Transaction Efficiency Analysis

Transaction Efficiency Analysis (TEA) | Identifying opportunities and quantifying benefits of digitalized FX risk management 4 It is important to remember that the provider of any electronic service holds a vast amount of data on its users. This data can include everything from how you use a social media app to the screen usage time on your mobile phone to even the way you interact with banking applications for FX and payments. A TEA report can encourage the sharing of this information that a banking partner holds on its customers. A more transparent view of such data can give corporate treasury functions greater and more accurate visibility over their FX operations globally, enabling their enterprises to make efficient decisions about their FX risk management processes. This client is a global FMCG major with operations in over 60 countries. Citi serves as its main banking partner in over 40 countries, providing cash management, liquidity, and risk management solutions. The company has subsidiaries in a number of restricted emerging markets, which creates friction when trying to cover risk. It has also recently kicked off a treasury transformation agenda to adopt best practices wherever possible. The company was looking at its global dealing model for actionable insights. Using TEA reports, it was able to pinpoint insights and areas for improvement, which included the following. Seamless transition from voice to platform The company had a rough target of capping the number of voice deals at 10%. However, from the TEA reports, it was evident that this was not the case. In a number of countries, such as Bangladesh, Brazil, and China, it dealt via voice without any rationale. These countries were identified as candidates for onboarding on the electronic platform. Auto-execution of small-value tickets Further investigation of the Vertical TEA report revealed that the company executed large numbers of small-value deals with manual touchpoints. In Brazil, for example, a large proportion of sub-500k tickets were executed manually via voice or on platform. These deals were identified for a threshold-based auto-execution. Connectivity The Horizontal TEA report demonstrated that although the company had good connectivity with Citi for FX risk management, there were still gaps that could be bridged. India and Argentina were identified as potential countries to implement STP connectivity. The company also expressed the desire to ultimately move all the existing connectivity to APIs where possible. Confirmations A key process within the treasury transformation agenda, confirmations were still being carried out by email and in paper in some countries. The visibility allowed the company to kick off a program to automate this via SWIFT or Misys. The TEA report is designed to use existing data to arm corporates with enough information to make informed business decisions as they strive towards a more efficient and automated future. Corporate treasuries are increasingly being asked to create further value and provide strategic direction. As the traditional avenues of value-add become saturated, treasuries need to divert their attention to areas such as efficiency and automation to create that distinct advantage for their respective businesses. We hope this paper provides some strategic consideration as corporate treasuries plot their next move. Case study An FMCG client looking for global efficiencies in FX risk management As the traditional avenues of value-add become saturated, corporate treasuries need to divert their attention to areas such as efficiency and automation to create that distinct advantage for their respective businesses.