Seminar SAP S/4HANA – What treasurers need to know

| 21-01-2020 | by treasuryXL |

Are you dealing with the replacement of existing SAP-systems with SAP S/4Hana and its impact on treasury departments? Discover the opportunities offered by this transition and what you need to be aware of by attending the SAP S/4Hana seminar on June 25, 2020 in Amsterdam organised by Schwabe, Ley & Greiner (SLG).

The transition to SAP S/4HANA

Many companies are currently transitioning to SAP S/4HANA. Hardly any other issue is presently as hot in IT departments of SAP clients. Treasury departments are also affected by the switch of their companies’ ERP systems.

It is therefore helpful, as a treasury department, to address this issue regardless of the extent to which you have relied on SAP in the area of treasury in the past. Why? Because these changes are going to impact everyone. Irrespective of whether you use a stand-alone TMS (in this case, at least because the interfaces and data sources will change) or your processes are reflected using SAP treasury modules (in this case the impact will of course be greater since your own systems will be affected by the switch).

Many corporates are taking the opportunity offered by the switch to the new SAP version to integrate their systems to a greater extent. As such, the fundamental question of what system to use also arises. This could be an opportunity to efficiently design your treasury processes using a new or optimised system-based solution.

What key issues are covered in the seminar?

  • SAP S/4HANA – an overview of what’s new compared to the old version
  • How your future system landscape needs to be configured – which options are available and what to pay attention to
  • Understand the IT approaches relevant to the S/4HANA launch
  • What to do during the transition while selecting a new system – possible strategies
  • A quick insight into the system: SAP S/4HANA
  • A quick insight into the system: SAP Analytics Cloud (SAC)

Target Audience

Managers and personnel in the areas of treasury, cash and liquidity management, risk management, controlling, finance and accounting, payables and receivables management, IT and SAP applications.

Objectives

1. SAP S/4HANA – an overview of what’s new compared to the old version.

  • General system architecture
  • The new design – web-based interface as an alternative to the SAP GUI
  • Which new features does SAP S/4HANA offer in the area of treasury?
  • A brief explanation of the new models: SAP Cloud Platform (connection to external systems), SAP Analytics Cloud (new approach to reporting and forecasting) and SAP Leonardo (machine learning)

2. How your future system landscape needs to be configured.

  • An overview of possible scenarios
  • What if you already use SAP treasury modules and there’s a switch to S/4HANA? What’s going to change? Which functions will have to be modified? Which functions are going to be added? Which licenses will you need?
  • Integrated system v. side-by-side approach – which advantages and disadvantages are there?
  • How can your existing non-SAP TMS be integrated into an SAP landscape?
  • If you currently use a non-SAP TMS, does it make sense to fully or partially switch to using SAP treasury modules?

3. Understand the IT approaches relevant to the S/4HANA launch

  • Greenfield v. brownfield approach; on-premise v. cloud strategy
  • Why is it also important for treasurers to understand their IT strategy?
  • What do these approaches mean for treasury departments?
  • S/4HANA best practices

4. What to do during the transition while selecting a new system – possible strategies

  • Treasury now needs a new system-based solution but it’s going to take time to implement the new S/4HANA system landscape
  • Possible interim solutions
  • Can and should your treasury department be the test bed for S /4HANA?
  • When is it better to wait?

5. A quick insight into the system: SAP S/4HANA

  • Navigation
  • New look and feel
  • Insight into several important apps

6. A quick insight into the system: SAP Analytics Cloud (SAC)

  • Brief overview
  • Comprehensive treasury reporting in real-time
  • SAC options in cash flow forecasting

Participation

The participation fee for the seminar is EUR 1,500.00 (ex VAT). This includes documentation, lunch and beverages.

Register with 20% discount via treasuryXL

We are delighted to give you the opportunity to register for the seminar with a 20% discount. Please be aware that discounted places are limited. The seminar allows a maximum of 15 attendees. We recommend to sign up early to secure your spot. You can use code treasuryXL20 at check out to receive your discount.

You can register here.

Date, Time & Location

Postponed until further notice (date unknown due to COVID-19)

10:00 – 18:00

Hotel NH Amsterdam Schiphol Airport
Kruisweg 495,  2132 NA Amsterdam

Lecturer

Florian Maak

Manager at Schwabe, Ley & Greiner

 

 

 

 

About Schwabe, Ley & Greiner

Schwabe, Ley & Greiner (SLG) has been in existence for more than 31 years and is the leading consultancy firm in the area of finance and treasury management. During these years, they have carried out more than 5,000 projects mainly in Germany, Austria and Switzerland for over 2,000 large and medium-sized clients in all sectors and on behalf of these clients for their subsidiaries in almost all Western European countries and overseas.

 

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How to Get Started with International Money Transfer

| 16-1-2020 | treasuryXL | XE |

Do you ever get fed up with expensive service charges for the “privilege” of using your money? Do hidden international money transfer fees give you cold sweats when you log into your online banking account? Are the service charges imposed by providers like PayPal and Western Union making your heart beat faster?

You’ve worked hard all your life – to pay your bills, to provide for your family, and possibly to leave your home country to start a new life. Why should you pay exorbitant fees to move money in this digital age? There’s no need for armored trucks, planes, or boats to transport cash from you to the intended recipient of your money. Today, secure digital transactions are what gets money from one corner of the world to another.

Transferring money with a money services business (MSB) like XE eliminates the sorts of fees banks charge. You’re also assured a fair trade-able exchange rate on your money, based on the mid-market rate. (Meaning the mid-point between the buy-rate and sell-rate from international money markets.)

If you’ve heard this pitch from foreign currency transfer providers before, don’t worry, we’re just warming up here.

A Strategic Division of a Global Financial Powerhouse

XE, unlike many of the independent money services businesses in the marketplace, is a subsidiary of Euronet Worldwide, a leader in global electronic transactions and payments, and in facilitating payments between financial institutions, retailers, service providers and consumers.

We are entrusted by leading brands such as Google, Apple, Netflix and PayPal for their payments. Our sister companies facilitate payments for streaming media content, gaming, gift cards and pre-paid cellphones.

Our foreign currency market experts ensure our customers get the best value on money transfers to over 170 countries, in sixty currencies. Our consumer clients can transfer up to $500,000 (or your country’s equivalent denomination) from their accounts. There aren’t any monthly service charges or registration fees to erode your savings. Businesses can contract transfers of amounts exceeding $1 million.

The ABCs of International Money Transfer

If you’ve never contracted the services of a money services business before, here’s what you need to bring to the “table” before you even register for an account.

  • A bank account, and an original electronic copy of a bank statement
  • Government-issued identification such as a driver’s license, passport, or an age of majority card
  • An electronic copy of a utility bill, such as electricity bill or from a telecommunications company
  • An understanding of the approximate value of your foreign currency trading and transaction needs. These can help XE recommend services which maximize your return.

XE is mandated to collect these documents by the financial regulators around the world. They are used for the sole purpose of verifying your identity, and to defend the interests of XE and our clients against criminal activities like money laundering and to prevent the funding of terrorist activities.

There are further details about the terms of our service in the disclaimer below, and our Important information page.

It’s surprisingly easy to register for an account with XE, though if you need any assistance along the way, our knowledgeable customer success teams in our offices around the world are happy to assist you along the way.

Once you have registered for your account, and have transferred money to it from your bank, you can initiate a single transfer, series of transfers, or even mass payments to multiple suppliers or recipients. If you read on to the next section, you’ll learn about how you can take advantage of volatile market conditions to save money on overseas payments.

Services Which Distinguish XE from other MSBs

There are several overseas money transfer businesses in the market, and finding the ideal one for your personal or business needs can be challenging if you don’t know where to look. XE rises above the competition for many reasons in part because of our reputation for being easy to do business with. The proof is in our five-star rating on TrustPilot. Even our competitors regularly cite XE exchange rate data as the most accurate and reliable in the industry.

Some of the unique services which our customers rely on to mitigate costs include:

  • Forward contracts – which can lock in an exchange rate for up to twelve months, like recurring payments abroad for condominium fees.
  • Market orders – If you aren’t pressed for time on a specific payment, choose an exchange rate amount you are comfortable with, and we’ll initiate your payment for the moment the exchange rate meets that rate for your currency pair. These orders make the most of your money in turbulent times.
  • Spot orders for mass payments – Lock in on a rate for multiple payments at once for a batch of payments to multiple suppliers.
  • Risk management, cash solutions foreign exchange consulting and structured foreign exchange products for unique business requirements.

Time is of the essence in the currency market, much like in the stock market or in commodities trading. The services above provide some protections against unexpected peaks and valleys in the valuation of your local currency, though you should ensure you understand how upward or downward market movements can impact your scheduled payments.

Rate alerts via email are especially helpful to know when to trade when your base currency is at an optimal value relative to the currency you are exchanging for.

Money Transfer on the Go

There’s no denying that smartphones, tablets, and wearable devices are surpassing traditional computers for accessing digital content and getting things done online.

XE’s mobile apps for Android and iOS enable our customers stay up to date on exchange rates and make international payments without breaking stride.

XE is constantly developing innovative new channels and experiences for overseas money transfer. If you are evaluating XE relative to other money services businesses, don’t just take our word for it. Check out the review on money service provider review site Finder.com

Admittedly, XE is not:

  • The best choice for sending less than $1 (but who does that?)
  • Ideal for those individuals or companies not willing to provide identification before making a transfer. Yet, that’s contrary to international regulations in any case.
  • The money services business for those who want to pay on a cash or credit card basis.
  • The least expensive provider in the marketplace, nor are we the most expensive. You can’t beat us for value for your money though.

Whether you need to transfer rand to pay suppliers in South Africa, make a condo down payment in Dirhams to Dubai, or send krona to your sweetheart in Sweden, XE Money Transfer makes it easy and affordable.

 

Mark Burdon

Mark is a content writer, editor, and digital marketing specialist at XE, based in Newmarket, Ontario. Before joining XE, he worked with IBM, Open Text, TELUS and Canada Post.

 

 

 

 

Source

Get in touch with XE.com

About XE.com

XE can help safeguard your profit margins and improve cashflow through quantifying the FX risk you face and implementing unique strategies to mitigate it. XE Business Solutions provides a comprehensive range of currency services and products to help businesses access competitive rates with greater control.

Deciding when to make an international payment and at what rate can be critical. XE Business Solutions work with businesses to protect bottom-line from exchange rate fluctuations, while the currency experts and risk management specialists act as eyes and ears in the market to protect your profits from the world’s volatile currency markets.

Your company money is safe with XE, their NASDAQ listed parent company, Euronet Worldwide Inc., has a multibillion-dollar market capitalization, and an investment grade credit rating. With offices in the UK, Canada, Europe, APAC and North America they have a truly global coverage.

Are you curious to know more about XE?
Maurits Houthoff, senior business development manager at XE.com, is always in for a cup of coffee, mail or call to provide you detailed information.

 

 

Visit XE.com

Visit XE partner page

 

 

 

Back to the old days: Currency jargon in forex trading

14-01-2020 | Marco Lassche |

Nowadays the youth use apparently ‘stacks’ as a nickname for money. In forex we use already for a long time nicknames…

 

Recently I heard my son talking to one of his friends on the play station: “Hey bro, we need more stacks to go to the next level.”

When I asked him what is stacks: “Dad come on, you don’t know? Maybe you are getting too old for this (41?). Everybody knows that stacks is money.” Ouch…
My ‘old’ brain went back in time and this felt a bit like my first steps in the world of FOREX trading. At that time no electronic forex trading platforms were used. We traded still directly with banks / brokers by phone or Reuters messenger. Instead of Bro we used Mate. Instead of stacks we used the nicknames for the different currencies. For me the first days it felt like I was ended up in a scene of the Tower of Babel.

“Hey Mate, I need a Cable (GBP/USD) in two”. Later on I understood, this meant I want a price quote for a GBP/USD in 2 million GBP at which you can buy/sell GBP against the USD.

Now you know that stacks is money, and a cable is GBP/USD, it is time for some more nicknames in currency (pairs), and some background explanation:

Please feel free to contact me if you need any further information or assistance in setting up a more professional framework for controlling your financial risks and cash management in a more efficient way.

 

 

 

Marco Lassche 

Founder and Owner of at Bedrijfskostenexpert
Treasurer and Project Manager at Van Caem Klerks Group
treasuryXL Ambassador

Why corporate treasury is the recruitment niche for me

| 13-1-2020 | by Pieter de Kiewit |

My father was an engineer, he built roads and bridges around the world. One of his three kids following in his footsteps was a silent wish we knew about. Regretfully for him we all went in other directions, my sister and me at least landed engineering degrees. One of my first business management professors did teach me about building bridges but between functional areas. That is what I have been doing as a recruiter for the last 25 years and having a blast. 10 years ago I decided to only recruit in corporate treasury. Let me tell you why.

In a very simple way I always describe corporate treasury to laymen mentioning three tasks:

  1. Cash management and treasury operations: opening and closing bank accounts, payments, predict what payments will land and leave.
  2. FX and interest risk management: what will € and $ do? Zero % on our savings account, what shall we do?
  3. Financing: with what money will we fund our current and new activities?

With this description I do not have to be afraid for sudden new competition, do I? But do know that during the crisis treasurers found solutions for the survival of their employers. They found funding to pay salaries, helped sales with creative financing solutions, making complex transactions reality. They helped companies not going bankrupt due to currency exposures and forced banks to offer better solutions at an acceptable rate.

Treasurers manage large sums and report directly to the CFO. They are involved in mergers & acquisitions, reorganisations and international expansion. They act in small numbers but have a huge impact. Corporate treasury changes continuously and creates new treasury bridges to better connect with traditional job types like accounting, tax and sales. Corporate treasury is currently automated quicker than many similar functional areas. The academic world is showing increasing interest. In the Netherlands the post graduate education at the Vrije Universiteit is becoming more prominent in the treasury community. Corporate treasurer is an exciting position, the secret is out!

What I am passionate about is helping CFOs, HR, internal recruitment and group treasurers with their staffing questions. Treasury teams are almost always small, building treasury recruitment expertise is not worthwile for corporate managers. That is why my colleagues and I can add value. An HR manager knows about assessments, we know about treasurer assessments. A CFO knows about equity deals, we know about treasurers having funding expertise in his specific industry. A group treasurer knows about treasury tasks, we know how these tasks are executed in other companies so he can compare. That is why we can deliver and have impact. That makes me enjoy my job so much.

This is why recruitment in corporate treasury is my niche and there is still builder of bridges in the family.

 

 

Pieter de Kiewit
Owner Treasurer Search

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Information session Treasury Management & Corporate Finance on May 13, 2020

10-1-2020 | by Kendra Keydeniers | Vrije Universiteit

The VU Amsterdam would like to invite you to the information Session of the Executive Education programmes at the VU Amsterdam on May 13,  2020. This evening gives an insight into the content and organisation of the programmes

 

The Information session of the postgraduate programme Treasury Management & Corporate Finance is from 18.30 hr. to 19:15 hr.

Anyone interested in the programme is welcome. We are looking forward to seeing you at the VU Amsterdam!

Register here

 

Take a dive into RT career stories from graduates

The VU has been delivering RT graduates successfully for a few decades. That means that there are hundreds of graduates working, most of them in corporate treasury. How do their careers look like after they graduated? treasuryXL asked some of the RT graduates about their career development and their thoughts about the RT programme. Check it out:

Currency markets impacted by a number of factors as we open a new decade

| 9-1-2020 | treasuryXL | XE |

The markets have been exposed to some real turmoil. In the wake of the tensions in the Middle East, we have seen a general decline of stocks and move toward typical risk on plays – treasuries are up overall, gold is trending higher and so is oil. Very generally there are a number of themes affecting the major crosses.

Let’s get up to speed and examine these broadly:

GBP:

On one hand, there have been an increase of investment monetary inflows based on economic data. Add to this a general sentiment of rate hikes from the Bank of England still being on the table and a very likely sense of uncertainty or even fear from European exporters with the ECB under a great deal of pressure to stabilise/raise inflation (and be inventive in doing so) and Italy dragging the boat down somewhat there is every opportunity for the trade items to play out in a buoyed GBP. There are a few ‘watch out’ aspects, though. These may include things like monetary policy having been kept on hold due to Brexit (and there could be a case to see the Conservatives attempt to waylay Bank of England’s efforts to raise rates) and the possibility that investors have priced a recession into investment outlook. When reviewing 17 institutional banks’ forecasts for 2020, the consensus is for a rate to the Dollar of 1.3400.

USD:

Again, a tale with two sides to the coin. The Federal Reserve has added liquidity to the repurchase market (short version of this mini-crisis is: that the amount of available cash in this market dropped exactly as the demand for borrowing jumped which made interest rates look outlandish – the added liquidity settles this and resumes a better velocity of money, or speed of funds flowing through the economy). There are still some divisions remaining in terms of the Fed’s outlook for rates, meaning that stabilising and stopping rate cuts isn’t technically off the table. The uncertainty in the Middle East in the clash between the States and Iran means that investors have flocked to the safe-haven currency of the Dollar and add to this some very real concerns about the strength of the global economy and growth forecasts, meaning that safe haven movement could have longer to garner flight to the Dollar all could point to a near to medium term robust USD. Temper this view with some very conflicting US economic data, muted inflation price pressures and China getting rid of bonds – which would force the States to increase its balance sheet.

EUR:

The EUR has had a short-term increase in currency strength versus the GBP, but this is largely from uncertainties of how trade will be arranged in finalising Brexit. There are widespread concerns that, if a deal may not be organised in the timeframe allotted, the UK could default to trading with the EU on World Trade Organisation terms, which are far less favourable than a direct agreement. As earlier mentioned, though, the EU has significant issues brewing in the form of inflation control via the ECB and from a very poor economic performance by Italy in the last 8-12 months in particular. There are green shoots of good news, though, with preliminary German consumer inflation figures looking far better than expected – a significant contribution to solving their issues given Germany’s size and relative impact on the bloc. All things said and done, against the context of uncertainty from geo-political risks and fiscal/trade uncertainties as well, the EUR could well be the net loser in the coming weeks.

Elsewhere in the world, the cost of the bush fires in Australia are touted at being ~$2bn AUD and climbing, but of course, the cost of people’s lives and the lives and environment for their unique and rich wildlife ecosystem will be immeasurable. Our hearts go out to the people of Australia and the brave service people fighting the disaster.

GBPEUR: 1.1800

GBPUSD: 1.3198

EURUSD: 1.1183

The figures are based on the live mid-market rate, correct as of 08:30 GMT on 07/01/2020, and are provided for indicative purposes only. Live mid-market rates are not available to consumers and are for informational purposes only. The rates we quote for money transfer can be selected via the page on our website ‘Live Money Transfer rates’.

Get in touch with XE.com

About XE.com

XE can help safeguard your profit margins and improve cashflow through quantifying the FX risk you face and implementing unique strategies to mitigate it. XE Business Solutions provides a comprehensive range of currency services and products to help businesses access competitive rates with greater control.

Deciding when to make an international payment and at what rate can be critical. XE Business Solutions work with businesses to protect bottom-line from exchange rate fluctuations, while the currency experts and risk management specialists act as eyes and ears in the market to protect your profits from the world’s volatile currency markets.

Your company money is safe with XE, their NASDAQ listed parent company, Euronet Worldwide Inc., has a multibillion-dollar market capitalization, and an investment grade credit rating. With offices in the UK, Canada, Europe, APAC and North America they have a truly global coverage.

Are you curious to know more about XE?
Maurits Houthoff, senior business development manager at XE.com, is always in for a cup of coffee, mail or call to provide you detailed information.

 

 

Visit XE.com

Visit XE partner page

From a P&L to a Cash-driven organization in less than a year after implementing Cashforce

| 7-1-2020 | treasuryXL | Cashforce |

For many multinational corporations, effectively managing their working capital across numerous regions can be a significant challenge. Additionally, optimizing cash streams in a complex data environment can be a time-consuming process. The same issue goes for Dawn Foods, a global B2B bakery ingredient supplier with multiple entities & finance departments. With more than 50 locations worldwide, serving products in 106 countries and 40.000 customers served globally it is one of the main players in the food industry.

Starting 2015 the company started a change management process to turn Dawn Foods into a more cash orientated company.  A taskforce was created supported by Bart Messing, European Treasury Manager and Marc Kersten, European IT director, sponsored by the VP Finance & IT Michael Calfee.

Their key objective was a 10% year-over-year reduction of Net Working Capital Days.

One of the essential building blocks of this plan was implementing a 24/7 working capital tool whereby the KPI’s could be reported into several dimensions that are relevant to the different business units and functions. The different dimensions are important, as the business will only support improvement processes and accept targets unless the KPI’s are measured in relevant dimensions.

After careful comparison based on an extensive survey under key business people between internal/external tools on quality requirements, costs and potential benefits, Cashforce, a ‘next-generation’ cash & working capital analytics solution, came out on top. By designing a proof of concept, in cooperation with the internal IT department, a successful solution was reached. After the implementation the results were already significant in a short time: an instant working capital dashboard that provides 24/7 insights, as well as with simulations in different dimensions that are relevant for each department.

By providing the right technology, in combination with an unmatched cross-departmental cooperation, Dawn Foods was able to build a bridge between its finance department and the rest of the departments, thus reducing complexity and increasing visibility and insights.

This led to millions of dollars saved since setting up the new project (over a three-year period). The cash that was freed up has in the meantime been used to finance a strategic acquisition.

 

 

Exclusive interview with FX specialist Arnoud Doornbos about FX Risk Management

6-1-2020 | by Kendra Keydeniers | Arnoud Doornbos | Ilfa Group

On January 23rd, 2020 Ilfa and Global Reach are organising a masterclass on foreign exchange risk management. FX experts Michael Jansen of Global Reach and Arnoud Doornbos of Ilfa will guide you through the design of a FX risk management program and demonstrate which opportunities a program like this has for your organisation.

Go to event and register for the masterclass. Places are limited so we recommend to secure your spot today.

treasuryXL is delighted to share our exclusive interview with one of the organizers and FX specialist, Arnoud Doornbos of Ilfa.

What is Foreign Exchange Risk Management?

Foreign exchange risk management strategy or FX hedging strategy are terms used to define all the measures devised by businesses or investors to protect the value of their cash flows, assets or liabilities from adverse fluctuations of the exchange rate.

Hedging is used by companies to manage their currency exposure. If a company needs to buy or sell one currency for another, they are exposed to fluctuations in the foreign exchange market that could affect their costs (or revenues) and ultimately their profit.

By booking a hedge, companies protect an exchange rate against a specified sum of currency for a desired timescale, providing companies with certainty.

There are a range of products that can be used for hedging, depending on the companies objective and the exposure they are trying to protect.

Typically, a company would hedge their foreign exchange (FX) exposure to protect its profit margin from market volatility. Hedging is most common in companies that have an exposure to a secondary currency and have fixed prices on their products or services.

What are the types of Foreign Exchange risk?

Foreign Exchange exposure is classified into three types:

  • Transaction exposure deals with actual foreign currency transaction.
  • Translation exposure deals with the accounting representation
  • Economic exposure deals with little macro level exposure which may be true for the whole industry rather than just the firm under concern.

Currency risks can have various effects on a company, whether it operates domestically or internationally. Transaction and economic risks affect a company’s cash flows, while transaction risk represents the future and known cash flows. Economic risk represents the future (but unknown) cash flows. Translation risk has no cash flow effect, although it could be transformed into transaction risk or economic risk if the company were to realize the value of its foreign currency assets or liabilities. Risk can be tricky to understand, but by breaking it up into these categories, it is easier to see how that risk affects a company’s balance sheet.

What are the most common critical Foreign Exchange risk problems that companies make?

Businesses that operate internationally or domestically must deal with various risks when trading in currencies other than their home currency.

Companies typically generate capital by borrowing debt or issuing equity and then use this to invest in assets and try to generate a return on the investment. The investment might be in assets overseas and financed in foreign currencies, or the company’s products might be sold to customers overseas who pay in their local currencies.

Domestic companies that sell only to domestic customers might still face currency risk because the raw materials they buy are priced in a foreign currency. Companies that do business in just their home currency can still face currency risk if their competitors operate in a different home currency.

What critical elements of Foreign Exchange risk are often overlooked?

One of the critical elements of the currency risk that are overlooked is the correct identification of the type of FX risk. A distinction must be made between certain and uncertain cash flows in FX. With certain cash flows, the company has to deal with a linear risk that must be covered with a linear financial hedging instrument, an FX forward. With an uncertain cash flow, risk profile is not linear and it is dangerous to use FX Forwards to hedge. FX Options are better financial products to hedge.

If the company does not include FX Options in its Treasury policy, the second best option is to use FX forwards for, for example, 50% of the principal sum of the underlying risk.

Anticipated and committed exposure cycle

How can you measure Foreign Exchange risk and the different types?

There are many ways to measure foreign exchange risk, ranging from simple to quite complex. Sophisticated measures such as ‘value at risk’ may be mathematically complex and require significant computing power.

Register of foreign currency exposures

A very simple method is to maintain a register of exposures and their associated foreign exchange hedges. Basically the details of each hedge are recorded against its relevant exposure. This type of approach may also assist with compliance with accounting standards.

Table of projected foreign currency cashflows

Where the business both pays and receives foreign currency, it will be necessary to measure the net surplus or deficit for each currency. This can be done by projecting foreign currency cash flows. This not only indicates whether the business has a surplus or is short of a particular currency, but also the timing of currency flows.

To properly determine the FX risk, account must be taken of the differences in sensitivity of the incoming and outgoing FX cash flows.

Sensitivity analysis

A further extension of the previous measure is to undertake sensitivity analysis to measure the potential impact on the business of an adverse movement in exchange rates. This may be done by choosing arbitrary movements in exchange rates or by basing exchange rate movements on past history.

Value at risk

Some businesses, particularly financial institutions, use a probability approach when undertaking sensitivity analysis. This is known as ‘value at risk’. While it is useful to know the potential impact of a given change in exchange rates (say a USD one cent movement) the question will arise: how often does this happen? Accordingly, we can do a sensitivity analysis using past price history and apply it to the current position. Then, given the business’s current position, and based on exchange rates observed over the last two years, it can be 99 per cent confident that it will not lose more than a certain amount, given a certain movement in exchange rates. In effect, the business has used actual rate history to model the potential impact of exchange rate movements on its foreign currency exposures.

What steps do you need to make to create a Foreign Exchange strategy?

Transaction risk is often hedged tactically (selectively) or strategically to preserve cash flows and earnings, depending on the companies treasury view on the future movements of the currencies involved. Tactical hedging is used by most firms to hedge their transaction currency risk relating to short-term receivable and payable transactions, while strategic hedging is used for longer-period transactions.

Translation, or balance sheet, risk is hedged very infrequently and non-systematically, often to avoid the impact of possible abrupt currency shocks on net assets. This risk involves mainly long-term foreign exposures, such as the firm’s valuation of subsidiaries, its debt structure and international investments. However, the long-term nature of these items and the fact that currency translation affects the balance sheet rather than the income statement of a company, make hedging of the translation risk less of a priority for management. For the translation of currency risk of a subsidiary’s value, it is standard practice to hedge the net balance sheet exposures, i.e., the net assets (gross assets less liabilities) of the subsidiary that might be affected by an adverse exchange rate move.

Translation risk is for a large part a Finance issue. Within the framework of hedging the exchange rate risk in a consolidated balance sheet, the issue of hedging a companies debt profile is also of paramount importance.  The currency and maturity composition of a firm’s debt determines the susceptibility of its net equity and earnings to exchange rate changes. To reduce the impact of exchange rates on the volatility of earnings, the company may use an optimization model to devise an optimal set of hedging strategies to manage its currency risk.

What is, in your perception, the biggest benefit of a working Foreign Exchange strategy?

Foreign exchange risk management is thus fundamental but it is often considered to be too complex, expensive and time-consuming. Nonetheless, with a simple, tailored monitoring activity, it can neutralise currency fluctuations and bring the following benefits: Securing marketing margins. Optimising cash-flow estimates.

What is your best advise for companies dealing with Foreign Exchange risk?

This Forex market is open 24 hours a day, 5 days a week and with a daily volume of $ 6.6 trillion the most liquid and largest financial market in the world. For most companies, FX risks are non-core risks The objective of most companies is not to be an FX trader. By correctly identifying and quantifying the FX risks and then neutralizing them with the correct financial FX hedging instruments, companies will have little or no trouble with currency fluctuations on the financial FX markets. The implementation of the correct procedures forms the basis of good FX risk management and will make opportunistic behavior of management disappear.

 

Arnoud Doornbos

Associate Partner Ilfa

FX specialist

 

 

 

 

 

What may we expect for blockchain and the crypto markets in 2020?

| 3-1-2020 | Carlo de Meijer | treasuryXL

2019 was a remarkable year for blockchain technology. A lot of things, some unexpected, happened. But now it is time to bring our attention to the New Year 2020. Just like last year, and the year before, we try to predict what awaits the blockchain industry. So, let’s look at what does 2020 have in store. What are the most expected events that will shape the blockchain ecosystem in 2020 and beyond?

The year 2019

By all measures 2019 was a transformative year for the blockchain and crypto space with a more realistic approach. Overall, our 2019 predictions worked out pretty much as expected. It was the year where the blockchain industry translated the hype of previous years into more practical use cases and further advancements in the field of blockchain and distributed ledgers.

Both corporates and customers were significantly increasing their understanding of where blockchain technology makes sense and where it doesn’t in terms of a solution for real business problems. The most memorable thing about 2019 for the blockchain space was the speed and sustainability with which it has regained recognition and legitimacy in the eyes of governments and institutional players. We saw the birth of new blockchain alliances, new next generation blockchain start-ups entering the market, the introduction of new infrastructure projects and a plethora of blockchain protocols matured and expanded in growth.

More spectacular was what happened in the cryptocurrency markets. New cryptocurrency trading products were launched and we saw the growth in the number of stable coins. We have seen an increase in governments, regulators and central banks engaging with crypto in general. Many central banks are paying close attention to the benefits of blockchain and the need for their own digital currency. This was mainly triggered by Facebook’s plans to launch its Libra crypto currency.

Gartner Hyper Cycle

But before going into my own predictions it is interesting to look at the Gartner Hype Cycle. According to Gartner during 2019 blockchain has passed the ‘trough of disillusionment’. The industry has learned some tough lessons regarding the difficulties surrounding widespread adoption of this technology. It showed that they were much ahead of its technical and operational maturity. During this stage most enterprise efforts remain stuck in experimentation mode, with very few meaningful applications for blockchain in the real world. As a result, interest has waned as most experiments and implementations failed to provide expected results. As a result earlier start-ups were forced to end their operations.

We are now on the peak of the slope of enlightenment, when corporates and customers really learn and begin to use the technology for practical, useful purposes that will change how companies, applications and users interact. According to Gartner, the 2020s will be the decade when blockchain technology will leave small-scale proof-of-concept projects behind, and makes its way into the operational structure of multinational corporations. Over the next couple of years it will expand into a number of pragmatic use cases in payment processing, data sharing, equity trading and contract/document keeping and tracking. Blockchain will be fully scalable by 2023, according to Gartner.

What to expect for 2020

Looking forward to the New Year 2020, there are several notable trends and movements in the blockchain and crypto currency area to watch. Some of the key trends we outlined this year will persist in 2020. Users of blockchain and distributed ledger technology will further focus on operational matters, deployment flexibility and, interconnectivity. They will look for enhanced services and tool offerings that meet their business needs.

Blockchain will enter the stage of more realism

1. Many blockchain start-ups will not succeed

A first prediction is that in 2020 many blockchain start-ups will not succeed in the market race for their blockchain production projects. An ordinary start-up with the use of the blockchain will not be able to get as high support as it happened before. The race will be difficult and only a few will survive the stiff competition, failing to provide expected results.

The problem does not lie with blockchain itself. There is the lack of uniqueness by these start-ups. Many repeat similar projects during the implementation of the blockchain. They create another alternative, rather than something conceptually new. Many start-ups will be just a simple waste of money since enterprises will not invest in a platform they are not confident about. Specialists and large companies are aimed precisely at finding new business opportunities for blockchain deployment. They will take a wait-and-see attitude. So it will last until the best use of this technology appears.

2. The token market will be cleaned up

Another expectation for 2020 is that the market for tokens will be cleaned up. As exchanges are forced to increasingly professionalise and investors gradually shift their focus to quality, so-called ‘zombie tokens’ for projects that are far from market-fit will be more aggressively delisted. New tokens coming to market will be few and will all be more mature. It is expected that the majority of publicly listed tokens will be delisted and/or cease trading. So from existing 2500 tokens actively traded today not more than 1000 tokens will be remain by the end of 2020.

3. Blockchain technology will become more mature

Blockchain itself, however, is far from a failure. What we have seen in 2019 is the increased maturity of the technology. And this trend will continue in an accelerated way in 2020 and beyond. Next year will mark the start of more mature and usable networks creating decentralised applications, building an increasingly competitive landscape for projects to “battle it out” in order to become mainstream.

Going forward, in order for blockchain platforms and the apps built on top of them to stand a chance of making their mark, the focus should be much more on improving usability and finding product-market fit. 2020 will see the launch of multiple ‘third generation’ blockchain projects, with a greater variety and reach of applications being built on top of the DLT ecosystem. Multiple large chains will be releasing significant technology upgrades such as Ethereum with ETH2.0 and NEM with Catapult, both in early 2020.

4. More realism will enter the blockchain market place

More realism is expected coming into the market towards blockchain and its implementation. Those responsible for blockchain projects will take a more informed and strategic approach. The effect will be that in 2020 there will be a more realistic and pragmatic approach to blockchain projects. Enterprise DLT teams will thereby focus on realistic use cases that might deliver a particular benefit and bring existing projects closer to, or into, production.

We will see a shift away from so-called R&D-type exploratory proof-of-concepts (PoCs) run in isolation to a focus much more on the end-to-end process to which blockchain/DLT will apply. This means more emphasis on how frameworks perform and how well they integrate with existing systems and, potentially, each other. As a result of this approach we will see more successful implementations of blockchain technology, whereby there will be improved ties between blockchain and business management solutions. .

Growing blockchain adoption by enterprises

Though scepticism will remains (for the time being), and many enterprises will take a wait-and-see attitude towards blockchain adoption, the increased maturity of the blockchain technology will certainly trigger adoption in the coming year(s). More and more enterprises will understand the added value of distributed ledger technologies (DLT), including transparency, immutability, and decentralization.

A Deloitte report revealed that 34% of companies have already initiated a blockchain deployment, while 86% of leaders are confident that its mainstream penetration is inevitable – results which are clearly indicative of the continued maturation of the market. But before seeing real widespread adoption blockchain technology will need to mature further, not only technically but also as a part of a more complete ecosystem.

1. Finance industry will continue to lead blockchain adoption

Once blockchain overcomes the initial hurdles, it will be a game changer for many industries with finance expected to be the “leading takers” of the blockchain technology. Unlike other traditional businesses, the banking and finance industry will not be extremely reluctant in adopting blockchain.

According to a recent PWC report, by 2020, 77 % of financial institutes are expected to adopt blockchain technology as part of an in-production process. Financial corporations are more likely to embrace blockchain for more traditional banking operations owing to the plethora of advantages it has to offer. Blockchain will more quickly take root in financial services for security and management of identities – first for businesses and later for consumers.

2. Enterprises outside the financial sector are more reluctant

Enterprises outside the financial sector however show a more reluctant attitude towards blockchain adoption. But moving into 2020, they may change their attitude towards a more positive but realistic one. Over the next 12 months, these companies will first need to analyse their business models, and ask how (as opposed to whether) blockchain is going to disrupt their industries.

With the growing maturity of this technology blockchain will become another piece of enterprise technology that helps an organization become more secure and efficient, even enabling new business models that grow the business or enable net-new businesses (some completely decentralized). Positive measurements of the value derived from blockchain in enterprise production environments will encourage a much broader uptake. With giant companies such as Amazon or Microsoft committing to building services around blockchain, we will begin to see accelerated adoption by enterprises and customers as they tackle the issues that have long time being hurdles for mainstream adoption – with real world solutions coming into play from 2020.

3. Further government integration of blockchain

Although governments around the world remain centralized, there are opportunities for them to incorporate decentralization into certain aspects of their activities. There are several countries, including the US, Japan, Denmark and even Estonia, that are already practising blockchain implementation in government agencies. Countries such as China and Estonia are utilizing blockchain to manage citizens’ healthcare data and create digital identity systems respectively.

In 2020 we may expect other governments actually accepting blockchain advantages and begin to use it to optimize financial and public services. We will certainly see further government integration of blockchain technology in order to process large quantities of data between agencies, services and administrative bodies each having their own database. Distributed ledgers will be crucial to streamlining interaction and information sharing between these entities. The adoption of blockchain technology for effective data management and the introduction of a distributed registry will greatly simplify this procedure and will improve the functions of government sectors.

4. Battle between private and public blockchains

In 2020, the battle between private and public blockchains will further heat up and the debate will reach corporate executive teams. Though enterprises often prefer to operate in their permissioned blockchain network and at first will be sceptical of public ledgers, this stance will change over time. The permissioned versus public network debate will see blockchain/DLT-based applications falling into two main categories: a. consumer-focused DApps, which will usually use public (permissionless) blockchains; b. enterprise applications, built almost exclusively on private (permissioned) networks using enterprise DLT frameworks.

While it’s not realistic today to support complex enterprise use cases at scale on a public blockchain, concerns about interoperability between multiple chain silos have already resulted in discussions about the role of public blockchains in enterprise processes. With multiple networks already existing for some of the most popular use cases (such as supply chain or trade finance), proliferation will continue.

5. Enterprises will utilize hybrid blockchains

As the hype around blockchain cooled, and corporates turned back to a more realistic approach, non-technical challenges and interoperability hurdles have emerged. Permissioned blockchains, while great for B2B uses, don’t connect with consumers who need an open ledger accessible by any mobile device via an API.

For this reason, many companies are looking for ways to close that gap and make the best of the decentralization of public blockchain networks on one side and the additional security of private networks on the other. Tech companies such as IBM and blockchain platforms like Corda and Ripple, are already responding with enhanced offerings and will continue to build these out to meet enterprise demand.

The International Data Corporation (IDC) reports that it is time for hybrid cloud initiatives to focus on IT goals, in addition to business objectives. 2020 is expected to be the year when we will start to see growing offerings of so-called hybrid blockchains. Hybrid blockchains, are a combination of a private or permissioned blockchain and public blockchain. According to surveys it is expected that more than 80% of future blockchain deployments will be hybrid or multi-cloud — or both. Especially networks with stringent data sovereignty and confidentiality requirements will clearly have chosen frameworks that support hybrid or multi-cloud models.

6. Interoperability will move center stage

In 2020, enterprises will increasingly focus on operational matters, demanding deployment flexibility and interconnectivity between networks. In 2020 the call for interoperability between the many blockchain networks and the various (and also distinct) protocols that have been launched will intensify. We still see a lot of private PoCs, often testing different blockchain technologies for the same purpose: to weigh the pros and cons. Each blockchain has varying levels of security, performance and privacy.

We have witnessed the emergence of multiple networks addressing the same use case. Already several networks cover identical or similar functionality, including: trade finance, invoice factoring, shipping documentation. Participants in these networks are keen to understand whether, and how, these various chains will be able to interact. These are all reasons we predict that the future will involve more focus on getting these to interoperate.

As networks expand, nodes will distribute across multiple cloud providers. This will apply even if a network leverages its managed blockchain offering from a service provider. Cross-blockchains pilots are expected to see live in 2020. The move of Hyperledger Besu to Linux Foundation Hyperledger, should be seen as a “definite” sign that permissioned Blockchains might start to cross. There is a thorough research conducted on how digital assets on various chains might co-exist.

7. Growing competition between blockchain platforms

Progressing to 2019, many enterprises joined existing consortiums around the most popular use cases. Most of these consortiums are now looking to go into production in 2020, thereby solving specific use cases including identity and document management, supply chain management, trade finance, IoT applications, etc.

For 2020 we expect more customizable permissioned networks forming as well as growing competition between blockchain platforms. Not only between the main existing blockchain platforms, Corda, Hyperledger, Ethereum and others, but also from new comers that could upset the existing balance. Who will become the market leader is still open. We also expect several integrations with other blockchain frameworks. Such as Digital Asset that is now firmly focused on its smart contract modelling language, DAML, integrating it with other frameworks. We will a number of interesting combinations emerge.

Blockchain communities will increasingly recognize the importance of good governance and will prioritize it in order to stay competitive and stand out from an increasingly crowded field of competing platforms.

8. Internet of Blockchains

Another development, may be not yet for 2020, but certainly for the coming years is the development of an Internet of Blockchains, just like the existing Internet. The next generation of blockchains will be a flexible system of a multitude of independent/sovereign yet cooperative entities with different applications, philosophies, and validator. The ecosystem will be an open, sovereign, secure network of interconnected blockchains, that will be able to interoperate made possible by interoperability protocols like Inter-Blockchain Communication.

Continued crypto currency confrontation

1. First national digital currencies will be launched

The Facebook Libra announcement has provoked a lot of debate at central banks throughout the word. From a recent survey 80% of countries are concerned about the popularity of uncontrolled financial assets. There is a consensus around the world among central bank governors and governments at large that they want to maintain control of money and money supply. A number of countries have already come with plans for launching their own national digital currency.

In 2020 we will see the launch of the first national digital currencies. It is thereby very likely central banks will focus on the wholesale market leaving the retail market for regulated institutions. China is pursuing its the Digital Currency/Electronic Payment (DC/EP) initiative and next year we will see the People’s Bank of China roll out its digital yuan. Russia’s Central Bank is also considering possibilities of issuing its own crypto Rouble in the near future, which would take the status of a national cryptocurrency. In addition, the World Bank, and the International Monetary fund have recently launched a private blockchain and quasi-cryptocurrency. The digitization of national currencies will continue its momentum in the coming years as more central banks and governments warm to the idea. Experts assumed that by 2022 at least five countries will issue a cryptocurrency.

2. Crypto currency market will be regulated

In 2019, there has already been a lot of talk about regulation in the blockchain industry and this will continue in 2020. The industry is evidently ripe for regulation granted the number of projects operating in the space. But the urgency for regulation has intensified. Government leaders and regulators worldwide are now wrestling with how they will handle blockchain technology and crypto currencies as we enter a new decade. The possible launch of Facebook’s Libra in 2020 forced regulators to take cryptocurrency seriously, and triggered many regulators to come up with more stringent regulation for crypto currencies, but without frustrating innovation. In order for blockchain and crypto to mature, enterprises and individuals need to feel completely comfortable leveraging this technology, secure in the knowledge that their government and legal systems support them.

3. Crypto currency market revised

In 2019 we saw many crypto projects failed and stopped their activities. As the crypto ecosystem matures, every project needs to have a viable use case, strong funding, strong community, and an experienced leadership team to succeed. It is expected that in 2020, this “weeding out” of poorly executed crypto projects will continue. Some even predict that “98% of crypto projects and their currencies will go to zero or have no viable exit for their holders”. In 2020, we may expect mergers and acquisitions to accelerate in the cryptocurrency sector across both exchanges and technology. In order to achieve full compliance and trust in the industry, exchanges have to work diligently to regulate themselves. In a similar way, we do believe exchanges will work more harmoniously toward regulation and pricing.

The trend we saw from the last few years that issuers are tokenizing fiat currencies and using them as easier exchange mechanisms on cryptocurrency exchanges will continue. There will be a clearer distinction between forms of currencies as payment tokens, utility tokens, asset tokens and security tokens. We will also see increased adoption of stablecoins, mostly fiat-backed, and driven from trading on exchanges. Another development will be the shift of major altcoins from being just a utility token towards more high-value transactions, even as a store of value. We see this shift will increasingly noticeable in 2020 as altcoins mature and demonstrate additional use cases to stakeholders and the investment community.

4. Banks will enter the crypto currency market

After the tumultuous 2019, the digital asset market will mature and crypto currency prices will continue to stabilize. As a result of this increased maturity it is expected to see more and more institutional investors enter the crypto markets in 2020 as education around digital assets improves. In 2020 we will also start to see other cryptocurrency payment systems gain momentum that do not come from legacy banking institutions. It is expected more banks to enter the crypto currency market in 2020, partly in a move to defend their positions. In this regard, we will see more big names in the financial industry coming into the blockchain and cryptocurrency sector.

Earlier this year, the US-based J.P. Morgan already announced the launch of a proprietary digital coin JPM Coin during 2020. Other examples are Fnality’s stablecoin, while the Japanese bank Mizuho announced its own crypto launch already in early 2019.

Integration Blockchain with other technologies

In 2020 we will also see the further integration of blockchain with other technologies such as the Internet of Things (IoT) and Artificial Intelligence. According to the IDC, many IoT companies are already contemplating the implementation of blockchain technology. According to them more than 20 percent of IoT deployments enabled blockchain based services by 2019 and this process will continue in 2020 and beyond. The IDC suggests that global spending on AI will reach $57.6 billion by 2020 and 51% of businesses will be making the transition to AI with blockchain integration.

Firms will gain measurable benefits from blockchain in conjunction with IoT and AI. Blockchain technology provides a secure and scalable framework for communication between IoT devices. Blockchain conducts much faster transactions compared to other platforms owing to its distributed nature of work.

Forward looking

As we recap, 2020 is going to be a pretty exciting year for blockchain in enterprises. If all these predictions come through and will be realised it may become a historical year for both blockchain and the crypto currency market, improving the attitude to this technology by corporates and consumers alike.

The focus will shift to integration and interoperability, from irrational exuberance to realistic assessment. So it looks like it is about to be THE year for new opportunities and achieving goals in a decentralized manner.

Blockchain projects and digital assets are set to grow in adoption with the like hood of rising breakthroughs in mainstream use cases. Potentially we will start to see some new business models because of the technology.

The future of blockchain is thus promising but there will still be stumbling stones in the initial stages of its journey. But leaving behind the concerns related to this technology, it seems that this innovation will gain the community’s trust.

To ensure the longevity of the blockchain and crypto industry into the next decade and beyond, key players need to work together to prioritize education, ensuring adoption continues to occur on a wider scale.

By the way, I wish everybody a great 2020.

 

 

 

Carlo de Meijer

Economist and researcher

 

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| 2-1-2020 | treasuryXL | XE |

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