Achieving Business Control and Transparency
by Jerome Hoffman, Business Development Director for Africa, Broadridge Financial Solutions
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.
Transforming the existing model
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:
- Improved workflow control and efficiency
- Cost-effective banking and payments connectivity through a single portal
- Reduced operational risk through standardised, secure messaging
- Promotion of operational best practice, such as timely trade confirmations
- Global reach
- Lower operating costs through efficient, advanced technology
- Increased confidence that only ‘good’ data reaches the TMS
- Minimised time to market for mandatory market changes
Looking to the shared service model
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.
A step-by-step approach
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.