Treasury Practice

The yield curve

Published: Jan 2008

In this article, the first in a series on yield curves, we introduce the basic concept of a yield curve, looking at what a yield curve is and how it usually appears.

Hantai Qin

Treasury Manager – Asia-Pacific Region


Headquartered in Florida in the USA, Jabil is a leading EMS (electronic manufacturing services) company, providing electronics design, production and product management to electronics and technology companies worldwide. Jabil has more than ten legal entities in China and is also active in India, Malaysia, Singapore, Japan, Vietnam and Taiwan.

Problem…

In 2006, Jabil made the decision to adopt an electronic banking solution as part of a wider restructuring of cash management in Asia. The company was making a large number of payments – several thousand each month – but without a centralised solution for managing cash, this was time consuming and inefficient.

A regional cash management solution was needed to streamline the payment processing and transaction reporting, provide greater visibility over payments and at the same time optimise liquidity. It was also hoped that the chosen solution would enhance control and risk management and assist with compliance with regulatory requirements such as Sarbanes-Oxley.

…Solved

Jabil invited ten international banks to put forward their solutions in October 2006. Following an extensive selection process, the solution offered by Citi was chosen. The decision was based on Citi’s wide branch network across Asia as well as the merits of the technically advanced Citibank File Exchange (CFX) solution compared to other e-banking solutions on offer.

Citi’s solution comprised two components, CitiDirect and CFX. The first of these, CitiDirect, is Citi’s electronic banking system. “CitiDirect gives us a global point of view,” explains Qin. “It enables the treasury people to see all the bank account movements across Asia, so this is where we can get the real time information.” CitiDirect also allows Jabil to standardise processes, automate report generation and manage reconciliation and reporting needs through a single platform.

“The good thing is that the local people know the local regulations and concerns, while Citi’s Asia people can focus on the big overview to solve all the problems and co-ordinate the project.”

CFX, meanwhile, provides a seamless connection at the local level. It enables straight through processing for files created by SAP by translating files generated by Jabil’s ERP system and acting as a gateway for host-to-host connectivity. “This has made payments easier than in the past,” says Qin. “For example, when the payment day comes we can easily run a payment report because this is a seamless connection. Then we will generate an SAP IDoc file, the file can be automatically transferred to Citi’s back office, and then they can make the payment. In this case, I think the whole process is more productive, and can save a lot of workload.” CFX also offers industry standard security software and the solution is compliant with Sarbanes-Oxley.

Citi was appointed in March 2007 and the implementation team was set up in May. “The first country chosen was Malaysia, since this is where Jabil’s SAP team and main manufacturing plant are located. As it was the start of a regional process, implementation took a few months due to file development and testing,” says Qin. “With Malaysia now live, adding new countries will be a simple process of around two months each, on the basis of the same infrastructure. The solution is scheduled to be in place in China around July this year.”

Qin is enthusiastic about the success of the solution and the level of service provided by Citi. “They have local knowledge throughout Asia; they also have one contact point based in Singapore, leading the whole implementation. The good thing is that the local people know the local regulations and concerns, while the Asia people can focus on the big overview to solve all the problems and co-ordinate the project.” He also expects Citi’s solution to provide additional benefits as the cash management project continues to develop. “CFX is a multi-bank solution and in the future this could be a big plus in terms of managing cash in other banks.”

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