Olam Agro India Ltd is a wholly owned subsidiary of Singapore based Olam International Group. The company began operations in India in 1992, carrying out general origination and Raw Cashew Nut (RCN) trading from a single office in Mumbai. Within two decades, Olam India has become one of the leading commodity companies across the sub-continent, and enjoys a pan-India footprint for 10 key products.

Olam India enjoys a strong reputation of managing one of the most diversified agri-commodity supply chains in India.
After analysing multiple alternatives in the market for our treasury front-office operations, we at OLAM India finally selected IBSFINtech which can be integrated at real-time. We perform extensive hedging activities and getting live market data has become a straightforward job owing to the integration of IBSFINtech’s TMS with Thomson Reuter’s DSS. We have been using TR’s FXALL for all hedging activities and STP from FXALL to IBSFINtech TMS has been a boon to us. Post integration of FXALL and IBSFINtech TMS, we have been doing all the currency related activities like derivatives, valuation and auto valuation. Bottom line, we have added at least $1 Mn to our trading portfolio over the last one year of using this solution
Anil Jena
Head Treasury, Olam Agro India Ltd

Challenges

Owing to their position, the company is exposed to significant foreign exchange and commodity price exposures.
Key challenges faced by the treasury team at Olam India include:

1. High dependency on spreadsheets and manual management of treasury processes
2. Prone to manual errors while booking in the market
3. Manual computation of MTM Rates
4. Exposure underlying maintenance
5. Validate trades with traders
6. MIS Report preparation used to take more than 1 day
7. Circulating business positions to each business users was done manually
8. Compliance with Central Bank regulations on derivatives
9. Adoption of hedge accounting to run hedge effectiveness test for derivatives
10. Consolidation of positions – As all the processes were manual, this particular activity took hours, sometimes even days to consolidate.

Solution

Olam India identified IBSFINtech’s Innovative Treasury 5.1i to enhance the efficiency of their treasury operations. The comprehensive and integrated treasury management solution helped the company to transition from spreadsheets and automate the end-to-end treasury operations.

Innovative TreasuryTM 5.1i supports Multi-Company, Multi -Location, Multi-Asset and Multi-Portfolio (or Product) Environment. It aids in managing exposure and offer tools to mitigate operational Risks. It provides real time reports/ dashboards for managing Open Positions vis-a-vis MTMs, Cash-flows and Collaterals. It leverages technology to incorporate the risk management process inherent in the solution to minimize risk by optimizing the risk-reward trade off. While quantifiable risks communicated by the top management are implemented in the form of threshold limits, qualitative risks are handled using intelligent forecasts and other analytical solutions.

Features of the solution:

  • A solution that uses cutting edge technologies to efficiently run a front office to trade in forex and to integrate them seamlessly to back office with built-in flexibility to handle complex settlement procedures and maturity mismatches.
  • Front office has the capability to handle Hedge Instruments like Forwards, Futures and Options. Instruments include both the Exchange Traded as well as the Over the Counter (OTC) types with provision for settlement, Cancellation, Rollovers – both for full and Partial amounts.
  • Integrating with Thomson Reuters FX Trading platform FXALL
  • Successfully executed orders placed on FXALL traverses through the IBSFINtech Treasury application by a office but completely integrated to provide straight through processing
  • Automatic generation of deal tickets, dealer pads, contract confirmations either through mail or physical printouts with an option to dynamically design confirmation templates.
  • Maintenance of dealer wise positions and different types of FX limits vis-à-vis hedges already taken and availability of the same in real time to Top Management. 
  • Maintenance of all types of contracts currency, maturity and bank wise with particulars of payable / receivable for the back office for each day and provision for cancellation or settlement on due dates.
  • Provision to rollover contracts on maturity either in part of completely with automatic calculation of charges.predefined workflow till settlement to appear in company’s ALM books.
  • Integration of currency exposure seamlessly with forward contracts to facilitate the company to hedge their exposure and provide mark-to-market at all times and measure risk through VAR approach.
  • Facilitate implementation of Company’s hedge policy and provide stop-loss and take-profit levels.
  • Capture as much information as possible to provide meaningful and dynamic MIS to assist the trading staff and top management to take fast business decisions.
  • Solution designed to provide maximum security, privacy and integrity by adopting time tested security practices.
  • Clear segregation of duties & responsibilities through workflow for front office, middle office and back .
  • Each Trading deal can be categorized and optionally be associated with the underlying import / export component.
  • Provision to maintain inter-company exposure (without the accounting module) for providing data to Top Management.
  • All deals including cross currency will have a rupee equivalent for crystallization, converted on a rate that is parameterized.
  • Reconciliation of confirmations on receipt from Banks.

Solution Benefits

  • IBSFintechʼs currency module saved Olam’s time, money and energy. 
  • Initiation of the FX or the initiation of the risk towards linking it with your underlying exposure. 
  • The module offers real time reports/dashboards for managing open positions. 
  • Adhere to the groups dynamic hedging strategy. 
  • Implemented faster and has fulfilled Olam’s requirement efficiently.
  • Efficient end to end management: front, mid and back office. 
  • Multi currency capability (dollar, euro, pound, yen)
  • They get access to real time mark-to-market
  • After implementation they started doing currency and all related activities like derivatives, valuation, auto valuation.
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Awards

Media Coverage

The interview was published in Corporate Treasurer, APAC’s most widely read and an independent print publication for CFOs and Treasury Teams. This interview was provided by Olam Agro India Ltd’s Head of Treasury, Anil Jena and he speaks about how IBSFINtech differentiates, infact is better than SAP Treasury.

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