Payment Platforms & Collections in China

11-08-2022 | treasuryXL | ComplexCountries | LinkedIn |

Cryptocurrency, digital wallets, virtual everything – there is a huge amount of change. China has been at the forefront of a lot of digital trends, partly due to the fact it had an antiquated banking system which has been thoroughly modernised, and partly because the explosion of internet shopping in the country required a digital payments solution. This is a challenge when there are no credit cards.

Source

This report is based on a Treasury peer Call which explored how this is affecting members’ companies, and how they are adapting to this brave new, digital, world.
  • Most participants are accepting payment using WeChat Pay and Alipay. None is using these tools to make corporate payments.
  • The collections process using these tools is efficient and effective: you work with a third party (usually accessed via a banking provider), who will transfer the funds to your account the following day. One participant did an RFP, with two Chinese and two foreign banks, and found the service was identical – though pricing was different, and not transparent.
  • There was no mention of billbacks, the excessively high fees and acquirors which blight the use of credit cards in other countries
  • The one complaint all participants had was the difficulty linking this process to internal systems, for the reconciliation of receipts or for compliance purposes in terms of identifying the source of cash. The third party companies do provide detailed lists of payors, but it can be difficult to upload these into the ERP system.
  • There was a lot of discussion about travel expenses. The low acceptance of credit cards in China complicates the automated links which often exist between credit cards and T&E management and control systems. Allowing employees to use Alipay and WeChat Pay generally raised problems in terms of obtaining adequate receipts. One participant’s company was doing extensive auditing of travel expense claims, but this is expensive.
  • One company is using virtual credit cards to solve some of these issues, while one is routing payments made on AliPay and WeChat Pay via credit card providers to get the automated expense reporting.
  • Another issue was that, in some cases, sales teams had opened Alipay and WeChat Pay wallets for customers to pay into – but there was no way to stop them from taking this cash to pay themselves. The solution is to require all collections to go via the third party providers, who are under instructions to only remit the cash to the Company’s bank account.
  • Most B2B collections still go through bank transfers or BADs (Bankers’ Acceptance Drafts). One participant is introducing controls to ensure BADs are only accepted if drawn on banks with an acceptable credit profile. Some participants are making payments by endorsing customers’ BADs to their own suppliers. There are some collections by cheque.
  • On the payments side, most participants are making payments via the banks’ host to host systems, or using the payment tools in their TMS products. Participants are using a variety of local and foreign banks: ICBC and Bank of China got the most mentions amongst the Chinese banks, with a spread across Citi, HSBC, Standard Chartered and Deutsche Bank for the foreign ones. Kyriba was the TMS mentioned.
  • One participant is using Pcards for small value purchases – but this is not easy.
  • One participant was struggling with customers who have operations in both mainland China and Hong Kong, and who regularly make payments out of the wrong entity.
  • One participant has experience of linking their IT systems directly to the banking system, to get reporting from all their banks. While possible, this requires a lot of IT work.

There as also a discussion about cash pooling: this works in China.

Bottom line: China is at the forefront of innovation in dematerialised payments. As one participant put it, it has become very hard to use old fashioned cash.

But, as this is China, things are not straightforward!

This report was produced by Monie Lindsey based on a Treasury Peer Call chaired by Damian Glendinning

To access this report:

Access to the full report is available to Premium Subscribers of ComplexCountries. Please log in on the website of ComplexCountries to access the download.
Please contact ComplexCountries to find out about their subscription packages.

What Does Real-time Connectivity Mean for Your Organization?

08-08-2022 | treasuryXL | Kyriba | LinkedIn |

Nowadays if you work in treasury, probably not a day goes by without you seeing a social post or article from your subscribed newsletters on the topic of real-time Bank API. It stands for the future of bank connectivity, and it will change the way data is exchanged between corporates and banks. Trent Ellis, Senior Solution Engineer at Kyriba, spends his time assisting clients to evaluate what works the best for them from a solution point of view, with both their current and future business needs in mind. In his discussions with clients and prospects, bank connectivity has always been a focus area and recently he noticed a growing interest in real-time Bank APIs.

 

By Trent Ellis, Senior Solution Engineer

Source

When it comes to real-time bank connectivity, the first thing I usually tell my clients is that it’s important to delineate between the different data flows such as inbound balance reporting, transaction details, confirmation reporting and outbound payment initiation. When an organization plans to make real-time bank connectivity a reality, the first thing they should do is to look at their data flows from daily operations. Identify and determine what data would benefit from a real-time update? Which items are critical for that real-time treasury decision making? Where are you going to maintain the balance and transaction data once it is received or payment data prior to it being transmitted to the bank?

Next, because many banks have grown their footprint by acquisition, bank accounts held in different regions (even regionally within a country) can be on different platforms with different technology. Therefore, within a single bank, API readiness can have a different status for different subsets of bank accounts based on branch and geographic location.

Now that the bank may have made an API connection available, how are you going to connect to it? Do you look at internal technical expertise and availability? Do you look to a third-party vendor? Consider a specialist that just does API connections or a TMS vendor that has other integrated modules and additional functionality beyond just the bank connection for statements and/or payments?

Real-time Bank Reporting, what does this really mean?

Banks are now offering bank balance API’s as well as transactional statement APIs, but sometimes not (yet) both. It’s more than likely not the same as what you would get from that same bank in the form of a BAI or MT940 standard bank statement as banks are still working on what data becomes available through the API. Bank balance reporting is important for real-time liquidity monitoring but will not always help your treasury or AP team confirm the status of a cleared payment, or the status of an important cash credit.

Yes, an API can deliver data in real-time but is the underlying platform that holds that data providing real-time data? Some banks are providing their “real-time” data on a predefined schedule throughout the day which means it is not what most would consider “real-time”. True real-time reporting requires process changes at the bank. Decreasing update time from day to hours or within the hour is an improvement that is easier to absorb without restructuring the process.

Real-time payments, what does this really mean?

Real-time payments are payments that are cleared and settled nearly instantaneously. Real-time payments are generally facilitated by domestic or regional payment infrastructures on a 24x7x365 basis including weekends and holiday.1

Many may not be aware that globally real-time payment infrastructures have been around for as long as 40+ years, and real-time payments can be enabled via FTP or API based on Bank / FI’s offerings and the connectivity option preferred by the corporate customer. Relatively, it has been a recent development in the US payment ecosystem. In November 2017, The Clearing House launched the first real-time payment infrastructure RTP® network in the US, built on the same Vocalink technology that powers the UK’s Faster Payment System. The RTP® network was built for financial institutions of all sizes and serves as a platform for innovation allowing financial institutions to deliver new products and services to their customers. Financial Institutions can integrate into the RTP® network directly, through Third-Party Service Providers (TPSPs), Bankers’ Banks and Corporate Credit Unions.2 The US Federal Reserve will be launching its real-time payment infrastructure FedNowSM in the 2023 – 2024 timeframe.

Globally real-time payments are growing at a double-digit growth rate across all major markets. Adoption of real-time payments will continue to be use case specific, especially for use cases that are underserved by existing payment infrastructures. In the long-term, we should expect real-time payments to be an important part of corporate’s payments mix alongside other traditional payment systems. Like other real-time payment infrastructures globally, the RTP® network has been increasing its transaction limits, which currently stands at $1million. This makes it more relevant for B2B / Corporate payment use cases – a very good example from our client HUNT Companies being the intracompany transfers for efficient deployment of working capital. However, this also means that if you need to make payments with value greater than $1million, you would need an alternative type or method for the time being. You cannot rely on the RTP® network as your only means to make payments and will still require connections for other payment types such as Wire, ACH and international formats.

Recommendations to clients

The world is certainly migrating towards real-time bank connectivity, but organizations will ultimately require various connectivity strategies to fit different geographical and banking technology. In 2022, most real-time Bank APIs are an incremental addition to existing connection methods and formats for both statements and payments. Currently, Bank APIs are not a replacement for other options, which are still required to get a complete picture of prior day statement activity and/or ability to send all required payments. Therefore, my recommendations to my clients always remain the same:

  • Identify and evaluate your data flows.
  • Where does real-time data make sense?
  • Talk to your banking partners and understand their offerings in detail.
  • Ask the question: Do your internal requirements align with the bank’s offerings?
  • Where are you going to house the data that is received/transmitted via the real-time Bank connectivity?
  • Talk to vendors that have teams of people that do this every day and evaluate their perspectives and subject matter expertise.

Find out more details on Bank APIs from the Kyriba Developer Portal, and watch any time an on-demand webinar on everything you need to know about APIs: Bank Connectivity and Beyond.

1 Real-Time Payments: Everything You Need to Know. Paymentsjournal.com. 2021
2 The RTP® Network: For All Financial Institutions. The Clearing House.

Click here to view all blogs by Kyriba

Cash & Treasury Management: Join The World’s Leading Experts in Copenhagen

04-08-2022 | cashandtreasury.dk | treasuryXL | LinkedIn

 

Featuring Chairman of the event, Pieter de Kiewit – Owner of Treasurer Search

 

Be a part of the exclusive Cash & Treasury Management Conference on the 1st of September 2022, which will be held in the extraordinary luxury settings at Hotel d’Angleterre in Copenhagen.

Get updated, expand your network, and get inspiration for optimizing your work within the Cash & Treasury Management community.

 

 

The international program consists of selected and experienced speakers that have proven success within a certain area of Cash & Treasury as e.g., ESG, digitalization and Cash Management. The conference brings together a selected group of high-level senior treasurers from global organizations. Learn from your international peers and join the exclusive network. The event ensures you a full day of new knowledge and inspiration made for high level Treasurers. You get in-depth with the latest trends, valuable content from recognized speakers and extensive networking opportunities.

Among others, these topics have been selected for this year’s conference:

  • Sustainability financing – experiences one year down the road
  • Proprietary data driven cash flow forecasting model
  • How we integrated Nets Group Treasury in to Nexi Group treasury
  • Experiences from a massive hacking attack
  • A career within Novo Nordisk treasury
  • Macroeconomic trends and predictions
REGISTER VIA TREASURYXL

 

As part of TreasuryXL’s network we offer treasurers 25 % discount.

Sign up now and join us 1 September – Remember to use the code when signing up: TreasuryXL25

 

 

Read the program and learn more about participation and sponsorship opportunities: cashandtreasury.dk

 

 

 

 

The value of making timely use of data

04-08-2022 | Cobase | treasuryXL | LinkedIn |

Since the start of the pandemic, the unprecedented financial stresses companies have underlined the potential consequences of underestimating risks and the value of building multiple business scenarios and corresponding options.

In the first in a series of blogs, we outline best practice for reviewing key financial data and look at the value of treasury dashboards and why cash forecasting is being undertaken more regularly, as well as exploring trends in payments.

The phrase ‘time is money’ is highly applicable in treasury environments where there are significant fluctuations in working capital availability. Companies that fall into this category benefit from at least daily reviews of key financial data. In companies where capital is constrained, reviewing existing credit facilities on a weekly basis is a sensible approach.

The pace of economic change at national and global level also demands more regular cash forecasting. With market conditions changing regularly, treasurers need to take a shorter-term view and implement monthly or even weekly forecasts.

This is backed up by research, showing that treasurers have increased their focus on cash forecasting in the last few years and intend to commit additional resources to this area, including investing in tools to generate better information about payments, receivables and forecasting, and technology to integrate cash flow forecasting into day-to-day banking flows.

Visual representation of key data is useful for helping senior management understand corporate cash positions. Treasury dashboards that present historic, current and projected financial information via charts and graphs allow for better decision-making.

They also enable the treasurer to produce user-definable reports on financial transaction data such as receivables and payables, cash on hand, currency exposures and days outstanding. These can be used to inform hedging strategies as well as enabling treasury teams to proactively report on their activities and play a more influential role in their organisation.

Reducing bank account complexity is another key treasury objective, which can be achieved through the use of virtual accounts that support automated receivables reconciliation processes and higher invoice matching rates while lowering banking costs.

One of the key cash flow and liquidity levers available to businesses is delayed payments. Every company wants to receive monies owed on time, but very few have never made a late payment to a supplier – particularly larger organisations with greater bargaining power.

Flexible payment terms are a key mechanism to manage and make the best use of cash flow, but this strategy may not be an option for small businesses. In this context, real-time or instant payments could be the answer, allowing businesses to hold on to cash for longer while paying suppliers and staff or reimbursing customers on time.

In the next blog in this series, we will look at how cash positions can be optimised through the use of specific solutions centred on connectivity and explain the pros and cons of connecting back office functions via SWIFT and how automation, frees up time for the treasurer to focus on higher value tasks.

 

The 7 habits of highly effective treasurers

Why are some treasury teams more adept at managing the financial challenges faced by their enterprises than others? We decided to identify some of the factors that contribute to intelligent treasury management and operational excellence and created an e-book which we would like to share with you. If you follow the habits outlined in this e-book, you will be well on the way to better cash flow and working capital management.

 

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Every CFO Needs to Track These 8 Cash Flow KPIs. Here’s why.

03-08-2022 | treasuryXL | CashAnalytics | LinkedIn |

Companies shut their doors for a wide range of reasons — but often, finances force leaders to close their business. Aisling McGrath, Senior Marketing Manager at CashAnalytics, explains to us 8 key performance indicators a CFO needs to use in order to analyze cash flow and minimize financial risks.

Original source

According to CB Insights, 38% of businesses fail because they ran out of cash and were unable to raise new capital. Another article by Formulate shows that previously successful companies fail due to financial factors like lack of funding, mounting debts, huge pension deficits, and more.

With stakes that high, it’s important that you keep track of your company’s cash inflow and outflow. Cash flow KPIs — when evaluated regularly — are a CFO or financial controller’s most powerful measure of underlying market valuation and profitability.

To analyze your cash flow and minimize financial risks, use these eight key performance indicators.

1. Operating Cash Flow

What Is Operating Cash Flow?

Operating cash flow (OCF) is the cash your business generates from its day-to-day operations, excluding investing and financing activity. This financial KPI shows you the number of times your company is able to pay up debt in any given timeframe.

Also known as cash from operating activities (CFO) or net cash from operating activities, operating cash flow is typically the first section shown in a cash flow statement.

How to Calculate Operating Cash Flow

Operating Income + Depreciation – Taxes + Change in Working Capital = Operating Cash Flow

Pros

Cash from operating activities is a key indicator of your company’s ability to generate cash. By monitoring this financial metric, you’ll identify income and expense sources — then double down on generating and maintaining the cash you need for a smooth business operation.

Operating cash flow is also a measure of financial success because it shows whether your core business operations are booming, and it directly influences liquidity.

Cons

Operating cash flow focuses only on basic business activities like providing services or manufacturing and selling products. The metric doesn’t account for investment revenue, expenses, or long-term capital expenditures, so it gives an incomplete picture of the cash status.

Another downside to this cash flow KPI is that it does not assess your company’s true liquidity position. Operating cash flow does not provide long-term liquidity visibility. You can only tell your firm’s cash balance per day.

2. Free Cash Flow

What Is Free Cash Flow?

Free cash flow (FCF) is the money your company has left after deducting operating expenses, capital expenditure, and major investments. The last one or two sections of cash flow statements often cover FCF and its different variations.

How to Calculate Free Cash Flow

Operating Cash Flow – Capital Expenditures = Free Cash Flow

Pros

Free cash flow gives a clear picture — to your finance team, business owners, investors, and creditors — of cash that you can mobilise at any given time. You’ll know if your company is able to:

  • Pay monthly dues (debt interest and investor dividends).
  • Carry out expansion activities like buying or setting up a new plant, introducing a new product line, hiring more staff, and more.
  • Go after short-term investments like money market accounts, treasury bills, certificates of deposits, and others.
  • Collect fresh loans or lines of credit.
  • Attract new investors or partners.
  • Influence favourable stock pricing.

Cons

While free cash flow is a good measure of profitability, it shouldn’t be used as a standalone indicator.

High free cash flow doesn’t always mean good financial standing — it could be an indicator of inadequate investments in business growth. At the same time, low free cash flow could be a symptom of growth and expansion. For accuracy, always consider free cash flow alongside other KPIs like operating cash flow and cash conversion cycle.

Capital expenditure changes from year to year and across industries. To get a good picture of financial stability over time, observe free cash flow for at least two years. Beyond that, you should also keep in mind industry realities and standards like the average profitability or break-even window.

3. Cash Flow Per Share

What Is Cash Flow Per Share?

Cash flow per share — also called free cash flow to the firm (FCFF) — is the amount of free cash flow on each outstanding share of your company’s stock. This metric appears as a ratio and shows a company’s earnings per share (EPS) less taxes, depreciation, and amortization.

When you have a high cash flow per share, it means your share value will be potentially high. But if your cash flow per share is low, the odds are that share value and earnings will remain down.

How to Calculate Cash Flow Per Share

cash flow per share

Pros

Financial analysts prefer cash flow per share to earnings per share because the former is difficult to manipulate. Cash flow per share accounts for irregular expenses — like depreciation and amortisation — and excludes non-cash earnings like pending accounts receivables.

As opposed to earnings per share, cash flow per share makes it harder for bad actors to alter your company’s cash flow numbers. Because of this reality, cash flow per share gives a more accurate picture of your business’s financial strength and business model vitality. This cash flow KPI also lets you determine your company’s ability to pay dividends and service other expenses.

Cons

One limitation of using cash flow per share is that it doesn’t show your firm’s net income because the calculation doesn’t include non-cash items. These items can only be found in the income statement or balance sheet. For proper analysis, look at your cash flow per share, income statement, and balance sheet together.

4. Cash Flow Yield

What Is Cash Flow Yield?

Cash flow yield (also called free cash flow yield) is a financial ratio that compares your company’s free cash flow to its current share value.

How to Calculate Cash Flow Yield

cash flow yield

Pros

Cash flow yield gives a clear picture of your firm’s ability to access cash quickly. From a cash flow yield calculation, you can tell whether your company is capable of a debt repayment or dividend payment. This metric is particularly key for investors because they always want to know how well their funds are working for them.

When investors are determining whether or not to put money in a company, they may want to see up to 10 years of cash flow yield data and compare it to a treasury note covering the same period. This comparison will help investors calculate the firm’s valuation or determine when a buyout will start generating profit. If cash flow yield is significantly lower than the treasury yield, the company will be considered a poor investment.

Cons

While cash flow yield is a great way to measure your company’s financial position, you should not fully depend on it. This KPI is only truly beneficial when you combine it with a collection of other indicators like cash flow margin or return on invested capital.

5. Cash Conversion Cycle

What Is Cash Conversion Cycle?

Cash conversion cycle (also called cash cycle or net operating cycle) is a measure of how quickly your company can turn resources — outstanding sales and inventory — into cash. The cash conversion cycle accounts for the average number of days it takes your company to collect receivables and sell off inventory — plus the amount of time you have to pay bills without attracting late fees.

How to Calculate Cash Conversion Cycle

cash conversion cycle

Pros

Because the cash conversion cycle reflects how quickly your firm is able to turn cash investments into returns, this metric helps you save money. You’ll be able to plan around when you expect cash inflow, so you can meet your financial obligations and avoid late payment penalties.

With a short cash conversion cycle, you can convince vendors to let you defer payment for goods. You’ll also gain the confidence to sell inventory on credit.

Cons

The cash conversion cycle is a good measure of your company’s operational and management efficiency — but it only applies to businesses with inventories.

Also, the cash conversion cycle doesn’t provide in-depth financial insight per time. But if you look at the cycle’s trend over time and in comparison with similar companies, you can:

  • Give proper reports to management and investors.
  • Work on improving the cycle time.

New investors tend to go for companies with a low cash conversion cycle because they make quicker returns. So if an investor has to choose between two companies with similar returns on current assets and shareholder equity, yours will be the best bet.

6. Cash Flow Margin

What Is Cash Flow Margin?

Cash flow margin is a ratio that shows how well your company converts its sales to cash. This ratio tells you the difference between money that has come in from sales and funds you’re still expecting — all of which make up your revenue. Because the cash flow margin compares actual money transfers to pending transactions, it’s a great measure of total revenue quality.

Say you booked a huge sale that boosted revenue but are having a hard time collecting the cash. Your revenue is up, but your cash flow margin isn’t.

How to Calculate Cash Flow Margin

Free Cash Flow/ Revenue % = Cash Flow Margin

cash flow margin

Pros

Cash flow margin reflects the actual amount of cash you have from sales, so it is a good measure of real-time profitability. This ratio also shows operational efficiency by presenting how well your firm collects accounts receivables.

Cons

A short-term cash flow margin is prone to inaccuracy. Say your company delays accounts payables to retain cash within the business. A one-year cash flow margin analysis will be off the mark because the cash position has been unduly influenced.

But a company can only defer payments for as long as its line of credit lasts before penalties start to apply. After some time — weeks, months, or years — the firm will need to pay its current liabilities. For a more accurate perspective, stakeholders — investors, management, or creditors — should consider period-to-period cash flow margins

7. Cash Flow Return on Invested Capital

What Is Cash Flow Return on Invested Capital?

Cash flow return on invested capital (CROIC) is the amount of money your company makes as a proportion of total capital employed.

How to Calculate Cash Flow Return on Invested Capital

Free Cash Flow/Total Capital% = Cash Flow Return on Invested Capital

cash flow return

Pros

Cash flow return on invested capital is a great profitability gauge because it calculates returns against funds employed to generate it. To make returns from investing, you need to create and follow a solid cash management plan. So a positive cash flow return on invested capital shows the strength of your capital investment strategy.

A high cash flow return on invested capital is great, but if your returns aren’t high in the first year or two, it’s not too much of a concern. If your returns consistently decline over multiple financial periods, though, it’s a likely sign of poor cash flow management.

Cons

Capital return on invested capital does not show which business activities are generating what value. This reality makes it hard to accurately monitor and influence cash inflows — especially one-off events like net income from a land or business division sale.

8. Net Debt to Free Cash Flow

What Is Net Debt to Free Cash Flow?

Net debt to free cash flow is a measure of how many years of free cash flow you’d need to repay your current outstanding debt.

How to Calculate Net Debt to Free Cash Flow

Net Debt/ Free Cash Flow = Net Debt to Free Cash Flow

Pros

Net debt to free cash flow shows your ability to pay off debt quickly, so it’s a great indicator of financial stability (or lack of it.)

Cons

Typically, needing a few instead of many years to pay off outstanding debt is a sign of economic resilience because it means either of the following:

  • You owe very little.
  • Your cash conversion cycle is short.

But sometimes, too little debt could be a red flag because it means your firm is not investing enough in ongoing growth to remain competitive.

Beyond Tracking Cash Flow KPIs, Use CashAnalytics for Quick Scenario Analysis

Cash flow KPI tracking allows you to regularly gauge your business’ financial health and minimise risk. But even with this monitoring, the unexpected can happen — like a pandemic or recession — and destabilise your business.

Prepare for potential volatility with scenario planning. With CashAnalytics’ robust suite of analytics features, you can quickly access financial data — and conduct scenario analysis. Book a free demo to see how our tool helps you track and predict cash flows.

 

CFO Perspectives: 5 asset management tactics CFOs should borrow when managing FX risk

01-08-2022 | treasuryXL | Kantox | LinkedIn |

When managing FX risk, CFOs could learn a lot from the world of asset management, where a revolution —led by indexing— has led to huge gains for investors. But how can you apply this to your business’s FX risk strategy? Watch below the video, or read the article!

Credits: Kantox
Source

In the second edition of CFO Perspectives, we’ll draw from our work with CFOs to explore the parallels between asset management and FX risk. We’ll break down the processes and tools used in asset management which can be applied to your currency management strategy, with some spectacular results.

Over the last couple of decades, the world of asset management —an industry with $100 trillion under management— has been turned upside down by a quite unexpected revolution: indexing. Instead of relying on managers’ capacity to time the markets, these firms have automated the selection of assets by quietly replicating stock indexes.

Can CFOs lead a comparable revolution in currency management?

The answer is: yes, they can! Let us see why and how they can accomplish that feat.

Having embraced indexing early on, two leading firms have assets under management north of $15 trillion. What’s more, they have achieved such a spectacular result with fees that are only a fraction of the fees charged by those who embrace speculation. They have saved, and they are still saving, hundreds of billions in costs to investors.

Similar changes may be afoot in the business world. The term ‘exposure under management’, now used by CFOs and treasurers, comes from the expression ‘assets under management’. More importantly, CFOs are eschewing speculation — just like their cousins in asset management.

When managing currency risk in the one-trillion-a-day forward currency market, CFOs are using more and more digitised, automated solutions.

A random walk for risk managers

Once in a while, a lack of currency hedging or even speculating on an FX market move can yield a positive outcome for CFOs. But luck will run out at some point. Sooner or later, blindfolded by overconfidence, ‘speculative’ risk managers flounder in their vain attempt to time currency markets — with disastrous consequences for themselves and their companies.

Like stock prices and the price of other financial assets, exchange rates are not predictable. They follow ‘a random walk’ in which the forecast is set equal to today’s exchange rate (the spot rate). Accordingly, investors —and risk managers— should embrace markets rather than trying to beat them.

This is the thrust of the analogy between the asset management revolution and the coming revolution in FX risk management, an event that will ultimately enhance the strategic role of CFOs.

5 asset management tactics CFOs should borrow when managing FX risk

Let us go beyond the surface and take a closer look at the key tools and processes used by the most successful companies in asset management. These processes provide a useful template for understanding how CFOs will use Currency Management Automation solutions to manage FX.

We can single out at least five main lines of action:

  1. Avoid timing the market. Nine out of ten of the so-called geniuses of the investment world have been ‘destroyed’, in terms of comparative performance, by the more modest index funds. Adding insult to injury, the latter have charged only a fraction of the fees. The no-speculation mantra has proved immensely successful in asset management. If one accepts the view that currency markets also follow a ‘random walk’, then there is no reason to expect a different outcome when it comes to FX risk management.
  2. Achieve operational brilliance. Indexed asset managers know that their success relies on engineering products that achieve operational brilliance by taking the risk of human error out of the equation. Just as indexing is measured by the tracking error between a fund’s rate of return and that of its benchmark, Currency Management Automation is at its core an engineering product that uses Application Programming Interfaces to achieve great precision in currency hedging while allowing managers to seamlessly run the entire FX workflow.
  3. Implement scalable solutions. Successful asset managers use platforms that provide scalability, which makes it possible to quickly and cheaply enter new markets such as bonds, commodities and others, almost anywhere and in many currencies. The same idea applies to FX automation, as CFOs are set to implement scalable, data-driven pricing and hedging solutions to enter new markets, enabling their companies to buy and sell in more currencies — with FX risk systematically under control.
  4. Innovate with a purpose. Indexing is one of the few truly beneficial inventions, a technology that has saved investors hundreds of billions of dollars. Similarly, the purpose of automated FX risk management is to allow firms to confidently ’embrace currencies’, reducing costs to customers and ultimately enhancing the value of the business. When it comes to innovation, purpose matters (see: “CFO Perspectives: 3 ways CFOs can use currencies to boost their business’ value”).
  5. Keep a foot in more than one camp. The world’s largest asset manager keeps a foot in both camps: active asset management and index funds. An entire platform provides a menu from which clients can select whatever financial slice they might fancy. Likewise, CFOs have at their disposal an entire ‘family’ of automated hedging programs and combinations of programs, including balance sheet hedging and a variety of cash-flow hedging programs that respond to their firms’ goals and pricing parameters.

Read the first edition of our CFO Perspectives series, 3 ways CFOs can use currencies to boost their business’s value here.

The 7 habits of highly effective treasurers

28-07-2022 | Cobase | treasuryXL | LinkedIn |

Why are some treasury teams more adept at managing the financial challenges faced by their enterprises than others? Cobase decided to identify some of the factors that contribute to intelligent treasury management and operational excellence and summarized it all in an e-book.

To this end, Cobase analysed the market and interviewed and observed our clients and the work we do for them.

Having considered the results of this analysis we came to the conclusion that while there are many factors that impact the ability of treasurers to do their job effectively, there are seven key habits that are continuously practiced by successful treasurers.

Download this e-book now and you will be well on the way to better cash flow and working capital management.

The State of Treasury in 2022: Research Summary

28-07-2022 | treasuryXL | TIS | LinkedIn |

This blog gives you insights into the state of the treasury function in 2022 and a short list of recommended action items for better management of modern-day treasury operations

Source

About TIS’ Global Research

The insights highlighted in this article are based on a comprehensive set of studies conducted by TIS and our affiliates between Q1 2017 – Q2 2022. During this period, TIS held one-on-one interviews with hundreds of treasury experts and also released a suite of digital surveys that gathered feedback from thousands of financial practitioners regarding technology, staffing, and general operations.

Over the course of our research, TIS partnered closely with a niche team of industry experts, thought leaders, and consultants to interpret the findings. Historical treasury data was also obtained from the Association of Financial Professionals (AFP) and the consulting firm Strategic Treasurer to provide context regarding the evolution of treasury technologies and practices over time. Together, the expertise of our consortium and the extensive feedback collected from industry practitioners has provided us with unparalleled insights into the state of the treasury function in 2022.

While this article serves to highlight the summary findings and recommended action items from our studies, readers that would like more data and information are encouraged to download our full whitepaper for extended coverage.

 

 

Research We Relied Upon

The below surveys, polls, and interviews represent the full suite of research that TIS relied upon to complete our study. Links to the associated research conducted by our affiliates are provided as applicable.

  1. 2017 Strategic Treasurer Technology Use Survey. View Full Results Here
  2. 2020 AFP Strategic Role of Treasury Survey. View Full Results Here
  3. 2020 TIS Rapid Research: Remote Work Capabilities Poll
  4. 2022 TIS Rapid Research: Treasury & Payment Systems Usage Poll
  5. 2022 TIS & Treasury Priorities & Opportunities Survey. View Full Results Here
  6. 100+ One-on-One Interviews with Active Treasury Practitioners Between 2017-2022

 

Key Findings & Highlights

This section provides a brief overview of the key points obtained through our research. For more information on any point of interest, please refer to the full whitepaper.

1. Treasury’s Responsibility List is Constantly Growing: The treasury function has never been more critical to the success of an organization, and this is being recognized internally by key stakeholders. However, treasury practitioners are now being handed additional responsibilities as executives and other departments realize the value they can provide, and nearly 80% of U.S. treasury teams saw their “net” list of responsibilities increase in 2022 vs 2021.

 

 

2. Stakeholders View Treasury as Equally Strategic & Operational: Over 50% of financial practitioners believe the treasury function holds key strategic value, which represents a significant shift from the traditional viewpoint of treasury being mostly an operational function. This shifting perspective is shared widely amongst internal stakeholders like accounting and AP. Today, treasury’s strategic influence is impacting areas like technology adoption, working capital management, bank connectivity, payment processing, and financial reporting.

3. A Saturated Technology Market is Confusing for Treasury: The growing importance of the treasury function and widespread digitalization of global financial operations has resulted in an abundance of Fintech and bank-led software products entering the market. While this has helped foster innovation, data also shows that many treasurers have become confused by the breadth of categories and service offerings in the market, which has led to greater indecision and headache during RFPs and implementations.

 

 

4. The Line Between “Treasury Expert” and “Tech Expert” is Blurring: As the treasury function continues shifting away from paper-based and manual workflows to digitally automated processes and software tools, treasury personnel are finding that their technological proficiency has a significant impact on their ability to perform their core financial responsibilities. This is leading many practitioners to seek out technology-based learning courses in tandem with their more traditional financial education.

5. Fraud & Security Concerns Remain a Critical Issue: In today’s remote and digitally-operated business landscape, tech-savvy criminals are presented with even more opportunities for infiltrating a company’s systems and processes. This is leading to a noted increase in fraudulent attempts across a variety of areas, and treasury teams are continuing to invest heavily in both technology and training to protect themselves.

6. Successful Treasury Teams Collaborate with Other Stakeholders: Research found that many of the most successful treasury teams are proactively working cross-collaboratively with other internal stakeholders and departments like accounting, AP, and IT to accomplish their objectives. These teams are also frequently partnering with external consultants, solution vendors, and bank personnel to ensure alignment and cohesion across all their various systems and operational workflows.

 

Recommended Action Items for Treasury

Based on the findings from our research and interviews, TIS experts have compiled a short list of recommended action items that treasury teams should consider as they seek to better manage their operations in 2022 and beyond. They are as follows:

1. Embrace the Opportunity to Provide Greater Strategic Input: As CFOs and other departments increasingly rely on treasury for reliable data and insights, practitioners should embrace the opportunity to expand their strategic influence internally. In the long run, this ability to provide value in new ways across the organization will benefit treasury when it comes to securing new budget and staffing approvals. However, in order to provide the most visibility and control over their operations without overloading their small teams, treasury must become highly adept at leveraging technology to eliminate manual workflows and repetitive tasks.

2. Becoming Proficient with Technology Should be Non-Negotiable: As technology continues to play a massive role in treasury, it’s crucial for practitioners to familiarize themselves with the core tenets of the modern technology landscape. This does not mean simply researching new buzzwords, but instead seeking to understand the unique differentiators that separate various bank and fintech product offerings in the market. Treasury should also not hesitate to seek out the help of specialized consultants or technology experts for help. Ultimately, treasury’s ability to effectively identify the solutions and capabilities that best fit their company’s needs will save significant time, money, and headache during implementations and migrations.

3. Managing Security for Remote Workforces Requires Extra Care: Given the continued prominence of fraud attacks within the treasury and finance environment, there is no room for error when it comes to protecting a company’s systems, workflows, and personnel. To secure their funds and assets, treasurers must implement multifaceted security controls and protocols that extend beyond the “frontlines” and include executives, administrators, and other “back-office” staff. Combining education and awareness with multiple layers of technology is the only way to gain the upper hand against a new era of tech-savvy criminal.

4. Building Strong Relationships with Other Stakeholders is Crucial: Today, most of the financial systems and workflows that exist within a business are closely intertwined. This means that treasury operations have a significant impact on other departments, and vice versa. Given the extent to which treasury workflows are integrated with those of other stakeholders, it’s vital for treasury to communicate and collaborate effectively with these groups. To ensure total alignment and cohesion, treasurers must be proactive in establishing solid relationships with internal IT, accounting, and AP departments as well as external banking and solution vendors.

5. Ongoing Education is Vital for Staying Ahead of the Curve: Treasury and finance teams have made it clear they are intent on furthering their education and professional skillsets. This professional development is not limited to any one area but encompasses a broad array of topics across both technology and finance. In a digital world, many practitioners are relying on remote seminars and webinars, but in-person events and training are still on the list for many teams as well. Moving forward, it’s highly recommended that practitioners who are serious about their careers undergo regular education and training so that they can stay abreast of new industry developments and innovations.

How Can TIS Help?

The TIS team hopes that the findings highlighted in our research are helpful for teams currently evaluating their own treasury structure, technologies, and workflows. For businesses that view these insights and find themselves in need for enhanced payments, cash management, and banking functionality, we would strongly urge you to consider the solution and services provided by TIS.

Today, TIS is streamlining treasury automation through a cloud-based platform that is uniquely designed to help global organizations optimize global payments and liquidity. In essence, the TIS solution is a multi-channel and multi-bank connectivity ecosystem that streamlines the processing of a company’s payments across all their global entities and systems.

Sitting above an enterprise’s technology stack and connecting with all its back-office, banking, and 3rd party solutions, TIS effectively breaks down department and geographic silos to allow 360-degree payments visibility and control. To date, the more than 200 organizations that have integrated TIS with their global ERPs, TMSs, and banking landscape have achieved near-real-time transparency into their payments and liquidity. This has benefited a broad variety of internal stakeholders and has also enabled them to access information through their platform of choice. Data is available either through dashboards or direct downloads but can also be delivered back to the originating systems.

As part of our client-centric service model, we fully commit our own resources to your implementation and manage the configuration of all required system functionalities, back-office integrations, and bank connections on your behalf. Beginning with project kick-off and lasting through testing and go-live, TIS’ all-inclusive approach to customer support means you never have to rely on internal resources to maintain our solution or integrate it with your existing technology stack.

This systematically controlled payments workflow is managed by TIS for both inbound balance information and outbound payments, and data can be delivered from any back-office system via APIs, direct plug-ins, or agents for transmission to banks and 3rd parties. No matter where you operate from, TIS provides global connectivity and provides the real-time data, control, and workflows needed for treasury to automate and control their end-to-end payments and liquidity processes.

For more information, visit our website or request a demo with one of our experts.

 

marcus evans | 25th Edition Capital Management for Banking Institutions | 26-28 September | London

26-07-2022 | treasuryXL | marcus evans | LinkedIn |

We are proud to announce our media partnership with marcus evans group for the 25th Edition Capital Management for Banking Institutions conference taking place in London on 26-28 of September, 2022.

London, United Kingdom

26 – 28 September 2022 

In recent years, the Basel IV capital regulations and amendments have put banks under large amounts of pressure to place the right measures, controls and models to understand these regulations’ impact on capital. With capital positions weakening, banks were forced to change their focus from capital optimisation to resource deployment, something which delayed Basel IV implementation. Additionally regulations such as the FRTB ad SA-CCR, impacting market and counterparty credit risk had a huge impact on the risk and capital management side. Moreover new regulations related to climate risk and stress testing being introduced recently by the Bank of England and the European Central Bank, meant that banks had to step up their capital related efforts in this area. In the face of new and ongoing regulatory pressures and market conditions banks need to be able to adapt and optimise their capital management practices.

With this in mind, the marcus evans 25th edition Capital Management for Banking Institutions conference held between 26-28 September, 2022 in London, UK will provide practical guidance on how to optimise capital management for banking institutions, with in-depth sessions on ensuring effective compliance with regulations such as the FRTB and SA-CCR, adapting to climate risk, enhancing capital planning, and meeting macroeconomic challenges. These hands-on sessions will be delivered by best-in-class practitioners who are uniquely equipped to pass on their expertise in this field. This guidance will enable banks to rise to the challenge of the new regulatory and macroeconomic conditions, and further develop their capital management and risk frameworks.

Attending This Premier marcus evans Conference Will Enable You To:

  • Overcome regulatory and macroeconomic constraints to optimise capital efficiency
  • Understand and adapt to the Standardised Approach for measuring Counterparty Credit Risk (SA-CCR)
  • Align with Basel IV from a business perspective
  • Link organisational practices and procedures to new regulatory demands
  • Capital Management: Usability of Basel Buffers
  • Unravel the complexities in capital optimisation

Best Practices and Case Studies from:

  • Johannes Langthaler, Senior Group Regulatory Transformation Manager, Raiffeisen Bank International
  • Andrea Cremonino, Head of Portfolio and Pricing Management Analysis and Strategy, UniCredit
  • Barbara Polak-Labit, Capital Management Lead, NatWest Group
  • Brightwell P Zhezi, Head of Economic Capital: Treasury and Capital Management, Standard Bank Group
  • Muhammad Rehan Nasir, Head, ICAAP and Model Validation, Dubai Islamic Bank
  • Thomas Rohold, Head of Financial Resource Management, Senior Vice President, Danske Bank

Special discounts available to Treasury XL subscribers! For more information please contact Ria Kiayia, Digital Media and PR Marketing Executive at [email protected] or visit: https://bit.ly/3M2gpQ0

 

marcus evans | 8th Annual Retail Deposit Optimization And Strategic Management | 12–14 September | Toronto

19-07-2022 | treasuryXL | marcus evans | LinkedIn |

We are excited to announce our media partnership with marcus evans for the 8th Edition of Retail Deposits & Strategic Optimization – Canada. In this edition of the conference, the delegates will find out the latest trends in customer experience and pricing in times of high-interest rates.

Toronto, Canada

12 – 14 September 2022 

This premier GFMI event will bring together leading industry experts in retail banking and digital transformation from across Canada to address the current challenges and best practices for acquiring and retaining retail deposits. More specifically, Haventree Bank, RBC, BMO, First Ontario Credit Union, SBI Canada Bank, Innovation Credit Union, and many others be discussing how to manage the excess liquidity levels obtained during the pandemic, establish customer loyalty in a highly competitive rate environment through personalization and digital transformation, and improve your bottom line through optimizing deposit revenue through dynamic pricing strategies.

 

Key Themes:

  1. Reviewing the impact of macroeconomic conditions on retail deposit optimization: how are rates and regulation changing strategies?
  2. Sourcing and retaining sticky deposits in a highly volatile rate environment 
  3. Utilize product and pricing strategies to stay on top of the competition
  4. How to handle liquidity levels in a rising rate environment
  5. Taking digital transformation to the next level by centralizing focus and innovation on customer experience

Interested in joining this exclusive event? Then contact Mr. Ayis Panayi at [email protected] for discounts available or visit the website https://bit.ly/3HY6v16.

 

Looking forward to welcoming you at the event!