Basisbeginselen Beursgang – Treasury for Non-Treasurers

| 21-03-2018 | Pieter de Kiewit |

Cash PoolingMet het huidige nieuws rond beursgangen (IPOs = initial public offering) heb ik gezocht op het steekwoord beursgang op treasuryXL en vond geen resultaten. Wellicht omdat de treasury beroepsgroep communiceert in het Engels. Voor Non-Treasurers ga ik bij deze kort in op de basisbeginselen van een beursgang en waarom hier zoveel aandacht voor bestaat.

Om maar te beginnen met waarom er zoveel aandacht voor bestaat. Dit is omdat het natuurlijk over het algemeen over heel veel geld gaat. En wat is zo’n beursgang eigenlijk? In den beginne is een bedrijf van één of enkele aandeelhouders. Dit zijn de oprichters, de familie of investeerders die een één op één deal hebben gesloten met de oprichters. Aandeelhouders besluiten zelf of en aan wie ze willen verkopen. Totdat de beursgang er is en aandelen vrij worden verhandeld op de beurs. Oprichters kunnen niet meer bepalen wie hun eigenaar is, iets dat Akzo Nobel en Unilever recent duidelijk hebben gevoeld.

Redenen die worden aangevoerd om naar de beurs te gaan zijn, niet uitputtend:

  • Er is kapitaal nodig voor verdere groei;
  • De eigenaren willen hun bezit te gelde maken;
  • Een notering aan de beurs geeft het bedrijf aanzien;
  • Middels een notering is het gemakkelijker in de toekomst andere soorten financiering te verkrijgen;
  • Aandelen- en optieplannen voor werknemers zijn gemakkelijker vorm te geven.

Een beursgang is niet zaligmakend. Veel van bovenstaande doelen kunnen ook via een andere manier worden bereikt: een banklening, verkopen aan een strategische partij en obligaties bij institutionele beleggers. Er komen ook zeer nadrukkelijke nadelen in beeld bij een beursgang: de rapportage eisen zijn veel hoger. Dit levert hogere kosten op. Je moet inzicht geven in je onderneming en haar plannen. Dit kan de concurrent zeker waarderen. Als je verkoopt, verlies je zeggenschap. Wie betaalt, bepaalt.

Voor treasurers is een beursgang vaak het hoogtepunt van zijn/haar loopbaan.
Weet dat als je als aandeelhouder wilt instappen, dat dit niet zonder risico is. In de hausse van beursgangen bij Facebook, AliBaba en anderen is er meer geld verloren dan verdiend. En zoals een investor laatst zei in het FD: “Waarom zou een private equity huis verkopen als de kansen voor de business case heel sterk zijn?”. Onderzoek waar je instapt en wat de motieven zijn van de verkopende partij.

Binnenkort staan er een aantal nieuwe bedrijven genoteerd aan de beurs. Ik ben benieuwd hoe de noteringen zullen verlopen. Later zullen we hier vast dieper op ingaan.

Pieter de Kiewit
[email protected] / +31 6 1111 9783

Pieter de Kiewit

 

 

Pieter de Kiewit
Owner Treasurer Search

 

 

 

How To Optimize Your Cash Management – upcoming event

| 19-03-2018 | treasuryXL | TIS Treasury Intelligence Solutions |

Treasury Intelligence Solutions GmbH (TIS)- a partner of treasuryXL, are organising a very engaging event that is being held in Amsterdam on Tuesday 27th March 2018, for corporate treasury. We have been kindly invited to attend and shall report back to you later, with our thoughts and experiences on what promises to be an interest evening. Read on for more information about this event and sign up if you find this event relevant to you and your company.

TIS will be joined by Cashforce, at the TIS Experts Evening in Amsterdam. The main focus will be on TIS client Archroma and their presentation on the global implementation of TIS.

TIS is the leading cloud platform for the management of company-wide payments and cash flows. TIS enables companies to make more efficient, more secure and more cost-effective payment transactions while also enabling customers to make better decisions when analysing financial and operational performance in real time.

Bas Coolen, Head of Treasury at Archroma, will present challenges in his department and his key objectives for a consolidation of bank account management and an optimization of payments.

Archroma is a global colour and specialty chemicals company headquartered in Reinach near Basel, Switzerland. It operates with 3,000 employees over 35 countries and with 24 production sites.

Cashforce will inform you about the art of automating your cash forecast with minimal effort.

TIS and Cashforce are very much looking forward to stimulating discussions and ideas with their comprehensive agenda and lectures. Reports on trends, achievements and real-world examples from the industry will round up the program for this evening.
During the networking section you will have the opportunity to further exchange with Bas Coolen and the experts from Cashforce and TIS. You can take this opportunity to ask your questions about how to operate an elaborate cash management system, that offers the functionality you require.

The event is being held in the Dylan Hotel, built on the site of a famous theatre – so we can expect a good performance.

Register now for one of the last remaining seats via the following link: Expert evening Amsterdam

treasuryXL wishes everyone – both participants and attendees – a productive evening and will report back later with our findings.

Smart contracts – oxymoron or the future for business?

| 16-03-2018 | treasuryXL |

On Tuesday 13th March 2018, RTL Z – a television channel – broadcast a “Cryptoshow” to explain how the Blockchain works and what it could mean for the future. They attempted to make the technology and information as simple as possible to show what uses the Blockchain could have in the world for consumers and businesses. One of the main areas of interest relates to Smart contracts. What are they? What are the advantages and disadvantages? What changes can they bring?

Definition

Wikipedia defines a Smart contract as “a computer protocol intended to digitally facilitate, verify, or enforce the negotiation or performance of a contract. Smart contracts allow the performance of credible transactions without third parties. These transactions are trackable and irreversible”.

These contracts facilitate the transfer of goods, services, property, money – in fact anything of value – in a manner that is transparent and direct. It removes the role of an intermediary.

How they work

  • You agree to enter into a transaction
    You draw up an agreement electronically
    The agreement is encrypted and placed on a secured shared ledger accessible to the counterparty
    As this is the Blockchain, the data is backed up at various other locations
    Both parties perform as per the agreement
    Costs are reduced by the absence of intermediaries
    As both parties have agreed to the contract they are faster and less expensive to administer
    Being electronic there is less possibility of errors occurring due to manual input

Advantages

  • Both counterparties receive an identical agreement
    You decide who can access and amend documentation
    Rules that have been agreed upon define how changes can be made
    Any agreed change in one document is automatically made to all relevant documents
    Encryption and the methodology of the Blockchain ensures that transactions cannot be altered after being agreed and the block validated

Disadvantages

  • Are they enforceable by law
    No action written in a contract can be against the law of the land
    Contracts still have to be written – electronically. This entails human involvement that could lead to errors
    Considerable knowledge of computer coding is required
    Lawyers still need to be involved in the formation of the contracts
    Costs – employing these specialists will come at a steep price

What further uses can the Blockchain provide

Digital identity – it will be possible to identify an agreed counterparty and all their static data can be stored
Proof of provenance – especially for ethical businesses, it will be possible to issue certificates proving the source of goods
Communication within the supply chain – discrepancies will show up and can be proactively addressed
Payments – removing financial intermediaries implies quicker payments and reduced costs
Ownership – Smart contracts enforced by law make it possible to register the legal owners of goods and property
Loyalty programmes – with all the details present from all transactions, it is possible to initiate programmes to reward clients/customers

The greatest savings will be seen in processing – both in time and costs. Some reports suggest savings of up to 40% can be established, together with a real-time overview of positions. However, the whole system relies on one major factor – trust. Where we previously met people, negotiated, agreed etc., now we will do more of that online. Furthermore, implementation of a Blockchain strategy will require a company to complete revaluate their current way of working, leading to considerable planning and strategic positioning.

The proposed future looks exciting – it is now up to industry to determine the road on which they wish to travel.

Term sheets – glossary of terms

| 15-03-2018 | treasuryXL |

Whenever entering into transactions with banks, both parties need to know and understand what they are trading. A relatively simple transaction like a FX spot has few terms – you buy one currency against selling another currency at an agreed rate and an agreed settlement date. The only other major factor relates to where the settlement has to take place – on what bank account are you receiving and to what bank account do you have to pay the counter currency.

However, when entering into a loan or derivative it is always prudent to draw up a term sheet stating all the relevant criteria to enable the bank to quote a price. Once the trade is effected, then a confirmation is sent which should have the same terms and conditions as the term sheet. Here is a list of terms that are regularly used and their meaning. They mostly apply to physical products as well as to derivatives.

American Option – an option that can be exercised on any working day until the expiration date

Bermudan Option – an option that can be exercised on more than one specified date before the expiration date

European Option – an option that can only be exercised on the expiration date

Binary Option – an option whose payoff is either an agreed amount (monetary or asset) or nothing at all

Call Option – The right, but not the obligation, to purchase a specified underlying asset, at a specified price (Strike price) on a specified date in the future

Put Option – The right, but not the obligation, to sell a specified underlying asset, at a specified price (Strike price) on a specified date in the future

Cap – an option that pays out when a specified interest rate price exceeds a pre-agreed level (Strike price)

Floor – an option that pays out when a specified interest rate price falls below a pre-agreed level (Strike price)

Collar – the simultaneous purchase of a Cap and sale of a Floor on the same specified interest rate for the same nominal amount, protecting the purchaser from rate rises whilst negating the cost of the option by selling the Floor

Strike price – the price (level) at which an option holder can exercise their rights under the agreed option

Premium – the cost of buying an option

Trade date – the date when the specifications of a contract are transacted

Effective date – the start date of a contract

Termination date – the end date of a contract

Payment date – the date on which a payment is made

Fixing date – the date on which a floating rate is set/fixed

Forward start – a contract agreed on a trade date, that becomes effective on a specified future date

Tenor – the length of time that a contract is valid

Reference rate – the specified interest rate (or FX spot)  index upon which future cash flows are based

Fixed rate – an agreed interest rate that cannot vary over the lifetime of the contract

Float rate – an agreed index rate that can be periodically reset over the lifetime of the contract

Derivative – a financial instrument that derives its value from the value of an underlying asset

Break clause – a clause written into the contract, that releases both parties from the contract in the event of a pre-agreed relevant event taking place

If you are interested to know what the effect of these terms can have on a contract, please contact us for more detailed information.

Hoe banken hun ondernemersrisico uitbesteden.

| 14-03-2018 | Frank Wijn |

 

Als oud-bankier ben ik vanaf 2008 bezig om mooie ondernemingen bij te staan in hun contacten met de bank, hen uit te leggen wat bankafspraken daadwerkelijk inhouden, bezig om ondernemers te behoeden voor “foute afspraken” en hun bankafspraken (waaronder financieringen) te optimaliseren.

 

 

Mijn werkwijze is simpel en doeltreffend. Alle afspraken met de bank worden gescreend en de teksten of afspraken die voor mij verrassend of onbegrijpelijk zijn, worden geel gearceerd. Zo kreeg ik mijn eerste derivatencontract onder ogen in het voorjaar van 2012. Het hele contract werd geel gearceerd. Ik begreep werkelijk niet waarom deze MKB-onderneming een cap met een knock-in-floor had gekocht ter afdekking van zijn renterisico. Niet veel later bleek dat zowel de klant, als de accountmanager van de bank het mij ook niet uitgelegd kregen. Mijn interesse was gewekt en het speurwerk begonnen. Dit was de opstap naar het mede-oprichten van Kennis Centrum Rentederivaten.

In de jaren 2012 en 2013 was ik vooral roepende in de woestijn, totdat ik mijn opgedane kennis en verbazing op liet tekenen door een journalist van Follow The Money. Het 2 pagina tellende artikel werd verkocht aan de Volkskrant en de deksel van de beerput kwam enigszins los.

In 2014 zag het tijdelijke samenwerkingsverband KCR het daglicht en in die samenstelling trokken wij door het land. Langs Nederlandse Vereniging van Banken, hoofddirectie van grootbanken, Autoriteit Financiële Markten, journalisten van dagbladen en de laatste 2 jaar ook de Derivatencommissie. Ondernemersverenigingen als MKB Nederland (en later ONL) gaven niet thuis. Te complex en te vervelend voor de banken.

Nu, vier jaar later, is het Uniform Herstel Rentederivaten (een broertje van Deltaplan KCR) in ontwikkeling. Voor een te kleine doelgroep, met teveel invloeden van de banken en te complex voor MKB-ondernemers om te begrijpen. Het niet-begrepen derivatencontract was destijds 6 pagina’s en de “oplossing” inmiddels 244 pagina’s. Maar goed er wordt wat gecompenseerd, dus beter dan niets.

Brengt mij bij de verbazing van vandaag de dag. Dat rentederivaten en niet-professionele / niet-deskundige klanten een moeilijk houdbare combinatie is, lijkt steeds duidelijker. Maar nu kwam ik zeer recent een staaltje renterisicomanagement van de bank zélf tegen. De ABN Amro Bank om precies te zijn. Hoe gaat deze bank om met het renterisico dat zijzelf zegt te lopen?

Lees en verbaas u. Let op hun woordkeuze “interpretatie van”. Tegen zo’n tekstblok in een financieringsofferte is geen derivatenproduct opgewassen.

“Klant centraal” was het toch?

frankwijnfoto1

 

Frank Wijn

Expert in financiële duidelijkheid 

 

IPOs – how to bring your company to the market

| 13-03-2018 | Lionel Pavey |

In the last week, 3 Dutch companies have announced that they will be floating on the stock exchange via Initial Public Offerings (IPOs). Alfen – an energy storage company; B & S – a cosmetics wholesaler; and NIBC – fifth largest Dutch bank in terms of assets. In America, Dropbox and Spotify, among others, are looking to float. Future issues in the Netherlands are expected to include Leaseplan, Varo Energy and Ayden. It is a very busy start to the year for investment banks with plenty of activity in IPOs and mergers and acquisitions (M&A). Here is a summary of how an IPO works.

What is it?

An IPO is when a company offers its shares to the public, which are normally purchased by institutional investors as well as, though usually in smaller amounts, to retail investors – individuals. A company first needs to issue a prospectus to potential buyers – this is a financial document that discloses all relevant information and financial statements about the company, in order that investors can determine the value of the company. 2 critical issues need to be determined – the share price and the number of shares to be issued. Shares are underwritten by one or more banks – they undertake the risk of bringing the shares to market and placing them with buyers. They also carry the risk of having to hold shares if they do not get sold at the time of the IPO.

Why do it?

Companies that have grown eventually start looking for alternative ways of raising funds – either for expansion or investment. The normal routes include bank loans, private placements, or capital injections via new shareholders, along with going public. It allows them to raise equity, offer incentives to management and employees, as well as increasing the awareness and profile of the company. There are large pools of liquidity – specifically pension funds and investment funds – that are looking for attractive investment opportunities. A major consideration for selling shares as opposed to private placements and loan products is the fact that, normally, there is never a need to repay shareholders their capital. As a shareholder you gain access to the increase of the value in the shares as well as dividend payments, both of which reflect the growth of the company. A shareholder has a future claim on a share of a company.

What are the advantages?

A cheaper route to long term capital
Diversification of ownership
The potential ability to attract better management
Alternative source of funding for acquisitions
A simple metric to determine the value of a company – share price * amount of shares

What are the disadvantages?

Considerable paperwork – business information, statements of accounts
Major costs relating to legal, marketing and accounting work
Primary information about your company that is freely published – your competitors
Large amount of time and effort needed to prepare everything
Dilution of power to shareholders
Compliance to new reporting methods – everything must be delivered on time
The issue might not be a success

Considerations

As a public company, reporting has to take place within certain time frames. This could, therefore, entail considerable investment in updates to accounting and reporting software – and processes – to comply with the regulations. Additionally, whilst preparing for an IPO, the company must still be run and managed as before. All these extra steps are on top of the daily management. Time must be found to make presentations and answer question from accountants, lawyers, investment banks and regulators.

Going live

If all has gone according to plan, an IPO will be successful and the share price will rise. The company’s profile has been increased and business grows. However, there are new responsibilities to shareholders, management and employees. There is a lot more communication necessary.

Final point
In a normal IPO, a company offers a mix of existing shares and new shares into the offering. This allows existing shareholders to realise a profit on their previous investment whilst also offering the company new capital. For the 3 Dutch companies mentioned at the start, all 3 issues are, basically, secondary offerings – no new shares are being created.

Lionel Pavey

 

Lionel Pavey

Cash Management and Treasury Specialist

 

 

MiFID II regulering van de georganiseerde handel

| 12-03-2018 | Michiel van den Broek |

 

De Europese MiFID regels hebben als hoofddoelstellingen om de Europese financiële markten efficiënter en transparanter te maken en om de bescherming van beleggers te vergroten. De MiFID II regels trachten zoveel mogelijk handelsvormen te reguleren. Deze regulering heeft betrekking op de dienstverlening en beleggingsactiviteiten van beleggingsondernemingen en exploitanten van gereglementeerde markten. Bij het verlenen van beleggingsdiensten kan een beleggingsonderneming op verschillende manieren transacties in financiële instrumenten uitvoeren: (1) als tussenpersoon en (2) voor eigen rekening.

Transacties uitvoeren via een tussenpersoon

Hierbij voert de beleggingsonderneming als tussenpersoon een klantorder uit voor rekening van de klant op basis van execution only, dan wel in het kader van beleggingsadvies of vermogensbeheer.

Transacties voor eigen rekening

Bij handel voor eigen rekening sluit de beleggingsonderneming een transactie af met eigen rekening en voor eigen risico.

Klantorders afhandelen als tussenpersoon op de georganiseerde markt

De beleggingsonderneming kan een klantorder:

Doorgeven aan een externe handelsplatform.

  • Een gereglementeerde markt (beurs)
  • Een alternatief handelsplatform, oftewel een Multilateral Trading Facility (MTF)
  • Een georganiseerde handelsfaciliteit, een Organised Trading Facility (OTF)

Uitvoeren zonder inschakeling van een externe partij.

  • Via interne afhandeling, oftewel Systematische Internalisatie (SI)

Ad a en b Gereglementeerde markt en MTF

Voor de gereglementeerde markt gelden de MiFID II regels voor gereglementeerde markten. Voor overige exploitanten van een MTF zijn de MiFID II regels voor beleggingsondernemingen van toepassing. De MiFID II regels voor gereglementeerde markten en MTF zijn vergelijkbaar maar niet helemaal identiek. Belangrijke verschillen zijn de vergunningsvereisten, de prospectusverplichting voor toelating tot de handel en de afwikkeling van transacties.

Samenvattend is een gereglementeerde markt aan meer regels gebonden, biedt meer beleggersbescherming en is duurder dan een MTF. In de praktijk zijn MTF’s geduchte concurrenten van beurzen. Deze concurrentie sluit aan bij een hoofddoelstelling van de MiFID regels, het efficiënter maken van handel op Europese financiële markten.

De handel op gereglementeerde markten en MTF’s verloopt via niet-discretionaire regels. Niet-discretionair betekent dat er geen enkele mogelijkheid mag zijn de aan- en verkoopbeslissingen te beïnvloeden.

Een beleggingsonderneming moet de nadrukkelijke toestemming van de klant hebben om klantorders buiten een gereglementeerde markt of MTF uit te voeren.

Ad c: Handel via een Organised Trading Facility (OTF)

Om binnen de Europese Unie de financiële markten transparanter en efficiënter te maken en concurrentieverhoudingen tussen handelsplatformen meer gelijk te maken, introduceert MiFID II de georganiseerde handelsfaciliteit (Organised Trading Facility, OTF). MiFID II definieert de OTF ruim om te bereiken dat elk handelssysteem onder toezicht komt naast de gereglementeerde en de MTF handel. Aangezien de G-20 de handel in bepaalde OTC-derivaten in de toekomst verplicht via een elektronisch handelsplatform wil laten verlopen, is het te verwachten dat deze ook onder de MiFID II regels voor OTF gaan vallen.

De OTF handel verschilt in twee belangrijk aspecten van de gereglementeerde en MTF handel: verhandelde producten en regels van handel.

OTF verhandelbare producten

Op een OTF mag geen handel plaatsvinden in aandelen (equity) of daaraan verbonden instrumenten. Er mag alleen worden gehandeld in non-equity instrumenten, zoals obligaties, gestructureerde financiële producten, emissierechten en derivaten.

OTF regels van handel

Op een OTF handelsplatform is er sprake van het afsluiten van orders via matching op basis van discretionaire regels. Matching bestaat uit het bijeenbrengen van tegengestelde klantorders. Discretionair betekent dat de beleggingsonderneming die de OTF exploiteert invloed heeft op welke orders met elkaar worden gematcht.

Deze invloed om een order te plaatsen, in te trekken of te matchen is mogelijk omdat de OTF exploitant bij de transactie handelt voor rekening van zowel koper als verkoper. De OTF exploitant kan ook de totstandkoming van een potentiële transactie faciliteren door partijen bij elkaar te brengen. Omdat beïnvloeding mogelijk kunnen kan er voor de exploitant een belangenconflict optreden waardoor de exploitant niet in het belang van de klant handelt. Om de belegger hiertegen te beschermen gelden er strenge zorgplichtregels.

OTF voorbeelden: agency crossing en matched principal trading

Een agency crossing system is een voorbeeld van een OTF waarbij matching van orders tot stand komt doordat de exploitant voor rekening handelt voor beide klanten. Een variant op de OTF is matched principal trading (back-to-back handel), waarbij de exploitant twee tegengestelde posities van klanten bijeenbrengt door transacties voor eigen rekening af te sluiten met dezelfde looptijd. Hierdoor wordt hetzelfde bereikt als bij matching via een agency crossing. Echter, bij matched principal trading moet de opdrachtgevers toestemming geven om de transactie af te sluiten, hetgeen bij agency crossing niet nodig is. Om de opdrachtgevers te beschermen, mag de exploitant bovendien geen marktrisico lopen. Dit betekent dat de bemiddelaar geen winst of verlies maakt, afgezien van de vooraf bekendgemaakte provisies, vergoedingen of kosten van de transactie

Ad d: Systematische internalisatie (SI)

In plaats van inschakeling van een externe partij kan een beleggingsonderneming een klantorder ook intern (in-house) uitvoeren zonder gebruik van een multilateraal handelssysteem systeem. Er is dus sprake van een bilaterale handel om klantorders af te sluiten. In plaats een klant als tegenpartij te zoeken om een tegenovergestelde klantorder uit te voeren, treedt de beleggingsonderneming zelf op als tegenpartij. Deze handelsvorm is een combinatie van de beleggingsdienst handel voor rekening van de klant met de beleggingsactiviteit handel voor eigen rekening van de beleggingsonderneming volgens niet-discretionaire regels. Een verschil met een OTF is dat ook aandelen (equity) of daaraan verbonden instrumenten mogen worden verhandeld.

Bij multi dealer platform treden meerder beleggingsondernemingen op als handelaar voor eigen rekening. Een single dealer platform is een handelsplatform waarbij één beleggingsonderneming steeds optreedt voor klanten door voor eigen rekening posities in te nemen.

In vergelijking tot beurs, MTF en OTF gelden er voor interne afhandeling minder regels voor transparantieplicht voorafgaande aan de handel.

Michiel van den Broek - foto

Michiel van den Broek

Owner of Hecht Consult

 

Corporate governance – it is all about the rules

| 08-03-2018 | treasuryXL |

Corporate governance is the rules and processes by which a company is controlled and directed. It is a balancing mechanism between different stakeholders – directors, shareholders, management, government, external financiers etc. The treasury function performs highly skilled and complex tasks to ensure continued and harmonious execution of all cash related functions. At the same time, there is much interaction with both internal and external stakeholders. The corporate governance within the treasury function should always be performed in accordance with predetermined and approved metrics as laid out in Treasury statutes. This means undertaking operations that are consistent with the governance within the corporation.

Corporate governance helps to define the strategies of a company, and highlight how these strategies will be implemented throughout the policies, procedures and working processes. Normally, Treasury statutes are drawn up by treasury and management – detailing the accepted methodology to perform the approved tasks – whilst responsibility and approval is granted by the directors. Once agreed upon, the statutes have to be observed by staff carrying out their duties and responsibilities.

As the treasury function is highly complex – both in financial products as well as regulatory frameworks – both directors and management need to fully comprehend the functionality as well as the implications of different financial products and services. The onus lies on the treasury department to ensure that other stakeholders not only have enough knowledge about the products, but also awareness and understanding of the relevant risks. This is vital to ensure that the right decisions are made at the highest strategic level.

Directors and management need to understand:

  • Financial risks undertaken whilst running the business on a day-to-day basis
    Operational controls to protect the business from fraud
    Risks inherent in approved financial instruments
    Strategies used to identify and mitigate financial risk
    How risk is measured and reported
    Potential exposure as a result of the agreed policy
    Acceptance that not all risks can be qualified and quantified
    The influence of external factors – market risk, counterparty risk, interest rate risk etc.

Proactive role of the Treasury

  • Accurate valuation of financial products used – if you cannot value it, you should not be using it
    Quick recording of all transactions
    Ensuring with controllers that all financial products are correctly input for accounting purposes
    Implementation and management of agreed Treasury policies
    Determining if bank covenants are being maintained
    Ensure compliance with all external regulatory frameworks
    Collaborating with auditors – both internal and external

Policy is influenced by strategy and objectives. The role of Treasury is to help to fulfil those objectives. Treasury has a dual function – it both mitigates risk as well as being the source of risk. Treasury enters into financial transactions on behalf of the business in order to mitigate risks; however, something like an unauthorised trade could subject the business to financial loss.

It is essential that directors and management understand both the risks that treasury manage, together with the potential risks that those transactions can create.

From dull numbers to smart data: A new era of cash visibility is dawning

| 06-03-2018 | TIPCO | Sponsored content |

Building on information that is now more readily available than ever before, advances in technology help create new insights for corporate treasurers. 

 

 

For the last decade or so, many treasury departments have focused on getting their hands on the data required for establishing daily, or at least weekly, visibility of group-wide cash. Countless projects have revolved around collecting electronic bank balance data – think MT940 and others – and considerable time and resources have been invested in automating and speeding-up data retrieval from TMS, ERP, trading platforms and other source systems.

After all, besides bank balances, data on bank and IC loans and deposits, intercompany clearing accounts and other financial positions needed to be incorporated as well to allow for a realistic assessment of the group’s financial status and available headroom. However, reporting based on these data has remained a painful exercise for most treasury teams as it typically involved exporting information from various, isolated data silos to numerous spreadsheets containing a plethora of handcrafted reports. The result: the number of hours spent on consolidating data, updating reports and correcting errors often reached double-digits, on a weekly basis.

The first step: compiling information

In recent years, the provision of relevant data has become much more automated and common place since the goal of having electronic account statements of all bank accounts world-wide centrally available was high on the priority list of many corporates. Very often, this was part of a larger effort to streamline and centralise cash management and payments. In many cases, a TMS was introduced to replace Excel spreadsheets and the treasury modules of popular ERP suites started to offer more sophisticated features, providing corporates with a preference for all-in-one solutions with a viable alternative to a standalone TMS. A mix of tried-and-tested, file-based connectors and more sophisticated web-services allowed for even speedier data interchange between source systems such as TMS, ERP or trading platforms. And any data not centrally available to the treasury department was collected from subsidiaries – facilitated in the best case by easy-to-use, web-based applications. With this kind of information basis established, dedicated treasury reporting solutions were leveraged to achieve close to 100% visibility of cash. At the same time, the rise in business intelligence software allowed end users to easily retrieve data without having to resort to spreadsheets and accessing reports online or even via smart devices became the norm rather than the exception.

The next step: Turning information into insight

For many corporates, these steps were already a big leap forward. But what next, now that all the integration challenges have been mastered and information is readily available? Of course, the ‘data puddles’ turned ‘data pools’ mentioned above can be used for plain and simple financial status reporting. But, given that it is 2018 and self-driving cars will soon hit the road in California: should that really be it? For us, the answer is a clear ‘no’. Today, treasurers have access to a whole new range of applications which make use of information that is now more readily available than ever, and which leverage recent advances in technology such as artificial intelligence to provide value-added services to treasury depart-ments. While we are very careful when talking about ‘revolutions’ in treasury, the advances we want to highlight below surely are a noteworthy evolution. Until recently, data analysis in treasury was still very much a manual task. This no longer needs to be the case as smart tools greatly reduce the time needed for performing even in-depth data analyses, thus allowing more time to be spent on acting on the results of such analyses. Let us take you on a quick ‘tour d’horizon’ using five examples of how smart applications can take your cash visibility to the next level:

1. Policy checks
In a typical treasury policy, one finds numerous rules and regulations relating to the opening of new bank accounts, the maximum allowed number of these accounts, acceptable account purposes, etc. Why not replace email-based processes for new bank account requests with intelligent workflows that not only ensure an end-to-end audit trail, but which also ensure that new bank accounts are automatically fed into all relevant systems such as ERPs, TMS or reporting tools once finally approved.

2. Compliance controls
Combined with smart request workflows as described above, regular, system-supported compliance checks further enhance group treasury’s grip on what is going on around the group. Whether these checks relate to the number, currency or counterparty of bank accounts or other financial positions, or the timeliness of data on authorised signatories in the system, outliers can easily be identified, and compliance can be swiftly restored.

3. Fraud detection
When electronic account statements are merely used as a means of importing end-of-day balances, much of their potential is lost. Based on smart search patterns, data provided as part of the remittance information can be used for valuable insights: Where in the group do frequent cash-based transactions occur? Banks’ business transaction codes (BTCs) or other related text snippets can point you in the right direction and responsible, local or regional finance staff can be notified automatically, using workflow-based notification processes so the background and soundness of such cash movements can be checked.

4. Performance KPIs
KPIs as a means of systematically measuring treasury performance are high on the agenda of many of the more advanced treasury departments out there. Whether they relate to the efficiency of core treasury processes (think request and approval workflows once again) or to other indicators such as the overall number of bank accounts, the percentage of accounts included in cash pooling arrangements, the share of trapped cash in overall cash – to name only a few basic KPIs: a well-compiled set of such figures that covers not only cash management but other areas as well – presented in the form of a clearly laid out KPI dashboard, finally provides the treasurer with a strategic steering wheel.

5. Bank fee controlling
You wonder what bank fee controlling has to do with cash visibility. The short answer: everything. Regular, system-supported bank fee analysis is not only about penny pinching but equally about developing an in-depth understanding of what is going on further up the process chain. A strikingly high number of fax payments in a country where you wouldn’t expect them? Fees titled ‘Others’ which amount to thousands of euros every month? If nowhere else, then you’ll find this information in the electronic fee statements (e.g. camt.086) provided by your bank. A smart analysis tool allows you to interactively drill down from cruising altitude to the line item level and within minutes you can reach out to either your bank’s customer service, your subsidiary or both to clarify what’s going on.

If you would like to know more and find out how technology can help you go one step beyond cash visibility and ease your daily life as a treasurer, get in touch with us. We are looking forward to helping you unleash your data’s full potential.

TIPCO Treasury & Technology GmbH

[button url=”https://www.treasuryxl.com/community/companies/tipco-treasury-technology-gmbh/” text=”View company profile” size=”small” type=”primary” icon=”” external=”1″]

[separator type=”” size=”” icon=””]

Italian general elections – the end of la dolce vita?

| 05-03-2018 | treasuryXL |

On Sunday 4th March 2018, Italy head to the polls. About 50 million people will vote for a new national government. They are looking to elect 630 members of the Chamber of Deputies and 315 members of the Senate of the Republic. A new electoral system will see 37% of seats allocated by a “first past the post system” and the remaining 63% allocated by proportional representation according to the largest remainder method. Political ideology is represented by more than 20 parties embracing the political range from communism to neo-fascism, together with 2 predetermined coalitions based on centre-left and centre right. One of the contestants is Silvio Berlusconi (representing the Forza Italia – the centre-right coalition) who is barred from holding public office until 2019 as a result of a tax fraud conviction! So what are the issues for the 3rd largest Euro-bloc country and what are the potential repercussions for the EU and the Euro?

The main issues appear to be the economy and immigration. The arrival of more than half a million immigrants since 2013 has upset many Italians and led to politicians increasing their rhetoric on the subject. Mr. Berlusconi has concluded that immigration is a social time bomb and has advocated a policy of mass deportation. His comments are shared by many other political parties – though not all. Electoral manifestos have included such populist tracts as increasing the minimum wage and tax allowances, reduction in income and corporate tax, increase spending on public welfare and, ambitiously and without detail, a reduction in sovereign debt by 40 percentage points in relation to GDP within the next 10 years.

Italian economy

Italy has seen a faltering economy over the last 10 years. Their annual GDP growth rate has rarely exceeded 2% per year in that time. Industrial output is still 5% lower than before the crisis. This is in stark contrast to their peers in Europe who have mainly all recovered and now have industrial output higher than before the crisis. Reforms have seen more than 1 million jobs created since 2014, but more than 60% of these are part-time jobs. Unemployment has fallen but the rate of unemployment is still over 11%. One third of Italians aged between 25 and 29 remain unemployed.

Sovereign debt has increased over the last 10 years. Outstanding debt now exceeds EU 2.2 trillion and the ratio of debt to GDP is over 130%. The banking sector is also affected. More than 15% of all loans to businesses and consumers are now recognised as non-performing loans. Additionally, at the end of 2017, Italian outstanding debt arising from Target2 balances was approaching EUR 440 billion.

So, Italy has the 2nd largest debt to GDP ratio in the EU, largest ratio of bad debts at commercial banks and the largest outstanding negative balance at Target2. The only sensible way to prevent the levels of debt from becoming unsustainable would be for the Italian economy to grow faster that their historical average – a well-meaning definition, but one that looks very remote in the present economic and political climate.

Italian politicians have increased their anti-EU rhetoric recently, stating that the current situation cannot continue – both economically and in relation to the number of immigrants. How they think the EU will change at a time that they are facing more internal pressure from dissatisfied member states is a mystery.

First results should arrive around lunchtime on Monday 5th March 2018 – only then will we know what the future holds for Italy, the EU and the Euro.

The image of Italy, for some, is of La Dolce Vita as seen in the famous film of 1960 by Federico Fellini. The vision of Anita Ekberg in the Trevi fountain – once seen, never forgotten.

But the moral of the story was the unsuccessful pursuit of love and happiness.