Published: September 29, 2014
Saudi Chevron Phillips (SCP) operates a shared service centre (SSC) to manage the cash, treasury and risk management requirements on behalf of all five Chevron Phillips’ joint venture companies in Saudi Arabia and United Arab Emirates (UAE). Each of these companies operates independently and therefore has different treasury policies, liquidity requirements and banking relationships. As part of its commitment to demonstrating industry best practices and offering service excellence to the entities it supports, SCP made the decision in 2013 to review and revise its bank communication strategy. As a result, SCP became the first organisation in the Middle East region to implement Alliance Lite2 for SWIFT connectivity as Alawi Al-Shurafa, Treasurer, and Shayan Rafi, Assistant Treasurer explain in this article.
In the past, we used a variety of banking platforms to communicate with each entity’s cash management banks. As each company appoints its own partner banks, this presented considerable operational and integration challenges due to the number of banking partners and proprietary systems involved. Users needed to work with multiple systems, each of which had diverse functionality, user profiles and access requirements. Each interface needed to be defined and maintained individually, which added operational risk and cost, and made it difficult to make changes to our treasury system infrastructure. In addition, we were considering implementing a payments and collections factory to process, control and execute incoming and outgoing cash transfers, so we needed a more robust and cohesive bank communication strategy.
We considered a variety of cash and treasury management solutions that offered connectivity and payment factory functionality. We were close to making a decision for one of the leading solutions in this area but we were then made aware of SWIFT AllianceLite2 through an article in the treasury press. We decided to research this option further and soon realised that AllianceLite2 could offer the secure, robust, ERP-agnostic and bank-agnostic bank connectivity that we were seeking.
Although AllianceLite2 is not designed to replicate the cash, treasury and payments management capabilities offered by treasury management system (TMS) or payment factory vendors, we already had much of this functionality in our existing ERPs and opted for the Swift Alliance Integrator middleware to bridge the gaps. Alliance Lite2, meanwhile, addressed the bank communication challenges we were facing in a cost-effective way, without the need to reconfigure our cash, treasury and payments processes. For example, the solution could be integrated with the two ERP systems that we use for treasury and payments (SAP and Microsoft Dynamics) allowing us to continue with our existing workflow, such as initiating and approving payments in the ERP before passing through to the relevant bank. SWIFT Alliance Integrator is being used to modify the file formats produced by the ERP to send on to the bank(s) which avoids the need to make costly changes to our ERP.[[[PAGE]]]
We held a number of meetings with SWIFT which gave us confidence that it was the right organisation to partner with in achieving our bank connectivity and payments objectives. In particular, we appreciated SWIFT’s stability, focus on security and flagship role in the industry. It was a particularly significant step for us at SCP to select Alliance Lite2 as we were the first organisation in the Middle East to do so. Although a small number of other organisations in the region have implemented SWIFT, they have done so via a service bureau, whereas Alliance Lite2 was a more appropriate alternative for us.
Implementation of Alliance Lite2 was very straightforward from a technical perspective. The most challenging part, however, was to mobilise our banks. In some cases, particularly amongst international banks such as HSBC, there was already a good level of awareness and support for SWIFT for Corporates and Alliance Lite2, and we received excellent project support. Some of our regional and local banks, however, had far less experience in supporting corporate customers to access their services via SWIFT. Consequently, it was more time-consuming to engage the right people at these banks and ensure that they could support the relevant SWIFT protocols, such as FileAct for transmitting payroll payments.
HSBC was instrumental in helping us to deliver a timely project, despite the challenges with some of our banks. We had a dedicated HSBC project manager who took a methodological, organised approach to project delivery and as a result, we were able to complete the project within 8 months across all of our banks. Most payments are transmitted through FIN, such as vendor and treasury payments, and FileAct is used for payroll and payments made through HSBC. As FileAct is more cost-effective and versatile, however, we are likely to move more payments to FileAct as more of our banks support this protocol in the future.
Rarely have we implemented a project that has brought such immediate and profound advantages as implementing SWIFT Alliance Lite2 together with SWIFT Alliance Integrator. All of our banks can be accessed through a single channel, without the need to juggle different systems and security tokens, and payments approval and transmission is a streamlined, straightforward process. By connecting with our banks directly via SWIFT, we have overcome most of the limitations previously posed by proprietary bank platforms.
On the remittance side, we are now able to electronically process payments to almost any bank or financial institution globally, whereas previously in many instances we had to fax manual payment instructions to our banks. The number of failed payment instructions due to use of incorrect or incomplete SWIFT codes or IBAN numbers has reduced significantly, not least because we are able to validate, identify and rectify data errors before sending instructions to the bank. The remittance process is also better controlled as the risk of file tampering associated with the manual upload of payment files to banks’ proprietary systems is eliminated as our ERP is integrated directly with SWIFT. As our cash management team now spend less time on manual processing, they can spend more time on analytical work that adds more value to the companies that we support, which allows us to provide a better service to them.
The more we explore and understand the solution over time, the more opportunities present themselves.
The more we explore and understand the solution over time, the more opportunities present themselves. For example, we are currently implementing EBR through Alliance Lite2. This is enabling us to achieve a single, consistent view of cash across all of our cash management banks for each company through electronic balance reporting (EBR). Balance and transaction information can then be integrated seamlessly into our ERP for automated reconciliation, which further reduces manual processing and improves control. Although we would have been able to achieve this without accessing our banks through SWIFT, it would have been far more difficult and labour-intensive.
The value of our SWIFT relationship has been greatly enhanced through the use of SWIFT Alliance Integrator. By adding a middle layer between our ERPs and Alliance Lite2, we have achieved our connectivity objectives without impacting on our existing systems and processes. In addition to EBR, we have created reporting queues to email reports to relevant individuals and alerts to approvers in the event of manual payments, and enable non-ERP applications (such as Sharepoint) to access data in a meaningful manner. For example, we implemented a Sharepoint database to create vendor remittance advices using the data from our MT940 statements.
SCP and our affiliate companies now have an unprecedented ability to reflect business changes quickly and easily. For example, we can add or change banking partners or introduce a new entity to our infrastructure. We can also make future changes, such as introducing XML formats easily, cost-effectively and without disruption. These advantages are critical to our strategic positioning within the group and allow us to offer a very high quality service to the businesses that we support, both today and in the future.
Looking ahead, we have a variety of business priorities that will be far easier to implement as a result of being connected to SWIFT. Once we have completed our EBR and auto-reconciliation implementation, we will turn our attention to regulatory issues such as know your customer (KYC) that are becoming increasingly important but are difficult to achieve without the right tools. We are currently researching this area more fully and have set up a task force to understand how we need to enhance our processes and reporting to demonstrate industry best practice in KYC and other regulatory requirements. SWIFT’s value proposition also extends to trade services, so we are currently looking at how we can use our connection to our banks via SWIFT to streamline processes for letters of credit and guarantees. What is very clear to us is that the opportunities through SWIFT are extensive and compelling. To take full advantage of these opportunities, we need to take a methodical, step-by-step approach to understanding and implementing these opportunities.
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