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Working in increasingly volatile and unpredictable times, many large corporates are analyzing the potential counterparty of risks regarding their banking relationships. According to the Asset Benchmark Research’s (ABR) Treasury Survey last year, counterparty risk was cited as a top five concern for surveyed Asia Pacific corporates.
In order to keep banking relationships in check and achieve operational resilience, companies are increasingly looking at multi-bank solutions such as Swift connectivity. Known as Swift for Corporates, the channel allows companies to interface seamlessly with multiple banks through a bank-agnostic system. The standardization and automation that the Swift channel looks to offer provides an avenue for companies to achieve greater efficiency.
While the Swift for Corporates channel provides organizations with a chance to rationalize their banking relationships, there are several factors which companies need to consider before enabling Swift connectivity.
One area of self-reflection is how to maintain existing banking links. By establishing Swift for Corporates, it is no longer possible to communicate with every bank in the world. It would be advisable to first survey any existing banking partners and determine whether they support the Swift for Corporates model. Moreover, since the channel uses a variety of standardized message types, such as MT101 and MT295, treasurers/CFOs will have to clarify if their banks support these formats.
Moreover, corporates need to be aware that connectivity with Swift isn’t an easy task to execute. It involves investment in terms of resources, time and money. Complexity of the task arises when having to establish a secure and automated end-to-end interface between the ERP system and banking partners. Businesses will need to determine if current treasury challenges are greater than the cost of Swift connectivity.
Aside from physically connecting with the Swift network, companies will need to go through a formal membership process with the organization. This would typically involve jumping through legal hoops and an internal company data review, which could disrupt the everyday operations of a business.
Finally, corporates would need to have full confidence in the robustness of Swift’s centralized system. While the solution does make companies bank-agnostic, it puts them in a situation where any point of failure in the Swift system, whether it be in Alliance Lite 2 or Swift Service Bureau, could leave them vulnerable.
Photo courtesy of Swift.
17 Feb 2017