GE was looking for a partner bank across nine regulated Asian markets in which they operate. They now have a low-touch cost model which has addressed the growing threats of cyber-attack and has also addressed their vital treasury aim of managing foreign currency payments with an automated solution.
Photo of Saurabh Gupta, Citi and Shilpa Narula, General Electric.
Asia FX & Derivatives Head
Operating in approximately 175 countries, General Electric (GE) is a diversified infrastructure and financial services company. The company’s products and services range from aircraft engines, power generation and oil and gas production equipment to medical imaging, business financing and industrial products.
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Asia Pacific is an important part of GE’s growth strategy, with several footprint countries, each having unique regulatory and business policies.
As part of their treasury transformation initiative, GE embarked on a study to reassess their current foreign exchange (FX) processes and platforms. Their approach was to divide this effort into two work streams: the first being onshore FX covering emerging markets, largely led by Asia and the second being offshore for developed markets.
To improve FX risk management, GE was of the view that they should create a single pipe for all their transactional FX payments. On average, GE has tens of thousands of transactional FX payments per year worth billions of dollars. And with large key industrial buyouts, these volumes have a multiplier effect from a treasury management standpoint.
GE’s key objectives during the process were to:
Simplify FX process and pricing.
Streamline and automate the FX payments process.
Reduce overall cost for FX.
Implement comprehensive FX reporting and reconciliation automation.
Leverage shared service centre (known as Global Operations Finance).
Shipla Narula, Asia FX & Derivatives Head explains: “We wanted to consolidate current fragmented touch points across countries and regional centres under the shared service centre (SSC) umbrella.”
In September 2015, GE began discussions with their key partner banks for a custom package solution to address the above objectives and challenges. GE was looking for a strong banking partner across nine regulated Asian markets that they operate in. The comprehensive multi-country solution delivers the following:
Electronic FX contracting, execution and pricing.
FX payments instructions embedded with FX booking order.
Digitising documentation handling.
One-touch FX reporting mechanism and enhanced reconciliation.
Consolidate FX services into a SSC (known as Global Operations Finance) – achieved standardisation vis-à-vis a single FX booking and payment process across all Asian markets, under the SSC framework.
Shilpa comments, “Citi provided a single point of contact to mirror the process ownership at GE’s end, thereby enabling faster discrepancy management and ongoing review. By digitising the documentation process and streamlining end-to-end FX payments process, we have seen an almost 50% reduction in overall turnaround time. As the innovative framework is capable of managing current complex regulation, many regional/global treasuries can look at replicating this state-of-the-art process.”
Best practice and innovation
Before 2016, GE’s cross border payment processes looked very different. Previously, thousands of cross border payments for nine emerging markets in Asia were manually booked for FX through an in-house data entry platform annually. This data was then consolidated by regional treasury centre teams in India for booking transaction FX across maturities and currencies. Coupled with this process, the physical documents as required in most Asian countries were ‘criss-crossing’ between GE and their banks before the final payment could be made. Back then, the entire framework relied heavily on legacy internal FX trade request and booking platforms, with the potential for improvement from FX risk management and FX settlement automation perspectives.
“It is a matter of honour for the GE team to receive the prestigious Adam Smith Award Asia. The Adam Smith Awards Asia provides a great platform for best practice sharing in the industry and we are honoured to showcase our learnings from the project. We are looking forward to learning about the other award winning projects.”
Shilpa Narula, Asia FX & Derivatives Head, General Electric
In 2016, GE took a leap forward to deploy the next generation of tools for effectively managing their FX payments and pushed new boundaries with their banking partner to innovate a workflow-lead model. This model is highly scalable and meets the requirements in the complex regulatory landscape in Asian markets.
Shilpa concludes, “In an era of growing cyber security breaches, automating a vital treasury deliverable of managing FX payments is highly admirable. By means of the solutions mentioned above, the ongoing technology cost for maintaining internal platforms and retirement of certain legacy middle office systems used for FX rate booking has been reduced, and replaced by a low touch cost model.”
Key learning points
Partner with Technology.
Technology is an enabler, and has immense power to deliver simple, structured and lean processes with unparalleled benefits on the cost front with enhanced productivity. Not to mention improved compliance and controllership.
Effectively unleash the power of teamwork.
Keep cross-functional teams involved and motivated and re-motivated (a term that I have coined during the course of the project), at every step and don’t get lost in the comfort zone or trivial details. With effective teamwork, harnessing complexity is not only conceivable; it’s fulfilling.
Keep pace with change and focus on fundamentals.
The world is changing faster than ever. Stay on top of industry’s latest trends.
Complex problems have simpler solutions.
Think out of the box, brainstorm for simpler solutions even better for simpler e-solutions.