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IBS Journal Supplement September 201 5

Helping the hand that feeds

The OPEC Fund for...
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OFID's work on the ground

After a round of recruitment to bring
in the necessary skills (Edojoined at this
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Helping the hand that feeds

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The OPEC Fund for International Development (OFID) has been undergoing a major digital transformation in the last few years to support its complex project/loan management operations and the associated payments. Working with SAP and Fundtech, plus a range of services partners, a lot has been achieved.

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Helping the hand that feeds

  1. 1. _O U: O '>l _U 3 4-» m GJ m (U k) IBS Journal Supplement September 201 5 Helping the hand that feeds The OPEC Fund for International Development (OFID) has been undergoing a major digital transformation in the last few years to support its complex project and loan management operations and the associated payments. Working with SAP and Fundtech, plus a range of services partners, a lot has been achieved. The OPEC Fund for International Develop- ment (OFID) is a major lender and, in the last few years, has been building an infra- structure to improve its automation and streamlining its core business processes. At its heart are SAP's ERP, Treasury and Loan Management systems, plus Fu ndtech's Swift service bureau. While some ofthe components are still under implementa- tion, much has been achieved. The initial vision was laid down in 2005 to have a fully integrated enterprise plat- form, inspired by a major organisational restructuring within OFID. By the end of 2015, when both SAP's treasury and lend- ing systems are due to be fully live, that vision should have been realised, says OFID's SAP project manager, Jacobs Edo. OFID's remit is to provide development assistance and it has been doing so since 10 © lBSlntelligence 2015 1976 when it was established by the mem- ber states of the organisation of Petroleum Exporting Countries (OPEC). Its focus is on projects that relate to basic needs such as food, energy, clean water and sanitation, healthcare and education. While the volume of loans is not high - typically 20 to 25 per quarter -they are high value (mostly in the range of SZO-SO million) and complex. OFID also provides grants, which are not repayable. The com- plexity is reflected in the fact that OFID deals with payments in 135 countries and 122 Currencies, including some that are not easily tradable or convertible. OFID was previously relying on an in-house developed system augmented by Microsoft Excel and Access. That system was mainly a data base for monitoring pro- jects, says EdoJWe then had the manage- wwwjbsintelligencecom ment's strategic goal of transforming the operation to a single, integrated enter- prise pIatformJThis was to span accounting (there were previously only spreadsheets), loans management and treasury. As the latter piece was deñ ned, so it also became clear that OFID needed to integrate a bank agonistic payment system as well. 'More or less ourjob is very close to that of a bank, we give loans to the public and private sector players] says Edo. As it start- ed to conceptualise its future IT platform, it looked at what other similar types of insti- tutions were doing, such as the World Bank and African Development Bank. 'Most were ahead of us( he recalls. There is a United Nations ERP group, with OFID now a mem- ber, and this provided useful lessons and input, A full selection process was carried out which led to the original choice of SAP. 'We had the managements strategic goal oftransforming the operation to a single, integrated enterprise platform. ' Jacobs Edo, OFID
  2. 2. u - a a* OFID's work on the ground After a round of recruitment to bring in the necessary skills (Edojoined at this time), the main accounting part of the SAP platform went live in 2008, followed by human capital management in 2009, and then an extension of this with employee/ manager self-service in 201 1 . The imple- mentations were in OFID's headquarters in Wenna. An RFP followed in 201 2 for the third phase, which was treasury and loans, plus a project management capabil- ity. By this stage, SAP's focus on OFID had improved, says Edo, as'we were no longer considered small fry'. OFID was moved to an enterprise support package with SAP and 'we are now doing well togetherí Approval for the later phases stemmed from the benefits that OFID had been able to show from the original investments, says Edo. 'Management was convinced that our spending brought value for money to the organisation. ' There have been parallel RFI and RFP processes for partners for each phases of the project. Tata Consulting was used for the accounting core, a German company called KWP was used for the HR pieces, and another German company, Convista, is working on the treasury and lending phase. It was important to gain expert help as OFID is a relatively small institution, with 191 staff and only ten in I'I'. The planned introduction of the treas- ury and risk management system meant we obviously needed a way to streamline our payment engine as well, says Edo. The SAP system provided 'straight-through processing [STP] support for Swift mes- sages straight out of the box but we're not a full bank and we didn't want to start recruiting Swift professionals in-house. ' This led OFID to evaluate a service bureau option as a viable alternative. Fundtech, now part of D+H Corpora- tion, was selected because it was one of Swift's premium partners, covered all of OFID's functional and technical require- ments, was bank-agnostic 'and gave us favourable pricingl says Edo. The STP aspect was important because OFID want ed a direct, seamless connection, without the need for additional proprietary mid- dleware, he adds. Providing all of the nec- essary checks are in place, it wanted direct processing of its messages by Swift. OFID signed with Fundtech in April 2015 and it took around three months to implement the bureau piece, with the relatively short timespan put down by Edo to the fact that most of the messag- es were out of the box from the SAP sys- tem, with the main tasks being to hook up the bureau and the SAP system back-end and implement the virtual private network (VPN) connection. The implementation of SAP's Loans Management system is taking longer. 'lt is one of the most critical parts and the challenge is basically that it is designed for commercial banks, so we have to perform some modifications} says Edo. Testing is currently underway, with all of OFID's loan or product types now defined and with being cross-checked by the business. All historical data will be migrated to the new loans platform and, with planned cutover © IBS Intelligence 2015 IBS Journal Supplement September 2015 by the new year, along with some phas- es of the treasury system, all of the pieces should be in place, marking a significant OFID digital transformation from a few years ago. Although there are some parts still to fall into place, OFID has already experi- enced a signiñcant improvement in the speed and ease of its operations, transpar- ency and in its ability to support its benefi- ciaries, including being able to make pay- ments in seconds not days. On the payments side, previously around 30 per cent were managed man- ually, and OFID used a mix ofglobal, local, intermediary and correspondent banking arrangements so the remaining 60 per cent of payments went through various banks' proprietary online bank- ing platforms. As well as the costs and inefficiencies associated with this, OFID did not have complete visibility of its cash position. It is predicting a 20-25 per cent return on investment from the Swift bureau in the first year. As well as the benefits stemming from STP, it has better financial risk management and govern- ance now. Ultimately, all of the operational improvements mean OFID is better able to fulfill its mandate to play an important role in alleviating poverty through facilitating better infrastructure, strengthening social services, and promoting productivity, com- petitiveness and trade. It has gone from largely manual to highly automated, with resultant knock-on beneñts to those that it seeks to help. 3.5 r wwwibsintelligencecom 1 1 : Apms asea DUO

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