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 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!

 

Recording Webinar | How successful master data management can help you secure financial processes?

12-07-2022 | treasuryXL | Nomentia | LinkedIn |

Recently, treasuryXL partnered with Nomentia on a live webinar on how successful master data management can help you secure financial processes.

Watch the recording of this session for free now by clicking on the image below!

In this webinar, we discussed how you can manage your Master data in a safe way, how you can prevent fraud and sanction risks through the management of this data, and the subsequent processes that make use of your master data. This ranges from the creation of counterparties in your ERP to the safeguard checks in your payment process and system.

More specifically, we will discussed the following topics:

  • Introduction to Master Data management
  • Managing the counterparty Master Data in your ERP
  • Trends that companies face related to Master Data
  • High-risk processes using your master data
  • Steps to create a safe and secure culture within your company
  • Setting up appropriate processes and systems to enable security

Watch the recording now!

 

 

 

marcus evans | 9th Annual Liquidity and Funding Risk Management | 14-16 September | New York

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

We are proud to announce our media partnership with marcus evans for the 9th Annual Liquidity and Funding Risk Management conference taking place in New York, on September 14-16, 2022.

New York, USA

14 – 16 September, 2022 

Understand how to adapt to a new normal where regulatory demands, macroeconomic pressures and technological developments are posing a myriad of challenges to liquidity professionals

The landscape for liquidity has changed drastically over the last few months as a result of the changing rates and transition out of the pandemic. During the COVID-19 pandemic banks generated a lot of liquidity via retail and commercial deposits, and the government’s support and stimulus packages. The Basel III regulations, such as the LCR, helped banks to avoid the liquidity crunch leaving them in a good overall financial position. As we are now transitioning out of the pandemic, the biggest concern for banks is understanding how they are going to manage as spending is going up and people are not depositing money in the way they have been over the last two years. Banks need to model and forecast liquidity fluctuations so they can position their balance sheets in the best way.  They also need to make sure their operations stay as resilient as possible in the new post-COVID-19 environment.

 

The GFMI 9th Annual Liquidity and Funding Risk Management conference will offer case studies on the best strategies liquidity and funding professionals can use when adapting to the current volatile market. The best methods of handling the current regulatory environment will also be assessed, as well as the latest developments within intraday liquidity and data management. This conference will also discuss the challenging funding environment and the best current practices to optimize balance sheets. Furthermore, emerging concerns within liquidity and funding risk management, such as climate risk, ESG and cryptocurrency will be examined and evaluated.

 

Attending This Premier marcus evans Conference Will Enable You to:

 

  • Determine the best practices to adapt to the current volatile market and macro influences
  • Evaluate how to manage the current regulatory environment
  • Assess the latest developments of intraday liquidity and data management
  • Discuss the challenging funding environment and analyze how to optimize balance sheets
  • Examine the emerging concerns within liquidity and funding risk management

 

Best Practices and Case Studies from:

 

  • Yujush Saksena, Managing Director, Treasury Risk, Morgan Stanley BNY Mellon
  • Shahab Khan, Subject Matter Expert- Regulatory Capital and Liquidity, JP Morgan Chase
  • Bridgit Chayt, Head of Commercial Payments & Treasury Management, Fifth Third
  • Armel Romeo Kouassi, Senior Vice President – Head of Balance Sheet Modeling, Northern Trust Corporation
  • Michael Berkowitz, Managing Director, Treasury and Trade Solutions, Citi
  • Oresta Mehta, Managing Director, Markets Treasury. Global Treasury Climate Lead, HSBC

 

For more information and registration discounts please contact: Ms Ria Kiayia, Digital Media and PR Marketing Executive at [email protected] or visit: https://bit.ly/3n7h0pb

 

 

 

 

 

CFO Perspectives: 3 ways CFOs can use currencies to boost their business’s value

05-07-2022 | treasuryXL | Kantox | LinkedIn |

As a CFO, you are aware of the benefits of FX hedging for treasury. However, are you also aware of the macro-level advantages for your company and its value?

A new CurrencyCast series has just been introduced by Kantox. They examine five ways that efficient currency management may benefit your entire business in the first episode of their CFO Edition miniseries, including how to incorporate it into your strategy and how to decrease cash flow fluctuation. Watch below the video or read the corresponding blog.

Credits: Kantox
Source

In the first edition of CFO Perspectives, we’ll draw from our work with CFOs to explore three ways senior finance executives can make currency management a winning growth and cost-saving strategy for their business.

Looking at the concerns expressed by CFOs in most risk management surveys, a number of familiar themes seem to reoccur: the importance of cash flow forecasting and monitoring, the centrality of FX risk management and the ongoing digitisation of treasury processes

Yet, this picture is far from complete. 

Ultimately, among the tasks assigned to CFOs, there is the need to make a contribution toward enhancing the value of the business. But what is the role —if any— played by currency management in that regard? Answering this question allows us to single out three strategic contributions of currency management that CFOs should prioritise.

Value and FX hedging: time for a reassessment

Does currency management create value? The traditional view has been ambivalent: a ‘glass half full, half empty’ kind of appraisal. While the benefits of hedging FX have never been in dispute, the problem lies with the perceived high costs of currency management.

This is precisely where things are changing—and quite fast. Digital, API-based technology is putting to rest the notion that currency management is always a costly, resource-intensive task. Meanwhile, Multi-Dealer Platforms (MDPs) such as 360T, embedded in these solutions, sharply reduce trading costs.

CFOs: three strategic contributions of currency management

(1) Create opportunities for growth

Feeling concerned about exchange rate risk, managers may neglect the growth opportunities that come from ‘embracing currencies’. Buying and selling in more currencies allow firms to capture FX markups on the selling side while avoiding markups on the contracting side. Two examples will suffice:

(a) On the selling side: In e-commerce setups, currencies can be leveraged to increase direct, high-margin sales on company websites with many payment methods. Multi-currency pricing is the secret weapon for reducing cart abandonment, which still stands at about 77% globally.

(b) On the buying side: Buying in the currency of their suppliers allows firms to (1) Avoid inflated prices charged by suppliers who seek to manage their own FX risk; (2) Widen the range of potential suppliers by putting them in competition; (3) Obtain extended paying terms.

By taking FX risk out of the picture, currency management enables firms to reap these and other margin-boosting benefits of using more currencies in their day-to-day business operations. Ultimately, it is about removing the disincentives that prevent firms from ‘embracing currencies’.

(2) Provide more informative financial statements

Informative financial statements allow investors to assess the quality of management by removing noise from the process. To the extent that the variability in net income is perceived as a measure of management quality, effective currency hedging creates a sense of discipline in the eyes of investors.

The good news for CFOs is that technology is making great strides in cost-effectively managing the accounting-related aspects of currency management. Here are two examples:

  1. Balance sheet hedging. Automated micro-hedging programs for balance sheet items take the impact of FX gains and losses out of the picture, as invoices are hedged with great precision.
  2. Traceability and Hedge Accounting. The perfect end-to-end traceability made possible by automated solutions eases the costly and time-consuming process of compiling the required documentation for Hedge Accounting.

(3) Lower the cost of capital

Companies can reduce cash flow variability thanks to a family of automated hedging programs and combinations of hedging programs, including layered hedging programs that make it possible to maintain steady prices in the face of adverse currency fluctuations.

In challenging times, when the availability of external financing at a reasonable cost is scarce —an all too common occurrence in years of pandemics and wars—reduced cash flow variability makes it possible for companies to execute their business plans and meet all cash commitments.

An impaired capacity to raise financing has implications in terms of valuation, especially for smaller businesses. This ‘cost’ has been variously measured, with some estimations ranging from 20% to 40% of firm value. Currency management enhances the capacity to raise finance and, by extension, lowers the cost of capital and boosts firm valuation.

A wide range of opportunities to create value

We have singled out three major contributions of currency management in terms of creating value for the business: (1) stimulating growth while protecting and enhancing profit margins; (2) lowering the variability of cash flows; (3) presenting more informative financial statements. We can mention even more benefits:

  • Taxation is optimised as smoother earnings reduce the tax burden when higher levels of profits are taxed at a higher rate.
  • Capital efficiency is raised when pricing with the FX rate improves the firm’s competitive position without hurting budgeted profit margins.

While most of these advantages have been known by CFOs for many years, there is a new factor to consider: they can be implemented with Currency Management Automation solutions that remove most of the resource-consuming, repetitive and low-value tasks performed by the finance team, eliminating unnecessary operational risks along the way.

With an added bonus: by leveraging currencies, CFOs have the opportunity to take decisive steps in terms of digitisation. According to a recent HSBC survey, digitisation is seen as the most positive factor by 84% of CFOs overall, as they expect investments in digital technology to have a “positive impact on their business”, with more than half of them expecting it to give the business model “a large boost”.

The time to act is … now!

Get new episodes of CurrencyCast delivered to your inbox every week by signing up the Kantox newsletter

marcus evans | 3rd Edition Commodity Markets Modelling, Analytics & Risk Management | 12-14 September | London

30-06-2022 | treasuryXL | marcus evans | LinkedIn |

We are proud to announce our media partnership with marcus evans group for the 3rd Edition Commodity Markets Modelling, Analytics & Risk Management conference taking place in London on 12-14 September 2022.

London, UK

12 – 14 September, 2022 | 08:30 BST

There are many challenges involved with Commodity Markets Modelling. A major one at the moment is the volatility within the energy markets, specifically the spike in the price of energy including gas throughout the European and world markets. Another challenge which has been there for slightly longer is the generating and accessing of quality data which can feed modelling, in particular AI and machine learning models. There also exists a specific challenge around the modelling of renewables which has become an area of increased interest over the last few years. Finally, there is always a push to have new techniques which can help to improve the performance of trading teams in a very competitive market.

With this in mind, the marcus evans 3rd edition Commodity Markets Modelling, Analytics & Risk Management conference held between 12-14 September, 2022 in London, UK will provide the much-needed techniques on optimising modelling and trading within commodity markets. The event will deliver attendees tailored sessions on accessing the best data types to assist accurate modelling and forecasting. Practical solutions will be delivered regarding battery storage and modelling of intermittent weather sources such as wind and solar energy. Finally, new innovation tools which can assist traders and decision makers in commodity markets spaces will be explored and evaluated.

Attending This Premier marcus evans Conference Will Enable You To:

  • Obtain the best practices for quantitative modelling in commodity markets
  • Appreciate the current need to adjust existing quantitative modelling and trading techniques
  • Overcome the limitations caused by spikes in energy price data
  • Assess business priorities in consideration of macroeconomic change
  • Ensure your institution is insulated from market volatility

Best Practices and Case Studies from:

  • Michael Haigh, Managing Director, Global Head of Commodities Research, Societe Generale
  • Cetin Karakus, Global Head of Quantitative and Analytical Solutions, BP
  • Barbara Lempp, CEO of EFET Deutschland, European Federation of Energy Traders
  • Richard Fu, Head of Commodities, Shanghai Pudong Development Bank
  • Mario Dell’Era, Quantitative Market Risk Senior Manager, Citi
  • Emmanuel Gincberg, Managing Director – Quantitative Strategist, Macquarie Group

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/3HvwFYs

 

 

 

Perfecting the Cash Forecast

21-06-2022 | treasuryXL | Kyriba | LinkedIn |

 

By Bob Stark, Global Head of Market Strategy

Source

The number one treasury issue that causes CFOs the most potential concern is unreliable cash visibility and forecasts, according to a Nov. 2018 CFO Publishing survey, “3 Key Areas Where CFOs Say Treasurers Need to be More Strategic.”

Every organization talks about forecasting more effectively, but few allocate sufficient people, time, and technology to build an effective program. Understanding the importance of an accurate cash forecast that can be relied upon for key financial decisions is critical to making the right investments in forecasting. While there are many reasons to forecast, such as protecting against currency volatility, there are a few key areas that should be addressed to help CFOs and treasurers further make the connection between accurate cash forecasting and bottom-line financial performance.

So, what is cash forecasting? Cash forecasting, when performed accurately, enables greater certainty of projected cash balances. Longer term investing, reduced borrowing costs, more effective hedging programs and better mobility of global cash, cash positioning is concerned with today and often the next five business days. The purpose is to manage daily liquidity to ensure shortfalls are covered and surpluses are concentrated to earn some yield on excess cash. 

Cash budgeting is performed by finance teams such as FP&A and is more focused beyond one year – although with increased emphasis on free cash flow guidance, the reconciliation of indirect budget-based forecasts with direct cash flow forecasts is increasingly managed quarterly. 

Cash forecasting typically extends cash positioning with horizons anywhere from one week to one year. Forecasting leverages multiple data sources to increase confidence in the projected cash balances so that better cash decisions can be made. The value of forecasting is based upon the value of those better decisions.

So why forecast? Ineffective cash forecasting costs money and impacts shareholder value. A poorly executed program drives a number of negative consequences so it is critical to understand the link between effective cash forecasting and bottom line financial performance. Excuses such as “we’re cash rich” or “interest rates are too low” no longer satisfy investors who demand that cash be deployed or returned to them. Without adequate visibility of forecast cash and where cash needs to be deployed to meet growth targets, CEOs and CFOs risk looking foolish in front of shareholders and analysts. 

The volatility in global currencies shows no signs of abating, meaning that the pressure on CFOs to maintain the value of foreign cash inflows and outflows persists. Companies can experience earnings per share losses from unexpected and unhedged currency impacts or have difficulty in maintaining (let alone increasing) return on cash in a post-Basel III environment. 

Forecasting cash will allow segregation of operational and non-operational cash into time buckets as well as deliver the needed accuracy to allocate cash to longer duration investment strategies. This will help preserve previously realised investment returns or help to find an alternative for cash balances that are no longer wanted by your bank!

Certainty in projected cash balances drives the CFO’s ability to anticipate and prepare for corporate actions and strategic investments. For example, without confidence in cash forecasts, the CFO and treasurer are not relied upon to contribute to key M&A decisions such as providing guidance on the components of cash, debt and equity to calculate a total acquisition cost.

When cash is held globally, share buybacks or dividend hikes are a challenge. Often CFOs find it cheaper to borrow cash domestically than repatriate funds – yet this analysis requires certainty into projected cash balances. Confidence in the forecast is critical to optimize business value; CFOs need an effective cash forecast in order to make commitments on how to reinvest cash to meet organic growth targets. Lack of confidence will lead to unnecessary borrowing or equity financing.

Consolidation of data – Finding the right information and determining the most efficient (i.e. automated) way to integrate it into a consolidated forecast system is key. 

While automation is important, data quality is also paramount to success. When building the forecast, each line item may be sourced in different ways. The source of the information will determine the best way to build the forecast for each line item. For example, many treasury teams prefer to import accounts payable data directly from the ERP while for receivables information they may wish to extrapolate historical data and model using a linear regression. For treasury teams to be effective, it is important that all methods be fully automated and secure so that initial setup, maintenance, and daily execution to build the forecast are easy and can be maintained by the user (and not require re-programming).

Collaboration – Making decisions on the best data to build the forecast also requires determining who to collaborate with to smoothly access that key information. In many cases, treasury does not have direct authority over the people that own systems and/or business responsibilities that offer that data Yet, treasury relies upon this outside information to build a comprehensive forecast, so good internal communication skills are critical to receiving quality information in a timely way. Accounts Payable, FP&A, IT, Regional Controllers all forecast projections for decentralized organizations. Many treasury teams plan, with their CFOs, a top-down collaboration model that builds effective cash forecasting into the team’s objectives and compensation. This draws attention to the forecasting objectives and motivates each team to fulfill their roles.

Measurement – The most important – and often overlooked – step is the measurement of forecast accuracy. Implementing a process to measure forecast accuracy at a detailed level to identify the source of variances is critical to improving quality and ultimately reducing forecast variances. Equally important is implementing a feedback loop – to systems and to people – that ensure that forecast data is improved based on variances that were identified. The feedback loop is especially important when non-treasury resources are contributing to the forecast to ensure that the right behaviors and cash forecast numbers are positively reinforced while opportunities for improvement are well communicated. This is especially effective when feedback is aligned to KPIs and quarterly objectives of those outside of the treasury team.

Key to success – A forecast variance analysis should be detailed with multiple ‘snapshots’ taken. If only a summary picture is reviewed (e.g. how effective was forecasting over a 3-month period) then a lot of the variability is hidden within that timeframe. Measuring daily, weekly, or bi-weekly will help uncover the ups and downs between forecast and actuals that might otherwise go unnoticed. Fortunately, the business intelligence features of a TMS such as Kyriba offers the data visualization and analytics required to offer this level of detail. Cash forecasting is especially important if you are “cash rich” with a high percentage of non-operational cash deposits. Multinationals with significant foreign revenues must forecast better, so they can hedge effectively and deliver cash predictability to their stakeholders. The key to forecasting is flexibility so that you have many options to model the different streams of forecast data. The accuracy of your data will determine if importing, regressing, extrapolating, or other methods of calculations are needed to build your forecast effectively. 

Without measuring forecast accuracy, it is impossible to know if you are good at forecasting. Data visualization helps focus on important variances – whether by category, time bucket, or geography – and isolate what data needs to be improved for future forecasting. ROI of cash forecasting is very high.

In summary, the value of forecasting is driven by what your organization can do with additional cash. The value of cash can be measured by investing longer with higher returns on cash, repaying debt, earning yield from early supplier payments, or investing in new organizational projects. Perfecting the cash forecast means freeing up cash from working capital and directing towards these higher value uses.

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TIS acquires Cashforce, an AI-powered provider of cash management and forecasting solutions.

17-06-2022 | treasuryXL | Cashforce | TIS

 

Revolutionizing Global Liquidity Management for Treasury and Finance

 

Treasury Intelligence Solutions (TIS), a global leader in enterprise payment optimization, today announced their acquisition of Cashforce, an AI-powered provider of cash management and forecasting solutions.

This acquisition will see Cashforce’s leading cloud solution – currently deployed at many of the largest and most sophisticated corporate treasuries in the world – become integrated with TIS’ SaaS payments platform. This unified solution will provide enterprises with an unmatched suite of capabilities for cash management, global payments, and fraud mitigation along with superior connectivity, workflows, and reporting functions.

Over the past few years, TIS and Cashforce have collaborated closely to provide a complementary offering for treasury and finance teams. These efforts were met with immediate success in the market as demand for improved cash management and forecasting tools has risen sharply. Now, TIS’ acquisition of Cashforce presents the perfect opportunity to integrate both products together as part of a more complete offering.

For the thousands of enterprise treasury and finance practitioners who currently use TIS, this acquisition provides access to faster and more accurate cash reporting, forecasting, and working capital management. To date, cash positioning and forecasting are still being performed manually by many treasury groups, which represents a major pain point for CFOs and business leaders when attempting to make strategic financial decisions. However, the robust capabilities provided by Cashforce eliminate many of these inefficiencies and ultimately enable companies to gain quick and accurate insights into their financial position based on reliable payments and liquidity data.

According to Erik Masing, Group CEO of TIS, “Cashforce has been a premier partner of TIS for several years and has contributed significantly to the cash forecasting and management capabilities we offer clients. The acquisition is a natural extension of our business and will allow TIS to further integrate Cashforce’s solution with our platform in order to offer advanced forecasting and data management capabilities to all our clients. This means enterprises can significantly reduce complexity in their global payments and cash management tech stacks by leveraging standardization and transparency afforded by a single, elegant solution.”

 

 

For Cashforce, the acquisition means that existing clients can now supplement their robust forecasting capabilities with TIS’ industry-leading payments and bank connectivity features. As explained by Nicolas Christiaen, Founder and CEO of Cashforce, “Giving businesses complete visibility over their cash and liquidity data has always been the core objective of Cashforce. While we have spent years perfecting our capabilities in this regard, TIS has been strengthening their suite of payments, bank connectivity, and cash management tools. When combined, these two sets of capabilities form the ideal solution for global treasury and finance teams to achieve full control and visibility over their entire payments and liquidity architecture – including all entities, back-office systems, and banks.”

With the added capabilities of Cashforce’s solution, TIS now offers a single, scalable cloud platform for clients to address needs in the following areas:

  • End-to-end payment processing and bank statement management
  • Global bank connectivity and financial messaging
  • Real-time cash positioning and liquidity management
  • Multifaceted cash forecasting, cashflow analytics, and working capital management
  • Bank account management and bank documentation management
  • Payment compliance and sanctions screening control
  • Treasury security, regulatory compliance, and fraud mitigation tools

For more information on TIS’ acquisition of Cashforce and the advantages our combined solution will provide to enterprise treasury, finance, and executive teams, contact us at [email protected] or by using the information found on our website.

 

About TIS

TIS is reimagining the world of enterprise payments through a cloud-based platform uniquely designed to help global organizations optimize payments, manage cash visibility, and mitigate risk. Corporations, banks, and business vendors leverage TIS to transform how they connect global accounts, collaborate on payment processes, execute outbound payments, analyze cash flow and compliance data, and improve critical outbound payment functions. With $2 trillion in payments processed annually, the TIS corporate payments platform helps businesses improve operational efficiency, lower risk, manage liquidity, gain a strategic advantage – and ultimately achieve enterprise payment optimization.

Visit us for more information at https://www.tispayments.com.