Executive Briefing CFOs in the Firing Line

| 01-07-2020 | TIS |

Government-imposed sanctions on who companies can trade with and how are changing almost daily. At the same time, CFOs are becoming personally responsible for sanctions violations relating to payments – and the size of fines imposed on errant organizations is snowballing.

How, then, can finance leaders tackle these issues to minimize the risk of sanctions breaches, improve payments workflows, and ultimately, avoid severe legal consequences? Our partner TIS offers an executive briefing on this topic. Read more about:

  1. The importance of government-imposed sanctions
  2. What types of sanctions exist?
  3. Pinpointing the risks
  4. Why in-house screening matters
  5. Optimizing the set-up

Download the latest executive briefing from TIS and gain timely insights into this complex topic and an extensive list of legal expert’s recommendations in order to ultimately protect the organization against the financial and reputational damage of a non-compliance incident as well as the CFO from personal liability.

About TIS:

TIS (Treasury Intelligence Solutions GmbH), founded in Walldorf, Germany in 2010, is a global leader in managing corporate payments. The Financial Times named TIS as one of “Europe’s Fastest Growing Companies” for 2019 and 2020. Offered as Software-as-a-Service (SaaS), the TIS solution is a comprehensive, highly-scalable, cloud platform for company-wide payments and cash management. The TIS solution has been successfully used for many years in both large and medium-sized companies, including Adecco Group, Hugo Boss, Fresenius, Fugro, Lanxess, OSRAM and QIAGEN. More than 25% of DAX companies are already TIS customers.

Your world of Payments. ONE Login.

Visit TIS.biz website

Download the executive briefing here!

 

Meet our Experts – Interview Ger van Rosmalen

01-07-2020 | Ger van Rosmalen | treasuryXL

Our Expert Ger van Rosmalen has over 45 years of global Trade Finance expertise (Letters of Credit, Documentary Collections, Bank guarantees) mainly working for international banks. In addition, he is also frequently asked to conduct trainings for companies like EvoFenedex and Vesting Finance, as well as for Chambers of Commerce, and Professional Higher Education programs. His drive is to assist companies with Trade Finance solutions. To help companies to achieve their business objectives through a better understanding of profitable Trade Finance solutions and instruments, and to promote efficient cooperation between Sales, Finance and Logistics. Get to know him better:

We asked him 11 questions, let’s go!

1. How did your Trade Finance journey start?

My first job started 46 years ago at the Letter of Credit Department of a Dutch bank. I applied for the job of junior and when I answered the question of the HR manager “do you have bank blood?” with YES he hired me.

2. What do you like about working in Trade Finance?

Not one day, not one transaction is the same. I like to be challenged, finding solutions, be creative but always within the guidelines of compliance/AML rules. Assisting customers to close their deal. Education and training of Trade Finance solutions so customers understand the risk before signing a contract.

3. What is your Trade Finance Expertise?

I have a lot of knowledge and expertise in the field of Letters of Credit and Bank guarantees. How to apply those instruments, explain to people with different levels of Trade Finance knowledge about these products and how to be able to understand the risks and to avoid or exclude certain risks.

4. Do you have examples of risk mitigation, creation of opportunities and/or cost savings?

Risk Mitigation in Trade Finance can be the use of “confirmed” Letters of Credit, it means (if possible) that the bank of the exporter is taking over the (country/bank) risk of a foreign unknown bank. If the exporter can fulfill the conditions of the Letter of Credit his risk is his own bank. Creation of opportunities is my passion, drive and reason for being is this business for such a long time.

5. What has been your best experience in your Trade Finance career until today?

The change of UCP500 to UCP600 (Rules for Letters of Credit) was a big improvement for companies dealing with L/C’s. It is not that black and white anymore. My experience is how companies adapted to these new rules if you take them through these rules. People felt more confident in using these instruments and will be used for some time. Since UCP600 is already in force from 2007 it is expected that new rules are on their way. I hope my very best experience is yet to come when new rules will be launched. Trade has evolved and rules should adopt to that.

6. What has been your biggest challenge in Trade Finance?

My biggest challenge is every day being able to convince people to use these well established instruments.

7. What’s the most important lesson that you’ve learned as a Trade Finance expert?

To trust my instinct. Some deals are too good to be true or I just miss the logic of the transaction. My instinct has let me down only once in 46 years.

8. How have you seen the role of trade finance expert evolve over the years?

On the Sales side of the Trade Finance Expert I noticed corporates appreciate direct contact with an expert who has all the knowledge of Trade Finance from a sales perspective as well a from a operations perspective. You have become their trusted advisor in this field.

9. The coronavirus is undoubtedly an unprecedented crisis. In general, can you elaborate on the impact this virus has on Trade Finance from your perspective?

The use of Trade Finance instruments will be more important now that we are facing the Corona crisis, which will force exporters to look for other sometimes forgotten alternative solutions. High tech innovative solutions such as FinTech or Block Chain is still under construction and exporters do not have the time to investigate those solutions. They need to generate turnover and need quick available products such as Letters of Credit to support their business. I embrace those new techniques but that will not have my priority the coming period of uncertainty. People tend to say Letters of Credit are old fashioned, time consuming and too much risk. I disagree if you understand what is expected of you as exporter. If you know how to communicate with your buyer and your bank you will experience the comfort of those almost forgotten products. It is imperative that you understand and educate yourself in this field or hire experts to support you.

10. What developments do you expect in corporate trade finance in the near and further future?

It will depend on how the financial world will be able to join forces and create workable solutions. Not several small groups of banks developing their system so still fragmented but one solution workable for all parties involved in Trade Finance. If you look at the Bank Payment Obligation (BPO) it is the example how we missed the opportunity to develop one unique system. Corporates dealing with different banks and other counterparts needed several systems offered by different banks or other parties. If suppliers of the Fintech or Blockchain solutions are learning from the BPO adventure they now have the opportunity to change the world of Trade Finance significantly. Digitalisation of Trade Finance is the future whether that will be the near future or somewhere in the future is the challenge of all parties involved.

11. What is your best advice for businesses without a Trade Finance expert?

In my opinion you cannot rely on knowledge outside your company only. It will make you vulnerable. Outsourcing is not the magic word. Educate and train yourself and your staff so you understand the impact of your decisions and take responsibility.

 

 

 

Ger van Rosmalen

Trade Finance Specialist

 

 

 

 


Does your business need support in Trade Finance, Treasury or a Treasury QuickScan?

We have treasurers available, go to Rent a Treasurer for all information.



Meet our Experts – Interview Olivier Werlingshoff

23-06-2020 | Olivier Werlingshoff | treasuryXL

Our Expert Olivier Werlingshoff specializes in the following fields:

His focus is to help the business improve their working capital and cash management processes to release trapped cash, to reduce costs and to be “in control”. Get to know him better:

We asked him 9 questions, let’s go!

1. How did your Treasury journey start?

After working at banks as cash management consultant for several years I was asked to set up a treasury department at a corporate.  The company was a combination of retail, real estate and development and active in the whole of Europe. Besides the set up of a new department they also wanted to optimize different working capital processes and increase the cash awareness. Coming from banks this was a total different environment. Instead of telling companies how to optimize their working capital, I had to do it myself together with different departments. My sales experience helped me to increase the internal cash awareness and to promote optimization of working capital processes.

2. What do you like about working in Treasury?

Treasury is the oil in organizations where all cash related departments comes together. By optimizing those processes you can get a grip on your cash, decrease risks and release trapped cash.

3. What is your Treasury Expertise?

Operational cash management, liquidity forecast (direct- indirect), risk management, (international) bank account structure,  cash pooling, working capital optimization.

4. Do you have examples of risk mitigation, creation of opportunities and/or cost savings?

Yes, a lot of cost savings examples and also release of trapped cash. Decrease bank transfer pricing, introduction of new payment methods to increase the turnover, implementation of cash pools and optimize working capital processes to release trapped cash to mention a few.

5. What has been your best experience in your treasury career until today?

By showing the benefits of treasury to colleagues by increasing the cash awareness. By doing so, new ideas comes out of the organizations itself and are more easy to implement.

6. What has been your biggest challenge in treasury?

The implementation of a new payment system in a complex organization. You have to focus on stakeholder management and get the operational department behind you with support of the board members.

7. What’s the most important lesson that you’ve learned as a treasurer?

Treasury is a supporting function. You have to help other departments and the CFO to achieve their targets.

8. The coronavirus is undoubtedly an unprecedented crisis. In general, can you elaborate on the impact this virus has on treasury from your perspective?

In a lot of sectors the sales dropped due to the Corona lock-down. Companies need to have a clear view on their cash and be able to pay their invoices on time. Forecasting is more than ever very important and key to be able to forecast funding needs on time.

9. What is your best advice for businesses without a Treasurer?

Not all companies need a dedicated treasurer. Controllers need to have more focus on cash related items and risks (liquidity, FX, Interest and audit). Furthermore it will be good for controllers to focus more on forecasts instead of the reporting of past activities.

 

 

Olivier Werlingshoff

Owner at WERFIAD | Working Capital | Cash Management |

 

 

 

 


Does your business need support in Treasury or a Treasury QuickScan?

We have treasurers available, go to Rent a Treasurer for all information.



Webinar | July 16 | Mitigating Fraud With a Corporate Payment Hub

| 22-06-2020 | treasuryXL | Kyriba |

In today’s changing IT environment, we see more corporates exposed to the risk of fraud, due to legacy controls and manual processes. With many companies applying a new ‘working from home’ strategy, the risk of fraud is bigger than ever before.

In today’s changing IT environment, we see more corporates exposed to the risk of fraud, due to legacy controls and manual processes. With many companies applying a new ‘working from home’ strategy, the risk of fraud is bigger than ever before.

During this webinar we will hear:

  • How does a payment hub support you in mitigating fraud?
  • What is rules based fraud detection?
  • Why is machine learning an important part of our fraud detection?
  • How does fraud detection fit in your overall payment processes?

Paul Simpson, Strategic Payments Director at Kyriba, together with Value Engineer, Alroy D’Cruz, will discuss these most important questions and will give you an insight on how Kyriba is supporting over 2,300 of your peers worldwide with our SaaS Payment Fraud solutions.

Presenters:

 

 

 

PAUL SIMPSON

Strategic Payments Director, Kyriba

 

 

 

 

 

ALROY D’CRUZ

Value Engineer, Kyriba

 

 



Submit on the registration page and save your place.

 

About Kyriba

Kyriba empowers CFOs and their teams to transform how they activate liquidity as a dynamic, real-time vehicle for growth and value creation, while also protecting against financial risk. Kyriba’s pioneering Active Liquidity Network connects internal applications for treasury, risk, payments and working capital, with vital external sources such as banks, ERPs, trading platforms, and market data providers. Based on a secure, highly scalable SaaS platform that leverages artificial and business intelligence, Kyriba enables thousands of companies worldwide to maximize growth opportunities, protect against loss from fraud and financial risk, and reduce costs through advanced automation. Kyriba is headquartered in San Diego, with offices in New York, Paris, London, Frankfurt, Tokyo, Dubai, Singapore, Shanghai and other major locations. For more information, visit www.kyriba.com.

An Introduction to Forwards, Futures and Options | Part 2

17-06-2020 | by Aastha Tomar

In her previous post, our Expert Aastha Tomar explained how the forwards work. Lets see the second type of hedge. The second type of hedge contract is futures. Like forwards they also fix the currency rate for a future date. The major difference between a future and a forward is that futures are exchange traded and therefore they are standardized.

Features of Futures

  1. They have standard sizes, delivery dates and settlement rules. The settlement mechanisms reduces much of the credit risk .
    -> Now why do I say that credit risk is reduced ?                                                                                                                                                                                                                                                                                                                                                                                                                    As mentioned earlier, all settlement takes place through the exchange clearing house and the two parties buyer and seller are not in direct contact with each other. Therefore since it is the responsibility of exchange clearing house to settle the trade, the counter-parties run the credit risk of the exchange clearing house instead on each other.

  2. They can be cash settled or physically delivered and are legally binding.They trade in one contract size, so corporate must trade in multiples of that
  3. They move in increments called ticks and each tick has a value. The number of ticks made or lost on a trade determines the loss/profit of the trade
  4. The counter parties holding the contracts on the expiration date must deliver the currency amount at the specified price on the specified delivery date or they can even close out the position before the expiry date, this can be done by doing an equal and opposite trade in the same futures contract.
  5. To enter into a future contract an initial deposit into a margin account is required . The contract is then marked to market each day and a company is required to add more funds to the margin account if cumulative losses drain the margin account. If the company does not respond to a margin call, the exchange closes out the contract.
  6. The contracts are physically delivered four times in a year on the third Wednesday of March, June, September, and December.

Difference between future and forwards

  1. Futures are traded on an exchange hence standardized therefore a company may not be able to hedge the exact and full amount of underlying transaction. They may have to under-hedge .
  2. The delivery date in future may not be same as the maturity of underlying transaction which may open the corporate for some market fluctuation.
  3. The treasures can easily unwind a hedge position earlier than its normal settlement date if needed.
  4. In a forward contract, the bank includes a transaction fee in the contract. In a futures contract, a broker charges a commission to execute the deal.
Lets understand futures with an example :

Lets take EUR/USD as an example,

One contract size for EURUSD future is $125,000 worth of Euros and one tick size for EURUSD future is .00005. Therefore the price movement will be ($125,000*.00005) =$6.25 per EUR

Now if we purchase one futures contract of the EUR/USD, which is trading $1.0901 . We are hoping that EUR will appreciate , relative to the Dollar. Suppose we are lucky and things go as expected, and the exchange rate rises to $1.09015, We will make $6.25 in profit (per contract). Cool !!! Suppose we are luckier and FED makes some negative announcement on top of that ECB does some tremendous positive changes in their policy due to which EUR shoots up becomes much more stronger and exchange rate rises to $1.09110 (a whooping increase of 20 ticks), then we would make $125.00 in profit per contract ($6.25 x 20 ticks = $125.00).

lets see it more clearly in the following table :

Now why do corporates stay away from Futures ?

  1. Futures cannot be customized hence there is not always a complete hedge
  2. Companies don’t want to put initial margin money in the exchange
  3. They want to stay away from the hassle of mark to market each day and depositing money if the losses erase the deposited margin money
  4. With forwards there is a human interaction with the banker who enters trade with you and you feel more comfortable with that, you may also negotiate forward premia with the banker and if there is a long standing relationship with the bank, the bank sometimes forego or reduce the fees. In Futures that’s not the case.

Whether its a forward or future contract, nothing is difficult if you have the intent to learn the product . Once you start understanding how hedge market works and start realizing the benefit of it then it will eventually be beneficial for you as a Treasurer and for your corporate which will be saved from unwanted currency fluctuations. In our third and last post in this series we will talk about Options ..keep learning, be safe.. to be continued ….

 

Aastha Tomar

FX & Derivatives | Debt Capital Markets | MBA Finance
Electrical Engineer | Sustainability

Meet our Experts – Interview Michael Ringeling

16-06-2020 | Michael Ringeling | treasuryXL

Meet our Expert Micheal Ringeling, an experienced Treasurer with a unique combination of corporate treasury, corporate control and banking expertise. A solid base in finance (Stork, TenneT) and banking (ABN AMRO Bank) contributed to his specialisation in treasury. Being hands on, trustworthy and creative with a can-do mentality, Michael worked as independent interim treasurer in the past nine years for various companies like TNT, Vion, TomTom and Unit4.

Knowing all the ins and outs in the world of treasury, he will hit the ground running and provide efficient and effective solutions on every operational and strategic level in the following areas:

Treasury and Cash Management

  • Cross border cross currency cash pooling, efficient banking infrastructure
  • Finance agreements
  • Intercompany loans, in house bank and intercompany netting
  • Interest rate and foreign exchange (FX) risk management and deal execution (hedging)
  • Treasury policies
  • Cash flow forecasting
  • Establish an optimal relationship between organisation and financial institutions

Treasury Control

  • IFRS, financial instruments and disclosures in the annual report
  • Alignment between Treasury and Control.

We asked him 11 questions, let’s go!

1. How did your treasury journey start?

I started my career in controlling and worked as a corporate controller for the national high voltage grid operator in the Netherlands (TenneT) when the finance director asked me if I would be interested in arranging a bridge loan facility for the acquisition of a company. The answer was obviously yes and that is how my treasury journey started.

2. What do you like about working in Treasury?

The interaction with various people in the business, managing liquidity and funding, finding smart solutions to optimise payment processes, deal with foreign exchange risks. In short, all different aspects of treasury that contribute to the company’s success.  

3. What is your Treasury Expertise?

I am an experienced treasurer with a unique combination of corporate treasury, corporate control and banking expertise.
Finance agreements, Liquidity management, Cash pooling, Efficient banking infrastructure, Intercompany loans, In house bank and intercompany netting, Interest rate and FX risk management, Deal execution, Treasury policies, Cash flow forecasting, IFRS, Financial instruments and disclosures in the annual report and establishing an optimal relationship between organisation and financial institutions are the core of my expertise.

4. Do you have examples of risk mitigation, creation of opportunities and/or cost savings?

For multiple companies, I have advised and executed numerous FX, interest rate and commodity hedges, mitigating the underlying business risks. I have arranged finance agreements enabling companies to pursue new business growth opportunities and implemented cash pools, optimising the cash positions and reducing finance costs.

5. What has been your best experience in your treasury career until today?

I would say the entire journey is one big experience.

6. What has been your biggest challenge in treasury?

Being an interim treasurer, every assignment has its challenges that need 100% attention. The biggest one was a time critical refinance to safeguard business continuity.

7. What’s the most important lesson that you’ve learned as a treasurer?

As a treasurer you are responsible for safeguarding one of the most valuable assets: cash. So be trustworthy at all times, communicate and make sure to always have access to sufficient liquidity.

8. How have you seen the role of Corporate Treasury evolve over the years?

Yes and no. The most important role of a treasurer is safeguarding liquidity. That has not changed much since the concept of money was invented in ancient history. What did change is that we no longer need well armored knights to physically protect the cash. Today’s defense mechanisms are more and more about automation, digital security and regulatory frameworks.

9. The coronavirus is undoubtedly an unprecedented crisis. In general, can you elaborate on the impact this virus has on treasury from your perspective?

Disruptive events like the COViD-19 crisis increase focus on business continuity. Protect your people and your liquidity! Many companies obtained additional (stand-by) credit facilities to make sure sufficient liquidity is available should the business be negatively impacted by the COVID-19 crisis. Cash is king again.

10. What developments do you expect in corporate treasury in the near and further future?

Increasing importance of automation, digitalisation and regulatory frameworks to safely operate corporate treasuries.

11. What is your best advice for businesses without a Treasurer?

Contact treasuryXL and call me.
Most small and mid-size companies will not have a full-time treasurer on board. That does not mean they don’t have treasury risks. Think about finance agreements and their terms and conditions, interest rate risk, foreign exchange risk, payment processes, electronic banking, bank guarantees and bank relationships. Some of these can be efficiently managed by the controller or finance director. However, some treasury topics can be handled better by a specialist. Ad interim, part-time, on a project basis or in an advisory role to support the finance director. Interested in how I can support? Please contact me, I’m just one phone call or email away.

 

 

 

Michael Ringeling

Treasurer

 

 

 


Does your business need support in Treasury or a Treasury QuickScan?

We have treasurers available, go to Rent a Treasurer for all information.



7 Experts on Activating Liquidity – a Guide to Leveraging Technology to Generate New Growth

| 11-6-2020 | treasuryXL | Kyriba |

Managing liquidity has never been easy, but new technologies are making it easier. With ease comes speed, accuracy and efficiency, enabling treasury to more effectively see, move and protect cash and generate increased business value. However, activating liquidity while navigating volatile markets can be difficult. So how does treasury leverage technology to activate liquidity and generate new growth, and what does it gain by doing so?

‘7 Experts on Activating Liquidity’ is a Mighty Guide, sponsored by leading global cloud treasury and finance solution provider Kyriba.  In this guide the question of how to leverage technology to optimise treasury and finance, extend visibility and controls, and maximise enterprise value is explored by asking seven treasury management experts from different industries the following questions:

  1. How does expanding the scope of treasury to be inclusive of cash, risk, payments and working capital increase enterprise value?
  2. How do you most effectively manage FX risk exposure, and why is it important to do that?
  3. What are the advantages of centralizing and standardizing global payment processes through a single system?
  4. What are the advantages of centralizing the management of free cash flow and liquidity in your organization?
  5. What level of integration is necessary to get a true, real-time view of cash and liquidity, and how would that real-time data enhance decision making and performance?

Their insights are collected in the five chapters of this eBook. In reading them, David Rogelberg, Editor, was struck by how different the challenges are for each of the expert’s business, and how they all benefit from greater visibility into cash, payments, risk and working capital.

CFOs have a tough balancing act – trying to pursue strategic growth initiatives while minding the right level of risk. And recent global events have exacerbated this challenge. The answer to solving this problem lies in Active Liquidity – an approach to treasury and finance that elevates the impact of liquidity to generate new market value, even in volatile markets.

Kyriba is excited to sponsor this eBook, in which seven treasury leaders lend their expertise to the concept of Active Liquidity and the key pieces that it encompasses – optimizing cash, payments and risk to generate business value.  Activating Liquidity puts organizations on a path to new value creation, enabling them to:

  • Expand the abilities of treasury and finance, using liquidity as a lever to build value
  • Extend visibility and controls to see, move, protect and grow cash
  • Transform data into intelligence and drive action to maximize enterprise value

This Mighty Guide aims to provide a holistic view and credible advice by exploring, comparing and contrasting a variety of viewpoints from top experts.  The insights given by these treasury executives will give a deep understanding of the benefits of Active Liquidity and how insight into global cash, liquidity and exposure can help execute treasury strategies more easily and efficiently.

Request and download free e-book:

Kyriba is a proud sponsor of this Mighty Guide.  Kyriba empowers CFOs and their teams to transform how they activate liquidity as a dynamic, real-time vehicle for growth and value creation, while also protecting against financial risk. Kyriba’s pioneering Active Liquidity Network connects internal applications for treasury, risk, payments and working capital, with vital external sources such as banks, ERPs, trading platforms, market data providers, and other financial institutions. Based on a secure, highly scalable SaaS platform that leverages artificial and business intelligence on an API-enabled architecture, Kyriba enables thousands of companies worldwide to maximize growth opportunities, protect against loss from fraud and financial risk, and reduce costs through advanced automation. Kyriba is headquartered in San Diego, with offices in The Netherlands, London, Paris, New York, Tokyo, Dubai and other major locations.

For more information, visit www.kyriba.com.

What does experience in Treasury get you?

10-06-2020 | Niki van Zanten

In the wonderful world of Treasury there is an easy and digestible answer for most things, but to cover the full context requires general elaboration. In other words, there are always main points but fine-tuning is equally important and the devil is in the details.

Keeping this in mind, let’s get right into attempting to answer the headline question of this blog and unravel what experience can mean for you in financial risk management with the following points

  • The answer before the analysis
  • The right analysis and additional validation
  • Speed when needed and a reserved approach 
  • An actual opinion
  • Leadership in crisis
  • Holistic approach to Finance and ability to see what’s really going on

The answer before the analysis

At school you have the smart kids who have the answer for tough questions (lets say for conversation sake a math equation which looks like this 3(1-2x)=-9, where question is what x is*) and get there by taking the necessary steps** to come to the correct answer. This is what you are taught and it leads to the desired result. Then, there is a second group who shout out the right answer immediately but skipped all the steps involved. The teacher will disapprove of this behavior as it’s not how you are taught to handle a mathematical problem. Also not all kids can be taught to handle problems this way. If experience were to be molded into these group of kids, it would perhaps be one who can answer the question immediately and then explain this steps in retrospect. In financial markets this combination is very valuable as going for the process can be cumbersome and hard to explain, unless you see what will happen at the beginning.

The right analysis and the right questions

Imagine you walk into a wine shop and ask for a bottle of wine to combine with a mouth watering turbot with lobster Bearnaise sauce. The wine shop owner recommends a Montrachet**, asking no further question. You ask him, why this wine? He answers the following; because it is a thick buttery wine thus perfectly combining with the richness of Bearnaise. Also this happens to be an excellent year from an equally exceptional producer. You end up buying the bottle to return home and taste a thirteen in a dozen overpriced bottle of wine which does reasonable well with the food but has no element of surprise or the fascination one might expect.

A few question from the wine shop owner like, what kind of wine do you appreciate a lot and what do you like about it or how much is your budget would help you on the way. The best question from your side is potential, did you ever try it? If it turns out he didn’t try it and is still trying to sell it to you he has a close resemblance to a very typical sales person in the financial sector. In other words, experience enables people to ask the right question as well as create a value and advice instead of value add for the selling party only.

Speed when needed or a reserved approach

Typically, it is assumed that decision making in financial markets and Risk management requires speed. In most cases, this is correct, providing you understand of the exposure for which your are hedging as well as the derivative you are using. Put in a simple example, when hedging a 5 year INR loan, experience will tell you to do some extra due diligence on the accuracy of the underlying exposure for the simple reason that the consequences can be significant if things go wrong. Immediately, you will also realize a 5 year tenor on INR is either not liquid or the credit component is priced in at a hefty charge replacing your FX risk with an interest risk on the roll over. If you do not execute with speed, you could be exposed to the spot risk; if you execute to fast, you might hedge something not required or with a derivative which doesn’t do the job as intended. A seasoned advisor will be the best of both worlds.

An actual opinion

Experience creates a backbone as well as a level of comfort to believe what you are saying. Consequently, this boils down to the question; Why is someone trying to sell something to me? Because you need it or because they need you to make their PL? This goes into the discussion on whether an advisor has an intrinsic or extrinsic motivation. In my view, experience is not a guarantee on where motivation comes from, but it had a lot more time to positively develop. You will hear what you are better of hearing than what you want to hear. On top of that, the advise will be more holistic as it takes a while to get all the bits and pieces of treasury together, let alone how it fits across departments in a company.

Leadership in crisis 

Argentina 2018. Hefty devaluation on the currency as well as very steep and volatile interest rates combined with liquidity issues, not to forget the social and economic disaster hitting many citizens. Situations like this, attract senior management attention like Winnie the Pooh spotting a jar of honey. One might be inclined to leave the ”when to hedge or not” decision to senior management or have endless meetings discussing business mitigation. Each crisis has different triggers as well as solutions. A seasoned crisis manager does add direct value in not only identifying root cause of what’s going on, whether financial instruments actually provide relief or are a black hole of money and in putting together the right and moreover realistic guidance for the business. I am aware of the fact that people do not like hearing bad news, but not listening to it usually brings problems back on steroids. 

Holistic approach

This is a tough one. Most people will agree, the big picture is the best one to follow, but its very common across corporates to religiously hedge PL exposures. Even in cases where there are conflicts, like the cash flow at company level being different sign than the PL FX exposure, often a bogus hedge is implemented. A holistic approach and good target setting, helps you pick the strategy with the overall best results and experience.

Conclusion

These are just a few considerations on why experience can provide added value in (FX) risk management beyond the well know assumption that it provides a way to do more in less time and is a great way to also transfer knowledge down to the younger workforce.

Hope this gives some food for thought and many fruitful discussions.

 

* multiply by 3 giving 3-6X=—9 and then deducting 3 on each side reducing equation to -6X=-12 revealing the answer.

** Montrachet is one of the words most sought after white wines. Also happy to discuss wine but that’s a different beast and business proposition.

 

Niki van Zanten

FX specialist

 

Meet our Experts – Interview Aastha Tomar

09-06-2020 | Aastha Tomar | treasuryXL

Aastha Tomar has joined treasuryXL at the beginning of 2020 as expert and already published 3 great blogs:

Aastha has been responsible for setting up of Treasury teams for her organizations from scratch and has been a founder member of FX Treasury in a Bank. Being in front office role throughout her career has made her indispensable for her organizations due to her business development and stakeholder management skills. She has single handed led transactions to the tune of USD 5Bn.
Aastha is an Electrical Engineer and master’s in finance, both from premier institutes in India. Her inquisitiveness to learn something new and accept challenging work is responsible for her stints in Software development, Investment banking, Banking and Entrepreneurship.
In her free time Aastha loves to write blogs/ articles on various topic ranging from leadership, life experiences and sustainability, her latest love.

 

We asked her 9 questions, let’s go!

1. How did your treasury journey start?

My first exposure to how Treasury actually works was quite early during my internship in my MBA. I was lucky enough to do internship in one of India’s largest Corporate Treasury. It was then I decided that I want to make my career in Treasury. Therefore my career choices after MBA were always made while keeping in mind that I have to move towards being a corporate Treasurer.

2. What do you like about working in Treasury?

Treasury is a very fascinating department, there doesn’t goes even a single day where you don’t learn something new. Every day brings a new aspect to the profile. You have to be on your toes always to be up the curve which is the best part. You are always on top of what is happening in the world and how it is impacting the business. You can always make a positive impact on organisation’s bottom line by being always ready with action of any kind of impact.

3. What is your Treasury Expertise?

I have worked in Corporate finance, fixed income financing through loans and capital markets and have worked in FX Treasury which included risk management, interest rate risk management and FX risk management.

4. Do you have examples of risk mitigation, creation of opportunities and/or cost savings?

I was responsible for ISDA negotiations where we always made sure that default covenants for the counter party are strict and always made sure that the covenants are adhered to and did frequent monitoring for the same. This always kept us informed and saved us from any shocks from covenants default which in turn would have led to default in the derivatives done with the counter party.

5. What has been your best experience in your treasury career until today?

I was the founder member of Treasury in my previous organisation. I joined the organisation before the bank was formed. The initial few months were very demanding as it involved infrastructure set up, documentation, informing corporations about our bank.  After much hard work and after few months I cracked one of the biggest deal for that year for my bank. It was such a nice experience where all your efforts which you put in finally bore fruit.

6. What’s the most important lesson that you’ve learned as a treasurer?

Time is for essence for a Treasurer, we have to take actions swiftly and seamlessly. Each day is different and bring new challenges therefore a Treasurer should be ready to face them  . Always think out of the box- what new products can be used, how to make most use of technology, how make a team which is self motivated and work towards a common goal.

7. The coronavirus is undoubtedly an unprecedented crisis. In general, can you elaborate on the impact this virus has on treasury from your perspective?

The corporations with strong risk management approach, with clear understanding potential risk on business through risk evaluation tools, such as sensitivity analysis, shall be the best place during the current scenario. They would have their foreign currency exposure hedged to an optimum limit, sufficient cash to work with and therefore, during these times, would be able to direct their efforts to improve operational efficiency, carry out M&A evaluations  rather than trying to learn swimming after being thrown in the waters. Business Continuity Management came into play and the organisations which has BSM only in theory in their policy books took lot of time to adjust to the new normal. Thus, COVID 19 brings additional responsibility of treasury towards ensuring corporations not only survive but thrive during the new normal.

8. What developments do you expect in corporate treasury in the near and further future?

One thing has been proved that there is no running away from the Technology. You may be in finance field but you got to know the technology as well. The major development which now will take place will be to reduce as much human intervention as possible in the working of Treasury which will make sure that if at all any such scenario is faced in future work can go on without much impact.

9. How have you seen the role of Corporate Treasury evolve over the years?

I answered this question in my article “The Missing Part of a Treasury Job Description“:

” Gone are the days when a Treasurer was just involved in risk management and ensuring liquidity. In current scenario of news going viral each action creates a ripple effect. As famous Jane Goodall once said : “You cannot get through a single day without having an impact on the world around you. What you do makes a difference, and you have to decide what kind of difference you want to make”. A Treasurer has to take an active role in policy making and lead her organization towards sustainability and protecting consumers  ”

 

Aastha Tomar

FX & Derivatives | Debt Capital Markets | MBA Finance |
Electrical Engineer | Sustainability





 


Does your business need support in Treasury or a Treasury QuickScan?

We have treasurers available, go to Rent a Treasurer for all information.



How to Build a FX Risk Management Policy for Your Business

04-06-2020 | treasuryXL | XE |

If you’ve been keeping up with our blog over the past few weeks, then you should be all caught up on foreign exchange risk. You know that your organization likely has some degree of FX risk, that you should make it a priority to assess your risk level and exposures, and that foregoing FX risk management is one of the most costly mistakes your business could make.

This brings us to our next point: crafting a foreign exchange risk management policy. Having a policy in place is one of the most important steps your organization can take to address foreign exchange risk and volatility in the global currency markets. But if you don’t have a policy in place, or you don’t think your current policy addresses the full scope of your organization’s FX risk, it’s time for an upgrade.

Not sure what to do or where to start? Let us take you through the steps of developing your organization’s foreign exchange risk management policy.

Why do you need a foreign exchange risk management policy?

Here’s the simple answer. If your organization doesn’t have a policy in place to deal with foreign exchange risk, you’ll only be able to respond to situations after they’ve already happened. Instead of acting to reduce your FX risk exposure, you’ll only be able to react to damage that’s already been done.

The markets are constantly moving, and volatility can have a real impact on your business’s bottom line without any warning. Without an FX risk management plan, you’ll only be able to jump into action once the damage has been done, and some of your initial response time will likely be taken up by strategizing over how to properly respond. In that time, the impacts to your business could easily increase.

A comprehensive FX risk management plan will not only give your organization a plan to jump into action in the event that market volatility has an impact on your business, but will also include long-term, ongoing measures to manage currency risk in your business’s day-to-day operations, even in times of muted volatility. By taking steps to reduce your risk exposures now, you can minimize the effects of volatility in the future.

What should your policy cover?

There’s no singular answer to this question, because there’s no such thing as a one-size-fits-all foreign exchange risk management policy. Every policy is different, because an effective policy will address your organization’s FX risks, based on your day-to-day operations and exposures.

There are, however, a few basic elements that every policy should make a point to include.

  • How much foreign exchange risk your business can handle, and over what time periods.
  • The tools your company will use to mitigate said risks.
  • Who in the business is authorized to make decisions about FX risk.
  • A robust process to manage currency risk on an ongoing basis (rather than ad hoc reactions).
  • Long-term strategic planning decisions (as opposed to just day-by-day developments).
  • Measures and action items that can be shared with a group of people, so FX risk management does not fall solely on one key person.

Once the policy has been created, it’s also important that you have a process in place to share it with the company at large, in order for the company to be able to apply risk reduction measures at all times (even if a key decision-maker is out sick or leaves the company).

How often should you update your policy?

At the very least, you should revisit your FX risk management plans once a year. But it might not be a bad idea to reassess more frequently, particularly if your business undergoes changes that could impact its foreign exchange risk.

The following changes would be good opportunities to readjust your FX risk management strategy:

  • An increase or decrease in exposure to particular overseas markets
  • Exposure to new overseas markets or currencies
  • Changes in the outlook for relevant currency markets.

How to get started

If you aren’t sure how to create or develop a risk management policy, we encourage you to discuss this with a foreign exchange specialist. A knowledgeable specialist can assess your FX risk, discuss your options, and help you to formulate the risk management policy that your organization needs for its specific risk profile.

For over 25 years, Xe has been a knowledgeable authority in the global currency markets. They understand foreign exchange risk, they help over 13,000 businesses each year with their foreign exchange and risk management needs.

Get in touch with XE.com

About XE.com

XE can help safeguard your profit margins and improve cashflow through quantifying the FX risk you face and implementing unique strategies to mitigate it. XE Business Solutions provides a comprehensive range of currency services and products to help businesses access competitive rates with greater control.

Deciding when to make an international payment and at what rate can be critical. XE Business Solutions work with businesses to protect bottom-line from exchange rate fluctuations, while the currency experts and risk management specialists act as eyes and ears in the market to protect your profits from the world’s volatile currency markets.

Your company money is safe with XE, their NASDAQ listed parent company, Euronet Worldwide Inc., has a multibillion-dollar market capitalization, and an investment grade credit rating. With offices in the UK, Canada, Europe, APAC and North America they have a truly global coverage.

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

 

 

Visit XE.com

Visit XE partner page

 

 

 

 

Source