Reducing risk while financing local government

A Cornerstone for Innovation – LGFA Takes Treasury to a New Level

April 01, 2024

At a glance


To manage financing activities and the associated market, liquidity and credit risks with a cloud-based treasury management solution.

FIS Solutions

FIS® Treasury and Risk Manager – Quantum Edition


Enhanced risk and control capabilities with no ongoing maintenance overhead.


In 10 months, Treasury and Risk Manager – Quantum Edition was successfully implemented to help LGFA reduce market-leading risk and control capabilities and STP of transactions.

Established in 2011, the New Zealand Local Government Funding Agency (LGFA) is a council-controlled organization responsible for financing the New Zealand local government sector by raising debt at favorable terms on behalf of local authorities to enable them to reduce funding costs and diversify funding sources. One of LGFA’s most important projects to date is the implementation of the latest version of Treasury and Risk Manager – Quantum Edition to manage its financing activities and the associated risks.

LGFA’s path toward an optimized treasury organization

In the four years since its incorporation, LGFA has become the largest issuer of NZD debt securities after the New Zealand government. It acts as a conduit for 95% of the local government sector in the country by issuing debt and on-lending to participating councils. LGFA is 20% owned by the New Zealand government and 80% by local government shareholders. As a result of its accountability to local and national government, and ultimately the New Zealand population as a whole, it is essential that LGFA demonstrates transparency in its processes and decision-making. Furthermore, LGFA is risk-averse and seeks to reduce as far as possible the considerable market, liquidity and credit risks to which it is subject because of mismatches between issuing debt in the market and on-lending to local councils.

Key to LGFA’s successful growth strategy over the past four years has been to outsource back-office functions wherever possible, including legal, HR and IT, so that staff overheads are low. Given that LGFA’s core activity is to raise debt, and the pivotal need to manage risk on behalf of shareholders and the wider stakeholder community, treasury is managed in-house. The team now has six members across two locations.

The treasury team was able to use services, such as transaction execution, settlement, risk reporting and treasury accounting, from the New Zealand government treasury, including access to the government’s treasury management system. This gave LGFA time to structure the treasury team, policy, processes and technology to support its operational and risk management obligations in line with best practices. This included implementing a treasury management solution that provided market-leading risk and control capabilities, and straight-through processing (STP) of transactions from execution through to accounting.

The way forward with a treasury management solution

Mark Butcher, chief executive officer, LGFA, explains the selection process it followed: “It was critical for us to implement specialist, best-in-class technology for effective decision-making, efficient processes and controls, and in-depth risk management analysis and reporting, and provide the degree of accountability and transparency required by our stakeholders. We worked with external consultants who had specific expertise in treasury technology to conduct a rigorous evaluation process. As a result, we identified Treasury and Risk Manager – Quantum Edition as the right solution as the cornerstone of our treasury function.”

As part of LGFA’s overall outsourcing strategy, it was essential that the treasury solution was offered as a cloud-based solution, which is key to the Treasury and Risk Manager – Quantum Edition value proposition. Neil Bain, chief financial officer, LGFA emphasises:

“Treasury and Risk Manager – Quantum Edition is a private, cloud-based solution which was an essential criterion given that we have a small treasury team across two locations and no internal IT support. As the solution is accessed online, and managed and maintained by FIS, we have the flexibility of managing our treasury transactions, analytics and reporting from any location. In addition, there is no additional maintenance cost or resource overhead as the system is automatically kept up to date and maintained in line with industry best practice.”

The proof is in the results

Another key criterion was that the implementation needed to be completed within a short, nonnegotiable timeframe. It took 10 months from the selection process until the implementation was successfully completed in July 2015. There were a variety of reasons for LGFA’s success, which was particularly noteworthy.

Team commitment

There was excellent co-operation between the FIS and LGFA teams, with well-qualified personnel on both sides. Both parties were committed to a successful implementation, and everyone put in the hard work and effort that was required. A detailed implementation plan was put in place and monitored daily to maintain project momentum and manage project changes and any potential impact promptly.

Adoption of best practices

LGFA’s treasury was in the unique position of building its policies and processes from scratch, without the need to support or migrate from legacy processes. This not only was an essential factor in streamlining the implementation, but also in achieving LGFA’s efficiency and transparency objectives.

Where to next?

Now that Treasury and Risk Manager – Quantum Edition is in live operation, the next step is to continue to optimize processes and the solution and explore the opportunities that it creates. Mark explains:

“We have delivered on our core objectives, and Treasury and Risk Manager – Quantum Edition meets our core objectives very successfully. In particular, we are able to be more innovative now that we have Treasury and Risk Manager – Quantum Edition in place, and we are already seeing the outcomes of this. We now want to see how we can make the most of the functionality it offers to support our evolving business model and expanding range of instruments.”

Reduced market, liquidity and credit risks

Increased transparency into decision-making

“The treasury implementation project was a great achievement for the combined LGFA and FIS team, completed on time, under budget and with fantastic outcomes. Rarely in my experience are projects of this scale and complexity completed so smoothly and satisfactorily.”
Mark Butcher, chief executive officer, LGFA
“As we do not need to dedicate resources to maintaining the solution, we can channel our efforts into leveraging its capabilities to meet our changing business needs. As the solution is readily accessible from any location, we can meet changing organizational needs, and the needs of home working or travelling users, giving us a very high degree of flexibility for the future.”
Mark Butcher, chief executive officer, LGFA
“We were able to use Treasury and Risk Manager – Quantum Edition ‘out of the box’ to take rapid advantage of functionality and ensure that our processes and reporting were in line with best practices. There are longer-term benefits, too, of avoiding complex configuration routines, particularly the ease with which the solution can be maintained over time.”
Neil Bain, chief financial officer, LGFA
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