Your Last Call | International Treasury Management Virtual Week | September 27 – October 1

22-09-2021 | Eurofinance | treasuryXL |

It’s free, It’s Virtual…

International Treasury Management is the annual meeting place for 1000s of the World’s most senior treasurers to learn and share experiences in valuable peer to peer discussions. With a reputation for ground-breaking sessions and world-class speakers, our 30th anniversary event will explore the boundaries of the profession, take a glimpse into the future of business, treasury and working life as well as offer the practical case studies on the treasurer’s top agenda items.

Only one treasury event can deliver the comprehensive mix of big picture global insight and granular treasury knowledge you need to make the right choices for the future.


Back to the future, again

Over the past 30 years since EuroFinance’s inaugural conference on International Cash and Treasury Management, much has changed. Treasurers have firmly become business partners, technology experts, risk managers and opportunity spotters. They often lead fundamental change within the company as markets, business models and technology shifts.

What next? This event will delve into how treasury operations can gear up for the future, having learned the lessons from the past. Where, who, what and how will the corporate be in the coming years and what is treasury’s role?

Keynote sessions will offer big-picture insight alongside themed streams including:

  • Payments revisited
  • Risks and Rewards
  • Digital strategies
  • Practical solutions to day-to-day Treasury challenges
  • The power of partnership

What makes International Treasury Management the must-attend event of the year?

  • networking on a global scale – a significant rise in attendees in 2020 boosted the value networking with banks, providers and potential clients… all in one place
  • strategic insights and best practices – get solutions to the challenges you face from treasury and economic experts during keynotes, practical case studies, fireside chats, analytical panels and more
  • future trends – delve into the latest innovations and new technology driving change in treasury, and their practical applications
  • live Q&A with world-class treasurers – enjoy borderless networking and live Q&As with high-profile speakers directly after each session
  • cost and time-efficiency – tune in form anywhere in the world, at the click of a button with no long distance travel or accommodation costs
  • continued learning – catch up on any missed sessions and re-watch your highlights, on demand for up 2 months after the event
  • unite your international teams – as a free event, it offers an opportunity for your whole treasury team to attend. Perfect for encouraging learning and development at all levels

September 27th – October 1st | Virtual

Register Now for Free!

 

 

Why M&A-Intensive Enterprises Need a Robust Technology Integration Strategy

21-09-2021| treasuryXL | TIS |

This article evaluates how the success of long-term M&A activity on the part of large enterprises is dependent upon their ability to integrate and connect the pre-existing technology stacks of newly acquired subsidiaries with their broader infrastructure. Chiefly, we evaluate how enterprises that regularly establish new subsidiaries and entities across the globe can ensure that the various finance, treasury, and banking solutions leveraged by these companies before the acquisition can be integrated and connected in a cost-effective and optimized fashion.

M&A Activity Remains a Top Priority for Global Enterprises

Although merger and acquisition (M&A) activity is fairly common in today’s business environment, it is typically large, global enterprises that leverage the strategy most frequently.

For organizations with billions in revenue and a steady stream of new investment, taking advantage of new market opportunities is often best achieved by acquiring companies that have already proven themselves successful in the field. In the case of the world’s largest enterprises like Microsoft, Apple, and Facebook, M&A activity comprises a significant portion of overall growth. In fact, Microsoft alone has acquired more than 216 companies since their founding, and Apple acquires a new company at an average rate of once every four weeks. Across other industries like staffing and HR, Fortune 500 firm ManpowerGroup has acquired four new companies in the past five years and 15 total companies over the past few decades.

But while an M&A-intensive business strategy might be advantageous for eliminating competition, increasing revenue, and maintaining growth, there are a variety of challenges that must be confronted in order for the model to prove successful in the long-term.

Of course, any M&A project undertaken by a company will face obstacles, most of which revolve around how to best integrate the employees, products, systems, culture, and customers of the acquired company into the acquiring enterprise. These challenges are typically what executives and business leaders focus on most during M&A projects, and for good reason. If employees and customers are dissatisfied with how the acquisition is managed or if the acquired company’s product line stagnates, it can quickly turn the entire project on its head and substantially hinder future profits and revenue.

However, in today’s digitally-oriented business landscape, the above factors are not the only concern for M&A-intensive enterprises. Instead, one of the core challenges confronting modern acquisition projects lies along the technology front.

This is particularly true when it comes dealing with finance, treasury, and banking technology.

Why is Financial Technology Complexity so Common for M&A-Intensive Companies?

When evaluating the operations of enterprises that regularly undertake new acquisitions, it’s easy to see how technology complexity can manifest itself.

Let’s quickly walk through a sample scenario.

Looking specifically at finance and treasury technology, suppose that a U.S.-based manufacturing firm decides to acquire an emerging competitor in Asia. Also suppose that this Asian competitor has been operating independently for several decades and has its own spread of regional entities, as well as a pre-existing set of back-office platforms and IT solutions. As such, the company is already using an ERP, TMS, and AP system, as well as a globally distributed network of banks and bank accounts.

Going a step further, now consider the diverse range of currencies, payment formats, and financial networks that the Asian enterprise uses compared to the acquiring U.S. company. Also, because the compliance arena in Asia is managed through a diverse and multifaceted set of jurisdictions, conducting financial operations in the region will require a unique approach to managing regulatory and sanctions processes, as well as data and payment security.

For the acquiring U.S. company, connecting the various systems and networks used by the Asian subsidiary with their broader technology stack will be no easy feat. To start, some of the systems in place at the Asian subsidiary may be hosted locally or even running on older, unsupported versions. If modern cloud solutions have not been adopted, then integration via open APIs becomes highly unfeasible and it will likely require extensive IT support to establish the connections. The same is true for integrating the various bank channels and payment formats in use by the Asian subsidiary into the enterprise’s global financial architecture. Accommodating the various risk, regulatory, and compliance measures in place across Asia will require even more support, as well as collaboration with multiple legal and banking teams.

The end result being?

Although a single acquisition of this scale may be manageable for a global enterprise with significant resources, those that consistently undergo new acquisitions will likely experience much more difficulty. This is because internal IT teams rarely have enough bandwidth (or budget) to successfully establish all of the required connections for every system. Instead, what often happens is after a few months or years, IT is forced to divert their attention from one acquisition to another, thereby letting a portion of outstanding system connections fall to the wayside.

Ultimately, this creates an environment where much of the data and information captured at the local or “entity” level will sit idle and siloed from the rest of the enterprise. Instead of real-time data access across their individual units and subsidiaries, finance and treasury teams at HQ will have to rely on manual submissions from field personnel to ascertain data. In some cases, it may take weeks for this information to be received, by which time it is often outdated.

In the long run, the impact of these technology limitations has far-reaching consequences for the broader enterprise, especially if such issues are present across each new subsidiary or locality that they acquire.

What are the Main Problems That This Lack of System Integration & Connectivity Cause?

Thinking through the above M&A scenario, suppose that a similar conundrum impacts each (or most) of the M&A projects that an enterprise undertakes. Eventually, the lack of automated connectivity and control between the enterprise’s HQ and each of their subsidiaries will result in significant financial issues, particularly in the below areas:

  1. Liquidity Management: If financial data related to cash positions and balances across a subsidiary and its underlying banks and accounts cannot be effectively transmitted to an enterprise’s HQ, then everything from cash forecasting and cash repatriation to short-term investing and risk mitigation will be impacted. If the enterprise does not know the exact amount of funds available across each entity, then it cannot effectively plan ahead to take advantage of investment or tax savings opportunities. Over time, losing out on these opportunities due to gaps in data quality and reporting can cost an enterprise millions of dollars every year.
  2. Payments Management: For enterprises that cannot accommodate the range of payment systems and formats in use by their subsidiaries or that struggle to connect with their bank channels and networks, a variety of pain points will occur. Common issues include a reliance on outdated formats that limit data quality and security, delays in payment processing that impact the timeliness of transactions and also constrain employee bandwidth, and an increase in operational costs for continuing to support legacy processes and channels. Additional security and compliance issues may also manifest themselves, as highlighted below.
  3. Security & Fraud Prevention: Without ample visibility into the payment processes and cash positions at each of a company’s subsidiaries or any centralized window for viewing this activity in real-time (or at least same-day), it becomes monumentally more difficult to identify and prevent fraud from occurring. If payments are initiated in disparate platforms at the local level and no overarching control or transparency is provided at the HQ level, then the threat of both internal fraud and external fraud increases exponentially.
  4. Compliance & Regulation: Due to the diversity of data management protocols, financial regulations, and sanctions policies that exist across each world region, a lack of payments standardization within an enterprise can result in increased legal and regulatory risk and also jeopardize their reputation and standing. Examples of data and payments compliance protocols for which non-compliance can result in severe penalties include OFAC sanctions in the U.S., GDPR data policies in Europe, and the recently introduced Personal Information Protection Law (PIPL) in China.
  5. General Financial Execution: If financial data is not automatically flowing between an enterprise and its subsidiaries, then every department and stakeholder with a need for this data is impacted. Accounting will be unable to track ledgers or financial statements, legal will struggle to manage regulatory and compliance issues, treasury will be hindered in their liquidity and payment processes, and the C-suite will lack the high-level financial data they need to make strategic decisions.

Although the above financial technology challenges present serious hurdles for M&A-intensive enterprises, there are solutions that can be put in place to alleviate the strain. One such solution includes the adoption of a modern Enterprise Payment Optimization (EPO) platform.

How Can the Complexity Caused by Global M&A Activity be Simplified & Managed?  

Because of the diverse systems landscape and limited IT bandwidth that often exists across M&A-intensive enterprises, achieving global visibility and control over finance and treasury operations requires a unique approach to connectivity and integration. In recent years, one strategy that has grown increasingly popular involves the adoption of an enterprise payment optimization (EPO) platform.

Modern EPO platforms are typically cloud-based solutions that sit above the other systems in an enterprise’s financial technology stack and manage connectivity across all their various back-office, banking, and 3rd party systems, including those at their entities and subsidiaries. Rather than connect every platform used within the enterprise to every other system, each solution need only connect to the EPO platform instead. This drastically simplifies the process of integrating new solutions with an enterprise’s tech stack and also automates the process of transmitting payments and financial data between any system that is connected to the EPO platform, including those used by different entities and departments.

Although the adoption of an EPO platform requires some up-front legwork, using a vendor like TIS ensures that the complexity of connecting to banks and various internal systems is almost entirely outsourced. This means that formerly difficult and time-consuming tasks that were a drag on internal IT teams (such as configuring and maintaining the links between new entity systems and HQ ERPs, HR systems, and TMSs) are now managed by the EPO vendor. As payment formats evolve or new regulations require changes in integration, EPO vendors like TIS automatically handle the upgrades and also manage the addition of new countries, banks, and users to an enterprise’s network as growth and expansion dictate over time.

Ultimately, by connecting all of the various banks and systems that comprise your financial technology stack to an EPO platform, you effectively ensure that regardless of where an entity is located or what local systems are being used, the data and information stored on their platforms is never left isolated or unaccounted for. And as older or outdated enterprise payment solutions are eventually replaced by newer and more upgraded systems, connecting them to the EPO platform in a similar fashion will ensure ongoing cohesion and connectivity across your global networks, even as various technology overhauls and system migrations occur at specific entities within the enterprise.

Once this type of EPO platform has been adopted, the ensuing benefits can be felt immediately by all enterprise stakeholders. Company-wide visibility to global cash balances drastically improves, liquidity management protocols become more streamlined, payments compliance and security features are standardized across all departments and entities, and the enterprise’s overall payments execution workflows become more automated and controlled.

Today, these capabilities are exactly what TIS is offering enterprises through our EPO technology suite.

Why is TIS the Ideal Solution for Simplifying M&A-Induced Technology Complexity?

TIS’ Enterprise Payment Optimization platform is a global, multi-channel and multi-bank connectivity ecosystem that streamlines and automates the processing of a company’s payments and subsequent reporting across all their global entities, banks, and financial systems. By sitting above an enterprise’s technology stack and connecting with all their back-office, banking, and 3rd party solutions, TIS effectively breaks down department and geographic silos to allow 360-degree payments and cash visibility and control. To date, the ~200 organizations that have integrated TIS with their global technology stacks have achieved near-100% real-time transparency into their payments and liquidity. This has benefitted a broad variety of internal stakeholders and has also enabled them to access information through their platform of choice, since the data that passes through TIS is always delivered back to the originating systems.

This systematically controlled payments workflow is managed by TIS for both inbound balance and transaction information and outbound payment instructions. Data can be delivered from any back-office system via APIs, direct plug-ins, or agents for transmission through TIS to banks and 3rd party vendors. No matter where you operate, TIS provides global connectivity by creating and maintaining compatibility with your required formats, channels, and standards so that organizations can connect with virtually any bank in the world.

Because of the deep connections that TIS maintains with internal systems such as ERPs or TMSs, external banks, and 3rd party vendors / service providers, the process of managing payments is simplified for every internal stakeholder. C-suite executives, treasury, accounting, AP, legal, HR, and other key personnel can access whatever financial data they need, exactly when they need it. And by automating this flow of information for both inbound and outbound payments, TIS provides the control and flexibility that enterprises need to function at their highest level.

Ultimately, the extensive experience and unparalleled integration capabilities provided by TIS enable enterprises to streamline their methods for managing payments and data across each entity and subsidiary. This has proven vital for a variety of TIS’ globally diverse clients, including Fortune 500 firms like ManpowerGroup and international NGOs like IFAW. And as these organizations add new companies, localities or seek to replace the underlying systems in use across various regions, TIS is there to help them manage the new integrations and connections, thereby ensuring a seamless transition and constant control over global payments and information.

In the digital world of enterprise payments, TIS is here to help you reimagine and simplify. For more information about how TIS can help you transform your global payments and information processes, please refer to the below resources.

About TIS

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

Visit tis.biz to reimagine your approach to payments.

 

Which Options Are There When It Comes To Bank Connectivity?

15-09-2021 | treasuryXL | Nomentia |

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

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

Direct host-to-host connections

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

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

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

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

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

Direct connections through regional standard protocols

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

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

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

Connections through SWIFT

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

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

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

Open banking APIs

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

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

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

What’s the verdict?

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

WATCH OUR WEBINAR ABOUT BANK CONNECTIVITY

 

 

Transitioning from LIBOR: Explaining the cash fallback rates

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

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


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

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

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

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

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

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

Fallback rate economically equivalent to USD LIBOR

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

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

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

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

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

Consumer cash fallbacks

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

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

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

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

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

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

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

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

Institutional cash fallbacks

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

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

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

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

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

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

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

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

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

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

Navigating the LIBOR transition

What’s the next step?

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

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

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

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

How to access the rates

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

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

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

 

 

Nomentia Acquires TIPCO: A union of exceptional products and teams

08-09-2021 | treasuryXL | Nomentia |

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

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

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

 

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

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

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

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

 

How does the acquisition affect Nomentia’s future?

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

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

 

Read the press release to learn more

 

 

What to Consider When You choose your Bank Connectivity Strategy? 7 Important Criteria

| 01-09-2021 | treasuryXL | Nomentia |

Most organizations would benefit from some form of Bank Connectivity as a service. But just deciding on outsourcing bank connectivity won’t magically make all those connections appear. In this blog, we’ll cover 7 important criteria you should think of when evaluating different options.

1. In which banks do the majority of your payments flow?

Make a list of all banks that your organization is connected with and include all banking relationships from all your subsidiaries. We have noticed in interactions with our customers that this first step can be eye-opening at times. Often, we have an idea of the different banking relationships but then there are still local bank relations that might not be that visual to your treasury function. It also provides you with a good understanding of how many bank connections you would need and whether you would benefit from simplifying your banking landscape before implementing a bank connectivity solution. If your organization is only working with 5 banks altogether the story is very different from an organization that has relationships with 20+ banks.

After mapping this out, you might want to apply the 80/20 rule: typically, you would first set up connections to the strategic banks that cover 80% of your payment flows. A cloud-based software from a Cash Management specialist will most likely be able to provide you these connections as part of their out-of-the-box functionality.

2. Evaluate your use of local banks

Even if you expand the use of strategic banks to more countries, you might still find a set of local banks that you cannot replace. Typically, a discussion about bank connectivity increases in complexity when the long tail of local banks comes into play. That’s where you need to ask yourself why you are working with local banks. Is it for collecting money, for making payments from a regulatory point of view or because of specific needs within your local business?

Having visibility on Cash is straightforward while covering payment flows is not easily justified from a direct cost savings point of view. At the same time payment fraud plays a role in the local banks. You might want to consider a solution to replace internet banks for manual payments with a centralized solution. Then, the business case cannot be backed up by direct cost savings, but cost-efficient risk mitigation.

3. How consolidated is your banking landscape?

After mapping out all your banks in a first step, you know your strategic banks. Now it’s time to take a look at which countries are covered by these strategic banks. Would it be a good time to reduce your banking relations by using a certain set of strategic banks in more of your countries in order to reduce the number of domestic banks?

4. How many file formats and payment types do you have in use?

It is a different thing to set up credit notes and treasury payments only, as opposed to also including domestic payments, salary payments, and tax payments. We recommend having a solution for all your payment types and file formats: this is the only way to get rid of the internet banks and the tokens.

5. Are you concerned about payment fraud and information security?

You should have a solution to cover all payment types in all countries with all banks. That is the only way to have a full audit trail and control in every country. A centralized payment process enables centralized validation and control. We have covered the topic of payment fraud extensively.

In our case, having bank connectivity as a cloud service lets you benefit from a platform, which invests annually roughly 1bn$ in information security. From an information security perspective, this lets us concentrate on application-level security, which is annually audited by 3rd parties.

6. Are you interested in having transparency in your bank fees?

Modern bank connectivity solutions enable transparency in banking fees: Having bank agreements and the related fees included and matched against the banks’ reports. Even more transparency can be gained with services like SWIFT GPI: SWIFT GPI enables banks to provide bank fee information for the e2e chain. Not all banks support these features yet.

7. Choose wisely

Once you go through the questions and mappings outlined above you are at a good place in making your decision for the right bank connectivity provider. It might seem tedious at times and one might think of bank connections as a mere technical thing, but they are so much more. We feel this is a perfect moment to evaluate all your processes and look at ways to harmonize them.

It’s also a great way to work closely together with your colleagues. We recommend approaching this topic in a project team between treasury, finance and IT: From an IT perspective you want to minimize the IT-footprint, finance will run the daily operations and treasury sets the policies and controls.

DOWNLOAD OUR BANK CONNECTIVITY WHITEPAPER

 

 

$20 Billion in Bank Service Fees: Are You Overpaying?

31-08-2021 | treasuryXL | Gtreasury |

By Heena Ladhani, Ecosystem Manager, GTreasury

Twenty billion dollars. That’s how many corporate treasurers in the U.S. are now forking over to banks in service transaction fees every year. It’s a big number and it’s growing every year. But there’s also vast potential for reducing that amount by optimizing the outlay for-fee services and becoming better-informed for price negotiations.

A recent survey from Treasury Strategies determined that 70 percent of corporate treasurers are reviewing their bank service fees on a monthly basis. However, the same survey determined that a fraction – just 21 percent of treasurers – will actually benchmark those service fees as part of their bank analysis and management. Among those treasurers who do use benchmarks, many only do so on a line-item basis, rather than at the product category level. A majority also don’t have processes to recognize the impact of volume on benchmark prices. In short, there is room – a lot of room – for opportunities to trim costs.

Accurate bank fee analysis backed by correctly applied benchmarking enables treasurers to preserve strong relationships with bank creditors as well. Too often, simplistic benchmark techniques give treasurers only a surface-level analysis of whether fees are in line with market averages. As a result, treasurers may falsely challenge their banks over small sums, while missing out on more appropriate and fruitful interventions – a ‘can’t-see-the-forest-for-the-trees’ scenario. Incomplete analysis comes with its own costs, absorbing misapplied resources and eroding creditors’ goodwill over insignificant or erroneous concerns.

Let’s look at two examples of how benchmarking, done right, can ensure treasurers’ accurate analysis and lead to optimized bank transaction costs:

Example 1: Benchmark beyond what you know

Wire transfer fees are an area in which effective benchmarking is especially ripe for opportunity. For example, suppose a treasurer’s initial internal benchmarking finds that the four banks the company uses offer rates spanning from $14 to $20. This self-benchmarking reveals the potential to move all wire transfer fees to the $14 rate. However, expanding benchmark horizons to the market at large makes clear that all the banks are charging fees well above the median.

There is no shortage of potential reasons for this, which should be investigated. The company could potentially reduce fees by using a bank portal, streamlining Fedwire, SWIFT, or CHIPS costs, opting for digitized communications, and beyond. Importantly, though, a small cost on each wire can quickly add up to significant savings. By benchmarking these fees at a more expansive scope, those savings can be found, pursued, and realized.

Example 2: True treasury management services costs are multi-dimensional

Take a hypothetical corporate treasurer examining lockbox item processing fees at two different banks. Bank X charges $0.30 per item; Bank Y charges $0.50. The treasurer’s organization directs 500 items to Bank X each month, and 5000 to Bank Y. On the surface, the treasurer’s analysis is simple: Bank Y is overly expensive and should be challenged.

A deeper and more holistic analysis, however, clarifies a more accurate picture. Factoring in bundled remittance processing services – such as monthly lockbox maintenance, daily deposit ticket charges, image and hardcopy fees, and courier fees – rewrites the story. Now it’s clear that Bank X provides a per item rate of $4.00, but Bank Y is just $3.00. The more simplistic cost benchmark analysis missed this crucial information.

That said, the analysis must also consider that volume is crucial to accuracy. Bank fees often vary by volume. Checking Bank X’s $4.00 per item rate against the market, the median benchmark price for a volume of 500 items a month is actually $5.00. The bank’s price is quite favorable at that volume. Now looking at Bank Y, the median benchmark price at a volume of 5000 is just $2.00 per item. Suddenly Bank Y is exposed as the truly expensive one.
There is a range of subsequent steps available to leverage this complete analysis into savings. The pricing may simply be too high, or active services may use overly expensive configurations. The treasurer should check for any unneeded services. Common redundancies can include receiving both electronic and hardcopies of checks, using packages featuring both electronic transmission and express mail, performing multiple daily deposits instead of a single batch, or using Fedwire rather than ACH. Accurate benchmarking makes each of these wasteful potential expenses easier to identify. Once recognized, streamlining such service costs can be simple.

When it comes to bank pricing, treasurers also have a variety of options for optimization. For example, treasury could consolidate the lockbox items to Bank Y’s lower cost. It could then restructure processing at that bank to the market’s median price. Alternatively, it could request a bid from Bank Yon on the total volume and explore that offer.

Apply robust benchmark analysis across the board

The same process for optimizing bank offers and options based on complete and accurate benchmark analysis applies to all bank services used by corporate treasury teams. All transaction processing and information services should be put to careful scrutiny to see what savings may emerge. In this way, implementing the right treasury management strategy and processes to make robust benchmarking an integrated component of regular bank fee analysis is an investment that pays equally robust dividends.

Author: Heena Ladhani is the Ecosystem Manager at GTreasury, a treasury and risk management system.  She is a FinTech professional with more than seven years of experience working with global clients to design solutions and improve processes utilizing treasury systems. She resides near Chicago.

 

How global enterprises can finally end the cycle of redundant IT-related payments projects

30-08-2021 | TIS |

This article begins by examining the current state of enterprise treasury and finance technology implementations, including the standard project timelines, core challenges, and ultimate outcomes. This is followed by an analysis that outlines an improved methodology for enterprises to follow as they seek to ensure the global optimization and standardization of their payment systems, workflows, and technologies.

Modern enterprises are stuck in an endless cycle of payment technology upgrades

 

For enterprise finance and treasury professionals, why does it feel like the road to payments automation and technology optimization is never complete?

If you’re an active practitioner, you’ve likely asked yourself this very question (or at least a variation of it) within the past few years. Perhaps it was during a very long and arduous TMS or ERP implementation, a major acquisition of a new entity, or a rationalization of your global bank relationships. In any case, your musings were probably due to the fact that these types of projects have become an all-too-regular occurrence (and a subsequent thorn in the side) for enterprises around the world.

As recently as 2018, data showed that the average corporate timeline for a SaaS-based TMS implementation was 10-18 months. Technology overhauls involving larger and more widely used systems, such as global ERPs, may have taken up to 3-5 years. And although these respective timelines continue to grow shorter as cloud services and other innovations rise to the forefront, projects of this magnitude still represent a massive undertaking.

During these periods, it’s common for practitioners to wind up collaborating with dozens of internal and external stakeholders, joining hundreds of calls, and spending countless hours training, testing, and configuring the new system – all while continuing to perform their core list of daily responsibilities.

The ultimate result being?

Although seasoned professionals will tell you that every implementation is different, let’s think about the bigger picture. Of course, the results of each specific project can vary drastically, sometimes for reasons far outside of anyone’s control. There may be budget constraints, bandwidth constraints, technical limitations, and even geopolitical or environmental obstructions. Employee turnover may cause undue delays as well. And yet other times, the entire project may flow smoothly and on budget from start to finish.

But looking beyond the individual success or failure of any single project, how long after each project’s completion will it be until a new technology implementation is required?

One year? Two years? Five years?

Or, in the case of global enterprises, perhaps you are simultaneously working on numerous financial technology implementations all at once, and the completion of one only results in your reprioritization of another.
Unfortunately, this endless cycle of new technology and payment upgrades is what most enterprise treasury and finance teams find themselves dealing with today, and it has become one of the primary sources of confusion and headache for global companies.

Let’s quickly evaluate the underlying complexities in more detail.

Why does global expansion often lead to excessive payments complexity?

 

Although domestic companies operating in a single country or region undoubtedly face their own degree of technology and payments complexity, the level of difficulty associated with managing a global network of systems, data, and information is exponentially greater.

What are the main reasons for this?

To begin, consider the sheer volume of payments being made across a global enterprise, including all the various locations, currencies, and payment types. For the largest companies, there may be millions of inbound customer payments occurring every day through a combination of cash, check, card, and account-to-account options like ACH and SEPA. At the same time, an equally large and diverse variety of outbound payments must be generated by the enterprise to compensate employees, vendors, and partners. And every time a new entity, industry, or market vertical is added to the mix, these volumes intensify.

Adding further complexity, consider how the payment channels and formats in use across each world region can vary broadly as well. Just to name a few, there is EBICS in Europe, NACHA in North America, SWIFT for international payments, and H2H (direct) connections that may be utilized globally. Local variations of these channels also exist in other regions, and going a step further, each of the specific banks used by an enterprise will have its own connectivity preferences for payments and information reporting. Individual clients, partners, and vendors may also request payment data to be created in specific formats such as SWIFT MT, ISO 20022, EDI, BAI, and BAI2.

Measure Payments Complexity

Finally, the diverse compliance and security standards that exist across various countries require unique filtering and monitoring workflows to be established in different regions. Although U.S. companies may be familiar in dealing with OFAC sanction lists, FBAR statutes, and data privacy laws like GDPR, the regulatory landscape in Asia, Africa, and the Middle East looks quite different. In fact, each specific country within these regions might have its own distinct set of rules and restrictions, and these protocols must closely adhere to any time that payments data and technology solutions are managed locally.

But despite all these challenges, perhaps the largest source of headache and confusion for enterprise practitioners stems from attempting to manage a disparate and unintegrated web of back-office payment solutions.

What do we mean by this?

The back-office conundrum: too many solutions and not enough integrations

 

In 2016, research from Fortune highlighted that global enterprises were undergoing merger and acquisition (M&A) activity at incredible rates, with the five most active companies absorbing 122 new entities between them on the year. Data from more recent years showcases a similar story, and at the same time, organic growth is also driving these enterprises to open new offices, enter into new markets, and expand into new world regions.

The challenge?

As these new acquisitions and locations ultimately go on to form new company entities and subsidiaries, the underlying systems used at each locality must be connected to the enterprise’s main technology stack in order to facilitate data transmission, cash and payment visibility, and other core financial functions. But for enterprises with hundreds of already-existing entities and a steady stream of new acquisitions, consider how many systems must be connected to the enterprise’s core technology stack each year. Also consider the amount of maintenance, upkeep, and investment that managing this global network of technology requires. And finally, reflect on how each of these systems will gradually become a legacy over time and need to be replaced as new technologies and solutions rise to the forefront of the industry.

We know from experience that not all of these global systems are able to connect or integrate with one another. Perhaps some solutions are too old, the budget too insufficient, or IT bandwidth is stretched too thin to prioritize the development of proper connections. As a result, it may take days, weeks, or even months for the data and information contained within these local systems to be made available across the entire enterprise. And if these siloed systems are not isolated occurrences but actually comprise a significant portion of the enterprise’s back-office infrastructure, then almost every single financial and payments-related function will be impacted.

EPO Payments Complexity

Without automated connectivity and integration, visibility to cash balances and payment statuses will take a hit. Creating a standardized compliance and security process will be almost impossible, and stewarding the company’s liquid assets will be hampered by a lack of transparency to global data.

Today, these siloed entity technology stacks and legacy systems are often the unintended result of sustained business growth. In fact, it’s almost natural for them to occur. However, with today’s speed of change in commerce and technology, it is no longer an option to leave each of these functions, systems, and geographies unconnected. Siloes trap data, reduce communication and visibility, and ultimately stifle growth. And in the world of payments and technology, a lack of visibility and automation will directly impact liquidity, profitability, and exposure to risk across the entire enterprise.

So then, for enterprises that find themselves in this situation, what is the best approach to optimization?

Introducing a new framework for managing enterprise payment maturity

 

In a perfect world, enterprises that need to connect all of their global technology and payments solutions, including bank platforms and 3rd party solutions, would simply integrate every system with every other system. This would effectively enable complete unification and connectivity across the enterprise’s entire network, and data could flow immediately and seamlessly across any department, entity, and location for real-time visibility and control.

Of course, active practitioners understand how unrealistic this approach would be. In reality, it would require an almost endless variety of custom integrations to be established across each internal system and potentially hundreds of banks and external solutions. Despite innovations surrounding APIs and other connectivity methods, this task would still be insurmountable, from both a budgetary and bandwidth perspective. And even if an enterprise did somehow manage to connect all these solutions together, the maintenance and upkeep required to sustain each integration would require a whole army of dedicated IT personnel and even more investment.

An alternative solution?

Given the fragmented systems landscape that exists across most global enterprises, the most effective way to achieve a holistic view of (and control over) every siloed process, system, and geography is by implementing a single Enterprise Payments Optimization (EPO) layer that sits above all other solutions in an enterprise’s technology stack. Rather than connect every platform with every other, each solution need only connect to the EPO platform instead. This drastically simplifies the process of integrating new solutions with an enterprise’s tech stack, and also automates the process of transmitting payments data between any system that is connected to the EPO platform, including those used by different entities, offices, and departments.

Although the adoption of an EPO platform requires some up-front legwork, using a vendor like TIS ensures that the complexity of connecting to banks and performing other technical functions is almost entirely outsourced. This means that formerly difficult and time-consuming tasks that were managed by internal IT teams (such as configuring and maintaining the links between external banks and internal ERPs, HR systems, and TMSs) are now managed by the EPO vendor. As formats evolve or new regulations require changes in integration, EPO vendors like TIS automatically handle the upgrades and also manage the addition of new countries, banks, and users to an enterprise’s network as growth and expansion dictate over time.

Once this type of implementation has been performed, the EPO platform can become the sole channel through which all company payment workflows and data streams are managed and controlled.

TIS Eliminates Global Complexity

As payment instructions or files from ERPs and other back-office systems pass through an EPO platform, they can be quickly transferred to the appropriate bank or end party. In addition, data can be shared with 3rd party vendors and other companies and partners within the network. Subsequent bank statements and reports can also be transmitted from the bank through an EPO platform to the various internal departments and systems where payment instructions are originating from.

Ultimately, the information stored on an EPO platform serves as the single source of truth for payments data across all corporate departments, subsidiaries, and geographies, and it prevents enterprises and their IT departments from having to manage a tangled mess of disparate back-office connections.

EPO solutions provide the perfect option to support ongoing enterprise growth and expansion

 

While the EPO orchestration strategy outlined above is very effective at breaking down geographic and entity-specific siloes, it is also the ideal platform for fostering a strategic, long-term approach to enterprise payment maturity.

Today, the technology landscape continues to evolve rapidly, as do the payment solutions and methods used by global enterprises. In the current era, this means that approximately once every decade, a company’s existing technology infrastructure will need to be overhauled. However, because various internal solutions are installed at different times and for different purposes, the upgrades and maintenance schedules for these solutions are rarely conducted in an organized and timely fashion. Sometimes, these upgrades are not completed at all. And as a result, it’s very easy for an “optimized” payment workflow and the underlying technology stack to start falling behind the curve.

This is why adopting an EPO orchestration layer is so essential for maintaining a constant state of consistency and control.

By connecting all of the various internal systems that comprise your global payments technology stack to an EPO platform, you effectively ensure that regardless of where an entity is located or what local systems are being used, the data and information stored on their platforms is never left isolated or unaccounted for. And as older or outdated enterprise payment solutions are eventually replaced by newer and more upgraded systems, connecting them to the EPO platform in a similar fashion will ensure ongoing cohesion and connectivity across your global networks, even as various technology overhauls and system migrations occur at specific entities or locations within the enterprise.

So, if you’re a treasury or finance professional working for an enterprise with significant process, system, and global complexity — complexity that is ultimately hindering your ability to operate efficiently — ask yourself whether a new approach to payments technology could be the answer.

And if that answer is yes, we invite you to consider TIS and our newly introduced Enterprise Payment Optimization (EPO) platform.

About TIS

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

Visit tis.biz to reimagine your approach to payments.

 

Helping Hand: Using Cashforce to Manage Growth Through M&A

24-08-2021 | treasuryXL | Cashforce

How one treasurer used Cashforce technology to improve forecasting and support growth.

When one treasurer saw that his team was getting too bogged down managing the company’s dozens of bank accounts across 25 entities, he sought out an automated cash management system, but he had a concern: the company is continually growing through mergers and acquisitions, and in the past, new accounts made everything muddy.

  • The process of integrating a new entity and any accounts it brings along can be cumbersome—and who knows if their ERP would even be compatible with the automated solution he chooses?
  • He said that Cashforce, a cash forecasting and working capital analytics solution that can work with multiple ERPs, was the answer. “Cashforce’s ability to take feeds from multiple ERP systems was big.”

New accounts, new problems. 

Before turning to Cashforce, the treasurer had significant capital committed to grow the business through acquisitions. He only had two or three people managing this aspect, and he said the company’s TMS offered little assistance.

  • “Cash is our lifeline,” he said. “To me, the most important thing is knowing how much cash we have and where it is.
    • “We’re not over-leveraged, but we’re leveraged,” he said, so finding a cash management solution that provides quick access to every detail was crucial.
  • But the treasurer said his company doesn’t expect accounts that come with newly acquired companies to work with its preexisting ERP system. Cashforce, which can take data feeds from new ERP systems, was the key.
  • “We needed a cash management solution that integrated with our current ERPs and future ERPs to be able to feed data into the tool,” he said.

Feel the force.

Because Cashforce can take those inputs, the treasurer said it could work. But would it actually save enough time, and free up cash through efficient management of working capital? The solution, he said, had four clear advantages that made cash forecasting “a lot more accurate” in just six months:

  1. Ease of use, with data visualization tools that teams can use without having to dig into reams of numbers.
  2. The ability to drill down into the data into transaction-level detail.
  3. The ability to take these now automatically generated data-driven insights to management instead of spreadsheets.
  4. The ability to view daily bank positions.

Feel the force. 

Because Cashforce can take those inputs, the treasurer said it could work. But would it actually save enough time, and free up cash through efficient management of working capital? The solution, he said, had four clear advantages that made cash forecasting “a lot more accurate” in just six months:

  1. Ease of use, with data visualization tools that teams can use without having to dig into reams of numbers.
  2. The ability to drill down into the data into transaction-level detail.
  3. The ability to take these now automatically generated data-driven insights to management instead of spreadsheets.
  4. The ability to view daily bank positions.

Bonus: data literacy.

 An added “unofficial” benefit of Cashforce that the treasurer added was change management—the opportunity to get a once data-hesitant team to embrace the possibilities offered by analytics.

  • Though he wasn’t intending on using Cashforce to manage credit and collections, through encouraging his team to dig into the data, “one of the biggest advantages is I got my C&C manager to give me a much more accurate forecast.

 

 

How to Start Avoiding Payment Fraud from Happening

| 18-08-2021 | treasuryXL | Nomentia |

It’s 2021 and even with advancing technologies and AI detecting fraudulent behavior, payment fraud remains an ever-present Risk for any company.

The other day we met with someone who has recently been a target of Payment Fraud and is now implementing a payment factory in order to reduce the risk. We wanted to take a look at how we approach the subject with our solution. Having the right software in place is important, sure but it goes beyond technology.

Let’s start with the Software, Nomentia’s Cash Management solution has several mechanisms in place that protect you against fraud.

Here’s a Quick list

  • First of all, our software creates a single point of managing all payments. We talk a lot about centralizing, and this is just that. Our product brings all these payments into a single view. If we think of a typical case, a company might upload some payments to internet banks, some to a service bureau, use host-to-host connections for others and maybe even run some payments via SWIFT. That creates at least 5 times X channels where payments are executed. This means all payments can’t be seen from one view, which already makes it impossible to detect fraudulent or suspicious payments. But in addition, those 5 times X channels also mean 5 times X places where user rights need to be maintained and controlled.
  • This brings us also to the second point; our software comes with a comprehensive user and user rights management. Our software creates a clear structure and visibility as to who has rights to which companies and accounts and what kind of user roles they are having. We create visibility and an easy way to maintain those rights.
  • When payments are transferred from one source system such as ERP, payroll and the likes to our cloud, files cannot be altered. This creates additional security measures that protect companies from attacks.
  • Lastly, we have created capabilities to set up straight forward approval flows that ensure a segregation of duty into the way payments are done, within the users’ approval limit. Approval limits can be set for each user when working in different roles for multiple companies.

Those are the things that come built into our software. But it’s important to highlight one key fact, most fraud attempts have a human factor and that’s why it’s important to look beyond the software and take a critical look at the processes. As a matter of fact, despite all the noise about external risks, fraud and theft are more likely to be committed by an internal actor than an external actor (Source: FBI Internet Crime Complaint Center).

In other words, if you focus on validating data for possible fraud, you probably should take steps to minimize the possibility of fraud in the first place. Otherwise, proverbially speaking, it’s winter (Northern Finland winter for that matter) and you are going out in shorts and with wet hair.

Apart from controlling user access rights, we would like to share some more tips and ideas that can help to mitigate the risk of fraud.

  • Payments that are made from ERP but rejected by the bank cannot be modified by all users. In practice this means when a payment is made from the ERP system but rejected by the bank, it bounces back where users need to review the failed payment, before sending it to the bank. Fixing the payment data on ERP master data instead of manual adjustments. This would highlight and prevent for example internal fraud attempts.
  • Consider working with your system admins to install payment templates that your end users can use. This decreases the risk for fraud and error by limiting the manual work of filling in information.
  • Make use of the full audit trail that we provide. You can see the whole lifecycle of a payment from its creation to its reconciliation, including by whom and which changes were made, who has approved and sent the payment.
  • Create clear rules on manual payment creation. We enforce a 4-eye approval flow before sending it. In manual payments, there might be a reason to have more than 2 persons approval. If you are having SSC’s in use or even multiple SSC globally. Use the standard 4-eye approval flow locally but have additional approval from another SSC to reduce the internal actor.

These are a few ideas from our side. We are always happy to hear more ideas and feedback on how we can together create safe payment processes.

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