Photo of Chandra Mohan Grover, IBSFINtech collects the award on behalf of JSW Group.

This Indian giant has exposure to five main currencies; USD, EUR, JPY, GBP and AUD. The solution it implemented supports a multi-company, multi-location, multi-asset, and multi-portfolio (or product) environment and helps manage exposure and offers tools to mitigate operational risks.

Complete risk management solution for this Indian giant

The challenge

The company is exposed to risks arising from market volatility, economic fluctuations and political events affecting currencies and interest rates. It has exposure in five main currencies – USD, EUR, JPY, GBP and AUD, and treasury operations are targeted to balance and hedge this exposure through forward contracts, future contracts and options. The company is presently managing risk via cash flow and fair-value hedging. The treasury desk is also engaged in interacting with its banks’ treasury to obtain the best rates for the company’s import and export transactions.

Some of the key challenges are:

• High dependency on spreadsheets and manual management of treasury processes.
• Linking hedges to underlying transactions.
• Effective hedge utilisation for all the upcoming sales invoices as well as other remittances.
• Manual computation of mark-to-market of forwards, options and swaps.
• MIS report preparation.
• Circulating business positions to each business user manually.
• Calculation of P&L of each division.
• Compliance with Central Bank regulations on derivatives.

The solution

JSW identified IBSFINtech’s Innovative TreasuryTM 5.1i solution to help the company to transition from spreadsheets and automate end-to-end treasury operations.

The solution supports a multi-company, multi-location, multi-asset, and multi-portfolio (or product) environment. It helps manage exposure and offers tools to mitigate operational risks. It provides real-time reports/dashboards for managing open positions vis-a-vis MTMs, cash flows and collaterals. It also leverages technology to incorporate the risk management process inherent in the solution to minimise risk by optimising the risk/reward trade-off. While quantifiable risks communicated by the top management are implemented in the form of threshold limits, qualitative risks are handled using intelligent forecasts and other analytical solutions.

The solution has the following features:

• An integrated, multi-company and multi-location treasury module to handle both hedge and trade books.
• Derivatives module to have exchange traded futures (ETFs) and options and OTC plain vanilla options including strangles, straddles and zero-cost structures.
• Interface with ERP to pull all business-related data (sales, purchases and loans) and make it available to treasury for effective risk monitoring.
• Interface to Refinitiv and Bloomberg.
• Client module has the capability to handle back office activities.
• Functions of front, middle and back offices are segregated without any overlap.

Best practice and innovation

This is a comprehensive solution that has the capability to manage the company’s defined risk management policy. As per the company’s policy, various risk parameters are captured and the system sends email alerts upon the breach of any risk parameter.

As part of the implementation, the IBSFINtech team discussed the workflow with the business and treasury teams to address their ‘pain points’. A workflow automation plan was recommended and implemented to address the smooth flow of data, resulting in a more effective treasury operation.

Key benefits

• Seamless ERP integration.
• Real-time interface with third-party providers eg Refinitiv.
• Offers decision support system and analytics for timely decisions.
• Comprehensive management reports and dashboard.
• Strong risk management platform supporting complex company policies, regulatory compliance and audit requirements.
• Monitoring limits on a real-time basis.
• Seamless automated email alerts for FX positions.
• Alerts for deals maturing.
• Mark-to-market capability.