17-01-2023 | treasuryXL | LinkedIn | Join Kantox and treasuryXL in this expert-led conversation on the future of currency management as we uncover the key treasury priorities and opportunities for the new year.
17-01-2023 | treasuryXL | TIS | LinkedIn |
Now in its 2nd consecutive year, TIS is excited to release the findings from our 2023 Treasury Priorities & Opportunities Survey. Having run throughout the course of Q3-Q4 2022, our research again captured responses from hundreds of U.S. finance and treasury practitioners operating at companies of all sizes and industries. The goal was to capture their perspectives on a range of items including the ongoing adoption and use of finance and treasury technology, as well as upcoming staffing plans, strategic and operational expectations, and overall trends occurring in the space.
This blog serves as a summary overview of the key results and findings from TIS’ 2023 Treasury Priorities & Opportunities Survey. To access the full results and analysis, you can download the extended whitepaper here.
In total, over 250 practitioners responded to this year’s survey, which consisted of roughly 30 questions. All respondents held roles in either treasury or finance. In addition, all respondents were operating at companies with headquarters in the U.S., but most maintained an active international presence.
In terms of company size, 34% of represented companies had annual revenues of $100M – $1B, and another 34% had $1B – $10B annual revenue. 14% had revenues of over $10 billion, while 18% were under $100mm.
Regarding industry representation, construction and manufacturing firms accounted for over 27% of all respondents. Companies from the software, education, insurance, retail, and automotive sectors collectively accounted for another 40%.
In aggregate, our 2023 research initiatives are representative of an appropriately diverse spread of treasury and finance practitioners from a variety of company sizes and industries.
The findings from our 2023 research highlighted that despite strong economic headwinds and market uncertainty, a significant number of treasury teams are still expecting to add more staff and adopt new technologies in the year ahead. In fact, while 48% of teams expected to add more staff, only 3% planned to reduce their headcount. Similarly, over 50% of respondents plan to invest in new cash management and payments-related technologies.
This should be taken as generally reassuring news for practitioners, especially given the wide-ranging budget and staffing cuts that have occurred within many U.S. companies and institutions in the past few months. However, these new technology and staffing additions are also being coupled with a new set of responsibilities and expectations from business leaders that may place greater strain on practitioners. These heightened expectations were clearly evident in our research, with 77% of practitioners indicating their list of responsibilities would increase in 2023, while just 2% believed their workload would be reduced.
Regarding the nature of these new responsibilities, it appears that many treasury teams are being relied upon to execute and contribute towards more “strategic” internal functions. Based on the data, 57% of practitioners indicated that the strategic role of their treasury group would expand in 2023, while just 4% indicated a decrease. Going a step further, when asked whether treasury was viewed as more “operational” or “strategic” by management, practitioners were evenly split in their perspectives at 48% strategic and 52% operational, respectively.
Looking deeper into the growing influence and responsibility of treasury, another interesting finding was that most treasury teams seemed to exert heavy control over their company’s AP and AR operations, either directly or indirectly. On average, 69% and 67% of treasury groups maintained some level of control over these operations, with little deviation between companies of different sizes and industries.
Although cash management and forecasting operations have long-been standard treasury responsibilities, data shows that practitioners have been placing an even greater focus on these operations over the past year.
Since early 2022, several major U.S. corporate treasury studies including AFP’s 2022 Strategic Role of Treasury Survey and Strategic Treasurer’s 2021 Treasury Perspectives Survey saw cash management, forecasting, and working capital projects ranked as top priorities for treasury teams. Our 2023 research corroborated these results with data showing cash management technology being the top priority for new software investments over the next year. In addition, cash management skillsets were listed as the most emphasized area of professional development focus for treasury teams in 2023.
Turning to cash forecasting, one primary focus of our research was learning more about the various forecasting workflows and strategies leveraged by treasury groups and companies of different sizes and industries. At a high level, we found that nearly half of survey respondents used a TMS to produce cash forecasts, with 20% leveraging an ERP and nearly 30% relying on Excel Spreadsheets. While Excel is still used predominantly by smaller teams, the use of TMS and ERP products was much more popular for companies with $500mm+ in annual revenue.
Regarding the preferred forecast horizon, 27% of teams focused on monthly forecasts, while 38% were prioritizing weekly analysis and 25% daily. Generally, smaller companies were only half as likely to conduct daily forecasts compared to larger firms, but 2x more likely to conduct quarterly forecasts. On the other hand, larger firms were more likely to conduct forecasts across numerous time periods including daily, weekly, and monthly. In aggregate, weekly forecasts were the most popular analysis period across all sizes and industries.
As a final point on forecasting and in-line with the broader digitalization shift that has been occurring in treasury for years, the top priority for practitioners when improving their forecast process revolved around either migrating away from legacy Excel-based processes or upgrading their existing software to achieve greater accuracy and automation.
To learn more about this research and for extended results and analysis, download the full whitepaper here. You can also watch our recent results webinar that features commentary on the key survey themes by a panel of industry experts.
16-01-2023 | treasuryXL | Kantox | LinkedIn |
Avoid the cliff and protect your cash flows! When volatility is at an all-time high, the right currency hedging strategy can set you apart. And save your business from an uncertain future. Transform your FX risk with a layered hedging strategy that will help you withstand unexpected changes in FX markets and protect your margins.
When implementing an FX hedging program, finance professionals responsible for risk management must be aware of the ins and outs of their business. This will be the starting point to uncover potential gaps in the hedging strategy and also opportunities to implement the program that fits perfectly.
Let’s understand how a layered hedging program works and how it could fit with your FX strategy.
Layered hedging programs allow CFOs and Treasurers to handle the related problems of FX markets volatility, shifting interest rate differentials, and less-than-stellar cash flow visibility.
The goal of a layered hedging program is to smooth out the hedge rate over time to lower the variability of company cash flows. Additionally, a layered hedging program that is created from scratch can deal with the problem of forecasting accuracy.
Instead of ‘protecting’ an FX rate, layered hedging programs build the hedge rate in advance. And because hedges are applied in layers, in a progressive manner, you do not need a 100% accurate forecast at all.
Not all hedging programs are the same, as they tackle different goals for managing FX risk. Before you implement a layered hedging program and start dedicating time and resources, you need to think about certain conditions. These relate to your current business model -including pricing structure, the FX exposure you want to hedge, cash flows, etc.- and your company’s specific needs when it comes to FX hedging.
This type of hedging program is best suited for firms that need or desire to keep steady prices not only for one individual campaign/budget period, but for a set of campaign/budget periods linked together. In layered hedging:
(a) Prices are usually not FX-driven, meaning that the FX rate plays no role in pricing strategy.
(b) The impact of the ‘cliff’ -a sharp adverse fluctuation in currency rates between periods-, cannot be passed on to customers at the onset of a new period.
(c) The exposure to hedge is a rolling cash flow forecast for a set of periods linked together.
Unlike other cash flow hedging programs, like static hedging where prices are either frequently updated or updated at the onset of a new budget period, pricing does not act as a hedging mechanism in layered hedging programs. And that puts cash flows at risk, so a solution must be found elsewhere.
In comes the star of layered hedging, smoothing the rate.
The secret of achieving a smooth hedge rate over time is to create commonality between trade dates for a given value date. Take, for example, a 12-month layered hedging program. The value date of October is hedged in 12 different months, from October in the previous year down to September.
Next, the value date of November is hedged in the same manner, starting in November of the previous year down to October. And so on and so forth. Note that the two value dates -October and November- share eleven out of twelve trade dates with the same spot rate. That’s the concept of the mechanically created commonality that lies at the heart of layered hedging programs.
However, the process of ‘layering the hedges’ is not as simple as it may seem at first glance. There are some common challenges that Treasurers and CFOs face when manually performing FX risk management activities.
Before crafting the optimal layered hedging program for your business, there are three common challenges that need to be considered. These are crucial to the success of the FX hedging strategy. And they relate to the configuration of the program, the intrinsic constraints of the business, and the level of automation currently available to the team. Let’s take a closer look.
(1) The degree to which the hedge rate is smoothed, for example by adjusting the programs’ length.
(2) The optimisation of forward points. For example, hedge execution can be delayed if forward points are ‘unfavourable’.
(3) The distance between the average hedge rate and the spot rate.
(1) The degree of forecast accuracy.
(2) Possible limitations imposed by liquidity providers who might not let a firm trade forward contracts that expire, say, more than two years out.
(1) Spreadsheet risk, including data input errors, copy & paste errors, formatting and formula errors.
(2) Key person risk, as only a handful of individuals understand the formulas that underpin the ‘monster’ spreadsheets.
Layered hedging programs are a powerful FX risk management tool to face the trifecta of problems created by a highly volatile scenario. These hurdles include currency risk —including the risk of a cliff, as we saw recently with the GBP-USD exchange rate—, shifting interest rate differentials, and less-than-stellar cash flow visibility.
Now that you know the ins and outs of layered hedging, you can start transforming your FX risk management workflow. And forget about the challenges that may come when facing uncertainty. That’s a pretty powerful advantage in a scenario of pandemics, inflation and war!
If you want to leave behind the challenges of manual work when it comes to currency risk, consider implementing automation software.
Kantox is the only solution that streamlines the currency management process through powerful automation of the entire FX workflow. This enables businesses to reduce currency risk, protect profit margins and price more competitively.
11-01-2023 | Cobase | treasuryXL | LinkedIn |
Banks provide solutions to connect and integrate corporate ERP systems, most of which are based upon batches of data being exchanged between the accounting platforms of the company and the bank. However, these are bank and country-specific and not a scalable solution fit for future growth or expansion.
Also it is important to determine whether payment batches follow a consistent approval chain. Malicious activity is difficult to detect in a cumbersome and scattered ERP and bank environment so treasury teams need to have confidence that payment batches generated in the ERP system are automatically sent to the banks in the right format and in compliance with local security standards.
In the third blog in this series we explore the merits of connecting accounting systems and/or ERP systems to your bank(s) and why companies benefit from being able to execute payments from a single platform.
If the company connects its ERP system through a platform or a dedicated middleware layer, this creates a tight workflow to which consistent approvals can be applied, reducing the scope for unauthorised payments. Automatic information feeds also support the execution of sophisticated liquidity forecasting and management of foreign currency exposure.
An additional factor for corporates to consider is whether their provider will be able to move to open banking APIs once their bank(s) make them available and provide APIs to their ERP environment. Connectivity between corporate accounting software and bank portals generates a number of benefits for corporates, including the availability of balance and transaction information in real-time to enable more accurate and timely decision-making and further optimise cash and credit lines.
Multiple cash management banking relationships make managing payments and cash a cumbersome process that involves logging in and out of different bank portals and managing disparate authorisation schemes while trying to ensure that bank data and data in ERP or accounting systems are synchronised.
Most ERP systems allow for batch payments only and have no interface for individual payments, which means there is no screen where individual payments can be entered manually.
When treasurers are unable to send single payments out of their ERP system directly to their bank, they are required to log into individual portals to perform these payments. This can become a frustrating process when they have to look for security tokens or recall passwords that are rarely used because of the sporadic nature of the payment.
It might be tempting to assume that this is not a major issue given that these payments are not made regularly and are often of low value. However, there will be situations where high value one-off payments have to be made. Regardless of the value of the payment, it is much easier to execute it from a single platform because the user experience is the same across all banks.
In the final blog in this series we will look at the benefits of maintaining a complete audit trail of payment activities and the advantages to be gained from having a consistent payment approval workflow across business units.
Treasury teams looking to optimise their cash management processes realise that making smart decisions requires tactical and strategic planning. However, there are a number of principles that can be applied by any business to increase the level of insight into how funds move into and out of their organisation.
That’s why we created ‘The ultimate guide for achieving efficient and safe multibank cash visibility and payments’. In this guide you’ll find questions that you can ask yourself to determine your current level of efficiency and spot the areas you might need to improve.
10-01-2023 | Konstantin Khorev | treasuryXL | LinkedIn | APIs, or application programming interfaces, have revolutionized the way that corporate treasury departments operate. Getting timely information about cash balances and transactions running through your bank accounts is crucial not only for treasury but also for other corporate functions: A/R, A/P, business operations and other departments
05-01-2023 | Carlo de Meijer | treasuryXL | LinkedIn |
Turning back from our almost one month stay during November in South Africa, our beloved travel country, I was heavily chocked by the events on the crypto markets. During our stay I had promised my wife not to follow the news in these areas. But looking at internet I read the various articles and blogs on the FTX crypto exchange collapse and the negative reactions throughout the crypto space. These events will of course have their impact on the various trends in the blockchain and crypto markets in 2023 and beyond. So let us start.
By Carlo de Meijer
Meanwhile the shock waves of the collapse of one of the biggest crypto exchanges make it still feel throughout the whole crypto sector. It affected the credibility and trustworthiness of crypto as a reputational asset. It also brought the dangers inherent in the cryptocurrency space, cementing the vision of an insecure landscape and acts as a barrier to the growth of the industry.
This time trust has fallen to an all-time low greatly reducing the interest among retail investors as well as institutions and financial players alike in the crypto markets, causing many crypto currencies to fell sharply.
It also caused an increased number of crypto firms being crashed or confronted with liquidity problems, while other distressed companies could be entrained by the fall of FTX. As a result the total crypto market capitalization has dropped from $ 3 tn to $821 bn as of the end of November.
Expectations are for a new tough and volatile 2023 for many in the crypto industry. Investors remain much more reluctant to enter the crypto market as long as there is no clearness on crypto regulation. This will heavily restrict the sprawling crypto ecosystem known as decentralized finance (DeFi) as well as the NFT market, that were booming segments in recent years. As a result a growing number of crypto firms will get into trouble.
Triggered by the events on the crypto markets, more stringent regulation will rise much sooner than later to prevent events like the FTX collapse and limit the misuses in the crypto markets. Regulatory authorities are now urgently working on stringent regulations of the largely unregulated crypto world. And that for various reasons. The FTX collapse underlines the risks and dangers of the unregulated crypto markets faced by consumers inherent in the crypto currency space. Given the crypto industry’s inability to self-regulate, it emphasized the need for tighter supervision and clear and more stringent regulatory frameworks. Regulators around the world will intensify their work in 2023 and come up with tougher rules for crypto companies. Aim is to meet the various risks and challenges of the crypto industry, including cryptocurrencies, crypto assets, stable coins, DeFi, NFT, lending and staking etc. but without frustrating or harming technology developments.
These rules should protect investors in crypto products and should ensure that crypto firms are more compliant and more transparent to act in a responsible way. Regulators should thereby look more closely at account balances and reserves at centralized crypto exchanges. This should ensure consumer protection, making crypto companies more transparent, while improving disclosures and risk awareness within the sector.
Regulators worldwide are expected to work more closely together to deliver a clear and effective global regulatory framework and supervision for crypto markets including crypto currencies to make crypto regulation effective. Without global coordination, even comprehensive local laws will do little to prevent cross-border regulatory arbitrage and the potential abuses. International institutions like BIS, IMF, G7, G20, the BIS, the World Bank and others are messaging that international regulatory collaboration and a cohesive regulatory framework is urgently needed. They are prepared to take the lead.
These developments on the crypto markets will also trigger central banks worldwide to accelerate their process of developing and implementing their own CBDC. In 2022 we observed increased interest in the concept of CBDCs in a growing number of countries worldwide. More than half of central banks all over the world are now exploring their potential as they could offer several benefits. Most central banks thereby already moved beyond conceptual discussions and are either in the researching, testing or deploying stage of the process. There are already CBDCs that have gone live.
This process will further continue in 2023 when we will see a growing number of CBDC projects, triggered by the recent developments in the crypto market. This will also initiate more central banks an earlier than expected introduction of their own CBDC. Thereby there will be growing collaboration worldwide supported by international organisations like IMF, BIS etc. This may indicate another viable field for blockchain growth.
It will not mean the end of the sector. Crypto markets such as DeFi and NFT may revive when new and more stringent regulation will have been implemented. Both the Defi and NFT markets are expected to further develop with the help of innovative developments, including tackling the main security issues.
a. The DeFi market will further innovate
We will see more technological innovations in the DeFi market, leading to more complex and interesting applications. These may include the creation of new digital assets and online payment systems, including utility tokens, digital shares, natural asset tokens, stablecoins, etc.
Next year will also likely bring more traction for use cases like self-custody wallets, synthetic assets, and prediction markets. And Improvements in the decentralized finance (DeFi) sector like the protocol Compound’s version (v)3 and the arrival of the zero-knowledge (ZK) ecosystem continued regardless. New infrastructural developments will continue such as the arrival of decentralized perpetual exchanges and regulatory-compliant platforms that connect traditional finance (TradFi) to DeFi.
b. The NFT market is expected to develop further technologically and creatively
NFTs, also known as non-fungible tokens, gained great popularity since 2021. In the past few years there has been a lot of talk about crypto games and crypto collectibles with the advent of NFTs. With this new asset class, there has been a shift in the way these assets can be used.
Though the recent crypto turmoil will cause minor interest – for the time being – this market is expected to develop further technologically and creatively. We will see industry disruption and ideas for utility NFTs such as in-game NFTs, identity tokens, and token-gated communities. Another trend is that the NFT market – previously only on the Ethereum platform – will increasingly be conducted in different chains. There will arrive a growing number of blockchain based platforms that allow players to trade their crypto assets on secondary markets.
c. We will the growth of interesting applications of tokenised assets
A new model around blockchain technology that will further emerge in 2023 and beyond is so-called asset tokenization. Tokenization thereby uses blockchain technology to turn digital or physical assets such as stocks, treasuries or corporate bonds into digital tokens. They are becoming increasingly popular, as smart contracts automate tokens transactions, while helping reducing and increase transparency.
We may see the growth of interesting applications of tokenised assets such as flash loans and real estate, while we will also see a surge of start-ups focused on bringing TradFi institutions into crypto in a regulatory-compliant way. Unlike crypto currencies, tokening makes assets easier to other people – both retail and business-users, to own that asset. It may open the present markets where trillions of dollars/euros are locked up in assets that cannot be deployed or to which there is extra ordinary limited access. Via asset tokenization anyone can invest in assets. People no longer need to go solely to the stock or cryptocurrency market.
But also in the blockchain area there will be a number of interesting trends that will determine the future development of the blockchain industry and how this technology is evolving in the coming years.
a. The blockchain markets will show further growth
Over the past few years, interest in blockchain technology has grown steadily and rapidly, with an increased adoption of the technology by finance and banks, governments, international trade and supply chain management, triggered by the various benefits it could deliver.
As a result the blockchain market is expected to further grow in 2023 and beyond. The spending on various blockchain solutions (market volume) is forecasted to increase to $ 23,3 bn in 2023 (from $ 12,2 bn in 2022).
b. Private blockchains are becoming popular
A trend that has started a few years ago and will further continue in 2023 is the growing adoption of enterprise or private blockchains. Enterprises are becoming more interested in private blockchains, because it permits only authorised users to access the network and take part in transactions. They require a key, sometimes called an invitation key from the owner. Private blockchains networks prove essential for safekeeping enterprise data. Access to certain documents and information is role-based and programmable to the authorised private blockchain based systems.
c. Blockchain will become mainstream
The adoption of blockchain-based systems is increasingly becoming the new standard across numerous industries. A growing number of Industries outside finance, are now searching for blockchain solutions. Thanks to blockchain’s ability to be used in almost any field, the trend will continue for years to come.
As the technology continues to evolve, more and more businesses are leveraging blockchain to streamline their operations. Blockchain is increasingly seen as an ideal for industries like finance, international trade, insurance, legal, logistics, supply chain management, healthcare, insurance, media and e-commerce where payments must be transparent, secure and efficient.
The year 2023 will see a number of interesting developments showing the blockchain infrastructure is becoming more mature, including cloud services, DAO’s, interoperability and compatibility tools.
a. Blockchain as a service (BAAS)
While the cloud services industry is still young, their transaction growth is driving innovation. For business it makes it possible to use technology, software etc. without huge investment, to build their own infrastructure and acquire new skills. More broadly for cloud services, blockchain brings greater privacy and security capabilities. Currently start-ups and established companies of all sizes both use Blockchain as a Service (BAAS). It is now offered by numerous well-known organisations incl. Microsoft, IBM, Amazon etc.
During 2023 we will see a firm pick up of BAAS. It supports IOT applications by offering different blockchain-enabled services such as smart contract services, dApps, verification services or user information and cloud blockchain storage. Beyond these improvements to to-day’s cloud services, blockchain can be added as a service offering itself for secure network management.
b. DAO’s go mainstream
With the rise of blockchain technology, Decentralized Autonomous Organizations (DAOs) has grown in popularity and this trend will continue in 2023. Decentralisation is changing the way business is done, thereby helping to reduce costs while eliminating the need for intermediaries.
DAOs are new model for organizations that are managed and operated on decentralised networks and use blockchain technology to store and share information. These are automated entities that operate on rules encoded as smart contracts and have no single point of failures. They can exist and make decisions without any human management. DAO’s also give individuals more access to economic resources, by allowing them to invest their money into projects they find promising, without needed someone else to manage it. How DAOs can overcome incentive challenges, implement cross-chain asset management and interaction capabilities and expand use cases will be key for the next phase of its development.
c. We will also see cross-chain solutions to solve interoperability and compatibility issues
Protocols are entering the blockchain market that provide fast connectivity of different blockchains. Initially there were many protocols and platforms in this sector but there were no standards. For this reason, companies could not achieve compatibility across platforms at the same time. The main challenge was the usual transfer of data from one user to another without the ability to negotiate the terms. New protocols such as Polkadot, Cosmos, Wanchain and others are now providing fast connectivity of different blockchains with trouble-free interaction. In these solutions various cross-chains are connected to achieve interoperability and compatibility.
As blockchain technology further develops we will see more innovations entering the market, including dApps, smart contracts and new consensus mechanisms.
a. Firm uptake of dApps
In 2023 we are going to witness a more massive adoption of Decentralized Applications or dApps. These are applications that run on a decentralized network and use blockchain technology to store and share data. As companies seek ways to increase efficiency and reduce costs, DApps are gaining popularity. Blockchain networks offer endless possibilities for dApps with peer-to-peer nodes and smart contracts. With dApps one can diminish censorship from centralised authorities and ensure privacy or dApps development flexibility. dApps do not experience downtime since they leverage decentralised computing and utilize open source licenses to lease or use. dApps are also crucial to accelerating WEB 3.0 integration.
b. Increasing popularity of smart contracts
Another trend we are going to see is the increasing popularity of smart contracts in a growing number of sectors. These are digital ones that are automatically executed after meeting several conditions. When certain conditions are met, agreements are instantly implemented by a blockchain allowing for proxy-free contracting without the need for intermediaries.
They are becoming increasingly popular, as smart contracts help reduce paperwork and manual processing, as well as eliminate the need for intermediaries. Due to smart contract mechanisms blockchain services are now available to companies that do not have the resources for several years of research and development of their blockchain system, allowing them to make their own self-executing contracts, protecting against unforeseen circumstances.
c. New consensus mechanisms entered the market
New methods of cryptography to verify transactions are entering the blockchain space such as Proof of Stake (POS), Proof of Authority (PoS) and Zero Knowledge.
Proof of Stake (PoS)
Newer protocols to reach consensus are focused on eliminating the problem of power consumption and become more eco-friendly. The Ethereum switch in 2022 from proof-of-work (PoW) to proof-of-stake (PoS), in an attempt to make their algorithm greener, reduced Ethereum’s energy usage by an incredible 99.9%, while speeding up data transfer and reducing fees. This trend is likely to be seen more in 2023 and beyond and is said to become the major topic. This will likely make blockchain an even more attractive solution for many companies.
Proof of Authority
Proof of Authority uses a large number of trusted and private networks in business. It has been introduced as a more energy-efficient alternative to PoS as less computational resources are needed. In proof-of-authority, machines earn the right to generate new blocks by passing a strict vetting process. These system moderators are preapproved participants who check blocks and transactions. The Proof-of-Authority model is scalable because it is based on a small number of block validators.
Zero knowledge protocols
Zero knowledge protocols may be one of the significant WEB 3.0 and blockchain solutions in the coming years. As the question of privacy comes to the forefront of the crypto industry, zero-knowledge technology has been particularly notable this year.
Zero knowledge technology can solve privacy and scalability issues for the newer layer 1 blockchain projects. Because blockchains are inherently transparent, this application is huge for the industry and allows many more interactions to take place on-chain in a private way. With ZK proofs, users are able to prove their identity on-chain without having to reveal sensitive data. ZK proofs are also extremely lightweight, making on-chain interactions much more scalable and efficient.
a. Blockchain-based identification management will further evolve
With the move to digital commerce and communication, the individual identity (id) – as mapped to digital websites – becomes increasingly important to control and authenticate. Present id techniques are flawed in quite a lot of methods. They are porous, operate in isolation and are prone to errors. Blockchain techniques however can solve these issues, and offer a single source to verify identity and assets. Digital verification processes have already been developed based on blockchain technology that covers the entire user journey.
The operations for blockchain identity management are wide ranging. Blockchain identification can even supply a kind of ‘self-sovereignty. This is mainly for providers in the DEFI system and other necessary services that require verification. With the entry of NFTs and Metaverse into the market, the issue of digital identity will continue to trade.
b. There will be increased focus on security audits
Another trend is the increased focus on security audits. Many cross-chain bridges have been launched with the focus on speed, this at the expense of disregarding security. Cross-chain bridges have as a result become a popular target for hackers. With the raise in security-related incidents, we anticipate that more projects will recognize the value of auditing going forward. It is essential for projects to undergo a comprehensive security audit, together with other methods such as using bug bounties (a monetary reward given to ethical hackers for successfully discovering and reporting a vulnerability or bug to the application’s developer) to improve a project’s security throughout its ongoing operations and development.
c. Tracking tools will continue to develop
But also tracking tools will continue to develop in the near future, and may add more capability to anti-money laundering investigations. On-chain data can benefit blockchain analytics and anti-money laundering investigations immensely. We are already starting to see a multitude of on-chain trading and analysis platforms and tools. Through the data aggregation of these tracking tools, users can discover information such as the location of their funds and determine whether their assets are connected to stolen funds.
d. Blockchain data analytics will get more priority
Rich and open-source data is one of the blockchain’s best features, as it allows for deep analysis of on-chain activity. Data reveals a massive amount about how blockchains are used, emerging trends, user behaviour, and on-chain money flows. Blockchain data is however still largely untapped. Leveraging this data in an efficient and responsible way is integral to the expansion of blockchain dApps and their use cases. In 2023 we will therefore see more blockchain analytics platforms entering the markets which will be critical for understanding on-chain analytics through wallet activity.
On the macro level, we will see more advanced implementations between blockchain and other technologies such as Web 3.0, Metaverse and Artificial Intelligence (AI).
a. Increased involvement of blockchain technology in Web 3.0.
We also will see an increased involvement of blockchain technology in Web 3.0. Web 3.0 is the next generation of the World Wide Web, that will radically change of how people interact with each other, by putting them in control of their personal data. Web 3.0 also aims to provide a personalised browsing experience for each uses. 2023 may see a further move toward adoption of Web 3.0 technology including blockchain as many will start to realize that it has to offer plenty of benefits over traditional systems such as increased security and transparency, lower costs, faster transactions, and more efficient storage space.
By being built on top of decentralised technologies like blockchain, Web 3.0 will provide users with a way to interact without having their personal information known by central authorities. The other significant aspect of Web 3.0 is that transactions are going to be done via crypto users that will serve as tokens for identity verification purposes.
As blockchain-powered “trustless ecosystems” evolve into Web 3.0, they are becoming key to the creation and monetization of digital assest. Web 3.0 may thereby take many forms including decentralised social networks, play-to-earn video games they reward players with cryptographic tokens and NFT platforms.
b. Growing use of blockchain technology for developing Metaverse
Another new trend is the growing use of blockchain technology for developing a secure and extensive Metaverse. The Metaverse, a shared virtual world providing engaging experience, can be interacted with big users through their digital avatar, an electronic image or online representation of the user. The ideas of the Metaverse is increasingly becoming a reality, with numerous well known platforms attracting a sizeable user base. Due to its decentralised structure, blockchain development can provide frictionless and secure access to the Metaverse, free from cyber-security and trend issues and inadequate user authentication. In addition to privacy and security, blockchain also links the Metaverse to the crypto economy, making it an attractive investment for companies in 2023 and beyond.
c. Companies increasingly use the combination of AI and blockchain
Blockchain technology is increasingly used to help keep track with the rapid development of Artificial Technology (AI) solutions, which studies the data in the blockchain and predicts future events, that is happening right now. Companies are increasingly using the combination of AI and Blockchain technology to build powerful solutions and we see that accelerating in 2023 and beyond.
Using blockchain to store and distribute AI models will provide an advanced audit trail and enhance data security for AI development. With the help of AI and machine learning, blockchain networks will become even more secure and efficient. This will enable businesses and organizations to store and share data securely, automate processes, and reduce fraud. AI can also use Decentralized Applications (dApps) to automate processes, reduce expenses, and increase transparency.
The business world needs to pay attention to these trends
Blockchain technology continues to advance, and applications of blockchain are being presented every day. Blockchain is a rapidly developing technology with new standards and delivery models and with a wide range of opportunities. For businesses it is important to stay up-to-date with the latest developments in the blockchain and crypto field. There are a number of these blockchain trends which a business needs to pay attention to gain the maximum out of it.
These trends described in this blog will help aid companies and organizations use the technology to its full potential to improve and streamline their operations, reduce costs, increase efficiency and boost security.
Wish you all a happy 2023.
Economist and researcher
04-01-2023 | Cobase | treasuryXL | LinkedIn |
We have previously identified automating critical workflows as one of the key components of intelligent treasury management.
There are many aspects of the treasury function where automation frees up time for the treasurer to focus on higher value tasks. Skills that are expected to be less important in the future – such as reporting and risk projection – are already being automated.
In the second blog in this series we explore the benefits of automatically processing bank statements and removing manual downloads of balance information from individual bank portals and manual uploads of payment files to every bank.
The obvious reason for moving to automated processing of bank statements is that it is a much more accurate process that reduces the scope for error. Much higher volumes of data can be processed compared to manual processing and it provides for seamless integration into back office systems such as financial accounting or ERP systems (of which more in our next blog).
Automatic bank statement processing enables data to be structured in a way that facilitates improved cash flow analysis. Standardised information enables this data to be consumed easily by back office systems to achieve improved reconciliation.
The major benefit of this integration is increased efficiency – all the benefits of ‘automation by default’ are applicable here.
Any treasurer seeking to run cash flow analysis needs to make sure that all payments (both incoming and outgoing) are processed uniformly so they can be absorbed by a single system without manual intervention or modification.
In many organisations, managing cash positions over multiple banks and accounts remains a manual process, increasing the possibility of human error.
One of the main reasons for this continued use of manual processes is that harmonisation is not easy to achieve. Implementation is complex because every bank uses a slightly different means of connectivity and different payment formats, making it a challenging landscape for individual corporate treasurers to navigate.
In addition, treasurers face more pressing concerns so addressing this complexity is rarely a priority. The perception is that if the existing manual process works there is no imperative to fix it, a view that has been reinforced over the last few years as corporates grapple with many other pressing issues.
Ironically, it is exactly events such as the global pandemic, the war in Ukraine, rising inflation, and the disruption of global supply chains that have highlighted the weaknesses of manual treasury processes.
Eliminating manual handling of payment data reduces opportunities for fraud and adds to the transparency, quality and speed of payments. Digitisation also provides companies with better visibility of their financial operations and improved governance.
In the third blog in this series we will look at the merits of connecting accounting systems and/or ERP systems to your bank(s) and why companies benefit from being able to execute payments from a single platform.
Treasury teams looking to optimise their cash management processes realise that making smart decisions requires tactical and strategic planning. However, there are a number of principles that can be applied by any business to increase the level of insight into how funds move into and out of their organisation.
That’s why we created ‘The ultimate guide for achieving efficient and safe multibank cash visibility and payments’. In this guide you’ll find questions that you can ask yourself to determine your current level of efficiency and spot the areas you might need to improve.
03-01-2023 | treasuryXL | Kyriba | LinkedIn |
The treasurer and CFO are today more closely linked to strategic financial objectives for the CEO, ensuring finance teams provide informed guidance on navigating risks and opportunities. This year, a revolutionary practice area and innovative technology is transforming the value of short and long-term cash flow forecasting with more certainty and analytics, empowering finance with a strategic liquidity planning toolset.
By Brian Blihovde
Senior Direct, Product Marketing
The treasurer and CFO are today more closely linked to strategic financial objectives for the CEO, ensuring finance teams provide informed guidance on navigating risks and opportunities. This year, a revolutionary practice area and innovative technology is transforming the value of short and long-term cash flow forecasting with more certainty and analytics, empowering finance with a strategic liquidity planning toolset.
Modern technology solutions are driving value across cash flow forecasting and strategic planning through inclusion of more information from different sources, using artificial intelligence (AI), machine learning and flexible scenario analysis. These user interfaces, reporting and analytics provide finance with better identification of free cash flow targets, improve EBITDA, and deliver views and analysis of total working capital levels.
New technology solutions for liquidity management planning create forecasts and analyses on actuals and planned cash flows to include liquidity instruments from debt to working capital programs. When the combination of cash, planned or committed financial flows (AP, AR, treasury) are used as an integrative planning tool with analytics, decision-making for the CFO is more accurate and based on today’s and tomorrow’s reality. Forecasted transactions originating from purchase requisitions, orders and finally invoices are a much better source of forecasted flows than spreadsheet estimates.
Liquidity planning tools and features created as part of an advanced solution gives finance the ability to see exact components of working capital and cash flow forecasts further out to deliver clarity on whether debt or other sources of liquidity will be too expensive. Identification of the mix of liquidity needed and the availability of planned sources or uses further helps the treasurer plan the intersection of borrowing levels, cash flows and confidence parameters for various scenarios and comparisons. The ability to quickly adjust parameters within a planned liquidity model with established, accurate cash management baselines, makes the job easier and faster for not only treasury and FP&A, but gives the CFO quick strike decisioning on the planned mix of cash and debt to fund operations or strategic decisions.
Global economic volatility continues to impact multinationals across a variety of indices and continued strategies by central banks to slow inflation with interest rate increases translates into significantly increased costs of borrowing. For finance organizations that provide liquidity as a net short-term borrower, it is extremely important treasurers can assess the mix of debt and the most advantageous debt instruments, or working capital programs, available. Treasury teams can directly impact greater overall financial performance by optimizing the cost of liquidity and keeping the right levels of available debt and free cash for investments. Modern liquidity planning solutions create better long-range views of available debt vehicles in cadence with cash and other programs to help prescribe the correct mix of long and short-term borrowing. Identifying where short-term debt has carrying costs over other sources of liquidity while also reducing the number of overall debt instruments (facilities or other lines) reduces costs that affect net earnings. Liquidity tools that incorporate the complete set of debt vehicles coupled with cash and forecasted flows create more ability to lessen reliance on borrowing, reducing and optimizing debt levels – all significant contributors to a stronger EBITDA.
In a recent cash forecasting webinar, 90% of attendees stated that they “lose confidence in their forecasts within three months.” Regardless of a static or rolling forecast scenario, lack of confidence in your firm’s future cash and liquidity levels hinders the ability to fund longer-term, accurate strategic decisions without having more of a backup in the form of higher credit limits available to shore up potential liquidity shortfalls.
The new cash forecasting features and capabilities available in new liquidity planning tools are creating better capabilities to manage longer-term liquidity questions:
As the economy continues to spiral, uncertainty will bring down the values of organizations who are incapable of managing the rate at which volatility impacts EBITDA – a consequence of legacy thinking and systems. CFOs and treasurers who are taking a new tact in leveraging liquidity across the enterprise, are finding success in minimizing impacts to their income statement and have an unobstructed vision for how they can unlock near and long-term growth.
29-12-2022 | Cobase | treasuryXL | LinkedIn |
Are you unsure about the discussion surrounding APIs and Treasury, or do you want to learn more? If so, you should definitely watch the recording of the joint webinar together with Cobase on the future of APIs to get more information.
This webinar is not just for tech experts, but also for treasurers interested in treasury technology who are looking to improve their infrastructure. During the webinar, you will learn about APIs, who owns them, and how to be more successful with them.
29-12-2022 | treasuryXL | TIS | LinkedIn |
As 2023 approaches, many treasury teams are actively evaluating their operations to identify areas in need of improvement during the year ahead. As these analyses are performed, TIS has compiled a short list of projects that treasury should consider undertaking in order to save costs, boost revenue, and drive further efficiency for their companies.
This blog serves as a precursor to TIS’ recent whitepaper, 5 Ways Treasury Can Save Money & Boost Revenue in 2023. You can download the full whitepaper using this link to review the full list of strategies and tips.
Given their position at the helm of global cash, payments, and working capital activity, modern treasury teams play a vital role in controlling the various operational, financial, and technological costs that impact their companies. From monitoring and reducing banking and transaction fees to preventing payments fraud, managing daily liquidity, optimizing working capital, and developing short-term debt or investment strategies, today’s treasury groups are often in the ideal position to analyze their company’s cash flows and make improvements to boost revenue or save costs.
However, because most treasury teams have a relatively small headcount and are tasked with an ever-growing list of responsibilities, it is critical that practitioners maximize their available resources and focus on projects that will have largest impact on their company. This is especially true in today’s volatile economic environment, where cutting costs and maximizing revenue is more important than ever.
Given this context, it is likely that treasury groups will be seeking to undertake a variety of cost-savings or revenue-boosting projects in the months and years ahead. In-line with these expectations, this blog will highlight three strategic ways in which treasury teams can have a positive impact on their company’s bottom line in 2023. For extended analysis, you can also download our full whitepaper for additional strategies and tips.
Today, it is common for global companies to work with numerous banks across different regions and entities. In fact, a 2022 TIS survey of over 250 treasury practitioners found that 40%+ of companies were actively using more than 10 banks globally. But while organizations obviously need a certain number of bank relationships to accommodate their geographical and operational scale, a larger than necessary group can result in higher costs, fragmented visibility, siloed workflows, and obscure points of communication.
For some treasuries, rationalizing bank relationships can be an effective way of reducing costs. By concentrating on a smaller number of relationships with a select group of core institutions, companies may be in a better position to negotiate more favorable pricing for their banking services. A more streamlined relationship structure can also improve operational efficiency by limiting the number of banking systems and connections required, reducing annual maintenance or service costs, and increasing transparency over all the related operations.
In addition to analyzing each bank relationship, it’s also important to consider the number of bank accounts in use. Because the number of accounts can easily become inflated over time through organic growth and M&A activity, many multinational corporations end up with more accounts than they want or technically need. In 2021, a Strategic Treasurer survey showcased that nearly 40% of companies used more than 100 bank accounts. Furthermore, 38% of companies indicated the number of bank accounts they used were increasing, and 20% of practitioners had identified previously unknown bank accounts attached to their company within the past 2 years (2019-21).
In the long run, companies with excess numbers of accounts that have not been closely monitored will be confronted with excess manual labor, inefficient cash management structures, and higher-than-necessary costs. It will also be much more difficult for treasurers to maintain visibility and control over the company’s cash and to detect fraud or compliance exposures.
Given these challenges, a streamlined bank account structure can not only reduce bank account fees, but also help to minimize idle cash balances and support more efficient cash management. As such, treasurers may be able to save money by rationalizing both the number of banks and accounts that they maintain.
Similar to how a company’s banking structure grows more complex over time, so too does the back-office technology structure that treasury groups rely on to manage operations.
While modern-day treasury software is undeniably critical for today’s practitioners to automate and streamline their processes, such solutions are not always implemented or integrated in an efficient manner. Sometimes the configuration is never completed, or various features are inactive and not functioning as intended. In the long run, a common result of company growth is to wind up with a large assortment of spreadsheets, banking portals, ERPs, and TMS solutions that are collectively causing redundant and fragmented workflows, overly manual processes, a lack of integration or interoperability, and unnecessary subscription and maintenance costs.
In recent years, industry data has demonstrated the effect that unnecessary technology complexity can have on companies. In fact, data from Strategic Treasurer found that 3 out of 5 companies that purchased a TMS were using less than 80% of the functionality they implemented. In addition, one of TIS’ recent research initiatives found that 38% of treasury and finance respondents were using more than 15 different treasury, vendor or payment systems – with two thirds using more than five systems. With this amount of diverse technology in place, it’s easy to see how processes can become inefficient and inconsistent, and how data can become siloed and difficult to consolidate.
In order to promote greater automation and transparency and to reduce overall technology costs, treasury teams with an excess number of systems should strongly consider a consolidation project. A simpler and more unified technology structure can result in more efficient processes, greater transparency, and improved decision-making as a result of more accurate information. Simplifying treasury’s technology stack can also result in other benefits such as improved reporting, reduced IT reliance, more secure fraud controls, and more standardized compliance management.
Considering that many companies today operate across multiple countries and regions, it makes sense that treasury teams are managing payments using a broad variety of currencies, channels, and methods. For example, a true multinational company will likely leverage ACH, check, wire, cards, and a variety of other options to send and receive payments. They will also probably use a diverse range of banking channels and financial messaging formats to transmit payments data, along with an equally diverse number of integration and service-level partners to assist with the process.
So how can treasury simplify these payment workflows?
When it comes to cross-border payments, one helpful consideration would be to execute transactions at the local level (i.e. in local currency), rather than relying on traditional correspondent banking or FX conversion services. Because many cross-border payment networks charge exorbitant fees for swapping currencies and delivering funds, companies that regularly transfer money between different countries and regions could save substantially by leveraging a more specialized service.
On the other end of the spectrum, there are also plentiful opportunities to optimize the use of domestic payment methods. In the U.S. for example, switching from physical checks (still a common instrument) to ACH can save time and effort, while other options like virtual cards may offer rebate or cash-back rewards. For companies that have a large network of suppliers and partners in the U.S., joining a rebate program or converting paper-based payments to ACH and virtual cards can provide substantial efficiencies and cost-savings, especially when such projects are executed at scale.
In today’s uncertain and volatile economy, it’s essential that companies take every opportunity to minimize costs and maximize revenue. As we’ve seen with treasury, there are numerous areas where cost-savings and revenue-generation projects can be pursued. Whether it’s through bank and technology rationalizations or improved payments execution and liquidity management strategies, treasury teams have numerous options at their disposal to impact the bottom line. Moreover, the benefits associated with many of these projects often create efficiencies outside of pure costs savings and include enhanced workflow automation, streamlined data management, and the elimination of error-prone, non-compliant, and fraud-exposed processes.
For organizations interested in pursuing any of these strategies or projects further, we strongly encourage you to consider how the TIS solution can help foster the desired outcomes.
At a high level, TIS helps organizations simplify and streamline their global payments and liquidity management operations. Our cloud-based platform empowers businesses to optimize critical functions surrounding cross-border and domestic payments, bank connectivity, cash forecasting, fraud prevention, payment compliance, and more.
Today, corporations, non-profits, and institutions all leverage TIS to transform how they connect with global banks and financial systems, collaborate on payment processes, execute outbound payments, analyze cash flow & compliance data, and promote working capital efficiency. Ultimately, the TIS technology platform enables businesses to improve operational efficiency, lower risk, manage liquidity, gain strategic advantage – and achieve enterprise payment optimization.
For more insight on ways treasury can save money and boost revenue in 2023, download our full whitepaper.
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