Identifying the pain points
There are certain topics that keep a treasurer awake at night. All of them have some criteria in common: still manual, error-prone with a combination of high financial risk and missing transparency of high-value treasury payments.
For Merck’s treasury it was the following processes: maintenance of standard settlement instructions, FX netting and settlement, payment approval and payment tracking. All processes being part of a very complex system landscape and therefore not yet fully digitalised in the daily work of Merck’s liquidity and FX risk management.
Merck’s treasury team is responsible for Merck’s in-house bank which maintains 22 different cash pools in 20 different currencies, connecting 400 subsidiaries in 70 countries and executing hedge activities in more than 40 different currencies. All treasury and operational payments are executed via the centralised payment factory.
The team took the challenge, created an internal project team, and came up with a solid, detailed and well thought idea. As a next step the team needed to involve their vendors and banks to understand if the daily challenges could be solved.
They collaborated internally and with external partners to drive automation across their entire liquidity and FX hedging process, leading the way for other companies using these vendor solutions to follow suit. It was a very difficult and innovative undertaking, but the team knew their efforts would reap rewards in the end.
Key processes automated
Merck has successfully automated the following four key process steps:
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Standing settlement instructions (SSIs)
Collecting SWIFT broadcasted standard settlement instructions via the SWIFT service bureau and directly importing into the treasury management system. Using a secure source of data and a secured communication channel mitigates payment fraud risk to minimum.
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FX netting and settlement
Innovative process to automatically match the net settlement payments of matured FX hedges. Matching net-settlement amount, currency, due date and beneficiary account automatically similar to deal matching.
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Payments processing after fraud monitoring
Automatic release of FX settlement payments based on fraud monitoring and pre-defined thresholds. Further reducing payment fraud possibilities.
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Real-time payments tracking
Utilising SWIFT gpi to enable real-time transparent payment tracking for all FX settlement payments. Guaranteeing fast and reliable execution and allowing immediate interaction on process disruptions.
“Beside my highly skilled, dedicated and creative team, the expertise of our vendors as well as their sophisticated treasury solutions were key to making this project a success,” explains Jörg Bermüller, Head of Cash & Risk Management.
All process steps mentioned above, are now fully automated. Real straight through daily liquidity and FX management process with full transparency on process execution and bank commissions guarantees a high security standard throughout the whole process.
All this leads to high efficiency and exception handling only enabling the team to concentrate on strategic decisions.
Benefits delivered
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Cost savings.
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Increased automation.
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Risk mitigated.
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Improved visibility.
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Errors reduced.
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Manual intervention reduced.
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Increased system connectivity.
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Future-proof solution.
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Exceptional implementation (budget/time).
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Quality accreditation achieved.
Coordinated team effort
This project was very much a team effort by an experienced and motivated treasury department which has a long history of seeking out and harnessing opportunities for improvements across the full scope of treasury activities. As such, the team has successfully achieved a high level of automation over a period of years. This latest initiative is a powerful demonstration of the team’s continuing commitment to harnessing innovation at every opportunity.
“The solutions established by the team are good examples for other treasuries and can be implemented in full or in parts independent of the used TMS, banks or confirmation matching service.”
Jörg Bermüller, Head of Cash & Risk Management
