ION/Openlink’s latest SWIFT technology offers a rich suite of tools to enhance and automate Treasury Operations; however, there is nothing turnkey about the standard definitions delivered with the build.
The Big Bang Theory
Treasury Operations are often undervalued despite being an integral part of a high functioning bank or corporation. Their core responsibility is to ensure the entity has sufficient liquidity to meet their financial obligations. A key part of this is having efficient reconciliation processes. As Newton almost said, for every Front Office action there is a larger and opposite matching, settlement, and reconciliation reaction within the Back Office. Especially for those dealers that have notoriously fat fingers.
In a prior era, many Treasuries relied on confirmation matching solutions bolted onto their Treasury Management System (TMS). A popular choice was Finastra’s Fusion application. Today’s TMS platforms inevitably support integrated confirmation matching including bank statement reconciliation, without a third-party application. As a word of caution, the system including the functionality does not necessarily mean it is easy to use. Just as the road to hell is paved with good intentions, the route to an efficient reconciliation process may require additional configuration and navigation around significant potholes.
As we discussed in the move to Transformer, ION has updated their Openlink SWIFT integration, which includes the introduction of the Message Transformation Service (MTS). MTS is a series of screens to configure and monitor the SWIFT message import process, primarily focussed on bank statements.
MTS replaces the short-lived Treasury Cash Management (TCM) screens that were initially built for a large corporate treasury implementation in version 12. TCM only supported bank statement reconciliation, not confirmation matching, and the screens were slow and clunky. Manually adding statement balances could be a time-consuming process, often simply watching the system spin a loading screen while you waited for a response.
The advent of MTS is accompanied by the removal of the Recon Module. Instead, bank statement reconciliation and confirmation matching are performed within the same framework, Auto Match.
While work has been done to ensure that majority of the prior functionality is still available in MTS and Auto Match, some gaps remain. Identifying which of them pertain to a client’s specific business, and coming up with a plan to resolve them, is critical to the success of the implementation.
Curb Your Enthusiasm
One functionality gap stemming from the move away from the Recon Module is the lack of a balance reconciliation. Auto Match offers no native functionality to reconcile the opening and closing statement balances to what is available in the system, nor does it supply any standard reports.
In addition, for accounts you do not reconcile, the system also offers no native solution to auto- balance the system balance to be in line with your bank statement balance. This issue is compounded by the fact that in the Cash Position Desktop screens, you cannot combine accounts where they differ whether the closing ledger or available balance is the true starting position. Normally this could be mitigated by using the system balance, but that value is effectively worthless without a customised auto-balance process for those accounts where the TMS does not have a record of every transaction.
Migration from the old screens and configurations is not as straight-forward as it should be and often the best choice is to reimplement rather than migrate, depending upon the complexity of the original TCM implementation. To help with this, ION supplies some packages they describe as ‘model’.
MTS delivers seven standard definitions for Auto Match. These cater for a range of matching and reconciliation requirements, from FX, Loan/Deposit, and Securities confirmation matching to prior-day and intra-day statement reconciliation. The issue is that, if one were to be generous, these should be called accelerator packages, but they are not best practice models. At best they are starting points to be adapted and customised to your requirements.
Each definition contains a range of matching strategies but not necessarily ones you would expect to use in practice. Suggestions include netting transactions on the bank statement leaving just a single flow for all that day’s activities. The focus seems to be on demonstration of capabilities rather than a solution that will satisfy any client’s common requirements.
The gaps present themselves early and often: issues with netting of cash on the statement reconciliation to problems matching the receiving agent or minor differences in the BIC on confirmations. The most significant gap is a solution to resolve unreconciled items. In fact, for the bank statement reconciliation, keeping the standard query would mean that items older than ten business days will simply disappear from your screen. Unaddressed.
What is clear from the above issues is that work is required for a Treasury to transform the model framework into a solution that can support their reconciliation needs. While the standard definitions give a flavour of what it possible, no consideration is given to exception handling, or treatment of unreconciled items.
The Good Place
These issues do not mean that all is lost, or that the MTS framework is simply masquerading as a heavenly solution and really you are in the bad place. Not only should Auto Match provide a robust reconciliation framework, but MTS also provides a range of new functionality including Payment Authorisation for implementing Delegated Authority Limits, or easier mapping between imported SWIFT messages and database fields using the Message Map.
Whether clients are coming fresh to MTS, or migrating from the Recon Module, they will need to consider the downstream processes required after matching. We have extensive experience using tools such as TPM to configure exception workflows, issue assignments and alerts, and, in general, closing the gaps between these starter packages and the needs of a modern, high-functioning Treasury desk.