The SWIFT Connection: When Does it Make Sense for Corporate Treasurers?

Corporate treasurers should consider SWIFT as a way to reduce banking costs while gaining flexibility, mitigating risk and improving visibility of their companies’ total cash position.

Accenture looks at the challenges facing corporate treasurers today, and shows how moving to SWIFT could provide a solution. This article looks at the benefits and the challenges of implementation.

Corporate treasurers face an unprecedented array of challenges involving cost containment, risk mitigation, stringent compliance, and visibility to their firm’s cash position. Many of them, however, lack a financial information system that can help them overcome these challenges.

One key problem is the number of connections to individual banks that must be maintained, a situation that generates both internal and external costs. Accenture estimates that the typical corporate-to-bank connection costs between €5,000 to €20,000 (approximately $7,000 to $28,000) per year per entity. Besides the expense, bank-specific standards make it impossible for treasurers to obtain visibility into their total cash position quickly. In addition, multiple bank connections and standards make compliance with regulations and internal controls more complex and expensive.

Treasurers want timely information about payments, treasury and securities orders, and reporting. And they need to understand their cash position at the end of every day—sometimes several times a day.

One possible solution is the Society for Worldwide Interbank Financial Telecommunication, or SWIFT, a member-owned cooperative that allows corporations to exchange financial information with their financial institutions through one standardized communication platform. SWIFT provides some 9,000 financial service institutions and companies with a connectivity framework that is used in concert with a payment platform offered by providers like SAP, Sungard, Wall Street Systems, Sage and Datalog.

In general, the more banking relationships a company has, the greater the savings it will gain by moving to SWIFT.

Such a change should not be made lightly, however. The legal contract with the bank will need to be modified, while some local banks might not be willing to accommodate a SWIFT channel. In addition, local regulatory requirements may mean that the change to SWIFT might not be a simple plug and play.

Moving to SWIFT can generate substantial benefits, including:
 

• A platform for sustained cost reduction.
   
• Improved bank account management.
   
• A clearer view of the bank relationship.
   
• Greater cash visibility.
   
• Expanded risk coverage.

A move to SWIFT does require careful planning and implementation. Each bank a company works with will need a SWIFT connection, and the company’s IT function will need to install and maintain a new system. Depending on the company’s strategy, some staff in IT, accounting or other functions might be redeployed so that they can work on more value-added activities. Either way, the transition must be planned.

The effort often will be more than paid for through rapid cost savings, greater flexibility, and better management of both bank accounts and cash flow. SWIFT enables treasurers “to build one centralized source of truth for all banking data shared across the company,” as characterized by the group manager for treasury at a global software corporation. A system using SWIFT as its communication platform does not just address corporate cost; it also frees up the treasurer to add value by spending more time focusing on firm strategy and performance.