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Readying Treasury for Hybrid Work

20-09-2021 | treasuryXL | Kyriba |

To say that the COVID-19 pandemic changed the way treasury departments and companies operate is a massive understatement. Treasury, a function already accustomed to ‘doing more with less,’ began operating remotely—often with a skeleton crew as companies were forced to reduce headcount.

Once mass distribution of the COVID-19 vaccine began, companies quickly began to strategise over what their post-pandemic workforce might look like. While the rise of the Delta variant has thrown a wrench into many organisations’ plans to reopen, eventually, that new work model will take shape. And it might look drastically different than what has come before.

Here are a few things to consider.

A hybrid work environment will very likely be the new normal.

Research from Harvard Business Review found that 70 percent of companies—including giants like Google, Citi and HSBC—are moving to a hybrid model. Just as treasury teams needed to adapt quickly to operating from home, now they’ll have to adjust to having some team members in the office while others are remote.

CFOs have an eye on emerging technologies.

The remote working environment brought on by the pandemic prompted, or perhaps forced, many organisations to digitise their processes. In a hybrid work environment (that could revert back to a fully remote one if COVID-19 variants continue to emerge), finance chiefs will continue to call for better technological solutions. New research from Gartner found that 82 percent of CFOs plan to increase investments in digital capabilities. CFOs named artificial intelligence (AI) as the technology that they expect to have the most impact over the next three years. Kyriba users can apply AI and machine learning (ML) to key cash management tasks like reconciling prior day bank files with their expected cash positions. For organisations that process high volumes of transactions, handling this process manually can take hours. Kyriba’s solution can identify and resolve discrepancies in minutes, and it learns from the data so that eventually, little to no human interaction is required.

Treasury’s role expanded considerably throughout the COVID-19 crisis.

More than 80 percent of treasury professionals said that greater value was assigned to treasury during the pandemic, according to the 2020 AFP Strategic Role of Treasury Survey. Furthermore, nearly 70 percent of respondents believe that treasury’s role will continue to be of greater significance. To maintain that influence over other, other departments, treasury professionals may need to revisit their soft skills. Just as employees may have faced difficulty giving presentations over Zoom, they may also find presenting in-person or to a mix of in-person and remote employees to be equally challenging.

Regional treasury centers might no longer need to be regional.

While it can be convenient to house a treasury center to manage cash and FX hedging in a region with unique regulations, the COVID-19 pandemic may prompt organisations to rethink that approach. Since the onset of the pandemic, those remote working has surged; the Stanford Institute for Economic Policy Research found that 42 percent of the U.S. labor force currently works from home. And perhaps more importantly, it’s been incredibly successful for both employers and workers, according to PwC’s U.S. Remote Work Survey. Ultimately, this could mean that treasury teams may no longer see a need to centralise their operations regionally even after the pandemic ends.

Continuous remote work means fraud threats will remain elevated.

According to the 2021 AFP Payments Fraud and Control Survey, business email compromise (BEC) scams increased last year. This was likely due to the remote work environment making it more difficult to verify emails with colleagues. Security will continue to be paramount for treasury, particularly if it moves to a permanent model where some employees regularly work from home. Treasury teams will need to continue to use strong controls like multifactor authentication, single sign-on and virtual private networks to ensure that only the appropriate people have access to their systems. Additionally, treasury employees must be even more meticulous about setting approvals for payments so that fraud attempts will be thwarted. With Kyriba Payment Fraud Detection, treasury can stop fraud in real-time. Users can set pre-defined detection rules, to screen for suspicious transactions. Additionally, ML algorithms can identify and quarantine dubious payments for further review.

The cloud provides a failsafe for business continuity planning (BCP).

Cloud-based treasury management systems aren’t only efficient modules to help treasury teams track cash and liquidity. They are also a key cog in BCP. Cloud-based solutions like Kyriba’s are hosted offsite in multiple locations, allowing your treasury department to function regardless of whether your team is working in the office or from a dozen different locations. So even if a new COVID-19 variant emerges, treasury teams can continue to function without interruption.

Making a Game Plan

While it’s unclear how soon offices will begin opening back up en masse, now is the time for treasury teams to begin planning for the shift. When the pandemic first hit, treasury functions had to respond quickly, and they did as best they could. Pivoting in this next phase won’t be seamless, but with the right protocols and technology in place, treasury teams can make smooth transitions.

#7 Poor internal communication (Dutch Item)

16-09-2021 | treasuryXL| XE

Internal communication problems can be an obstacle to good currency practices and risk management, especially as organizations grow. Business units that working in silos and rarely talking to each other, have little insight into the place their specific currency risk within the company’s overall risk.

In het ergste geval nemen bedrijfsonderdelen zelfs autonome beslissingen over transacties en risicobeheer die niet passen binnen de context van het bedrijf als geheel. Zo kunnen toeleveringsketenmanagers hedging gebruiken om het risico van hogere importprijzen af te dekken zonder te weten welke omzet de verkoopafdeling verwacht te halen uit buitenlandse verkopen.

Zulke storingen in de communicatie maken het erg moeilijk voor uw bedrijf om vreemde valuta holistisch te benaderen om de beste koersen en de beste service te krijgen en de risico’s zo effectief mogelijk te beheren. Als uw bedrijf met dit probleem te maken heeft, is het belangrijk om zo snel mogelijk actie te ondernemen voordat sluimerende risico’s ergens in het bedrijf echt een probleem gaan worden.

“Ken alle aspecten van het valutarisico van uw bedrijf”

De beste manier om dit risico tegen te gaan, is samen met uw valutaprovider een degelijk risicobeheerbeleid te ontwikkelen. Als u eenmaal alle aspecten van het valutarisico van uw bedrijf kent, kunt u de juiste procedures implementeren om het op holistische wijze te benaderen. En door deze procedures in elk onderdeel van uw bedrijf te implementeren, voorkomt u dat een enkel onderdeel van uw bedrijf een probleem kan veroorzaken. Tot slot moet u zich afvragen hoe gemakkelijk of moeilijk het is om voortdurend te communiceren met uw valutaprovider zelf. Online systemen maken de dagelijkse gang van zaken voor veel bedrijven sneller en eenvoudiger, maar er zullen altijd momenten zijn dat u extra hulp nodig hebt. Zoek een provider die telefonische hulp biedt waarmee u problemen zo snel mogelijk kunt oplossen. Weet u persoonlijk met wie u waarschijnlijk te maken krijgt? Is er bijvoorbeeld een enkele persoon of een team verantwoordelijk voor uw account? Krijgt u de informatie over valutamarkten die u nodig hebt om proactief beslissingen te nemen?

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Which Options Are There When It Comes To Bank Connectivity?

15-09-2021 | treasuryXL | Nomentia |

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

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

Direct host-to-host connections

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

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

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

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

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

Direct connections through regional standard protocols

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

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

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

Connections through SWIFT

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

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

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

Open banking APIs

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

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

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

What’s the verdict?

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