RECAP | Cash and Treasury Management Event Copenhagen | By Pieter de Kiewit

06-09-2022 | cashandtreasury.dk | treasuryXL | Pieter de Kiewit | LinkedIn

 

Last week, Pieter de Kiewit was Chairman of the Cash & Treasury Management Conference in Copenhagen. Pieter decided to take the effort to share his experience with you.

 

By Pieter de Kiewit, Chairman of the event

Corporate treasury events come in many shapes and sizes. Earlier this year, I reported on my visit to Mannheim, in a few weeks you can expect a blog about Vienna, in this blog more about Copenhagen. I can already tell you that I liked the format and set-up of this event.

Corporate treasury markets will always be very niche. The event organiser, Insight Events, targeted a mainly Danish-Scandinavian audience. The sessions were all in English and the venue was the beautiful Hotel D’Angleterre in the heart of Copenhagen. It was also a conscious choice to keep the audience small, just under 150 and of high calibre: almost all treasurers, most of them quite senior and well informed. The consequence of this choice is also that there were no parallel sessions, all sessions were attended by the entire audience. During the break one could meet the various treasury service and product providers, including treasuryXL partner Nomentia.

Last year, I was asked to present on “how to get hired for your next treasury position” and had some questions during other sessions. Based on the bond we built, I was asked to be moderator/chairman of this year’s event. I thought it was a great gig, if it was appreciated, you just have to ask others.


The programme consisted of presentations and panel discussions led by Nordea. I was impressed by the level of quality offered. There were two macro-economic presentations, one by the Chief Economist of Nordea, a well-known TV personality in Denmark and the other by a senior director of EKF, the Danish export credit agency. Both gentlemen brought very thorough interesting insights but, given the current global developments, also a gloomy and dark future.

Another highlight was the input on ESG financing where treasurers and senior sustainability experts together informed the audience about the reality of this type of funding making in, at least for me, an inspiring way. In a cleverly constructed format, credit rating and Basel IV developments were linked in a session with the most questions from the audience.

In other, more traditional but also essential and informative sessions, building treasury teams, mergers and career development were on the agenda. And the non-treasury topic was brought up in a very entertaining way about a hacked company that does not want to pay a ransom. Relevant not only for treasurers and definitely food for thought.

Looking back, I see a very successful and high quality event. On a personal note, I always enjoy the international in my work. Me as a Dutchman, extrovert, direct and sometimes unintentionally rude, communicating with civilised, reserved Scandinavians who do not ask too many questions hopefully did not result in not being invited for next year. We shall see…..

 

 

 

 

 

 

 

Thanks for reading!

Pieter de Kiewit

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

06-09-2022 | treasuryXL | Philip Costa Hibberd| LinkedIn |

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

RPA in treasury

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

Answer provided by Philip

What is RPA (Robotic Process Automation)?

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

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

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

What are common use cases of RPA in treasury?

  • Reporting: collecting information from different sources, calculating measures and KPIs, drafting the reports, distributing the reports (after getting confirmation that everything is ok).
  • Master data management: support with the creation, updating, deletion and cleansing of master data in different sources and systems. Synchronizing data across systems.
  • Cash Position: collecting bank statements/account balance information from different systems, consolidating information, saving and/or distributing the cash position information to the appropriate people and systems.
  • Payment processing: collecting and consolidating payment requests, handling predefined exceptions and validations, inputting/uploading payment batches before cut-off times, providing reports and feedback on each action.
  • Cash Flow Forecasting: collecting cash flow data from different systems and sources, sending automated reminders, consolidating the information, applying validations and checks, notifying exceptions, distributing the information.
  • Month end activities: sending notifications/reminders on deadlines and expected activities, collecting and distributing FX rates, consolidating information, performing automatic checks, limit checks, compiling and distributing month end reports to accounting / FP&A / etc.
  • User and access management: checking user roles and statuses in different systems, notification of accesses about to expire, creating accounts for joiners and disabling accounts of leavers.
  • Mark-to-market valuations: collecting deal confirmations from different sources, extracting information from different mediums (excel, PDF, emails), running the models, preparing and distributing the reports.
  • Covenant management: collecting the information from different sources, calculating the ratios, warning of (imminent) breaches, warning of risky trends, distributing reports.
  • Bank fee monitoring: gathering bank statements / CAMT.086 / Bank Services Billing (BSB)  from different systems, processing the information, generating and distributing reports, automatic disputing of fees based on predefined rules.
  • Chargeback / Credit card disputes: collecting pre and post approval information, filing the disputes, notifying users of responses and exceptions/follow up needed.
  • Automated testing regression testing of ERP/TMS/system updates, bank connectivity testing, end to end process testing, generating testing reports and evidence.
  • (Basic) Trading: computing of exposures, inputting  vanilla deals in trading platform (if within predefined limits – otherwise notify traders), deal execution according to trading policy, handling of post trade activities.

 

Thank you for reading,

Phillip Costa Hibberd


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

Get to Know TIS

05-09-2022 | treasuryXL | TIS | LinkedIn |

To give their clients the best treasury, payments, and liquidity management software and support possible, TIS is continually expanding and developing. Download the “Get to Know TIS” Factsheet to view the most recent details about their business and solution portfolio.

Source

Get to Know TIS

Read the factsheet to learn more about TIS. The purpose is to summarize each area of our business in order to educate readers on all the core capabilities, value-added services, and general operational expertise that TIS offers to clients.

This resource also highlights relevant stats, figures, and metrics that demonstrate TIS’ position as a global leader in enterprise payments and liquidity management. For more information about the capabilities that TIS offers or to better understand any aspect of our solution suite, request a private demo with one of our experts by emailing [email protected].

 

You can find the factsheet here

Managing working capital in challenging times | Attend on December 1st 2022

31-08-2022 | treasuryXL | The Working Capital Forum | LinkedIn |

 

Are you a Corporate Treasurer? Attend The Working Capital Forum Europe 2022 for free: use code TXL22CG

  • Banks, fintechs, and other solution providers can get 25% off the cost of a ticket using this TreasuryXL code: TXL2225

 

 

Mark your calendar for the 1st  of December 2022! The Beurs van Berlage in Amsterdam will open the doors for The Working Capital Forum Europe. This event brings together leaders in treasury, procurement, and payments to share ideas and techniques for better working capital management across supply chains.

That’s never been so important as in these times of rising interest rates, inflation, and supply chain shocks, when managing working capital is everyone’s concern.

From supply chain finance to accurate cash forecasting, solutions for every component of working capital management will be discussed on stage, demonstrated in our information area, and examined in our workshops at the world’s largest specialist working capital and supply chain finance event.

We’re delighted to return to Amsterdam for this one-day live event, with main stage keynote sessions, panel debates, and breakout workshops and demos.

If you’re interested in optimising working capital in your organisation, you need to join us in Amsterdam for the most productive day you’ve had in years.

Among the topics we will be covering are:

  • Cash forecasting and cash visibility
  • Payables finance
  • Receivables finance
  • Optimising receivables – get paid faster
  • Inventory management and inventory finance
  • Supply chain finance
  • ‘Deep tier’ supply chain finance
  • Funding options for trade and supply chain finance
  • Using working capital tools for ESG objectives
  • Credit insurance
  • Disclosure rules on supplier finance
  • Ratings agencies and their view of working capital solution

TO REGISTER AND FIND OUT MORE VISIT:  WORKING CAPITAL FORUM EUROPE 

Visit the Working Capital Forum: https://www.workingcapitalforum.com/

Join our events here: https://www.workingcapitalforum.com/events

Enter the Working Capital and Supply Chain Finance 2022 Awards here: https://www.workingcapitalforum.com/awards.html

 

 

CFO Perspectives: How to set a currency hedging strategy

30-08-2022 | treasuryXL | Kantox | LinkedIn |

How should a CFO set their currency hedging strategy, to protect cash flows or to minimise P&L impact? In the fourth edition of CFO Perspectives, we’ll explore how senior finance professionals can choose the right path when it comes to hedging.

Credits: Kantox
Source

According to a recent HSBC report, the objectives of currency hedging are pretty extensive. While three-quarters of surveyed participants mention forecasted cash flows as an FX risk that their company hedges, 61% cite balance sheet items as the risk they hedge. Other participants say minimising the impact on consolidated earnings is one of their FX hedging objectives and KPIs.

The debate about whether to hedge cash flows or earnings —by removing the impact of accounting FX gains and losses— is as old as currency hedging itself. The two sides have powerful arguments in their favour.

Cash flow hedging vs balance sheet hedging

What’s the correct approach?

The debate will likely never be settled entirely. No single approach for currency risk management is definitively better than another. Different opinions may reflect the type of business activity, the preferences of investors and even managers’ own biases.

The key step for any CFO looking to establish or revamp their business’s currency hedging program is to clarify what the firm is trying to achieve. Only with enough clarity on this matter can the dangers of ad hoc or unsystematic hedging be avoided. 

So, where does that leave us? This blog brings some welcome news to beleaguered CFOs as they take sides. While nothing replaces clarity regarding the key objectives of currency management, technology now makes it possible for risk managers to:

  1. Use a single set of software solutions to run cash flow and balance sheet FX hedging programs
  2. Automate the time-consuming and resource-intensive process of implementing Hedge Accounting

This is big news indeed!

Practical steps on the journey to the FX hedging decision

While a certain amount of debate and discussion is unavoidable when deciding the goals of a firm’s FX hedging program, a number of practical steps can be followed to determine what should be hedged.

These steps share a central concern about protecting and enhancing the firm’s operating profit margins by giving particular importance to the pricing characteristics of each business division.

These steps include:

  1. Steer clear of ad hoc or unsystematic hedging. This is a path to nowhere and should always be avoided.
  2. Set the goals of your FX strategy, such as defending a campaign or budget rate, achieving a smooth hedged rate over time, hedging transaction exposure, or removing the impact of accounting FX gains and losses.
  3. Based on these goals, define the best hedging program while imagining that infinite resources can be deployed. By doing so, CFOs can squarely focus on their FX goals.
  4. Consider using Currency Management Automation to seamlessly execute all the steps of your program, breaking internal silos and ensuring connectivity with your own company systems (ERP, TMS).
  5. Only then ‘prune’ the strategy and adjust it to the available resources, while measuring the impact —in terms of risk, costs and growth— of this adjustment.
  6. Use technology to automate the process of compiling the required documentation for Hedge Accounting.

In other words: to set a currency hedging strategy you need to do away with outdated constraints. Technology is putting to rest the traditional view of currency management as a resource-intensive activity. So the message is: give priority to your FX goals, not to the resources currently at hand.

Read the third edition of our CFO Perspectives series, 5 ways CFOs can increase the efficiency of treasury operations.

What is a yield curve or interest rate curve? (Dutch Item)

29-08-2022 | Erna Erkens | treasuryXL | LinkedIn |

Valutacoach en currency specialist Erna Erkens legt in dit artikel uit wat een ETF is, hoe je daar in kunt beleggen en waarom je daarin zou beleggen.

Oorspronkelijke bron

Inhoud

Ik was een tijdje geleden te gast bij een bank. Daar spraken we innovatie, risico en rendement. Dat is wat kort door de bocht, maar dan heb je een idee van het onderwerp. De ETF kwam in dit gesprek ook voorbij. Een van de topmensen van deze bank vroeg: “Wat is een ETF?” Dat was ook nog eens iemand die best vaak risico’s van deze bank moest beoordelen. Het goede nieuws was dat hij eerlijk was over het feit dat hij het niet wist. Het slechte nieuws was dat iemand op zijn positie niet wist wat een ETF was. Een goede reden voor dit artikel.

Na het lezen van dit artikel weet je beter het verschil tussen een ETF en een beleggingsfonds. Kan je met meer vertrouwen en succesvoller beleggen in een ETF. Ben je makkelijker in staat te beoordelen of een ETF als belegging bij jou past. En slaag je erin om duidelijker uit te leggen wat een ETF is als dit ter sprake komt.

Beleggen in ETF’s is de laatste tien jaar steeds populairder geworden. Maar wat is een ETF nu eigenlijk? En hoe werkt zo’n ETF nu eigenlijk?

Lees ook: Consumentenprijsindex vs. producentenprijsindex: dit is wat je moet weten

Wat is een ETF?

ETF staat voor Exchange Traded Fund. Een ETF is een beleggingsfonds dat bestaat uit verschillende onderliggende activa, zoals aandelen of obligaties. ETF’s worden verhandeld op de beurs, net als aandelen. Dit maakt ze toegankelijk voor iedere belegger. Ze werden in 1993 geïntroduceerd in de VS. Het is de eenvoudigste manier om een index te kopen. Je koopt een ETF met 1 transactie. Ze werden in het begin Indextrackers genoemd. Je kunt een ETF alle werkdagen verhandelen met dezelfde handelstijden als de AEX. Dus van 9.00 uur tot 17.30 uur.

Als je bijvoorbeeld een ETF van de AEX  koopt, wordt je geld belegd in alle aandelen die in de AEX zitten.

Er zijn ook ETF’s in een combinatie van producten zoals aandelen, obligaties en vastgoed. Of in aandelen uit verschillende sectoren. De keuze is reuze.

Erna Erkens Valuta Advies - Wat is een ETF Hoe kun je daar in beleggen Waarom zou je daarin beleggen (5)

Wat is een ETF? Waarom zou je daarin beleggen?

Kort gezegd zijn ETF’s een goede keuze voor beleggers die diversificatie willen en risico willen verlagen. Ze worden soms ook gebruikt door beleggers die snel geld willen verdienen – al is dat wel afhankelijk van je beleggingsstrategie en de ETF waarvoor je kiest. En garanties zijn er natuurlijk nooit.

Als je overweegt om in een ETF te beleggen, is het belangrijk dat je goed informeert en weet waar je aan begint. Zoals met elke vorm van beleggen, is er altijd het risico dat je geld verliest.

ETF’s zijn niet geschikt voor iedere belegger, dus denk goed na voordat je erin stapt!

Voordelen van ETF’s

  • Eén van de voordelen van ETF’s is dat je in één keer kunt beleggen in verschillende onderliggende activa. Bijvoorbeeld: met één ETF kun je beleggen in verschillende aandelen van bedrijven uit een bepaalde sector. Op deze manier kun je gemakkelijk een diversificatie aanbrengen in je portefeuille, wat het risico verlaagt.
  • Een ander voordeel is dat ETF’s goedkoper zijn dan beleggingsfondsen. Dit komt omdat er minder kosten zijn, zoals een fondsmanager, managementkosten en kosten voor analisten.
  • Ook hebben ETF’s een hoge liquiditeit, wat betekent dat ze makkelijk te verhandelen zijn. Dit is een belangrijk voordeel, vooral als je snel geld nodig hebt.
  • ETF’s zijn een makkelijkere manier van beleggen dan beleggen in individuele aandelen of obligaties.

Nadelen van ETF’s

  • Nadelen van ETF’s zijn dat ze vaak iets minder rendement opleveren dan andere beleggingsvormen, zoals aandelen of obligaties. Dit verschil in rendement wordt tracking error genoemd.
  • De reden van deze tracking error kan de volgende oorzaken hebben:
  • De ETF-aanbieder heeft niet alle onderdelen van de index in bezit, maar slechts een deel.
  • Een index kan wijzigen door herbalancering of het verdwijnen van een bedrijf, dus aandeel, van de beurs.
  • Dividenduitkeringen van de onderliggende beleggingen.
  • Uitlenen van effecten, mits de vergoeding daarvoor (deels) wordt teruggestort in het fonds.

Nog een nadeel van een ETF

  • Je betaalt wel kosten per transactie. Dus als je veel transacties doet vallen de kosten hoger uit. Verder betaal je voor het beheer van de onderliggende waarde en er is vaak ook een service fee. OOk heb je te maken met het verschil in koers tussen de verkopers en de kopers. De zgn. Bied- en laatkoersen. Kosten kunnen per ETF verschillen. Dus let daar goed op. Vergeleken met obligaties hebben ETF’s wel iets meer risico.
Erna Erkens Valuta Advies - Wat is een ETF Hoe kun je daar in beleggen Waarom zou je daarin beleggen (5)

Wat is het risico van een ETF? 

Het risico van een ETF is afhankelijk van de onderliggende activa waarin het belegd is en wat de ontwikkelingen in die onderlinge active.  Als je bijvoorbeeld in een ETF belegd die bestaat uit aandelen van bedrijven uit de technologische sector, dan is het risico hoger dan wanneer je in een ETF zou beleggen in obligaties.

Dit komt omdat de technologische sector beweeglijker is dan de obligatiemarkt.

In het algemeen is het risico van een ETF hoger dan het risico van een obligatie, maar lager dan het risico van een aandeel.

Dit betekent dat ETF’s geschikter zijn voor beleggers die bereid zijn om iets meer risico te nemen, in ruil voor de kans op een hoger rendement.

Welke soorten ETF’s zijn er? 

Er zijn verschillende soorten ETF’s, afhankelijk van de onderliggende activa waarin ze belegd zijn.

Sommige ETF’s bestaan uit aandelen, andere uit obligaties of grondstoffen. Er zijn ook ETF’s die een mix van verschillende onderliggende activa hebben.

Wat is het verschil tussen een ETF en een aandeel/obligatie? 

1. ETF = meerdere onderliggende activa

Het belangrijkste verschil tussen een ETF en een aandeel/obligatie is dat je met een ETF in meerdere onderliggende activa kunt beleggen.

Als je in een ETF belegt die bestaat uit aandelen van bedrijven uit de technologische sector, dan beleg je indirect in alle bedrijven die in deze ETF zitten. Dit is niet mogelijk met aandelen of obligaties. Dan moet je alle aandelen of obligaties individueel aanschaffen.

Je kunt wel een aandeel kopen van een bedrijf uit de technologische sector, maar je hebt geen invloed op de rest.

2. ETF = vaak goedkoper dan aandeel/obligatie

Een ander verschil is dat ETF’s meestal goedkoper zijn dan aandelen en obligaties. Dit komt omdat er minder kosten aan verbonden zijn, zoals o.a. managementkosten. Ook hebben ETF’s een hogere liquiditeit, wat betekent dat ze makkelijker te verhandelen zijn.

ETF’s vs. beleggingsfondsen

Een veel voorkomende vraag is hoe ETF’s verschillen van beleggingsfondsen, aangezien het basisprincipe hetzelfde is.

  • Het belangrijkste verschil tussen deze twee soorten beleggingsinstrumenten is de manier waarop je ze koopt en verkoopt. Beleggingsfondsen worden eenmaal per dag geprijsd en je investeert doorgaans een vast bedrag.
  • Beleggingsfondsen worden samengesteld door een fondsmanager en de onderliggende aandelen of obligaties worden via een effectenmakelaar of rechtstreeks, maar het belangrijkste punt is dat de transactie niet onmiddellijk is. In een fonds stop je een bedrag en een fonds keert een rendement in % uit.
  • ETF’s daarentegen worden net als aandelen verhandeld op grote beurzen zoals de AEX en de Nasdaq. In plaats van een vast bedrag te investeren, kies je hoeveel aandelen je wilt kopen. ETF’s hebben ook een koersnotering.
  • Omdat ze net als aandelen verhandeld worden, fluctueren de prijzen van ETF’s voortdurend gedurende de handelsdag, en je kunt aandelen van ETF’s kopen wanneer de aandelenmarkt open is.

Hoeveel geld heb je nodig om in ETF’s te kunnen beleggen?

ETF’s hebben geen minimuminvestering nodig – tenminste niet in dezelfde zin als beleggingsfondsen.

Ook worden ze per aandeel verhandeld, dus tenzij je broker de mogelijkheid biedt om fractionele aandelen te kopen, zul je tenminste de huidige prijs van één aandeel nodig hebben om te beginnen.

Een bekende en populaire ETF is bijvoorbeeld die van Vanguard FTSE All-World. Op het moment van schrijven staat die rond de 95 euro. Eerder dit jaar (2022) stond hij hoger (rond de 105 euro), maar zoals normaal is op de aandelenmarkt fluctueert dat.

Lees ook: Wat is valutarisico?

Erna Erkens Valuta Advies - Wat is een ETF Hoe kun je daar in beleggen Waarom zou je daarin beleggen (5)

Doe nu de valutatest!

Als valutacoach help ik beleggers met het vergroten van hun winst door aandacht te besteden aan valutarisico.

Neem 5 minuutjes de tijd om tien vragen te beantwoorden en ontdek hoe ook jij beter kunt scoren op valutagebied.

Doe nu de test!

Wil je beginnen met beleggen? Dan raad ik je aan om je eerst goed te verdiepen. Dat begint met het lezen van boeken over beleggen, het volgen van trainingen en bekend worden met het vakjargon.

Heb je vragen of wil je meer informatie over aanstaande trainingen? Neem dan contact met mij op.

Owner at EEVA

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

25-08-2022 | treasuryXL | LinkedIn |

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

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

Is the trend in the dollar-euro exchange rate something to worry about for treasurers?

We talked about whether treasurers should be concerned about the present trend in the Dollar-Euro exchange rate in last month’s poll. 38 people participated in the poll, and the results are shown in the image below. Thank you to everyone who voted.

 

What do treasurers think?

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

Views of treasuryXL experts

Patrick Kunz

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

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

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

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

 

Harry Mills

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

 

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

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

Hedge Maintenance and Funding Requirements

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

Treasurers as internal Consultants

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

Collateral and Margin Calls

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

Currency Options

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

Paul Stheeman

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

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

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

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

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

32% groei, non-bancair financieren krijgt vleugels (Dutch Article)

25-08-2022 | Stichting MKB Financiering | treasuryXL | LinkedIn |

In 2021 hebben ruim 42.000 bedrijven financiering aangetrokken via non-bancaire financiers. Hiermee werd in totaal voor €3,1 miljard aan financiering verstrekt, een groei van 32% in vergelijking met het jaar er voor. Ruim 1 op de 5 financieringen onder de €1 miljoen is in 2021 al op deze manier verstrekt. Dit blijkt uit het Onderzoek non-bancaire financiering 2021 van Stichting MKB Financiering. 

Bron: Stichting MKB Financiering


“Steeds meer ondernemers weten de weg te vinden naar non-bancaire financiers. Toch is het voor veel ondernemers en hun adviseurs nog lastig om de juist keuzes te maken. Daarom is het belangrijk dat de komende jaren er ook actief ingezet wordt op de bekendheid van deze financieringsvormen bij het brede mkb” – Ronald Kleverlaan (Voorzitter Stichting MKB Financiering).

Snelle groei crowdfunding en vastgoedfinanciering 

Op factoring en de kredietunies na zijn alle sectoren binnen de non-bancaire financieringsmarkt tussen 2020 en 2021 sterk gegroeid. Daarbij valt voornamelijk de groei van financieringen binnen crowdfunding (124%) en vastgoedfinanciering (87%) op.

Vooral financieringen voor het (kleine) mkb

Traditioneel zien we dat vooral kleine financieringen worden verstrekt door non-bancaire financiers. Zij zijn gespecialiseerd in financieringen voor het (kleine) mkb.

In 2021 zijn 40.510 financieringen onder een kwart miljoen verstrekt aan ondernemers, voor in totaal €1.7 miljard. Dit is 41% van de totale financieringen onder een kwart miljoen,die verstrekt zijn aan ondernemers in Nederland en een sterke stijging met 2020, toen nog 29,8% non-bancair verstrekt werd aan kleine kredieten.

Snelste groei in financieringen > € 250.000

Opvallende trend is dat non-bancaire financieringen ook steeds groter worden. De snelst groeiende categorie was afgelopen jaar de financieringen van € 250k – 1 mln. Het aantal verstrekkingen is hier met 55% gestegen. Maar ook het aantal nieuw verstrekte financieringen > €1 mln zijn met 37% hard gestegen.

Afgelopen jaar werd al 22% van alle financieringen aan mkb bedrijven < €1 miljoen verstrekt werd via non-bancaire financiers, terwijl dit in 2020 nog maar 17% was.. ontvangen.

De totale omvang van de verstrekte non-bancaire financieringen < € 1 mln. bedroeg afgelopen jaar € 2,49 mld, een stijging van 27%. In totaal hebben 42.236 bedrijven een financiering van < € 1 mln. ontvangen. Over de volle breedte is de non-bancaire mkb financieringsmarkt gegroeid.

Per categorie komt dit neer op:

  • Financieringen < € 50k – 12% stijging naar € 643 mln
  • Financieringen € 50k-250k – 30% stijging naar €1.049 mln
  • Financieringen € 250k-1 mln – 38% stijging naar € 801 mln
  • Financieringen > €1 mln – 55% stijging naar € 641 mln

Download Onderzoek non-bancaire financiering 

Het volledige onderzoek met tabellen en grafieken per non-bancaire financieringsvorm is beschikbaar als pdf en te downloaden.

 

What is a Cash Conversion Cycle?

24-08-2022 | treasuryXL | CashAnalytics | LinkedIn |

Did you know that on treasuryXL you can find information on all relevant treasury topics? One of the concepts you can find information on is the Cash Conversion Cycle.  A business’s cash conversion cycle (CCC) is a measurement of how much time it takes to turn a cash investment in the business into a cash return in the form of sales. CashAnalytics can tell you all about how to calculate your CCC, what makes a good/bad CCC and how to shorten your CCC.

Original source

Find out:

  • How to Calculate Your Cash Conversion Cycle

  • What Is a Good Cash Conversion Cycle?

  • How to Shorten Your Cash Conversion Cycle (Sustainably)

  • Sustainable CCC Improvements Require Reliable Real-Time Data

Read what Cash Conversion Cycle is all about

 

When Should You Start a Hedge Program?

23-08-2022 | treasuryXL | GTreasury | LinkedIn |

A popular Chinese proverb says “the best time to plant a tree was 20 years ago. The second-best time is now.” This is equally true in the world of hedging.

Source: Hedge Trackers, a GTreasury Company

We’ve seen volatility in currency markets, with the EUR falling 9 percent between Labor Day and Thanksgiving. We’ve seen volatility in commodities, with some commodity prices doubling and tripling and oil prices approaching 10-year highs. And short-term interest rates may quadruple in a year.

Companies that have well-run hedge programs have time to prepare and adjust to these forces. But what if you’ve been waiting for “the best time” or “the right time” to hedge?

Two years ago, we were surprised with a global pandemic – when everything settles down, will it be a good time to start a hedge program? Before we even have a chance to assimilate that, we are now faced with war in Europe. Sanctions, which will almost certainly be followed by more sanctions and more volatility, and which will be followed by what? Are you feeling like you’ve missed the opportunity to start hedging?

It’s never too late to set up a hedge program.

Now, just like last week, last year, and five years ago, the steps are the same.

  • Determine what your objective is. As our own Helen Kane says, “I believe that most hedge programs should take a deep breath, step back and determine what is really the objective…. Are they trying to protect margins? Are they trying to lock in budgeted earnings? Are they smoothing the year-over-year impact of currency into their financials?”
  • Once you know your objective, identify and quantify your exposures. Investigate the start of the exposure (often not easy to identify) and its end. The answers will be different depending on your hedge objective, and that’s why it’s critical to get that objective determined first. It is expected that you would have different objectives for different exposures.
  • You’re ready to start working on your policy, detailing what exposures will be managed with what strategies/derivatives over what time frame. You may want to consider some flexibility in the policy to systematically take advantage (or not), with clear guidelines generational rate movements – allowing more or less (but not zero) hedging in those times when rates hit 5- or 10-year highs or lows. This provides a framework to contemplate those things that we thought were so rare that we wouldn’t see them in our lifetime. Remember those days?
  • There are other documents that will be necessary. If not addressed directly in your policy, you’ll want a guideline for accounting and an appropriate control structure. You’ll also need to make sure that inception documentation supporting any special hedge accounting is compliant.
  • You’ll need to set up a process for collecting exposures at different stages (anticipated, recognized, impacting earnings, settled).
  • Make sure that you have a good working relationship and legal framework (ISDA) with your counterparties and that you set up a good process for trading and competitive bidding.
  • Of course, trade management and special hedge accounting should not be left to spreadsheets. We’d be happy to introduce you to CapellaFX, which not only is a trade repository but also accumulates your exposure data (existing and anticipated), applies hedge decisions, designates and documents exposures, drives your hedge accounting and provides effectiveness tests. Most importantly, it is user-friendly for both Treasury and Accounting and doesn’t require a derivative specialist to use or implement.

Conclusion

Does all of this seem daunting? It doesn’t have to be. Hedge Trackers can help you with every step. We have the people and the systems to assist your team, or you can offload some or all of the process to us.

Returning to our original question on the best time to plant the tree – or start a hedging program. If you haven’t already done so, recall that the next best time to start is right now.