From the October 2003 issue of Treasury & Risk magazine


On the heels of Y2K, Morgan Stanley's treasury knew it was time for a technology makeover. Its cash forecasting system was old and straining under the weight of more volume, and its programming language, SmallTalk, was rapidly becoming obsolete. But given its size and scope-assets total $500 billion and cash flow is in 29 currencies-Morgan Stanley's treasury managers knew that the solution was unlikely to be any off-the-shelf system. A replacement would require the investment bank to embark on an immense and time-consuming project to create a totally new system, but treasury decided it had no alternative. "We weren't able to find any outside vendors able to meet our needs," says Alexander Frank, Morgan Stanley's treasurer. "Our environment is complex. As a result, we needed a level of customization that led us down the [in-house] path."

It took two years, 12 full-time treasury employees and a project cost of $18 million to create Proteus, a global forecasting and funding system.

The biggest challenge: maintaining, reconciling and making available unprecedented amounts of diverse real-time data over a single platform. Because the project was so large, it was broken into three phases. In the first phase, the core Proteus system was designed and then beta tested in Latin America, Canada and Europe. In the second, Proteus was expanded to all currencies and rolled out globally. Finally, exception-based reporting was installed, which searches for data anomalies and raises alerts to cash management. "Every single area was involved in massive amounts of testing--thousands of man-hours," says Robert Newton, an executive director at Morgan Stanley.

Along the way there were technology wrinkles to solve, such as getting the system to work with Japanese NT Windows. Then, there was the challenge of communicating globally. Face-to-face communication required key people to fly around the world each month. "We put the best people in forecasting on the project," says Newton.

One clear advantage of the new system: significantly expedited global movement of data. Proteus now processes over one million transactions every day and has saved the firm $3.5 million per annum so far. What's more, the system ultimately delivers a very rich functional experience, says Newton. "Because we have robust data at our fingertips, people are much more educated about cash flows and what they're made up of," he says. "Exception management is a big part of the business process."


General Electric

Despite the fact that General Electric's generation of standby letters of credit and bank guarantees was voluminous and growing daily, the process remained manual and paper-intensive. For each transaction, as many as 25 pieces of paper might be involved, and the GE staff assigned to the task totaled two. "The volume of transactions was the pressure point," says Lynda McGoey, GE's manager of trade and project finance. "We knew we had a problem because the volume kept rising, and we weren't going to increase head count. You had very talented people with extraordinary expertise at a fax machine. Not a good use of time."

The solution was obviously to de-paper the process. Since a trade-finance e-auction system didn't exist, GE teamed up with SunGard Banking Systems to craft one.

The automation paid off. By digitizing the process, GE sharpened its productivity and got better pricing. Also, fees are automatically processed, paid and recorded. There's no longer any paper to be filed, since everything is on the server. Also, data can be viewed in real time and downloaded by users. "Now, anyone with access can log onto the system and run a report," McGoey says.

Though the portfolio has grown from $1.7 billion to $3.5 billion, there are still only two people managing it since processing time has been halved. Now, the staff has more time for customer service and contract issues, says McGoey.



When Whirlpool began whittling down commodity costs through e-auctions, the idea of applying this kind of aggressive competition to cash management services began gaining momentum. "In the past, everyone would submit pricing," says Frank Luongo, director, treasury analysis at Whirlpool. "But you didn't really know how far you could push it. You kept going until you'd had enough, and the negotiation could take weeks."

For Whirlpool, the first target was to get better rebates from banks with its travel and entertainment cards and purchasing cards. The means was adapting Free Markets e-auctions to do this. The method mimics any e-auction. The software sets a time limit for bidding and keeps track of the highest bidder. But there is a twist: Handpicked banks are the ones invited on auction day.

The beauty of the e-auction system, says Luongo, is that Whirlpool can see the bids taking place on the computer screen. Because banks don't know who else is bidding, they're forced to improve their price in real time. Whirlpool sets the minimum bid at the current rate. Not surprisingly, banks don't always like the process. "It takes some of the power out of the banks' hands," Luongo says.

Whirlpool has few complaints. Thanks to e-auctions, rebates have improved 330% over the old contract. "Our biggest realization is that pricing is a difficult thing to get your arms around," says Luongo. "We were surprised at how much room there was."


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