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Four Things Every CFO Should Know About Treasury

06-01-2022 | treasuryXL | TIS | LinkedIn |

This article is intended as a precursor to TIS’ latest whitepaper that highlights how CFOs can use their knowledge of the treasury function to spearhead initiatives that drive higher revenue, better financial decision making, and greater process automation and control. After reviewing how modern treasury groups typically operate, we will analyze the main benefits that a fully-optimized treasury team can provide to the CFO and an organization at large. To assess the full suite of data, insights, and commentary, download the whitepaper.

A CFO’s Summary of the Treasury Function

Although most CFOs will (or should) have a robust understanding of how the treasury function operates, let’s start with a quick synopsis for those who may be newer to the role.

At the highest level, treasury is a subset of the finance department that is responsible for safeguarding their organization’s most important asset (cash) as well as providing transparency and control over the day-to-day processes necessary for the company to meet its financial obligations (i.e. payments). This means that at its core, the treasury function most commonly performs:

Cash and liquidity management
Payments and bank account management
Financial Risk, Fraud, & Compliance Management

Of course, certain treasury teams will have additional duties levied onto them depending on the size, complexity, and structure of their organization. For instance, cash flow forecasting, FX trading, debt and investment activity, and cash pooling or netting are all functions that commonly fall under treasury’s purview, but it ultimately depends on the specific makeup of their organization.

Moving beyond these core roles, however, it’s also important to note that treasury groups, even those at multibillion-dollar, multinational companies, often consist of five or fewer individuals. In fact, data from 2020 showcased that the average treasury size for U.S. organizations, regardless of company size or complexity, was just four personnel. Further data from 2020 shows that the majority of these teams are accustomed to working remotely, with team members often located across entirely different regions and time zones.

But while treasury staffing might be kept to a minimum, the best teams still manage to optimize their processes by relying heavily on technology automation instead.

In order to function at the highest level, modern-day treasury teams utilize a variety of digital technologies that range from bank portals and Excel spreadsheets to cloud-based ERPs and TMS platforms, payment hubs, business intelligence solutions, and many other specialty systems. In 2021, the majority of solutions that treasury teams use are SaaS-based and connect via APIs with other SaaS solutions in their company’s environment, including other back-office solutions as well as external partner, vendor, and 3^rd party platforms.

Thus, for organizations that are smart about their hiring decisions and that leverage finance and treasury technology in a strategic and efficient manner, even the smallest of treasury teams can excel at their roles and boost financial productivity.

However, on the opposite end, organizations that either ignore or underutilize their treasury group can end up with significant gaps in their financial processes, particularly from a payments, liquidity, and risk management standpoint.

Four Things Every CFO Should Know About Treasury

Download our latest whitepaper to gain additional data, graphics, and commentary!

Access the whitepaper.

About TIS

TIS is reimagining the world of enterprise payments through a cloud-based platform uniquely designed to help global organizations optimize outbound payments. Corporations, banks and business vendors leverage TIS to transform how they connect global accounts, collaborate on payment processes, execute outbound payments, analyze cash flow and compliance data, and improve critical outbound payment functions. The TIS corporate payments technology platform helps businesses improve operational efficiency, lower risk, manage liquidity, gain strategic advantage – and ultimately achieve enterprise payment optimization.

Visit tis.biz to reimagine your approach to payments.

Tame the ghost! Cancellations & currency management in Travel

20-12-2021 | treasuryXL | Kantox | LinkedIn |

How to automate the FX treatment of cancellations

It is no secret that the wave of cancellations following Covid-imposed travel restrictions has been a nightmare for travellers, airlines, hotel chains and tour operators alike. In the United States alone, cancelled domestic flights peaked at 137 thousand in April 2021. Largely due to cancellations, air traffic in Europe in 2021 was barely equivalent to 43% of the level seen before the pandemic.

Given the amount of time and resources devoted to adjusting their refunding policies, many players in the industry are still scared by the ghost of cancellations. But is that fear warranted? Not when it comes to FX management. This is because Currency Management Automation gives travel companies the tools to minimise the P&L impact of cancellations.

When it comes to FX management, the message is crystal clear: the ghost can be tamed.

Cancellations and FX exposure

FX risk management is a process in three phases: the pre-trade, the trade and the post-trade phase. Cancellations are an important element of the pre-trade phase, when the exposure to currency risk is collected and processed. Now, the type of exposure and the way it is managed depends, crucially, on each business’ pricing dynamics (see: “The hidden secret behind the different types of FX exposure”).

In the Travel world, dynamic prices are the norm (see: Currency Management Automation in Travel Distribution). OTAs, Bed banks, Hotel chains, DMCs and others frequently update their FX-denominated prices, and their cash flows are at risk from the moment of the bookings till settlement. For this reason, most Travel distribution firms apply micro-hedging programs that take those ‘firm commitments’ as the key FX exposure item.

This is where cancellations kick in. A cancelled FX-denominated booking diminishes the exposure to currency risk if the corresponding hedge has not been executed, or if an already executed trade is closed out at the same FX rate. Otherwise, there would be a situation of over-hedging. Manually adjusting hundreds or thousands of individual pieces of exposure to their corresponding hedges can quickly become an impossibly complicated task.

Taming the ghost in FX-related cancellations

Currency Management Automation provides treasurers with a number of tools to tame the ghost of cancellations. The first line of defence is to include —as part of business rules defined in the process of FX automation— an automatic cancellation rate. For example, if managers set an average cancellation rate of 10%, Kantox Dynamic Hedging® will hedge the remaining 90% hedge of the bookings.

As more information becomes available, this cancellation rate can be refined and adjusted by management when it so desires. While it is good practice to try and anticipate events, perfect accuracy cannot be expected in matters related to travel cancellations, especially in the current situation. This is why a second line of defence is provided by what our FX automation software takes as ‘negative entries’, a more efficient way to deal with cancellations. Let us briefly see how that works.

An entry is an individual piece of exposure. As part of the implementation phase of the software, risk managers establish a set of business rules that include —for each currency pair— the accumulated value of the entries they wish to hedge. These instructions also include a rule for setting negative entries from their own ERP, Booking Engine or Data Lake in the event of cancellations. API-transmitted negative entries automatically cancel the corresponding FX exposure.

But what happens when a negative entry is pushed after the corresponding hedge has been executed? Not much. Because travel-related FX exposure typically includes hundreds/thousands of individual transactions, new positions are constantly entered for the same currency pair and value date. The more granular the information included in these entries, the more accurate the FX hedging process, and the better the traceability of each piece of exposure.

Conclusion: speed is the name of the game

As the effects of the global pandemic still loom large, the ability to quickly process cancellations is a must for airlines, hotel chains and wholesalers in general. FX management is an integral part of this process — and it relies mostly on automated micro-hedging programs for bookings or ‘firm commitments”.

These micro-hedging programs, in turn, automatically treat cancellations as a key element of the ‘pre-trade’ phase of exposure management. If your aim is to tame the ghost of cancellations —while relieving the finance team from performing repetitive, resource-consuming and potentially risky manual tasks—, FX automation is the starting point.

The time to act is now!

Survey | Anomalous Payments Detection

15-12-2021 | treasuryXL | Nomentia | LinkedIn |

Our partner Nomentia and Netguardians, are conducting a survey for treasury and finance professionals to get a better understanding of the current challenges companies are facing in identifying and preventing anomalous payments. This way, we can provide more relevant solutions and share industry knowledge with the treasury and finance community.

Payments are growing in volume and gaining speed, with “instant payment” gradually becoming the norm. With increasing speed and volume, the risk of processing anomalous or fraudulent payments increases simultaneously. These anomalous payments may be caused by human errors or by fraudulent activities such as fraudsters impersonating CEOs, sending fake invoices, and other scams. This results in both operational and financial losses for the company.

By filling out this survey you will help advance the solutions that are needed to fight anomalous payments. You can fill out the survey completely anonymously. It takes around 5 to 10 minutes to complete the survey depending on the answers you provide throughout the survey.

We thank you for your kind participation!

Currency Volatility Is A Catalyst for Response by Treasury

15-12-2021 | treasuryXL | Kyriba | LinkedIn |

The Q2 2021 Kyriba Currency Impact Report showed a strong tailwind for many US corporates driven in large part by the strengthening of two main trading currencies for many US corporates, EUR and GBP.

Both currencies strengthened steadily through Q2 2021, but currencies have since retreated through Q3 2021, setting up a return of relatively strong headwinds for the Q3 earnings season.

As we look forward to Q3 and Q4 currency impacts, it is very likely we will see increased levels of negative currency impacts for North American and European corporates as a result of continued business activity expansion combined with the return of a stronger USD and general market uncertainty. The recent impact of the newest COVID variant, Omicron, has also added a new level of uncertainty-driven volatility and questions about how businesses and central banks will respond.

Beyond the general level of market uncertainty there are a few other economic and operational challenges that are adding to the complexity of managing currency risk and liquidity. With inflationary conditions starting to take hold in the US and other parts of the world, Treasurers and CFOs are having to contend with increasing supply chain costs. In addition, the supply chain disruptions are increasing the uncertainty of business operations. Many treasury teams are far less confident in their long-term cash flow forecasts which has many reconsidering their hedging and liquidity needs.

How are Corporate Risk Managers responding to the currency markets and supply chain disruptions?

Treasury teams are faced with a complex set of variables in the current market environment. Their long-term cash flow forecasts are less and less reliable due to uncertainty related to supply chain disruptions. The disruptions are impacting both the supply side and the revenue side of the forecasts. There is increased uncertainty around both the value and timing of supply chain cash out flows. On the revenue side, there is also uncertainty around the value and timing of future inflows as manufacturers are having a hard time getting products on the shelves. In addition, the currency markets are adding to the complexity as the USD is strengthening or at least holding strong against a broad basket of currencies.

As a result, many treasury teams are re-focusing on the things they can control. Daily and even intra-day cash position monitoring is the norm now and combining that with an increased focus on FX hedging for working capital positions on the balance sheet are critical best practices to ensure treasury teams have the right amount of cash in the proper currency at the right time to cover vendor and supplier payments and ensure they maintain a strong liquidity position as they ride out the supply chain storm.

Another challenge FX risk managers are having to contend with is the by-product of improper posting of multi-currency transactions within their ERP system(s). When volatile currency markets are creating significant directional moves in various currency pairs, it often uncovers multi-currency accounting posting mistakes as well as missed exposures. This missed exposures and improper accounting postings can results in very surprising results that often create significant FX losses. The most frustrating aspect of these types of FX impacts is that they are entirely self-inflicted. With proper Exposure Data Integrity Analytics and robust and dynamic exposure capture processes, these self-inflicted currency impacts can be anticipated and avoided.

Ultimately, Treasury teams that can monitor and manage their liquidity and working capital FX exposure in a single integrated platform have a distinct advantage in the current market.

Question treasuryXL Panel #4 | When do I pay an FX surcharge to my payment service provider?

14-12-2021 | treasuryXL | EcomStream | LinkedIn |

treasuryXL is the community platform for all your relevant treasury questions.

We received the following question from one of our followers… Read more

2021 Treasury Technology Analyst Report

13-12-2021 | treasuryXL | Gtreasury | LinkedIn |

The 2021 Treasury Technology Analyst Report is the definitive guide to today’s technology for Treasury & Risk Management, Treasury Aggregation, and Supply Chain Finance and Cash Conversion. Request your copy to learn more about these technologies and evaluate how GTreasury stacks up for treasury and risk management.

2021 Treasury Technology Analyst Report

A digital treasury technology evolution is a big undertaking. With so many types of solutions to choose from, it’s hard to know where to start. We recommend you start with this report – The 2021 Treasury Technology Analyst report. It will help you understand the benefits and selection criteria to consider for three types of valuable treasury technology solutions: Treasury and Risk Management Systems (TRMS); Treasury Aggregation Solutions; and Supply Chain Finance and Cash Conversion.

Topics covered in this 64-page report include:

The shift to emerging technologies
The value of API connectivity
The power and value of a networked technology ecosystem
Principles of treasury technology selection and implementation
Definitions, Challenges/Solutions, Selection Criteria, and the Future of each of the three types of technology.

Request your copy to learn more about these technologies and evaluate how GTreasury stacks up among treasury and risk management platforms.

Complete the Form to Get Your Complimentary Copy Now!

Refinitiv case study | How LG Electronics reduces operational risk across its FX trading workflow

06-12-2021 | treasuryXL | Refinitiv | LinkedIn |

LG Electronics is a global leader and technology innovator in consumer electronics, mobile communications and home appliances. Following an analysis of the market, LG decided to implement a trading and confirmation solution in order to improve its foreign exchange processes. Read the case study to find out more.

LG Electronics is a global leader and technology innovator in consumer electronics, mobile communications and home appliances, employing 87,000 people working in 113 locations around the world. With 2013 global sales of US$53.1 billion, LG comprises five business units.

The company’s previous foreign exchange had several inefficiencies and risk of manual errors, and was difficult to audit. Too much time was spent on simple and mundane processing rather than value-added functions. The task for LG was therefore to find a solution that would allow the company to solve these inefficiencies and allow its staff to focus on other areas of the job.

As a solution, LG decided to implement a trading and confirmation solution in order to improve its foreign exchange processes. The system ensures that the best price will be available and LG can then execute on the platform electronically. With this innovative technology, LG has been able to really reduce its operational risk across their FX trading workflow.

“We now have the ability for users in our various Asia entities to create, modify and approve FX spot and forward orders electronically,” says Calvin Lee, Manager, Asia Pacific Treasury Centre at LG. “The solution will then electronically consolidate orders for our Regional Treasury Centre to control and feed approved orders to our relationship banks to obtain an electronic ‘multi-bank quote’”.

The new platform LG has implemented has greatly increased the efficiency of the company’s FX process while at the same reducing the risk the group was exposed to. On top of these advantages, LG has benefited from much-improved control as a result of implementing the solution.

Key benefits

Productivity gains
Process efficiencies
Foreign exchange gain(s)
Risk removed/mitigated
Increased control

How does BRITA GmbH use Nomentia Payments in Germany?

BRITA GmbH, a German water filter manufacturer with total sales of 617 million euros in the business year 2020 and 2,205 employees worldwide at the end of 2020, is the market leader in drinking water optimization and individualization. The company is represented by 30 national and international subsidiaries and branches as well as shareholdings. Brita has manufacturing facilities in Germany, Italy, China and the United Kingdom.

The challenge

Brita has a complex business. The company’s products are distributed globally in over 70 countries on all 4 continents.

Brita’s treasury department was facing the following challenges:

– The used multibank payment tool was discontinued.

– Lack of a system that is independent of banks.

– Lack of centralization of treasury and cash management.

Currently, cash management is not centralized in the company. But there are group requirements setting a minimum standard for banking systems. However, rolling out the project in Germany was the first step to evaluate the possible adoption also by the subsidiaries.

To roll out Nomentia worldwide and achieve the goal of having one system for all payment transactions, first, Brita needs to take a few vital strategic moves, such as ensuring that all subsidiaries are using a group bank and the same ERP system, as well as setting up connectivity with all the group banks to be able to handle also those payment types that cannot go through Electronic Banking Internet Communication (EBICS).

The solution

Instead of working with as many as 7 different banks just within Germany to process payments, Brita chose to use Nomentia, as a single tool that is independent of banks.

Currently, Brita is connected to two major global banks and a few local banks through EBICS. They are currently discovering the possibility to add more connections, like a host-to-host connection to a major global bank.

In the beginning, Brita’s treasury and IT departments had to work closely with Nomentia to set up the project that required a lot of communication from both parties.

“Once our IT understood that Nomentia can do magic by connecting to our ERP system, retrieve a file from the bank and send it to our ERP in the right format, it was easy to get their buy-in. Our team had a lot of experience with long ERP projects and they were impressed with Nomentia’s capabilities” – said Doreen Lenk, Manager Group Treasury & Risk Management.

Nomentia’s Payments solution is currently used by almost all Brita’s German branches and they are currently in the middle of rolling out the solution in Italy. In case that’s a success, they may look at starting to use Nomentia in other countries as well.

The benefits

Rolling out a new product for treasury management can often be a challenge. It requires strategic planning from the department, cooperation with IT, and working closely with the solution provider. In addition, aligning the group in different countries also requires a lot of paperwork as well as training.

Brita has realized three key benefits of working with Nomentia. These benefits can be even further realized after further adoption of the solution.

1. One system for all in Germany for better processes and decreasing the number of errors

The biggest benefit has been that German branches can use one tool to communicate with all German banks. Without Nomentia, Brita would be working with several systems from several banks. Now all transactions go through Nomentia which makes the process less error-prone.

2. Automated processes

The processes have been automated for the German branches and this saves a lot of time for the accountants. As Nomentia is also integrated with SAP, they can see all the invoices from SAP, too.

3. Avoid fraud

With having just one system in place, it’s easier to have the highest level of transparency of the transactions and access rights.

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Who is process owner in the search for a treasurer?

| 30-11-2021 | treasuryXL | Pieter de Kiewit | LinkedIn | Over the last years, Treasurer Search found hundreds of treasurers. Our client contact persons are HR managers & internal recruiters, the CFO, Group Treasurer and sometimes even procurement. There is no standard first contact. Working with more than one often works best. This is what […]

A CFO’s Summary of the Treasury Function

Four Things Every CFO Should Know About Treasury

About TIS

Top 5 treasuryXL website articles of 2021

Top 5 treasuryXL LinkedIn posts of 2021

How to automate the FX treatment of cancellations

Cancellations and FX exposure

Taming the ghost in FX-related cancellations

Conclusion: speed is the name of the game

How are Corporate Risk Managers responding to the currency markets and supply chain disruptions?

2021 Treasury Technology Analyst Report

Topics covered in this 64-page report include:

Key benefits

The challenge

The solution

The benefits

1. One system for all in Germany for better processes and decreasing the number of errors

2. Automated processes

3. Avoid fraud

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