Jun 2010 Financial News

New technology system to enhance GraceKennedy's risk management

Jun 04, 2010

Conglomerate GraceKennedy is setting aside up to J$457 or just more than US$5 million to buy a new information technology platform designed to increase risk management while driving efficiencies and new business across its local banking and investment arms, First Global Bank(FGB) and First Global Financial Services (FGFS).

"The new software system will be a core operation system for banking and investment management, so it will be used by both First Global Bank and First Global Financial Services with benefits expected to be derived from improved operating efficiencies, as it will facilitate straight-through processing and enhance our product development capabilities," said Courtney Campbell, the chief executive officer of GraceKennedy Financial Group Limited, the holding company for the conglomerate's financial businesses.

"So, for example, in First Global Financial Services it will enable them to process mutual funds and unit trust in the bank and, working together with First Global Financial Services, we will be able to offer services to customers that are across both institutions once the customers give the authorisation," Campbell told shareholders at the parent company's annual general meeting (AGM) in St Catherine on Wednesday.

The software, called Flex Tube, is being purchased from Oracle, an international financial-services software company based in California in the United States. The acquisition and implementation of the operating system will be financed by GraceKennedy Financial Group Ltd, using internally generated cash over a two-year period.

The project, Campbell said, is expected to get underway by the end of September this year.

The system, Campbell is promising, will transform the way the companies operate allowing them to hit the market faster with new products while improving control and risk management.

The banking arm, FGB, has been rolling out control and risk-management improvements since what has been deemed irregular bond trading activities, said to have inflicted losses of just under US$20 million, were discovered there in August last year.

"We will be able to identify the risk that we want to monitor very closely and provide real time feedback on where we are on whatever limits and controls that we have set," Campbell said this week.

The banking and investment segment of GraceKennedy Limited has been performing sluggishly, recording declining revenues and profits in the latest financial report by the Group.

At the end of the three-month period to March this year, the segment generated total revenues of $1.8 billion, a drop of 10.5 per cent compared to the same period in 2009.

Despite declining revenues, the bank managed to grow its loan portfolio for the period, the group reported. FGB also recently launched its online banking service along with the new business and corporate visa credit cards.

The focus at FGFS has been on portfolio management and investment advisory services, an area being targeted for fee revenue growth.

Like the financial services division, GraceKennedy's food business has also been working to create greater levels of efficiencies, having developed its own state-of-the-art distribution centre, which is said to be already generating impressive levels of savings for the group.

"We have generated savings in transportation cost - we could not ship in time the quantity ordered, now we are able to do that," said Erwin Burton, the GK Foods' chief executive officer.

He was also speaking at the conglomerate's AGM held at the new 250,000 square feet warehousing facility at Bernard Lodge, outside the capital city centre. The warehouse was built at a cost of $2.8 billion and equipped with electricity-powered forklifts, among other modern industrial features.

"Service levels have improved significantly, at the end of April it was 93 per cent, by the end of the year it should be at 95 per cent and in 2010 up to 97 per cent," Burton said.

"We will see the impact on the company's bottom-line as we will be selling more goods."

The move into the new facility started in February with seven of GraceKennedy's warehouses now located there. The operations of Grace Foods & Services are expected to be consolidated at that location by the middle of this month.

"We expect to be fully operational by July and see great efficiencies and savings operating from this facility," Burton told shareholders.

Along with its own operations, the distribution is also expected to build addition business for the company.

"We expect to take on new business and we are now in strong negotiation with new agencies to build business," said Burton.

A number of new products are also expected to be launched this year by GK Foods. Last year, the division did total sales of $630 million from new products brought to market during the year.

GraceKennedy's chairman Douglas Orane said an aggressive posture towards new business was the best way to counter current, negative market conditions.

"What we have found works for us is (that) whenever there is a recession, we invest for the future and that's what we are doing right now, so we are investing not only in infrastructure such as this distribution centre, new software for First Global Bank and FGFS, but also new product innovation," Orane said.

Source:
sabrina.gordon@gleanerjm.com
Jamaica Gleaner
Friday June 4, 2010

http://jamaica-gleaner.com/gleaner/20100604/business/business7.html