Enabling Company Growth through the Latest Connectivity ... · PDF fileEnabling Company Growth...
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The Financial Professionals Forum 2012
Enabling Company Growth through the Latest Connectivity Solutions
Juan Carlos Lozano, Market Manager Latin America, Citi
Rene Schuurman, Product Manager Connectivity, Citi
The Financial Professionals Forum 2012
Table of Contents
Secure and Efficient Cash Management for Corporates: •The corporate perspective •How to make cash management secure and efficient •Market trends and outlook •Citi connectivity solutions
The Financial Professionals Forum 2012
The 21st Century – First Decade in Perspective
Liquidity Strategy
Approach
Liquidity Management
Cost of Getting it “Wrong”
The Environment
Financial Conditions for Corporations
Capital Markets
“Back of the Envelope” “Directional will do”
Ready access to external liquidity. Seeking higher yields for cash.
Too little – easy access if needed
► Low interest rates ► Strong cash flow generation
promotes capital spend ► High credit and counterparty
limits ► Less emphasis on financial
and operational efficiency
► Ready access to cheap external capital
► Historically tight credit spreads
► Reasonable benchmark rates
Pre 2007 Growth Phase
“Piggy Bank” “What can I reasonably access?” Safe haven for balance sheet cash. Intense focus on cash generation and self-sufficiency
Potential distress
► Financing costs increase ► Slow growth across sectors ► Lower risk appetite ► Stringent controls on
expenses ► Reduced capital spend
► Reduced access to capital ► Very wide credit spreads ► Very low benchmark rates
2008 – 2009 Crisis Mgmt Mode
“Focus like a laser” “Good is not good enough!”
Increased emphasis on centralization and efficient liquidity structure
High risk but cautious optimism
► Lower capital usage ► Higher premium on
sustainable operating and financial efficiency
► Continued caution on risk
► Improving access to funding markets
► Spreads are still wide ► Financing covenants
2010 Onward Cautious Growth
The Financial Professionals Forum 2012
Implications for 2012: Execution Imperatives
Continued volatile market conditions and evolving regulations require improved information management and reporting capabilities Maintain financial flexibility with
comprehensive funding strategies across multiple options
Think strategically of treasury transformation opportunities
Implement robust control processes to monitor operational & financial risks that come with growth
Reassess banking relationships with a view towards future growth strategies and plans
Company-wide cash and liquidity management programs are a must “Piggyback” treasury objectives on
organization-wide technology/process initiatives to help drive the business case
Close coordination with businesses, regions to identify issues and mitigants Implement policies, controls and ensure
ability to monitor
Long-term view of requirements across a broader network Rationalize providers to improve operating and
cost efficiency
Keep abreast of changing market conditions
The Financial Professionals Forum 2012
Priority: Investing in Technology
Current technology trends:
• ERP and treasury management systems that increase straight-through processing
• New global standards (e.g. XML) that simplify information exchange and systems integration between companies and their banks
• Open standards (e.g. SWIFTnet) that reduce companies’ dependency on particular banks to make payments
• Automated procure-to-pay solutions, with features such as integrated supplier databases and electronic invoicing, eliminate paper processes and streamline receivables and payables
The Financial Professionals Forum 2012
Best Practices to Achieve Centralization and Automation
Centralization of treasury and
operations Automation of
processing and reconciliation
Rationalization of banking relationships
Reduce the integration effort and achieve greater consistency of services by consolidating Treasury and SSC activity around fewer banking partners offering wide geographical and functional footprint
Harmonization of file formats
Achieve efficiency by building the process around strategic file format. This can be either existing core format or new industry standards, such as ISO 20022 XML
Consolidation of connectivity channels
Simplify technical solution and reduce potential failure points by replacing various bank-proprietary connectivity channels with single secure, robust and scalable bank-neutral network, such as SWIFTNet
The Financial Professionals Forum 2012
Trends in payment initiation
-
Beneficiary account is held in the same country as the ordering account
Ordering account is NOT held in the home country
Ordering account is held in the home country
Beneficiary account is NOT held in the same country as the ordering account
Centrally controlled X-border payments
Centrally controlled local payments
Domestic X-border payments
Domestic local payments
“A move from cross-border to domestic transactions…
The Financial Professionals Forum 2012
Trends in bank access
Client uses Bank-system
Client uses in-house system
Open Bank adapts to Client standard
Closed Client adapts to bank-standaard
Web Services
Open Links
Bank Proprietary Stations
Bank Proprietary Links
…is supported by standardizing connectivity… Integrated Services
The Financial Professionals Forum 2012
Trends in bank capability access
Capabilities used from a single bank only
Capabilities used from multiple banks
Single bank interface
Multiple bank interface
+ very efficient - no best of breed
+ very efficient + best of breed
- not efficient - no best of breed
- not efficient + best of breed
… which leads to a reduction in the number of bank relationships”
The Financial Professionals Forum 2012
Best Practices in Bank Integration
Build a true STP model, including; – Acknowledgement and statement
reconciliation – Eliminate manual process and
steps Single network solutions
– SWIFT – Secure, robust protocol
Single connection to banking partner
Single, global EDI format Bank statement enrichment Bank statement consolidation
(reduce bank interfaces Use of digital identities, providing
true non-repudiation and security behind your firewall
The Financial Professionals Forum 2012
Selecting the Right Connectivity Channel for the Business Model Each corporate operating model sets unique priorities for banking channel services. Citi has developed a rich set of solutions tailored for specific client needs
Local or Decentralized
Model
User-friendly interface Ease of deployment Single window Flexibility, customisation Local Languages
CitiDirect® Online Banking
Centralized Treasury
Real time message Multi-banking Resilience of network Statements & Reporting Data aggregation
CitiDirect® Online Banking CitiConnect® TreasuryVision
Shared Service Centre
Maximum automation Standardization Capacity for large files Integration with ERP Effective reconciliation
CitiConnect® Straight Through Reconciliation Autobank for SAP
The Financial Professionals Forum 2012
Support of industry standards for
communications and custom
formats
Unparalleled global reach with TTS and
SFS capabilities
covered worldwide
Single Connectivity
Window to Citi’s Investor Services,
Intermediary, Cash, Trade, and Card
products
Cash & Trade
Wholesale Cards
Issuer Services
Investor Services
Statements & Reporting
Security
Processing/Routing
Tracking
FTP SFTP HTTP
HTTPS AS2 VAN
MQ Series ConnectDirect
SWIFT
ERP Integrator
Communication Protocols
A multitude of connectivity options
Entrust TD Comm Press
S/MIME SWIFTNET
Security PGP
Enrichment
Transformation Bundling/Un-
Bundling Multi-Destination-
Routing
SLA Monitoring File/Msg
Monitoring Runtime ID
Reconciliation
CitiConnect® – The Architecture
The Financial Professionals Forum 2012
CitiConnect® for Files
Facts:
2,400+ clients globally use CitiConnect for Files
700+ Shared Service Centres
5 million transactions processed monthly, 600 thousand files
Rapid growth of ISO 20022 XML popularity: 18% of all transactions now processed in this format
Payment and collection capabilities in over 90
countries and more than 100 currencies
Prior and current day account information for balance reporting, automated reconcilement
Notifications delivered via Web browser
Increased straight-through processing rates
Ability to reject/repair/authorize transactions online
ERP Integrator
SWIFT
Files
Benefits: File transmission and receipt from anywhere, at any time
Industry standard and customized formats:
– Formats include: ISO 20022 XML, SAP IDOC, EDIFACT (PAYMUL and DIRDEB), ANSI X12, Custom file formats
Available communication protocols:
– SWIFTNet FileAct FTPS, SFTP, FTP, HTTPS, AS2, MQ, Connect: Direct
Available security protocols:
– Entrust, TDCompress, EDIFACT Security, PGP
The Financial Professionals Forum 2012
CitiConnect® for SWIFT
Facts 200+ clients globally use CitiConnect for SWIFT Citi is #1 bank for volumes of messages and files
delivered through SWIFT network, in both Corporate and Bank markets
18% market share of SWIFT Corporate market Citi is #1 in geographical coverage, with 90 countries
certified for offering SWIFT for Corporates
Reduces cost of implementation, integration and
support
True STP in all countries of operation
Detailed and automated response messages
Statement data aggregation capabilities
File format choices through SWIFT FileAct, including ISO 20022 XML – leveraging CitiConnect for Files
A single connection for multi-bank transaction initiation via other banks
ERP Integrator
SWIFT
Files
Benefits: A secure connection to Citi via industry-standard
SWIFT™ network
Support MT messages through SWIFTNet FIN, and batched files through SWIFTNet FileAct service
An integrated and real-time connection for initiating payments, receiving information, and accessing services directly from your treasury management system
Single BIC leveraging any of Citi's branches for a global access for sending messages
The Financial Professionals Forum 2012
CitiConnect® ERP Integrator
The Challenge The CitiConnect ERP Integrator
SAP ERP
Citi ISO XML
Template
Bank Integration Challenge
Formatting payment instructions with the right data for delivery to your bank
Ensuring data is valid and accurate
The Solution
CitiConnect ERP Integrator leverages existing capabilities of SAP and delivers payment and direct debits in ISO 20022 XML with payment details, including local clearing rules, for straight through processing
Significantly shortens the implementation
Adaptable into your current ERP system
Supports all payment types in Citi’s ISO 20022 XML footprint
No additional SAP license cost
The Financial Professionals Forum 2012
The Pros and Cons – Proprietary Connectivity vs. SWIFT
Internet or
VPN
VPN
Bank 3
Bank 2
VPN
VPN
Bank proprietary host-to-host connectivity solutions
Pros ▲ Once investment made, lower service and usage
fees ▲ No extensive agreements ▲ Fewer hops make connectivity troubleshooting
easier
Cons ▼ Multiple bank connections result in higher
maintenance costs ▼ May need to maintain multiple standards in
connectivity, security
Pros ▲ One connection. ▲ Cost efficient on-boarding and migration of banks ▲ Proven reliability with over 99.99% availability,
robust security
Cons ▼ New legal agreements required ▼ Initial cost of migrating to SWIFTNet via Service
Bureau ▼ Additional intermediary charges by Service Bureau
and SWIFT
Service Bureau
Internet or
VPN
VPN
Bank 3
Bank 2
SWIFTNet (via Service Bureau)
VPN
VPN
VPN
The Financial Professionals Forum 2012
SWIFT Connectivity Models
Internet
Service bureau or Member/Concentrator
VPN
Internet or VPN
Web server Work flow
SWIFTAlliance
SWIFT
Network partners
VPN
VPN
Direct Connection
Very large volumes of messages & files
Manage your own SWIFT connection
Service Bureau
SWIFT Alliance Lite
Large volumes of messages & files Outsource SWIFT connection
+/- 200 transactions per day Simple entry level solution
Main characteristics Popularity
2%
Main characteristics Popularity
Main characteristics Popularity
78%
20%
Source: SWIFT
SWIFT connectivity methods should be evaluated based on features, and costs to ensure the right fit for the corporate
efficiency, renewable energy & mitigation
In January 2007, Citi released a Climate Change Position Statement, the first US financial institution to do so. As a sustainability leader in the financial sector, Citi has taken concrete steps to address this important issue of climate change by: (a) targeting $50 billion over 10 years to address global climate change: includes significant increases in investment and financing of alternative energy, clean technology, and other carbon-emission reduction activities; (b) committing to reduce GHG emissions of all Citi owned and leased properties around the world by 10% by 2011; (c) purchasing more than 52,000 MWh of green (carbon neutral) power for our operations in 2006; (d) creating Sustainable Development Investments (SDI) that makes private equity investments in renewable energy and clean technologies; (e) providing lending and investing services to clients for renewable energy development and projects; (f) producing equity research related to climate issues that helps to inform investors on risks and opportunities associated with the issue; and (g) engaging with a broad range of stakeholders on the issue of climate change to help advance understanding and solutions.
Citi works with its clients in greenhouse gas intensive industries to evaluate emerging risks from climate change and, where appropriate, to mitigate those risks.
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