The challenge
JSW International faced challenges in maintaining a single version of truth while ensuring the data is captured from multiple information sources. Collaboration amongst the teams was another key challenge, as before automation, the teams were maintaining separate MIS prepared by different teams.
The solution
JSW selected a treasury, risk and trade finance management solution from IBS Fintech, comprising a comprehensive risk management platform enabling JSW to enhance visibility, improve control, mitigate operational risk, drive automation, optimise business efficiency, and ensure business continuity. The chosen solution is an ‘all in one’ product, covering multi-asset class, multi-currency, multi-location and multi-company. It empowers JSW to manage compliance, financial and operational risks all in one solution.
The product portfolio of the company comprises innovative and exclusive modules for currency, hedge accounting, option valuation, commodity, and money market investment and exclusive modules for import/export and banking management, logistics, borrowings and liquidity and cash management.
Managing commodity risk is crucial, so the solution needed to incorporate a commodity risk module. One of the primary challenges for the treasury team is knowing the quantum of risk they are exposed to, which arrives from business cash flow. Managing via spreadsheet or manually, consolidation of cash flows becomes very difficult and delays in managing the risk due to high volatility. So, the solution first consolidates the cash flow/underlying exposure and gives clear visibility, open position of commodities on both sides, sales and purchase.
Once the risk is identified, hedging on exchange, capturing the deals, and linking to underlying exposure are done in the solution for better visibility of the hedge and unhedged portion the overall positions. Hedges are transacted using forward contracts and derivative contracts like ‘over the counter’ (OTC) options and swaps to manage the risk.
Throughout the life of the hedge, monitoring these hedges for the price risk is again essential which needs constant monitoring with input of market data. The solution takes in market data to calculate mark-to-market positions and valuation of the derivatives to arrive at the decision of deal execution.
Best practice and innovation
The key value proposition of the solution extends far beyond automation to enable this holistic digital transformation. The hedge instruments and workflows that are automated are futures and options deals capture, cancellation, monitoring and valuation.
JSW transacts swaps contracts to manage the price swings in the market of its commodity. Each leg has an option to link to the underlying exposure which is basically the vessel details.
Key benefits
- Single point of truth.
- Strong governance in finance and treasury transactions.
- Real-time decision support a holistic 360-degree view.
- Optimised decision making by enhancing visibility and real time access to business data.
- Digital solution.
- Improved communication between treasury department and rest of the firm.
- Adheres to industry regulations and internal compliance.
- Audit trails, email alerts and notifications.
- Seamless integration with existing ERP, market data providers and banks.
- Intuitive dashboards, analytics and reporting.
Jetun Javeri, Director concludes, “The solution has provided us with VaR limits which was our requirement. The hedging module has the capability to be linked shipment-wise which is a feature not commonly found in other products in the market. It makes the product unique and gives us a clear picture. The package provided has been running successfully and meeting all our requirements. The team has also recommended us to link to daily market data updates for appropriate data through the market data providers Bloomberg/Reuters and we are considering the same to further enhance the efficiency of our solution.”
