the demands to drive workflow efficiency and achieve processing accuracy.
Broadridge has encountered a growing challenge experienced by corporate treasurers who feel hindered by a lack of standardisation and process control in their operations, which can lead to a disparate view of cash management across business units. A large multinational organisation operating in Africa today has to deal with numerous agent banks across its many internal departments and affiliated entities within the group and each with its own systems, making an overall view of the company’s cash positions and movements extremely difficult to accomplish. Today’s corporate treasurer needs to have the capacity to exchange financial information with all counterparties via a centralised operation – to have one single, highly secure, standardised communication platform at their fingertips as opposed to one that has to handle multiple connections via a range of interfaces and technology protocols.
The creation of a single, unified approach allows corporate workflow to be captured and managed more efficiently. A treasury department which can clearly see the status of cash positions, in real time, and is able to consolidate and aggregate disparate data, is empowered to coordinate better decision making within the organisation. Operating with improved transparency and control, the treasury can move monies around the group more effectively, for example to cover funding requirements and minimise overdraft and other costs.
Having an effective treasury management system (TMS) is crucial to a treasury department’s operational efficiency and there has been a rapidly-growing trend in Africa, and especially in South Africa, for corporates to fully embrace an outsourcing approach to their treasury systems. Driven by the desire to improve efficiency and quality, there has also been a considerable increase in demand for SWIFT connectivity services to enable the adoption of standardised global messaging. As an alternative to in-house SWIFT messaging, integration and automation, a shared bureau facility can reduce many of the barriers in terms of cost, knowledge and dependability that could otherwise impact the benefits that the business requires. In such a service, user-friendly, browser-based applications can provide fully automated messaging between any number of in-house systems, business entities and financial counterparties for transactions including payments, confirmations, trade initiations and settlement. Such a service should offer direct access to the SWIFT network, process both domestic and international payments, and ensure that messages are validated and routed in a controlled environment. In this way, firms can achieve a higher rate of straight-through processing (STP) while minimising errors or investigative delays and benefitting from significantly reduced exposure to risk.
A SWIFT service based on an exception-based processing engine offers the following key benefits:
A leading global organisation operating in many regions around the world approached Broadridge regarding its strategy to standardise its international treasury payments processing. The firm’s treasury department had to manage payables and receivables in an extensive range of currencies across its locations. It relied on relationships with multiple banks to support its transactions which proved inefficient given the diverse communications networks in use, and was therefore both expensive to manage and increasingly difficult to centrally control money flows.
The company embarked on a strategy to reduce these risks and costs by centralising and standardising its international treasury payments processing and cash management onto a single platform and leverage SWIFT’s global and secure financial messaging standard. As part of this strategy, the company is also deploying an Enterprise Resource Planning solution, and achieving SWIFT connectivity was a vital element of this plan. The seamless integration of this platform and Broadridge’s SWIFT solution created a harmonised infrastructure enabling the flow of payments across the group to be unified and simplified. The firm now has a single window into all its transaction banking relationships, offering a consolidated view of its front office bookings, performance dashboard, cash control and back office management.
Another international firm is using a shared SWIFT service to receive confirmation messages relating to foreign exchange (FX), money market (MM), commodities and hedging transactions from its many agent banks globally. Smoothly integrated with existing systems, the treasury group has been able to match confirmations against the records it holds on its TMS and communicate any discrepancies back to the banks in a highly efficient process and with full management control. Where fax-based trade confirmations were received previously, automation has enabled substantial efficiencies such as the best practice of confirming trades within the hour. The solution has helped the firm to mitigate the risks associated with trade booking errors, and its automated exception-based processing helps to reduce exposure to market fluctuations - such as currency rate changes - during prolonged investigation into matching errors, ensuring accurate data reaches the TMS.
Broadridge’s service bureau is maintained in line with the latest standards for financial messaging, and can respond rapidly to new market requirements with no impact to the host TMS system. SWIFT upgrades are provided automatically and user-specific configurations and enhancements are available. [[[PAGE]]]
Both cases champion the benefits that can be gained by centralising treasury operations. To summarise:
Global visibility on cash and trade
Simply achieving a reliable mechanism for receiving end-of-day or intra-day transaction reporting directly from all banks increases funds visibility and facilitates the ability to better invest. Furthermore, by monitoring transaction matching statuses in real time, managing confirmation and settlement cut-off times, and being more proactive with cash management – such as reducing the organisation’s exposure to overnight interest payments and overdraft rates - significantly increases the value that a centralised treasury department can offer to any corporate institution.
Lower cost of financial transactions
SWIFT allows for channel rationalisation – a single channel versus a multitude of different proprietary banking communication channels. The more banking relationships there are at the outset, the higher the savings. Additionally, standards used via SWIFT provide increased STP, allowing gains in staff productivity, for example through the elimination of time-consuming manual processes such as the need to re-key payments data into several reports.
Improved security and reliability
The ability to control payment initiations and increased security, while more difficult to quantify, are also recognised as key benefits. High levels of network availability and up-time are fundamental to minimising processing risk.
Compliance
For corporates under stringent regulation, such as Sarbanes-Oxley or local currency restrictions, using one single interface significantly reduces the administration work required to document, and keep up-to-date, banking communication processes.
Operational efficiency
A reliable and flexible workflow-based solution, capable of serving a centralised global treasury operation, offers the discipline and control that improves processing flows and delivers operational efficiencies.
Choice of banks
By being better able to monitor banking service provision, a firm can adapt to evolving relationships without any development effort, switching transaction banking relationships without technical barriers.
The benefits need not stop there. Further opportunities to standardise more treasury and business functions are available. Another multinational corporation, operating across multiple industry sectors, has recently taken the initiative to achieve centralisation by integrating further functionality into its hub. Alongside its existing TMS, the firm added a packaged bundle of Broadridge solutions, which included a SWIFT bureau, a web-based workflow and management control tool, and additional reconciliation and matching solutions to effectively build a complete international payments capability that handles all pre- and post-settlement tasks.
Facing growing volumes of FX and MM transactions and with a requirement to increase control, this leading firm embarked on a major transformational project to overhaul the infrastructure of its treasury department turning it into a highly visible, efficient centralised operation. Operational control and transparency were key to this firm’s plans to grow; the aim was to significantly improve operational control, moving away from reliance on its banking relationships to obtain greater business visibility, and maximise its enterprise-wide processing efficiency and accuracy.
The firm opted for a three-tier SWIFT-based processing capability:
The synchronicity between the Broadridge solution bundle and the TMS has enabled the firm’s treasury department to achieve a centralised hub. The firm’s Head of Treasury now has access to a powerful set of advanced business tools in one place, ensuring payments are processed effectively, cash and liquidity positions are fully visible, and exposure to potentially costly errors is minimal. It was previously a non-SWIFT organisation, but upgrading to the global standard of SWIFT messaging has transformed its controls, allowed it to easily work with a number of banking providers at the same time and obtain immediate information on payments and positioning. Unique, internal procedures and guidelines – such as currency controls or rules relating to particular sanctions – are efficiently managed, promoting best practice across the treasury function.
Africa is a continent entering an unprecedented period of growth. An evolving and changing market, closely scrutinised with persistent fascination by the media, businesses, economists and industry bodies alike, the region continues to attract multinational corporations enthused to do business there. And, for firms established in Africa, volumes of FX and MM trades are set to grow in step with domestic and global trading growth. Whether domestic, regional, international or all of these, treasury departments face the need to be ever more efficient in order to position themselves and their companies for growth and success.
Having a reliable and flexible automated solution capable of serving a centralised treasury operation, and handling growing transaction volumes without the need to invest in system capacity or networks, as well as enhancing the quality of business intelligence and decision-making, is an effective way for firms in Africa to support future growth.
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