Automating Treasury Management to Better Manage Margin Calls

Today, buy-side firms are actively embracing proactive approaches to treasury management. The introduction of automation and the need for greater operational control has caused a 180-degree shift in how funds manage their treasury workflows. Active treasury management is the future of buy-side financing in an era of shrinking prime broker balance sheets, multiple counterparties, and increasing regulation.

Margin Call Management: A Fundamental and Time-Consuming Task

For asset managers, margin calls are an integral part of daily operations, playing a critical role in maintaining operational integrity. However, the process is notorious for its time-consuming nature. Moreover, margin call issues intertwine with cash management and collateral management, two of the most crucial functions within any fund. Many asset managers struggle to perform these tasks efficiently, hindered by inconsistent views of data and discrepancies between internal accounting systems and custodial perspectives on current and projected cash flows. Accurate alignment of these numbers is essential for asset managers to make informed decisions regarding trades and positions for their trading desks. In cases where the figures do not align, dispute management becomes a necessity.

Overcoming Technological Challenges in Margin Call Management

The adoption of available technology presents additional complexities in margin call management. Most asset managers adopt a best-of-breed approach, utilizing separate systems for margin and collateral management, cash management, and other essential functions. While this approach offers flexibility, it comes at a significant cost, including initial capital outlays for implementation and ongoing expenses for maintenance and upgrades. Asset managers often find themselves burdened with multiple systems, multiplying the associated costs.

Envisioning a Comprehensive Solution

Given the numerous challenges surrounding margin call management, asset managers are actively seeking new and innovative approaches to address these issues, as well as broader concerns related to cash management, collateral management, and dispute management. When evaluating potential treasury management solutions, it is essential to consider specific capabilities that streamline operations and drive efficiency. Some key features to look for include:

• Automated Margin Call Management: A solution that incorporates automated margin call management within its framework, eliminating the need for a separate email application
• Efficient Population of Margin Call Email IDs: Batch population of margin call email IDs for multiple accounts, reducing manual effort and increasing accuracy
• Normalization of Counterparty Data: Implementation of counterparty data normalization to mitigate the risk of human error
• Configurable Margin Rules: Flexibility in configuring margin rules at the portfolio, product, or security level, coupled with automatic calculation of margin call requirements
• Integrated Cash and Collateral Management: Seamless integration of current and projected cash flows within cash and collateral management functionalities
• Streamlined Data Load Monitoring: Ability to check the status of important document uploads, ensuring clarity and seamless file delivery
• Granular Information Drill-Down: Empowering users to drill down from the fund level to account-specific details, accessing increasingly granular information as needed
• Counterparty Fee Tracking: Automated tracking of counterparty fees, facilitating cost-benefit analysis and optimization
• Trade Suggestions and Currency Exposure Mitigation: Automated suggestions of trades and netting positions to mitigate currency exposures, minimizing risk
• Controlled Cash Balances: Functionality enabling controllers to review and sign off on cash balances before sharing them with downstream systems

Choosing an Integrated Solution

While the above list is not exhaustive, it highlights essential capabilities asset managers should seek in an integrated solution designed to efficiently handle diverse cash, dispute, and collateral management tasks through a unified interface. Ideally, the solution should be modular, allowing funds to begin with a primary focus, such as cash management, and gradually incorporate additional functions as needs evolve over time.

Conclusion

With increasing regulatory scrutiny, buy-side firms recognize the importance of active treasury management. Margin call management, treasury management, and collateral management are fundamental aspects of ensuring operational integrity and driving efficiency within funds. By embracing innovative solutions and leveraging integrated platforms that offer automation, streamlined processes, and enhanced data accuracy, asset managers can overcome the challenges associated with margin call management. A comprehensive treasury management solution enables seamless coordination between cash, dispute, and collateral management functions, empowering asset managers to make informed decisions and optimize operational efficiencies.

IVP Treasury Management provides one such robust platform designed to help asset managers improve transparency and efficiency across treasury and cash management operations. It can help funds implement the discussed strategies and provides a comprehensive approach to efficient margin call management.

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