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Top 5 most common pain points in Treasury
14-02-2020 | treasuryXL | Michael Ringeling
The purpose of Treasury is to manage a company’s funding, liquidity and to mitigate its financial and other risk. Made up of three sub-disciplines, Treasury’s overall objective is to safeguard the company’s holdings and to follow the long-term strategy set forth by Corporate Finance (and strategy). Cash Management, on the other hand, is primarily focused on operational, short-term, efficiency and process optimisation, whereas Risk Management is oriented towards financial research and operational controls.
Michael Ringeling, corporate treasury expert, made a top 5 of the most common pain points he encounters in Treasury, including consequences and a solution.
Top 5 of the most common pain points in Treasury
Too many bank accounts at too many banks
Consequence:
Complex to manage, poor control, higher risk of fraud, higher costs, more KYC/AML requirements
Solution:
Less bank accounts at fewer banks, all via one or two electronic banking systems or multibank platform to manage payments and cash flows. The result will be more efficient, more secure and more cost-effective payment transactions, reporting and reconciliation into the ERP system.
No reliable cash flow forecast
Consequence:
Poor liquidity management. Insecure about the required short and long term funding and poor management information.
Solution:
A good cash flow forecast, providing adequate insight in the organisation’s short and long term cash flows, will contribute to an efficient funding strategy and lower cost of funds.
FX results, (negatively) impacting the company’s P&L
Consequence:
The company’s financial results are impacted by unforeseen and unknown FX results
Solution:
FX risk management analyses, create a FX policy and perform deal execution (hedging) to control FX results
New Loan Agreement needed – negotiations
Consequence:
Difficulties in assessing if the loan terms and conditions are fair. Risk of overpriced loans and/or unfavorable terms and conditions required by the bank(s).
Solution:
Assist the company when negotiating with the bank(s) to get a fair deal with terms and conditions that will not unnecessary limit the company’s flexibility.
Cash is trapped on too many stand alone bankaccounts around the world
Consequence:
Company cannot effectively use a significant amount of cash, resulting in higher (short term) loans and higher interest costs.
Solution:
Implementation of a cross border cross currency cash pool to centralise the company’s cash balances. As a result the amount of local trapped cash will be reduced and that cash can be used for general corporate purposes. Less short term loans and lower interest costs.
Sounds familiar?
Do you recognize the pain points that we mention above in your business? Or are you experiencing other critical treasury pain points in your business?
In our active network there are several treasury experts who can offer treasury support. They can be hired for specific projects or on a regular basis. Check Rent a Treasurer and let us help you.
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Inflation Data for EURUSD
13-02-2020 | treasuryXL | XE |
Markets have once again turned risk averse overnight, with the Chinese city of Hubei the latest outbreak focus. With a European tech conference cancelled, as well as fears in South Korea and Japan. The medium and long-term impacts are still non quantified. Currency markets do not like uncertainty.
And so, the now go-to bellwether currency is the USD, which moved above the psychological level of 99.00 which has been touted for some days. As a consequence most currency pairs have moved lower against the Greenback. One of the more notable casualties is the most liquid pair – EURUSD. Generally regarded as a low volatility play, it’s has now moved down over 13.5 % in the last two years, and tests key support.
GBPEUR has gained momentarily as a result, and indeed UK importers can be buoyed by a much healthier session for GBP across the board. Risk bearing currencies like AUD, NZD and CAD have all suffered as a by-product, and will be dictated to by Geopolitical fears related to the Coronavirus outbreak.
Yesterday did not help the EUR on the data from with Industrial production numbers much lower than expected at -2.1%, a huge shift. And this fragility for the single currency will today be magnified by German CPI inflation releases. For the EURUSD traded pair, the release of US CPI inflation numbers later in the session could have a similar push/pull impact.
Back to the UK and today we see PM Boris Johnson reshuffle his cabinet, and whilst not significantly market moving; the emphasis will be closely eyed for negotiations with Brussels.
One final thing to note is the release this morning of the RICS house price balance numbers here in the UK. This number has shown a positive swing, the post UK. election decision clearly has people moving on up. Long may it continue.
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About XE.com
XE can help safeguard your profit margins and improve cashflow through quantifying the FX risk you face and implementing unique strategies to mitigate it. XE Business Solutions provides a comprehensive range of currency services and products to help businesses access competitive rates with greater control.
Deciding when to make an international payment and at what rate can be critical. XE Business Solutions work with businesses to protect bottom-line from exchange rate fluctuations, while the currency experts and risk management specialists act as eyes and ears in the market to protect your profits from the world’s volatile currency markets.
Your company money is safe with XE, their NASDAQ listed parent company, Euronet Worldwide Inc., has a multibillion-dollar market capitalization, and an investment grade credit rating. With offices in the UK, Canada, Europe, APAC and North America they have a truly global coverage.
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Maurits Houthoff, senior business development manager at XE.com, is always in for a cup of coffee, mail or call to provide you detailed information.
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Financing a Livable World
11-2-2020 | by Aastha Tomar
If Greta Thunberg doesn’t inspire us, breathing some Delhi air may. While these might have been in news recently, more of this discussion is on social media rather than real action.
Sustainability has thus mostly been associated with activist connotation and, less with real, on-ground impact.
As we evaluate on-ground actions, investments towards such actions become first step and these need to make “financial sense” for investors to flock in. That’s when, I believe, that traditional financial acumen fails us. The foundational elements of investment rationale shall make such investment difficult. Let’s evaluate how –
Of all, these foundation elements make investment capability of capital markets to adapt in disruptive situations, like we are facing now for climate change, difficult. Financial markets, in its prevailing methods, would only consider climate change once its impacts are visible, but that, I guess, would be too late.
Having worked in Debt capital markets (DCM) my first reaction was to search of how DCM is contributing in sustainability and this led me to know about a beautiful concept of green bonds. The bond by their very name “green bonds” click into mind that there is something related to sustainability in it.
Green bond principles, intended to provide a framework for debt funding for projects which shall contribute to sustainability, is a step in the right direction. It has been framed with four core pivotal elements –
It’s the use of proceeds which sets apart green bonds from regular bond issues. The eligible projects for such issuance should be from around ten categories including renewable energy, energy efficiency, pollution prevention and control, green buildings etc.
A cumulative $580 billion of green bonds were sold through 2018, according to Bloomberg New Energy Finance. According to climate bond initiative in quarter 3 of 2019 itself USD 6.2 bn worth green bonds were issued worldwide, which is 87% up YoY. There were 139 issuers from 32 countries. There are many issuers joining the race and many nations as well. European nations being the ones taking the lead.
Though figures for green bonds may seem encouraging when we see them standalone but when compared to the global bond markets which are more than USD 100 trillion market, green bond market is hardly a fraction of it. Europe alone needs about 180 billion euros ($203 billion) of additional investment a year to achieve 2030 emission targets set by the European Union in the 2015 Paris Agreement on climate change.
In nutshell, green finance initiatives are steps in right direction but need more muscle and speed to enable actions on ground.
What are your thoughts?
FX & Derivatives | Debt Capital Markets | MBA Finance
Electrical Engineer | Sustainability