Readying Treasury for Hybrid Work

20-09-2021 | treasuryXL | Kyriba |

To say that the COVID-19 pandemic changed the way treasury departments and companies operate is a massive understatement. Treasury, a function already accustomed to ‘doing more with less,’ began operating remotely—often with a skeleton crew as companies were forced to reduce headcount.

Once mass distribution of the COVID-19 vaccine began, companies quickly began to strategise over what their post-pandemic workforce might look like. While the rise of the Delta variant has thrown a wrench into many organisations’ plans to reopen, eventually, that new work model will take shape. And it might look drastically different than what has come before.

Here are a few things to consider.

A hybrid work environment will very likely be the new normal.

Research from Harvard Business Review found that 70 percent of companies—including giants like Google, Citi and HSBC—are moving to a hybrid model. Just as treasury teams needed to adapt quickly to operating from home, now they’ll have to adjust to having some team members in the office while others are remote.

CFOs have an eye on emerging technologies.

The remote working environment brought on by the pandemic prompted, or perhaps forced, many organisations to digitise their processes. In a hybrid work environment (that could revert back to a fully remote one if COVID-19 variants continue to emerge), finance chiefs will continue to call for better technological solutions. New research from Gartner found that 82 percent of CFOs plan to increase investments in digital capabilities. CFOs named artificial intelligence (AI) as the technology that they expect to have the most impact over the next three years. Kyriba users can apply AI and machine learning (ML) to key cash management tasks like reconciling prior day bank files with their expected cash positions. For organisations that process high volumes of transactions, handling this process manually can take hours. Kyriba’s solution can identify and resolve discrepancies in minutes, and it learns from the data so that eventually, little to no human interaction is required.

Treasury’s role expanded considerably throughout the COVID-19 crisis. 

More than 80 percent of treasury professionals said that greater value was assigned to treasury during the pandemic, according to the 2020 AFP Strategic Role of Treasury Survey. Furthermore, nearly 70 percent of respondents believe that treasury’s role will continue to be of greater significance. To maintain that influence over other, other departments, treasury professionals may need to revisit their soft skills. Just as employees may have faced difficulty giving presentations over Zoom, they may also find presenting in-person or to a mix of in-person and remote employees to be equally challenging.

Regional treasury centers might no longer need to be regional. 

While it can be convenient to house a treasury center to manage cash and FX hedging in a region with unique regulations, the COVID-19 pandemic may prompt organisations to rethink that approach. Since the onset of the pandemic, those remote working has surged; the Stanford Institute for Economic Policy Research found that 42 percent of the U.S. labor force currently works from home. And perhaps more importantly, it’s been incredibly successful for both employers and workers, according to PwC’s U.S. Remote Work Survey. Ultimately, this could mean that treasury teams may no longer see a need to centralise their operations regionally even after the pandemic ends.

Continuous remote work means fraud threats will remain elevated.

According to the 2021 AFP Payments Fraud and Control Survey, business email compromise (BEC) scams increased last year. This was likely due to the remote work environment making it more difficult to verify emails with colleagues. Security will continue to be paramount for treasury, particularly if it moves to a permanent model where some employees regularly work from home. Treasury teams will need to continue to use strong controls like multifactor authentication, single sign-on and virtual private networks to ensure that only the appropriate people have access to their systems. Additionally, treasury employees must be even more meticulous about setting approvals for payments so that fraud attempts will be thwarted. With Kyriba Payment Fraud Detection, treasury can stop fraud in real-time. Users can set pre-defined detection rules, to screen for suspicious transactions. Additionally, ML algorithms can identify and quarantine dubious payments for further review.

The cloud provides a failsafe for business continuity planning (BCP). 

Cloud-based treasury management systems aren’t only efficient modules to help treasury teams track cash and liquidity. They are also a key cog in BCP. Cloud-based solutions like Kyriba’s are hosted offsite in multiple locations, allowing your treasury department to function regardless of whether your team is working in the office or from a dozen different locations. So even if a new COVID-19 variant emerges, treasury teams can continue to function without interruption.

Making a Game Plan

While it’s unclear how soon offices will begin opening back up en masse, now is the time for treasury teams to begin planning for the shift. When the pandemic first hit, treasury functions had to respond quickly, and they did as best they could. Pivoting in this next phase won’t be seamless, but with the right protocols and technology in place, treasury teams can make smooth transitions.

#7 Poor internal communication (Dutch Item)

16-09-2021 | treasuryXL| XE

Internal communication problems can be an obstacle to good currency practices and risk management, especially as organizations grow. Business units that working in silos and rarely talking to each other, have little insight into the place their specific currency risk within the company’s overall risk.

In het ergste geval nemen bedrijfsonderdelen zelfs autonome beslissingen over transacties en risicobeheer die niet passen binnen de context van het bedrijf als geheel. Zo kunnen toeleveringsketenmanagers hedging gebruiken om het risico van hogere importprijzen af te dekken zonder te weten welke omzet de verkoopafdeling verwacht te halen uit buitenlandse verkopen.

Zulke storingen in de communicatie maken het erg moeilijk voor uw bedrijf om vreemde valuta holistisch te benaderen om de beste koersen en de beste service te krijgen en de risico’s zo effectief mogelijk te beheren. Als uw bedrijf met dit probleem te maken heeft, is het belangrijk om zo snel mogelijk actie te ondernemen voordat sluimerende risico’s ergens in het bedrijf echt een probleem gaan worden.

“Ken alle aspecten van het valutarisico van uw bedrijf”

De beste manier om dit risico tegen te gaan, is samen met uw valutaprovider een degelijk risicobeheerbeleid te ontwikkelen. Als u eenmaal alle aspecten van het valutarisico van uw bedrijf kent, kunt u de juiste procedures implementeren om het op holistische wijze te benaderen. En door deze procedures in elk onderdeel van uw bedrijf te implementeren, voorkomt u dat een enkel onderdeel van uw bedrijf een probleem kan veroorzaken. Tot slot moet u zich afvragen hoe gemakkelijk of moeilijk het is om voortdurend te communiceren met uw valutaprovider zelf. Online systemen maken de dagelijkse gang van zaken voor veel bedrijven sneller en eenvoudiger, maar er zullen altijd momenten zijn dat u extra hulp nodig hebt. Zoek een provider die telefonische hulp biedt waarmee u problemen zo snel mogelijk kunt oplossen. Weet u persoonlijk met wie u waarschijnlijk te maken krijgt? Is er bijvoorbeeld een enkele persoon of een team verantwoordelijk voor uw account? Krijgt u de informatie over valutamarkten die u nodig hebt om proactief beslissingen te nemen?

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Which Options Are There When It Comes To Bank Connectivity?

15-09-2021 | treasuryXL | Nomentia |

In this blog, we want to give an overview of the different options for bank connections from host-to host, direct connections through regional standards and SWIFT. On top of that we’ll also take a look at open banking APIs and what possibilities they might hold for the future.

Bank connections enable corporate customers to exchange messages with their banking partners. Companies need to have a relationship with at least one bank, in practice there are typically several banks involved, for example to exchange account information and sending payments. Bank connections are so to speak the backbone of your treasury department because they ensure the uninterrupted flow of information between your business process tools and banks, allowing you to create accurate cash forecasts, manage liquidity and the likes. Bank connectivity will remain a topic that corporate treasury departments need to decide how to approach. Now, let’s look at the different options for creating bank connections.

Direct host-to-host connections

One of our webinar polls showed there are still 30% of our respondents who maintain host-to-host connections with their banks. This means that typically the IT department sets up bank connections to specific banks. How those work in specific then depends on the bank. With some banks a host-to-host connection is needed for each country where the company is operating. Luckily many banks offer single point of entry connectivity which means that once you’re connected, you can use it to operate cash management messages in all or multiple countries where the bank has branches.

Since the bank is hosting the service, it also means that the bank is dictating all technical requirements and corporate customers need to adapt to changes the banks might make.

And change is imminent, especially when it comes to messaging formats, communication protocols and security requirements. There are for example client certificate renewals that come up usually every two years. Root certificates expire more infrequently but cause more maintenance work.

Another quite timely example is the Transport Layer Security (TLS) protocol version upgrade. TLS certificates not only have to be renewed from time to time, but older TLS protocol versions have known vulnerabilities and the banks are enforcing their clients to use newer versions all the time.

Maintaining direct host-to-host connection requires you and especially your IT department to make a commitment to maintain these connections day in and day out. Which requires special technical expertise from the IT department and a lot of resources, especially when you employ many host-to-host connections in your ecosystem.

Direct connections through regional standard protocols

The EBICS (Electronic Banking Internet Communication Standard) is a standard protocol that is used in Germany, Switzerland, and France. Also, banks in other countries are testing this standard.

The challenge with EBICS has been that different countries have their own versions of the standard. In 2018 EBICS 3.0 was launched with the goal to harmonize the differences and to make it easier to communicate across borders. In practice Germany and Switzerland are still using EBICS 2.5 and it will take until November 2021 until EBICS 3.0 becomes mandatory for banks in Germany.

Some international banks have adopted EBICS into wider use. Which means that corporations familiar with EBICS may use it for message exchange and authorization in other countries as well. Only the future will show if EBICS fulfils its vision of becoming the pan-European standard protocol for bank communication.

Connections through SWIFT

Companies can connect directly to the SWIFT network and with that get connected with over 11 000 financial institutions in more than 200 countries. SWIFT is hosting and maintaining the global network for that. It’s highly secure and reliable. It’s a single gateway that almost sounds like it opens the door to paradise for you, at least in the mind of someone who spends his time building host-to-host bank connections for single banks. You are empowered to change banking partners based on your business needs without having to worry about establishing new connections.

SWIFT has a sort of do-it-yourself approach by providing Alliance Lite2 to companies. And here comes the other side of the coin. A direct connection to SWIFT is costly and requires time and resource-demanding integration. In addition, you need to comply in full scope with the SWIFT Customer Security Programme (CSP) that requires all their members to protect their endpoint, because naturally, they need to protect their network.

Most corporate customers use a SWIFT Alliance Lite2 Business Application (L2BA) provider or a Service Bureau for the connection. In the L2BA model, a service provider takes care of handling all necessary requirements to connect to the Swift network and you buy your bank connections pretty much as a service. Often this is packaged with other products and solutions you might use.

Open banking APIs

Open banking APIs are one of the most interesting developments. We already see banks all across Europe offering premium APIs for corporates that go beyond what is possible today.

Open banking APIs are set to bring a real-time component to the game that hasn’t been there so far. In the past there was no way for external systems to fetch for example real time balances from banks, but this is about to change. While as previously, corporations would execute batch payments, with open banking APIs this will be possible whenever a payment is needed with instant effect. Looking at balances and payments is the beginning of new solutions that will be available to corporate treasury.

Open banking APIs is something that companies and providers such as Nomentia will need to take into account for their roadmap because this is clearly where we will be able to provide innovative solutions for our customers in the future.

What’s the verdict?

It would be great to give an easy answer to this question. But it’s just not that simple. As I outlined above, all connection methods have pros and cons It really depends on your needs and internal structures what you need.

WATCH OUR WEBINAR ABOUT BANK CONNECTIVITY

 

 

Transitioning from LIBOR: Explaining the cash fallback rates

14-09-2021 | treasuryXL | Refinitiv | Jacob Rank-Broadley

The LIBOR transition: We explain what fallback rates for the USD cash markets are and provide practical insights on how these rates can be used.

  1. Refinitiv USD IBOR Cash Fallbacks are designed to ensure existing USD LIBOR referencing products such as loans, bonds and securitisations can continue to operate post-USD LIBOR cessation.
  2. There are two versions of the Refinitiv USD IBOR Cash Fallbacks: those for consumer products and those for institutional products.
  3. Initially, market participants can use the prototype USD IBOR Cash Fallbacks to become more familiar with the rates and test technical connectivity.

For more data-driven insights in your Inbox, subscribe to the Refinitiv Perspectives weekly newsletter.

During my previous blog on fallbacks in April 2021, I outlined the importance of introducing robust fallback rates into the USD cash markets.

There is a substantial exposure of cash instruments that have no effective means to easily transition away from LIBOR upon its cessation. New LIBOR legislation signed into State of New York law reduces the adverse economic outcomes associated with the instruments by requiring them to use the Alternative Reference Rates Committee’s (ARRC) recommended fallback language.

In March, the ARRC announced Refinitiv as publisher of its fallback rates for cash products. Since then, Refinitiv has been working with the Federal Reserve and the ARRC to finalise the design of the USD IBOR Cash Fallbacks.

Refinitiv is committed to supporting you through the LIBOR transition with LIBOR Transition and Replacement Rate solutions

Fallback rate economically equivalent to USD LIBOR

The Refinitiv USD IBOR Cash Fallbacks provide the rates described in the ARRC’s recommended fallback language.

These are composed of two components: the adjusted Secured Overnight Financing Rate (SOFR) part measures the average SOFR rate for the relevant tenor. Added to this is a spread adjustment, which measures the difference between the USD LIBOR for each tenor and SOFR compounded in arrears for that tenor.

Adding these two components together gives an all-in fallback rate that is economically equivalent to USD LIBOR.

There are two version of the Refinitiv USD IBOR Cash Fallbacks: those for consumer products and those for institutional products. Both are published to five decimal places and include the adjusted SOFR rate, the spread adjustment and the all-in rate.

Watch: Refinitiv Perspectives LIVE – The LIBOR Transition: Risk-Free Term Rates

Consumer cash fallbacks

Refinitiv USD IBOR Consumer Cash Fallbacks are designed to ensure existing USD LIBOR referencing consumer cash products such as mortgages and student loans can continue to operate post-USD LIBOR cessation.

These rates are based upon compound SOFR in advance, which means the rate is known at the start of the interest period, plus the spread adjustment.

Prior to 1 July 2023, the spread adjustment will be calculated as the median difference between USD LIBOR and SOFR compound in arrears for the previous 10 working days, resulting in the spread adjustment changing on a daily basis.

This is an indicative rate, and while it should not be used as a reference rate in financial products, it is designed to aid familiarity with the USD IBOR Consumer Cash Fallbacks prior to adoption in July 2023.

Following 30 June 2024, the spread adjustment will be calculated as the median of the historical differences between USD LIBOR for each tenor and the compounded in arrears SOFR for that tenor over a five-year period prior to 5 March 2021.

For the period between 1 July 2023 and 30 June 2024, the spread adjustment will be calculated as the linear interpolation between the two rates outlined above.

A floored version of the consumer cash fallbacks is also available, meaning that if the average SOFR across all days in the tenor is below zero, then the all-in published fallback rate will be solely the corresponding spread adjustment.

Refinitiv USD IBOR Consumer Cash Fallbacks will be published in 1-month, 3-month and 6-month tenors.

Institutional cash fallbacks

Refinitiv USD IBOR Institutional Cash Fallbacks are designed to ensure existing USD LIBOR referencing commercial cash products such as bilateral business loans, floating rate notes, securitisations and syndicated loans can continue to operate post USD LIBOR cessation.

In order to account for different conventions in different markets, there are a number of different versions of the Refinitiv USD IBOR Institutional Cash Fallbacks. There are three different ways of capturing the average SOFR rate: SOFR compound in arrears, Simple SOFR in arrears and SOFR compound in advance.

Added to this is the spread adjustment, which is calculated as the median of the historical differences between USD LIBOR for each tenor and the compounded in arrears SOFR for that tenor over a five-year period prior to 5 March 2021.

Unlike Refinitiv USD IBOR Consumer Cash Fallbacks, there is no transition period. This means that the spread adjustment remains fixed for perpetuity.

Each of the SOFR compound in arrears and Daily Simple SOFR rates will be available in up to seven tenors in a variety of different forms in order to conform to convention in different markets.

The 3-, 5- and 10-day lookback without observation shift versions give counterparties more notice by applying the SOFR rate from three, five and ten business days prior to the rate publication date.

The 2-, 3- and 5-days lookback with an observation shift versions also give counterparties more notice by applying the SOFR rate from two, three and five business days prior to the publication date, but in contrast to a lookback without observation shift, it applies that rate for the number of calendar days associated with the rate two, three and five business days prior.

The 2- and 3-day lockout versions fix the SOFR rate for the last two and three days prior to publication.

The plain version has no lookback, observation shift, or lockout.

The SOFR compound in advance rates for institutional products will be available in 1-month, 3-month and 6-month tenors.

Download now: Navigating the LIBOR transition

 

 

What’s the next step?

Initially, market participants can use the prototype USD IBOR Cash Fallbacks to become more familiar with the rates and test technical connectivity.

Following the ARRC’s recent endorsement of Term SOFR, Refinitiv plans to supplement the initial prototype with a forward-looking term rate version in due course.

During the prototype phase, we anticipate changes to the methodology based on user feedback to ensure full alignment with industry standards prior to publication of the production rates.

Production rates for the institutional cash fallbacks should be available from autumn 2021, and for the consumer cash fallbacks they will be available from July 2023.

How to access the rates

Prototype rates are now available from the Refinitiv website and through Refinitiv products including Refinitiv® Eikon, Refinitiv Real-Time and Refinitiv® DataScope.

For more information on these rates, including the methodology and identifiers (RICs), please visit our Refinitiv USD IBOR Cash Fallbacks page.

Refinitiv is committed to supporting you through the LIBOR transition with LIBOR Transition and Replacement Rate solutions

 

 

Our (interim) treasury labour market is extremely international

13-09-2021 | treasuryXL | Pieter de Kiewit Just before starting my vacation I created a small overview of the recent successes of Team Treasurer Search. Next to the fact that we see the speed of placements picking up, I think it is striking how international our treasury labour market is. This is not only for […]

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Why might you use a market order?

09-09-2021 | treasuryXL | XE |

If you’re making a payment in a volatile market and aren’t operating under a deadline, you may want to consider a market order for your next money transfer.

If you need to send money overseas, sending it on the spot and crossing your fingers for a good rate isn’t your only option. (Thank goodness!) There are several ways to get the most out of your foreign exchange transfers, whether you’re hoping to get it done by a certain date or get the best possible rate. One of such is the market order, and it’s available to everyone. But what exactly is a market order and how does it work?

What is a market order?

Remember how we described forward contracts as the “buy now, pay later” transfer option? Market orders would be the “buy now, transfer later” option.

When you make a market order, you can specify your target rate at which you’d like to exchange your currencies. The current rate doesn’t matter: the markets are constantly moving, and you’ll never know when your desired rate will be live.

After you’ve placed your market order and set your target rate, your work is done, and now it’s up to the markets. Once your rate is live, your currency will automatically be purchased, allowing you to transfer currency at your ideal rate.

Why use a market order?

The foreign exchange market is volatile and unpredictable. Nonetheless, you can monitor the market and come up with a clear-cut currency strategy that allows you to get the most out of your foreign exchange transactions, without having to constantly check the rates.

With a market order, you can easily set an exchange rate you want for your currency and once your target is met, the transaction is initiated automatically. This gives you the opportunity to get the highest value for your currency regardless of how volatile the market is.

Key things to note about a market order

  • It allows you to customize your market order by setting the amount, exchange currency, value date, and validity.

  • You can choose a desired target exchange rate to either stop-loss, make -profit, or get the best of both.

  • Your market order triggers automatically once your target rate is reached.

  • Since the process is automated, you’re not required to keep monitoring the market for the best rates.

  • You can sit back and relax without bothering about the volatile nature of the foreign exchange market!

A market order allows you to get the best out of sending money at your most preferred exchange rate and to prevent the undesirable effects of the unstable foreign exchange market. Once you set a market order, the online money transfer platform such as Xe monitors the foreign exchange rate movement, automates and completes the transfer on your behalf once the set rate is reached.

It’s an opportunity for you to benefit from an automated foreign exchange management system with minimal exchange rate risks.

When should you use a market order?

You can use money order just about any time you want. However, certain situations make a money order the preferred choice for sending money. Here are the most preferred periods to use a money order:

  • To get the best of higher rates

  • To save money and time

  • To make the most of foreign exchange purchase

  • To create a safety net

  • To get the most out of your budget

  • To take advantage of favorable exchange rate

  • To manage foreign exchange risk

Depending on the currencies you want to transfer and what’s going on in the world at the time, your currencies could be subject to quite a bit of volatility. If you’re contending with frequent market motion, setting up a market order can help you to ensure that you’ll be able to make your transfer at the best possible rate, whenever that may be.

Market orders are also a great option for transfers that aren’t time-sensitive. Some transfers (such as bills or educational payments) need to be made by a certain date, but if your transfer doesn’t come with its own hard deadline, you can take advantage of market orders to make the most of your money in your transfer.

Why should you take note of currency risk management?

Managing the risks associated with the volatile nature of the foreign exchange market is important to get the best rates for your money transfer. This is one of the key reasons why the market order is such a good option. Here are key reasons why you should consider currency risk management using a market order:

  • All your foreign transfers will be based on strategic decisions.

  • You’ll be able to forecast your international expenses.

  • You’ll know precisely what foreign exchange range will be used for your transfer.

  • You’re not required to keep monitoring the market to get the best rates.

  • Market order is automated so you aren’t bothered about missing the best rates.

  • You can use the volatile nature of the market to your advantage.

Is a market order the best option if your transfer is date-focused?

No.

Unlike several other available money transfer methods, a market order isn’t the best option if you intend to transfer your money within a specific date. That’s if your money transfer has a deadline.

For example, some payments such as overseas mortgage, school fee or an emergency medical bill require payment within a specific period. Once you miss such a deadline, you’ll have to deal with the consequences that follow.

In such situations, a market order isn’t the best method for transferring your money. However, if your transfer doesn’t require any deadline or specific dates, a market order could be your best bet. Market orders are mostly suitable for money transfers that aren’t time-sensitive. It provides a perfect opportunity to sit back and wait for the best market rates before your transfer goes through.

How do I create a market order?

Ready to set up a market order? It’s no more complicated than sending any other money transfer. If you don’t have an account, take just a few minutes and sign up for your free account first. If you’re already registered, visit our Money Transfers page to learn more about how you can get started.

Are you curious to know more about XE?
Maurits Houthoff, senior business development manager at XE.com, is always in for a cup of coffee, mail or call to provide you the detailed information.

 

 

Visit XE.com

Visit XE partner page

 

 

 

Nomentia Acquires TIPCO: A union of exceptional products and teams

08-09-2021 | treasuryXL | Nomentia |

Nomentia announced yesterday that the company has acquired TIPCO Treasury & Technology. Shortly after the news was released, we had the chance to sit down with Jukka Sallinen, CEO of Nomentia, and talk about the announcement, what does the acquisition promise for finance and treasury professionals globally, and what does the future hold for Nomentia.

The acquisition of TIPCO is the latest milestone in Nomentia’s history. What’s the reason behind the transaction?

There are a couple of reasons. First and foremost, we’ve felt that both companies share a very similar mission. We want to provide unparalleled solutions for and with our customers. TIPCO’s Treasury Information Platform (TIP) is an exceptional treasury management solution that is widely known in the DACH region, and TIPCO has been also famous for its acumen in treasury. Our combined solutions and domain expertise make us one of the strongest players in the cloud treasury and cash management space. I have no doubt that our current and future customers will benefit from our combined product portfolio. Another good reason for joining forces with TIPCO is that we’ve strongly felt that both companies have had surprisingly similar cultures – both have a very healthy obsession for providing the best solutions for our clients and we take pride in what we do.

 

Tell us more about the merged product portfolio and how treasury teams will benefit from it?

Before the acquisition, Nomentia cash management was consisting of Bank connections, Payments, Cash Forecasting, In-house banking, Bank Account Management, and Reconciliation solutions. Adding TIP to the solution mix, we can now provide robust and sophisticated cash flow forecast and cash visibility solutions, as well as solutions for trade finance, FX risk, treasury reporting and treasury workflows, and more. TIP has been always loved by the users and now all Nomentia customers will have access to TIP.

Today, it’s not feasible for treasury teams and finance teams to choose one provider for all their needs or trust that their ERP system would provide a working solution alone. Treasurers should be able to choose the solutions that can best resolve their challenges and meet their needs. To get the best outcome, finance and treasury teams often need to work with multiple vendors – taking the best solution from each. Of course, that’s not always ideal from IT’s point of view, but that’s where our team comes in to take care of the implementation plan together with the client and integrate with their existing systems and banks. We trust that a lot of our current customers will find new solutions from our updated offering that can help them to overcome their current challenges.

New customers will find that Nomentia can offer the widest cash and treasury management solution portfolio on the market to help them build better treasury processes.

 

How does the acquisition affect Nomentia’s future?

During the past year, Nomentia has taken big steps toward becoming the global powerhouse for treasury and cash management. After last year’s merger of OpusCapita and Analyste, we’ve successfully got our footprint in many new markets, and we’ve been especially growing in the DACH and Benelux regions besides continuing to be the number one choice of treasurers in the Nordics. Acquiring TIPCO and merging the two product portfolios will help us to strengthen our position in Europe even more.

Our team has been also growing significantly – it’s always great to work with people that are experts in their field and can truly help our customers to develop their operations. Together, we will exceed our customers’ expectations with our strong product portfolio and even stronger team. Personally, I am thrilled about the news and can’t wait to roll up our sleeves and get to work together with our new colleagues!

 

Read the press release to learn more

 

 

Spreadsheet risk: the silent killer of FX performance

07-09-2021 | treasuryXL | Kantox

Imagine a perfectly designed currency hedging program for a company that seeks to protect its annual budget. Given the specific features of that company —especially its pricing dynamics— such a program would allow the finance team to systematically achieve a hedge rate that would be equal or better than the FX budget rate, avoiding overhedging all the while. The hedging strategy would also consider the firm’s degree of forecast accuracy, as well as the forward discount or premium of the currencies in which it trades.

Now imagine that this optimal FX hedging program was implemented on perfectly designed spreadsheets. Armed with super-efficient spreadsheets, the finance team would project forecasted revenues and expenditures, calculate the firm’s exposure to currency risk and set a time frame for the execution of hedges.

A treasurer’s dream come true? Not so fast.

Any reasonably well-designed currency hedging program goes through a process in three phases: the pre-trade phase, the trade phase and the post-trade phase. Each of these phases, in turn, comprises several intricate steps. And here’s where a wholly unexpected risk would sneak in, with potentially devastating consequences: spreadsheet risk, the silent killer of performance.

Spreadsheet risk is omnipresent 

Spreadsheet risk comprises a series of errors stemming mostly from the requirement of data to be manually inputted into each cell. Manual management not only takes up much of the financial team’s resources and time — it makes human error inevitable. The most commonly observed errors and risks comprise:

  • Data input error, including ‘fat finger mistakes’
  • Copy & paste error
  • Formatting errors
  • Formula errors
  • Multiple versions across the firm
  • Lack of backups
  • Users’ lack of skills
  • Insufficient guidelines

spreadsheet risk in FX hedging

Despite all the efforts in spreadsheet risk management, the problem is not going away. In fact, more risk is being created as economies grow and businesses become more complex. The truth is that spreadsheets were originally designed for small pockets of data. They were never designed to handle large amounts of data in an interconnected environment.

Experts know well that the world’s most famous business spreadsheet saw the light of day before the World Wide Web and the internet browser — that is, before the explosion of interconnectedness. And interconnectedness lies at the heart of modern FX hedging programs.

Spreadsheets traveling back and forth

The most prosaic element of a FX program is the seemingly innocuous process of sourcing currency rates for multi-currency pricing purposes. Quite apart from the fact that many firms undertake it with irrelevant time-based criteria, the reality is that, once currency rates are sourced —for example, from the European Central Bank’s website— the commercial team receives the information on a spreadsheet.

Next, the FX exposure needs to be collected and processed. Budgeting, as we know, is a process that involves commercial and production teams, purchasing managers, economists, human resources departments and treasury teams. In other words: the cornerstone of the hedging program is the result of dozens, or more likely, hundreds of spreadsheets traveling back and forth across the enterprise. At this point, spreadsheets risk is only in its initial stages.

Depending on the forward discount/premium of the currencies involved, conditional FX orders are set. The information must be provided by the relevant commercial teams/purchasing managers — on a spreadsheet. Then the trade phase kicks in. If manually executed, several processes take place: approval request, first review, second review, final approval. Yet more spreadsheets are transferred in the process.

And what about the FX payments and collections process? And the FX accounting and performance analytics stages? You guessed it: critically important information is subject, once more, to data input errors, copy & paste errors, formula errors and formatting errors. These are the ingredients of a potentially nightmarish scenario. Even for the best-designed currency hedging programs. And even for programs implemented on brilliantly designed spreadsheets.

FX Automation: taming spreadsheet risk

In an increasingly interconnected world with more complex business models, spreadsheet risk can be a silent killer of performance. Business managers face enough risks in the day-to-day management of their operations, and treasurers in particular have enough on their plates to worry about the spreadsheet risk in their FX hedging programs.

It’s high time they work to better manage this risk. Here, Currency Management Automation is your company’s best antidote. These software solutions use Application Programming Interfaces to ensure that data can flow seamlessly between different systems (ERP, TMS) and software without any need for spreadsheets.

The time to act is now.

Strategic Treasurer’s Analyst Report Series: Treasury and Risk Management Systems

06-09-2021 | treasuryXL | Kyriba |

This document contains a comprehensive illustration of the current state of treasury technology and the exciting future direction using new tools that are already with us. This FinTech analyst report from Strategic Treasurer takes a look at the current health of the TMS space and what benefits can come from implementing a treasury management system in your operations. Additionally, this report covers emerging technologies within treasury, such as the use of robotic process automation, artificial intelligence, and more.

Understand the current TMS space and its benefits

The Treasury and Risk Management Systems Analyst Report offers a thorough evaluation of the TMS space by covering the emerging uses of AI/ML (artificial intelligence and machine learning), RPA (robotic process automation), and API (application programming interface) technologies in treasury.

It also discusses:

  • The place of a TMS/TRMS in business continuity planning and preparing for disruption and volatility
  • The best practices and proper mindsets for avoiding pitfalls in selecting, making a business case for, and implementing treasury technology
  • The varied ways in which these solutions address the day-to-day pain points and inefficiencies of treasury departments

Download it now!

#6 Not having a Grip on Compliance (Dutch Item)

02-09-2021 | XE |

Regulatory compliance must be an absolute priority for all organisations involved in foreign exchange transactions with foreign customers and suppliers. You must implement robust procedures to generate the information that your foreign exchange providers must legally have in order to carry out transactions on your behalf.

Als u dat niet doet, loopt u het risico dat betalingen niet op tijd worden verwerkt, waardoor uw relatie met leveranciers en klanten onder druk komt te staan of zelfs uw toeleveringsketen verstoord wordt. Ook uw cashflow kan in gevaar komen. Ondanks deze noodzaak is vertraging door regelgeving een veelvoorkomend probleem bij vreemde valuta. Financiële instellingen moeten zich aan strikte regels houden wanneer zij valutatransacties uitvoeren namens hun klanten. Volgens wetgeving om witwassen en andere verdachte praktijken tegen te gaan, moeten zij de identiteit controleren van alle partijen waarmee ze zaken doen, waaronder de buitenlandse partijen waarmee uw bedrijf contact heeft. Vertragingen in het verificatieproces kunnen de uitvoering van uw transactie vertragen.

“Bescherm uw cashflow, uw toeleveringsketen en uw relatie met leveranciers en klanten.”

U moet ook oppassen dat u niet verstrikt raakt in onbekende buitenlandse bankgegevens. Bankgegevens in eigen land zijn gestandaardiseerd, maar internationaal kan dat van land tot land
verschillen en kunt u te maken krijgen met internationale rekeningnummers (IBAN), bankidentificatiecodes (BIC) en andere gegevens.

Uw valutaprovider moet u kunnen helpen deze potentieel verwarrende variaties te verwerken en tegelijkertijd de geldende regels na te leven. Worden er bijvoorbeeld online systemen gebruikt om de invoer van gegevens te automatiseren, waardoor fouten of ontbrekende gegevens snel ontdekt kunnen worden die anders uw betaling zouden kunnen vertragen? Geeft uw provider eenvoudig advies zonder gebruik van jargon over de gegevens die u nodig hebt van buitenlandse partijen en waar u die kunt vinden? Kan uw provider betaalgegevens in zijn systemen bewaren zodat u ze niet bij elke volgende transactie opnieuw hoeft in te voeren?

Als u niet precies weet hoe u ervoor zorgt dat u de regelgeving naleeft, bespreek dat dan met een gespecialiseerde valutaprovider.

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