In 2015 with a relatively new Head of Finance at the helm, one of New Zealand’s largest not-for-profit organisations decided to review its financial and treasury processes against current best practice.
Stefan Azzopardi and his team at Southern Cross conducted an evaluation of all processes and mandates. They identified the opportunity to introduce a more automated method to the existing paper-based processes and evaluated three potential approaches to achieving best practice: the appointment of an external fund manager; the employment of more treasury staff; and the out-sourcing of treasury middle and back office operations.
An outsourced solution
Deal entry, settlements and reporting are the most time-consuming part of treasury operations, so it made sense for Southern Cross to look at retaining the front end dealing and settlement approvals in-house and investigate out-sourcing the middle and back office function.
Stefan approached treasury operations specialists, ETOS and found that an outsourcing model made financial and operational sense. “ETOS is a very good fit,” said Stefan. “They are treasury specialists and have connections with banks, NZ Clear and share registries. They have a level of expertise in day-to-day treasury operations that we could not replicate in-house.”
“ETOS helped us to transition from Southern Cross to their team and from a paper-based system to the automated asset and liability management system ‘Protecht’. This created a more controlled environment, reducing opportunities for human error, improving segregation of duties and producing an automated stream of reporting,” he explained.
ETOS also handled the migration of over 250 investments from different custodians to be held under Southern Cross ownership in NZ Clear.
Stefan said: “The movement of investments to NZ Clear was a large piece of work. For 20-30 investments this process was far from easy and required investigation into the custodian and management of each one to enable migration to the clearing house. ETOS managed the whole process from start to finish seamlessly.”
Now Stefan and his team find that managing and reporting on the Southern Cross portfolio is easier, with metrics available at the touch of a button. “Six or seven months into the implementation of the new system and NZ Clear, ETOS’ role is more middle office operations than advisory,” commented Stefan. “But when we have the odd issue crop up around deal settlement or clearing, ETOS investigate and resolve it quickly and efficiently on our behalf.”
With the small, part-time team at Southern Cross backed up by a much bigger ETOS treasury operations team, key person risk is significantly reduced – particularly when people are sick or away on leave.
“ETOS offers good service at a reasonable price and they give us much more flexibility, cover and extra control than we experienced handling it all in-house,” Stefan said. “They are extremely responsive and upfront when it comes to discussing expectations and limitations and our relationship means we can lift the phone at any time if we need advice.”