Published: September 22, 2008
Belcorp is an independent beauty company based in Peru with forty years’ experience in producing high quality cosmetics. The company provides skin care, body care, makeup, fragrances, personal care, jewellery and clothing to discerning women, including a unique portfolio of internationally renowned brands, L’Bel, Esika and Cyzone, which are distributed across 15 countries in North, South and Central America. The firm designs its products at the Centre de Biodermatologie des Laboratoires Sérobiologiques in France and production takes place in Colombia. In 2007, Belcorp’s sales reached $1bn.
In 2007, Belcorp started to connect to its banks using SWIFTNet, one of the smaller firms to do so. In this interview, Helen Sanders talks to José Antonio Solís, Senior Treasurer of Belcorp about their reasons for doing so, and some of the experiences they have had.
When I joined the company seven years ago, I was tasked with centralising our treasury activities which had previously been spread across the countries in which we did business. We set up a Group Treasury function here at our headquarters in Peru which would provide treasury services across the Belcorp group.
We wanted a system through which we could connect to everybank. It needed to be highly secure and provide a consistent and automated approach to the transfer of data.
Belcorp is unusual in many ways. For example, I often read about treasurers of large companies who are seeking to reduce their banking relationships to, say, one or two banks per country or even fewer. Belcorp has a unique business organisation, with many thousands of independent beauty consultants who sell our products, in addition to internet sales and specialised boutiques. This means that we need to work with a large number of banks in each country: for example, we work with 12 banks in Venezuela alone, and around 70 overall.
When we centralised our treasury activities, we knew that if we wanted to optimise our liquidity, we would need to know exactly how much cash we held in each account and in each country. Furthermore, we had to make payments in each of these countries from Peru. Consequently, we had to connect to all of these banks through Group Treasury.
We talked to all of our banks to ask for daily statements to be delivered electronically every morning showing prior day closing balances. In some cases, the banks could provide this in a highly automated fashion, while in others, their systems were less efficient so it was more difficult to retrieve this information. For example, in some cases, we had to access their system or a web page and pull down the statement manually, and the data was then put into our ERP. While we were able to put together a daily cash position based on these statements, they all had to be accessed in a different way with varying degrees of automation.
This led to operational risk, as there was a high probability of error, such as in statements being missed or recorded inaccurately in the ERP. We employ people with strong skills in our treasury, whom we want to add value to our business. If they are spending a large proportion of their time on manual processing: dealing with payments through multiple systems, extracting statements and putting data into our ERP, we will inevitably lose this talent as individuals are not able to use their skills to add value.
We wanted a system through which we could connect to every bank. It needed to be highly secure and provide a consistent and automated approach to the transfer of data. Having spoken to our banks, we could not find a solution which would achieve this. However, we conducted some internet-based research and came across SWIFT and the MA-CUG model for corporate access. We recognised the benefits of this approach and contacted some of our key banks and SWIFT to find out more about it.
The SWIFT representative for Latin America was initially quite surprised at our enquiry: after all, it did not seem obvious why a relatively small, Latin American corporate would see a value in SWIFT connectivity. However, once we had explained our business dilemma, our rationale became more apparent. We spent the next couple of years considering the opportunity to connect to SWIFT and putting together a business case, which was not easy. At that time, the ability for corporates to connect to SWIFT was still quite new and there were no examples either of companies in Latin America, or companies of our size, which had done so. However, this time proved valuable, not only in developing a strong business case, but the MA-CUG model evolved over this period. For example, when we first started looking, there was a SWIFT connection cost of €2,000 per bank. A year later, this had fallen to a €2,000 for any number of banks, whereas there is now no connection fee at all. [[[PAGE]]]
As the pioneer of SWIFT connectivity for corporates in the region, we could not wait for our banks to propose the solution to us; rather, we had an active programme to advise the banks of our intentions and to educate them about SWIFT for corporates and MA-CUGs. We found it relatively easy to articulate the value proposition for banks. The banks have already invested in SWIFT for bank-to-bank communications but they are frequently only leveraging a small percentage of this investment. Providing corporate access is a way of enhancing the way that they work with their corporate customers whilst making better use of this investment.
While it took some time to educate the banks about SWIFT and the MA-CUG model, all of our banks are supportive of our approach. However, every bank has its own priorities and will focus on the activities which generate revenue. Providing SWIFT corporate access does not have a significant revenue implication and consequently, progress has been slow and there is not often a great deal of resource available. While in theory it ought to take two to three months to achieve connectivity through SWIFT with a bank, the reality has been nearer nine to twelve months.
There is only one service bureau available in Latin America that supports only FIN messages. Due to the nature of our business, we needed to make mass payments through FileAct which also brought advantages for our banks. There are potentially two steps for a bank connecting to their corporate customers through SWIFT: firstly, changing file formats to SWIFT message types (MTxxx) and secondly, sending/receiving files through SWIFT. By using FileAct, this first step is removed, as the banks can use their existing file formats, making the process easier.
Consequently, our only option was to connect directly to SWIFT through the MA-CUG model.
As Belcorp was breaking new ground, there have inevitably been various challenges. At the very start of the project, the SWIFT box was confiscated by customs in Peru - after all, surely SWIFT is something for banks, not corporates! It took months of declarations and documentation to release it from customs. Thereafter, none of our banks, nor SWIFT, were able to give us a clear implementation guide, so much of the project was ‘trial and error’. We found it difficult to get help from the SWIFT helpdesk in New York and each step was slow as we did not know the tasks which we would need to undertake or the order in which they should be conducted. Forms and processes which were meant to take two to three weeks often took two to three months.
However, with support from our principal banks, we have now connected to BBVA in five countries, and a further ten are now connected.
Although the project has been challenging at times, it is inevitably getting easier as both we, and our banks, build our expertise in SWIFT. We have achieved the reduction in operational risk and improvement in security which we were seeking and we are deploying our staff more effectively. While they may have spent three or four hours a day on manual processing, they are now able to spend their time on more strategic activities which add greater value to the company.
We expect that we will have all of our principal banks connected to SWIFT over the next two years and as we connect to each bank, the cost and effort of implementation is reduced further. As the business develops over the next few years, we see further cost reductions as we expand our operations into China, India and Central and Eastern Europe, where we will need to engage banking partners, with which we will connect via SWIFT.
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