BCR Publishing
We are the leading provider of news, market intelligence, events and training for the global receivables finance industry.
Working with industry leading organisations, experts, governments and universities, BCR Publications delivers expertise in factoring, receivables and supply chain finance to a global audience.
BCR has long been a beacon of innovation and excellence in the realm of receivables finance, playing an instrumental role in shaping the industry’s international landscape. Through its comprehensive conferences, insightful publications, and thought leadership, BCR has facilitated crucial dialogues and connections among industry professionals, driving forward the development of receivables finance globally.
Currency Volatility Is A Catalyst for Response by Treasury
15-12-2021 | treasuryXL | Kyriba | LinkedIn |
The Q2 2021 Kyriba Currency Impact Report showed a strong tailwind for many US corporates driven in large part by the strengthening of two main trading currencies for many US corporates, EUR and GBP.
Both currencies strengthened steadily through Q2 2021, but currencies have since retreated through Q3 2021, setting up a return of relatively strong headwinds for the Q3 earnings season.
As we look forward to Q3 and Q4 currency impacts, it is very likely we will see increased levels of negative currency impacts for North American and European corporates as a result of continued business activity expansion combined with the return of a stronger USD and general market uncertainty. The recent impact of the newest COVID variant, Omicron, has also added a new level of uncertainty-driven volatility and questions about how businesses and central banks will respond.
Beyond the general level of market uncertainty there are a few other economic and operational challenges that are adding to the complexity of managing currency risk and liquidity. With inflationary conditions starting to take hold in the US and other parts of the world, Treasurers and CFOs are having to contend with increasing supply chain costs. In addition, the supply chain disruptions are increasing the uncertainty of business operations. Many treasury teams are far less confident in their long-term cash flow forecasts which has many reconsidering their hedging and liquidity needs.
How are Corporate Risk Managers responding to the currency markets and supply chain disruptions?
Treasury teams are faced with a complex set of variables in the current market environment. Their long-term cash flow forecasts are less and less reliable due to uncertainty related to supply chain disruptions. The disruptions are impacting both the supply side and the revenue side of the forecasts. There is increased uncertainty around both the value and timing of supply chain cash out flows. On the revenue side, there is also uncertainty around the value and timing of future inflows as manufacturers are having a hard time getting products on the shelves. In addition, the currency markets are adding to the complexity as the USD is strengthening or at least holding strong against a broad basket of currencies.
As a result, many treasury teams are re-focusing on the things they can control. Daily and even intra-day cash position monitoring is the norm now and combining that with an increased focus on FX hedging for working capital positions on the balance sheet are critical best practices to ensure treasury teams have the right amount of cash in the proper currency at the right time to cover vendor and supplier payments and ensure they maintain a strong liquidity position as they ride out the supply chain storm.
Another challenge FX risk managers are having to contend with is the by-product of improper posting of multi-currency transactions within their ERP system(s). When volatile currency markets are creating significant directional moves in various currency pairs, it often uncovers multi-currency accounting posting mistakes as well as missed exposures. This missed exposures and improper accounting postings can results in very surprising results that often create significant FX losses. The most frustrating aspect of these types of FX impacts is that they are entirely self-inflicted. With proper Exposure Data Integrity Analytics and robust and dynamic exposure capture processes, these self-inflicted currency impacts can be anticipated and avoided.
Ultimately, Treasury teams that can monitor and manage their liquidity and working capital FX exposure in a single integrated platform have a distinct advantage in the current market.
Question treasuryXL Panel #4 | When do I pay an FX surcharge to my payment service provider?
14-12-2021 | treasuryXL | EcomStream | LinkedIn |
treasuryXL is the community platform for all your relevant treasury questions.
We received the following question from one of our followers… Read more
What should you know about SWIFT system transfers?
09-12-2021 | Xe | treasuryXL | LinkedIn |
The SWIFT network is well-known and used by banks around the world, but it may not be the best channel for you to send your money transfers through.
The Society for Worldwide InterbankFinancial Telecommunication (SWIFT) network, which was founded in Belgium in 1973, handles about half of the world’s cross-border fund transfers. As international commerce has grown, the SWIFT network has grown commensurately. It handled about 2.5 million daily transactions in 1995 and more than ten times that many in 2015.
But SWIFT is not a bank. It does not even touch the money which passes along its network. Instead, SWIFT sends payment orders to correspondent accounts at member banks. As such, SWIFT is strictly a bank-to-bank transfer service.
If you’re sending a money transfer with a bank, you’ll become acquainted with the SWIFT system. But is it the best channel to send your money through? We’re not so sure.
What does the SWIFT system mean for you and your money transfers?
Added fees. In order to be members and transfer through the SWIFT system, banks are charged SWIFT fees. To counter this, both the recipient and the correspondent bank usually add fees to SWIFT transfers. Somebody, either the sender or the recipient or a combination of both, must pay them.
Bad exchange rates. There are some hidden currency transfer costs, at least in most cases. Currency exchange rates vary in different markets and at different times. Banks routinely choose the worst possible currency exchange rate. Then, they quickly move the money to another marketplace and pocket the difference.
Long transfer times. As mentioned above, SWIFT completes “most” of its transactions within thirty minutes. In this case, “most” means about half. Some transactions could take several days to process. Other delays, such as large transfer amounts or first-time users, could delay the process even more.
How does the SWIFT network work?
Today, SWIFT connects about 10,000 financial institutions in about 200 countries. That sounds sweeping and impressive. But most of its transfers go through fewer than two hundred banks, brokers, clearinghouses, and corporations.
Furthermore, SWIFT is the industry standard for linguistics and code, even for non-SWIFT institutions like Xe. SWIFT works with various international organizations to set content and format standards for messages and transactions. In other words, the network infrastructure usually handles codes as opposed to account numbers and other sensitive information. That’s one reason SWIFT is so secure.
Another reason the network is secure is that its three data centers in the United States, Switzerland, and the Netherlands communicate with each other via subterranean or submerged cables. These communications channels are difficult to hack.
SWIFT upgraded its network infrastructure in 2001 and again in 2008. Not coincidentally, 2008 was also the year international funds transfer prices went up significantly. As part of the upgrade, SWIFT required all member institutions to replace their bilateral key exchange encryption hardware with a Relationship Management Application. Member banks gladly passed these costs along to consumers.
How secure is the SWIFT system?
2008 was a long time ago in technological terms. The smartphone you had back then, assuming you had one, probably looked like one of those World War I field telephones compared to the one you have now. Yet 2008 was also the last time SWIFT did any major security upgrades.
The network paid the price in April 2016. Hackers used malware to steal about $81 million from the central bank in Bangladesh. The malware intercepted the supposedly unbreakable SWIFT codes and also covered the hacker’s tracks. Perhaps most disturbingly, SWIFT admitted that these thieves, or ones similarly equipped, had tried this before.
A few months later, an Ecuadorian bank sued Wells Fargo after the latter allegedly honored a $12 million fraudulent transfer. Hackers obtained canceled transaction requests, altered the amounts, and submitted them.
Questions continue about the network’s security. Some banks claimed they have lost money to hackers in much the same way. These allegations are under investigation.
Can you make money transfers without using the SWIFT system?
Yes, you can! Many banks and providers utilize the SWIFT system to send their money transfers due to its security, efficiency, and well-established reputation, but some providers instead opt to use other channels (or even create their own channels) to send money transfers.
Do you want an example of one such provider? Well, now that you mention it…
Sending money with Xe
SWIFT might be the largest international funds transfer platform in the world. But in terms of security, efficiency, privacy, and a few other areas, it falls short.
So, if you need a reliable and affordable way to send money overseas to family or friends, give Xe a try. We send money through our own money transfer channels, which means that we aren’t on the hook for additional SWIFT system fees and delays—and neither are you.
But don’t worry: our channels are still completely secure. We adhere to regulatory standards in every country that we do business in, with bank-grade security measures to ensure that your money and information are completely safe