International Treasury Management and Corporate Finance

22-09-2022 | François de Witte | treasuryXL | LinkedIn

The following event, which features our Expert François de Witte, is something we’d like to call your attention to. To learn more about corporate finance and international treasury management, register below.

Register Here

Description

 

The treasurer is the custodian of the company’s daily liquidity. He manages, anticipates and secures cash flows by ensuring that financial needs are covered. This cursus will give the ability to assist directly and practically the treasurer of large corporates or to take over the treasury responsibilities in a SME. The different modules will allow you to acquire the fundamentals of the different areas of the “Corporate Treasurer” profession.

 

Module 0  – Introduction to Treasury Management

Speaker: Benjamin Defays / Treasury Manager

 

  • Bank account opening/closing

  • KYC

  • Payments and bank connectivity

  • Liquidity structures

  • Cash forecast

  • Importance of working capital

  • Factoring/reverse factoring

  • Main financial measures

  • Economic thinking

  • Risk Measures

  • Hedging

  • Fraud risk

  • Credit risk

  • General context

  • Bank guarantees

  • Letters of credit

Module 1 : Payments, Cash Management and Banking Relations – Fundamentals

Speaker François De Witte / Consultant  

 

  • Payment and interbank clearing and settlement methods.

  • Payments instruments, processes and tools

  • Electronic banking channels

  • Working capital, cash and liquidity management – basic concepts

  • Day to day cash management

  • Organisation of the cash management and tooling

  • Financing the company

  • Basic insights in managing banking relationships

Module 2 : Risk Management Applied to Treasury – Fundamentals

Speaker: François Masquelier / Group Treasurer

 

  • FX, Interests
  • Counter-parties
  • Others (Reputation, etc…)
  • Objectives of hedge accounting
  • Required documentation and formalization of hedge accounting relationships
  • Different types of hedges (Fair Value, Cash Flow, Net Investment)
  • Booking adjustments of different hedge types
  • Typical examples of different hedge types

Module 3 : Trade Finance Applied to Treasury – Fundamentals

Speaker: Benjamin Defays / Treasury Manager

 

  • General contact, cultural aspects
  • Why trade finance in treasury
  • Bank Guarantees, Burgschafts, Surety bonds, Letters of credit, Cash against documents
  • Alternative security instruments
  • Disruptive technologies

Module 4 : Credit and Collection Applied to Treasury

Speaker: Benjamin Defays / Treasury Manager

 

  • Introduction to credit risk management
  • Concepts & Practices/Types of credit risks
  • Understanding financial statements and ratios
  • Credit Scoring/Ratings – S&P, Bloomberg models
  • Collection:
    • Collecting overdue receivables – setting priorities
    • Strategies dealing with overdue invoices
    • Debt collection services development

 

Module 5 : Cyber-fraud: what you need to know to manage this ever increasing risk

Speaker: Thierry Hamon / Cash management & Cybersecurity expert 

  • Getting an overview of the different cyber-attacks techniques currently used
  • Understand the possible consequences of cyber-fraud and what needs to be protected
  • Learn 50 ways to protect
  • Special focus on IT backup, fraudulent emails & disaster recovery plan for treasury
  • Co-construction of counter-measure list for all main cyber-attacks
  • Personal action plan definition for each participant

 

Public cible

Anyone who wants to acquire basic knowledge of corporate treasury and put this knowledge into practice.

Prerequisites
  • Basic background in finance or accounting
  • For the advanced Excel workshop, a preliminary (good) knowledge in Excel is required.

Conditions

Training material

Course material will be provided at the beginning of the course.

Location
Chambre de Commerce Luxembourg

7, rue Alcide de Gasperi
L-1615 Luxembourg
Luxembourg

 

Register Here

 

 

Francois de Witte

 

François de Witte

 

 

 

 

 

 

New Treasury learning platform at Finsiders-Academy (Dutch)

15-09-2022 | François de Witte | treasuryXL | LinkedIn

Wij vragen de aandacht voor de volgende opleidingen, waarbij onze Expert François de Witte betrokken is. Namelijk een nieuw intitiatief van Finsiders-Academy om een Treasury opleiding op te zetten, en goed nieuws want de eerste modules zijn klaar!

Wat is Finsiders?

Finsiders is een financieel projectconsultancy bureau dat organisaties ondersteunt in hun tijdelijke nood naar ondersteuning, op vlak van controlling, accountancy, treasury en transformatie. We leveren operationele ondersteuning maar denken ook strategisch mee met de organisatie.  Daarnaast begeleiden we onze consultants uitgebreid met persoonlijke coaching en begeleiding, onder andere via het online leerplatform van de Finsiders Academy. Daar kunnen ze tijds- en plaatsonafhankelijk zichzelf verder ontplooien en bijleren, alsook zich voorbereiden op een nieuw project.

Welke leer modules zijn momenteel beschikbaar?

Op dit moment zijn de volgende modules klaar:

  1. Working Capital Management: https://www.finsiders.be/nl/opleidingen/working-capital-management
  2. Cash Forecasting and Cash & Liquidity Management: https://www.finsiders.be/nl/opleidingen/cash-forecasting-liquidity-management
  3. Financing & Bank Relations: https://www.finsiders.be/nl/opleidingen/financing-your-company.
  4. Globaal packet Cash Management: https://www.finsiders.be/nl/opleidingen/cash-management-opleidingspakket.
  5. Optimizing the Financial Flows: https://www.finsiders.be/nl/opleidingen/optimizing-financial-flows.

Voor wie zijn deze opleidingen extra relevant?

De opleidingen zijn relevant voor finance professionals die een dieper inzicht willen krijgen in het cash en liquidity management.

Wat moeten geïntresseerden nu doen?

Geïnteresseerden kunnen via de website inschrijven voor een e-learning naar keuze. Ze hebben 1 jaar toegang tot het online leerplatform en kunnen op eigen tempo en volgens hun eigen agenda tijdsonafhankelijk aan de slag.

Vind hier alle opleidingen

 

 

Francois de Witte

 

François de Witte

 

 

 

 

 

 

Quickly refresh your treasury knowledge? Download our eBook: What is Treasury?

08-09-2022 | treasuryXL | LinkedIn |

Hello Treasurers, CFO’s, Cash Managers, Controllers and other Finance addicts, how do you quickly refresh your treasury knowledge? Or how do you explain ‘What Treasury is’ to family and friends? Well, there is a simple solution for it. Download our eBook: What is Treasury? 

This eBook compiled by treasury describers all aspects of the treasury function. This comprehensive book covers relevant topics such as Treasury, Corporate Finance, Cash Management, Risk Management, Working Capital Management.

This eBook was prepared by treasuryXL based on the most useful best practices offered by Treasury professionals throughout the previous years. We compiled the most crucial information for you and wrote clear, concise articles about the key topics in the World of Treasury.

We took a deeper dive into each of the above-mentioned treasury functions and highlight:

  • The purpose of each named Treasury function (What is?)
  • What specialists do
  • Examples of Activities
  • Summary of Frequently Asked Questions and answers
  • Conclusion

How to receive the eBook ‘What is Treasury’ for Free?

We simply giveaway two presents for you! By signing up for our newsletter you will automatically receive the following in your inbox:

  1. On Fridays, our Coffee Break weekly newsletter will land in your inbox. In this weekly newsletter, we will highlight the whole week full of the latest treasury news within our community.
  2. The 41 pages eBook, What is Treasury?

 

Subscribe, Join, Download and Relax.

Welcome to our community and have fun reading!

 

 

Director, Community & Partners at treasuryXL

 

 

 

 

Ask the treasuryXL expert #4 What is RPA, and what are common use cases of RPA in Treasury?

06-09-2022 | treasuryXL | Philip Costa HibberdLinkedIn |

treasuryXL is the community platform for everyone with a treasury question or answer! treasuryXL expert Philip Costa Hibberd is often asked what RPA exactly entails and what some typical treasury use cases for RPA are. In today’s article Ask the treasuryXL Expert, Philip tells us all about RPA software and when it is happening in treasury.

Question: “What is RPA, and what are common use cases of RPA in Treasury?”


Answer provided by Philip

What is RPA?

RPA stands for Robotic Process Automation and is a software that performs rules-based work, interacting with systems, websites and applications in the same way a human would. Think of Excel Macros on steroids. With RPA, you can program robots to do the repetitive tasks that nobody wants to do. Robots work 24/7, are fast, make no mistakes, and are very cost efffective

Sounds good… but does this mean that we”ll soon be out of a job? No. Quite the opposite.

Robots are great at performing repetitive, standardised and time-consuming tasks, but are not great at dealing independently with the uncertain and complex world in which treasurers operate. This is why bots and treasury professionals are such a great combination. Bots give us superpowers: they give us back the time we need to focus on the valuable activities that make the job interesting and at the same time they allow us to keep direct control over the repetitive (but often critical) processes we need to do (without actually having to do it ourselves).

What are common use cases of RPA in treasury?

Reporting: collecting information from different sources, calculating measures and KPIs, drafting the reports, distributing the reports (after getting confirmation that everything is ok).

Master data management: support with the creation, updating, deletion and cleansing of master data in different sources and systems. Synchronizing data across systems.

Cash Position: collecting bank statements/account balance information from different systems, consolidating information, saving and/or distributing the cash position information to the appropriate people and systems.

Payment processing: collecting and consolidating payment requests, handling predefined exceptions and validations, inputting/uploading payment batches before cut-off times, providing reports and feedback on each action.

Cash Flow Forecasting: collecting cash flow data from different systems and sources, sending automated reminders, consolidating the information, applying validations and checks, notifying exceptions, distributing the information.

Month end activities: sending notifications/reminders on deadlines and expected activities, collecting and distributing FX rates, consolidating information, performing automatic checks, limit checks, compiling and distributing month end reports to accounting / FP&A / etc.

User and access management: checking user roles and statuses in different systems, notification of accesses about to expire, creating accounts for joiners and disabling accounts of leavers.

Mark-to-market valuations: collecting deal confirmations from different sources, extracting information from different mediums (excel, PDF, emails), running the models, preparing and distributing the reports.

Covenant management: collecting the information from different sources, calculating the ratios, warning of (imminent) breaches, warning of risky trends, distributing reports.

Bank fee monitoring: gathering bank statements / CAMT.086 / Bank Services Billing (BSB)  from different systems, processing the information, generating and distributing reports, automatic disputing of fees based on predefined rules.

Chargeback / Credit card disputes: collecting pre and post approval information, filing the disputes, notifying users of responses and exceptions/follow up needed.

Automated testing regression testing of ERP/TMS/system updates, bank connectivity testing, end to end process testing, generating testing reports and evidence.

(Basic) Trading: computing of exposures, inputting  vanilla deals in trading platform (if within predefined limits – otherwise notify traders), deal execution according to trading policy, handling of post trade activities.

 

Thank you,

 

Phillip Costa Hibberd



Do you also have a question for one of the treasuryXL experts? Feel free to leave your question on our treasuryXL Panel. The panel members are willing to answer your question, free of charge, with no commitment.

Discussion LinkedIn poll | The Dollar-Euro exchange rate reached parity for the first time in two decades

We analyze the results of the most recent treasuryXL poll on today’s corporate treasury concerns in this third edition of the newsletter. We’ll show you how treasurers voted to express their opinions on a current issue, and a few treasury experts will explain their positions.

We have invited Patrick Kunz, Harry Mills and Paul Stheeman to share their views on the current topic.

25-08-2022 | treasuryXL LinkedIn |

Poll results

We talked about whether treasurers should be concerned about the present trend in the Dollar-Euro exchange rate in last month’s poll. 38 people participated in the poll, and the results are shown in the image below. Thank you to everyone who voted, and don’t forget to vote in the new poll this month!

 

First observation

The results indicate quite clearly that the Corporate Treasurer is, of course, very much aware of the current trend. The exchange rate remains volatile, as the euro has even currently fallen to a new two-decade low. A number of treasuryXL experts have expressed their views regarding the current trend and how it may or may not affect treasury activities.

Views of treasuryXL experts

Patrick Kunz

 

“The main reason for keeping an eye on it is so a treasurer can estimate what the impact of a falling Euro or stronger USD will be on the company’s financials.”

 

Patrick voted for the option to keep a close eye on the current trend

 

Keeping an eye on the Euro-Dollar rate is not necessarily to know what the current rate is. The main reason for keeping an eye on it is so a treasurer can estimate what the impact of a falling Euro or stronger USD will be on the company’s financials. Both in the field of FX hedging (not all companies hedge 100% of their exposure but have a rolling hedging policy) and higher hedge costs (forward points have increased due to larger interest rate differences with the US).

But also the sensitivity of the exchange rate on profits and sales is important. For example, if you sell in USD, you suddenly earn more in EUR and you probably sell more. On the other hand, if you buy in USD, it becomes more expensive while your EUR price is fixed. Is it perhaps cheaper to buy elsewhere? What is the impact on the cost price and total demand and turnover of the product? Do the prices need to be adjusted? All questions that the treasurer does not have to answer but that he can signal to his colleagues (CFO, Procurement, Sales etc.).

 

Harry Mills

 

“Currency risk aside, treasurers have other headaches to contend with when currencies exhibit high volatility and/or experience a large directional shift (trend) in value.”

 

Harry voted for the option to keep a close eye on the current trend

 

The euro’s descent from above $1.20 in mid-2021 to below parity with the dollar has been well covered in the financial media, and the impact on European importers is obvious: higher import costs, squeezed margins, and pressure on business performance. Currency risk aside, treasurers have other headaches to contend with when currencies exhibit high volatility and/or experience a large directional shift (trend) in value. Let me name a small sample of potential areas for attention

Hedge Maintenance and Funding Requirements

Managing the currency hedging position, in line with policy, requires maintenance – trading in derivatives such as forward contracts and options, which presents its own challenges when exchange rates change over time. Additionally, FX swaps are used to balance cash positions and manage liquidity: it’s typical for swaps to be deployed to rollover the settlement on a hedging trade, or to bring forward a delivery. A lower EUR/USD spot rate compared to the hedged rate could incur a funding requirement if the position is out of the money when rolling-over or extending (i.e., for a euro-buyer / dollar-seller).

Treasurers as internal Consultants

Treasurers will need to work with the risk team and other stakeholders to manage internal expectations and provide guidance into the business. Preparing commentary, analysis, and forecasts using proprietary research and that of appropriate external sources, such as banking and consulting partners, is a critical area in which treasurers can demonstrate additional value. Business leaders will be aware of the EUR/USD parity story from headlines, but taking advice and information from trusted internal resources could be invaluable.

Collateral and Margin Calls

For European importers, selling the euro to buy the dollar, a move below parity will likely mean their hedging position is in the money, but of course, future hedging trades may well be at less favourable rates. For those firms selling the dollar to buy the euro however, they may find that they are losing headroom on their trading lines and could face margin calls as the sustained fall in the euro erodes their position value. Regular stress-testing of position valuations should give ample forewarning of any calls for additional collateral, and frequent communication with liquidity providers should provide the opportunity to discuss trading terms and spreads, which are liable to be adjusted in times of high volatility.

Currency Options

EUR/USD volatility has risen to multiyear highs, meaning that option premiums are higher. Treasurers will need to manage the impact of higher hedging costs and ensure an appropriate balance of cost-efficiency and hedge effectiveness is achieved. Another way EUR/USD breaking below parity could be a concern for treasurers is regarding option payoffs, and especially for path-dependent trades such as knock in or knock out options. Exotic options and multi-leg “structured” products can return a vastly different outcome in the event of a large shift in the underlying spot rate. Care should be paid to model various scenarios for the impact on the hedging and liquidity position, and to offer guidance on the appropriateness of such transactions.

Paul Stheeman

 

“The recent movements in the EUR/USD may seem extreme at first glance, but historically they have in no way gone outside of trends or ranges we have seen before.”

 

Paul voted for the option that there is no need to be concerned

 

I think treasurers should not be over-worried about the current movement in EUR/USD exchange rate. Let me explain to you why.

Every company should have a sound FX policy. This policy should take into account the possibility of increased market volatility. Some companies believe that their balance sheet is strong enough to deal with fluctuations in exchange rates and therefore will not hedge much, if at all. Others will want to manage their risk by using futures contracts or options. These instruments allow CFOs and Treasurers to hedge at a comfortable level. The only ones who may have sleepless nights are those who have not implemented a coherent hedging policy. But under normal circumstances, any Treasurer will ensure that such a policy is in place and implemented.

Moreover, European importers are concerned about the strength of the USD and the weakness of the EUR. But the current volatility in the market is by no means extreme. Over the past seven years, we have seen prices move between 1.25 and 1.00. In the seven-year period between 2008 and 2015, we saw rates between almost 1.60 and 1.10 . In that period, the euro has fallen twice as much as it has in the past seven years. Or look at the volatility over a shorter period, during the financial crisis between 2008 and 2010, when we saw rates move dramatically in both directions over much shorter periods. The recent movements in the EUR/USD may seem extreme at first glance, but historically they have in no way gone outside of trends or ranges we have seen before.


Would you like to explain your own vote for this poll? Join the discussion in the comments. And above all, don’t forget to give your opinion on our latest question!

Ask the treasuryXL expert #3 How to prevent fraud caused by BEC for my treasury department?

17-8-2022 | treasuryXL | Zhanna IrgaliyevaLinkedIn |

treasuryXL is the community platform for everyone with a treasury question or answer! TreasuryXL expert Zhanna Irgaliyeva is more often asked what you can do about fraud caused by BEC. Today she will tell us a few tools to prevent BEC scams for your treasury department.

Question: “How to prevent fraud caused by BEC for my treasury department?”


Answer provided by Zhanna

What are BEC scams?

BEC scams are everywhere and they never go away. A sort of email scam called a “business email compromise” (BEC) targets businesses with the intention of defrauding them. Compromise of business emails is a significant and spreading issue that affects businesses of all sizes and in every sector worldwide. Organizations have been exposed to potential losses in the billions of dollars due to BEC schemes.

What would you recommend to prevent fraud caused by BEC?

There are a few tools I recommend you to use to prevent BEC scams. First, it would be smart to rewrite the company’s policy and procedures to include internal controls to reduce fraud. You could verify new or updated beneficiary data not via email, but via a Main Agreement or Change Orde. Another option is separation of duties through the use of two-factor authentication.

Also, make sure to train your staff on the different types of BEC fraud and familiarize them with updated internal controls to mitigate the risk of fraud. Then, secure your email, and regularly update the required antivirus software. Daily reconciliation of company’s accounts would also be smart to do for early identification of BEC scams. Finally, always stay alert with everyday payment transactions as BEC scam can pop up just like that.

 

Zhanna Irgaliyeva

Reference: Association of Financial Professionals



Do you also have a question for one of the treasuryXL experts? Feel free to leave your question on our treasuryXL Panel. The panel members are willing to answer your question, free of charge, with no commitment.

Hogeschool Utrecht | Opleiding Treasury Management Post-Bachelor (Dutch)

10-08-2022 | treasuryXL | Hogeschool Utrecht| LinkedIn |

Je ambieert een functie als financieel directeur van een grotere (internationale) MKB-onderneming of non-profitorganisatie. Maar hoe word je financieel directeur? Die vraag staat centraal in de training Treasury Management. Tijdens vier masterclasses verdiep je je in de belangrijkste onderdelen van treasury management: corporate finance, cash management, valuta- en rentemanagement. Na de training ben je klaar om je ambitie waar te maken.


Je bent nu controller, accountant, financieel adviseur, cash manager of bankier en hebt minimaal drie jaar werkervaring. Jouw kennis uit het financiële bedrijfsleven vullen we aan met alle ins en outs van treasury management. Je start in het voorjaar en sluit de training na de zomer af met een opdracht uit je eigen praktijk. Ook doe je mee aan een treasury management game.


Schrijf je nu in


Opleidingsinhoud

Tijdens de opleiding Treasury Management richt je je op veel praktische vraagstukken. Je houdt je bezig met bankrelatiemanagement, (alternatieve) financieringsmodellen, rentederivaten, rapportages, internationaal zakendoen en meer. Allemaal met maar één doel: ervoor zorgen dat jij je verder professionaliseert, zodat je klaar bent voor die (internationale) topbaan.

Toelating

Om toegelaten te worden tot de cursus Treasury Management moet je een hbo-diploma hebben, net als minimaal drie jaar relevante werkervaring.

Tijdens een adviesgesprek kijken we samen of de opleiding aansluit bij je ambitie én of jij past bij de opleiding. Door de interactieve colleges leer je van elkaar, dus de samenstelling van de groep is van belang. Gestreefd wordt naar een diverse groep deelnemers uit verschillende sectoren van het bedrijfsleven en de non-profit sector.



 

Ask the treasuryXL expert #2 How can I efficiently and cost-effectively get central bank approval/advice for cross-border flows in cash-strapped countries without delaying my business?

treasuryXL is the community platform for everyone with a treasury question or answer! Today, we discuss a question that treasuryXL expert Vasu Reddy often hears within his treasury network. The question relates to challenges for Treasury in Emerging Markets that most corporates continue to experience.

27-07-2022 | treasuryXL Vasu Reddy | LinkedIn |

Question: “How can I efficiently and cost-effectively get central bank approval/advice for cross-border flows in cash-strapped countries without delaying my business?”


Answer (by Vasu Reddy)


“This is a common question I receive. It is related to emerging market challenges for treasury that most corporates still experience.

My idea is to proactively submit an application in advance. This application should indicate the nature and scope of the transaction, the benefits to the company, and the impact on the country (including currency and cash implications). Furthermore, it should include the reasons for not sourcing locally, the basis for the costing, and supporting documents such as supplier agreements, shipping documents, etc.

If it is a recurring remittance, such as royalties or monthly Global service charges, then a special dispensation should be applied for (renewed annually) to avoid individual applications resulting in increased costs, efforts and delays.

The best approach is to work closely with your authorized dealer, who is your main partner bank and who has strong links with the Central Bank, has automated systems and is fully aware of regulatory changes. ”

Vasu Reddy



Do you also have a question for one of the treasuryXL experts? Feel free to leave your question on our treasuryXL Panel. The panel members are willing to answer your question, free of charge, with no commitment.

Discussion LinkedIn poll | The impact of recent interest rate increases on treasury

Welcome to the second edition of this newsletter where we discuss the latest treasuryXL poll on current issues in corporate treasury. We will take you through what treasurers think about a current topic by their votes, and a couple of treasury experts will explain their views on the subject. In this edition, we discuss what treasurers should do first to control against sharp increases in interest rates.

We have invited Niki van ZantenJeremy Tumber and Vincenzo Masile ACT ICM ICA ACAMS to share their views on the topic.

25-07-2022 | treasuryXL LinkedIn |

Poll Results

Geen alternatieve tekst opgegeven voor deze afbeelding


We clearly notice that the majority of the treasurers are of the opinion that the first thing to do to control sharp interest increases is to reconsider the investment strategy of excess cash. We asked a number of treasury experts to explain why they voted for the other options than for a reconsideration of the investment strategy.

Views of treasuryXL experts

Niki van Zanten

 

“Place excess cash in USD requires a holistic approach, the right time and knowledge, but if applied correctly, will manage your cash like a pro”

 

Geen alternatieve tekst opgegeven voor deze afbeelding

Niki voted for the option to move excess cash to USD.

 

Treasurers want to manage certain risks, and often there is a silo approach. Liquidity risk is managed with loans and deposits, Interest risk (and returns) are managed with products such as interest rate swaps and FX is managed with FX spot, forwards and swaps. Once the incoming data (think bank balances, forecasts, markets rates) is structured, the data becomes information and is sufficient to act as treasurer with clear objectives (these are often defined in the above silos).

The next step would be to validate whether the approach meets the objectives. So, far nothing to worry about….until the market exhibits unexpected behavior. For example, a disconnect between FX swap points and underlying interest rate differentials (Jan 2015 USDCHF as a reference), or perhaps a need to optimize interest rates. In this case (and when provided time and knowledge is available), a holistic approach to FX, interest rates and cash can provide the opportunity to place excess cash in a higher-yielding currency without adding FX risk to your portfolio.

In short, it may make sense to place excess cash in USD if it does not shift FX risk or if this shift is managed by FX swaps and the pricing between swaps and deposits is compared. Again, this requires a holistic approach, the right time and knowledge, but if applied correctly, will manage your cash like a pro.

Some considerations may be to look at the efficiency of FX swaps versus deposits, as FX swaps tend to be more efficient, automation of solutions, and tracking and identifying market behavior.

 

Jeremy Tumber

 

 “Analyze how your company is exposed to the economic cycle ”

 

Geen alternatieve tekst opgegeven voor deze afbeelding

Jeremy voted for the option to choose something else.

 

First, analyze how your company is exposed to the economic cycle – a study I saw in the early 2000s showed that the best position for airlines was to be 100% floatig, because their business was effectively in lockstep with the business cycle.

In theory, when an entity is part of an industry that is closely aligned with the economic cycle, it has a natural hedge for its interest rate exposure, in that it can afford to pay higher interest rates when the economy is booming, and get some relief from lower interest rates when the economy is slowing. The study I’m referring to involved a major German airline; at the time, the airline’s funding was 80% fixed, and their comments at the time were not very favorable to switching to such a large floating exposure. Fast forward 15 years, or so, and I checked their Financials. They were 85% floating at the time, so they had clearly stepped into the results of the study.

The biggest risk for them would be an extended period of Stagflation, so I hope they do well in the current circumstances!

 

Vincenzo Masile

 

“My view here is that a treasurer should take a conservative approach”

 

Geen alternatieve tekst opgegeven voor deze afbeelding

Vincenzo voted for the option to move excess cash to USD.

 

Macro themes continue to drive financial markets. One does not have to look much further than the inverted US yield curve or the collapse in copper to understand that investors continue to re-price global growth prospects lower.

This is possibly because: (a) European activity is more exposed to the Russian energy supply shock and b) the U.S. economy has entered this global tightening cycle with more momentum and a positive output gap.

Inverted yield curves are typically bad news for pro-growth currencies (commodity exporters + Europe & Asia ex-Japan) and typically good news for the dollar, the Japanese yen, and the Swiss franc. This environment looks set to continue over the summer months as the Fed continues its tightening policy.

Recall that the German Bundesbank estimated that the Germany economy could take a 5% GDP hit if gas is rationed. It now appears that we are now not far from such a scenario. The pressure on European growth has caused the Eurostoxx benchmark equity index to fall 22% year-to-date, versus -20% for the S&P 500. The question will be how much more the ECB can tighten before the growth valves come down.

My view here is that a treasurer should take a conservative approach and assume that there are no large loans to be repaid to the banks, existing cash in excess should be moved to USD or to CHF or to JPY at least until the end of this year.

Sooner or later, Ukraine and Russia war will come to an end, so the cycle will reverse and EUR will become more attractive for investors and for treasurers.


Would you like to explain your own vote for this poll? Join the discussion in the comments. And above all, don’t forget to give your opinion on our latest question!

Ask the treasuryXL expert #1 How might digital trade transactions reduce the threat of fraud and money laundering?​

04-07-2022 | treasuryXL Vincenzo Masile | LinkedIn |

treasuryXL is the community platform for everyone with a treasury question or answer!

Today, we discuss a question that treasuryXL expert Vincenzo Masile often gets to hear within his treasury network about digital trade finance.

 

This edition, the following question will be answered:


“How might digital trade transactions reduce the threat of fraud and money laundering?”



Vincenzo Masile

“That is a question I think is very relevant right now, especially after Covid. Firstly, let me look back at trade finance over the past few years. In 2019 and 2020, trade finance came under scrutiny following a number of high-profile defaults, suspected frauds and double financings and, in some cases, the failure to provide proper collateral for goods.

While legislation to recognize electronic trade documents will not bring about an overnight change in financier confidence, it is likely to do so in the medium term.

A game-changer for digital trade

The availability of fully enforceable electronic trade documents recognized by the most widely used trade jurisdiction will in itself have a major impact on the approach of both companies and financiers towards digital trading solutions.

Transferable records, such as bills of lading, are the most important commercial documents in trade and currently, less than 1% of bills of lading are in electronic form. This is a huge missed opportunity, given that electronic transferable records will make trade safer, paperless, easier, cheaper, faster, and greener for companies.

Implications for the security in trade transactions and regulatory treatment of trade finance: URDTT

The Uniform Rules for Digital Trade Transactions (URDTT) version 1.0 are the result of the mandate given by the ICC (International Chamber of Commerce, Paris) Banking Commission to develop a high-level structure of rules, obligations, and standards for the digitalization of trade transactions.

The ICC Uniform Rules for Digital Trade Transactions (URDTT) are intended:

1. For a fully digital environment;

2. To be neutral with regard to technology and messaging standards; and,

3. To extend into the corporate space, including commercial transactions and the growing community of non-bank providers of financial services.

The URDTT are designed to be compatible with UNCITRAL (United Nations Commission on International Trade Law) Model Laws, including those Electronic Commerce, Electronic Signatures and Electronic Transferable Records.

The rules will serve as an overarching framework for digital trade transactions thereby providing global standardization, consistency and conformity, providing a collective understanding of terms and definitions, whilst promoting and supporting the usage of electronic records/documents/data.

Various technology service providers have already publicly stated their intention to work with the URDTT, in fact, a number have already incorporated the URDTT into their platform rulebooks and are actively looking at developing trade products based upon the URDTT.

Conclusions            

Trade finance functions that adopt appropriately targeted automation and advanced analytics as integral parts of their compliance operations will be more important than ever in this uncertain international environment. With such high volumes of transactions and increasing complexity, efficient trade financing is key to ensuring that warehouses, harbors and supply chains are running smoothly – thus keeping the age-old business of  international trade firmly afloat.”



Do you also have a treasury-related question? Feel free to leave your question on our treasuryXL Panel. The panel members are willing to answer your question, free of charge, with no commitment.