Tag Archive for: treasurer development initiative

The impact of blockchain technology on central counterparty clearing houses

| 23-11-2017 | Treasurer Development | Minor Treasury @ Hogeschool Utrecht | Frans Boumans |

Today’s blog has been written by Youri Toepoel, Romy Steegwijk & Dirk Heesakkers , who are 3 students studying for the minor Treasury Management at the University of Applied Sciences in Utrecht. We welcome their contribution – it is good to see the youth engaging in Treasury matters! Here is their opinion on Blockchain technology and its impact on central counterparty clearing houses.

A central counterparty clearing house can reduce counterparty risks associated with doing business with unfamiliar counterparties in unfamiliar markets. When businesses lack the capabilities, resources and expertise required to reduce counterparty risks, a central counterparty clearing house might be the solution. In recent years new disruptive technologies have been developed. Cryptocurrencies are becoming more known worldwide and the underlying technology, the blockchain, might be able to decentralize current services offered by financial institutions like banks.

Counterparty risk

Counterparty risk is the possibility that someone you do business with is unable to meet his/her obligations with you. Events during the recent credit crunch, particularly with Lehman Brothers, showed that banks and businesses had put too much trust in the credit ratings formed by the credit agencies. Corporates based creditworthiness of counterparties mainly, or even only, on the credit ratings given by credit rating agencies, expecting those ratings to be accurate and trustworthy. This has proven to be wrong and since the credit crunch many businesses started to measure and control counterparty risk based on other factors beside the credit rating received from the credit rating agencies (Treasury Today, 2014).

The counterparties

For the treasury function the counterparty risk is mainly associated with the banks and other financial institutions since these are the parties the treasury function is mostly dealing with. Additionally, also governments are important given they supply the “risk free” government bonds, but as seen with the government of Greece even governments show the ability to get into financial problems. The treasury function will often deal with these parties to attract or repel liquidity, derivatives or long-term loans to support the business’s day-to-day operations. In the end, exposure to suppliers and customers are also important to the counterparty risk.

Central Counterparty Clearing House (CCP)

A central counterparty clearing house (CCP) is an organisation that exists in various European countries to help facilitate trading done in European derivatives and equities markets. These clearing houses are often operated by the major banks in the country to provide efficiency and stability to the financial markets in which they operate. CCPs bear most of the credit risk of buyers and sellers when clearing and settling market transactions (Investopedia).

Blockchain versus central counterparty clearing house

A CCP offers a good solution to the counterparty risk that most companies face when doing business with counterparties. But this service, as it basically provides a settlement between two parties, might be a prey for decentralization by technology based on the Blockchain.

The Blockchain is often simply described as a distributed ledger and has the capability to replace services being provided by central service providers like banks. The unique part is the absence of a trusted third party (a bank that we visit or to which we log in with a key, an Amazon.com, eBay or whoever you know and trust…) (Servat, 2015).

Currently, the only obstacle seems to be regulation since the blockchain already shows numerous application possibilities. Lots of banks and other financial institutions are currently investing big money in the blockchain technology to find out in which way they can use it (or save themselves with?) (Scuffham, 2017).

Whether the blockchain totally replaces or gets integrated by financial institutions like the CCP, these innovations are surely interesting to follow and keep track of (Treasury Today, 2014).

Sources/bronnen/aanvullend

https://medium.com/@colin_/central-counterparties-ccps-in-decentralised-blockchains-f2cf671f5787

http://www.investopedia.com/terms/c/ccph.asp

http://treasurytoday.com/2016/05/blockchain-technology-ttqa

https://www.treasury-management.com/article/1/354/2920/blockchain-%96-disruption-or-hype-.html

http://treasurytoday.com/2017/09/the-rise-and-rise-of-blockchain-tttech

https://www.reuters.com/article/us-rbc-blockchain/exclusive-royal-bank-of-canada-using-blockchain-for-u-s-canada-payments-executive-idUSKCN1C237N

https://fd.nl/beurs/1222842/nieuwkomer-ripple-provoceert-betaalbedrijf-swift-op-eigen-terrein

Minor Treasury Management

More information about the minor Treasury Management at the University of Applied Sciences?
Please contact Frans Boumans.

 

Frans Boumans

Manager Minor Treasury Management @ University of Applied Sciences in Utrecht

 

 

 

IT treasury management systems

| 03-11-2017 | Treasurer Development | Minor Treasury @ Hogeschool Utrecht | Frans Boumans |

Today’s blog has been written by Florian de Bruin & Jake Verspeek , who are 2 students studying for the minor Treasury Management at the University of Applied Sciences in Utrecht. We welcome their contribution – it is good to see the youth engaging in Treasury matters! Here is their opinion on IT Treasury management systems.

The complexity of financial control is increasing, but the demand of treasury management to process the right information on time is still there. The treasury management systems enable the treasurer to process the information on time. This involves responding quickly to developments in the money and capital markets and the continuous optimisation of liquidity management and financing. The complexity of the function increases because it is not just about managing and optimising incoming and outgoing cash flows, managing liquidities & investments, and financing of various activities of the company; but also for managing interest rate risks and currency risks. As a result, the Treasury management systems have taken a central role in the overall management of risk in an organisation.

Treasury management systems are available to optimise the treasury management within a company. It is often companies that are diverse, complex and operating internationally that use this IT software. It will therefore not be very common for small businesses with a simple business/structure or a small revenue. The risks and costs of treasury management usually run parallel to these structural features. The features of a treasury management system can be summarized in 10 points:

  • Cash management
  • Payment transactions
  • Foreign currency risks
  • Loans
  • Hedge accounting
  • Derivatives
  • Real- time links
  • Reporting
  • Analysis
  • Risk management

Treasury management maps these processes and manages them. A treasury management system is crucial in supporting such treasury functions in such types of companies.

As seen in the general market for IT, the market for treasury management systems is getting bigger and evolving at the same time. The market for treasury management systems has grown sharply, partly due to the increasing use of IT within companies. Because of the decent use of IT within companies for some while, the level of the market has reached a decent maturity level and the systems functionalities are increasingly expanded and developed. What is of great importance is that these systems have a great security implemented. It is not desirable that unauthorized persons may make any changes to data, such as cash flow of some deals. Such things can have major consequences for the treasury department and the company.

It is a challenge to find the right system that fully complies with the wishes of the treasury department. Creating the perfect match is the biggest challenge. Each system has their own specialty. For example the supplier DiscoverEdge delivers a system that is specialised in Cashflow forecasting, but the supplier Equens SE deliver has a system specialised in Payment management. It is a key factor for making the perfect match that you keep in mind that this match will be for the long term. Also, it is important for a company to ask what do we really desire from the system and what are we going to desire in the near future from the system. In this way you can make a choice that you still will be satisfied with after a couple of years.

At this moment there are no major developments for Treasury management systems. But the IT industry is one of the most innovative industries. So, you never know when there is a new major development for Treasury management systems.

Resources
http://www.treasury.nl/files/2007/10/treasury_239.pdf
http://www.ey.com/Publication/vwLUAssets/EY_-_TMS_Survey_2%C3%9F14/$FILE/EY-TMS-Survey-2014.pdf
https://www.accountant.nl/globalassets/accountant.nl/web-only/0034_bottemanne_14augustus2014.pdf

Minor Treasury Management

More information about the minor Treasury Management at the University of Applied Sciences?
Please contact Frans Boumans.

 

Frans Boumans

Manager Minor Treasury Management @ University of Applied Sciences in Utrecht

 

 

 

Due to the improved economy and other factors we notice a rising interest in the development of the treasurer as a person. Education, competence development and labour market changes are the most obvious topics this concerning. This is why we started the Treasurer Development initiative. 

 

HU Treasury Papers – Digging into the treasury hot topics

| 15-9-2017 | treasuryXL |

In earlier blogs we informed you about the minor treasury management at the Hogeschool Utrecht and the new Treasurer Development initiative. Together with you we will start connecting the dots in an exciting way and kill two or even more birds with one stone. This is how.

Currently, with your input, we are compiling a list of hot topics in treasury. If you did not complete the one-question-survey, please do so. Your opinion is important. The top 8 of this list will be handed over to the students attending the minor treasury management at the Hogeschool Utrecht. For each topic, one student or a small group will write a 400 word report, based upon literature and web studies. A report typically will be a description of the topic that can also be read by laymen as well as relevant current developments. These reports will be published as blogs on www.treasuryXL.com under the name “HU Treasury Papers” and used for educational purposes in their program. A number of experts from our community have already volunteered to help with editor and/or referee services for the articles.

Doing so, students will learn about corporate treasury. Most likely these blogs will be an excellent read for non-treasurers wanting to learn about the fundamentals. Together with experienced experts, these blogs can be stepping stones into internships and perhaps even first jobs.

If you are interested, this is how you can contribute:

  • Complete the survey;
  • Read and comment on the website or in social media;
  • Think about internships in your organisation;
  • Offer your time, expertise and/or network as a guest lecturer or expert in treasury internships.

You can respond to us at treasuryXL or contact Frans Boumans (e-mail: [email protected]) at the HU. We will further inform you and look forward to your input.

Annette Gillhart – Community Manager treasuryXL

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