The Evolving Role of Treasury in the Crypto World: A Comparison with Traditional Corporate Treasury Functions
With the rise of cryptocurrencies and blockchain technology, the role of Treasury is undergoing a significant transformation. Traditional corporate treasury functions have long been the backbone of financial management, ensuring liquidity, managing risk, and overseeing cash flow. However, with companies like Ripple leading the charge in the crypto and digital payments space, a new type of treasury function has emerged—one that blends these conventional responsibilities with the added complexities of managing digital assets. In this blog post, we’ll explore the key differences between a traditional corporate treasury function and a crypto treasury function, using Ripple’s unique approach as a case study. Traditional Corporate Treasury: A Brief Overview In a traditional corporate setting, the treasury function’s role is centred around managing the company’s financial resources to ensure stability and growth. The primary responsibilities include: These functions are typically executed in fiat currencies, with a focus on traditional financial instruments and banking relationships. Treasury in a Crypto Company: The Ripple Case In contrast, a treasury function in a crypto company like Ripple operates in a vastly different environment, where digital assets and blockchain technology are at the core of the business. Ripple, a company known for its cryptocurrency XRP and blockchain-based payment solutions, splits its treasury function into two distinct sides: the crypto side and the fiat side. Each of these sides comes with its own set of challenges and responsibilities, which differ significantly from those in traditional corporate treasury functions. 1. The Crypto Side: Managing Digital Assets The crypto side of Ripple’s Treasury function focusses on managing the liquidity of XRP and various stablecoins used to fund customer transactions and facilitate settlements. Here’s a closer look at the key responsibilities: Just like in traditional Treasury function, liquidity management is crucial, but the assets involved are cryptocurrencies. The crypto treasury team must ensure that there is sufficient liquidity in XRP and other digital assets to meet the company’s operational needs and customer demands. For a crypto treasury function, it is critical to have excellent forecasting and close relationships with upstream and downstream partners, because holding excess liquidity of any crypto asset may result in increased risk of impairment. It also underscores the need for high-trust stablecoins that minimise these risks. For a company like Ripple, the crypto treasury function works to understand customer demand for various crypto assets (by engaging customer-facing functions internally), and ensure proper fiat currency funding is in place to facilitate the repurchase of said crypto assets from open markets. A critical part of the crypto treasury function’s role is facilitating settlements for the repurchase of assets like XRP on the open market. This task requires a deep understanding of the mechanics of blockchain-based transactions, which vary between different blockchains and crypto assets. The crypto treasury function must be adept at timing these operations to minimise costs and optimise asset value. This may involve settling trades either in fiat currencies or using stablecoins, each having distinct advantages and limitations. Liquidity in crypto markets—especially in stablecoins—is growing rapidly, and consequently, the settlement of crypto trades and cross border movements will become much easier for traditional corporations in the coming years. The volatility of cryptocurrencies introduces unique risks that require constant monitoring and management. Unlike traditional treasury functions, which primarily deal with fiat currency risks, a crypto treasury function must navigate the complexities of price swings, regulatory changes, and market liquidity challenges in real-time. Minimising balance sheet holdings of volatile assets is a primary focus for crypto treasury functions and underscores the need and appetite for stablecoins. As non-FIs seek to mitigate the potential risks of utilising crypto assets in their operations, the demand for stable, high-trust stablecoins will surely grow. Managing digital assets also involves ensuring their security. This includes using custodial services, managing private keys, and implementing measures to protect against cyber threats. The crypto treasury function must be familiar with the latest blockchain security practices and technology and proactively mitigate risks by applying sufficient resourcing to the systems and headcount required to properly secure crypto holdings. 2. The Fiat Side: Traditional Responsibilities with a Twist While Ripple operates heavily in the crypto space, it still maintains a traditional fiat side to its treasury function. This side of the treasury handles many of the same responsibilities as a conventional corporate treasurer but with additional complexities brought about by the integration of crypto operations. Similar to traditional treasury roles, managing cash flow remains a priority. However, the integration with crypto operations means the treasurer must coordinate between fiat and digital assets, ensuring that both sides are aligned in meeting the company’s financial needs. Ripple’s fiat treasury function manages relationships with traditional banks and financial institutions, but with the added complexity of integrating crypto transactions. This often involves navigating a regulatory environment and KYC challenges that are still catching up with the realities of digital assets and the pace of innovation in the blockchain economy. As a company operating in both fiat and crypto worlds, Ripple’s treasury function must stay compliant with a diverse set of regulations. The fiat treasury function must adhere to both traditional financial regulations and the evolving standards in the crypto industry to ensure a compliance-first mindset and build trust with customers and trading partners. Key Differences and Challenges Traditional treasury functions primarily manage assets that have relatively stable values, such as cash, bonds, or equities. In contrast, a crypto treasury deals with highly volatile digital assets, requiring a laser-focused approach to risk management and liquidity planning. While traditional treasury functions rely on well-established financial systems and security protocols, crypto treasury functions must be well-versed in fledgling blockchain technology, cybersecurity, and the unique and evolving risks associated with many different digital assets. Traditional Treasury functions are governed by well-established regulations. In the crypto space, however, regulations are still evolving, and the crypto treasury function must be proactive in navigating this uncertain environment to establish trust and provide transparency for customers and regulators. The crypto market operates 24/7 and is highly reactive to global events. A crypto…
Adam
Revolutionising Treasury Operations with Premium Banking APIs
This article is written by Necto Corporate treasuries are under increasing pressure to optimise cash management, enhance liquidity, and mitigate risk. All while navigating a complex and rapidly changing global economy. The introduction of premium banking Application Programming Interfaces (APIs ) is set to revolutionise these operations. It is offering unprecedented levels of real-time data access, seamless integration, and operational efficiency. This evolution marks a significant shift from traditional bank connectivity methods, promising to transform how treasurers manage their finances. The Historical Context of Bank Connectivity To appreciate the transformative power of premium banking APIs, it’s important to understand the evolution of bank connectivity. For decades, treasurers have relied on legacy systems to interact with their banking partners. In the 1970s, the Society for Worldwide Interbank Financial Telecommunication (SWIFT) emerged as a groundbreaking development. This enabled standardised cross-border financial transactions. SWIFT became the global standard for secure, reliable, and efficient financial messaging, but it was not without its limitations. The system often required batch processing, leading to delays and a lack of real-time data availability. In the 1990s and early 2000s, host-to-host (H2H) systems and bank portals began to gain traction. These systems allowed corporations to establish direct connections with their banks, providing more immediate access to banking services. However, these connections often required significant IT resources to set up and maintain. And they still didn’t provide the level of flexibility or real-time access that modern treasurers need. Additionally, each bank had its own proprietary system, leading to a fragmented and complex connectivity landscape. The Shift to API-Driven Connectivity As technology advanced, the financial industry began to recognise the need for a more agile and integrated approach to bank connectivity. This need gave rise to API-driven connectivity—a game-changer in the world of corporate treasury. APIs, which allow different software applications to communicate with each other, have become the backbone of modern digital ecosystems. In the context of treasury operations, APIs facilitate real-time access to banking data. Thus, enabling treasurers to make informed decisions based on current, accurate information. Unlike traditional connectivity methods, APIs are designed for flexibility and scalability. They enable seamless multi-bank connectivity, allowing treasurers to manage accounts and transactions across multiple banks through a single interface. This is a significant improvement over the siloed systems of the past, where each bank required a separate integration and manual data reconciliation. Overcoming the Challenges of Traditional Connectivity Traditional bank connectivity methods have long been plagued by several challenges, including: 1. Complex Integrations: Setting up H2H connections or integrating with SWIFT often requires significant time, effort, and technical expertise. Each bank has its own protocols and systems, necessitating custom integrations that can take months to complete. 2. Outdated Data: Traditional systems typically operate on a “prior day” basis, meaning that treasurers are often working with outdated information. This delay can hinder effective cash management, making it difficult to optimise liquidity or respond to market fluctuations in real time. 3. High Costs: Maintaining multiple bank connections and managing the necessary IT infrastructure can be costly. Additionally, the lack of standardisation across banks means that treasurers often need to invest in specialised software or services to manage their connectivity. 4. Limited Flexibility: Traditional systems are often rigid and difficult to adapt to changing business needs. This lack of flexibility can be a significant barrier in today’s dynamic financial environment, where agility is key to staying competitive. These pain points highlight the urgent need for a more efficient and agile approach to bank connectivity—one that can meet the demands of modern treasury operations. The Advantages of Premium Banking APIs Premium banking APIs offer a powerful solution to the challenges of traditional connectivity, providing a range of benefits that can transform Treasury operations: 1. Real-Time Data Access One of the most significant advantages of premium banking APIs is their ability to provide real-time access to banking data. Treasurers can monitor cash positions, track payments, and reconcile accounts instantly, enabling more accurate and timely decision-making. 2. Simplified Integration APIs are designed for easy integration, reducing the time and effort required to connect with multiple banks. Many APIs follow industry standards, which further simplifies the integration process and reduces the need for custom development. 3. Enhanced Security Security is a top concern in Treasury operations. And premium banking APIs are built with robust security features to protect sensitive financial data. These APIs often include encryption, secure authentication methods, and compliance with industry regulations. Ensuring that data is transmitted securely between systems. 4. Scalability As businesses grow and their financial needs become more complex, premium banking APIs offer the scalability required to manage increasing volumes of transactions and data. APIs can easily be extended or modified to accommodate new services or additional banking partners, providing the flexibility needed to support business growth. 5. Cost Efficiency By reducing the need for extensive IT resources and minimising the complexity of managing multiple bank connections, premium banking APIs can lower the overall cost of Treasury operations. Additionally, the ability to access real-time data can lead to more efficient cash management, reducing the cost of borrowing and optimising liquidity. 6. Future-Ready Premium banking APIs are designed with the future in mind. As emerging technologies like artificial intelligence (AI) and quantum computing become more prevalent, APIs will play a crucial role in enabling these technologies to interact with financial systems. This positions treasuries to take advantage of the latest innovations and remain competitive in an increasingly digital world. Case Study: API-Driven Treasury Transformation Consider the example of a multinational corporation that operates in multiple currencies and manages a complex web of bank accounts across different countries. In the past, this corporation relied on traditional H2H connections to manage its banking relationships. However, the process was cumbersome and time-consuming, often leading to delays in accessing cash positions and difficulties in managing liquidity. By transitioning to an API-driven approach, the corporation was able to streamline its treasury operations significantly. Premium banking APIs provided real-time visibility into cash positions across all accounts, enabling the Treasury…
Franklin
Treasury for Non-Treasurers: What’s Treasury’s impact on business performance? (Part 1: Operational Treasuries)
Last week, we explored whether Treasury is a strategic function. We’ll now dive into how different types of treasuries impact business performance. In this article, we’ll focus on operational treasuries, which come in two types: basic and control-orientated. We’ll examine their impact through the lens of the first article’s four key treasury objectives, which will help the non-treasurer understand the difference between them. We’ll then look at their overall effect on business performance, including profitability and other forms of value-add. Basic Treasuries Basic treasuries form the foundation of treasury operations, primarily focusing on day-to-day cash management. Here’s what they do and how they impact business performance through the lens of the four pillars of Treasury objectives: Overall Impact on Business Performance: Tells for Basic Treasuries: Control-Orientated Treasuries Control-oriented treasuries take a step beyond basic operations, with junior personnel doing the same work as those in basic treasuries but more senior or skilled ones running more sophisticated activities. There are better infrastructures, controls and processes in place. Here’s how they impact business performance: Overall Impact on Business Performance: Tells for Control-Oriented Treasuries: As said in the second article, most treasury functions think of themselves as strategic, yet over 82% are likely to be tactical or operational. Given that finance functions are usually conservative, the majority of this 82% of treasuries are likely to be control-orientated, not strategic or even tactical. So, asking the treasurer whether the function is a control-orientated treasury is frequently not the best way for a non-Treasurer to find out. The best way is to look for tells: Predictable keywords you will hear in conversations with control-orientated treasurers are: Generally, as would be expected in a function that prizes certainty, ‘closed’ precise phrases are preferred to imprecise ones: And so on. That’s not all: In a function looking for certainty, the devil is in the details. Products, services, and features become more important than the higher-level problems, solutions, contexts and cultures. It takes both treasurers’ and non-treasurers’ practice. Still, you can also distinguish control-orientated treasuries by their emphasis on tools and processes rather than well-thought-out – and I emphasise CREDIBLE solutions. Hard tangible aspects like systems and pricing will be considered in detail. How people are affected, potential side-effects of change and impacts of future priority changes will not be. Answers to these questions can only be fuzzy, not something a security-seeking treasurer wants to consider. Consequently, if you hear the following terms WITHOUT A CREDIBLE SOLUTION with it, you will know you are dealing either with a) an incomplete statement, b) a more junior employee in the function, or c) a control-orientated treasury: There are many more examples. The underlying benefit behind these concepts is a greater control or certainty, or, if you are sardonic, the illusion of greater control or certainty. They are a necessary base for greater success, but they do not provide success by themselves. We have spent significant time on these tells. Why are they so important? Answer: If a non-treasurer identifies a treasury as a control-orientated operational one, care must be taken. Mutual understanding won’t be easy. Some actions shouldn’t even be contemplated. External providers and internal counterparts will realise these treasuries are mainly inward-looking and, therefore, not proactive. They’ll want to control, so sharing control will not be welcome. They’ll wish for security, so significant changes will be challenging. Other external counterparts, such as journalists and treasury associations, can expect that people in these functions will not want to lose face, which is another form of loss, so the words they hear should be taken with a pinch of salt. The same with new entrants into the treasury world and CFOs new to the management of treasury, for that matter. On the positive side, though, control-orientated treasuries are the Goldilocks of the treasury world – neither too simple nor too complicated. They are excellent functions where juniors can start learning and, later on, become experienced and skilled. There is nothing wrong with being a control-orientated treasury. It may be what management wants – consciously or unconsciously. It may be a result of culture or context. There are plenty of good reasons for having this type of treasury. From the outside, it is just harder to identify them. Conclusion Understanding the type of treasury you’re dealing with helps non-treasurers set realistic expectations for what they can do to impact business performance. While basic treasuries focus on maintaining day-to-day solvency, control-oriented treasuries do this too, but take a more enterprise-wide approach to solvency management and profitability support. Both types play crucial roles in supporting business performance, but their impacts differ in scope and depth. And you can look at it another way. Basic treasuries are simple. They are usually found only in small companies. Owners of these companies decide to have separate functions to get the advantages of specialisation. In bigger companies, however, if the company owners, board members, CFOs and other C-suite members do not want to handle the extra complexity in people, processes and infrastructure a more advanced treasury brings, a control-orientated treasury is a good choice. If, on the other hand, they have or can access the skills needed to delegate but not abdicate the responsibility of running an advanced treasury, it becomes a tradeoff – management time vs risks vs expected benefit. The other side of every action in an organisation is a cash or credit transfer. The overall question for someone running a business is whether, in their business, the other leg of the core business’s transactions is worth spending time on. We will see more potential for value creation and significant strategic impact as we move up the treasury sophistication ladder into tactical and strategic treasuries. Stay tuned. Next article: A Tale of two Treasuries: Basic and Control-Oriented Previous Articles in this Series: 1st article – What is Treasury? 2nd article – Is Treasury a Strategic Function? Join our Treasury Community Treasury Masterminds is a community of professionals working in treasury management or those interested in learning…
Nicholas
Junior Treasurers Interview: A Session with Sean Howlin
This is the second edition of our Junior Treasurers Interview series, where we explore the experiences and insights of young Treasury professionals. In this series, we continue to learn how new treasurers are building their careers and adapting to the changes in the Treasury field, including the impact of new technologies. In this interview, we talk with Sean Howlin, who discovered his passion for treasury during his first internship. Starting with a choice between Treasury and Accounting, Sean found himself drawn to the variety and challenges of Treasury work. He shares important moments from his internships that confirmed his decision to pursue a career in Treasury, his excitement about taking on more responsibility, and his interest in the systems that support Treasury operations. Sean also talks about the skills he has developed, the challenges he has faced and his goals for the future. We discuss how he balances work with his personal life and why he believes curiosity and flexibility are key to success in treasury. Join us as we dive into Sean’s experiences and find out what makes a career in treasury both rewarding and challenging. Path to Treasury Q: What sparked your interest in corporate treasury and led you to pursue an internship in this field? When entering my first internship in a retail bank in Ireland, I was given two options as to which area I wanted to enter within the finance department: accounting or Treasury. I had never heard of treasury before, and when I looked into treasury, I saw that the job typically involves areas of cash management, fund raising, liquidity, investments, and more. These areas interest me a lot more than just typical accounting. Q: Can you share a defining moment during your internship that reinforced your decision to build a career in treasury? In my second internship at a reinsurance company, it was an 8-month internship and after about 3 months, I could feel myself getting more confident in the role and this also came with more trust. I felt like I was given a lot more responsibility within the team, including being one of the main team members working on an upgrade for the electronic bank account management. This was one of the biggest motivations for working in Treasury—not only the work but also the ability to be given responsibility and work well in a team. Q: What aspects of Treasury work do you find most exciting and why? As I have said earlier, the ability to be given more and more responsibility quickly, as well as the fact that the two teams I have worked on were smaller groups, means that most people tend to be multifaceted as they can cover different areas of Treasury. I have spent most of my time in Treasury Governance, which is mostly looking at systems, including TMS and data systems, while also looking at controls. The front office has also been very exciting, as you can see the work in Treasury governance and in the building of systems and how that can inform decisions and actions taken in the front office. Seeing the two come together can be the most informative and exciting. Internship Experience Q: What were your main responsibilities during your eight-month internship in Treasury? Initially, my main responsibilities were all around learning and getting to know the team and the different systems that are involved. Then, while I was there, a project began around upgrading their current EBAM system. This started with a complete data cleanup of the existing static data, which moved to an analysis of the static data to ensure that the layout was optimal. This was followed by a data transfer to the new system. This was my main responsibility of my internship, under the supervision of other team members and my manager. Q: Can you describe a challenging project you worked on and how you approached it? Another project I worked on was determining target balances for each bank account we held. This was in an effort to track and identify particular accounts that had little to no movement. This could mean that those accounts could be closed, and that would reduce the number of bank accounts we held, which would make it easier to maintain the remaining accounts. I used a variety of analysis methods to identify these accounts which was helped by my degree in mathematics and statistics. Q: What did a typical day look like for you as a Treasury intern? My main work related to the two projects above but as any intern would agree, I also had numerous smaller jobs that were mainly just helping the senior people on the team, examining user permissions, helping user get setup on systems, etc. Skills and Learning Q: What are some key skills you developed during your internship that you believe are crucial for a career in treasury? I think one of the most important skills that I realised I needed was communication! I was only starting out but I quickly realised how important it is. Not only do you have to be able to relay your thoughts and problems but you also have to be able to pick up on what other people are highlighting for you. This would tie into what I call the internal network—knowing who to go to with certain problems. Treasury tends to touch on different areas of the business You would have your own team but it’s also good to have people in other areas so you know who to reach out to when issues or problems came up. These would have been the main skills I developed during my internship. Q: How did your internship help you understand the complexities of corporate treasury operations? Those two projects really highlighted the complexities; there was over 2000 bank accounts with a wide variety of banking connections. It was also on a global scale so with 100’s of locations, this would make what seems like a simple task a challenging one….
How to prepare for a successful payment factory implementation
This article is written by Nomentia Checklist for successful payment factory project A payment hub offers organizations a centralized platform to streamline payment processes and enhance financial management, especially in complex payment landscapes. Forward-looking treasury and cash management professionals are increasingly looking to safeguard and future-proof their business-critical processes with a payment hub. Proper preparation is essential for successfully building a payment factory. Here’s a comprehensive checklist for organizations planning to build a payment factory: What is a payment factory? A payment factory is a centralized system that optimizes and enhances payment processes for businesses. By consolidating and automating these processes, it allows organizations to streamline operations, improve control, and boost efficiency. Why it is important to prepare for building a payment factory Building a payment factory requires careful planning to ensure that it meets the organization’s needs, integrates smoothly with existing systems, and delivers the expected benefits for all stakeholders. Preparation helps mitigate risks, minimize disruptions, and maximize the success of the implementation. Assessing your current payment processes Evaluate existing payment workflows and processes: Before embarking on your payment factory journey, it is vital to understand what’s beneath your current payment operations, and what’s behind the processes. Things like what systems you have in place, how many bank accounts you have, where your payment files are located, which banks you work with, and how much your processes differ based on locality. Start by assessing your current payment processes to understand how payments are currently managed, the systems in place, and any pain points or inefficiencies. Identify pain points and areas for improvement: Identify bottlenecks, manual processes, errors, and inefficiencies in your current payment workflows. You should account for the fact that operating across borders can require finding a balance between centralization and local autonomy. For further understanding, read this article. Determine the scope and objectives of the payment factory project: Define the scope of the payment factory project, including its objectives, goals, and expected outcomes. Check out this article discussing payment hub scope and objectives. Stakeholder engagement in payment factory project Identify key stakeholders: Identify key stakeholders, including finance, IT, procurement, and executive leadership, who will be involved in the payment factory project. Make sure that you have buy-in from all the stakeholders and you will have clear roles and responsibilities going forward once the project kicks off. Communicate project goals and objectives: Clearly communicate the goals, objectives, and expected benefits of the payment factory project to all stakeholders. Communication is perhaps the most difficult part of the project. Managing change is never easy as some of customers can testify. Earn buy-in and support: Gain buy-in and support from stakeholders by demonstrating the value of the payment factory and addressing any concerns or objections. Cross-functional project team: Establish a cross-functional project team to oversee the implementation, with representatives from finance, IT, procurement, and other relevant departments. While it may be the finance team that will be the main user of the payment solution, other departments could also be affected. Make sure you take it into consideration from the beginning. The IT and security departments will be your biggest stakeholders as you will need to team up with them to ensure that the payment factory project is delivered, and the solution meets all compliance expectations. Setting clear objectives and requirements for payment factory implementation Define objectives and goals: Clearly define the objectives and goals of the payment factory project, like improving efficiency, reducing costs, enhancing control, and minimizing risks. Best payment factory objectives and goals are always aligned with wider organizational business goals. While some seek to be more compliant, others want to put in place uniform global processes, but in the end, all share a common drive to enable their teams to work better together while improving transparency. Specify functional and technical requirements: Specify the functional and technical requirements for the payment factory based on the organization’s needs and objectives. For example, the system should automate the end-to-end payment process, including payment initiation, validation, authorization, and execution while providing real-time reporting and analytics on payment transactions, which enables your organization to monitor cash flows, identify trends, and make informed decisions quickly. On a technical level, these requirements could include things like integration with ERP and financial systems while supporting high availability and scalability. Prioritize requirements: Prioritize requirements based on their importance to the business and their impact on achieving project goals. When prioritizing requirements for payment factories, you should consider the strategic objectives, geographic focus, and operational complexity of your operation. For example, a company looking to streamline operations in a specific region should prioritize setting up the payment factory in that location first. This requires them to focus on local compliance, integrating with regional banks, and automating processes to enhance efficiency. Once the initial implementation is successful, the company can then expand to other countries, scaling the system to handle additional bank connections and accounts. By starting small and gradually expanding, businesses can manage system complexity effectively and ensure a smooth transition to an optimized, centralized payment process. Document requirements: Document requirements in a detailed project plan or specification document to guide the implementation process. The right partner can help organizations identify their payment factory needs by leveraging their expertise to conduct thorough assessments and gap analyses. They can also assist in crafting a comprehensive RFI/RFP that captures all critical requirements, ensuring that once the scoping of the project begins, the implementation is aligned with the organization’s strategic goals and operational needs. Selecting payment factory vendor or solution Research available solutions and vendors: Research available payment factory solutions and vendors to identify those that best meet your requirements. Collaborating with an experienced partner can streamline this process, as they can provide valuable insights into the strengths and weaknesses of various solutions based on your specific needs. Additionally, they can facilitate vendor evaluations and comparisons, ensuring that you select a solution that aligns perfectly with your operational goals and technical specifications. Evaluate vendors: Evaluate vendors based on criteria such as functionality, scalability, integration…
Young Treasurers Interview: A Session with Fabian Bohner
In this series, we interview treasurers and younger treasurers about their careers, motivations, knowledge, and priorities. But also on tech, IT, and AI data science. We kick off this series with Fabian Bohner from Germany, Treasury Manager at Peri SE. Fabian has recently earned a certificate in data science and it got us curious why he chose that. Path to Treasury Q: Can you tell us a little about your background and how you ended up in the field of Treasury?Studied business administration with a focus on finance and IT. I took some modules at my university in the field of bank treasury and did an IT semester abroad in Dundee, Scotland. I jumped right into corporate Treasury after graduating. Q: What drew you to a career in treasury, and what do you find most rewarding about it?A practice semester in 2010 within an international robotic manufacturing company during their refinancing due to the aftermath of the global financial crisis/euro crisis. Corporate Treasury has connections to all other departments and is, from my point of view, the true heart of a company. Treasury and IT Integration Q: How do you see the relationship between Treasury and IT evolving in today’s business environment?Treasury Management Systems being the standard and the acceleration in the last years in IT, the impact on Treasury is getting more and more. Q: Can you provide some examples of how technology has impacted your work in Treasury?Automation of repetitive tasks and straight-through processing wherever possible to leverage human brain activities to solve complex problems. Q: What are some of the main benefits and challenges you’ve encountered with the integration of IT in Treasury functions?If there is no understanding of the benefits of IT usage, it is usually quite difficult to convince several stakeholders. Often, IT speaks a different “language” than Treasury/Finance. Role of Data Science in Treasury Q: What motivated you to take a course in data science, and how has it influenced your work in treasury?For me, IT is a crucial part for getting things done efficiently in Treasury. Data is the new gold and with Data science, you can dig for it. In Treasury I can see the most benefits in cash flow forecasting, FX risk management and fraud prevention. Q: Can you share any specific projects or tasks where your data science skills have been particularly useful?Automated cash flow forecasting via machine learning based on SAP financial data (debtors and vendors). AI and the Future of Treasury Q: What role do you see AI and machine learning playing in the future of Treasury?From my point of view, AI and machine learning come to stay. You either adapt and start working with those tools, or you lose your edge. AI-based cash flow forecasting will be the standard part of Treasury Management Systems in a few years. Q: What advice would you give to young professionals or students who are interested in pursuing a career in treasury with a focus on data science and AI?Be aware that there are Corporate Treasury departments out there. Get your hands on Treasury as working student or during practical semesters. Try combining IT and Finance and start tinkering with data science and AI. Conclusion Q: What are the key takeaways from your experience that you’d like to share with our readers?Treasury is the best profession you can take 😉 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.
Instant Payment fraud: Head of Antifraud at UniCredit gives best practices
This article is written by Trustpair Executed in 10 seconds, instant payments remove the possibility of after-the-fact controls. More than ever, companies need to strengthen their payment process, thanks to robust internal control measures and improved collaboration. Giovanna Guidolin, head of Anti-Fraud at UniCredit, shares her insights and best practices to stop instant payment fraud. For more insights and best practices, download Trustpair and UniCredit’s latest white paper about Instant Payments. I’m Giovanna Guidolin. I’ve been working for Unicredit for 25 years. Before taking responsibility for the Antifraud department, I built up a solid experience of more than 12 years in Internal Controls and Investigations. I have a strong interest in understanding criminal behaviors and new Fraud scenarios. Yes, the shift toward digital payments has indeed increased fraud risks. As more transactions move online and rely on digital platforms, cybercriminals have adapted their tactics to exploit vulnerabilities in these systems. Some of the main trends observed in payment fraud are driven by techniques known as Social Engineering. Cybercriminals use several methods, including phishing, credential stuffing, spoofing, or artificial intelligence to gain unauthorized access to individuals’ or businesses’ accounts. The exponential increase in the use of social networks, as well as the pandemic period, have also contributed to the change and increase in the target audience of possible victims. Business Email Compromise (BEC) scams target businesses, often using social engineering tactics to trick employees into transferring funds or providing sensitive information. These scams can result in significant financial losses for organizations. These trends highlight the evolving nature of payment fraud and the importance of implementing robust security measures, such as multi-factor authentication, encryption, fraud detection alerts, and user education, to mitigate risks and protect consumers and businesses from financial losses. Certainly, instant payments present both benefits and risks. While they offer convenience, speed, and efficiency in transferring funds, they also introduce several risks that need to be carefully managed. For example: Fraudulent TransactionsThe speed of instant payments means that there is less time for financial institutions to detect and prevent fraudulent transactions. Fraudsters can take advantage of this window of opportunity to conduct unauthorized transactions before they are identified and stopped. Account TakeoverInstant payments can be used to facilitate account takeover fraud, where cybercriminals gain unauthorized access to individuals’ or businesses’ accounts and initiate fraudulent transactions in real time. Transaction ReversalsUnlike traditional payment methods where transactions can be reversed or disputed, instant payments are typically irrevocable once initiated. This means that if a payment is made in error or as part of a scam, it may be challenging to recover the funds. To mitigate these risks, financial institutions and payment service providers must implement robust security measures, such as transaction monitoring, authentication controls, encryption, and fraud detection alerts. Additionally, customer education and awareness programs can help individuals and businesses understand the risks associated with instant payments and take appropriate precautions to protect themselves against fraud and financial loss. Businesses can take several strategic measures, for example: Implement Robust Fraud Detection and Prevention MeasuresBusinesses should deploy advanced fraud detection software that can monitor transactions in real time, detect suspicious patterns or anomalies, and flag potentially fraudulent activities. This may include machine learning algorithms, anomaly detection techniques, and behavior analysis to identify and prevent fraudulent transactions. Enhance Authentication and Authorization ControlsBusinesses should implement strong authentication measures, such as multi-factor authentication (MFA) and biometric authentication, to verify the identity of users and prevent unauthorized access to accounts or payment systems. Additionally, they should enforce strict authorization controls to limit access to sensitive systems and data only to authorized personnel. Invest in Secure Payment InfrastructureBusinesses should invest in secure payment infrastructure and technology to ensure the reliability, availability, and security of instant payment systems. This may involve adopting encryption protocols, tokenization techniques, and secure communication channels to protect sensitive data transmitted during payment transactions. Educate Employees and CustomersBusinesses should provide comprehensive training and awareness programs for employees and customers to educate them about the risks associated with instant payments and how to identify and respond to potential threats. This may include raising awareness about common scams, phishing attacks, and social engineering tactics used by fraudsters. Establish Clear Policies and ProceduresBusinesses should establish clear policies and procedures for conducting instant payment transactions, including guidelines for verifying the authenticity of transactions, reporting suspicious activities, and resolving disputes or errors. These policies should be regularly reviewed and updated to address emerging threats and regulatory requirements. Monitor and Analyze Transaction DataBusinesses should continuously monitor and analyze transaction data to identify emerging trends, patterns, and anomalies that may indicate fraudulent activities. This may involve leveraging data analytics tools and techniques to gain insights into customer behavior, transaction patterns, and potential fraud indicators. Collaborate with Industry Partners and Regulatory AuthoritiesBusinesses should collaborate with industry partners, financial institutions, and regulatory authorities to share information, best practices, and threat intelligence related to instant payment risks. This collaboration can help businesses stay informed about emerging threats and regulatory developments and enhance their overall security posture. By implementing these strategic measures, businesses can better prepare for instant payment risks and leverage this payment method to improve the customer experience, increase operational efficiency, and drive business growth while safeguarding against fraud and financial losses. 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.
FX Averaging: Pros and cons for your currency hedging
This article is written by HedgeFlows FX Averaging helps remove the risk of picking the wrong timing for your FX transactions. Instead of risking the uncertainty of selecting the wrong day or time for your currency purchase, where you may encounter an unfavourable exchange rate, FX averaging breaks down the transaction into smaller increments, spreading them evenly over a designated period. Businesses commonly opt for monthly averaging, although the timeframe can be adjusted to suit individual business requirements. This approach ultimately results in more consistent exchange rates, steering clear of the short-term highs and lows of currency fluctuations: Using FX averaging in practice Utilizing an averaging strategy proves beneficial for businesses experiencing consistent FX exposures over time. Take, for instance, a retail e-commerce enterprise where daily foreign currency sales flow steadily and predictably. Rather than incurring substantial (2%+) FX conversion fees through payment processors like PayPal or Stripe, businesses have the option to accumulate funds in foreign currencies and employ FX averaging with a provider such as HedgeFlows. This approach not only saves on FX conversions but also eliminates the FX risks associated with holding foreign currency balances. By leveraging cloud-based technology and API integrations, averaging contracts can align seamlessly with the frequency and settlement timing of payouts from e-commerce platforms, ensuring currency proceeds are converted at stable and foreseeable rates. What’s wrong with FX averaging for medium- and long-term currency risks While averaging proves effective in managing short-term timing risks, its effectiveness diminishes over longer periods, spanning months or quarters. Despite this, some businesses still rely on averaging for their extended currency management needs, often overlooking the real FX risks they face. Consequently, these businesses remain vulnerable to currency fluctuations over prolonged durations. For example, raising capital in foreign currencies often creates the financial risk that the foreign currency depreciates, making the raised funding worth less in the home currency. Thus, this leads to a reduced runway. As explained in this post, these risks are greatest for longer periods, where currencies may have more time to move unfavourably. In this scenario, the averaging strategy would delay fixing exchange rates until future periods, focusing on spreading out transactions over a set timeframe, such as one month before the settlement date. Consequently, this leaves the business vulnerable to long-term FX fluctuations—a predominant risk in such situations. For more effective currency management in these cases, a static FX forward strategy or a more sophisticated, layering approach proves to be significantly more robust and beneficial. 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.
Treasury for Non-Treasurers: Is Treasury a Strategic Function?
We closed last week with the question: “Is Treasury a strategic function?” Ask 1,000 treasurers the question, 999 will say “Yes”. 🙄 I’m being unkind. There is no agreed definition of ‘strategic,’ so every function is strategic in some way or another. Let’s tighten that up. Here’s my definition: “A strategic Treasury: 1. Is one whose focus is on value-add for itself and, more importantly, for more than itself. It’s willing to have worse results if the results of the company or those of customers, suppliers, or anyone in the value chain increase more than the Treasury losses (or extra work and costs.) 2. Is proactive. It puts forward ideas for value creation without needing to be asked by higher management or other functions. 3. Differentiates itself from an operational treasury, which processes and is generally reactive, and from a tactical treasury, which, although still mainly a processing function, does innovate to some extent but only to improve its results, not others’. 4. (and this one might be surprising) Is one that has lower-level functions within it that are at the tactical and operational levels. Dreams without the ability to deliver are useless.” Many of you will find it unlikely that such functions exist. 😠I respectfully disagree and thank one of my first bosses at IBM, Ray Pillai, and ABB and Nokia at the height of their success for showing me that they do. 👠I was fortunate enough to help build IBM’s first Regional Treasury Centre, so I saw it develop from nothing into a world-class operation. Are many Treasuries strategic according to this definition? Answer: No, in fact, very few are. Trying to put some figures on this, research on the diffusion of innovation (a key requirement for proactivity) suggests that 2.5% of an average set of people or organisations are innovators. But Treasury operates within and surrounded by finance, a necessarily conservative environment, and many of its participants have an accounting background, where, again, necessarily, they are trained to be conservative. Many also operate within company and country cultures that don’t encourage risk-taking and bottom-up proactivity. For any of these reasons and more – that we will talk about in later articles – a much smaller figure is likely to be correct. In my experience, less than 1% of organisations meet all the criteria above. Early adopters are supposed to be 13.5% of the population. I think I think this figure for Treasury organisations that meet many but not all criteria is more likely to be between 5 and 10% for the same reasons. The rest (early majority, [34%+], late majority [34%+], and laggards [16%+] go from being tactical treasuries to operational ones. Note that these are high-level numbers, and if you concentrate on an individual Treasury, it can be the exception that proves the rule. Also, Treasury project teams and sub-functions can have different orientations. And all these can change at times and over time: If external cultures, context, material adverse impacts (‘Black Swans’), significant needs, key personnel or other aspects change, so does the Treasury orientation. Some become more strategic, some less. At a higher level, though, the numbers probably don’t change that much. Some go up and some down. Long-term, truly innovative Treasuries are rare, and so are fast followers. Working with strategic Treasuries These strategic Treasuries are the trendsetters. They are the customers that suppliers work with when developing new products. They face problems and learn how to control undesirable aspects of cutting-edge products. If they innovate frequently, they become good at spotting undesirable elements in advance and managing them. Other Treasuries don’t. Seduced by tales of success by others, they buy products and services but don’t realise the dangers until it’s too late. Current example: As Treasuries become increasingly automated, who’s left to design and implement change in a crisis? Why should non-Treasurers care? So, OK, it’s clear why a treasurer might care. But why should a non-treasurer care? Answer: Because a strategic Treasury will initiate change for the benefit of the whole organisation, working for you, the non-treasurer, and for those who will deliver maximum benefits for the company. As we’ll see in the next article, these benefits are substantial and translate into better financial results, freer budgets, and happier work environments. And best-in-breed Treasuries can communicate effectively with you in your language. You don’t have to add ‘gain treasury expertise’ to your list of priorities. Tactical Treasuries also work well with others. But they will not initiate. And they won’t be the driving force for improvement. They don’t add as much value as strategic Treasuries but instead help you achieve it. They are more business partners than value-added functions. How can you tell if a Treasury operation is strategic? Over time, non-treasurers see this difference. Non-treasurers realise they get more value out of strategic Treasuries – and vice-versa. Strategic Treasuries accumulate political capital, which translates into more staff, bigger budgets, and more opportunities for value-add. This last point is a big ‘tell’ for non-treasurers – like a poker tell that tells you what cards the player is holding. How do you recognise strategic or tactical Treasuries from the outside looking in? Look for those with large staff, resources and budgets compared to similar organisations or other back-office functions in the same organisation. The staff will seem happier and more motivated. They will be more flexible. They will try to see situations from your point of view. These are the strategic and tactical Treasuries. And remember: They do exist. Next article: What’s Treasury’s impact on business performance? To read the first series of this article, please check: Treasury for Non-Treasurers: What is Treasury? 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…