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Question treasuryXL Panel #2 | How is PSD2 being applied in a business context?
12-10-2021| treasuryXL | Cobase |LinkedIn |
treasuryXL is the community platform for all your relevant treasury questions.
We received the following question from one of our followers…
QUESTION
“As a treasurer, efficient and risk-free handling of payments and reporting are top of mind. In the daily news I read a lot about PSD2, but why don’t I see much of this being applied in a business context?”
ANSWER
We asked for assistance of our highly valued partners to answer the question: Joost Kevelam, Head of Sales and Head of Financial Markets & Risk Solutions at Cobase.
With his expertise he could help out our contact perfectly!
Joost Kevelam responds:
“That is a great question. Today PSD2 is very much geared towards retail users. For corporate usage, we see three key hurdles that need to be cleared.
Firstly, for reporting purposes PSD2 still demands use of bank-specific tokens; either for periodical consent (for reporting) or for each payment. For treasurers that have several banks this is prohibitive.
Secondly, corporate treasurers want to connect in such a way that they can do all their cash management tasks in their ERP and the ERP then connects (unattended) to all their banks. The banks’ PSD2 (or Open Banking) connections often do not support these patterns.”
Lastly PSD2 protocols vary wildly across banks, there is no standard yet. Developments in the right direction are unfolding slowly.
In the meanwhile there are solution providers in the market that offer much of the touted future PSD2 benefits, but with technology that is already easily available today (e.g. swift, host-2-host and other APIs). If you select a provider, please consider whether they have the license and capability to easily migrate you to the PSD2/Open Banking interfaces once they are suitable for corporate usage.
Feel free to contact me if you wish to discuss how these technologies can make your life as a treasurer easier.
Do you also have a treasury related question? Feel free to leave your question at our treasuryXL Panel. The panel members are willing to answer your question, free of charge, no commitment.
No More Excuses! It’s Time to Implement the Right Hedging Program
11-10-2021 | treasuryXL | Kantox
More than half the participants of the Kantox & TMI FX Survey describe their existing currency hedging program as inadequate. And that’s not all: 72% of participants admit the need for updates and changes to their policies and programs going forward.
How do we account for this widespread inadequacy? The answer is simple. Most managers start by assessing the available Treasury resources. Only then do they set up the firm’s hedging programs.
This is the wrong approach.
Instead, managers should start by assessing the FX needs of the business, paying special attention to the firm’s pricing parameters. Only then should they design the hedging program.
Over-hedging —the situation of a firm that has hedged in anticipation of an exposure that has failed to materialise— is a perfect example of the challenges posed by a program designed with the available technology. As the Kantox & TMI Survey shows, it is one of the most pressing concerns for treasurers.
The problem of over-hedging is often associated with a ‘lack of visibility’ in treasurers’ forecasts. The apparent solution then is to ask for more staff to be hired at the Treasury team.
At Kantox we disagree with this diagnosis.
More often than not, over-hedging is the byproduct of a hedging program that was badly designed from the start—and where the wrong tools were applied. Spreadsheets, TMSs or ERPs, were never designed with FX management needs in mind.
That’s why it is becoming more and more important to use technology that is flexible enough to allow managers to deploy FX programs that are tailored to the specific needs of the business.
Starting off on the right foot
Take the case of a company that does not update its prices frequently, yet has an FX-sensitive business model, favourable forward points, and a low degree of forecast accuracy. It would be hazardous for such a firm to rely on a traditional ‘static program’ where the whole budget is hedged at the start of the period.
Instead, the magnitude of an early static hedge should be kept within the bounds of what is nearly 100% certain in terms of accuracy. For the rest of the budget, a more dynamic combined program —based on firm commitments— can be designed.
Such hedging programs and combinations of programs can be tailored to fit any business model and pricing parameters. By applying these programs, companies make sure that situations of under or over-hedging are avoided, and that a hedge rate that is equal or better than their budget/campaign rate is systematically achieved.
But this requires technology.
A game-changer: Streamlining the end-to-end FX processes
There is a way out of the costs created by inadequate hedging programs. As Antonio Rami, Kantox’s co-founder and Chief Growth Officer put it during a recent Kantox webinar: “By using technology to streamline the end-to-end process of FX risk management —from the pre-trade phase down to the accounting tasks— companies can sidestep the pitfalls of softwareless currency management”.
Armed with a thorough understanding of the FX needs and pricing dynamics of their business, companies can deploy the Currency Management Automation solutions needed to create —and to execute— the hedging program that best suits the business.
It’s high time to ditch excuses like the ‘lack of visibility’, ‘high FX volatility’ and ‘insufficient treasury resources’.
Start off on the right foot instead. Look at the needs of the business first, and then go for the hedging program that allows your firm to take advantage of emerging growth opportunities—just about anywhere in the world.
WEBINAR ALERT | How to achieve cash forecasting excellence – challenges and strategies
treasuryXL | Nomentia |
Date & time: October 20, 2021 at 3.00 pm CET | Duration 45 minutes
Cash forecasting remains one of the most challenging topics in treasury management. With the knowledge and years of experience of our experts within TreasuryXL and Nomentia, we will discuss cash forecasting in more depth. We’ll tackle the challenges that are paired with cash forecasting, and strategies to overcome challenges to achieve cash forecasting excellence.
Join the webinar to learn more about:
Click on the banner for registration.
Meet the speakers
François de Witte
Seasoned Treasury Expert
TreasuryXL
Huub Wevers
Senior Sales Manager
Nomentia
Jouni Kirjola
Head of Solutions and Presales
Nomentia