Treasury Today Country Profiles in association with Citi

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Toyota Financial Services, Winner, Best Risk Management Solution

Tim Carley, Numerix, Paul Foster, Toyota Financial Services collects the Award on behalf of Vanita Aggarwal and Niklas Olenäs, Skysparc

This project demonstrates true innovation, achieved by attaining the best from people, processes and technology. To achieve its objective of improving funding options and maintaining regulatory best practice without taking on additional operational risk, TFS was seeking an ‘uncharted territory’ solution to reliably synchronise complex data across two contrasting environments.

Photo of Tim Carley, Numerix, Paul Foster, Toyota Financial Services collects the Award on behalf of Vanita Aggarwal and Niklas Olenäs, Skysparc.

Vanita Aggarwal

Director, Treasury Risk

Toyota Financial Services (TFS) is the finance and insurance brand for Toyota in the United States, offering retail automotive financing and leasing through the Toyota Motor Credit Corporation (TMCC). TFS currently employs more than 3,300 associates throughout the United States and has managed assets totalling close to $100 billion.

in partnership with

The challenge:

TFS needed to implement a new system to enhance its valuation methodologies, expand funding diversification through complex structures and to ensure compliance and regulatory best practice. However, it also wanted to retain its existing treasury management system as its system of record.

Data for a portfolio of approximately 1,400 transactions was required to be transferred to the new system and kept in sync whenever a new deal was added or an existing deal amended. This created a very complex data exchange challenge between two core systems.

One thing which TFS wanted to avoid was a ‘black box’ solution, eg not being able to manage and adjust the interface going forward in-house.

The solution:

The solution was the implementation of the Position Data Loader (PDL). This automatically fetches relevant transaction data from Wall Street Suite (WSS), maps it to an agreed (non-standard) common interface format, then encodes the data for Numerix and transfers it to the Numerix database. This process operates daily, picking up all new deals and any changes that are made. As there are different ways a deal can change over its lifetime, this involves a complex mapping process to find and extract all the relevant data from WSS. The mapping is set up within the SkyREPORT interface builder and passes the converted data to the Numerix loader, which runs automatically on a daily basis, ensuring data in WSS and Numerix are always in sync.

“TFS asked two providers to work with us to solve these challenges. SkySparc is a consultancy with deep knowledge of Wall Street Suite, TFS’s core treasury system and was the ideal partner in developing the data extraction piece. Numerix has the financial and mathematical skills necessary to develop the mapping, coding and data import into Portfolio,” explains Vanita Aggarwal, Director, Treasury Risk.

Best practice and innovation:

This project demonstrates true innovation, managed by attaining the best from people, processes and technology. To achieve its objective of improving funding options and maintaining regulatory best practice without taking on additional operational risk, TFS was seeking an ‘uncharted territory’ solution to reliably synchronise complex data across two contrasting environments.

By bringing in two able external partners with unique skills and knowledge into a multi-disciplinary team, TFS has obtained an automated, robust and flexible solution, the PDL, which makes use of highly innovative software: SkyREPORT interface builder and Numerix Portfolio.

“As a result of implementing the PDL, TFS is now able to automate the valuation of more complex structured derivative transactions, such as step-up callables and zero-coupon callables. This should allow for more diversified and efficient funding, reducing borrowing cost and therefore interest expense. The project was also completed on time and within budget,” concludes Aggarwal.

Key benefits:

  • Improving efficiency and reducing operating risk through automation.

  • Boosting TFS’ funding diversification capabilities.

  • Complying with and meeting best practice for accounting rules.

    • Meeting the FASB accounting rule promoting the Overnight Index Swap (OIS) to be the standard discount curve for valuation was a key driver for the PDL project. With PDL automation TFS is well positioned to be amongst the first corporate treasuries to adopt OIS.

    • TFS worked with Numerix as a vendor – Numerix Portfolio is a powerful front and middle-office application that provides a consistent valuation and risk framework for pricing and hedging simple and complex portfolios, including structured products and exotic derivatives.

    • TFS worked with SkySparc as a consultant – SkySparc specialises in Wallstreet Suite and brought its financial and technical expertise to the project using SkyREPORT, its advanced reporting, testing, reconciliation and integration platform, to build the interface and fully automate the complex data extraction process.

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