enabling company growth through the latest connectivity ... · pdf fileenabling company growth...

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


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 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


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


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


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


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…


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


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”


Finance functions become centralized


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


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


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


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


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


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 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


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%



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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