Treasury Contrarian View: Banks vs. Fintechs – Should Treasurers Bet on Smaller Players?
In the corporate treasury world, large global banks have long been considered the go-to partners. They bring a reputation for stability, deep balance sheets, and an established track record. But in recent years, fintechs have emerged as serious challengers, offering nimble, innovative solutions that many traditional banks simply can’t match. So, here’s the question: Are treasurers limiting themselves by sticking to the perceived safety of big banks, or is it time to rethink the role fintechs could play in your treasury strategy? Beyond Safety: What Really Matters? Yes, safety and stability are key priorities, but they shouldn’t be the only factors in the decision-making process. Treasury teams also need functionality, speed, and solutions that solve real-world challenges. Here are some areas where fintechs might outshine their larger counterparts: The Case for Big Banks Of course, big banks bring undeniable strengths to the table: What’s the Right Balance? Treasurers don’t need to choose either banks or fintechs. In fact, the best approach may lie in diversifying partnerships to get the best of both worlds. For example: Your Turn Let’s open the discussion! To spark the conversation, we’ll include comments from our board members and insights from treasury vendors and fintechs already disrupting the space. Watch this space for their thoughts—and add your own below! Dan Kindler, CTO and Co-Founder at Bound, comments: I don’t see this as an either-or situation. Especially not for larger corporates. Many already use fintechs alongside their banking relationships – and I don’t see this trend slowing down. The banks handle the corporates’ core cash and liquidity needs while fintechs offer specialised tools, like automated FX hedging, that help them manage their day-to-day treasury operations more efficiently. Think of it this way: banks are like the solid foundation of a house – essential, reliable, built to last. We’re more like the smart home system, adding layers of automation, control, and visibility that make everything work better together. Eleanor Hill, Freelance Content Creator at Treasury Storyteller, comments: The tide is changing. I see many more treasurers working directly with fintechs these days. By ‘directly’ I mean not through a bank collaboration with a fintech (partnership being the ‘safer’ route). Of course, the appetite for direct fintech relationships varies according to the size and maturity of the corporate, but it also differs quite significantly by geography. In India, for example, there is huge appetite among the treasury community for fintech solutions. To the point that many treasurers say they would be happy to spend as much on fintech solutions as a TMS (audience poll conducted by me at Treasury Khazana 2024 Conference). That fintech versus traditional tech space is perhaps where the most interesting battles are still to unfold. Lorena Pérez Sandroni, Head of Treasury at PayU GPO, comments: Fintechs are considered a viable alternative to big banks in treasury operations because of their innovative solutions and agile development processes, which allow them to quickly adapt to market and business needs. Specific partnerships with fintechs cannot be disclosed for obvious reasons. However, the biggest opportunity for fintechs is seen through collaboration rather than disrupting traditional banking, as the main challenges for fintechs are linked to regulatory compliance. Recommended Reading Join our Treasury Community Treasury Mastermind is a community of professionals working in treasury management or those interested in learning more about various topics related to treasury management, including cash management, foreign exchange management, and payments. To register and connect with Treasury professionals, click [HERE] or fill out the form below to get more information. Notice: JavaScript is required for this content.
Franklin
Cash Efficiency—How to Get the Most Out of Your Cash
This article is written by Palm A common issue we hear at Palm is that businesses are aware of their idle cash but lack the time and resources to manage it effectively. This can range from the minor inconvenience of maintaining a small balance in an unused overseas account to a larger problem of having unutilised funds scattered globally. Treasurers have always strived to have their cash in centralised accounts, whether using cash pools or virtual account structures. However, in more recent years, with the rise of interest rates, this topic has been given much airtime in board meetings and leadership conversations, as idle cash represents forgone interest income. This blog explores the concept of idle cash, its origins, and how we are on a mission to give treasurers the tools they need to forecast and manage their cash proactively and prevent idle cash balances from occurring in the first place! What is Idle Cash? Idle cash refers to money held by a company that isn’t being actively used for business operations, investments, or other productive purposes. While maintaining some level of cash reserves is prudent for liquidity and unforeseen circumstances, excessive idle cash can represent a missed opportunity and become a drain on company resources. Causes of Idle Cash Several factors can lead to the accumulation of idle cash: The Risks of Idle Cash While having cash on hand might seem like a good thing, excessive idle cash can pose several risks to your business: Deep Dive into Trapped Cash Trapped cash specifically can be a headache for treasurers, the time spent completing paperwork to ‘release’ the cash. Trapped cash refers to cash and liquid investments held by foreign subsidiaries that cannot be easily repatriated to the parent company due to tax implications, regulatory restrictions, or other factors. Countries Where Cash is Often Trapped While the specifics can vary based on a company’s global footprint and the nature of its operations, some countries are notorious for making it difficult to move cash out: Risks of Trapped Cash Having large amounts of trapped cash can pose several risks: Strategies for Managing Idle and Trapped Cash Given these risks, what can you do to manage idle cash more effectively? Also Read Join our Treasury Community Treasury Masterminds is a community of professionals working in treasury management or those interested in learning more about various topics related to treasury management, including cash management, foreign exchange management, and payments. To register and connect with Treasury professionals, click [HERE] or fill out the form below. Notice: JavaScript is required for this content.
Treasury Is Easy; Is It?
We sometimes hear people say treasury is difficult. On paper, it might seem simple: track cash, manage risks, secure financing, and automate processes. However, in practice, treasury is a balancing act requiring a deep understanding of the interconnected nature of its core pillars: cash management, risk management, corporate financing, and technology and automation. While it’s true that getting these pillars right covers 80% of the job, the real art of treasury lies in understanding the interdependencies between them. Treasury doesn’t operate in silos—each pillar is woven into the others, forming a cohesive system that needs to be tailored to your company’s unique needs. The Four Pillars and How They Interconnect Where to Begin? With these interdependencies in mind, the question isn’t just “Which pillar should we focus on?” but rather, “Which interconnected priorities matter most to our business right now?” Scenario 1: Cash Is Tight, Margins Are Low If your business operates on thin margins and limited cash reserves, the focus should start with cash management, but risk management and financing must also be considered: Scenario 2: International Operations and FX Exposure For multinational companies, risk management takes center stage, but it cannot succeed without strong cash management and financing strategies: Scenario 3: Growth and Expansion Rapid growth requires careful attention to corporate financing, but this inevitably ties into cash management and technology: Scenario 4: Efficiency and Optimization For businesses seeking efficiency, technology and automation are essential, but they must enable the other pillars: The Treasurers’ True Job: Mastering Interdependencies Treasury is not just about managing individual pillars—it’s about understanding and leveraging the connections between them. A treasury that operates in silos risks inefficiency, higher costs, and missed opportunities. By focusing on the interplay between cash management, risk management, corporate financing, and technology, treasurers can create a system that is greater than the sum of its parts. At Pecunia Treasury & Finance, we help companies navigate these complexities and design treasury functions that align with their priorities. Because in the end, while treasury may seem “easy” in theory, true success lies in mastering the interdependencies that drive real value. Also Read Join our Treasury Community Treasury Mastermind is a community of professionals working in treasury management or those interested in learning more about various topics related to treasury management, including cash management, foreign exchange management, and payments. To register and connect with Treasury professionals, click [HERE] or fill out the form below to get more information. Notice: JavaScript is required for this content.
Comparing CFO and Treasury Roles: Responsibilities, Pain Points, and FX Software Benefits
This article is written by GPS Capital Markets Finance professionals are integral to the success of every business, playing vital roles that ensure financial health and stability. At the helm is the Chief Financial Officer (CFO), responsible for overseeing the company’s overall financial strategy, while the treasury department manages more tactical aspects of financial operations. Together, these roles complement one another, each contributing to the organization’s financial goals. CFOs and treasury teams work alongside advisors and contractors to ensure consistent cash flow and strict adherence to regulatory requirements. As CFOs are increasingly called upon to transform finance operations, treasury stands as an ideal area to strengthen a company’s financial soundness. By leveraging advanced FX software and automation tools, treasury professionals are able to mitigate risks, improve working capital, and enhance automation processes, allowing organizations to thrive even in uncertain markets. Let’s delve into how these dynamics between CFOs and treasury professionals shape the financial landscape. The Value of Treasury to the Organization Treasury departments contribute significant value to an organization by managing the cash conversion cycle. This involves ensuring that the company maintains enough liquidity to meet its financial obligations while simultaneously maximizing the returns on any excess cash. Treasury’s responsibilities range from hedging against currency fluctuations to optimizing cash flow across global operations. They handle the tactical aspects of cash flow management, funding, and risk mitigation, ensuring that the organization remains financially stable in both the short and long term. On the other hand, the CFO focuses on broader financial strategy, with an emphasis on long-term goals, investor relations, and high-level financial planning. The CFO’s role requires consolidating data across various departments and markets, ensuring regulatory compliance, and delivering strategic insights to the board of directors. CFOs depend heavily on data from different parts of the business to devise strategies that align with the company’s objectives while managing risks, including those related to foreign exchange. Pain Points for CFOs and Treasury Professionals Both CFOs and treasury professionals face distinct challenges in their respective roles. Understanding these pain points is crucial for enhancing operational efficiency and ensuring financial stability. CFO Pain Points CFOs often struggle with the consolidation of data from multiple departments and external sources. This process can be time-consuming and prone to errors, making it difficult for CFOs to develop accurate and timely financial insights. Additionally, staying compliant with constantly evolving financial regulations and hedge accounting standards presents an ongoing challenge. For CFOs, real-time access to data is critical for making strategic decisions, but manual processes often hinder their ability to act swiftly on key insights. Treasury Pain Points Treasury professionals, meanwhile, frequently contend with the overwhelming volume of data related to currency exposure. Managing this data manually can make tasks such as netting and gaining visibility into the company’s financial position unnecessarily complex. Hedging strategies, which require precise data for accurate implementation, add another layer of complexity. Furthermore, treasury teams must react quickly to market volatility, a task that is challenging without the aid of automated tools that can keep pace with rapid changes in the financial landscape. FX Software as a Solution FX software has emerged as a critical tool for both CFOs and treasury professionals, offering tailored solutions to address their distinct needs and pain points. How CFOs Use FX Software CFOs utilize FX software to gain a comprehensive overview of their company’s FX exposure and hedging activities. The software automates the preparation of financial reports and strategic plans, reducing the need for time-intensive manual data consolidation. Through the use of automated dashboards and real-time reporting tools, CFOs are able to access the insights they need during board meetings and other critical discussions, allowing them to make well-informed, timely decisions. This technology enables CFOs to focus on long-term forecasting, scenario analysis, and ensuring that hedge accounting standards are consistently met through automated processes. How Treasury Professionals Use FX Software For treasury teams, FX software provides real-time monitoring of currency exposure and facilitates the execution of hedging strategies with precision. Automation significantly reduces the need for manual processes such as spreadsheet management and data gathering, allowing treasury professionals to focus on higher-value tasks. Additionally, these platforms optimize cash flow management and minimize risk by automating hedging and intercompany netting tools, empowering treasury teams to respond more effectively to market volatility. Comparing the Pain Points Addressed by FX Software FX software effectively addresses many of the challenges faced by both CFOs and treasury professionals. For CFOs, the software streamlines complex data consolidation processes, automates regulatory compliance, and facilitates faster decision-making through real-time data insights. Treasury teams, on the other hand, benefit from the automation of labor-intensive tasks like data collection and trade execution, which reduces the impact of market volatility and improves overall risk management. Climbing the Career Ladder from Treasury to the C-Suite Although the CFO’s role focuses on high-level strategy and treasury teams concentrate on operational efficiency, there is a clear career path for treasury professionals aiming to advance to the C-suite. To successfully transition into executive roles, treasury professionals must adopt several key strategies. Broaden Financial Knowledge Treasury professionals aspiring to become CFOs need to expand their expertise beyond liquidity and cash management. Developing a robust understanding of corporate finance, including budgeting, financial planning, and capital structure, is essential for building the skills required to step into a senior executive role. Master Technology and Data Analysis As technology and automation continue to transform the finance sector, the ability to effectively leverage FX software for both strategic insights and operational efficiency becomes increasingly important. Professionals who can analyze and act on financial data quickly will distinguish themselves and be better prepared for leadership positions. Develop Leadership Skills Treasury professionals seeking to move into the C-suite must also focus on developing strong leadership and communication abilities. This involves managing cross-functional teams, presenting complex financial data to senior management, and influencing high-level decision-making processes. Strategic Involvement Actively participating in strategic discussions, such as risk management and long-term financial planning, gives treasury professionals the exposure they need…
Treasury Contrarian View: Why Stop at 100% Hedging?
In corporate treasury, the conventional wisdom is often to hedge up to 100% of a company’s exposure. This aligns with the most common policies and, on the surface, seems to mitigate risk effectively. But here’s the kicker: some strategies and products allow companies to hedge beyond 100% of their exposure. So why do most organizations stop at 100% when going beyond could make more sense in certain situations? Let’s think about it. In volatile markets, a 100% hedge may not account for potential over- or under-hedged positions caused by fluctuations in forecast accuracy, timing mismatches, or unforeseen economic changes. Hedging beyond 100% can create a buffer, ensuring the organization stays covered even when the unexpected happens. Yet, this approach remains underutilized. When Could Hedging Over 100% Make Sense? Why the Reluctance? Despite these potential benefits, most companies shy away from hedging beyond 100%. Why? Here are a few potential reasons: The Call for Discussion Should treasurers challenge the status quo and embrace more strategic and flexible hedging approaches? Is it time to rethink treasury policies to allow for greater flexibility in managing exposures? Or is the perceived risk of over-hedging simply too high? What do you think? Let’s start the conversation! Share your thoughts in the comments below. To kick things off, we’ll be sharing comments from some of our board members—treasury practitioners with deep industry expertise—and insights from our content partners, including leading treasury vendors and technology providers. Stay tuned for their perspectives, and feel free to respond or add your own! Nicholas Franck, Treasury Masterminds board member comments: Gains and losses are a product of cash forecast accuracy AND movements in market rates. Most treasuries put significant time and effort into making their cash forecasts accurate, but little to none into making their risk managers experts. “That would be speculation”….You can’t be forecast what the market rate will be in three year’s time – but you can work for three years forecasting what it will be in one minute, one hour, one day’s time. Who’s done an analysis to see what improvement in market rate forecasting is needed to justify one or two FTEs? If not, why not? Johann Isturiz Acevedo, Treasury Masterminds board member comments: Cost increase is key element to stop at 100% for market like AMECA when cost of carry is expensive, it has to be well presented to the management to make such a case Recommended Reading Join our Treasury Community Treasury Mastermind is a community of professionals working in treasury management or those interested in learning more about various topics related to treasury management, including cash management, foreign exchange management, and payments. To register and connect with Treasury professionals, click [HERE] or fill out the form below to get more information. Notice: JavaScript is required for this content.
UK Bond Market Reform Set to Unlock Growth
UK capital market reform, retail investors and untapped potential The UK’s capital markets are amid the most significant set of reforms for a generation. Free to change its regulations after leaving the EU and driven by concern about the performance of its capital markets, the UK government commissioned the UK Listing Review[1]. Published in 2021, this made a number of recommendations that are in the process of being taken forward, all designed to make the UK a more attractive place in which to raise capital – and its markets more accessible for retail investors. The drive for retail accessibility is partly spurred by changes to the pension landscape and the rise of user-friendly tech-enabled investment platforms which have increased demand from retail investors who are much more engaged with managing their own funds than twenty years ago. It is also partly spurred by the realisation of the untapped potential that retail investors present. By some estimates[2], the value of the UK retail investing market has grown to over £4 trillion since 2005. To say this represents a material pool of capital that could be accessed by companies is an understatement. In the UK at least, approximately 20% of household assets are invested in financial securities[3]. This compares to 43% in the USA[4]. Unlocking access to more retail capital, could help businesses raise the funds required to meet their goals such as expansion, net zero transition and digital transformation, whilst also boosting household finances and employment opportunities. No wonder the initiative has received strong, cross-party political support. Corporate bonds, barriers to retail access and proposed reforms Currently it is easier for UK individuals to invest in equities, crypto-currency, or to bet on a horse, than to invest in a blue-chip, investment grade, corporate bond. This is ironic, given that bonds sit at the safer end of a company’s capital structure, whilst UK retail investors are over exposed to higher risk equities. Bonds are crucial products for investors to have access to. In contrast to equity, they can provide a means of capital preservation (via investment repayment at maturity), together with a regular income from interest payments. These features are helpful for investors making financial plans – equities for capital growth and bonds for cash flow and capital preservation. Whilst investors can access bond funds, these do not serve as an adequate replacement for direct bond investment because the visibility of an individual bond’s maturity date is lost. This does not support investor planning and also changes the behaviour of the investment, encouraging selling during times of depressed prices. Funds also contain value eroding management fees. A key barrier to UK retail access to corporate bonds is regulation, in particular the UK’s EU inherited Prospectus Directive, which was rolled out in 2005. Designed to protect ‘retail’ investors by requiring additional disclosures for bonds denominated under 100k, the effect was to exclude them, as issuers chose the easier route of using high denominations and issuing to institutions (the wholesale market). Low denomination bonds that UK retail investors can feasibly purchase, have declined by 99% since that date. The regulator (the UK’s Financial Conduct Authority – ‘FCA’) is unhappy with this outcome. They believe that retail investors are better protected by investing alongside institutional investors. Free from the EU and encouraged by the UK government for the reasons above, initial proposed reforms were published by the FCA in 2023[5] and contained two elements: 1. To remove the need to have a retail AND wholesale prospectus, such that only ONE will be required; and 2. For seasoned investment grade bond issuers who decide to use low denominations, to be subject to even fewer disclosure requirements than currently required when they use high denominations (in order to incentivise a switch) The feedback on these proposals was published in December 2023 and was strongly positive. Detailed proposals are now expected in early Q1 2025, with implementation later in the year. The intention is for this reform, plus others, to sit under the “Public Offers and Admissions to Trading Regime”, which will replace the Prospectus Directive in the UK. Another regulatory barrier has been the UK’s EU inherited PRIIPs regulation, which has had the effect of making any retail targeted bond, a PRIIP if it contained a make-whole clause (a fairly standard feature). Being classified as a PRIIP has meant that additional disclosures and documentation are required, which has also encouraged issuers to avoid retail investors. The FCA has recognised this situation too and in December 2024 issued a consultation paper proposing that this will not be the case under the new CCI regime which is being set up to replace the PRIIPs regime[6]. Retail Investors – profile and significance It is worth considering who we mean by “retail investors”. Of course, they are individuals. But these individuals are investing via financial intermediaries such as investment platforms and wealth managers, who are acting as aggregators of demand. In the UK, the leading investment platform is Hargreaves Lansdown with around £180bn assets under administration and the top wealth managers include Investec/Rathbones with c£110bn AuM, RBC Brewin Dolphin, with £60bn AuM and Killik & Co, with c£10bn AuM. Understanding the size and composition of the retail investment community and how they interact with primary and secondary markets is significant for a number of reasons. Firstly, many issuers ‘fear’ the prospect of dealing with retail because they interpret this as having to deal with “thousands of individuals”. However, in reality, an issuer and its transaction counterparties will be dealing with a limited number of intermediaries (who also take on the responsibility of complying with Consumer Duty regulations). These intermediaries can be added to any new bond issuance process and post-issuance, investor communications and any bond amendments are handled via the same retail intermediaries. Secondly, by aggregating demand, these intermediaries represent genuine additive demand to the bookbuild process. And thirdly, largely thanks to the discretion granted by individuals to wealth managers, some of these intermediaries can move fast and act in…
James
How to Map Currency Risk
This article is written by Kantox According to the recent 2021 Citi Treasury Diagnostics survey: “Corporates are now conducting comprehensive policy and ERP/TMS technology reviews with the main question being asked by senior managers: when, where and how does currency risk emerge?” The FX risk map is a useful tool that allows us to provide answers to these fundamental questions. Toni Rami, Kantox Chief Growth Officer says: “Mapping currency risks is an essential first step in defining, selecting, and implementing risk mitigation solutions […] If you can’t measure it, you can’t manage it”. The FX risk map and the ‘when’ question The FX risk map is a graphical representation of the lifespan of an FX-denominated transaction. Before a transaction is settled in cash, it is recognised in the books of the company as an invoice at the prevailing spot rate: the ‘accounting moment’ in the life of the transaction. Before that, still, it is considered a firm commitment — a legally binding agreement for the exchange of a specified quantity of resources at a specified future date or dates. And even before that, it was merely a forecast, an anticipated transaction that is not yet legally binding.This, in a nutshell, describes the journey of an FX-denominated transaction. Currency risk emerges from the fluctuations in the exchange rate across the lifespan of the transaction. With that in mind, we can see that the exposure to currency risk can be classified as: (a) accounting exposure (from the moment the invoice is recognised); (b) cash flow exposure that includes the transaction exposure (from the firm commitments), and the forecasted exposure of revenues and expenditures. Pricing risk At Kantox we pay attention to another element of the FX risk map that is usually neglected in most textbooks: pricing risk. Pricing risk is the risk that —between the moment an FX-driven price is set and the moment it is updated— a shift in the exchange rate can negatively affect either your profit margins or your competitive position. For example, if you sell in EUR and the exchange rate EUR-USD is systematically part of your pricing parameters, an appreciating USD could hurt your budgeted profit margins. On the other hand, if the EUR appreciates, your competitive position could suffer as you would be in a position to price more competitively EUR without affecting budgeted profit margins.The natural way to reduce pricing risk is to increase the frequency of exchange rate and price updates -— but that option is not available for companies that desire to keep prices steady during a single campaign or budget period, or across a set of campaign periods/budget periods linked together. The ‘where’ question The FX Risk Map provides answers to the questions that were raised earlier: Let us see this last point in more detail: The first thing to note is that most TMS focus on the latter part of the lifespan of a transaction, namely from the ‘accounting moment’ on to the ‘cash flow moment’. That is fine if your goal is to execute balance sheet hedging, as the exposure is made up mostly of recognised invoices.But if your goal is to execute a cash flow hedging program, most TMS fail to properly capture the relevant type of exposure: forecasts for individual campaigns or budget periods, forecasts for sets of campaigns/budget periods linked together, and firm commitments for sales and purchase orders.Moreover, they are unlikely to have the flexibility to execute combinations of hedging programs, as they must have the capacity to capture different types of exposure that sit in different systems within your company. The solution is going to be to use currency management automation solutions, that will allow you to capture all the required information from whatever source, whatever system it is in your company, your TMS, your ERP, a booking engine and other company systems, all with the help of a single software solution. Conclusion: towards hedging programs The FX risk map is, of course, a simplification. Each company will have its own, more elaborated risk map than the simple version discussed today. In spite of its simplicity, the FX Risk Map allows us to better understand the when, and even the where issues of currency risk. From there, it is not difficult to see how a firm’s FX goals, combined with its pricing parameters, will result in different hedging programs: micro-hedging of firm commitments or invoices, static hedging for individual campaigns or budget periods, layered hedging for sets of campaigns/budget periods linked together, and —last but not least—, different combinations of all the above. Also Read Join our Treasury Community Treasury Masterminds is a community of professionals working in Treasury Management or those interested in learning more about various topics related to Treasury Management, including Cash Management, Foreign Exchange Management, and Payments. To register and connect with Treasury professionals, click [HERE] or fill out the form below to get more information. Notice: JavaScript is required for this content.
The 12 Myths of Treasury: Debunking Misconceptions and Raising Awareness
Treasury remains one of the most misunderstood yet essential functions in any business. From ensuring liquidity to managing financial risks, treasurers play a pivotal role in navigating companies through uncertain waters. However, over the years, I’ve encountered several myths and misconceptions about treasury—ideas that limit its perceived value or oversimplify its complexity. Let’s explore The 12 Myths of Treasury and set the record straight. Myth 1: Treasury Is Just About Cash Management Treasurers are often seen as mere cash managers, limited to handling payments and ensuring liquidity. Some organizations treat treasurers as the “cashiers” of the company, while there are even CFOs reserving tasks like debt negotiations with banks – the perceived “glamorous” side of treasury – for themselves. Treasury goes far beyond cash management. It’s a strategic function that safeguards financial stability, manages risk, and drives growth through proactive planning and collaboration. Treasurers are not just managing the present they’re shaping the future of the business. Myth 2: Treasurers Don’t Need to Understand the Business Treasurers are often viewed as isolated from the broader business, focusing solely on numbers and financial transactions. Many believe that understanding the company’s operations, strategy, or market dynamics isn’t essential for their role. Treasurers must deeply understand the business to manage liquidity, risks, and funding effectively. Their role requires a comprehensive view of the company’s operations and strategic goals to make informed decisions and align financial strategies with business needs. From my own experience, I’ve seen how critical this understanding is. The more we understand the business and communicate within the organization with all the business units, the more we can add strategic depth to our role and provide solutions. I recall a case where a CIO was exploring a Treasury Management Systems (TMS) without involving treasury in the process. The lack of collaboration could have led to a solution that didn’t meet the company’s actual needs, emphasizing the importance of treasury being part of key business decisions. I’ve often collaborated internally with teams like procurement, logistics and HR. I remember instances when they brought issues to my office, and together, we worked on solutions that balanced financial strategy and operational needs. These moments underline the value of treasury’s deep involvement in the business. On the other hand, knowing the business and being able to guide through site visit banks or external stakeholders, have made my feel great satisfaction whilst showcasing the operations firsthand. This helps them not only understand our business better but also strengthens our relationship and credibility. Treasurers are not just “number people.” They are business partners who bring financial expertise into the operational, strategic, and external landscapes of a company. Myth 3: Treasury and Accounting Are the Same Thing Treasury and Accounting are often seen as interchangeable roles within finance. Treasurers are assumed to perform tasks like bank transactions and account reconciliations or interest accounting entries, leading to the belief that their work and responsibilities are identical to those of accountants. Some even argue that Treasury should report to Accounting or even that salaries should be equivalent, perpetuating the misunderstanding. Treasurers are not Accountants. Their role requires a different skill set, a broader understanding of financial markets, and a strategic mindset. Recognizing this distinction is key to unlocking treasury’s full potential. While Treasury and Accounting share common ground, they serve distinct purposes. Accounting is backward-looking, focused on recording and reporting historical financial information. Treasury, on the other hand, is forward-looking, focused on managing liquidity, mitigating risks, and aligning financial strategies with the company’s long-term goals. Separating these two functions is essential for compliance and governance. For example, if Treasury manages payments and also reconciles bank accounts, there’s no independent oversight, increasing the risk of errors or fraud. By keeping these functions separate, companies create a system of checks and balances that enhances transparency and accountability. Another reason for separation lies in the different areas of expertise. Treasury for instance focuses on forecasting and securing funding to maintain liquidity, while Accounting ensures accurate reporting and compliance with financial regulations. Each department’s specialization allows them to complement each other effectively without overlap. At the end, the true success lies in fostering strong collaboration between these departments to achieve aligned financial goals. Myth 4: Treasurers Only Work with Banks Treasurers are often perceived as solely managing relationships with banks—handling loans, deposits, and payment systems. This narrow view overlooks the broad scope of their responsibilities and the diverse stakeholders they collaborate with to ensure the company’s financial stability. While banking relationships are an important part of Treasury, they’re far from the only focus. Treasurers also work with suppliers, customers, rating agencies, auditors, and even internal teams like procurement to manage liquidity and financial risks. For example, for working capital management, treasurers collaborate with supply chain and procurement teams to optimize payment terms with suppliers and ensure cash flow aligns with operational needs. Similarly, they may work with rating agencies to improve the company’s credit profile, directly impacting borrowing costs and access to funding. Other cases as well are with technology providers for treasury automation as treasurers are increasingly involved in selecting and implementing TMS and automation tools. Treasury’s role extends beyond transactional banking to becoming a strategic partner that bridges the internal and external financial landscape, aligning liquidity, risk, and funding strategies with broader business goals. Treasurers don’t just “work with banks”—they work across the organization and with external stakeholders to drive value and financial resilience. Myth 5: Technology Will Make Treasurers Obsolete With the rapid rise of automation, APIs, and AI-powered tools, some believe that technology will eventually replace the need for treasurers altogether. This view assumes that treasury tasks are primarily transactional and can be fully automated. Technology is not a replacement for treasurers but an enabler of their work. While automation tools like APIs, RPAs, and TMS systems streamline processes and reduce manual work, they do not replace the strategic judgment, risk management expertise, and forward-thinking that treasurers bring to the table. For example, These tools free up treasurers’ time…
MariannaPolykrati
Understanding Trade Receivables Securitisation
This article is a contribution of our partner, Demica Trade receivables securitisation (TRS) is a resilient funding option that has much to offer corporate sellers and investors – so what is TRS, what are the benefits, and which challenges do corporates need to address when implementing a programme? The rise of trade receivables securitisation Bridging the gap between corporate financing needs and investor demand, trade receivables securitisation (TRS) offers a valuable source of funding. It enables sellers to manage risk, grow their businesses, and improve their financial performance. Investors, meanwhile, appreciate the strong, risk-adjusted returns offered by TRS. The higher interest rate environment has prompted corporates to look outside their standard credit lines in the quest for additional liquidity, making TRS an increasingly attractive proposition. Meanwhile, the market for TRS transactions has grown steadily in recent years: according to the Association for Financial Markets in Europe (AFME), European TRS represented €46.8bn of reported commitments as of December 2023, up from €42.5bn in December 2022. Banks, meanwhile, recognise the growth potential of TRS. Demica’s 2024 Benchmark Report for Banks in Trade Finance polled the views of 169 supply chain finance professionals around the globe, with 12% citing TRS as the product which had the highest growth potential within their organisations – ahead of factoring (9%), asset-based lending (7%) and dynamic discounting (5%). How does trade receivables securitisation work? In a nutshell, TRS involves selling receivables to a special purpose vehicle (SPV) using a limited-recourse structure in which the seller takes the junior tranche. This process typically works as follows: The term ‘trade receivables’ is loosely defined. When talking about trade receivables securitisation (TRS), it refers to invoices that have been issued to clients, but not yet paid. In order to be eligible for TRS, invoices will need to be transferable and enforceable, and payment will not be conditional on any future events. Invoices are often sold in batches. Most programmes will include all invoices from corporate entities participating in the securitisation, other than specific exclusions. The performance of the receivables is assessed on a portfolio basis, and while there is a preference for well-rated debtors, this is not a necessary condition. Benefits of trade receivables securitisation for corporates and investors For corporate sellers, TRS presents a way of accessing competitive, tailored funding. Compared to other forms of corporate debt and receivables financing, TRS programmes offer significant benefits: they are typically committed for longer terms, and can be tailored to clients’ needs. They also provide greater flexibility and are more commercially competitive, with fewer operational requirements than other forms of receivables financing. On another note, corporate sellers can use TRS to deconsolidate receivables from the balance sheet. In this situation, the TRS programme will include additional features, such as including a loss discount on the sale, or an insurance wrapper. For investors, securitisation transactions can provide strong risk-adjusted returns, with various structuring features available to mitigate risks. Most transactions funded by banks and bank conduits can achieve implied ratings of A or AA under S&P Global’s trade receivables criteria. TRS programmes also allow investors to invest in an asset class that is directly exposed to the real economy, and to contribute to the growth of medium-sized companies. Addressing the challenges of implementing a trade receivables securitisation Alongside the benefits, TRS does present some unique challenges that need to be addressed when implementing a programme. For one thing, TRS programmes need to be tailored to the specific requirements of different sectors, corporate sellers and receivables types. Challenges can also arise due to the large volume of data, reporting obligations and cash dominion challenges associated with TRS. As such, a successful programme will require support from a wide array of third parties and partners. These can include corporate service providers, security and data trustees, cash managers, and a reporting agent such as Demica. Join our Treasury Community Treasury Masterminds is a community of professionals working in Treasury Management or those interested in learning more about various topics related to Treasury Management, including Cash Management, Foreign Exchange Management, and Payments. To register and connect with Treasury professionals, click [HERE] or fill out the form below to get more information. Notice: JavaScript is required for this content.