06-04-2022 | treasuryXL | Treasury Delta | LinkedIn | The optimal, objective, and transparent selection of treasury supplier solutions and/or banking services, observing procurement principles and guidelines, remains a complicated challenge for all treasurers. It is extremely time-consuming and cost-ineffective. This article highlights a niche fintech solution developed by Treasury Delta to successfully digitize the […]
04-04-2022 | treasuryXL | Kantox | LinkedIn |
“The year of predictable unpredictability”, as The Economist calls it. But what challenges lay in store for risk managers in 2022 when it comes to their FX risk strategy?
Let’s start with the first of our challenges that will affect your FX risk strategy in 2022, namely shifting interest rate differentials across currencies. This is the result of central banks reacting to inflation and inflation expectations. This will, in all likelihood, lead to increasing differences between FX rates with different value dates—also known as forward points. Central banks from a wide range of countries have adjusted their short-term interest rates in 2021, and more are set to act in 2022: Chile, Brazil, Czech Republic, UK, Hungary, Poland, NZ, South Africa, and South Korea among others.
Is your company well-prepared to manage those shifts? Is it well-prepared to take advantage of favourable forward points? In the event of ‘favourable’ forward points, for example, when a company sells and hedges in a currency that trades at a forward premium, pricing with the forward rate would allow that company to price more competitively—without endangering its profit margins.
As Toni Rami, Kantox’s Co-founder and Chief Growth Officer says, “most companies fail to take advantage of this opportunity, either because they lack the technology to do it, or because they are not aware of it, or because of both”.
Is it well prepared to protect itself from unfavourable forward points? This is shaping up to be a key concern in 2022. It would be the case, for example, of a company that sells (and hedges) in a currency or in currencies that trade at a forward discount, like a Europe- or a US-based firm that sells, for example, in Brazil.
This company could protect itself by setting boundaries around its FX pricing rate by means of automated and dynamically updated profit-taking and stop-loss orders in order to delay as much as possible the execution of the hedges. Failure to have this mechanism in place will mean:
(a) unnecessary financial losses due to the cost of carry (a key point in 2022 given recent developments in central bank policies)
(b) too much capital tied up in terms of collateral/margin requirements
(c) not enough time at your disposal in order to fine-tune and improve your forecasts (FX surveys consistently show that CFOs and treasurers would like to have more time at their disposal to fine-tune and improve their forecasts)
Turning to the second challenge, is the ongoing pressure on profit margins. There is a clear need for better, more dynamic pricing systems, as McKinsey surveys consistently show. Does your company have a proper system to price with FX rates? On the face of it, this looks like a simple proposition. It’s not. It requires a system to fetch the appropriate FX rate with criteria in terms of:
(a) sourcing the FX rate;
(b) communicating that FX rate to commercial teams
(c) updating that rate according to time-based or data-driven criteria.
And it also requires a system to create the FX-pricing rules that your business needs. Failure to have these systems in place will likely result in not being able to properly set the pricing markups —per client segment and per currency pair— that your commercial strategy requires and not being able to adequately use the forward rate for pricing purposes.
Take, again, the case of unfavourable forward points, namely a firm that sells and hedges in a currency that trades at a forward discount, or that buys and hedges in a currency that trades at a forward premium. With the proper pricing rules in place, the firm needs to price with the forward rate. That would allow it to avoid unnecessary financial losses on the carry. In 2022, with several EM central banks preparing to further raise short-term interest rates, this is likely to be a critically important element in any FXRM strategy.
Finally, the uncertain FX markets outlook is a reminder of the importance of having a solid FX risk management strategy in place in 2022. According to Citi’s latest Treasury Diagnostics survey, 79% of risk managers have exposure to non-G10 currencies, in many cases unhedged because of costs, liquidity and regulations; 60% of treasurers expect a new client base in emerging markets to be the largest driver of FX-denominated sales growth. Yet 57% of CFOs say they suffered lower earnings in the past two years due to significant unhedged FX risk (worldwide), rising to 77% in EMEA. America: 61%, Asia: 43% (HSBC survey).
This requires automated hedging programs and/or combinations of automated hedging programs. Failure to have these programs in place in 2022 is likely to mean: (a) a high variability in performance, whether it is measured in cash-flow terms or in terms of accounting results; (b) failure to adequately protect and enhance operating profit margins; (c) the possibility that your customer’s FX could turn into your own credit risk if excessive currency volatility forces them to wait for a better exchange rate to settle their bills.
Worried about your FX risk health? Take our free assessment and get a personalised insights report in minutes.
29-03-2022 | Philip Costa Hibberd | treasuryXL | LinkedIn |
What are 3 key do’s and don’ts to keep in mind in your RPA journey? Find out in this article I wrote, which was originally published in the Summer Edition of the Zanders Magazine.
This article was originally published in the Summer Edition of the Zanders Magazine. Are you interested in knowing more about Process Automation in the realms of Finance, Treasury and Risk Management? Feel free to reach out to me on LinkedIn.
Last year’s spring, we organized a ‘jargon-free’ breakfast session to explore what robotic process automation (RPA) is all about. We had a look under the hood of a complex, hard-working robot and shared experiences on how to make the journey of deploying a digital workforce as smooth as possible. Find a brief summary below, covering (briefly) what RPA is about, what are the 3 main stages of the RPA journey, and what are the key do’s and don’ts per each stage.
RPA stands for Robotic Process Automation and is software that performs rule-based work, interacting with systems, websites and applications in the same way a human would. It is a powerful tool that, when applied to the complex industries we work in, allows us to focus more on the valuable activities that make our jobs interesting and less on the boring and repetitive tasks that no one wants to do. You can think of it as macros on steroids.
You can find the key takeaways from the Breakfast Session, in the form of do’s and don’ts, summarized below for each of the following 3 stages of the RPA journey:
✔Do: Have fun!
Did you enjoy playing with Lego when you were a child? Then you will probably enjoy tinkering with RPA. Just like with Lego, spend some time discovering all the different components that you have available and finding out all the different ways you can get them together to craft something useful and tailor-made to your needs. Did you like playing with Barbies better than Lego? That’s also great, don’t worry. Deploying RPA in your team will give you plenty of opportunities to put your role-playing experience to use. Understanding roles, responsibilities, objectives and requirements of a process and effectively communicating the benefit of automating via RPA are the pillars of a successful implementation.
❌ Don’t: Don’t forget to explore slightly more advanced components, such as queues, credential management tools, log management tools, robot orchestration and control rooms.
You don’t want to have to bulldoze and rebuild your shiny proof-of-concept automation in a later stage, just because you weren’t aware of these components. They will become critical once you have more than a few processes at hand.
To stay in the Lego metaphor: make sure to explore the features of the full Lego range and don’t just idle on the baby-friendly Lego Duplo.
✔Do: Make sure processes and solutions are well documented.
I get it. You want to start building your bot as soon as possible. But make sure to first invest some time in drafting the following documents:
• A Process Design Document to capture at the very least the As-is process flow
• A Solution Design Document to capture how you intend to automate the process
You will be happy to have the former if (when?) you start having discussions on the scope of the work that the bot is expected to perform. It can prevent misunderstanding about what the process is all about and what the bot can do. You will be happy to have the latter if (when?) you have to do some maintenance on the bot that you are now developing. This blueprint will help you to quickly zoom in on the component that you need to tweak.
Good documentation will become even more important as your team grows. Imagine how much karma you will earn when someone in urgent need of fixing the bot finds and reads your clear blueprint!
❌ Don’t: Don’t automate sub-optimal processes.
Get everyone familiar with the concept of GIGO – Garbage In Garbage Out – and its less polite brother SISO. A bad manual process will become a terrible automated process, because robots can only act based on predefined rules. The rules can be as complex as you like but there can’t be any room for discretionary judgment. The untiring robots lack that.
Make it clear that a process needs to be streamlined and standardized before it can be a candidate for automation. If it’s not, someone will have to cross the jungle of “It has always been done this way”, which usually stands between a ‘Garbage Process’ and a ‘Good Process’. Who knows, it might turn out that many tasks and subtasks in the process weren’t needed after all.
✔Do: Set up a clear RPA Governance.
Once you hit the stage of growth, where your team is rolling out one bot after another, clearly defining the process of automating processes becomes even more important than clearly defining the process that you are automating.
Does the RPA team sit in IT or with the business? Who is responsible for what, in case of a malfunction? How are Audit, Compliance and Risk Management going to adjust policies to include the changes brought in by your new digital workforce?
❌ Don’t: Don’t forget Security.
While designing your RPA Governance framework, don’t forget the more practical side of Security.
You wouldn’t want to allow anyone the temptation of circumventing the four-eyes principle you already have in place. For example, you must make sure it is still impossible for anyone to input a payment to themselves and have it released by the unaware robot accomplice.
Define as soon as possible how you are going to create, assign and manage the credentials that your bots will need to interact with your existing IT infrastructure. Particularly in the case of unattended bots, it would be best to create specific users for your digital colleagues, with clearly distinguishable usernames. You might even consider going as far as letting your robot change all its passwords to ones of its secret liking as soon as it gets in production.
23-03-2022 | treasuryXL | Kyriba | LinkedIn |
By Andrew Deichler, Content Manager, Strategic Marketing
Application programming interfaces (APIs) have the potential to revolutionize the treasury and finance function. But when is the time to move to APIs, and when is file transfer protocol (FTP) still sufficient?
Let’s explore the use cases for APIs and when it is appropriate to begin using them. We’ll also look at areas where FTP is still sufficient.
Largely viewed as conduits for faster bank connections, APIs allow systems to exchange data faster. Unlike FTP, APIs do not require any kind of file download to transmit information; users have instant access to the data they need.
Major ERP providers are working with API developers to embed APIs into their workflows so users don’t need to take any action outside the ERP. For example, Kyriba is working with SAP, Oracle, Microsoft Dynamics and others on API connectors. And Kyriba users can also integrate APIs into their ERPs on their own with our plug-and-play solutions.
APIs have nearly limitless potential. They can facilitate an open ecosystem that enables third-party developers to build applications on top of the API provider’s platform. Through such a platform, corporate treasury and finance departments can expedite the flow of data. Kyriba’s Open API hub, launched in 2021, is an online marketplace of real-time connections to apps, data, and new products and services that inject data-driven decision-making into every financial operation.
APIs offer treasury and finance many capabilities that they haven’t had before, such as the power to “un-batch” payments. Rather than relying on batch processes that transmit at several pre-determined times each day, APIs allow payments to be initiated from treasury management systems and ERP systems as needed—even in real time. In fact, real-time payments require the use of an API because payments can’t be transmitted instantly if a file needs to be downloaded.
Furthermore, APIs can also un-batch reporting, allowing organizations to manage cash continuously and in real-time. Just like batch payments, batch reporting is constrained to set times each day. APIs allow treasury and finance teams to receive intraday liquidity updates as needed, improving the ability to position, reconcile and invest cash. And immediate visibility into cash also allows companies to vastly improve forecasting.
All that said, FTP isn’t dying out just yet. Banks and technology solutions providers that are managing open platforms are not replacing legacy formats with APIs; rather, they are offering them as a complement to these formats.
Furthermore, the rollout has been slow; most banks are not using APIs in live production yet. And the ones that do mostly offer them for certain real-time services—meaning that multiple connectivity options are needed to fully support a treasury and finance team.
But even if you have full API capabilities, they may not be appropriate for every type of data transfer yet. Generally speaking, FTP is better for large bulk transfers of data, while APIs are preferable for smaller, more specific transfer needs. And even though APIs can virtually eliminate the need for batching, some organizations may not see a need to end the practice—and they’ll need FTP to do that.
Lastly, FTP has been around for many years, making it compatible with legacy systems. Unlike API connections, which require that systems on both ends support the technology, FTP only requires that the appropriate file format be used. So, FTP won’t require any major conversions for your software. In other words, if the status quo is working for your organization, you may not see the need to make any changes right now.
In many ways, APIs bring key advantages over a file-based approach, such as an immediate response from banks and the ability to receive new data and notifications in real-time. But for the time being, flat-file technology is still very much in use.
Fortunately, Kyriba users don’t have to choose one or the other. Kyriba connects to 600 global banks on behalf of our nearly 2,500 clients using a variety of connection protocols, including APIs and FTP. So regardless of whether your bank and ERP are set up for APIs or not, Kyriba can ensure that you’ll have the right connectivity for your organization.
For more information on APIs, view our API Whitepaper, Fact Sheet and Infographic.
21-03-2022 | Peter Löbl-Brand | treasuryXL | LinkedIn |
We are happy to interview our newest treasuryXL expert, Peter Löbl-Brand.
Peter has been a corporate treasurer for over 10 years and is also a lecturer for multinational finance and risk management at the University of Applied Science in Wiener Neustadt, Austria.
Peter gathered insights while advising multi-national listed companies as well as local small and medium-sized companies.
He currently lives south of Vienna and is focusing on re-/structuring corporate treasury departments of SMEs.
Visit Peter’s LinkedIn profile to see an overview of his career and activities. But first…
My treasury journey started about 10 years ago as a credit risk manager at RHI AG, now RHI Magnesita. After about 3 years of working in this position, I got the chance to take over the Treasury team as team leader.
It’s a people’s business. Ensuring liquidity and therefore laying the foundation for the operative business of the corporate while having always a close relationship with your capital partner end strengthening their trust in the corporate feels like being one of the most important and highly valued links in the business.
I started my career in the group treasury of a listed company. Stage by stage I developed myself into a full-scale treasury and commercial officer working for a bigger SME company right now. My focus is on small to medium sizes companies with a high need for commercial structuring and the need to set up treasury management from scratch. To build, entertain and lead by example is energizing myself to perform.
Enabling business with partly sanctioned customers and countries.
Maintaining the tension and excitement after more than 10 years in corporate treasury.
Do not trust a soft commitment.
From my understanding, the corporate treasury is a business enabler. Especially when driving business internationally the corporate treasury is able to pilot business relationships to success. Based on that understanding Corporate Treasury is always seeking to find better instruments and the appropriate solution to close a deal.
I expect more and more solutions and instruments acting on the blockchain. Right now the industry is too much focusing on the blockchain as an enabler for cryptocurrency. Using the blockchain in international business will also solve the impossible trilemma as it makes business cheaper, adding quality and reducing costs for all parties.
Get in touch with Peter
Click here for his Expert Profile
Thanks for reading!
Kendra Keydeniers
Director Community & Partners, treasuryXL
17-03-2022 | Wim Kok | treasuryXL | LinkedIn |
Episode 3 of a series of educational videos on URDTT (Uniform Rules for Digital Trade Transactions) is now available. Please take a look and let me know what you think. Episodes 1 & 2 are, of course, still available on our YouTube channel.
Trade Advisory Network Limited and treasuryXL Trade Finance experts launched their third episode of a series of free, educational videos on URDTT. There will be 6 episodes in total covering all aspects of the development, interpretation, and application of URDTT in the context of a digital trade strategy. In the upcoming months, you can expect one educational video per month.
In this session, we look at the parties involved in a Digital Trade Transaction (DTT). We start with the principal parties – the seller and the buyer – and then move on to the financial services provider, and finally cover any other parties that might be involved.
Duration: 14.46 min
Enjoy, explore and develop!
Interested to know more about this topic and the upcoming educational videos? Contact our Expert Wim Kok.
International Business Consultant
Trade Finance Specialist
14-03-2022 | Jermal McDaniel | treasuryXL | LinkedIn |
We are happy to interview treasuryXL expert, Jermal McDaniel.
Jermal is an accomplished Finance practitioner with over 16 years of Treasury operations and Finance experience.
Jermal is an innovative visionary who utilizes a “Think Tank” methodology to generate ideas and action plans designed to streamline and automate manual processes to facilitate department efficiency.
How did his career in Treasury start and what is his best experience working in Treasury?
My Treasury journey started when my agency recruiting career ended in 2003. I did not set out to be a Treasurer, I kind of found myself in the Treasury field and I am blessed to still be a part of the Treasury Community.
I love the sense of urgency, the attention to detail, and the camaraderie/synergy needed to be a successful Treasury department. I often tell my staff that Treasurers are not born, they are made, and if you are detail-oriented, can work well under pressure, and are timely and accurate, I can give you the rest of the tools to be successful.
My Treasury experience is Mortgage-related. When studying for the CTP it gave me a lot of insight into FX transactions, Short Term liquidity investments, and optimal Debt vs Equity financing philosophies for Firms, but my expertise is in managing all aspects of Treasury including Banking relationships and building well run cross-functional Treasury Teams.
My best experience has been seeing a few of my former employees take the knowledge and guidance that I have given them and parlay that into Sr. Manager and Director of Treasury roles.
Data mining, and consistently getting timely information reconciled and into a useful form for Senior leaders to use for decision making.
You cannot perform all of the Treasury functions on your own and if you do not have a cross-trained Treasury team, there will be a high probability that important transactions will fall through the cracks tarnishing the reputation of your team and the department.
I am excited to see that Firms are really beginning to value what a good Treasury department means to the Firm. As the stewards of the Cash, making sure that there are enough funds to satisfy all of the financial obligations is Paramount to the success and reputation of the Firm.
There is a big push to bring on more Fintech resources to help with recording and reconciling all of the day-to-day cash movements. Treasury Management Systems are helping to streamline cash forecasting and reconciling by becoming a “Single Source of Truth” where information can be accessed by all of the Stakeholders making everyone involved more self-sufficient.
Get in touch with Jermal
Click here for his Expert Profile
Thanks for reading!
Kendra Keydeniers
Director Community & Partners, treasuryXL
09-03-2022 | treasuryXL | Kantox | LinkedIn |
Give up your time-driven rules for pricing with an FX rate and go for a data-driven approach instead!
In this article, we are going to highlight the challenges faced by treasurers as they seek to manage pricing risk. According to Toni Rami, Kantox’s co-founder and Chief Growth Officer: “Understanding pricing is perhaps the most crucial element in order to design a great FXRM program
Pricing risk is the risk that —between the moment an FX-driven price is set and the moment it is updated— shifts in FX markets can impact either a firm’s competitive position or its profit margins.
The natural way to reduce it is to increase the frequency of price updates. After all, the price itself is a potent hedging mechanism. But that is not an option for companies that wish to keep steady prices during a campaign/budget period or during a set of campaigns/budget periods linked together.
We will discuss this situation in further articles. Today we want to highlight the shortcomings of the most widely used criteria for pricing updates: time-driven criteria.
A time-driven rule to manage pricing risk consists in setting a time frame between the moment an FX-driven price is set and the moment it is updated. It can be every 24 hours, every week, every month. Quite obviously, the longer the time to the update, the higher the risk.
At Kantox, we are convinced that this approach is arbitrary, that it doesn’t protect you against FX risk, and that it does not reflect the business or financial needs of the firm. Take the 24-hour rule. Why not 23 hours or 25 hours instead? A time-based approach does not eliminate risk: a sharp move in markets can well take place inside a very short time span before prices are updated.
Another way to see this is that it makes it more difficult for the firm to react to favourable moves in FX markets. Take the case of a firm that prices and sells in EUR and buys in USD, using the EUR-USD currency rate as a key pricing parameter. A rise in the EUR could allow it to outsmart the competition by pricing more competitively without hurting its budgeted profit margins.
Failure to take advantage of this type of opportunity is a serious shortcoming in terms of pricing strategies, at a time when —according to consultants McKinsey— pricing is becoming a key strategic element in today’s competitive landscape.
At Kantox, we believe that such arbitrary time-driven rules should give way to a data-driven approach that consists of setting boundaries around an FX reference rate, such that prices are updated only if the market moves beyond the upper and lower bounds of those boundaries. The system then serves a new reference rate and dynamically adjusts the upper and lower bands around it.
If FX markets remain relatively stable, then the firm can keep steady prices, something that is attractive in many B2C setups. This approach also allows treasurers to take advantage of favourable moves in currency markets while protecting budgeted profit margins, independent of when these movements occur.
How far or close to the reference rate these boundaries are set reflects risk managers’ tolerance to FX risk. In addition, the pricing configuration can be adjusted according to the goals of management in terms of:
While most Treasury Management Systems lack what we call a ‘strong FX rate feeder’, Currency Management Automation solutions —working alongside your existing systems— allow finance teams, among many other things, to set up an efficient data-driven solution to manage all the aspects of pricing with FX rates, including pricing risk.
Worried about your FX risk health? Take our free assessment and get a personalised insights report in minutes.
03-03-2022 | treasuryXL | Treasury Delta | LinkedIn | Treasury Delta, our Irish fintech partner, recently formed an alliance with Blokken, a Dubai-based fintech aggregator. This strategic partnership will bring further innovation and digital technology deployment to the corporate treasury ecosystem within the Middle East. Credits: Blokken Source
03-03-2022 | treasuryXL | Aico | LinkedIn |
Ensuring manual payments are secure is a common concern for treasury, internal controls teams, and accounts payable process owners. While for some companies, manual payments cases are few and far between, others perform regularly and in large amounts and thus are at high risk of mishandling funds. In this webinar we will present:
Manual payments are often required for one-time vendors, where they are not set up in your ERP system, but a payment needs to be made. Whilst these tend to be infrequent in nature, the process still needs to be carefully managed to ensure internal controls are applied, and the risk of errors or even fraud is minimised.
The Aico solution provides a Manual Payments module to fully support this process, and in this Webinar, we will show you:
Sarah Bellerby, Solutions Consultant at Aico
As a qualified accountant with a background in Audit, Sarah started her career working in organisations with extremely manual and fragmented processes. For the past 10 years, Sarah has been driven by her passion for identifying and implementing intelligent solutions to streamline financial processes, mitigate risk and increase compliance. For the past 2 years, Sarah has been working specifically in the Record to Report arena, supporting customers in their Finance Transformation projects to implement intelligent financial close automation solutions.
Shivam Dosa, Head of Service Delivery at Aico
An ACCA qualified accountant with a passion for RPA and improving productivity in the workplace by utilising technology. Shiv has a broad background, spanning from working in Corporate Finance to Financial Control to Project Implementations, This experience has given him a solid foundation for Financial Close Automation within Aico.
About Aico
We help enterprises simplify financial close and record-to-report (R2R) accounting processes. The result is less manual work and faster period-end financial reporting with the assurance of compliance and data accuracy.
Our software platform includes solutions for the key R2R processes – Account Reconciliation, Closing Task Management, Journal Entries, Intercompany Invoicing and Manual Payments.
Unique real-time integration to multiple ERP systems brings increased automation levels and reduces IT system complexity to our customers.
With teams and a network of partners across EMEA, we deliver high-complexity projects for enterprises with a global footprint.
Visit aico.ai for more information about Aico.
Visit Aico resource library for eBooks and webinars on R2R and financial close best practices.
Join us on LinkedIn.
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