The payment and settlement process is a critical aspect of asset management that demands meticulous attention. Even a minor error in this area can result in significant financial losses for funds and asset managers. However, by implementing certain measures, firms can mitigate cash management risks and optimize their payment and settlement procedures. To enhance efficiency and security in cash management operations funds can employ some effective strategies like:

  • Sanctions List Integrations: Integrating with the sanctions list administered by the Office of the Foreign Assets Control (OFAC) serves as a powerful tool to combat money laundering and regulate cash activities. This integration is particularly valuable during regulatory filings and compliance reporting, enabling organizations to identify and prevent any illicit financial activities effectively.
  • Customized Workflows: Establishing well-defined workflows is crucial for the smooth functioning of the payment and settlement process. Customized workflows act as the backbone of the entire cash management operation, governing actions across different user groups and ensuring consistency and reliability. By setting up standardized workflows, firms can reduce the risk of errors and discrepancies, thereby enhancing overall efficiency.
  • SWIFT Message Transmission Security: The transmission of SWIFT messages has been a focal point for stakeholders seeking to minimize potential fraud. Implementing end-to-end encryption of SWIFT messages has emerged as the most popular and effective method in combating security threats. This encryption provides robust protection against unauthorized access and tampering, ensuring secure communication between SWIFT bureaus and client providers. Additionally, the inclusion of Unique End-to-End Transaction References (UETRs) in SWIFT messages has further strengthened security measures in the payment and settlement process.
  • Managing Fund Admin Access: For funds that entrust fund admins with payment processing, deciding on the extent of privilege and access can be challenging. Two distinct approaches have been observed in this regard. The first approach involves directly sending Letters of Authorization (LOAs) to fund admins, granting them complete control over the payment processing. The second approach, on the other hand, involves granting view-only access to fund admins, allowing them to screen payments within the application without altering the transaction details. While the first approach provides greater control to the client, the latter is often preferred due to its convenience and efficiency.
  • Functional Groups and Super User Concept: An effective cash management software should support multiple user groups across various business scenarios while maintaining flexibility. To achieve this, many organizations adopt the “Super User” concept, designating a user with comprehensive privileges to oversee the entire payment and settlement process. This approach streamlines decision-making, enhances coordination, and ensures an efficient cash management process.

In conclusion, the implementation of robust cash management practices is crucial for funds to minimize cash management risks and optimize their payment and settlement processes. By integrating with sanctions lists, establishing standardized workflows, ensuring secure SWIFT message transmission, managing fund admin access, and utilizing the concept of functional groups and super users, businesses can enhance control, security, and efficiency in cash management. Embracing advanced solutions such as the IVP Cash Management Solution enables asset managers to shift away from manual workarounds and adopt a streamlined approach, thereby reaping the benefits of an automated cash management process. Prioritizing these measures will enable asset managers to effectively safeguard their financial transactions, mitigate potential risks, and drive overall operational excellence.

Learn more about the benefits of IVP Cash Management Solution or contact us at sales@ivp.in