Following a merger, Mubadala Investment Company decided to join SWIFT to achieve daily visibility over its 600-plus bank accounts and utilise electronic payments and fund transfers. This has laid the foundation for the transformation of Mubadala Treasury into an in-house bank capable of addressing the liquidity needs of the company’s internal and external stakeholders.
Photo of Raed Alawadhi and Allan Lound, Mubadala Investment Company.
Abu Dhabi, UAE
Mubadala is a pioneering global investor, deploying capital with integrity and ingenuity to accelerate economic growth for the long-term benefit of Abu Dhabi.
SWIFTly bringing together two giant companies
On 29th June 2016, His Highness Sheikh Mohamed bin Zayed Al Nahyan, Crown Prince of Abu Dhabi, Deputy Supreme Commander of the UAE Armed Forces, and Chairman of the Abu Dhabi Executive Council, issued a resolution initiating the merger of two of Abu Dhabi’s leading government-owned investment entities – the International Petroleum Investment Company (IPIC) and Mubadala Development Company (Mubadala). The merger was one of the largest in the history of the UAE, leading to the creation of the world’s 14th largest Sovereign Wealth fund known as the Mubadala Investment Company (MIC), with US$125bn in assets under management.
Mubadala’s treasury team had to contend with a tight five-month deadline to perform critical analysis of the new joint organisation’s financial risks and liquidity profile, identify potential points of failure, and execute funding arrangements to support the operations of the new organisation.
The journey began with the realisation that Mubadala’s portfolio had grown globally to embrace operations across 30 countries, touching on industries as diverse as aerospace, technology, oil and gas, real estate, healthcare and a wide variety of others. Mubadala is now structured around four global business platforms that align with Abu Dhabi’s diversification agenda.
There was also an increasing need to accelerate the tempo and reach of activities performed by the treasury, balancing the need to manage liquidity and financial risks for a rapidly growing organisation while maintaining the agility of a tightly bonded treasury team.
The work began with the goal of bringing about daily cash visibility to 600 plus accounts, spread across more than 20 banks, straddling all the major continents of the world. This required Mubadala to join the SWIFT network and implement systems and processes to effectively send and receive electronic messaging through the network.
The joint project team tackled this challenge by taking a three-pronged approach: execute a selection process for a SWIFT bureau; select a payment factory to govern the flow of financial messaging in and out of the organisation; and execute negotiations with all major relationship banks to enable SWIFT payment and statement messaging.
Within a period of eight months, the joint project team successfully executed all three initiatives, bringing about daily cash visibility across all critical accounts around the world. It is estimated that MIC achieved cost savings of AED1.4m on daily cash reporting through increased efficiency.
Furthermore, the concomitant implementation of electronic payments and fund transfers through the SWIFT network reduced by half the time required to execute fund transfers, enabling treasury to pool funds more effectively and drastically reduced value leakage.
Seeing the benefits that electronic payments and fund transfers brought, treasury realised that it could multiply benefits several times over by enabling Mubadala’s fully owned subsidiaries to also interface their back-end financial systems with Mubadala’s payment factory system, gaining those subsidiaries the ability to transmit and receive financial messaging through the SWIFT network.
“We consider winning an Adam Smith Award to be a resounding validation both of the approach that we have taken at Mubadala to grow our treasury function and the IT that supports and enables it; as well as the long and hard work put in by our treasury and IT colleagues to make it happen.”
Raed Alawadhi, VP Business Applications, Mubadala Investment Company
Best practice and innovation
The innovation that is being demonstrated is the leveraging of technology to introduce major efficiencies in key treasury functions. The team gained daily cash visibility through electronic messaging, as well as the capability to transmit electronic payment instructions. This combination enabled Mubadala’s treasury team to concentrate cash more effectively and drastically reduce value leakage.
Also, seeing the benefits that electronic payments and fund transfers brought, treasury opened integration to the payment factory to Mubadala’s fully owned subsidiaries, gaining those subsidiaries the ability to transmit and receive financial messaging through the SWIFT network; hence accruing to them the same efficiencies that Mubadala treasury gained.
Leveraging the technology is also laying the groundwork for the transformation of Mubadala treasury into an in-house bank capable of addressing the liquidity needs of the company’s internal and external stakeholders.
Cost savings of at least AED1.4m.
Efficiency gains and time savings.
Helped maintain Mubadala’s AA credit rating.
Improved daily cash visibility.
Streamlined and standardised processes.
Key learning points
The banks are an important stakeholder in any SWIFT implementation. Getting them to the table early in the project is a critical success factor.
Perform extra due diligence on the choice of SWIFT bureau as they can bring value added capabilities to the table that can enhance the organisations native capabilities.
The implementation of the SWIFT project required engagement across treasury, finance, legal, compliance, technology, audit and other business units. Stakeholder engagement and strong project management is key to keeping all stakeholders aligned.
VP Business Applications
Raed Alawadhi is Vice President of Business Applications within Mubadala’s Enterprise Technology Services unit. Passionate about fintech, the combination of engineering and finance background give him a unique ability to bridge the gap between the disciplines.