09-02-2023 | The year’s second edition features a discussion on the newest treasuryXL poll results, including a review of treasurer voting patterns and expert perspectives on effective currency management.
09-02-2023 | treasuryXL | Kantox | LinkedIn |
When managing foreign currencies there is an underlying FX risk that Treasurers may not see, the credit risk. In this week’s episode of CurrencyCast, Agustin Mackinlay explains how to mitigate this risk.
Disclaimer: This information is being shared for informational purposes only and was originally published by Kantox (Source)
Embrace currencies to protect your capital, maintain your cash flow, secure your earnings and access better financing! Let’s find out how to mitigate the consequences of the underlying FX risk, the credit risk.
When working with foreign currencies, CFOs and treasurers have the mission to try to reduce the FX risk as much as they can. But there is an underlying currency risk that they could be missing, credit risk.
In this week’s episode of CurrencyCast, we shared the secrets to mitigating credit risk by embracing currencies. Now, we will explain in detail what are the key actions that involve eliminating this risk.
There is an underlying currency risk that you are probably not seeing and could eliminate easily just by following a simple rule in your currency management strategy, embracing currencies.
This is the credit risk or, more precisely, the risk in account receivables when customers need to settle their bills in a different currency than their own.
What do we mean by embracing currencies? There are many benefits that treasurers and CFOs can gain from implementing a multi currency approach to their FX strategy.
Some of them include the ability to price more competitively or boost your company’s profit margins just by operating with multiple currencies. But there is one which is helping companies drastically reduce currency risk, by uncovering the underlying credit risk.
We’ll reveal the advantages of taking ownership of the underlying FX risk so that you can expand your business with full confidence.
If you are selling in Emerging Markets like Brazil or Turkey but using only one currency like EUR or USD, you might be tempted to think that you have solved the currency risk problem.
But that’s an illusion: the underlying currency risk is still very much there. By urging customers to use a currency that is foreign to them, you are in effect transferring that risk onto their shoulders.
In the event of a sharp devaluation of the local currency, they might feel inclined to wait for a better exchange before settling their bills. In other words, your customers would speculate in FX markets with your firm’s money.
We’ve seen that phenomenon at play after the pandemic, both in Latin America and Eastern Europe. As a treasurer or CFO, you don’t want to be in that position.
In order to avoid your client’s FX risk from turning into your own credit risk, the solution is to sell in the currency of your customers while taking care of the underlying FX risk. Needless to say, this presupposes a strong, automated currency cash flow hedging program.
Such programs include: hedging firm sales/purchase orders as they materialise, hedging forecasted exposures for one or more campaign/budget periods, or a combination of these, with tools that provide visibility over the exposure throughout.
Now you know the importance of seeing there is another added layer to your currency risk that you could be missing. It is time to consider the advantages that would flow from taking full ownership of the underlying currency risk:
After uncovering the underlying FX risk, you need a solution to mitigate the credit risk.
A currency management automation solution could be the answer for companies that want to embrace currencies. This type of tool can streamline your currency management strategy and automate your entire FX workflow to reduce FX risk, including the ‘hidden’ credit risk.
As we mentioned before in this episode of CurrencyCast, we live in a multi-currency world where businesses can take advantage of the profit margin-enhancing benefits of selling in many currencies, like monetising existing FX markups or driving high-margin sales to company websites.
Thanks to automation, these advantages far outweigh the perceived inconveniences and costs of managing the underlying FX risk. And, in the current scenario of uncertainty, you get an additional and very attractive bonus: less credit risk in your commercial operations. That’s quite a lot!
03-02-2023 | treasuryXL | Kantox | LinkedIn |
We’re living in a multicurrency world and we’re multicurrency treasurers. You can get a head start on your competitors by simply understanding the benefits of operating with multiple currencies. Start leveraging the multicurrency world we’re in.
Disclaimer: This information is being shared for informational purposes only and was originally published by Kantox (Source)
With so many benefits to operating with the different foreign currencies out there, it is crazy to think that some companies are not taking advantage of this.
In this week’s episode of CurrencyCast we discussed why businesses should consider implementing a multicurrency approach to their FX risk strategy. This article will take a deeper dive into the benefits and give you some insight into how to be a more strategic treasurer.
In this episode, we analyse a development that many find surprising, but that stands at the core of our thinking at Kantox: the multi-currency world. The prevailing view of a world dominated by a handful of currencies like the dollar and the euro is being challenged as we speak.
We’ll reveal how you can take advantage of the benefits that lie ahead in this multi-currency world and contribute to enhancing your profit margins.
The currencies of a number of small, but well-managed economies (together with the natural rise of CNY) are gaining in importance: SEK, NOK, CAD, AUD, NZD, SGD and KRW among others.
The change is not driven in a top-down manner by macroeconomic forces. Instead, it reflects a bottom-up and microeconomic phenomenon, made possible by technology.
Today’s multi-currency world is mostly driven by corporate treasurers taking advantage of Multi Dealer Platforms such as 360T. These platforms have led to a dramatic compression of spreads, increasing liquidity beyond the major currency pairs and reducing the network effects of the USD.
For example, whereas a CAD-MXN transaction used to require two trades involving USD and CAD on the one hand, and USD and MXN on the other, now CAD-MXN can be directly and competitively traded on Multi-Dealer Platforms.
Back to the issue of the multi-currency world. Let me mention some of the benefits of selling in more currencies (we discussed the advantages on the contracting side earlier on):
Let’s take this example if you are a company operating with imports from a foreign country there could be some hesitation regarding whether to work with the local currency or not. In certain cases, using the local currency translates into better deals from a commercial perspective, as FX markups from suppliers are avoided. Also, firms get access to a wider range of suppliers.
From a liquidity management perspective, you may benefit from extended paying terms as well giving you more runway to finalise your sales. Finally, from a strictly financial perspective, there could be a wider forward discount of currency pairs which is a way to generate more positive forward points when hedging.
By taking FX risk out of the picture, you put your business in a position to confidently use more currencies in day-to-day operations. Additionally, if you then implement the best automation solution that will help you remove time-consuming and error-prone tasks, you could have a strong currency management strategy that becomes a great strategic asset.
On top of that, there are other bonuses to implementing technology:
Now you know all the benefits of a multicurrency world for currency managers. By empowering commercial teams to always buy and sell in the most profitable currency, the finance team acts as a strategic business enabler within the enterprise. That is the promise of the multi-currency world that is taking shape as we speak.
You are now prepared to face the future of currency management and reap all the benefits of the multiple currencies available. But to keep the ball rolling and make the most of foreign currencies, you need a tool that allows you to have full control of your FX exposure.
That’s why Kantox offers a unique currency management automation solution that enables treasurers and CFOs like you to optimise your FX workflow. Talk with our currency management experts and find out how today.
02-02-2023 | treasuryXL | ComplexCountries | LinkedIn |
This call took place five days after FTX filed for bankruptcy. However our discussion did not dwell on crypto as an investment (We haven’t found a treasurer who would). The interest for treasurers is to help their companies understand the business opportunities of the metaverse, and that isn’t going away.
According to Gartner,’ [https://www.gartner.com/en/articles/what-is-a-metaverse] by 2026, 25% of people will spend at least one hour per day in a metaverse for work, shopping, education, social media and/or entertainment’, and…’A metaverse is not device-independent, nor owned by a single vendor. It is an independent virtual economy, enabled by digital currencies and non-fungible tokens (NFTs).’
So it’s no surprise that many companies are developing strategies to capitalise on what could be a massive business opportunity. Participants in this call comprised treasurers representing companies at different stages of this journey, all facing the challenge that the regulatory and financial infrastructure available is at an early stage of evolution.
Crypto has clearly not gone away for corporate treasurers and I’m certain we’ll see further uses going forward. There is a huge amount of detail in this report, which is essential reading for any treasurer wishing to understand the challenges or benchmark their processes.
30-01-2023 | treasuryXL | Refinitiv | LinkedIn |
A recent white paper from Refinitiv – produced in collaboration with global consultancy, FINTRAIL – discusses the key elements currently shaping the evolving fintech space and the key trends that will be shaping the fintech landscape in 2023.
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The fintech industry is one of dynamism and innovation; a space where agile players harness new technology and challenge the status quo of the traditional financial services industry every day.
Undoubtedly, this delivers substantial opportunity for those involved in the sector, but at the same time, financial criminals are similarly leveraging technology and using advancements to devise new ways to further their illicit activities.
In this fast-paced space, characterised by evolution and a growing financial crime threat, what key elements are at play and what factors have shaped and defined the industry in 2022, and will continue to do so in 2023?
Findings from Refinitiv and FINTRAIL, based on interviews with experts from different fintechs across a range of geographies, have identified five key factors that are shaping fintechs today.
The fintechs we spoke to stress that the right technology can make all the difference when it comes to managing financial crime, with some describing machine learning and artificial intelligence (AI) as “indispensable tools”.
This view is in line with the recommendations of the Financial Action Task Force (FATF).
Interviewees also stress the importance of “explainability” – in other words being able to explain what data is used to reach different conclusions and why the results can be trusted – when introducing technology.
Leading technology needs trusted, comprehensive data, but fintechs highlight that striking a balance is key. Requiring too much information can damage the customer experience, while not enough leaves fintechs vulnerable to financial crime.
Collecting the right data – and the right amount of data – and then building a complete picture of risk is key to the combined fintech goals of maximising efficiency, keeping customers happy and protecting against financial crime.
Technology and data are critical in managing financial crime threats, but a third and equally critical element is invaluable human expertise. The right people across difference disciplines can make all the difference.
Those we interviewed said that engineers and data scientists are key, and further that the compliance profession is considered “recession-proof” – upskilling compliance team members should be a key priority for those in the sector.
Interviewees also highlighted that fintechs should concentrate on attracting and retaining key staff, but should also consider outsourced solutions for additional support and expertise.
Effective governance is a key consideration for fintechs as they grow and evolve. The nature of the industry and the rapid growth trajectories often followed by sector participants mean that effective AML controls and good governance need due attention.
Plus, fintechs agree that governance models should not be static – they need to adapt over time.
Efficiencies are increasing in the industry, with new technology now enabling fintechs to integrate specific data points alongside behavioural biometrics to help them spot suspicious activity.
For example, device identification data can identify if an account is accessed from a new device and this can be compared to a client’s history.
To further boost efficiencies, fintechs say that adopting a dynamic approach to risk is key and avoids wasting often scarce resources.
Fintechs can expect these top trends to continue in the year ahead and should especially take note of the powerful combination of tech, data and human expertise that are not only shaping the sector, but can enable better compliance and good governance, while boosting efficiencies.
As the industry continues to grow and develop at pace, many players are rightly concerned with ensuring an engaging and positive customer experience that offers connectivity and seamless interaction. They must, however, also keep tight control of the AML processes they will need to protect against widespread illicit activity and ensure regulatory compliance.
Read the full white paper. AML challenges for fintechs: Insights for the future
26-01-2023 | treasuryXL | Kantox | LinkedIn |
Scared about 2023 looking even worse than the crazy last three years? Keep calm and take a holistic approach to currency management.
Source: Kantox
If we look back at the economic landscape of last year, treasurers and CFOs have been dealing with risky scenarios for a while. But is the future as dark as some say? Our latest episode of CurrencyCast featured the treasury trends for 2023. In this article, we will take a deep dive into those trends and give you some tips on how to tackle the challenges in this volatile landscape.
Consultants and pundits are busy laying out scary scenarios for 2023. However, the future is uncertain so let’s not waste time in futurology trying to predict what’s coming.
Instead, we can focus on understanding the treasury trends of 2023. In this article, we’ll analyse those trends with a focus on currency management and give you actionable tips on how to handle any hurdles ahead.
CFOs and corporate treasurers need to be well prepared for the upcoming challenges and opportunities as they manage currencies. The top five priorities in the corporate treasury space for 2023 are:
In the past year, the financial markets have seen high levels of FX volatility and an unstable economy that seems to point towards a recession. Trends of high inflation, banks’ rising interest rates, political instability, and more will remain in the new year.
Hence why, it is fair to say that currency managers need to be well-prepared to face interrelated risks affecting FX rates. Companies dealing with foreign currencies will have difficulties accurately forecasting cash flows.
However, there is no reason to panic yet. There are a few strategies that corporate finance professionals can implement to tackle FX volatility; we will explain them later.
Shifting interest rate differentials are a likely scenario in 2023 as central banks act to tame inflation, each at its own pace. The good news is that companies can optimise such interest rate differentials across the entire FX workflow. Here are a couple of examples:
– With favourable forward points, pricing with the forward rate improves the firm’s competitive position without hurting budgeted profit margins.
– With unfavourable forward points, pricing with the forward rate helps managers avoid losses on carry and the temptation of excessive pricing markups.
– Finally, the cost of hedging can be lowered by delaying hedging execution with the help of automated conditional FX orders.
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In addition, the current emphasis on strong liquidity management will persist well into 2023. Liquidity management allows the treasury team to have a wider view of the company’s resources and be financially agile.
This will give any treasury professional the required accurate insights on the cash projections. And ultimately, help the business be prepared for potential liquidity risks that may arise.
Avoiding less-than-stellar cash flow visibility will be top of mind for treasurers in 2023. As economic cycles could be disrupted again, companies need to be able to get ahead of the curve and reduce deviations in their cash flow projections.
However, we believe that the importance of having accurate cash flow forecasts is somewhat overstated, at least when it comes to currency risk management.
To understand why this is so, the treasury team should consider how the different cash flow hedging programs deal with this concern:
– In firms with dynamic prices, forecasting accuracy is not much of a concern because firm sales/purchase orders have a very high occurrence probability.
– In firms with steady prices across several campaign/budget periods, layered hedging programs build the hedge rate in advance instead of protecting an FX rate.
– In firms with steady prices for a single campaign/budget period, conditional orders to protect the budget rate provide managers with time to update their forecasts.
For better cash flow visibility in the new year, companies will need to consider their ability to implement hedging programs that best suit their needs.
In 2023, the role of the corporate treasurer will require professionals to improve their technological skills. The traditional treasury function is shifting towards an automated digital infrastructure that enables increased efficiency and faster processes.
To manage currency risk in the new year, treasurers will need to move away from siloed systems and wasting time on manual tasks. Instead, they need to look for a solution that is able to automate the entire FX workflow.
Tools that are able to connect, via APIs, to their treasury management system and other data sources, for updated reports that give accurate insights into their FX exposure.
Now you know the treasury trends that will be dominating 2023 for corporate treasurers. But we also want to give you some tips on how currency managers should act in the face of such challenges.
As we like to emphasise at Kantox, currency management is much more than currency risk management. And currency risk management, in turn, is more than just the act of executing a hedge. Let us see this in more detail.
Consider the case of automated conditional orders to protect a budget rate. To the extent that the underlying levels are not hit, no trades are executed. Yet, you are still actively managing your firm’s exposure to currency risk.
Delaying hedges may lead to netting opportunities that ultimately result in less, not more, hedging transactions. The results are:
Pundits predicting a catastrophic 2023 may turn out to be right. Then again, they might not. In any case, the priority for currency managers is to take a holistic view of currency management that allows them to:
As you have seen, corporate treasurers will need to be well-prepared for all the interrelated risks of the turbulent economic landscape. With the help of the right automation tools, the treasury function can have a strong currency management strategy that helps them storm the weather outside.
Kantox is the currency management automation solution that covers the entire FX workflow so you can improve your profit margins and leverage foreign currencies.
Book a free strategy session with our currency management specialists to learn more.
26-01-2023 | treasuryXL | ComplexCountries | LinkedIn |
ComplexCountries reports detail how corporate treasurers approach challenges in complex countries, across associated treasury processes and how they adapt to economic and regulatory changes.
Their reports cover a wide range of topics associated with treasury processes in these countries, and how they are impacted by economic and regulatory changes. This includes how corporate treasurers approach currency risk management, compliance with local regulations, and maintaining cash and liquidity in the face of political and economic instability. The goal is to help treasurers navigate these challenges and protect their company’s financial position.
Find below some of the free reports detailing complex country challenges for treasurers
25-01-2023 | treasuryXL | Kyriba | LinkedIn |
By Bea Saldivar, Global Payment, ERP and Treasury Advisor
Andrew Deichler, Content Manager, Strategic Marketing
Payments fraud in 2021 was as bad, if not worse, than the year before, according to the 2022 AFP Payments Fraud and Control Survey. But even though business email compromise (BEC) scams dropped substantially last year, many organizations are still falling prey to them and incurring significant losses.
At the heart of BEC scams and more recent developments like deepfake fraud is impersonation. Cybercriminals use social engineering tactics to develop profiles on company employees or routine vendors, which they then impersonate to dupe unsuspecting people into making critical mistakes.
To identify an impersonator, it’s helpful to know the telltale signs. More than likely, the payment request will be urgent and will attempt to exploit unique circumstances, such as a specific time when employees are out of the office. Additionally, if your organization is making a lot of payments to contractors for a project, fraudsters might attempt to exploit that.
For example, Philabundance, a Philadelphia food bank lost about $1 million due to a successful BEC scam. The food bank was in the process of building a $12 million community kitchen. The accounts payment (AP) team received an invoice from what they thought was a construction company supplier and made a payment.
The Government of Carrabus County, N.C., also found itself victimized by a vendor BEC scam. The county intended to send money to a contractor it had been working with for the construction of a new high school. Through a series of emails that began in late 2018, the fraudsters made requests to update bank information. The county didn’t do its due diligence and ultimately sent more than $2.5 million to the fraudulent account. While over $776,000 was ultimately recovered, about $1.7 million remains unaccounted for.
When it comes to payments fraud, many treasury and finance departments still get lulled into thinking they are more protected than they are. Organizations may assume that their procedures are infallible or that any lost funds will be reimbursed, but they quickly get a wake-up call when a successful attack happens. The following myths are common.
“We have an approval process in place.” Even the companies with the strictest policies in place can still have a breakdown in processes. Employee ID/password combinations can be stolen. Regional treasury/shared service centers may require fewer numbers of approvals due to limited in-country staff. And companies with multiple ERP systems might have different approval processes—a scenario that is ripe for fraud.
“My bank will cover me.” There is no obligation for a bank to cover any client for payments fraud, unless the bank itself has been breached, like in a bank employee scheme. The bank may still reimburse corporate clients on a case-by-case basis, but don’t bet on it.
“We have cyber insurance.” Many companies assume that if they purchase cyber insurance, that they are covered in the event of a loss. However, if an organization can’t prove that it took all the right steps to protect itself, it’s very likely that the insurance policy won’t cover the loss. Many plans don’t cover BEC scams, for example, because they involve an employee making an error. There have been several legal cases where insurance firms have refused payment and the courts sided with the insurers. Furthermore, even if cyber insurance does agree to pay out, you might still have to pay a high deductible. For some plans, that cost can be tens of thousands of dollars.
Fortunately, there are many ways to protect your payments and your data. The following tips can help.
Embrace the cloud. Organizations should embrace cloud technology to secure payments and systems. IT teams know that payments data and connectivity are more secure when hosted externally. However, not all cloud solutions are alike. Solutions like Kyriba Enterprise Security ensure that treasury, payments, and risk data meet internal security policies and international security requirements while providing 24/7, global support.
Align all departments. Your internal IT department, as well as any key areas that touch payment processing areas such as treasury, accounts payable, shared services, etc. all should be aligned with your security policies. With more and more companies allowing remote work, companies must ensure that all employees are using effective protections such as strong passwords, policy controls, multifactor authentication, IP filtering, single sign-on and data encryption.
Automate payment processes and standardize controls. Automation allows organizations to standardize the payment journey from the initial request to the receipt of the payment. Risk lies in the exceptions to a standardized process, i.e., payments made outside of this typical format that provide fraudsters with opportunities. Again, these are usually one-time, urgent payment requests that can come in for things like mergers and acquisitions, legal settlements, emergency payroll, etc.
Enable real-time screening, alerts, and notifications. The rise of same-day and real-time payment systems has increased the need for real-time responses to fraud attempts. Modern fraud detection software uses artificial intelligence (AI) and machine learning to screen payments against historical payment data, pinpointing any anomalies.
Implement fraud prevention workflows. Modern payments fraud modules support fully automated, end-to-end workflows for the resolution of outstanding suspicious payments. Users can determine how each detected payment should be managed, enforcing the separation of duties between the initiator, approver, and reviewer of a detected payment.
Know your vendors. Vendors can be a major liability for your company. In some cases, vendors are granted access to their customer’s network credentials. If that vendor’s security protocols are lacking, they can become an unknowing backdoor into that customer’s systems. This is what happened in the infamous Target breach in 2013. Therefore, it is imperative to have a detailed information security questionnaire that can provide confidence in the governance and risk programs that a vendor has in place. Additionally, with vendor BEC scams proliferating, organizations need to make sure that requests for payment instruction changes are verified directly with the vendor before any transactions are completed.
To mitigate the risk and safeguard your payments, organizations must have a unified solution that connects ERPs, internal and external systems that allows for a secure, end-to-end payment journey. Furthermore, when exceptions occur, protocols can’t be abandoned no matter how urgent the request. Any departments that touch payments need to understand that one slip up can be catastrophic, not only leading to loss of funds, loss of job and reputational risk for the whole organization.
Kyriba is here to help you protect your organization against payments fraud. Learn more here.
23-01-2023 | treasuryXL | GTreasury | LinkedIn |
Cash flow and working capital are the lifeblood of your business. How are you protecting your cash positions and reducing risk in these times of increasing business volatility?
Source: GTreasury
Today’s digital cash visibility and forecasting solutions provide amazing opportunities for companies and their decision-making processes. In this webinar, we provide an in-depth look at how these modern solutions help you, your department, and your company reach your full potential.
Jake Fernandez, GTreasury – Product Manager, will discuss:
19-01-2023 | Pieter de Kiewit | treasuryXL | LinkedIn | If you are interested in learning about FinTech and how to get into the industry, there are a few things you may want to consider. With my focus on corporate treasury, we are in close contact with various Fintech companies who ask us on a regular basis to support them in their recruitment. We learned these companies have specific requirements.
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