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Meet our Experts – Interview Aastha Tomar
09-06-2020 | Aastha Tomar | treasuryXL
Aastha Tomar has joined treasuryXL at the beginning of 2020 as expert and already published 3 great blogs:
We asked her 9 questions, let’s go!
1. How did your treasury journey start?
My first exposure to how Treasury actually works was quite early during my internship in my MBA. I was lucky enough to do internship in one of India’s largest Corporate Treasury. It was then I decided that I want to make my career in Treasury. Therefore my career choices after MBA were always made while keeping in mind that I have to move towards being a corporate Treasurer.
2. What do you like about working in Treasury?
Treasury is a very fascinating department, there doesn’t goes even a single day where you don’t learn something new. Every day brings a new aspect to the profile. You have to be on your toes always to be up the curve which is the best part. You are always on top of what is happening in the world and how it is impacting the business. You can always make a positive impact on organisation’s bottom line by being always ready with action of any kind of impact.
3. What is your Treasury Expertise?
I have worked in Corporate finance, fixed income financing through loans and capital markets and have worked in FX Treasury which included risk management, interest rate risk management and FX risk management.
4. Do you have examples of risk mitigation, creation of opportunities and/or cost savings?
I was responsible for ISDA negotiations where we always made sure that default covenants for the counter party are strict and always made sure that the covenants are adhered to and did frequent monitoring for the same. This always kept us informed and saved us from any shocks from covenants default which in turn would have led to default in the derivatives done with the counter party.
5. What has been your best experience in your treasury career until today?
I was the founder member of Treasury in my previous organisation. I joined the organisation before the bank was formed. The initial few months were very demanding as it involved infrastructure set up, documentation, informing corporations about our bank. After much hard work and after few months I cracked one of the biggest deal for that year for my bank. It was such a nice experience where all your efforts which you put in finally bore fruit.
6. What’s the most important lesson that you’ve learned as a treasurer?
Time is for essence for a Treasurer, we have to take actions swiftly and seamlessly. Each day is different and bring new challenges therefore a Treasurer should be ready to face them . Always think out of the box- what new products can be used, how to make most use of technology, how make a team which is self motivated and work towards a common goal.
7. The coronavirus is undoubtedly an unprecedented crisis. In general, can you elaborate on the impact this virus has on treasury from your perspective?
The corporations with strong risk management approach, with clear understanding potential risk on business through risk evaluation tools, such as sensitivity analysis, shall be the best place during the current scenario. They would have their foreign currency exposure hedged to an optimum limit, sufficient cash to work with and therefore, during these times, would be able to direct their efforts to improve operational efficiency, carry out M&A evaluations rather than trying to learn swimming after being thrown in the waters. Business Continuity Management came into play and the organisations which has BSM only in theory in their policy books took lot of time to adjust to the new normal. Thus, COVID 19 brings additional responsibility of treasury towards ensuring corporations not only survive but thrive during the new normal.
8. What developments do you expect in corporate treasury in the near and further future?
One thing has been proved that there is no running away from the Technology. You may be in finance field but you got to know the technology as well. The major development which now will take place will be to reduce as much human intervention as possible in the working of Treasury which will make sure that if at all any such scenario is faced in future work can go on without much impact.
9. How have you seen the role of Corporate Treasury evolve over the years?
I answered this question in my article “The Missing Part of a Treasury Job Description“:
” Gone are the days when a Treasurer was just involved in risk management and ensuring liquidity. In current scenario of news going viral each action creates a ripple effect. As famous Jane Goodall once said : “You cannot get through a single day without having an impact on the world around you. What you do makes a difference, and you have to decide what kind of difference you want to make”. A Treasurer has to take an active role in policy making and lead her organization towards sustainability and protecting consumers ”
FX & Derivatives | Debt Capital Markets | MBA Finance |
Electrical Engineer | Sustainability
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How SMEs should select a BAAS platform?
| 08-06-2020 | Carlo de Meijer | treasuryXL
In my last blog BAAS and SMEs: New Opportunities I explained what Blockchain-as-a-Service is, where it could be used for and what the benefits are for SMEs. But another question is: how should SMEs select BAAS providers and their offerings. What are the various issues they should look at to get the most out of it. In other words: how should SMEs deal with this?
Why many SMEs move to BAAS?
But first, why this growing interest by SMEs for Blockchain-as-a-Service (BAAS)? There are various reasons for that. Such a the promised benefits in terms of efficiency, simplicity, transparency, speed, costs etc.
BAAS has some interesting use cases ranging from smart contracts, document origin tracking, resource sharing, single window, contract execution and spend rationalisation.
And BAAS could be used in various business activities like food safety tracking, international transactions, retailer industry, supply chain management, and trading.
What issues for SMEs to consider?
But before a company decides to start integrating BAAS services in their existing infrastructure it is important for them to consider a number of key issues. They should ask themselves a number of key questions.
Such as, does the company really need BAAS (or blockchain)? If so, for what purposes? And what are the specific (basic) requirements to look for at the “ideal” BAAS provider? What other factors to be considered? And finally, which BAAS provider offers the right and best type of solutions for the company?
Do you need BAAS or Not?
One of the first questions a company should ask themselves is do they really need BAAS. Whether or not BAAS matters to a company will depend on a number of issues.
Does the company already works efficiently from a cost and processing point of view? There may be hurdles in the company in the form of managing varied database, browsers, firewalls, application servers, and hardware, that could make it very difficult to integrate BAAS offerings into the legacy network of the company.
And does the company have the team skills that are comfortable and confident (or not) in using BAAS? Do they already use (one or more) cloud providers? And if so, do they have enough experience with these. This question is especially relevant because BAAS offerings are evolving quickly.
Other questions that may determine all or not choosing BAAS will be the tools available, choice of operating systems, ease of use, and pricing, thus costs.
So many things to think about, investigate and discuss.
Some broad guidelines for Selecting a BAAS Partner
Given the lack of readily available guidelines and best practices a lot of discussions and evaluations are needed into the process of selecting a BAAS provider or solution. Here are some broad guidelines a company should consider.
BAAS provider experience
First of all the company should ask themselves has the BAAS provider prior experience in setting up blockchain infrastructure? A company should ensure that the BAAS provider has proven experience in developing and deploying Blockchain technology. Companies should be ensured that the implementer department of the BAAS provider has professional staff that could easily attain the complex solutions for the enterprises. Companies should also ensure that the BAAS provider disposes of a good developer community, thereby guaranteeing “excellent output”.
BAAS provider’s commitment
There is also the question of BAAS provider’s commitment? Delivering quality is of great importance when choosing the right BAAS provider. A company should therefore probe their commitment to quality, process and standards of BAAS offerings.
Security assurance
Another critical issue that a company should investigate is can the BAAS provider deliver security assurance? In the first place they hey should ensure that – for privacy and security reasons – BAAS offerings are built on permissioned blockchains. Given the variety of security issues ranging from application level to server level, it is important to look for potential gaps in security assurance in the proposed BAAS implementation plan.
Seamless deploying
A company should also look if the BAAS provider has enough experience in deploying. A company should evaluate the BAAS provider’s experience in deploying cloud-based solutions for operating systems similar to that of their organization. SMEs should thereby look for BAAS providers that offer quick and economic deployment, testing, staging, and good production line. Companies also need to ensure that the new Blockchain infrastructure integrates seamlessly with their legacy systems.
User-friendly
A company should make sure that the proposed BAAS systems and processes are user-friendly and easily to adopt. After all, they look for a system that their employees do not find difficult to use or navigate.
BAAS innovation
SMEs should also ask how innovative BAAS providers are. As BAAS solutions may vary from provider to provider, innovations might be a real trigger in case of any blockchain deployment. Innovations in the BAAS marketplace can create a more different type of BAAS architecture for a company’s organization.
Cost control
But also in terms of costing control the company should be aware of the real costs. Can a company be assured that they just pay for the value proposition delivered by the BAAS provider? Companies should therefore carefully analyse the pricing options and post-deployment support options and modalities. They should investigate if there are hidden costs linked to the BAAS contract.
Other features of BAAS offerings to look at
But next to these issues there are other basic features of BAAS offerings a company should look for. These include, amongst others, things such as offering good backend or backup solutions, quickly add up new additions to the platform, offer technical support in case of self-deployment etc.
Need for backend services
One key issue that should be investigated thoroughly by SMEs is how BAAS could deliver a company’s unique need for backend services such as integration of popular features and mainstream technologies. A BAAS provider should at least provide some key deliveries including data security, process control, costing control and integration. These backend services should support a wide range of applications without changing the legacy network, often characterised by multiple layers of the data sources, processes and workflows.
Companies should also know the ins and outs of the blockchain platform in order to avoid risks. This asks for adopting proper monitoring and managing tools to manage the BAAS solution network effectively. For security reasons it should be made sure that the application data and user data “should stay within the boundaries of the platform” .
There are also a number of process control requirements for the application. SMEs should be guaranteed that the new BAAS environment needs to keep maintaining the original performance all the time. Some performance checking tools could let companies know how much capable their blockchain solution really is. It also needs to have protection mechanism from hackers, controlling data flow, computer resources, active monitoring tools etc.
Smart contract offering
When considering BAAS a company should make sure that the BAAS provider offers the smart contract integration with the deployment. As you have read in my former blog smart contracts are an important part of any BAAS solution. These allow the companies to electronically measure and encode all terms of the contract so there can be no dispute. Though they are not (yet) legal contracts, they allow the enforcement of an agreement between parties under pre-agreed rules, but also enforces the penalties in case of any rule breaking situation.
Access management
And there is the issue of who and who may not have access to certain information within the organisation. Companies should look for identity based consensus solutions as all the enterprise will operate with known identities. Not everyone in the company should have access to internal securitised information.
It is therefore also important to look for secure Identity and Access framework integration with the BAAS solution. It will enable companies to control the user access from critical information in the organisation, helping the administrator to regulate and control access all over the network.
Flexible deployment
And there is the issue of flexibility in deploying BAAS solutions. BAAS providers should offer versatility when it comes to BAAS frameworks. This asks for the availability of a variety of toolsets for companies. Companies need to have a choice in case of choosing the perfect framework. They should choose a BAAS operator that offers optimal support.
What else to consider?
A final, and may be the best way to select a BAAS architecture is the existing customer ecosystem. In many cases BAAS companies that can offer the most advanced and trouble-free BAAS have a large customer base. So, a BAAS provider with good and positive customer base could be a sign of good quality services.
After having answered all these many questions a company may (or may not) be able to select their favourite BAAS provider. On Google you may find various oversight lists of BAAS providers with many ins and outs.
Enjoy your BAAS journey!
Carlo de Meijer
Economist and researcher
Source
An Introduction to Forwards, Futures and Options | Part 1
03-06-2020 | by Aastha Tomar
Our financial world has now gone through enough crisis. Some learnt from previous crisis and were braced for the next while some were still in their learning phase. The current crisis took everyone by alteration because this time it was not the financial sector which was responsible for the ordain. The fluctuations seen in equity, bond, commodity and currency markets may have become Achilles heels for Corporate Treasurers in current times.
The incumbent state of affairs was such that Corporates had to protect their bottom line while trying to stay afloat. The entire cash flow projections would have gone for a flip for those who didn’t hedge their foreign currency exposure. One way that would have taken a part of vexation away from corporate treasurers due to currency fluctuation is hedging. It would have attenuated the impact of currency fluctuation on investments, borrowings, assets etc .
Let us have a look at the most used and basic methods of hedging in this article :
Forwards
So what are forwards? In a simple language its a hedge product between two parties which freezes your cash flow for a future date. That ways whatever the market situation be on the maturity date of the hedge, your cash flows are locked and predetermined. Whether you are an exporter who can know the exact value of future payments or an importer who can anticipate the exact costs of products; a forward will hedge the risk of currency fluctuation for both.
Features of Forwards :
Example :
Suppose you are an exporter based in the Netherlands and you want to sell Dollars in an years time. You know due to current euro zone, corona crisis and negative interest rate scenarios Euro may fluctuate sideways and therefore you want to lock in the price of USD today itself so that one year down the line you don’t have to worry about the fluctuating rates. What do you do ? You approach a bank informing them that you have to sell USD (buy EURUSD) for 1st June, 2021. After basic documentation bank enters with an forward agreement with you . Where in today’s spot rate , the currency premium for one year , the amount of hedge and the maturity rate will be mentioned .
Spot EURUSD : 1.08282 (1 EUR = 1.08282 USD )
1 year interest rate for EUR = -.07%
1 year interest rate for USD = 0.7%
So after one year based on interest rate parity :
EUR 1* ( 1+(-.0007))= USD 1.08282 *( 1+ .007)
0.9993 EUR = 1.090 USD
Therefore 1 EUR = 1.0911 USD
Therefore by entering a forward contract today you have fixed your EURUSD rate to 1.0911. Note that because the dollar has a higher interest rate than the EUR, it trades at a forward discount to the EUR.
Let us take a simple scenario analysis to make things clearer :
Here the forward deal amount is : EUR 1mn
Spot rate on the day of deal is : 1.08282
Forward rate fixed for the deal is : 1.0911
We can clearly see above that if the spot is same as the forward rate on the maturity date then there is no loss or gain, but if spot moves to 1.09250 then the corporate saves USD 1400 on the contrary if spot moves to 1.0900 the corporate wont be able to take advantage of the low price and will have to exercise the forward at 1.0911 as fixed earlier thus letting go of USD 1100.
So if forwards are so beneficial why do corporates still do not execute forwards for all of their foreign currency transactions :
Whatever the reasons be but the main business of corporates is not to use their energies in managing their fx risk but to increase profits by their mainline business hence its always advised for corporates to hedge their fx risk as much as possible to increase efficiency and prevent themselves from unseen shocks.
In our next post in this series we will see a second type of hedge … to be continued. Till then keep learning and be safe .
FX & Derivatives | Debt Capital Markets | MBA Finance
Electrical Engineer | Sustainability