FX centralisation project delivers for Solvay
The challenge
The FX centralisation project was launched by corporate treasury early in Q218 with the aim to extend the group’s in-house bank (IHB) FX risk management best practices to the worldwide group treasury scope, namely the Latin American and Asia Pacific regions.
Objectives:
- Expertise: centralise deal execution in a unique front office expertise centre – Brussels corporate treasury.
- Digitisation, automation and straight through processing: through the generalisation of the use of electronic exposure reporting, FX trading and confirmation tools.
- Standardisation: align local and regional FX risk management processes with the group treasury policy and best practices, thus improving efficiency (operational robustness, process simplification).
- Bank relationships: emphasis on core banks in the project’s scope (vs local banks) and foster a more transparent and fairer pricing and business allocation.
- Improved governance and control and compliance.
The solution
The features described are performed centrally from Brussels on behalf of all of the countries in scope, namely Brazil, Chile, Peru, China and Korea:
- Exposure identification, FX deal execution and reporting.
- Deal confirmation and settlement are managed centrally whenever allowed by regulation (Korea, China) – limitations for Brazil confirmation and settlement process.
- FX trading exclusively performed through multi-bank electronic trading platforms 360T and Bloomberg FXGO (when 360T not available).
- FX deals confirmed electronically via Misys (digital copy if not available – no paper confirmations).
- Standard and automated SAP report for exposure identification.
- FX trading exclusively with core banks (credit provider banks).
Best practice and innovation
With the FX Centralisation project, Solvay managed to achieve centralisation, alignment and in certain cases automation in the most challenging and diverse regulatory and technical environments. In no more than six months, it was able to bring best in class FX risk management policies, standards and electronic tools to a scope that was left out by its in-house bank for regulatory restrictions. In less than six months, it achieved full on-behalf-of electronic trading for Brazil, Chile, Peru, China and Korea.
“We established electronic Misys confirmation for countries where paper is the norm and fully and exclusively re-centred our FX business within these regions with our core relationship banks,” explains Hatem Soua, Treasury Manager, Solvay.
The centralisation effort is ongoing and the achieved milestones up to date, lay the ground for a state-of-the-art fully centralised, fully integrated FX risk management structure – integration with new TMS solution and extension of scope to India and Thailand to cover 100% of FX transactional exposure.
Key benefits
- 85% of regional FX deals are now traded by the Brussels corporate treasury team on behalf of local entities, representing 400 tickets executed exclusively through 360T and Bloomberg.
- Significant savings, thanks to the benefits of an electronic and automated RFQ process.
- Total manual trades (email or phone-based) reduced by 85% across worldwide scope (marginal manual trade today vs 90/100% originally in Asia and Latin America).
- Improved strategic and economic allocation of business opportunities with core banks.
- Improved internal control environment and reduced execution risk with the implementation of STP and TMS interface with electronic trade and confirmation platforms.
- Increased visibility and understanding of global group’s exposure beyond the centralised IHB view.
- Centralised point of contact and dialogue between the corporate treasury team and banking partners across the world for FX risk management matters.
