Taking the SWIFT Route to Treasury Automation

One of Australia’s largest listed companies, Wesfarmers was looking for a way to automate its confirmations and payments, notably those relating to foreign exchange (FX) deals. Seeking a solution that would integrate seamlessly with its treasury management system (TMS), Wesfarmers’ treasury team opted for SWIFT Alliance Lite2 – garnering significant cost and time efficiencies in the process.

Headquartered in Perth, Wesfarmers’ diverse business operations cover home improvement and outdoor living; apparel and general merchandise; office supplies; and an industrials division with businesses in chemicals, energy and fertilisers, as well as industrial and safety products.

Although each of these businesses are run autonomously, the majority of the group’s treasury operations are centralised in Australia. As Peter Dagnia, Senior Finance Manager, Group Treasury, Wesfarmers, explains: “All the debt is raised centrally and we do FX dealing on behalf of all of our businesses on a back-to-back basis. We’re also the banker for the group. So, all of our physical bank accounts are in the name of Wesfarmers Limited and each of the businesses has a bank account with us in their name.”

To make sure that group treasury was operating as efficiently as possible, Dagnia and his team initiated an automation programme, starting in 2009. “One of the areas we were most keen to automate was FX, since we have a significant volume of transactions across the group – and the value of these deals is also high, with some deals running to tens of millions of dollars.” Before treasury could get to that point, however, it was necessary to put in place systems that would establish the correct processes, workflows and controls to enable automation.

“We embarked on a phased automation journey, with the first step being to roll out a new TMS, namely City Financials’ eTC Treasury Workstation. With eTC in place, we then integrated 360T to enable more seamless web-based FX trading. This means that we no longer had to manually enter FX deals into eTC. We also plugged market data feeds from Reuters into the set-up, as we wanted the best market data available. With the fundamentals covered, it was then time to look at automating the FX-related confirmations and payments.”

Dagnia was exploring options in this area when he met a local SWIFT consultant at an industry conference – and was introduced to the concept of Alliance Lite2. This cloud-based solution offers a direct SWIFT connection to counterparties and is highly scalable, so there are no barriers to entry from a volume or value perspective.

Hosted and operated by SWIFT, Alliance Lite2 permits manual and automated message exchange with additional options such as back-office integration, so it was a good fit for Wesfarmers. Dagnia continues: “I was very interested to learn about Alliance Lite2 and once SWIFT visited the management team to explain how it could work and the benefits we could reap, it became very clear that the solution would offer some enormous process efficiencies – with minimal technical or operational disruption.”

Goodbye manual processes

Since treasury is largely centralised, Wesfarmers’ opted to roll out SWIFT Alliance Lite2 for group treasury, but not for the operating units. “One of the great benefits of implementing a cloud solution is that it’s minimally invasive and always kept up-to-date. So, the technical side of the implementation was very straightforward, especially since eTC is configured to handle SWIFT, with matching software built into it.”

Given that automating the foreign exchange dealing workflow was the key priority, MT300 confirmation matching was the first step in the Alliance Lite2 implementation. “That was relatively easy to achieve and means that as soon as we perform a deal in 360T, the MT300 is waiting for us in eTC. We then went on to set up automated MT101s, so that payments relating to FX deals are sent without authorisation, which is where the biggest process efficiencies have been reaped.”

 As Dagnia outlines: “Previously, everything was highly manual. It took up a great deal of time – and paper – populating payments and going through the authorisation process.” It took group treasury around 18 months to get to the point where all of the payments are fully automated. “Because we were essentially removing the controls we previously had in place around authorisation, we had to make sure that all of our bank accounts were watertight – and that all of the details were 100% correct and locked down in eTC,” admits Dagnia.

Indeed, this was the most time-consuming part of the project. “There was a lot of groundwork, revisiting every single bank account to make sure it was set up properly – if you have one character in the wrong place, your payment fails. So, we had a dedicated resource who reviewed all of the static data. We also worked closely with our auditors to ensure that we dotted the i’s and crossed the t’s.”

Today, the whole FX dealing process – from placing the deal to payment and settlement – is automated through eTC, 360T and SWIFT. “We conduct the FX deal, the MT300 is generated, we select MT101 as the payment type, and that’s it – confirmation messages come back from the banks automatically and the payment is sent automatically. It really couldn’t be easier!”

Alongside significant cost savings, this has freed up the treasury team to focus on more value-added tasks, which is particularly important for Wesfarmers as it is a highly acquisitive company. Dagnia believes that automation has also been beneficial for team morale, since many of the repetitive elements of the role have been removed.

In addition to MT300s and MT101s, Wesfarmers has set up MT940s, so that daily balances are also displayed in eTC, giving instant cash visibility at the click of a button. “At the moment, we have a legacy system in place for our cash management, but we are keen to leverage the MT940s further in the future.” Another plan Dagnia has in mind is to extend SWIFT to the individual business units. “We’ve seen huge benefits by using Alliance Lite2 at a group level, and we believe the business units could too, so we will work towards that in the coming years,” he explains.

“SWIFT has become a critical part of our treasury operations and we would certainly not want to be without it,” Dagnia concludes. “Of course, we have manual back-ups in place, but it would be tough to revert to those paper-based processes – all of the running around the office to get signatures and logging in to systems with passwords we’ve forgotten! We’re delighted with the automation SWIFT Alliance Lite2 has brought and our only regret is not discovering it sooner.”