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Treasury Transformation


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Treasury transformation

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Treasury Transformation

  1. 1. The OPEC Fund for International De- velopment (OFID) is the development finance institution established by the Member States of OPEC in 1976 as a collective channel of aid to the devel- oping countries. OFID works in coop- eration with developing country part- ners and the international donor com- munity to stimulate economic growth and alleviate poverty in all disadvan- taged regions of the world. It does this by providing financing to build essential infrastructure, strengthen social ser- vices delivery and promote productivi- ty, competitiveness and trade. OFID’s work is people-centred, focusing on projects that meet basic needs - such as food, energy, clean water and sanita- tion, healthcare and education – with the aim of encouraging self-reliance and inspiring hope for the future. From 2001 through 2011, OFID suc- cessfully transformed her Information Technology support operations from a decentralized organization to an effi- cient centralized unit through the stra- tegic and visionary support of its pio- neering leader Dr Deyaa Alkhateeb. OFID IT has risen to the management challenge of supporting continuous business improvement by envisioning a compatible IT strategy that supports institutional reform. As the transfor- mation effort continued in 2012, the SAP Phase III system blueprint identi- fied OFID treasury as the remaining frontier in its Financial Operations department, which had hitherto relied on manual and non-integrated business processes for its operations. TREASURY TRANFORMA- TIONAL OBJECTIVES · Eliminate manual procedures and optimize treasury business pro- cesses, thereby fulfilling operational and accounting compliance for financial (Continued on page 2) A decade of transformation: OFID ten years on; published June 2013 as revised in March
  2. 2. transactions.  Centralize and standardize treasury- specific business processes in order to achieve alignment and synergies across the organization, thereby eliminating multiple systems and ex- cel sheets.  Increase position and exposure fore- cast transparency, providing insights into available cash to optimize the utilization of working capital.  Utilize treasury employees more effectively and efficiently, thereby eliminating error-prone, time- consuming and labour-intensive man- ual activities.  Enable more effective decision mak- ing and reduce costs over the long term through standardization and automated approval workflows. In order to meet - and surpass the above expectations –the decision mak- ers in treasury decision wanted greater transparency and control over complex business processes related to managing and streamlining of payments, cash, li- quidity and risk management. At all times, physical cash had to be accounted for: where and when it WAS needed, and what and who needed it? It was therefore necessary for the treasury team to better understand and manage potential challenges with liquidity, coun- terparties and exotic currencies. As a strategic and go-to sup- The core guiding principles of the transformation project were: Simplification: - Analyse oppor- tunities to simplify and re-engineer core business processes under a common architecture and use common components wherever possible to enable transparency, visibility and auditability. Reusability: - Leverage existing IT investments where possible and “buy against built” IT strategy, since OFID is not a software house. Automation: - Automate repeti- tive and complex activities with due regards to workflows, govern- ance, risk and compliance require- ments. Integration: - Integrate core busi- ness within existing system, there- by guaranteeing a single source of business truth. Information: - Provide a founda- tion for OFID business intelligence using an appropriate business warehouse solution and centralize SAP TRM Solution Overview SAP software for treasury and risk man- agement is natively integrated into SAP ECC for increased transparency and control. It provides a single source of information and automates many critical treasury based business processes, thus eliminating extensive manual data gather- ing and rekeying, duplication of efforts, reconciliation and human errors. The system promises to be more inclusive of coordination and visibility by:  Reducing treasury management costs, transactional cycle times and resource demands.  Enhancing decision making and re- ducing unnecessary bank charges, overdrafts or borrowing  Streamlining payment processes and ensuring reporting/compliance  Improving efficiency and automation by using straight-through processing  Optimizing operating capital to fund operations with robust cash and li- quidity. SAP TRM offers comprehensive suites of functions for the management of treas- ury and financial risk to enhance insight, control and compatibility with manage- ment’s digital transformational drive; hence its adoption. “Treasury organizations evolve from local to regional centres and global depart- ments using technology and processes to enable in- house banks, payment factories and centralization of activities as FX trading, investment and funding. The use of SAP treasury applications facilitate these challenging tasks to our customers” – ConVista Consulting, Project Implementation Partner
  3. 3. Transforming Treasury Operations It is the core task of the OFID treasury department to ensure liquidity and to manage portfolios and exposure to fi- nancial risk. To do this effectively and efficiently, the Treasurer uses analyses of the current liquidity and risk situation to make decisions about future invest- ments and undertakings, taking into ac- count the conditions of the financial markets. After deal capture and settle- ment, the transfer of all relevant infor- mation into financial accounting has to be ensured. Managing positions in terms of controlling interest or cash payments, execution of corporate actions etc. had to be covered by the new system. Key Business Benefits  Automation of all treasury-based business processes for managing financial transactions.  Integration and ease of operational and accounting compliance moni- toring and reporting.  Real-time reporting and manage- ment of foreign exchange, interest rate and counterparty risks.  Online, real-time and 360 degree view on cash position and facilitat- ing better investment and financial decisions.  Reduction of operating cost through better financial and debt management.  Optimization of working capital with the help of improved liquidity forecasts and reporting. Payment and Bank Communica- tion Services The system provides an integrated pay- ment and bank communication platform that centralizes and optimizes all pay- ment processes, thus reducing cycle times and costs, while helping to ensure compliance. For a global institution such as OFID, international payments and transactions amongst its numerous gov- ernments, companies and beneficiaries (as well as the gathering and reconciling of data from multiple financial institu- tions) should not be “business as usual” Also, a payment approval workflow that is automated and rules-based stream- lines routing and provides -as additional benefit - intuitive status monitoring, which supports visibility in the payment lifecycle. Bank communication is provi- sioned with more seamless integration with spreadsheet standards including support for multibank gateway codes from the SWIFT to help minimize exotic currency risk. Streamlined payment pro- cesses reduce cycle times and costs, while helping to ensure compliance. However, multiple point-to-point elec- tronic interfaces, payment standards, and data formats can increase support costs and resource demands, as was the case before Phase III. Treasury depart- ments within multinational organizations face the additional challenge of complex business operations on a global scale. Cross-border payments and transac- tions among companies, as well as the gathering and reconciling of data from multiple financial institutions, are “business as usual.” SAP software for payments and bank communications can help you meet these challenges head on. Cash and Liquidity Management Services Cash and liquidity management is one of the most critical treasury functions. Yet, forecasting liquidity is complicated by the amount of data that must be gathered. SAP software for cash and liquidity man- agement addresses this challenge with features such as comprehensive and, timely insight into global sources and uses of cash – as well as the reporting of internal cash positions. This system max- imizes and automates cash flow visibility, imports cash balances from all house banks, and combines them with real-time financial data from accounts receivable and payable online from all operational areas. Added to this are comprehensive reporting and analytics capabilities for even more effective cash management decisions in “Business Warehouse”. Cash Management Deliverables  Restructuring of all planning levels and bank clearing accounts determination in line with account receivables and ac- count payables  Update of payment methods regarding SWIFT integration  Integrated memo records to improve the quality of the cash position reports  Integration of the new movements’ types from treasury and other product types into the cash & liquidity position forecasting.
  4. 4. Financial Risk Management Ser- vices The financial risk management compo- nent of SAP TRM provides financial risk analytics which assist treasury officers manage market-based risks with greater accuracy; -they can conduct real-time reviews of cash positions, risks, com- modity price changes, and currency con- version rates with the incorporation of dashboards and other visualizations, de- cision makers can quickly calculate expo- sures and identify risks. Financial risk analytics can help deter- mine in real-time the effects of market risks – including interest rate, foreign exchange, and commodity price fluctua- tions on revenue streams, input costs, and cash flows. Also, decision makers can pinpoint counterparty risk exposure to cash balances across global bank ac- counts. Risk mitigation strategies can therefore be strategized to improve the quality of hedge transactions and structure deals. This approach enables the acceleration of transactions and notifications to the business. In addition, the creation of an audit trail helps ensure that every hedg- ing transaction is recorded and accu- rately reported. Key features of our digitized Treas- ury  Automation of Foreign Exchange (FX), Listed and Over-The-Counter (OTC) derivatives management ser- vices  Up to the minute money and market risk analysis results  Business partner and credit risk anal- ysis reporting  Investment portfolio analysis in line with institutional policies and proce- dures  Centralized exposure and limit man- agement services  Hedge management and hedge ac- counting services  Integration into SAP Funds Manage- ment for budgeting and availability control tools “The OPEC Fund is an institution that has been evolving continuously since its incep- tion 39 years ago. The OPEC Fund you see today bears little resemblance to the insti- tution of 20 years ago or even of 10 years ago. This has been partly by necessity - the development arena is constantly shifting - and partly by design” Suleiman J. Al-Herbish Director General, OFID Mr Jacobs Edo Email: SAP Systems Coordinator at OFID and also doubles as the Phase III Project Manager. He is also certified by SAP and the University of Ap- plied Sciences and Arts North-western, Switzer- land’s Business Transformation Academy as a Transformation—Lessons Learnt  Identify key internal change champi- on  Secure senior management buy-in and support  Understanding key business pro- cesses and process re-engineering  Stakeholder management is skill is a MUST!  Deep technological and innovation knowledge  Excellent communication skills Conclusion When completed, the SAP Phase III treasury project will further leverage the OFID digital transformation exercise. It will also complete the provisioning of the requisite integrated technological infra- structure and services required to sup- port the OFID stakeholders’ community – Member Countries, Beneficiar- ies/Borrowers, Employees, and Suppliers - and significantly improve execution of