Photo of Karsten Kabas, Merz Pharma Group and Joy Macknight.

Merz Pharma has implemented a solution that delivers integrated analysis, dealing and portfolio management/administration activities regarding short-term investments, long-term investments and foreign exchange hedging all in a single tool.

Karsten Kabas, Head of Corporate Treasury, explains the background at Merz Pharma Group. “We were operating from a ‘behind best practice’ position still dealing via telephone, administrating the portfolios in Excel and dependent on the banks’ valuations for accounting purposes. So we leveraged the use of our new information tool (Bloomberg) to implement electronic dealing; we integrated administration and real-time valuations of all portfolios and established a bypass to include the remaining telephone deals.”

The goals have been achieved without implementing separate dealing software (eg 360T) or separate portfolio management software. Furthermore, as Bloomberg had already been in place Merz Pharma had no additional costs for this project.

The solution has enabled Merz Pharma to realise the following benefits:

• Moved to electronic dealing in FX and assets (bonds, commercial paper).
• Integrated remaining telephone deals to have full transparency within the solution.
• Established a professional portfolio management/admin tool for both FX and assets.
• Established own valuations of assets and FX derivatives.
• Stopped increasing the number of software systems in use.

The solution (Bloomberg) delivers integrated analysis, dealing and portfolio management/admin activities regarding short-term investments, long-term investments and FX hedging. Like an increasing group of corporate treasury functions worldwide the company uses Bloomberg as an information platform for cash, FX risk management, pricing of options.

But beyond this Merz Pharma has on a step-by-step basis:

1. Moved its portfolios of short term/money market investments, long-term investments and FX derivatives (and their administration) onto Bloomberg to take advantage of integrated real-time pricing, scenario analysis, news and rating alerts, total return and return attribution tracking.
2. Started to use the closing valuations in Bloomberg of its portfolio holdings (securities and derivatives) for accounting purposes.
3. Enabled electronic trading of bonds and commercial paper with most of its banking partners in Bloomberg and transferred the majority of the dealing activities onto Bloomberg. Furthermore, the small number of remaining telephone deals are bypassed into Bloomberg via voice confirmation dealing tickets so that it has full transparency of all deals within the Bloomberg dealing blotter functions.
4. Enabled electronic trading of FX derivatives with their banking partners in Bloomberg and transferred the majority of the dealing activities onto Bloomberg; furthermore, the small number of remaining telephone deals are also bypassed into Bloomberg so that the company have full transparency of all deals within the Bloomberg FX dealing blotter.

As Kabas concludes: “At low-cost, in a short timeframe and with manageable allocation of workforce we implemented electronic dealing, professional portfolio management and administration, real-time valuations, and several minor benefits (alert and news pop-ups, dealing out of the portfolio by one double-click etc) all integrated in one software tool in order to keep down system complexity and drive process efficiency. Our treasury department located in Switzerland is a small team of 2.5 FTEs and manages all cash management, risk management, asset management, cash flow planning and in-house banking activities of the Merz Pharma Group.”

Bloomberg will now release a confirmation matching centre which will, it claims, challenge Misys and others in that sector. Merz Pharma advised that it will implement this right from the start so that the “last mile” will also be integrated into their straight through processing (STP).