The challenge

Prior to 2022 treasury operated via extensive use of Excel spreadsheets and manual processing across cash management, dealing, payments and accounting. With the large and complex nature of the business, including the departmental split of investments and finance teams and regulatory oversight of the Financial Sector Conduct Authority (FSCA), coupled with the legacy technology landscape, it was evident the existing model was not sustainable.

Challenges included:

• Keeping track of daily balances and projected positions for >2500 bank accounts across 25 banks. Existing processes included manual collection from bank portals and forecasting overlay which consumed significant effort commonly only being finalised at 11am each day, limiting time available for strategic activities.

• Data collection and keying into cash and dealing spreadsheets was error prone and lacking any controls presenting risk and internal control/audit issues.

• Payment execution through banking platforms was time consuming and required significant email traffic to complete approval and execution resulting in late payments.

• Treasury accounting was fully manual resulting in significant pressure on the team to close the period on time by the fifth business day of the next period.

The solution

In 2021, Alexforbes selected FIS Integrity as their new treasury management system (TMS) and engaged treasury consulting specialist Covarius to deliver their treasury systems implementation project. Prior to the project, the following objectives were identified:

1. Cash management: the four regional banks (FNB, Standard Bank, ABSA and Nedbank) not being accustomed to international standards, each required proprietary bank statement formats necessitating custom interfaces to be built. Furthermore, without bank-driven sweeping structures, consideration was required as to the most effective way to centralise cash and avoid manual treasury transfers on bank portals.

2. Payments: Alexforbes intended to discontinue portal payments and move to electronic delivery. However, challenges were presented in the banks lack of compliance to standard SWIFT formats, the need to comply with South African regulatory reporting standards for cross-border payments and the challenge of settling foreign currencies given that Alexforbes did not hold foreign currency accounts (FCAs). For each scenario custom solutions were required.

3. Foreign exchange: Alexforbes’ policy precipitating lack of FCA’s and the subsequent bank agreements for pre-ordered FX rates presented a unique challenge in the TMS whereby FX spot/forward transactions currency movements were purely notional, presenting a deal capture and mark-to-market (MTM) calculation issue.

4. Investment management: Alexforbes held certain regional investment instruments not common beyond South Africa’s borders such as Unit Fund Investments and Step-up notes. These instruments did not immediately translate into out of the box TMS instrument types.

5. Automation: the resulting TMS project introduced full connectivity and systemised all processes across cash management (balance collections, liquidity reporting and target-balancing), dealing (borrowing, investments and FX including dealing portal integration), payments (including domestic/international treasury and AP international payments) and accounting (across all instruments with integration to Smartstream).

Best practice and innovation

Best practice

• Audit and control: a suite of custom Integrity reports and dashboards to key controls eg, custom dashboards to validate statement integration.

• Management reporting: power BI reports and dashboards to provide significant improvements in management reporting, control and audit.

• Best practice TMS workflows: full STP and dual administration across data, cash, payments, dealing and accounting. Treasury payments integration with approval controls and ACK feedback. Journals automatically generated and integrated with SmartStream.

Innovation

• Proprietary integration for payments and statements to meet local format, cross-border regulatory and FX payment challenges for all local banks.

• Bespoke instruments setup for FX dealing without FCAs, utilising dummy accounts and integration to import banks MTM, Unit Funds, utilising in-house bank accounts and step-up notes, modelled with long-term loans enriched with integration of regular adjustments file from investment department.

• Modern Wiki for treasury processes and troubleshooting: created in their SharePoint platform to fully enable treasury personnel with detailed work-instructions to maintain and develop the TMS solution and support organisational change.

Key benefits

• Cost savings.

• Process efficiencies.

• Increased automation.

• Risk mitigated.

• Improved visibility.

• Errors reduced.