Treasury set out to establish a host-to-host connection to J.P. Morgan’s ACCESS Next Generation platform. This included an optimal account and liquidity structure and a dynamic hedging strategy. The solution also incorporates bank-agnostic file formats that use ISO XML, ERP PeopleSoft integration for banking and foreign exchange, mobile banking with on-the-go reporting and payment authorisation and 24/7 web-based enquiry management tool.
Photo of Saravanan Sokkalingam, IGATE, Jatin Aggarwal, J.P. Morgan.
Associate Director – Finance
IGATE is a global leader in providing integrated technology and operations-based solutions to meet the business challenges of corporations in North America and Asia Pacific. With over 33,000 employees globally and revenues of more than $1.2bn, IGATE offers applications and platforms to clients across multiple industries.
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Getting even: treasury raises its game
In the high-tech space, the treasury function of a leading player has to be an equal running partner with the rest of the business. It was this realisation that drove the treasury team at IGATE to look to enhance its liquidity management and streamline its work with global industry standards, thus enhancing control, visibility, security and automation. By centralising its processes, including its account structure, and consolidating its banking relationships, treasury would become the technology equal of its business colleagues.
A scalable platform that could support its future growth was called for and with its sights firmly on functional optimisation – and minimal business disruption during the transition – IGATE chose to work with J.P. Morgan. Treasury set out to establish a host-to-host connection to the bank’s ACCESS Next Generation platform. This involved:
An optimal account and liquidity structure. This reaches across the US and India to support a new cash management solution, making improvements to its receivables and payables processes, and enhancing reconciliation. The solution that IGATE adopted uses automatic sweeps into multiple investment vehicles, enabling it to achieve a higher earnings rate on global balances. For interest-bearing Demand Deposit Accounts, where the yield is based on blended balance tiers, the sweeps result in more stable long-term balance levels that drive higher yields mapped to overnight, one-month, three-month and six-month balance threshold tiers.
A dynamic hedge strategy. This assigns differential weightings to discretionary buckets and enables it to keep part of its position unhedged as per the internal risk management programme so that it can be protected in the event of adverse movements and allow hedging at more opportune times. Total exposure is kept under a manageable threshold.
Best practice and innovation:
From the outset, a strong relationship with IGATE was built through dialogue across various lines of business. J.P. Morgan adopted a consultative approach in developing a solution specific to IGATE’s objectives. In practical terms, IGATE adopted a phased project approach to install internet-based and host-to-host connectivity. Components of this system include:
Bank-agnostic file formats that use ISO XML, ERP PeopleSoft integration for banking and foreign exchange.
Mobile banking with on-the-go reporting and payment authorisation.
A 24/7 web-based enquiry management tool.
The integrated J.P. Morgan solution leverages a customised structure that increases yield and efficiency while enabling far better risk management through increased visibility over the company’s funds. As examples of where it scores, the team says the new structure has resulted in a 60% yield enhancement over the previous set-up, and IGATE is now able to implement rules-based investments with automated liquidity management based on its investment policy. In North America, IGATE’s multi-entity Zero Balance Account with a single pool header account has reduced the company’s bank accounts to less than ten.
The bottom line for treasury is that the solution has enabled it to maximise returns on its available liquidity, reduce the volume of idle cash, enhance its cash forecasting processes, and achieve far greater visibility and control – an overall level of efficiency that even its technology-focused colleagues would be proud of.
Enabled the company to achieve quantitative benefits with a positive impact on employees and risk management.
The liquidity solutions and automation resulted in considerable yield enhancement.
Optimal account and liquidity structure has enabled IGATE to reduce its number of bank accounts significantly.
20% reduction in banking fees.
Considerable improvement in days payable outstanding (DPO).