Tag Archive for: risk management

Top 5 most common pain points in Treasury

14-02-2020 | treasuryXL | Michael Ringeling

The purpose of Treasury is to manage a company’s funding, liquidity and to mitigate its financial and other risk. Made up of three sub-disciplines, Treasury’s overall objective is to safeguard the company’s holdings and to follow the long-term strategy set forth by Corporate Finance (and strategy). Cash Management, on the other hand, is primarily focused on operational, short-term, efficiency and process optimisation, whereas Risk Management is oriented towards financial research and operational controls.

Michael Ringeling, corporate treasury expert,  made a top 5 of the most common pain points he encounters in Treasury, including consequences and a solution.

Top 5 of the most common pain points in Treasury

 

  1. Too many bank accounts at too many banks

Consequence:
Complex to manage, poor control, higher risk of fraud, higher costs, more KYC/AML requirements

Solution:
Less bank accounts at fewer banks, all via one or two electronic banking systems or multibank platform to manage payments and cash flows. The result will be more efficient, more secure and more cost-effective payment transactions, reporting and reconciliation into the ERP system.

  1. No reliable cash flow forecast

Consequence:
Poor liquidity management. Insecure about the required short and long term funding and poor management information.

Solution:
A good cash flow forecast, providing adequate insight in the organisation’s short and long term cash flows, will contribute to an efficient funding strategy and lower cost of funds.

  1. FX results, (negatively) impacting the company’s P&L

Consequence:
The company’s financial results are impacted by unforeseen and unknown FX results

Solution:
FX risk management analyses, create a FX policy and perform deal execution (hedging) to control FX results

  1. New Loan Agreement needed – negotiations

Consequence:
Difficulties in assessing if the loan terms and conditions are fair. Risk of overpriced loans and/or unfavorable terms and conditions required by the bank(s).

Solution:
Assist the company when negotiating with the bank(s) to get a fair deal with terms and conditions that will not unnecessary limit the company’s flexibility.

  1. Cash is trapped on too many stand alone bankaccounts around the world

Consequence:
Company cannot effectively use a significant amount of cash, resulting in higher (short term) loans and higher interest costs.

Solution:
Implementation of a cross border cross currency cash pool to centralise the company’s cash balances. As a result the amount of local trapped cash will be reduced and that cash can be used for general corporate purposes. Less short term loans and lower interest costs.

Sounds familiar?

Do you recognize the pain points that we mention above in your business? Or are you experiencing other critical treasury pain points in your business?

In our active network there are several treasury experts who can offer treasury support. They can be hired for specific projects or on a regular basis. Check Rent a Treasurer and let us help you.

 

Michael Ringeling

Corporate Treasurer Expert

How are largest European companies managing their financial risks?

17-10-2019 | Stanley Myint | BNP Paribas

The second edition of the “Handbook of Corporate Financial Risk Management” has just been published by Risk books. The handbook is written with all risk management professionals, practitioners, instructors and students in mind, but its core readership are Treasurers at non-financial corporations. It contains 43 real life case studies covering various risk management areas. The book aims to cover both financial risk management and optimal capital structure and its contents.

Motivation for the book

This Handbook is based on real-life client discussions we had in the Risk Management Advisory team at BNP Paribas between 2005 and 2019. We noticed that corporate treasurers and chief financial officers (CFOs) often have similar questions on risk management and capital structure and that these questions are rarely addressed in the existing literature.

This situation can and should lead to a fruitful collaboration between companies and their banks. Companies often come with the best ideas, but do not have the resources to test them. Leading banks, on the other hand, have strong computational resources, a broader sector perspective, an extensive experience in internal risk management, and the ability to develop and deliver the solution. So, if they make an effort to understand a client’s problem in depth, they may be able to add considerable value.

The Handbook is the result of such an effort lasting 14 years and covering more than 700 largest European corporations from all industrial sectors. Its subject is corporate financial risk management, ie, the management of financial risks for non-financial corporations.

While there are many papers on this topic, they are generally written by academics and rarely by practitioners. If we contrast this to the subject of risk management for banks, on which many books have been written from the practitioners’ perspective, we notice a significant gap. Perhaps this is because financial risk is clearly a more central part of business among banks and asset managers than in non-financial corporations. However, that does not mean that financial risk is only important for banks and asset managers. Let us look at one example.

Consider a large European automotive company, with an operating margin of 10%. More than half of its sales are outside Europe, while its production is in EUR. This exposes the company to currency risk. Annual currency volatility is of the order of 15%, therefore, if the foreign revenues fall by 15% due to FX, this can almost wipe out the net profits. Clearly an important question for this company is, “How to manage the currency risk?”

The book blends real corporate situations across capital structure, optimal level of cash, optimal fixed-floating mix and pensions, which are particularly topical now that negative EUR yields create unpresented funding opportunities for corporates, but also tricky challenges on cost of cash and pensions management

One reason why corporate risk management has so far attracted relatively little attention in literature is that, even though the questions asked are often simple (eg, “Should I hedge the translation risk?” or “Does hedging transaction risk reduce the translation risk?”) the answers are rarely simple, and in many cases there is no generally accepted methodology on how to deal with these issues.

So where does the company treasurer go to find answers to these kinds of questions? General corporate finance books are usually very shy when it comes to discussing risk management. Two famous examples of such books devote only 20 – 30 pages to managing financial risk, out of almost 1,000 pages in total. Business schools generally do not devote much time to risk management. We hope that our book goes a long way towards filling this gap.

Website

We invite the reader to utilise the free companion website which accompanies this book, www.corporateriskmanagement.org There, you will find periodic updates on new topics not covered in The Handbook. Much like the book this website should prove a useful resource to corporate treasurers, CFOs and other practitioners as well the academic readers interested in corporate risk management.

About the authors

Stanley Myint is the Head of Risk Management Advisory at BNP Paribas and an Associate Fellow at Saïd Business School, University of Oxford. At BNP Paribas, he advises large multinational corporations on issues related to risk management and capital structure. His expertise is in quantitative and corporate finance, focusing on fixed income derivatives and optimal capital structure. Stanley has 25 years of experience in this field, including 14 years at BNP Paribas and previously at McKinsey & Company, Royal Bank of Scotland and Canadian Imperial Bank of Commerce. He has a PhD in physics from Boston University, a BSc in physics from Belgrade University and speaks French, Spanish, Serbo-Croatian and Italian. At the Saïd Business School, Stanley teaches two courses with Dimitrios Tsomocos and Manos Venardos: “Financial Crises and Risk Management” and “Fixed Income and Derivatives”.

Fabrice Famery is Head of Global Markets corporate sales at BNP Paribas. His group provides corporate clients with hedging solutions across interest rate, foreign exchange, commodity and equity asset classes. Corporate risk management has been the focus of Fabrice’s professional path for the past 30 years. He spent the first seven years of his career in the treasury department of the energy company, ELF, before joining Paribas (now BNP Paribas) in 1996, where he occupied various positions including FX derivative marketer, Head of FX Advisory Group and Head of the Fixed Income Corporate Solutions Group. Fabrice has published articles in Finance Director Europe and Risk Magazine, and has a master’s degree in international affairs from Paris Dauphine University (France).

Content:

Introduction

1 Theory and Practice of Corporate Risk Management *

2 Theory and Practice of Optimal Capital Structure *

PART I: FUNDING AND CAPITAL STRUCTURE

3 Introduction to Funding and Capital Structure

4 How to Obtain a Credit Rating

5 Refinancing Risk and Optimal Debt Maturity*

6 Optimal Cash Position *

7 Optimal Leverage *

PART II: INTEREST RATE AND INFLATION RISKS

8 Introduction to Interest Rate and Inflation Risks

9 How to Develop an Interest Rate Risk Management Policy

10 How to Improve Your Fixed-Floating Mix and Duration

11 Interest Rates: The Most Efficient Hedging Product*

12 Do You Need Inflation-linked Debt

13 Prehedging Interest Rate Risk

14 Pension Fund Asset and Liability Management

PART III: CURRENCY RISK

15 Introduction to Currency Risk

16 How to Develop an FX Risk Management Policy

17 Translation or Transaction: Netting FX Risks *

18 Early Warning Signals

19 How to Hedge High Carry Currencies*

20 Currency Risk on Covenants

21 Optimal Currency Composition of Debt 1:

Protect Book Value

22 Optimal Currency Composition of Debt 2:

Protect Leverage*

23 Cyclicality of Currencies and Use of Options to Manage Credit Utilisation *

24 Managing the Depegging Risk *

25 Currency Risk in Luxury Goods *

PART IV: CREDIT RISK

26 Introduction to Credit Risk

27 Counterparty Risk Methodology

28 Counterparty Risk Protection

29 Optimal Deposit Composition

30 Prehedging Credit Risk

31 xVA Optimisation *

PART V: M&A-RELATED RISKS

32 Introduction to M&A-related Risks

33 Risk Management for M&A

34 Deal-contingent Hedging *

PART VI: COMMODITY RISK

35 Introduction to Commodity Risk

36 Managing Commodity-linked Revenues and Currency Risk

37 Managing Commodity-linked Costs and Currency Risk

38 Commodity Input and Resulting Currency Risk *

39 Offsetting Carbon Emissions*

PART VII: EQUITY RISK

40 Introduction to Equity Risk*

41 Hedging Dilution Risk *

42 Hedging Deferred Compensation*

43 Stake-building*

Bibliography

Index

Note: Chapters marked with * are new to the second edition

Webinar: Interested in how to minimize costs for FX payments?

| 20-6-2019 | TIS |

Does your firm have a global payment landscape? Are all FX payments globally and their associated costs visible to you?

If the answers are Yes and No, you don’t want to miss this 30-minute webinar chaired by Ebury, one of Europe’s fastest growing FinTechs and TIS, a global leader in corporate payment solutions.

For corporate treasurers and cash managers, FX risk management is part of the daily tasks. In this joint webinar presented by Ebury, a global finance specialist in foreign exchange, and TIS, a global leader in cloud-based corporate payment SaaS solution, the experts Thomas Fakhouri, Head of Technology Partnerships at Ebury and Nikola Hristov, Product Owner at TIS, will discuss how a fully integrated and automated payment process with add-on FX service generates enormous saving opportunities for corporates.

Register today

Wed, Jun 26, 2019
3:00 PM – 3:30 PM CEST

Best read articles of all time – Beleggen in obligaties met een hoge rente – een bespiegeling

|09-05-2018 | Douwe Dijkstra – Fastned- Het Financieele Dagblad |

pile-of-money

 

Hoe interessant is beleggen in bedrijfsobligaties met een hoge rente? Hoe aantrekkelijk is deze financieringsoptie voor ondernemingen? Wij  hebben onze experts Douwe Dijkstra en Pieter de Kiewit om een kort commentaar gevraagd naar aanleiding van de obligatie uitgifte van Fastned.

 

 

Op de site van Fastned was begin december 2016 te lezen:
‘U kunt nu investeren in Obligaties Fastned met 6% rente’. Later in de maand ging de tekst verder: ‘We zijn verheugd u te kunnen mededelen dat Fastned de inschrijving is gestart voor de uitgifte van obligaties. De obligaties hebben een looptijd van 5 jaar en keren per jaar 6% rente uit. Dit is een mooie kans om (verder) te investeren in de groei van Fastned en een duurzame wereld.’
Vervolgens werden de belangrijkste kenmerken van Obligaties Fastned genoemd.
Dat de obligaties zeer gewild waren blijkt vandaag. Op de site van Fastned verschijnt nu een tekst dat alle obligaties geplaatst zijn. En Fastned vervolgt:
‘Gezien de grote interesse in obligaties Fastned zijn er zeker voornemens om binnenkort nog een uitgifte te doen.’

In het Financieele Dagblad kon men op 6 december een Bartjens commentaar lezen over de Fastned obligaties:  Het principe is simpel: een wankel bedrijf leent geld. Beleggers willen de relatief grote kans op wanbetaling gecompenseerd zien met een behoorlijke vergoeding: dus een hoge rente. In de VS zijn junkbonds populair, hier is het een kleine markt. Maar deze week is er weer een onvervalst speculatieve obligatie uitgegeven. Fastned. Het bedrijf dat een Europees netwerk van snellaadstations voor elektrische auto’s bouwt, leende € 2,5 mln. De lening heeft een looptijd van vijf jaar. De couponrente is 6%. Ter vergelijking: de Nederlandse Staat (superveilig) leent voor vijf jaar tegen 0%, Shell (behoorlijk veilig) leent voor vijf jaar tegen een coupon van 1,25% en Gazprom (Russisch, iets minder veilig) leent in Zwitserse frank voor vijf jaar tegen 2,75%. De 6% van Fastned impliceert dus behoorlijke risico’s. Het bedrijf is klein, jong en verlieslatend. Het heeft geen reserves en een negatief eigen vermogen, zo blijkt uit het prospectus. Maar goed, ‘de cost gaet voor de baet uyt’ en juist nu moet Fastned investeren.’

Expert Douwe Dijkstra vult hierop aan:
Voor beleggen in Fastned obligaties geldt hetzelfde als voor elke andere investering. Het rendement is omgekeerd evenredig aan het risico. Zolang niemand weet of de koers van aandelen Koninklijke Olie omhoog of naar beneden gaan, weet zeker niemand of beleggen in een 6% obligatie van Fastned achteraf wel of geen goede investering zal blijken te zijn geweest. Het lijkt mij enkel aantrekkelijk voor beleggers die wel een gokje durven te wagen met een te overziene inzet die ze wel kunnen missen. Of voor beleggers met een ideologische wereldvisie. Vorige week las ik in een ander artikel nog dat die investeerders met een loep gezocht moeten worden.

En Pieter de Kiewit zegt:
Investeren in start-ups gaat mijns inziens gepaard met een andere investeringsanalyse dan in volwassen ondernemingen. Daarbij is de ‘groene factor’ voor vele beleggers reden anders naar een onderneming te kijken. Dit is bijvoorbeeld heel zichtbaar bij Tesla. Persoonlijk vraag ik me af of een avontuurlijke investeerder in dit geval niet beter een equity investering kan doen.
Vanuit Fastned perspectief kan ik, met hun vertrouwen in hun business case, begrijpen dat ze liever obligaties uitgeven dan nieuwe aandelen..

douwedijkstra

 

Douwe Dijkstra

Owner of Albatros Beheer & Management

 

Internal Fraud – or how not to cheat yourself

| 22-02-2018 | Lionel Pavey |

Most companies, regrettably, experience internal fraud. The financial value of the loss can be small or large – however the impact is the same. Internal investigations, procedural reviews, the time spent on detection, possible prosecution, together with the potential loss of reputation are significant factors above and beyond the monetary loss. Fraud can never be eliminated, but the threat can be minimised through proper procedures.

Fraud is normally caused by false representation, failure to disclose information and abuse of power and position. As fraud is performed by people and their actions, a first step to prevent fraud would be to look at the current working environment within a company. If a company is putting extra stress on employees – bigger targets, loss of overtime payments, reductions in secondary benefits, no pay rises nor promotions etc. whilst the directors receive bonuses– this can lead to employees becoming aggrieved  and seeking retribution. Furthermore, employing more temporary staff and external contractors, can distance the remaining employees and challenge their allegiance and loyalty.

Internal procedures

One of the least sexy components within a company is internal procedures. They need to be drafted, amended, agreed, published, implemented and reviewed on a rolling basis. Very few people enjoy writing these manuals, but they are essential to ensure that everyone is aware of the correct procedures that have to be followed to perform any tasks. Often there is talk of a “four eyes principle”. Personally, I have always believed in a “six eyes principle” as it requires more independent control and makes fraud less easy to perform. Most of the procedures are, of course, built  around common sense. Duties should be segregated – different departments have different roles to perform in ensuring the complete procedure is followed throughout the company. Even within a single department, attention should be paid to segregating duties.

An example would be the administrative function relating to a purchase. There are 4 distinct stages – procurement, arrival, warehousing and dispatch/shipment. If one member of staff was responsible for the relevant data input for all 4 stages, there is an increased risk that fraud could take place. This is not to say that work should be segregated that one employee only ever does one function – this could also lead to fraud either through disenchantment or over familiarity of the systems and procedures used at one specific point in the production chain.

External procedures

Certain departments within a company have contact with external sources – suppliers, clients, financial institutions. Anyone who has contact with an external counterparty can be swayed by opportunity if the controls are not in place. In respect of purchasers – what contact do they have with suppliers outside the office? Are they entertained – restaurants, sports events etc? How often do they have contact? In respect of sales – are they responsible for determining the sales price? How often do they see clients and spend money on them? The same also applies to treasurers, cash managers, risk managers etc.

The necessary checks and balances need to be put into place. A record of all contact with external parties needs to be kept, updated, verified and stored. Temptation can be caused by personal hardship, flattery or grievance at how the person is perceived to being treated by the company.

Standing up to the boss

As stated, a healthy company should have procedures and statutes in place. These need to be adhered to at all times – there can be no exceptions. However, a mechanism for escalation is often missing. Example – someone sends in an expense claim approved by their manager. The treasurer or controller might question the veracity of a particular entry. A proper mechanism to escalate the discrepancy needs to be firmly established. That a manager has signed off on the expense claim does not mean it is correct.

Even directors have to make sure that their claims are signed off by other members of staff. Being at the top does not mean that the procedures do not apply. Requests for a priority payment outside of the agreed procedure should always be questioned. If everyone has agreed to the standard procedures, then there can be no justification to make a payment outside of the normal procedure, just because it has been deemed a priority. If truly deemed necessary, then authorisation must be given not only by management and directors, but also by the legal department. If this occurs, then the existing procedure needs to be examined as to why the incident occurred and where the procedure broke down. This all has to be detailed in writing – fraud can happen at the highest level as well as low down with an organisation.

Static data

Every contact both inside and outside of the company should be recognised and recorded in a data system. Static data refers to all relevant data concerning an entity – full name, registered address, bank details, contact details etc. This data should be fed into all other systems, but data input should be restricted to a small number of employees. These employees should not have access to any of the systems that are used to input data relating to daily operations.

Another key area is in the cash management side – book keeping can be complex and differences not noted until the yearly audit. However, cash movements contain plentiful details – name of beneficiary, account numbers etc. This can be reconciled against the prevailing static data – are the bank account numbers the same?

Fraud can never be eradicated, but by being open, allowing questions to be asked, even performing unexpected checks on the system and its integrity, and creating an atmosphere where staff know that they can question without fear of reprisal, then at least everyone will know that the company is alert and vigilant.

That knowledge and awareness will make a potential fraud think twice.

 

Cashforce: Treasury year-end meetup

| 04-01-2018 | Nicolas Christiaen | Cashforce | Sponsored content |

Onderstaand een kort verslag van ons Treasury year-end meetup-event van eind 2017. 

Tim (Jonk – Thomson Reuters) en Martijn (Duijnstee – Cashforce) trapten af met een (uiterst!) korte terugblik op 2017 want alle ogen waren eigenlijk al gericht op het progamma waarin de 3. Top-challenges 2018 voor corporate treasurers de revue zouden passeren.

Nicolas (Christiaen – Cashforce) gaf inzicht in wat er bij komt kijken om, in 6 stappen, een daadwerkelijk nauwkeurig en geautomatiseerd 1. Cash forecasting-proces in te richten. No more Excel!

Bart-Jan (Roelofsz – HERE Technologies) kwam letterlijk net uit ‘de vlieger’ uit Chicago stappen en kon gelijk door naar het podium waar hij een bijzonder aansprekende presentatie gaf over 2. Financing in het algemeen en de transitie van bedrijfsactiviteiten en opbouw van het Treasury en Finance Team in een snel groeiende organisatie. Top!

Alex (Goraieb – Thomson Reuters) nam het stokje over en gaf ons meer dan een kijkje in de wondere wereld van 3. Risk Management. Een wereldreis in de achtbaan van volatiele markten en valuta, via de onderliggende techniek van trading in grote posities naar een lesje ‘hoe selecteer ik de beste bank’. Well done!

En toen was het snel! naar de borrel want in het kader van ‘Act Global, drink Local’ stond het Ijndejaarsbier van Brouwerij ‘t Ij koud en op fust te wachten, en wat had iedereen toch een dorst gekregen…

Tijdens de borrel werden er meerdere robbertjes uitgevochten tijdens de Kick-off 2018 games op de Cashforce-voetbaltafel.

Voor hen die er waren, dank voor jullie komst en voor hen die er niet waren: volgend jaar een nieuwe kans want wat ons betreft zeker voor herhaling vatbaar!

 

Nicolas Christiaen

Managing Partner at Cashforce

 

TIS & FX Treasury Webinar: Corporate Payments Optimization

| 06-10-2017 | TIS | 2FX Treasury | Sponsored content |

TIS and 2FX Treasury organize a webinar that we would like to bring to your attention. On October 19th between 04:00 and 04:45 PM TIS and 2FX Treasury will host: Corporate Payments Optimization: How to reduce complexity in your business. An interesting session for treasury professionals. 

Complexity is not your friend. Whether in your finance, treasury, shared services or IT departments, improved processes help to reduce risk.
How do the most efficient and effective businesses in today’s world manage a multi-region, multi-bank, and multi-ERP environment? How have leading finance, treasury, and IT professionals gained visibility across their corporate payments landscape?

Join the optimization discussion in this webinar where we discuss business cases based on:
  • Current challenges
  • Standardization and automation of corporate payments through pre-built bank connectors and formats
  • Reduced operational and financial risk due to increased transparency and straight through processing (STP)
  • Enhanced security and compliance

De 100 meest veelbelovende FinTech bedrijven – wie wordt de winnaar?

12-9-2017 | FM.NL | treasuryXL |

Op 27 september is het zover. Buitenlandse investeerders en FinTech-specialisten van naam reizen dan af naar Brussel. Tijdens de European FinTech Awards & Conference 2017 zullen zij oordelen hoe de veelbelovende techbedrijven van Europa ervoor staan. De omgetoverde FinTech-awardzaal van ‘The Egg’ bombardeert  de Europese hoofdstad deze dag tot hét techcentrum van Europa. De top 100 aanstormende FinTech-bedrijven van Europa zijn bekend. Wie wordt gekozen tot winnaar?

Meer dan 34.000 FinTech enthousiastelingen hebben gestemd op hun favoriete Europese FinTech-bedrijf. Het is nu aan de FinTech vakjury: wie winnen de European FinTech Awards 2017? U hoort het op 27 september.
Honderden Europese fintechbedrijven staan op het punt door te breken en uit te groeien tot scale-up. Miljarden liggen klaar om geïnvesteerd te worden in bedrijven die de markten gaan veroveren. Wie wordt de volgende?

De 100 meest veelbelovende FinTech bedrijven

 FM.NL heeft de 100 bedrijven in een artikel gepresenteerd:
 

Bron: FM.NL

Top 3 FinTechs per categorie

 

 

 

 

 

 


Bron: FM.NL

Veelbelovende FinTech-bedrijven & verrassende visies op de European FinTech Awards in Brussel:
Deel expertise en visies. Laat u verrassen tijdens de vele kennissessies, keynotes en pitches. Krijg de beste antwoorden op uw vragen: Hoe schaalt u efficiënt een FinTech-bedrijf op? Wat kunnen we leren van succesvolle FinTechs? Hoe reageren banken en wat denken investeerders?

Laat u inspireren door de meest veelbelovende FinTech-bedrijven ten overstaan van aanwezige investeerders, stakeholders en andere belangstellenden op 27 september 2017.  Dit is de dag waarop u de beste FinTechs van Europa pas écht leert kennen.

Korting via treasuryXL

Bezoek de European FinTech Awards & Conference met korting
Ontmoet 27 september 2017 in ‘The Egg’ in Brussel 400 nationaal en internationaal befaamde FinTech-entrepreneurs, bankiers, investeerders en adviseurs. De European FinTech Awards & Conference 2017 biedt een unieke kans om uw netwerk te vergroten. Laat deze kans niet glippen om gearriveerde FinTech-sprekers op het podium te zien en 30 pitches te zien van Europa’s beste innovatieve ondernemingen van dit moment.

Speciaal als TreasuryXL community lid krijgt u 10% korting met de code: Friend2017, boek vandaag uw ticket(s)

De European FinTech Awards wordt georganiseerd door Alex van Groningen en B Hive. 

Annette Gillhart – Community Manager treasuryXL

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Startup FinTech company Facturis and the traditional bank: How do they do it?

| 23-8-2017 | PowertoPay – Unified Post | Sponsored content |

Facturis, a partner of UnifiedPost, is an online platform that helps to optimize the financial situation of small and medium-sized enterprises in the Netherlands. The platform facilitates a more efficient flow of incoming and outgoing invoices, debtor management, retrieval of digital debit authorizations, dynamic discounting and dynamic working capital credit. In this interview, Nico Ten Wolde, CEO of Facturis, is telling more about developments in the financial technical (FinTech) world.

 

How did Facturis originate from the Rabobank?

Nico: “Rabobank started a strategic orientation in 2010 to increase its added value and uniqueness for its business customers. Rabobank wants to provide services within the customers’ business processes whenever and wherever they are needed. Where Rabobank has traditionally focused on offering products such as transactions, finance and insurance, she wanted to offer services to support the full order-to-cash flow process of her customers. This goes further than the execution of transactions and the provision of funding. By offering different services that work in synergy on one platform, the customer has lower operating costs and a lower need for external financing. In order to achieve this, Rabobank has established a partnership with UnifiedPost in the form of Facturis. UnifiedPost delivers the invoicing platform technology.”

What is the target group of Facturis? What do you do to connect the product to this target group?

Nico: “Facturis focuses on the business market, with the primary focus on small and medium-sized enterprises (SMEs). These types of organizations need to obtain services from many different parties in order to optimize the financial and administrative processes. Because they buy services from different parties, there is insufficient insight into and grip on the overall financial process. By integrally providing services from various partners on one platform, we give entrepreneurs more insight into their financial situation. That goes further than sending invoices – it’s about getting bills paid as quickly as possible.”

Fin Tech initiatives – what changes?

Everyone talks about the changing role of the banks, partly through the FinTech initiatives. What do you think are the things we already notice?

Nico: “What I see is that 10 years ago a bank was the only place you would consider for financial services, this is no longer always the case. Think of FinTech parties like Adyen, which offer a wide range of financial products from banks and other financial institutions on a platform. The customer no longer deals directly with a traditional bank. In addition, we see a strong growth of (crowd) funding platforms. The financing is no longer obtained through a bank. More recently, several blockchain initiatives and the oncoming implementation of PSD2 will create new opportunities for players outside the traditional banking world.”

Why do you think banks will increasingly work with FinTech companies? What is the benefit for the banks?

Nico: “On the one hand, banks often have to deal with complex legacy systems which limit the possibilities to quickly implement new solutions. On the other hand, banks have to deal with implementing and maintaining new rules and regulations with the current processes. This makes it almost impossible to quickly implement innovations. FinTech companies can quickly launch new concepts for specific target groups. Through cooperation with banks, the power of the existing brand and distribution channel is optimally utilized. A win-win situation for the customer, the FinTech company and a bank.”

What was the biggest success in Facturis?

Nico: “The launch of the pilot Invoice Credit. The Invoice Credit is a dynamic working capital credit that moves along in real-time with the (outgoing) invoice flow of a company. As a result, the entrepreneur does not always have to return to his bank to make an adjustment on his credit line. Due to the flexibility of InvoiceCredit, companies can streamline the flow of money, thus optimizing their working capital. InvoiceCredit fulfils the companies need for a credit that reflects fluctuations in the invoice flow and that grows along with the company.”

What is your biggest challenge within Facturis?

Nico: “Our biggest challenge is to maintain the speed you need as a FinTech to be successful and to be able to continue to innovate. Laws, regulations and legacy systems sometimes limit the speed to launch new services quickly within large corporate organizations. In cooperation with large organizations, such as banks, we face the challenge of balancing speed and adopting new banking services.”

How has such a creative thinking startup within the (traditional) bank been adopted so well?

Nico: “On the one hand, with a lot of missionary work within Rabobank in the form of presentations and writing many memo’s to convince the right stakeholders inside and outside the Rabobank. On the other hand, the arrival of Wiebe Draijer (Chairman of the Board of Rabobank) helped us greatly with the adoption of Facturis within the Rabobank. With the establishment of a FinTech & Innovation department, Rabobank made a clear choice for the adoption of FinTech companies in the future.”

What do you think is the most successful FinTech initiative in the market?

Name 1 launched and 1 that has not yet been launched.

Nico: “Launched: Kabbage: Kabbage is an American FinTech that can assess a consumer’s or SME’s financing request within a few minutes.

Not launched: Easytrade, an innovative currency hedging solution for hedging currency risks of (international) companies. Easytrade is a new FinTech initiative created by Rabobank Moonshot Program, an internal acceleration program aimed at realizing the advancing ideas of employees.”

What do you think are the most important FinTech developments in the near future?

Nico: “In the coming years, I see major changes in risk management. Through the application of AI and machine learning, we are able to better estimate risks and utilize opportunities with a much larger predictive ability. This has a positive impact on customers, we can deliver services exactly when the customer needs them. In addition, integrating blockchain initiatives and virtual currencies within the financial sector will take a huge run. With the implementation of PSD2, it is possible for FinTech companies to combine the old world and the new world. This allows for gradual adoption
of these new developments for customers.”

PowertoPay – Unified Post

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Graphs with no time line – why and how

| 7-8-2017 | Lionel Pavey |

A key role within the Treasury function is providing forecasts to the directors and management. Graphs are a frequently used tool of course.
When constructing graphs it is normal to put time on the horizontal x axis and read the prices from left to right – from old to new. Visually, this appeals to us as we normally read from left to right. However, when the price does not change much for a long period of time the graph no longer looks fluid – there is a period of activity, followed by a long period of almost standing still, followed by another period of activity. To try and eliminate this period of inactivity whilst still presenting the data requires an approach where sequential time is removed from the equation. This brings us to the last article in this series.

The following two graphs ignore time and focus purely on changes in the price that have been filtered to meet specific criteria.

Renko Charts

 

Prices are represented by blocks – hollow for upward movements and solid for price falls.

Every block has a predefined value – if we were showing interest rates a block could represent 5 basis points. If we had an upward price movement this means that the following upward block can only been drawn once prices have risen more than 5 basis points from the last block. If the price moved up 4 basis points and then dropped by 3 basis points, no additional blocks would be added to the graph.

Blocks are plotted at a 45 degree angle showing upward and downward sloping price changes.
Price reversals are shown when prices have moved more than 2 blocks in the opposite direction. Yet again if we had an upward slope and the price was 1.25 (our blocks are set to 0.05 or 5 basis points) we would require a downward movement of more than 0.15 (15 basis points) to 1.10 to draw 2 solid blocks downwards.

What remains is a very smooth representation of price movements with a uniform value for every block, whilst filtering out smaller movements that have been filtered out by the conditions set on block size.

Point and Figure Charts

Price changes are represented by vertical columns – X’s for rising prices and O’s for falling prices.
As with Renko charts, the X’s and O’s have a predetermined size and a price reversal is shown when prices change by 3 boxes as opposed to 2 on a normal Renko chart. When direction changes a new column is drawn to the right of the present column. Otherwise, the same criteria is applied to both charts except point and figure show true vertical columns as opposed to 45 degree lines.

So why would someone look at prices in this particular way? Such a chart does not necessarily show the latest price – the predefined filters ensure that only price changes that meet the criteria are shown.

The main advantages include:

  • A constant filter that reduces the noise associated with normal time charts
  • Analysis is based only on movement – not on time
  • Perceived support and resistance levels are easier to see
  • The current trend is very clear to see

All the techniques shown in this series are applicable to everyday analysis and everyone has their favourite approach. Some like to see all data, whilst others prefer to see filtered, smoother data. The eternal question when looking at charts and seeing the current trend is to ask “where will the price go?” Initially, the immediate answer is that price will follow the current trend until such time as it does not anymore. This might seem a cheap flippant answer, but it is the truth. We have firmly established that we need to know the price in the past to determine if the present price movement is in a clearly established trend. If we knew nothing about the price in the past it would be pure guesswork to say which way the price would go?

We could still be wrong however, but at least we can establish why and how we made our opinion.

No chart or charting system can clearly determine what the future price will be with 100 per cent accuracy. By following the trend we can at least say what the current market direction is, without being able to clarify, purely on price, when the market will change direction.

Charts that eliminate time make it easier to see where the top and bottom of the market prices have been established. Therefore, if we are in an upward trend and approaching a market high that has been reached twice before, we can state with a reasonable amount of confidence that we are approaching a level that the market has tested twice before but not been able to break above. This would imply, on a technical analysis, that there is perceived resistance in the market to taking the price above the previous high.

However, a word of caution when using charts.
The best analogy I have ever heard for not relying 100 per cent on charts is as follows:

Would you sit behind the steering wheel of a vehicle and drive forward whilst the windscreen was blacked out and only have the rear view mirror to show you where you have been and only have that information to decide when you had to steer?

There is no system that can guarantee telling you what the future price will be. Analysis has to be taken with a pinch of salt but, any market professional should be able to perform analysis. If you can not analyse then you can not predict.

Lionel Pavey

 

Lionel Pavey

Cash Management and Treasury Specialist


You might have missed the first two articles of this series and can find them here:

Treasury for non-treasurers: Data analysis and forecasting – seeing the future by looking at the past (Part I)

Treasury for non-treasurers: Data analysis and forecasting – Seeing the future by looking at the past (Part II)