Innovation in Treasury

By Tarryn Hoare, Executive Head of Department, Vodacom Group Treasury 

Sitting at the kitchen table, laptop in front of me and my three-and-a-half year old daughter on my lap wrapped in a blanket eating a cream and strawberry jam biscuit, I think about what innovative ideas or methods we have implemented or are implementing in my team. What we are doing in treasury is very similar to how my daughter is eating her biscuit: she pulls the two sides apart and inspects the filling of cream and strawberry jam, asking many questions about how and why it was put together.

Our team of five is taking all the existing treasury processes and reports, pulling them apart like a cream and jam biscuit, inspecting the ‘filling’ and asking questions to rationalise the usefulness and relevance of each part. As this exercise progresses we are aware that needs are constantly changing and the reason you required a process or a report a few years ago may have evolved or changed. Therefore to keep up with the changing times treasury’s processes and reports require the same fluidity. 

Analysing treasury processes and reports 

This dissection has been carried out in different stages. Firstly, we shine a light on the information we collect from our entities, look at the detail from different angles, and by doing so we peel apart the layers and unveil very interesting trends and insights into our group-wide business behaviours and methods. Interestingly enough these findings have been sealed within the data we have always had access to and all we have done is ask questions in a different way via healthy and transparent engagements with our entities. 

These exercises enable us to support each entity and collaborate with them more effectively to achieve shared goals as we better understand their operational requirements and challenges. We also subscribe to the saying ‘knowledge has no value unless you use and share it’; therefore knowledge-sharing is an active part within our team dynamics and we also disseminate it to the entities to assist them with their challenges to achieve solutions at a swifter pace.  

Secondly, we deconstruct our existing reports and rationalise each section to ensure it is still relevant. We consolidate reports wherever possible to reduce the number of emails distributed as we are in an era where managing incoming emails is a task all on its own. We also make the updating of the reports as automated as possible so they are readily available and usable by the audience to make informed business decisions. We understand our audiences’ requirements and appreciate their tight and busy schedules and therefore have both a detailed and a snapshot version of each report to ensure that our executive team have a quick treasury overview of the markets we operate in. If more detail is required, this is also readily available. 

Thirdly, we audit and cleanse our policies and procedural documents and ensure they are aligned to our existing and new processes within treasury and that they continue to uphold the strict segregation of duties we follow. Policies should be clear and simple and seen as the recipe to guide and support all of treasury’s major decisions and actions. Procedural documents are seen as the kitchen appliances to carry out the heavy-lifting work and they provide step-by-step guidance as to how each policy will be put into action.  

Brilliant at the basics

Going through the three stages above ensures that treasury continues to be the first go-to hub for information and analysis requests, as treasury is at the heart of the company and needs to be nimble and quick off the mark to provide a service of excellence to many divisions on operational and strategic projects. 

We report directly to the Vodacom Group CFO, and share his ethos which is ‘be brilliant at the basics’. This encompasses achieving operational treasury best practice from the ground up, which means that the same level of accuracy, attention to detail and professionalism is applied by each team member to each of their tasks, roles and expectations within treasury.

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We are currently deconstructing information on the consolidated Vodacom group bank account structure, which includes a few hundred bank accounts held with more than 50 financial institutions and spread across more than 30 entities. Going back hundreds of years, the traditional bank account was used to store cash for safe-keeping. We are now in the 21st century and we have evolved tremendously from when the very first bank account was opened and we therefore need to look at the traditional bank account from the point of view of counterparty risk, liquidity and investment management. 

To achieve this you require accuracy, transparency and a regular stream of bank account information deployed from all your entities to monitor this effectively and from a consolidated viewpoint. We rely on two forms of information to serve this purpose, (i) we receive detailed Excel reports on each and every bank account held by our entities around the world and (ii) we utilise SWIFT[1] MT940 messages to electronically, swiftly, reliably, securely and automatically report the end-of-day closing bank balance on each bank account held across most of our banks to one system portal which receives and decodes the encrypted MT940 files and provides an overall view. From here we continuously test to ensure our internally set global counterparty limits, liquidity and investment management thresholds are maintained.

Foreign exchange exposure management is a major part of our team’s responsibilities and we deal high volumes of FX trades on a daily basis. This of course means there are a significant numberof FX trade confirmations to check in back office, to ensure the trades are accurate. In 2015 we implemented a new treasury management system (TMS) to better support the team for our end-to-end FX process. We identified the shortcomings of our previous TMS and configured and built the templates, search engine and reports within the new TMS so that we have straight-through processing and a single-point of entry intoa single system. At the push of a button we can carry out reconciliations, FX trade confirmations and run reports entirely within one system. 

Our FX trades are now automatically confirmed via SWIFT MT300 messages within our new TMS. If any of the mandatory fields on the MT300 files do not match, the FX trade gets reported on a mis-match report which is investigated by back office and corrected accordingly and immediately by front office. The benefit of this is tremendous, as the time spent in checking FX trade confirmations has halved, and we have made cost savings as well as achieving our goal of becoming a world-class treasury team. The time saved is now being put to better use for analysis, strategising and upskilling.

Today, speed is everything and to be able to make an informed business decision you need to have an agile team who can respond quickly, with clarity and reliability. Therefore in the pursuit of achieving treasury innovation you need to encase your cream and strawberry jam ‘filling’ with a solid structure. This is achieved by employing smart people with the right experience and qualifications combined with the right ethics, commitment and attitude, to work alongside you and share in and achieve your treasury vision.

Note
[1] Society for Worldwide Interbank Financial Telecommunications