Cash & Liquidity Management

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Managing Treasury in the Global Fight Against Hunger For an organisation like the World Food Programme, optimising cash and treasury management is having a direct impact on its ability to deliver food assistance and reduce hunger in crisis-struck communities around the globe.

Managing Treasury in the Global Fight Against Hunger

Managing Treasury in the Global Fight Against Hunger

by Robert van der Zee, Treasurer & Deputy Director of Finance, UN World Food Programme

Improving cash and treasury management processes is not simply a tactical means of reducing costs or demonstrating best practices in an academic sense. Instead, as Robert van der Zee outlines in this article, for an organisation like the World Food Programme, optimising cash and treasury management is having a direct impact on its ability to deliver food assistance and reduce hunger in crisis-struck communities around the globe.

Key facts: WFP Treasury

    • 9 treasury professionals
    • Nearly 400 bank accounts across 88 banks in 93 countries
    • USD 2.1bn in investments (2015)
    • USD 0.6bn in FX transactions each year, from hard currencies to 32 local currencies

WFP Treasury Organisation

WFP has a small, centralised treasury organisation of eight people including myself based at our headquarters in Rome, Italy. I act as both treasurer and deputy director of finance. As a small team, with enormous responsibilities to beneficiaries and donors, it is essential that we optimise our use of head office resources, and minimise the amount of time spent by field offices on administration. Consequently, over the past four years we have embarked on a process of review and optimisation of our treasury processes and infrastructure to ensure the flow of transactions and information is as efficient, transparent and cost effective as possible.

Rationalising bank relationships and connectivity

A key element of our treasury optimisation strategy was to centralise cash and harmonise cash management processes wherever possible. As a first step, we wanted to rationalise our banking partners to reduce fragmentation of cash, and manage our counterparty risk more effectively. In 2012, we launched a request for proposal (RFP) for global banking services, and ultimately appointed four banks: two global banks, and two regional African banks, given the large number of programmes we operate in Africa. Although we still need to maintain relationships with local banks for access to branch networks, selecting global banking services was a major step forward in rationalising and simplifying our cash management arrangements.

The next step was to communicate securely and reliably with our banks, both at a group treasury level and in our field locations. Although we had implemented a single instance of SAP as our ERP system across the organisation, we had very little connectivity between SAP and our banking systems, so payments had to be input into each system individually, resulting in duplication of effort and a potential loss of control and accuracy. We considered implementing a specialist treasury management system, but the business case was not sufficiently compelling, as our treasury activities are relatively straightforward: for example, we outsource most of our investment management, and we do not make use of complex derivatives for FX hedging. Furthermore, we operate as a single entity, with a number of branches, which further simplifies our treasury needs.

Therefore, we decided to create a more integrated payments infrastructure based on SAP, and designed our process roadmap with PWC. The new design created a system for setting up payment instructions and approving payments either centrally or remotely (using SAP’s Bank Communication Manager). Files are then formatted as appropriate (using SAP’s Process Integrator) and transmitted to our banks via SWIFT. We use MT101 messages for treasury payments and FileAct protocol for all other payment types.

SWIFT in Africa

The decision to use SWIFT rather than banks’ proprietary electronic banking solutions was a significant one, and leveraging a bank-neutral, multi-bank platform rather than individual electronic banking systems has been crucial in providing greater security, flexibility and efficiency in bank communications. The decision to adopt SWIFT is relatively uncommon among organisations with significant emerging market activity. We recognised, however, that although it would be more difficult to implement SWIFT in some countries compared with others, we estimated that we would be able to connect 60 percent of our offices to partner banks (although this is proving to be slightly higher).This also equates to around 90 percent of our total volumes. As we did not have the resources to manage the SWIFT infrastructure directly, we appointed SunGard (now FIS) as our service bureau.

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