RISK MANAGEMENT | 17 SEPTEMBER 2021

Banking on
FX Efficiency

C-1

Chris Paizis

Head: Client FX and International Banking

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Corporate treasurers are increasingly in the spotlight as businesses aim to negotiate these difficult times. How can banks help?

Junk status, COVID-19, load shedding, social unrest… While it feels as though South Africa may be rolling from one crisis to another, businesses across the country are increasingly leaning on their corporate treasurers to guide them.

“The corporate treasurer’s core responsibilities have not changed in the past year, but their importance has certainly been elevated,” says Chris Paizis, Head of Client FX and International Banking at Absa Group. “One of the basic duties of any corporate treasurer is to ensure there is sufficient liquidity – and this is especially true during a time of crisis.”

The treasurer’s task is further complicated by volatility in the foreign exchange (FX) market, as currency hedges need to be maintained and even as the currency market itself provides a source of liquidity. “Many international corporates are transacting in FX swaps in order to generate local liquidity in the markets in which they operate,” says Paizis. “As a corporate treasurer you need to be able to manage your company’s banking, liquidity and FX through these crises.”

Digital enablement

The South African banking system adapted quickly when the first wave of COVID-19 infections hit the country, focusing on simplicity and safety while enabling clients to transact and manage their risks digitally. With that increase in digital banking, banks have had to move quickly to ensure security and efficiency.

“Globally there has been an increase in digital fraud affecting individuals especially, and it’s been hugely important for us to ensure that the same thing doesn’t happen in our corporate or wholesale transactions,” says Paizis. “From Absa’s perspective, we were going through our separation from Barclays and building our own systems when the pandemic broke out last year. We’ve spent a lot of our development time focusing on the customer experience – not only in terms of how easy it is to use but also around the three elements of safety, security and stability. Our approach has been to understand our clients’ preferred channels and help to facilitate their preferred ways of trading. As we continue to enhance our own digital offering, Absa Access, efficiency and safety are very much top of mind.”

Many global corporates use multibank aggregators to facilitate their trading. Here, too, Absa has worked closely with those aggregators to ensure it offers the right solutions to its clients. “If you are a corporate based in Amsterdam and you deal with a dozen different countries across Africa and wish to trade all of those transactions at one point, we have made it possible for that to be done seamlessly while the transactions get booked in-country,” says Paizis. “Another functionality that we have digitised for these clients is their ability to place orders, as opposed to only transacting in the spot market through the aggregators.”

Non-negotiables for abnormal times

Corporate treasurers insist on efficiency, safety and flawless execution. Paizis says that efficiency, in this case, implies not having to log in to several systems to do your everyday business banking, such as payments, FX, money market and so on. “Offering a single sign-on in an efficient, seamless and safe way is definitely a priority,” he says. “And part of the efficiency drive is also around costs. We’re focusing on ways in which we can reduce transaction costs for our clients.”

The current environment of uncertainty and volatility makes effective risk another non-negotiable. “What we’ve found through this ongoing crisis is that while the currency remains liquid, it is completely unpredictable,” says Paizis. “As banks, we have to ensure that our engagement with clients is more than just transactional; we must also help them develop hedging structures that will see them through these cycles. At Absa we’ve seen many successful examples of this, with clients increasingly engaging in hedging structures that they might not have considered during normal times.”

And as treasurers across industries would tell you, the current times are far from “normal”.

Chris Paizis

Head: Client FX and International Banking

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