Blockchain consortia need good governance: but how?

| 24-03-2020 | Carlo de Meijer | treasuryXL

Blockchain consortia are creating a massive hype in the market. Many enterprises are highly interested in this type of network willing to join these consortia in order to gain optimal benefits of this technology. However, there is still a large uncertainty among them how these consortia work and how they are governed.  Up till recently the focus was mainly on governance solutions for public blockchain platforms like Hyperledger and Ethereum. Consortium blockchain governance however will become as or even more important to enterprises than public blockchain governance because they will work with this level of governance on a daily basis.

People in the field are increasingly aware that consortium project blockchain governance need to address quite different issues from public blockchains. But what are the main governance issues enterprises should think about ? So let’s take a deeper dive.

What are blockchain consortia?

Before going into more detail in the governance issue, it is good to say that there is no universal sort of blockchain governance. First of it all it depends on the type of blockchain solution that companies can use. Here we can distinct in fact between three main types of blockchain systems: open or public, private or permissioned and consortium or federated blockchains. While the public and private variant are ‘pretty self-explanatory’, the consortium blockchain needs more nuancing.

Blockchain consortia are defined as a type of network where multiple organisations maintain the system  A group of companies thereby collaborate on advancing the state of blockchain technology adoption in the industry, establishing industry standards, drafting use cases, developing key infrastructure and also operating commercial blockchain platforms.

Consortium blockchains are in fact hybrid solutions, in-between public and private, i.e. between fully open, decentralized systems and fully centrally-controlled, thus taking the best of both worlds.  Instead of only one organization, multiple organizations take part in the consortium. As a result, every organization gets similar treatment. So, there’s no single entity ruling over the network.

Types of blockchain consortia

There is however not one uniform type of blockchain consortium. Basically we can distinct between three types at present: technology-focused, business-focused and dual-focused.

The first type of blockchain consortia is the technology-focused. These offer reusable blockchain platforms, solutions based on technical standards. Mainly these have multipurpose use cases. This type of blockchain consortium exists solely for the purpose of helping blockchain reach global recognition. Quorum (based on Ethereum), R3 Corda and Hyperledger have emerged as some of the most popular blockchain development platforms. Each is suited to different industries and types of solutions, and developers are working with them around the world.

The second type is pure business-focused. These tend to develop blockchain solutions for a specific business issue. Instead of offering open-source platforms, many of them go for commercial purposes only. While the majority of these consortia so far are from the financial sector, many other industries like supply finance, trade finance, life science, healthcare etc. are joining in to work on blockchain-based systems and reap such benefits as shared resources, decreased development time and increased communication. Examples include consortia like  Bankchain, We.Trade, Marco Polo, B3i etc.

The third one is dual-focused. Here, they focus on both technology and business when offering a platform or solution, combining the best of both worlds. So, in a way, they would offer an open-source platform suitable for any kind of solution but also commercial products as well.  An example of dual-focused consortium is R3.

In this blog I will focus mainly on the second and third type with from a blockchain governance point-of-view the dual-focused blockchain consortium being the most interesting.

Benefits of blockchain consortia

Joining such a blockchain consortium could bring enterprises a number of interesting benefits, including cost savings, shared (and lower) risks, build critical mass of adoption and offer influencing standards.

First of all such a blockchain industry consortium would help enterprises cut all the expenses quite impressively. Instead of each company building their own solution from scratch, by being part of a consortium, they can share the development costs and time with other organisations.

As these consortia are mainly suited for industrial purposes, enterprises can easily link these up with their existing network more efficiently than public or private blockchain. This can lead to shorter development times and economies of scale. This allows smaller organisations to take advantage of the same system as larger ones. Another significant aspect of this blockchain industry consortium is that they can give a lower transactional fee. As it is a more controlled environment, and only permissioned people can get in, it would be much more stable.

What is blockchain governance?

But what is governance in general and why is it important?  The term ‘governance’ is used in many ways. In the business environment it is often defined in the context of process and IT control. Governance is thereby a structure that every user or participant agrees to follow. It refers to all actions such as decision-making processes that are involved in creating, updating, and abandoning formal and informal rules of a system.

In the context of blockchain consortia we define governance as a set of rules that govern this partnership both organisational and operational. These rules focus on what is the subject of the regulation, who is involved, i.e. what are the roles and what are they responsible for, and, how will decisions be made? These rules can be code (e.g. smart contracts), laws (e.g. fees for malign actors), processes (what must be done when X happens), or responsibilities (who must do what).

Why is proper governance important for blockchain consortia?

One of the aims of governance is to establish a foundation of mutual trust, which allows companies to carry out their business processes using the blockchain solution. Its core purpose is to meet the user or participant’s needs with available resources as efficiently as possible and achieve the long-term sustainability of the structure. There are various reasons why good governance for blockchain consortia is urgently needed.

First of all: from an acceptance point of view.
As the size and complexity of blockchain have grown, better management calls for proper governance. Since the strategic value of the blockchain networks lies in its scaling, it is important to consider that an increasing network size correlates positively with an increase in coordination complexity. Hence, for the few high-potential applications in trade finance, insurance, supply chain and mobility services a proper establishment of sustainable governance principles for the deployment of a blockchain consortium is key.

Second: no one party can exert dominant control
Consortium blockchains have many of the same benefits of private blockchains. But there is something more. That is they could employ a group governance model over their network so no one party can exert dominant control over the others. This increases the trust of a consortium network significantly over a single entity private blockchain, while still maintaining the benefits of a private blockchain. Additionally, consortium blockchains are not restricted to only being visible to network members. Their transactions can be openly seen by the public, engendering increased trust.

Third: to solve the Coopetition Paradox
The strategic value of blockchain technology can only be realised through the respective adoption at scale. These blockchain consortia are thereby effectively obliged to address the so-called Coopetition Paradox through collaboration between natural competitors in a particular industry. The Coopetition Paradox forces blockchain consortia to break up fierce competition between industry rivals in order to access the strategic value of such a business network. Obviously, there is no one-size-fits-all solution to this topic.

Fourth: as a mean to achieve efficient change
The biggest motivation behind Blockchain governance for blockchain consortia is the goal of efficient change. That means the ability to fix issues as fast as possible and change where change is needed. These issues can be of all kinds, including changes to blockchain parameters, the recovery of lost coins due to hacks.

Governance is especially needed in blockchains with enterprise or end-user use cases. Quick updates could enable enterprise and mass market end-user use cases.
An update/change that takes too much time could cause corporates to abandon the service or not participate in the consortium. Changes could also divide the community and lead to even more uncertainty and hesitation to participate. Conceptually, this is where centralized applications are advantageous.

Fifth: governance mitigates indirect dependence on incumbents
Another motivation to use blockchain governance in blockchain consortia is that it could mitigate indirect dependence on incumbents, such as the likes of Facebook, Amazon, Google that determine their own rules, such as the publicly criticized use of personal date. Publicly accessible and governable blockchains could mitigate that indirect dependence. Everybody who is interested in how those systems are set up, could purchase the respective tokens and suggest changes including changes in regards to how personal data is handled.

Sixth: Governance as a competitive advantage
A sixth but not final motivation is that it could improve competition. Given the fact that most blockchain projects are open-source, copying them is a waste of effort. Thus, the biggest competitive advantages for blockchain projects stem from the community’s size and speed of adaption. The more supporters a project has and the quicker the developers can react to issues and competitors, the greater the chances of survival.

What governance model for blockchain consortia?

Governance in blockchain consortia is quite different from that in pure public or private blockchains. A private blockchain is mostly controlled by normal IT governance, while the issue of specific blockchain governance only applies to open and permissioned platforms

Before enterprises can develop governance of the blockchain consortium, they first need to determine the business goals and business model of the blockchain project. So will the blockchain project operate as a service provider (so no direct customer contact) with a relatively limited number of participants, or will it act as a market participant, directly reaching the ultimate customer. The business model may also be affected by regulatory issues in the business.

Key factors to consider
When starting a blockchain consortium it is important to agree on a number of rules right at the outset, such as access to the platform and rules to perform activities. In the context of a permissioned blockchain solution used by a consortium business partner network, there remains the question of what exactly it is important to control.

In order to ensure the reliability, integrity and transparency of the solution, one needs to consider more than just goal-oriented governance issues (such as changes to data structure, codes and technology). One should also define the various stakeholders and their specific roles, as well as assess how to control the ecosystem. But also what entity should represent the blockchain consortium and what legal issues to consider

One should at least agree on a number of questions
There is no best practice here, so there are many open questions and a lot of unknown territory, such as who can decide what, and when?, how should decisions be made? (using people and committees, or using smart contracts?), which data should be visible to whom and what is allowed, what is not allowed, and what do people want?

Governance structure: issues
When thinking about the governance structure, one should address some main  issues. First of all one should ensure that all stakeholder groups in the blockchain eco-system are represented. One should also focus on implementation of the business model for the blockchain consortium (B2B or B2C). While determining intellectual property ownership and licensing as well as how to raise and spend funds to support the blockchain project

Shared values
The governance system should be based on a number of shared values. First of all there should be no dominance by a single player: i.e. as decentralised as possible.
The partnership and the distribution / exercise of power should be governed by rules. It should be an open value-added chain: i.e. – intellectual property is available to the consortium and can be exploited by its members. Relating to collaboration between companies, the process and data standards for the consortium should be defined together and used. And it should be a neutral platform, meaning that  the solution should be ‘open’ whereby all members should have access to the process, data and interface definitions.

Blockchain consortium governance architecture

Governance of blockchain consortia should be looked at on various layers. business network; protocol level and data level.

Business network layer
One of the key challenges of forming a blockchain consortia is balancing the interests of the initiators and the later-joiners. One should take account of the early investments made by the initiators as well as the incentivisation needs for later-joiners of blockchain consortia. This becomes even more crucial if the initiators are industry leaders or key competitors. In such cases, the coopetition paradox urges the operators of the business network to open up towards competitors to materialise the strategic value of the network for all contributors.

A centralized legal entity for the business network, a so-called network operating company governed by open governance principles is the preferred standard. The network operating company would be in charge for the development, administration and commercialisation of the blockchain application. This central entity approach enhances transparency within the business network and compliance with respective laws especially in the field of anti-trust and data protection. However, not every network member has similar interests. Some like to assume a more active role in the management and technical deployment of the network while others just simply want to use the blockchain application as a service through an API-access.

The organisational governance must account for the interests of both the equity holders and the community. The equity holders of the network operating company would elect the members of the board of directors representing their respective interests. The board itself appoints an executive management team in charge of the day-to-day operations of the business network and thereby the platform.

Non-equity holding customers should be given a voice by establishing a so-called community council. This body can be approached for consultation in case of key product development issues, changes to membership admission policies or protocol and data privacy related matters.

In order to ensure maximum reach and acceptance within the ecosystem, the platform should be open-sourced to the community. This means that basic access to the platform is granted for free, provided that the node operation is handled by the respective member. Next to that a tailor-made subscription-based API-access model could be offered.


Protocol layer
The initial protocol layer is normally defined by the initiators of the business network during the assessment undertaken in the proof-of-concept. In general, the framework used should be based on an open-source standard (such as Hyperledger Fabric, R3 Corda or Ethereum). This would facilitate the integration into legacy systems for the users. Furthermore, the above-mentioned blockchain frameworks also enjoy prominent support by companies operating in the ecosystem. Moreover, in case changes to the protocol become necessary, the network operating company can consult the community council for consent prior to its implementation.

Data layer
And there is the data layer. The blockchain application should be built upon the principle of privacy by design. That means that any data should only belong to its original owner and can only be transacted in agreement with the data owner. Moreover, the network operating company should act as the data controller and data processor in line with the applicable data protection laws, while the data storage would ideally be decentralised (e.g. point-to-point communication or IPFS), although the relevant solutions need to mature further.

Some concluding remarks

What has been written in this blog is just a starter. Blockchain governance is an ongoing discussion and will certainly involve a wide range of different opinions. There is no best-practice. Solutions described here for blockchain consortia governance are still far from complete.

The challenges of governance in blockchain consortia are very similar to those solved (and continuing to be solved) by open source software (OSS) projects, such as Linux and OpenStack. Blockchain project consortia should therefore look to the experience of OSS projects to take advantage of their experience (and avoid their errors).

 

Carlo de Meijer

Economist and researcher

 

XE shares 5 Best Practices for Working Remotely

19-03-2020 | treasuryXL | XE |

Within the past few years, remote working has seen a significant rise in workplaces around the world. Some workplaces have shifted to fully remote operations, while others offer remote work as an optional perk for employees with long commutes. Since 2005, remote work has grown by 140 percent, and many employees identify remote work opportunities as a major perk when considering whether to work for a company.

More recently, within the past few weeks in fact, remote work has gone from a modern workplace perk to a necessity for businesses concerned about protecting their customers and employees from the spread of COVID-19 (coronavirus). For the office workers who are now carrying out their duties from home and the managers who are now virtually leading spread-out, remote teams, this presents a difficult new challenge.

To remain safe and healthy during this uncertain situation, XE wanted to take this time to share some of their advice for those of you who’ve suddenly been thrust into working (and managing) from home.

1. Keep a structure.

It’s easy to stick to a schedule in an office. Even if you don’t have set hours, there’s usually at least a clear window for when it’s time to work and when you’re off duty. When you’re working remotely, it can be hard to maintain the same level of organization.

  • Set work hours. If working hours haven’t already been established by your employer, establish set working hours. Treat these hours like you would any other hours at work. You wouldn’t stop working in the middle of the day to spend a couple of hours reading or gaming, right? And this goes both ways—in addition to establishing when you’re on the clock, make sure to give yourself the same hours off that you would normally have.
  • Establish your workspace. Even if you don’t have your own personal office, you can take over your desk or clear out a spot at your table and dub it the “work zone”. Do you normally like to spread out across your desk in the office? Find a way to do the same at home.
  • Don’t get distracted by household chores.It’s one thing to take 30 seconds to move the laundry from the washer to the dryer, or to check on the pot roast in your slow cooker. It’s another to vacuum the living room or make a quick pharmacy run during “work” hours. Make sure to focus on your work. It can be difficult if you have family members home with you, but find a way to communicate that you’re at work and not to be disturbed—whether it’s a sign on the door, a locked door, or a pair of noise-cancelling headphones.

2. Communicate everything.

Suddenly, it’s no longer as easy as leaning over to ask your teammate a question or stopping by another coworker’s office for a quick catch-up. Most conversations will happen in writing, and the lack of body language, facial expression, and intonation can easily breed misunderstanding.

You don’t need to micromanage, but you should aim to communicate more frequently and more specifically than usual. What would seem clear in a face-to-face session might not be as clear in a quick email, and you won’t have the benefit of overhearing pertinent conversations when you’re working remotely. Ask yourself: is there any ambiguity here? Could anything I’m saying possibly be misunderstood? Odds are, you’ll be able to say yes to both questions. Communicate as frequently as possible. There’s no such thing as too many details.

3. Take measures to prevent isolation.

In addition to putting a jump on your business communications, don’t forget to frequently reach out to your team on a personal level. In 2018, 21 percent of remote workers reported that they were concerned about feeling isolated, not just informationally but also socially.

We’re not encouraging you to put yourself or anyone else at risk. But along with frequently reaching out to other members of your team to communicate and collaborate, consider other ways to boost connectivity. Some managers have implemented “team lunch” conference calls for everyone on their team to virtually eat together and catch up. While this may not be feasible for your team to do every day or even every week, talk with your team and work out some ways to create socialization.

4. Be patient.

Let’s face it. Technology has revolutionized the modern workplace, but it can create its fair share of issues. Just this morning, the massive influx of remote workers in Europe caused Microsoft Teams’ chat tool to briefly go down.

These events can be frustrating, but they are inevitable when working from home, and even more so when you and your colleagues are not accustomed to regular remote work. Understand that technical difficulties are bound to happen—especially within these initial days—and that some people may take some time to adjust to the new status quo. It can be easy to get annoyed, but think instead of what you can do to help your teammates through the transition.

5. Take time to breathe.

New updates about coronavirus are constantly pouring in, and it can be easy to feel distracted and even overwhelmed by the news, particularly for those who have preexisting health problems or worry about the safety of their loved ones.

In most office settings, you’re free to step out for some air if you need a breather. Just because you’re not in the office doesn’t mean that you shouldn’t let yourself have breaks if you’re feeling overwhelmed. Build breaks into your schedule and communicate with your team and managers if things are growing difficult for you.

For managers and higher-level employees, make sure to check in with your teams and direct reports during this tumultuous time. This is an uncertain, overwhelming, and even scary time for a lot of people, and it can be hard to focus on everyday work in these circumstances. Be mindful of the situation and aim to work with your teams, not against them.

For many of us, this is one of the most frightening, challenging things we have experienced in our adult lives. Along with taking the right measures to stay hygienic and prevent the further spread of pathogens, the best thing we can do right now is work together to ensure that our customers and those relying on us have our full support, with whatever we can offer.

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.

 

 

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treasuryXL announces partnership with OpusCapita

| 19-3-2020 | treasuryXL | OpusCapita |

treasuryXL announces partnership with OpusCapita, a leading cash management provider.

VENLO, The Netherlands, MARCH 19, 2020 – treasuryXL, the community platform for everyone who is active in the world of treasury, today announced the premium partnership with a leading cash management provider, OpusCapita.

As a marketplace, treasuryXL will offer OpusCapita market commentary and insight to its audience. Offering a continuous flow of relevant treasury content, making treasury knowledge available, results in treasuryXL being the obvious go-to platform for its’ audience. OpusCapita will have a prominent role in the Treasury Topic environment with coverage in Cash Management, risk management, Treasury Software, Payments & Banking and Fraud & Cybersecurity. Together they will host virtual roundtables in the near future to connect with partners and experts around the world.

“We are excited to take part in the treasury community that TreasuryXL is building and look forward to join the network of treasury experts.” Marc Josefsson, Head of Strategic Sales, OpusCapita.

OpusCapita has over 800 customers across more than 100 countries. Their secure, cloud-based solution enables Treasury and Finance professionals to harmonize global processes and policies, centralize treasury and finance operations and reduce complexity.

treasuryXL and OpusCapita strive for a fruitful partnership where its’ audience are top of mind making sure that (potential) clients are always up to date with the latest cash management news and events benefit from a comprehensive range of services and products.

About treasuryXL

treasuryXL started in 2016 as a community platform for everyone who is active in the world of treasury. Their extensive and highly qualified network consists out of experienced and aspiring treasurers. treasuryXL keeps their network updated with daily news, events and the latest treasury vacancies.

treasuryXL brings the treasury function to a higher level, both for the inner circle: corporate treasurers, bankers & consultants, as well as others that might benefit: CFO’s, business owners, other people from the CFO Team and educators.

treasuryXL offers:

  • professionals the chance to publish their expertise, opinions, success stories, distribute these and stimulate dialogue.
  • a labour market platform by creating an overview of vacancies, events and treasury education.
  • a variety of consultancy services in collaboration with qualified treasurers.
  • a broad network of highly valued partners and experts.

About OpusCapita

OpusCapita enables organizations to buy and pay quickly and securely, with a real-time view of their business. OpusCapita customers use their source-to-pay and cash management solutions to connect, transact and grow. OpusCapita processes over 100 million electronic transactions annually on its Business Network.

Visit OpusCapita

Visit Partner Page

Read Customer Success Stories

How do the current events influence currencies around the world?

| 17-03-2020 | Erna Erkens | treasuryXL

In this blog, our Expert Erna Erkens, discusses the past events and their consequential effect on currencies. Erna Erkens is owner of Erna Erkens Valuta Advies, a consultancy firm specialized in currencies.

After 35 years of work experience in the financial markets at 2 different banks, Erna wanted to work as a self-employed person. For many companies, the topic of “currency risk” is on the agenda, but often does not reflect the effect that currency movements can have on organisational results. Erna noticed that there is a great need within SMEs for knowledge and support with regard to currency risks, among other things. With EEVA, Erna shares her knowledge in different ways to meet this need.

(Blog is in Dutch)

EUR/USD: 1.1105 of andersom 0.9005 (gisteren 1.1235 of andersom 0.8900).

EUR/USD: Gisteren geen cijfers uit de Eurozone, maar wel een ingelaste vergadering van de EU ministers van Financiën. Uit de VS was gisteren de NY Empire State index veel lager dan verwacht en vorige maand. Vandaag de Ecofin vergadering en de ZEW index uit Duitsland en de Eurozone. Verder nog de kosten van arbeid en de productie uit de bouw van de totale Eurozone. Uit de VS de detailhandelsverkopen, de industriële productie, het gebruik van de capaciteit, de zakelijke voorraden, de openstaande vacatures en tot slot de NAHB huizenmarkt index. Maar de ogen zullen toch vooral op de financiële markten gericht zijn deze dagen. Alles is in mineur behalve de USD. Dus EUR/USD moest toch weer een cent prijsgeven gisteren. Als de vlucht naar de USD aanblijft houden kunnen we wel weer wat verder naar beneden. Tot de paniek over is. Toch zal dit gelimiteerd zijn door de verkleining van het renteverschil tussen de EUR en de USD. Dus als er maar een beetje vertrouwen terug komt zal de EUR/USD flink stijgen. Maar nu lijkt de USD nog een flinke veilige haven. Toch is de EUR/USD een stuk hoger sinds de laagste koers van 1.0790 van een paar weken geleden.

  • GBP/USD: 1.2210 (gisteren 1.2345)
    GBP/USD: GBP/USD blijft maar dalen. Gisteren geen cijfers, maar vandaag de cijfers van de arbeidsmarkt. De cijfers blijven uit het VK eigenlijk vrij goed, maar ja, daar trekt de koers zich op dit moment niets van aan. Wel goed voor de export. Dit helpt de economie van het VK wel. Het VK heeft een andere strategie om de coronacrisis te pareren. Ze doen eigenlijk soort van bijna niks. 
  • EUR/GBP: 0.9095 of andersom 1.0995 (gisteren 0.9100 andersom 1.0989)
    EUR/GBP: Steeds meer een markt voor kopers van GBP. Vandaag cijfers van de arbeidsmarkt. Brexit is even op de achtergrond gekomen. Even iets anders aan de knikker. 
  • EUR/CNY: 7.8065 (gisteren 7.7995). USD/CNH 7.0125 (gisteren 7.0170), USD/CNY 7.0025: PBoC fixing: USD/CNY: 7.0094 (gisteren 7.0018).
    EUR/CNY: Eigenlijk weinig nieuws. De beurzen iets lager, maar niet veel. Corona besmettingen lopen nog steeds terug.

Olieprijs

WTI Crude Oil: USD 29.58 (olie voor de VS, gisteren USD 31.12) Brent Oil: USD 30.08 (olie voor Europa, gisteren USD 33.66). Olie uit Shanghai Yuan 241.30 = USD 34.47 (contract is van april 2020). Het verschil tussen de Brent en de WTI Crude Oil is bijna helemaal verdwenen. Dat is best heel bijzonder. En dat is ook een teken voor mij dat de beweging bijna voorbij is. Maar de USD 50 komt niet zo snel terug. Pessimisten zien het naar onder de USD 20 gaan. Zou kunnen, maar ik ben minder pessimistisch. Maar de komende maanden lijkt Saudi Arabië de oliekraan vol open te draaien. Althans dat zeggen ze nu,maar dat kan zomaar weer veranderen. Als dat blijft zal er een gematigde stijging komen denk ik. Maar als er toch weer gesprekken met Rusland en overeenstemming zal zijn dan kan dit onmiddellijk weer helemaal omslaan. Ik acht dat ook niet onmogelijk. De opslag voor olie is nu schreeuwend duur. Ik denk dat we de komende tijd nog te maken houden met lage olieprijzen,maar dat dit wel op een iets hoger niveau zal zijn. Ik heb het al vaker gezegd, maar ik schat de ruimte om verder te dalen vrij beperkt in. Standard Chartered verlaagd zijn gemiddelde verwachting van de olieprijs voor de Brent van met -USD 29 maar USD 35 voor 2020.Ik ga mijn lange voorspelling ook naar beneden aanpassen volgende week. Maar niet zover denk ik. Het is alweer dalende.

Barrel / vat olie = 158.99 liter
Gallon =  3.7854 liter

Goud

USD 1483.0 (gisteren USD 1514.00). De goudprijs is in USD per troy ounce (=31.1 gram). Goud heeft zijn glans als veilige haven op dit moment helemaal verloren. Iedereen gaat voor cash. Dus is de USD,Japanse Yen, Zwitserse Franc in trek. En zelfs de Euro lijkt wat veilige haven glans te krijgen. De bodem van het goud lijkt overigens wel ongeveer bereikt. Cash is King!!! Maar dit zal snel weer terugkomen. Als de echte paniek wegebt of als je aan de nieuwe situatie wennen. Mooi moment om te kopen zou ik zeggen. Een analist sprak de woorden: De traditionele regels zijn op niet meer aan de orde en er is niets dat als een veilige haven kan worden geclassificeerd. Zelfs het goud niet. Dat komt snel weer terug is mijn gevoel.

Zilver

USD 12.35 (gisteren USD 13.10). De zilverprijs is in USD per troy ounce (=31.1 gram). Zilver is helemaal in de kaartenbak verdwenen. Ongelofelijk. Zilver op een laagterecord sinds 2009. Ongelofelijk. Wat voor het goud geldt is voor het zilver nog meer van kracht. Wat een koopje. iedereen komst echt wel weer bij zinnen. Dan zal het zilver weer snel stijgen, Maar dit is wel een enorme klap. die had ik niet eens een beetje aan zien komen. Tja.. Ik kan me een turbo of call optie goed voorstellen.

Beurzen gisteren en vanmorgen 

De Europese beurzen zijn gisteren gemiddeld -4.2% lager gesloten. De AEX is gisteren -3.10% lager gesloten op 419.83. De AEX is vanmorgen 3.6% hoger geopend op 431.65. Weer bijgekocht gisteren. De beurzen in de VS zijn gisteren gemiddeld -12.5% lager gesloten. (Dow Jones, Nasdaq en S&P). Azië: De Japanse Nikkei is vanmorgen 0.06% hoger gesloten. Chinese beurzen zijn vanmorgen gemiddeld -0.5% lager gesloten. De beurs in Hongkong is vanmorgen 0.85% hoger gesloten.

En verder…

Trump

In deze tijd komt echt leiderschap naar boven. Ik zie op de tijdlijn op twitter van Trump alleen maar geretweete berichten. Een soort doorsturen. En het eerste bericht op Twitter van hemzelf gaat over de journalisten van The Times. Tja… Verder terug op de tijdlijn roept hij Amerikanen op elkaar te steunen en geeft hij aan dat er genoeg voedsel is in de supermarkten voor iedereen. Hij is positief over de beurzen. We gaan na de crisis de beste beurzen ooit zien. Dat is makkelijk voorspellen na een daling van 30%. En tot slot nog goed nieuws. Hij zal de luchtvaart en bedrijfsleven steunen. Dat geeft rust op de beurzen zo lijkt het.

Centrale Banken

Gaat Rusland de rente verhogen om de Roebel te ondersteunen? Zou bijzonder zijn in deze tijden van renteverlagingen. Turkse Lira’s ook helemaal in de kaartenbak. Zweden gaat ook weer verruimen door de aankoop van obligaties.

Diversen

Als het er echt op aan komt, willen mensen toch nog steeds cash geld hebben en is de USD nog steeds in trek, samen met de Japanse Yen en de Zwitserse Franc en in mindere mate de EUR. Ik vind de woorden van de Europese Ministers wel groot, maar nu de daden nog. Het gaat allemaal traag. de FED is daar wel beter in. Dat heeft niet met Trump te maken overigens. De FED/overheid in de VS heeft totaal USD 2200 miljard beschikbaar gemaakt. Dit is voor 330 miljoen inwoners ongeveer. Dat is USD 6.666.67 per inwoner. Wat stellen wij daar als Europa tegenover? En met welk tempo?

10 jaars rente

Bund contract: 171.40 (contract per juni 2020, gisteren 172.49). Een verschil van 0.15 punten in de Bund is ongeveer 0.01% in de 10 jaars IRS (Bund omhoog = lange rente omlaag en vice versa). De Bund is de meest verhandelde langlopende Duitse obligatie en geldt als leidraad voor de obligatiemarkt en IRS prijzen. De IRS prijzen zijn de basis voor onze hypotheekrentes. De lange blijven ineens stijgen. De rente in de VS is met 1.5% verlaagd en de lange rente’s stijgen? Raaarrrrr

10 jaar Staats Duitsland -0.41% (gisteren -0.48%). Verschil met VS 1.24%.
10 jaar Staats Nederland -0.08% (gisteren -0.22%) Verschil met VS 0.91%.
2 jaar Staats VS 0.40% (gisteren 0.38%) Verschil met 10 jaars VS 0.47%.
3 maands rente VS 0.27% (gisteren 0.25%). Verschil met 10 jaars 0.60%.
10 jaar Staats VS 0.83% (gisteren 0.85%)
10 jaar Staats VK 0.51% (gisteren 0.41%) Verschil met VS 0.32%
10 jaar EUR IRS -0.05% (coupon 6 maanden en 30/360). Gisteren -0.08%

 

Source

 

 

 

Erna Erkens

Owner at Erna Erkens Valuta Advies (EEVA)

 

Yvonne Wijnberg shares her Register Treasurer experience

| 13-03-2020 | by treasuryXL | Yvonne Wijnberg

 

The Vrije Universiteit (VU) Amsterdam is proud to announce that they honored 13 new Register Treasurer (RT) graduates. The graduated RT’s of March 2020 were part of the 22nd class. One of the graduates is Yvonne Wijnberg. Yvonne is Treasury Manager at the fast-growing, international non-food discounter, Action. She shares her story with us about her RT experience from start till end.

 

Investing

The Treasury Management & Corporate Finance post graduate programme is 1.5 years of investing in yourself and your career. For sure if you have been out of school for as many years as I have, it is not easy to get back in the process of studying  for exams, but once you are back in the routine, it brings you so much more than you expected.

Switch to treasury

After a career in Corporate Accounting I decided that I needed a change, so 12 years ago I made the switch from Corporate Accounting to Treasury. It was not easy to start from scratch again after working for over 10 years already, but I have never regretted the change a single day.

My career has never been a speedy process and I have made a few sidesteps along the way, but in the end it got me to where I am today. In March 2020 I finished the post graduate programme for Treasury Management & Corporate Finance at VU university Amsterdam.

 

Enrichment

When I started in September 2018, I was worried I might be the oldest there, fortunately this was not the case. The group was a pleasant mixture of sexes, ages, experience and disciplines. Not only people who work in corporate Treasury joint the programme, but also consultants, bankers, controllers and tax professionals were part of the group. This is one of the reasons why the programme is so interesting. Getting to know my fellow students and interact with them was an enrichment to my development and network.  But also the lectures from professionals over a wide spread of topics is something that has added value to my daily operations.

The programme is diverse. Some courses focus on cases, while others are more theoretical. But the complete programme gives a solid basis of all subjects that can cross your path in Treasury. And as always, one course will appeal more to you than another. If you’re working in groups on assignments the learning point is not only the assignment itself, but also in broadening your view and making you more aware of other options then the once that seems most logical to you.

Part of the programme is also that you need to write 2 academic papers. For me this was the biggest challenge. But in the end this was a good way to broaden my knowledge on 2 subjects that will help me in my work.

Why the RT-programme

The reason for joining the programme was maybe a little different for me than for most. With more than enough practical experience I found myself lacking the theoretical basis which made me insecure at times. The programme has given me broader theoretical knowledge that helps me in my daily practice. This allows me to make decisions more easily and with more confidence.

During the programme at times it was hard, not only for yourself but also for your loved ones. And you always have the challenge of dividing your time between work, family and study. But in the end it is all worth it!

 

 

Yvonne Wijnberg

Treasury Manager at Action

 

 

 

 

Graduated as a RT and ready for a new treasury challenge?

Being a RT opens doors to new challenges more easily. Are you looking for an interim or a permanent position? Do you want to work in a small business or rather prefer a big corporation? If you want to make a switch in your career and you are open for a new adventure than I would highly recommend to contact our partner Treasurer Search. Treasurer Search is a successful treasury recruitment company, founded 10 years ago with consultants that have experience in treasury recruitment up to 20 years.

Do you have any questions about the RT programme? Are you a RT who want to share your career development via an interview? Or do you have any other related questions or remarks about the RT topic? You can contact me directly via:

Kendra Keydeniers
Community & Partner Manager at treasuryXL

 

 

 

 

 

 

Currency Moves Caught You Off-Guard? You’re Not Alone.

12-03-2020 | treasuryXL | XE |

In the past few years, the financial markets had just about lulled participants to sleep. Equity markets delivered steady returns, interest rates remained low, and global currencies adhered to ranges and experienced relatively muted volatility. But that’s no longer the case.

You’re not alone if you were jolted awake by all the recent market volatility. Few anticipated the unprecedented market movements of the past three weeks.

There was no definitive announcement on February 14 that in three weeks’ time:

  • US equity markets would plunge, taking the DJIA, Nasdaq, and S&P 500 all down nearly -25% at their lows,
  • The US Federal Reserve would execute a surprise 50 bp rate cut,
  • US 10-year and 30-year bonds would fall to record low yields, and
  • Oil prices would plummet -26% in one day after OPEC and Russia fail to reach an oil production accord.

Yet all of these events happened, leaving corporate finance departments, treasury groups, CFOs, and business owners to contend with the consequences.

Since February 21, three of the most commonly used currencies by North American corporations (CAD, EUR and JPY) have seen moves of 3.6% to 9.5%. Here’s a summary of the moves:

  • CAD -3.6% weaker against USD, trading above 1.3700 for the first time in nearly two years. What triggered this? The unexpected oil price plunge which was exacerbated by continued equity sell-off. Just three weeks ago, the CAD was at 1.3205.
  • EUR +6.1% against USD, trading at 1.1495 on March 9 after being at 1.0785 just three weeks ago. Exporters can enjoy both the 6% rise in spot and also the forward point premium, which makes locking in forward rates attractive. Importers have been left wondering what to do. Many decision-makers are frozen, hoping the spot rate will reverse. The charts remind us that just one year ago, EUR was at 1.1500 and two years ago 1.2400.
  • JPY +9.5% against USD, made more stunning as the JPY had a surprise 2% weakening to 112.00 on Feb 21 following weak GDP data, to only to be reversed dramatically by coronavirus safe-haven flows. These took the JPY to below 102.00 on March 9 with incredible speed. To quantify this, the FX option market which use FX Option volatility as a key measure, has seen 1-month JPY ATM option volatility spike nearly 10% (unheard of!) to 21.5% after being 11.8% on Friday.

 

What’s the takeaway from all this?

As a business, it’s important to recognize that FX risk is real and has many potential impacts to your results. Regardless of whether your company benefited or was hurt by these market moves, FX risk can:

  • Raise import costs,
  • Reduce export sales margins,
  • Make your product less competitive, and
  • Possibly disrupt your 2020 business plans.

To illustrate the financial risk, here are example payables or receivables denominated in CAD, EUR, and JPY. There is the P/L impact looking at both 2/21 to 3/9 period, as well as considering if the currency trends continue:

If P/L swings of this magnitude cause you corporate nausea, please know you can take actions to mitigate them. FX volatility is a risk you can manage.

 

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

 

 

 

The Missing part of a Treasury Job Description

10-03-2020 | by Aastha Tomar

Change is where Treasury is

It’s difficult to ignore the word ‘sustainability’ when you are staying in the Netherlands, one of the leaders in sustainability, green finance and green bonds. This makes me wonder why everyone here talks about the word so much – Why is it absent from the Job description of one of the most crucial team of an organization – Treasury?

Any usual job requirement for a Treasurer includes Cash Management, Risk Management, Hedging, Cash flow forecasting, P&L and similar. But where is one of the most trending consideration? Especially, in times when corporations are weighing sustainability targets not far from their profitability targets. Is it not the responsibility of a “treasury” function to be cognizant and be considerate of possible approaches to impact environment through their decision of investments and borrowings?

This brings us to consideration – Are corporations expecting specific functions (read CSR team/ PR team) to work towards and prove their sustainability efforts to the world? Are corporations willing to implement the sustainability philosophy into organizational DNA?

With evolved considerations, gone are the days when a Treasurer was just involved in risk management and ensuring liquidity. In current scenario of news going viral each action creates a ripple effect. As famous Jane Goodall once said : “You cannot get through a single day without having an impact on the world around you. What you do makes a difference, and you have to decide what kind of difference you want to make”. A Treasurer has to take an active role in policy making and lead her organization towards sustainability and protecting consumers.

How can a Treasurer help in sustainability?

As I advocate sustainability related expertise, lets evaluate how a Treasurer can help in sustainability:

1. Consideration in Investment/Borrowing Rationale

  • Choosing counter-party carefully: A Treasurer while selecting for investing options for excess cash, while trying to increase returns for the company should also ensure that the partners with whom she is working are aligned with sustainability. ESG is the new word which is taking importance nowadays with almost all the organization, banks , asset management companies trying hard to come up with various financial products which are aligned with ESG . Try to choose such sustainable investing options where the counter party is trying to have a positive impact on environment and at the same time you don’t compromise on your returns.
  • Green Bonds / Sustainable finance : You don’t need to be in a renewable space to issue green bonds. You just need to have an intent: Drew Wolff, Starbucks launched green bond within few weeks of joining Starbucks in 2016. Even though it was an infrequent issuer, didn’t have leverage of being a regular issuer in the market they took chance by entering into sustainable bond space. The use of proceeds were supposed to get used to buy sustainable coffee. “The bond acted as lightning rod for a lot of separate social responsibility efforts at the company and helped align financing and these efforts for the first time” said Wolff. Additionally it increased commitment to transparency and reporting. Corporate should try to make best use of the current investment trend where investments both from retail and institutions have increased by 34% from 2016 in green investments. Investors have become savvier and trying to invest more in bonds which have green element in it. Corporates should try to integrate its financing with sustainable finance. Once they incorporate sustainable financing, they will automatically be aligned with guidelines designed for the same which will in turn give them a direction towards sustainability.

2. Business Partnership

  • A Treasurer also has a stake in supply chain, how? Let me answer this by asking one more question? Who had the most sleepless nights when Volkswagen posted loss for the first time in 15 years when caught implanting a sophisticated defeat device it implanted to pass emission tests? What would you have done if in your career you had to bear the scar of posting a loss for an organization due to an unethical supply chain? A Treasurer should increase her influence in company’s sourcing/ manufacture products and extended supply chain because they are the ones to bear the brunt when the cash flows are hit.

3.  Behavioral Considerations

  • Less Paper more technology: In this rapid world of digitization there are still few who take help of paper and pen. You may see print outs of hedging structures lying on tables. Banks sometimes still need hardcopy of underlying from Corporates for their records. A small step of ensuring less/no paper usage by Treasurer will ensure that the team follows her and will eventually impact environment in a positive way.
  • There are times when there is no one in Dealing room but the Television (which is on so that we don’t miss any global news) is on. Dealing rooms have a Televisions as a necessary accessory, and its important also to keep a check on what’s happening in world. But we also know that it can be switched off when no one is in the room.
  • There are many other ways where just by small step a Treasurer can impact the environment positively. Just by saying no to sales/ business development professionals for a physical meeting and instead suggesting a skype meeting may help save fuel and decrease carbon emission.

Eventually it depends upon an individual that she just sticks to what has been asked for or to step forward and do something worthwhile which impacts the organization, its stakeholders and our future generations who look up to us to provide them a health living environment to live.

Sources :

  1. https://www.theglobaltreasurer.com/2019/04/29/green-bond-demand-continues-to-rise-as-esg-returns-grow/
  2. https://ctmfile.com/sections/background/sustainable-green-treasury
  3. https://www.oregon.gov/treasury/invested-for-oregon/Pages/Sustainable-Investing-governance.aspx
  4. https://www.bloomberg.com/professional/blog/treasurers-need-know-sustainable-financing/
  5. https://www.treasury-management.com/article/4/412/3484/the-rise-of-esg-business-drivers-and-treasury-imperatives.html

What are your thoughts?

Aastha Tomar

FX & Derivatives | Debt Capital Markets | MBA Finance
Electrical Engineer | Sustainability

Remaining challenges of blockchain adoption and possible solutions

| 06-03-2020 | Carlo de Meijer | treasuryXL

A growing number of companies have expressed their will to enter the blockchain arena. But after some number of years in which their focus was mainly on the benefits of blockchain in various areas, in terms of speed, costs, streamline operations and increased efficiency, their attention is now turned to the various challenges and bottlenecks that are preventing widespread adoption. In this blog I will go into more detail in these bottlenecks and how the industry is trying to tackle these.

Main challenges

First of all there is a reputation challenge. Blockchain is still very much connected to the crypto world in the mind of many. And that is seen as a world of bad actors, hackers, frauds and speculators.

But more important are the technical ones such as immaturity (still slow and cumbersome), lack of scalability, lack of interoperability, stand-alone projects, difficult integration with legacy systems, complexity and lack of blockchain talent.

What to think about the organisational challenges at corporates like lack of good governance, lack of awareness and understanding, lack of user experience and education, the attitude of incumbents, or the security and privacy challenges, including lack of regulation. And there is the productivity paradox.

And finally, but not unimportant other challenges such as culture, energy consumption/environmental cost.

Blockchain has an image problem

Blockchain has an image problem. Blockchain is too much linked with cryptocurrencies in the mind of many. Especially crypto has a negative image that is surrounded by fraudsters, hackers that are using he technology for criminal activities. This bad name is reflecting on the blockchain technology system as whole and is making people seriously think twice before adopting it.

Before the general adoption is possible, members of the public must understand the difference between bitcoins, other crypto-currencies, and blockchain. One should understand that cryptocurrencies are only one application of blockchain technology amongst many others. This will help to eliminate the sometimes negative implications and may result in an increased willingness to use the technology. In the meantime a growing number of collaborative initiatives in the blockchain world in various industries have come up to bring wider change. This sort of interdependence may be the key to moving forward.

Corporates are afraid of the disruptive character of blockchain

There are organisations that do not like the idea of blockchain and its disruptive character. For some it is a nightmare thinking they will lose market share or will even become obsolete.

Blockchain is about 80 per cent business process change and 20 per cent technology implementation. It represents a total shift away from the traditional ways of doing things. This even goes for industries that have already seen significant transformation from digital technologies.

It places trust and authority in a decentralised network rather than in a powerful central institution. And for most, this loss of control can be deeply unsettling.

It is still uncertain who will be most affected by blockchain implementations and which areas of the business are likely to be most disrupted. So, a more ‘imaginative’ approach is needed to understand opportunities and also how things will change.

And there are the vested interest of incumbent parties

Existing regulation represents by far the most significant hurdle for blockchain innovators, as ‘existing regulations favour incumbents and their vested interest over disruptors’. The digitisation (of information) process is taking place in a so-called regulatory “heavy” zone. That is not that strange given the long-established authority of governments to protect consumer and property rights.

Blockchain presents new challenges to regulators looking to protect consumers and markets, but the rigidity with which regulators in the world’s major economies have approached blockchain has served to stifle innovation and growth.

But that view is also changing and as soon as also governments and other public organisations are seeing the benefits of this technology and develop a regulatory model that encourages innovation while protecting consumers that might be an eye opener for others.

Blockchain is still an immature technology

Beyond the above described challenges, blockchain faces a number of implementation challenges, that has all to do with the still immature technology.

  • Lack of scalability

One major technology challenge of blockchain is related to the technical scalability of the network which can put a strain on the adoption process, especially for public blockchains.

Legacy transaction networks are known for their ability to process thousands of transactions per second. Visa, for example, is capable of processing more than 2000 transactions per second. The two largest blockchain networks, Bitcoin and Ethereum however are far behind when it comes to transaction speeds. While the Bitcoin blockchain can process three to seven transactions per second, Ethereum can handle approximately 20 transactions in a second.

This lack of scalability is not such an issue for private blockchain networks, since the nodes in the network are purposely designed to process transactions in an environment of trusted parties, which makes sense business-wise.

There are some interesting solutions upcoming to tackle the scalability issue. Such as s the Lightning Network, which consists of adding a second layer to the main blockchain network in order to facilitate faster transactions. Another interesting solution is Sharding that groups subsets of nodes into smaller networks or ‘shards’ which are then responsible for the transactions specific to their shard. When offered in conjunction with the proof-of-stake consensus mechanism, has the potential to scale up the application.

  • Lack of standardisation: limited interoperability

Another main challenge is the lack of interoperability between the large number of blockchain networks. Over 6,500 projects are leveraging a variety of – mostly standalone – blockchain platforms and solutions with different protocols, coding languages, consensus mechanisms, and privacy measures.

The problem is that with so many different networks, the blockchain space is in a ‘state of disarray’ due to a lack of universal standards that would allow different networks to communicate with each other.

The lack of such uniformity across blockchain protocols also takes away consistency from basic processes like security, making mass adoption an almost impossible task.

The establishment of industry-wide standards with regard to various blockchain protocols could help enterprises collaborate on application development, validate proofs of concept, and share blockchain solutions as well as making it easier to integrate with existing systems.

There are now various projects that offer interoperability among different blockchain networks, such as Ark which uses SmartBridges architecture to address this challenge, and claims to provide universal interoperability, plus cross-blockchain communication and transfers. Another example is Cosmos, which uses the Interblockchain Communication (IBC) protocol to enable blockchain economies to operate outside silos, and transfer files between each other.

  • Integration with legacy systems

And there is the challenge for corporates of how to integrate blockchain with their legacy system(s). In most cases, if they decide to use blockchain, organization are required to completely restructure their previous system, or design a way to successfully integrate the two technologies.

One problem is that due to the lack of skilled developers, organizations do not have access to the necessary pool of blockchain talent  to engage in this process. Reliance on an external party can soften this problem. But most solutions present on the market require the organization to invest a significant amount of time and resources to complete the transition.

And there are the high incidences of data loss and breach that are discouraging most companies from transitioning to blockchain. Every enterprise is reserved and unwilling to make changes to its database, and for good reasons, as data loss or data corruption constitute major risks.

Recently, new solutions emerged which enable legacy systems to connect to a blockchain backend. One such solution is Modex Blockchain Database, a product designed to help people without a background in technology, access the benefits of blockchain technology and remove the dangers posed by the loss of sensitive data.

  • Lack of blockchain developers

While the demand for qualified blockchain staff is increasing dramatically, the blockchain landscape suffers an acute  shortage of an adequately trained and skilled /qualified people  for developing and managing the complexity of peer-to-peer networks. Blockchain technology however demands additional qualification and know-how.

According to some, the demand for blockchain-related jobs has increased by almost 2000% between 2017 and 2020. Having a sufficient pool of qualified developers is a top industry concern.

Blockchain technology is still in its infancy and is still evolving. It requires time for the developer community to adopt it, and for educational institutions to introduce relevant blockchain-related courses. Though this will alleviate the market demand, the results however will become palpable only after students will finish their training and that will take some time. .

  • Blockchains can be slow and cumbersome

Due to their complexity and their encrypted, distributed nature, blockchain blockchains can be slow and cumbersome. Transactions can take a while to process, certainly compared to “traditional” payment systems such as cash or debit cards.

When the user number increase on the network, the transitions take longer to process. It can take even days to process the whole transaction. As a result, the transactions cost is higher than usual, and this also restricts more users on the network.

In theory the principle extends to blockchain networks which are used for something other than as a store of value (for example logging transactions or interactions in and IoT environment). This is a problem which could be solved with advances in engineering and processing speeds, but that will take some time.

Organisational challenges


And there are various organisational challenges that are limiting the use of blockchain technology by corporates.

  • Lack of awareness and understanding

The main challenge for corporates associated with blockchain, especially the small and medium ones, is a lack of awareness of the technology and a widespread lack of understanding of how it works. Many companies do not understand what blockchain is or what they can do. This has a lot to do with the dominance of technicians in the blockchain area and their too much technology approach.

This is hampering investment and the exploration of ideas. Instead a much more business oriented approach is very much needed. This asks for improving the user experience for those not as technically minded. Organisations really must educate themselves about this emerging technology. They should increase their level  of understanding at all levels. This asks for better educational campaigns to make all this knowledge more accessible.

  • Productivity paradox

And there is the so-called blockchain paradox. The speed and effectiveness with which blockchain networks can execute peer-to-peer transactions comes at a high aggregate cost, which is greater for some types of blockchain than others. This inefficiency arises because each node performs the same tasks as every other node on its own copy of the data in an attempt to be the first to find a solution.

Therefore, decisions of corporates about implementing blockchain applications need to be carefully thought through. The returns to individual processing may diminish as the network grows in size. This means that blockchain applications must harness network effects to deliver value to consumers or to sectors at large.

  • Lack of cooperation

The blockchain creates most value for organisations when they work together on areas of ‘shared pain or shared opportunity’. The problem with many current approaches, though, is that they stand alone: organisations are developing their own blockchains and applications to run on top of them.

In any one industry sector, many different chains are therefore being developed by many different organisations to many different standards. This defeats the purpose of distributed ledgers, fails to harness network effects and can be less efficient than current approaches.

A positive developments is however the rise of so called blockchain consortia, aimed to tackle industry wide issues, including standards, critical mass etc.

  • Security and privacy challenges

And what to think about the various security and privacy challenges. While cryptocurrencies offer pseudonymity, many potential applications of the blockchain require smart transactions and contracts to be indisputably linked to known identities, and thus raise important questions about privacy and of the security of the data stored and accessible on the shared ledger.

Many companies nowadays work with privacy rules governed by regulation. Their consumers trust them with sensitive information. But if this information is all stored in a public ledger it won’t actually be private anymore. Private or consortia blockchain could work here. You would get limited access, and all your sensitive information would stay private as it should.

Security is another crucial topic here. However, only a handful of scenarios have good protocols that can cope with this. While blockchains are more secure than traditional computer systems, hackers can still breach apps, systems, and businesses built on blockchains.

The solution is not just government protection of privacy. Self-sovereign identities on blockchain will enable us to capture and control our own data. While there is a lot of work on several privacy protocols such as proof of zero knowledge to overcome these obstacles and good identity initiatives are underway (Sovrin), we are still a long way from a radically new identity framework.

  • Lack of regulatory clarity and good governance

There is also the lack of regulatory clarity regarding the underlying blockchain technology, which is a significant roadblock for mass adoption. Regulations have always struggled to keep up with advances in technology. This is also the case with blockchain. One of the challenges of the blockchain approach (which was also one of its original motivations) is that it reduces oversight.

Many organizations are making blockchain technology as a means of transaction. But even now there aren’t any specific regulations about it. So, no one follows any specific rules when it comes to the blockchain, so there is still no security.

There are certain areas that require regulatory support, such as the earlier mentioned smart contracts. If the regulations do not cover smart contracts, it inhibits adoption as well as investment in the blockchain industry.

Centralised systems, particularly in financial services, also “act as shock absorbers in times of crisis” despite their challenges and bottlenecks. Decentralised networks can be much less resilient to shocks, which can impact participants directly, unless careful thought is given to their design.

There is thus a strong argument for blockchain applications to work within existing regulatory structures not outside of them. To get over this challenges, Government and extremely controlled sectors may need to create regulations for blockchain. But this means that regulators in all industries have to understand the technology and its impact on the businesses and consumers in their sector.

Other challenges

  • Blockchain has an environmental cost

And finally but not least important the huge energy consumption is another blockchain adoption challenge. The majority of blockchains present in the market consume a high amount of energy.

Most of the blockchain technology follow bitcoins infrastructure and use Proof of Proof-of-work (PoW) as consensus mechanism for validating transactions. These protocols require users to solve complex mathematical puzzles, and require tremendous computing power to verify and process transactions and to secure the network.

In the meantime the amount of energy consumed by computers that compete to solve the mathematical puzzle has reached an all-time high. Some estimate that Bitcoin transaction energy consumption could soar as high as the yearly electricity usage of Denmark in 2020. Add to this the energy needed to cool down the computers, and the costs increase exponentially.

To overcome this issue, many blockchain proponents are developing more efficient consensus algorithms, that are less energy taxing. So-called proof-of-stake (PoS) protocols were introduced, that involve a combination of a participant’s stake in the network and an algorithm to randomly assign the task of validation to a node. Given that the participants are not required to solve complex puzzles, these mechanisms significantly reduce energy consumption.

Furthermore, from a business perspective, private blockchains are more suitable to serve company interests, as they provide restricted access, an additional layer of privacy to protect trade secrets, and are more energy-efficient.

Forward looking

In general, technological advancements take a long time to mature and reach a stable form that can be introduced into the market. Like any technological innovation, blockchain will follow the same, slow trajectory of adoption over the coming years. Although there are many possibilities, it will still take some time to get rid of all the challenges and use it to get all the benefits of it.

The list of Blockchain adoption challenges mentioned above clearly underlines the need for technological improvements. And the industry is very busy solving them. If we can fix these and remove the various bottlenecks, things will surely become more comfortable and trigger mass adoption.

 

 

Carlo de Meijer

Economist and researcher

 

What’s Money Transfer Really About?

05-03-2020 | treasuryXL | XE |

There are some situations where cash just won’t cut it. This is where we enter the wonderful world of money transfer. What is money transfer? It’s simple: it’s any form of payment that doesn’t involve cash.

Money transfer comes in two forms: payment and transfer. When you use you debit card at a store or your boss gives you your paycheck through direct deposit, you’re experiencing small-scale money transfer. When you’re sending money to another account or person, whether it’s across town or across the world, you’re also making a transfer.

When would you need an international money transfer? If you’re:

  • Purchasing property overseas
  • Sending tuition or spending money to a student studying abroad
  • Making an international move
  • Preparing for an exotic trip

…then money transfer is the way to go. Your money is in good company: experts estimate more than $2.5 quadrillion moves around the world each year.

Don’t let the technical details overwhelm you. Online money transfer is a quick, simple, and secure process for any of your currency exchange needs.

Is one money transfer method better than the others?

If you’ve been looking into making a transfer, there’s no doubt you’ve run across several different methods for your transfer. In addition to money transfer, you’ve probably also heard about:

  • Wire transfer
  • Money order
  • Balance exchange
  • Bank transfer

These options may seem more or less interchangeable—after all, at the end of the day, your money is moving where it needs to go, so does it really matter how it gets there?

Yes, it absolutely does. Choosing a money transfer over some of these other methods can influence:

  • The speed of your transfer
  • Your currency exchange rate
  • Whether or not you incur any additional fees during your transfer
  • The ease of the process
  • The amount you can transfer
  • Where you can transfer
  • The currencies you can exchange.

When you make a money transfer through Xe, you can trust that your money will reach its destination quickly, securely, and with no tacked-on fees.

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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.

 

 

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Do Androids dream of Electric Spreadsheets? A Beginner’s Guide to AI in Treasury – Part II

| 03-03-2020 | treasuryXL | Cashforce |

MISSED PART I? YOU CAN READ IT HERE.

Not too long ago, AI seemed a distant dream for creatives in Hollywood and sci-fi movies such as Blade Runner. Today it is all around us. We carry it in our pockets, it harnesses the technology in self-driving cars and it teaches itself how to solve a Rubik’s Cube in under a second. As this technology matures, every company must ask itself the central question: Will artificial intelligence disrupt my industry? And how can it benefit me? While the world of finance may have a conservative ring to it, it is rapidly modifying to a digital future. We can already see artificial intelligence being used in many applications.

Grim city

Just as Blade Runner was an artistic catalyst for future-noir narratives, so is machine learning essential for the narrative of treasury automation.

For example, machine learning algorithms are incredibly good at recognizing corrupt financial activities or identifying bank fraud since it can handle information thousand times faster than we can blink. Algorithms analyze user actions and distinguish between various types of transactions by gathering a huge amount of data (Big Data). By pointing out odd behavior, it learns over time and becomes even better at it. Another way Big Data is being used, is through credit scoring. By deciding who is eligible for a credit card and who isn’t the algorithm takes over the role of a human analyst.

Not only for analysis purposes but also for saving costs you will find different applications. Today we see customer care or cold calling getting replaced by talking bots, almost indistinguishable from human interaction, helping enterprises save a lot of time and money.

Finance is a fundamental aspect of everyday life for everyday people, all around the world. The endless potential is mesmerizing and what we now see is only the tip of the iceberg. However, the sudden shift is already delivering tangible business benefits. So where does this sudden shift come from? First off, as we’ve seen in part 1, the shift has been going on for well over a decade, silently emerging.  The market is becoming more and more electronic, due to the explosion of the amount and speed of data in- and output. Secondly, the cost of running high powered computing networks came down drastically. These two key factors resulted in a trend that has never been seen before.

Crystal Ball or Digital Snake Oil? 

So what exactly is true of the hype? I’ll be the first one to admit that the proclaimed revolution is often widely exaggerated and ungrounded. When it comes to stock market predictions, a monkey with a dartboard still has the upper hand compared to powerful AI tools in many occasions. Success in human-imitative AI has in fact been limited due to the complexity of human intelligence. It has layers of nuance still to be grasped. In addition, to answer on a human intellectual level is not the same as understanding the meaning behind it. Thus, the challenge of creating humanlike intelligence in machines remains greatly underestimated.

So where is the line between the crystal ball that knows all and digital snake oil? So far, the limiting factor lies in automated and repetitive processes. The basic approach only works in a closed domain with strict rules, such as chess or Go. Now if you add in the word ‘tedious’ to ‘automated’ and ‘repetitive’, you will have the perfect recipe for what is a monotonous task in finance: Managing & updating spreadsheets.

Electric Spreadsheets 

Plumbing the depths of the seemingly infinite sea of spreadsheets is still a known task in treasury, although the negative consequences are common knowledge among business departments. According to our survey, still more than 90% of companies use Excel spreadsheets for their day-to-day operations. Yet, technology doesn’t suffer from some of the dilemmas humans may face in finance which could affect people’s ability to make good decisions: Computers don’t need vacations or sleep, they are less biased and they can do the job more precise. These are obstacles in which AI, in comparison to managing spreadsheets manually, can excel.

Another factor that heavily influences the conversion to artificial solutions is the huge amount of data spread over different branches in a company. Though every department has its own responsibilities, it still has useful data. This untapped information, called Dark Data, has the potential to create a bridge between treasury and other branches, leaving more room for actual analysis between departments within. It goes without saying, AI is remarkable for finance and the promises of this technology, including Big Data, are starting to enter the realms of possibility.

A Crystal Clear Future 

A great example in which artificial intelligence has become an especially important asset is effective cash flow forecasting, one of the essential components of treasury which requires a varied skill set. Despite our best intentions, no human being has the cognitive prowess to deliver a fully accurate prediction of the future. As cash forecasting is in most cases still manually managed through spreadsheets, this often results in forecasting errors. Now, technological improvements are quickly reshaping current business strategies. AI algorithms can be of help in this case to complement the human industry expertise and business acumen, while effectively using historic data to paint a more accurate picture.

So how does this work in practice? One possibility is by analyzing a vast amount of data from your ERP and TMS system and attributing certain weights to time-based (day, week, month, …) or amount-based (customer’s payment behavior) parameters. Through variance analysis, the AI system can continuously learn and adapt to new data and expose hidden patterns, making cash flow forecasts become more accurate over time. This can be combined with statistical methods such as linear regression or time-series analysis to create synergies for accuracy.

Not only will AI help with the processing of data, but it will also change the role of the treasury department altogether. Cash forecasting administrators will be better placed to direct their time to the greatest effect, draw out valuable insights from the AI-produced forecast and tailor the process over time to address any variances. The combined intelligence, in which humans and machines have vastly different thought processes, produces superior results. In the future, AI will become as important as the human component for financial decision-making. Collaboration is key, a crystal clear future is the aftermath.

With the help of an AI-based algorithm, a cash forecast with a considerable accuracy can be constructed.

One Night at Time

So Do Androids Dream of Electric Spreadsheets? To dream you need neurons which, until we’ve reached further, are only present in the brain and controlled by the principles of nature. It’s safe to say no blade runner will hunt down your Cash forecasting system (at least for now). But surely the world of finance will be disrupted by the unprecedented AI revolution, one night at a time.

Movie references aside, the better question would be ‘Can my company benefit from this emerging technology?’. Sitting still and letting your corporate competitors gain the first advantage through AI is a risk that every industry should consider for every relevant department involved. For now, we can only know for sure that this unfinished scenario could lead to all sorts of directions. With all these changes happening, you probably do want to be a part of it when the new script on AI in treasury is being written.

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