When is the right time to connect ERPs and other systems?
This article is written by Cobase In an era where businesses are expanding globally and financial operations are becoming more complex, the integration of ERP systems with banking platforms is crucial. Many finance departments struggle with limited bank connectivity, delayed end-of-day statements, and manual processes that hinder efficiency and accuracy. This blog explores these challenges and offers insights into how integrated solutions can address these issues effectively. Struggles with current ERP systems Limited bank connectivity Many ERP systems only provide connectivity to local banks or specific regions, which is insufficient for globally operating businesses. This forces finance departments to manage multiple bank portals and interfaces, each with its own requirements. The complexity of handling different formats and protocols can lead to significant delays and errors. For instance, a multinational company might need to maintain different connections for each of its banking partners, leading to a fragmented and inefficient financial management process. According to a report, up to 80% of global companies face difficulties in establishing bank connectivity due to varying protocols and standards across different regions. Delayed end-of-day statements End-of-day statements are essential for accurate financial reconciliation and cash management. Delays in receiving these statements can cause significant issues, such as cash flow problems and inaccurate financial reporting. Time zone differences, varied bank cut-off times, and processing delays often contribute to these challenges. In practical terms, a company might find itself waiting hours or even days for transaction data to be updated, preventing timely reconciliation and impacting overall financial decision-making. A study revealed that 67% of finance departments experience delays in receiving end-of-day statements, impacting their ability to manage cash flows effectively. Manual payment processes Manual handling of payment batches is another significant challenge. Finance departments often have to download payment files from the ERP system manually and upload them to bank portals. This process is not only time-consuming but also prone to errors and fraud. Simple tools like Notepad can be used to alter payment files, increasing the risk of unauthorized changes. A real-world example involves companies where employees manually adjust payment files, leading to potential discrepancies and increased risk of fraudulent activities. According to research, manual payment processes can lead to a 25% higher error rate compared to automated systems. Insufficient capabilities Even when ERPs offer some level of bank connectivity, they often lack the full range of capabilities needed by large organizations. This includes inadequate support for multi-currency transactions, complex authorization workflows, and integration with various financial services. As a result, finance departments must manage multiple systems and manual processes, which reduces efficiency and increases the risk of errors. For example, a survey indicated that 73% of companies with international operations face challenges due to insufficient ERP capabilities, leading to reliance on manual interventions and external systems. Real-world examples of ERP connectivity challenges Integrating ERPs with banks is often more complex than anticipated. For example, the process of connecting a single bank to an ERP system can take six to twelve months and involve handling up to 500 different format variants for international projects. This complexity can lead to significant delays and increased costs. A survey conducted by PwC found that 54% of companies experienced significant delays in their ERP-bank integration projects due to the complexity and variability of banking formats and protocols. Solutions to improve ERP-bank connectivity and efficiency Automated and secure payment processing Cobase offers a centralized solution for handling payments, eliminating the need for manual uploads and downloads. Cobase automates the distribution of payment files to the appropriate banks in the correct formats, saving time and reducing the risk of errors and fraud. By automating these processes, companies can ensure that payments are processed efficiently and securely, reducing the workload on finance teams and minimizing the risk of human error. A case study showed that a company using Cobase reduced their payment processing time by 50% and decreased errors by 30%. Real-time cash visibility Cobase addresses the issue of delayed end-of-day statements by providing near real-time cash visibility. This integration ensures that data from all bank accounts is available as soon as it is released, allowing finance departments to maintain an up-to-date view of the company’s cash position throughout the day. This capability is crucial for making informed financial decisions and managing cash flow effectively. Companies can achieve a 40% improvement in cash management efficiency after implementing the solution. Comprehensive bank connectivity Cobase connects to a wide array of banks worldwide through multiple channels such as SWIFT, host-to-host (SFTP), EBICS and APIs. This global connectivity allows businesses to manage their finances efficiently, regardless of geographic location or the number of banks they work with. By leveraging existing connections and maintaining them, Cobase reduces the complexity and cost associated with building and maintaining individual bank connections. Businesses experienced a 60% reduction in integration costs using Cobase’s comprehensive connectivity solution. The ultimate guide for achieving efficient and safe multibank cash visibility and payments To optimise cash management processes you need to apply a number of key principles to increase the level of insight into how cash moves into and out of your organisation. Cobase has listed these key principles in ‘The ultimate guide for achieving efficient and safe multibank cash visibility and payments’. In this practical guide, Cobase divided the principles into four categories and within each category you’ll find questions that you can ask yourself to determine your current level of efficiency and spot the areas you need to improve. All the questions are related to the following topics: Reading and pondering the questions will form a starting point for conversations that lead to meaningful change and improvement. Download ‘The ultimate guide for achieving efficient and safe multibank cash visibility and payments’ and find out how your cash flow (management) processes can be optimized. 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…
Franklin
What’s Treasury’s impact on business performance? (Part 2: Strategic Treasuries)
Introduction Strategic Treasuries – entities that transform treasury into a core driver of business performance In the previous articles, we looked at basic and control-oriented treasuries, short- and medium-term-focus in maintaining solvency and managing financial risks. But what happens when a treasury goes beyond these operational levels? What if they transform into functions that not only manage risks but also actively drive organisations forward, dealing proactively with internal and external stakeholders and contributing directly to profitability and strategic goals? Welcome to the world of strategic treasuries—the rare but powerful entities that transform treasury from a back-office function to a core driver of business performance. As promised in the first article, where we said we’d explain why some treasuries are profit centres, we’ll now explore why certain treasuries make this leap and what impact they have on the organisation. The Evolution of Treasury: From Control to Strategy Strategic treasuries don’t evolve from control-oriented to actively seeking opportunities to add value. The business context forces the change. Let’s start by revisiting the journey of a treasury function. Basic treasury is about managing cash—ensuring that the business can meet its short-term obligations and avoid insolvency. Control-oriented treasuries take this a step further by improving forecasting and applying more professional solvency and risk control techniques, extending their focus from short- to medium-term, using information sourced mainly from other finance functions. Strategic treasuries operate on an entirely different level. These treasuries don’t just manage what’s already there—they actively seek opportunities to enhance profitability, go beyond ensuring solvency to adding value, and align with the organisation’s broader strategic goals. In other words, they transform cost centres into profit centres, directly impacting the bottom line. But—and this is important—they don’t evolve from a control-oriented treasury as a matter of course. The business context outside of treasury forces or opens the door to this change. We’ll talk about this later in this article. Strategic Treasuries and Their Impact on Business Performance If control-oriented treasuries are like the police, handling day-to-day issues, strategic treasuries are like the armed forces, handling unforeseeable, potentially existential financial risks. Being a profit centre is no longer just about creating profits, it’s about proving that the functions are good enough to handle crises, buying the board and giving management time to find a long-term solution So, how exactly do strategic treasuries influence business performance? The answer lies in several key areas: While all treasuries aim to maintain solvency, strategic treasuries focus on long-term financial health. This involves diversifying financing sources, managing complex cash flows, and ensuring that the organisation is prepared for future financial challenges. The result? A more resilient company, better equipped to navigate economic fluctuations and capitalise on growth opportunities. And, think of it another way! The above doesn’t do justice to just how much better they manage solvency. Think of control-oriented treasuries as being like the police – fine for managing problems day-to-day for the foreseeable future. But what about the unforeseeable future! That’s the job of the armed forces. You hope they won’t be needed but you want them there to counter any possible existential problem scenario. You do want them to train every day to be ready, even if you don’t think that scenario is likely. Strategic treasuries are like the armed forces of finance, staffed by more skilled and specialised teams, equipped with better infrastructure and granted the authority to act quickly and proactively. They are there to manage ‘black’swans’—unforeseen material adverse changes. Being profitable is now not only for the sake of increasing profits but, more importantly, to prove to the Board, C-Suite and everyone else that they’re ready to swing into action when needed. After all, if they can’t deliver solvency and make profits reasonably consistently, they’re obviously no good! So a wise CFO, still risk-control oriented, understands that a strategic treasury is not just a profit centre but also an extension of a control-oriented treasury. An extension that now manages unknown as well as known future risks. In a crisis, it buys time for management to find longer-term solutions. Whereas control-oriented treasuries are cost-centres, strategic treasuries contribute to profitability to prove their worth and make sure they’re not a burden on sales and procurement functions, reducing the need for higher core business profitability. By engaging in proactive financial management, these treasuries don’t just control risks—they take advantage of market opportunities to improve returns. Whether it’s by using more sophisticated foreign exchange strategies, better interest rate management, or innovative financial products, strategic treasuries significantly boost a company’s profit margins. Strategic treasuries also improve productivity across the organisation as well as their own. They not only provide value-adding services to internal stakeholders—such as financing solutions for sales or optimising payment terms with suppliers—they also provide systems to interface with internal and external customers, improving service-levels, streamlining operations and reducing costs. The impact is felt company-wide, as smoother operations lead to better overall performance. The most critical role of a strategic treasury is its alignment with the company’s broader goals. Unlike control-oriented treasuries, however, company strategy is affected by the strategic treasury’s strategy and vice versa. This alignment ensures that every decision made within the Treasury contributes to the overall success of the organisation – and vice versa. Types of Strategic Treasuries Not all strategic treasuries are alike. In fact, they typically fall into two broad categories: How can you spot these treasuries? As usual, look for a few key “tells”: Why Companies Invest in Strategic Treasuries Given the complexity and costs of strategic treasuries, and the fact that they are not part of the core business, why do organisations choose to develop them? The reasons vary, but they often boil down to a few key factors: Conclusion Strategic treasuries represent the pinnacle of treasury evolution, transforming what is traditionally a cost centre into a powerful driver of business performance, but also a safety net against unforeseeable financial risks. From enhancing profitability and expanding long-term liquidity (solvency requirements plus excess funds) to improving operational efficiency (productivity) in…
Nicholas
JPMorgan’s AI Chatbot: The Future of Financial Research and Its Impact on Employees
In a groundbreaking move, JPMorgan Chase has unveiled an in-house artificial intelligence (AI) chatbot designed to function as a research analyst. This innovative tool, part of the bank’s broader strategy to integrate cutting-edge technology into its operations, is poised to revolutionize the way financial research is conducted. The Role of the AI Chatbot: A Research Analyst in the Digital Age The newly developed AI model by JPMorgan is far more than just a sophisticated chatbot. It represents the evolution of financial analysis, standing as the digital equivalent of a traditional research analyst. This AI-driven tool is designed to sift through vast amounts of financial data, news, market trends, and research reports at a speed and accuracy far beyond human capability. It can identify patterns, provide insights, and even offer predictions that would otherwise require hours, if not days, of manual research. The AI research analyst doesn’t just compile data; it interprets it, offering insights and analyses that can inform investment decisions. In essence, it performs the core functions of a human research analyst but with the added advantages of scalability and efficiency. This development aligns with JPMorgan’s ongoing efforts to leverage AI to stay competitive in the fast-paced financial services industry. What Does This Mean for Employees? The introduction of this AI-based research analyst raises important questions about the future of jobs within financial institutions. For JPMorgan employees, particularly those in research and analysis roles, this innovation could be both an opportunity and a challenge. A Glimpse Into the Future of Finance JPMorgan’s launch of an AI-based research analyst signals a broader trend in the financial industry. As AI continues to advance, the integration of these technologies into daily operations will become increasingly common. For employees, this presents both a challenge to adapt and an opportunity to innovate. The future of finance is one where human expertise is enhanced by AI, leading to more informed decision-making and a more efficient, data-driven approach to financial analysis. As JPMorgan leads the charge in adopting AI-driven tools, the company sets a precedent for how financial institutions can balance technological innovation with the need to support and develop their workforce. The AI chatbot is not just a new tool—it’s a catalyst for change, redefining the roles of research analysts and setting the stage for a future where human and machine intelligence work hand in hand. Dimitris Bithas, FPWM, Financial Analyst – Eurobank, Comments My view about JPM’s AI chatbot is neutral. It is neither positive nor negative, and the reason is that technology keeps evolving, and its rate of progress increases exponentially over the years. There is literally (and should not be) no one who can prevent technology from going on. So, in our case, are there any jobs in danger? Probably yes. And by that, I don’t mean that a specific role, e.g., research analyst, will disappear, because human factor is always essential in order to interpret data and turn them into meaningful stories, but maybe the amount of people that are needed may be reduced—if a bank needs 10 analysts, with this new technology, due to automation of the tasks, 5 or 6 analysts might be enough. But, there are also some new opportunities for other types of jobs. In order to update and keep the chatbot running properly, the bank may need to hire more people in its IT department, which will create more job placements there. As the time goes by, the jobs in the financial services industry are shifting more to the “IT & Data” field rather than traditional economics—finance, and this AI chatbot is just a similar case. Additional Resources 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.
Where Are Foreign Exchange Rates Headed?
This article is a contribution from one of our content partners, Bound Introduction You know, we talk to a lot of people about exchange rates. One question we get all the time is where rates are going to go. First thing I want to be clear about here is that Bound is not in the business of trying to predict where rates are going to go. But one question that comes up a lot is what should be the default assumption? Where exchange rates will go if I want to assume nothing in terms of changes in supply and demand, volatility, and global macroeconomic changes. Bound’s Role and Services So I want to talk a little bit about how Bound thinks about that. The first thing I want to be clear about is what Bound is in the business of doing. Of course, we help companies make their foreign cash flows more stable and predictable. If you have unbound cash flows, so cash flows that just bounce around with the exchange rates, you can use one of our three automated programmes to make those cash flows more stable and predictable: The Flat Rate Assumption and Interest Rate Differentials But let’s get to the main question at hand here, which is, what should the assumption be if I assume zero volatility? A lot of people assume it’s going to be the same. Rates have been moving around over the last couple of years, and I know it’s not going to stay the same as we go into the future, but because I can’t predict it, I’m just going to assume that it’s going to stay the same. Because it’s just as likely to go up as it is to go down, so that’s my safest assumption. That ignores one really important principle, which is the interest rate on the two currencies, and that creates what’s called the forward curve. So let’s pretend we’re doing a trade today, dollars for euros, and then a year from now we’re trading those back. The current exchange rate today is about 110, so we would exchange 110 dollars for 100 euros. If the interest rates on those two currencies were exactly the same, we would just swap that money back. But since the dollar earns more interest over the course of the year, we can’t just swap those back and have that be fair, or whoever got the dollars on January 1st is in a way better position. So what we do instead is to take into consideration the interest earned over the course of the year, and the exchange rate needs to change. So in this example, the 110 becomes 115. The 100 euros become 103. The exchange rate needs to move, from 110 to 1.1214, to compensate for that small difference. Understanding the Forward Curve So that is the essence of the forward curve. Let’s take a look at a couple of real forward curves here. And again, this is the assumption that this is not about volatility. This is not about if the economy is going to strengthen or anything. This is just today’s exchange rate and the adjustment we need to make for the fact that these currencies have different interest rates on them. So you can see Pound<>Euro is going to dip a little bit, Dollar<>Swedish Krona is going to stay pretty level but come down, Euro<>USD and USD<>Brazilian Real are both going to go up. Because the Brazilian Real is quite a high-interest-rate currency relative to US dollars. And so this is almost a 5 percent adjustment over the course of the next 12 months, in where that exchange rate will go strictly because of the interest rate. So if supply and demand don’t change, if the economies of the US and Brazil stay exactly the same, there’s nothing else that changes. This is where a rational person would assume, just based on the interest rates, where this exchange rate would change. Misconceptions About Hedging That could be good for me or bad for me, depending on if I’m buying or selling BRL. Some people assume that this is a cost of hedging, saying, if I hedge the rate out a year from now, that rate could be potentially a lot worse for me. So I’m not going to hedge at all; I’m just gonna assume that it’s gonna be flat. But assuming that it’s flat is essentially making the assumption that it’s going to be volatile and it’s going to be volatile in the right direction to hold that flat because you’ll be fighting against the interest rate differences across these two currency pairs over the course of that whole year. The way Bound tends to think about volatility and exchange rates is that the default assumption is the forward curve itself, and volatility revolves not around a flat line but around the forward curve. 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. Recommended Reading Notice: JavaScript is required for this content.
The Broken State of Correspondent Banking
Written By:Royston Da CostaMastermind Board Member “The opinions expressed in this article are solely those of the author and not necessarily those of Ferguson.” Introduction Correspondent banking has long been the backbone of cross-border trade and global financial integration. However, having recently experienced what was an inefficient and complex system, I began to scrutinise the system for its vulnerabilities. In this article, I will explore the contributing factors to this, as well as the implications for global finance, and potential solutions for a more resilient and efficient system. Understanding Correspondent Banking Correspondent banking involves relationships between banks, where one bank (the correspondent) provides services on behalf of another bank (the respondent), usually in a different country. This system allows banks to access financial services in jurisdictions where they do not have a physical presence, enabling international payments, trade finance, and foreign exchange transactions. Usually, correspondent banks have a relationship with the respondent bank; however, there are occasions when a correspondent bank may be required to deal with a bank it does not have a primary correspondent relationship with, and this can be very frustrating for the Corporate caught in the middle. The correspondent banking model, which has remained largely unchanged for decades, is increasingly seen as outdated and inadequate for the demands of the modern global economy. This is further emphasised by the 14 days that it took a correspondent bank to return funds that do not belong to them to one Corporate I know. Key Issues Plaguing Correspondent Banking Operational Inefficiencies Correspondent banking is inherently complex, involving multiple intermediaries, time zones, and jurisdictions. This complexity often results in slow transaction processing times, high costs, and a lack of transparency. Payments can take several days to clear (sometimes weeks), with little visibility for customers on the status of their transactions. This inefficiency is particularly problematic in a world where consumers and businesses expect real-time financial services. Moreover, the reliance on legacy systems and outdated technology exacerbates these operational inefficiencies. Many banks, some even consider themselves as global players, still use systems that are decades old, making them ill-equipped to handle the demands of modern finance, such as instant payments, enhanced security, and data analytics. Regulatory and Compliance Burden I recognise that one of the most significant challenges facing correspondent banking today is the escalating regulatory and compliance burden. In the aftermath of the 2008 financial crisis and subsequent money laundering scandals, regulatory bodies around the world have tightened their grip on financial institutions. Anti-money laundering (AML) and counter-terrorism financing (CTF) regulations have become more stringent, with banks now required to conduct extensive due diligence on their counterparties, which is fair, in my opinion. While these regulations are necessary to safeguard the financial system, they have also made correspondent banking more cumbersome and costly. Cybersecurity Threats The rise of cybercrime poses another significant challenge to the correspondent banking system. The global nature of these networks makes them attractive targets for cybercriminals, who can exploit vulnerabilities in the system to commit fraud, theft, or other malicious activities. The risk of cyberattacks has grown as financial institutions have become more interconnected, and the potential for significant financial and reputational damage has increased. As the threat of cybercrime continues to increase, it is incumbent on banks within the correspondent network to invest in appropriate cyber security and ensure they are not reliant on outdated security protocols. Otherwise, this could not only expose them to potential breaches but also undermine the trust that is essential for the smooth functioning of correspondent banking relationships. Consequences of a Broken System Financial Inclusion The broken state of correspondent banking has wide-ranging implications for the global financial system. The most immediate impact is on financial inclusion. As correspondent relationships dwindle, so too do the opportunities for individuals and businesses in affected regions to participate in the global economy. This can exacerbate poverty, hinder economic development, and perpetuate inequality. Inefficiencies and Costs Additionally, the inefficiencies and costs associated with correspondent banking can stifle innovation. Fintech companies and other financial innovators often find it challenging to navigate the complex and costly correspondent banking landscape, limiting their ability to offer new and improved financial services to consumers. A good example of this is the solution for KYC (Know Your Customer), and whereas a number of Fintechs offer excellent solutions for this regulatory requirement, invariably the banks do not have the technology to plug in to the Fintech’s solution. Moreover, the fragility of the correspondent banking system poses a risk to global financial stability. As fewer institutions are willing or able to maintain these relationships, the system becomes more concentrated, increasing the risk that a failure in one part of the network could have cascading effects throughout the global financial system. Potential Solutions and the Way Forward Addressing the problems in correspondent banking requires a multifaceted approach that involves both technological innovation and regulatory reform. Adoption of New Technologies In my view, the adoption of blockchain and distributed ledger technologies (DLT) offers a promising solution to many of the issues plaguing correspondent banking. These technologies can enable faster, more secure, and more transparent transactions, reducing the reliance on multiple intermediaries and legacy systems. Blockchain’s potential to provide real-time settlement and immutable transaction records could significantly enhance the efficiency and security of cross-border payments. Rise of Central Bank Digital Currencies Moreover, the rise of central bank digital currencies (CBDCs) could also revolutionise the correspondent banking model. CBDCs, by offering a digital alternative to traditional currencies, could streamline cross-border payments and reduce the need for correspondent relationships. I recognise that this is unlikely to take place anytime soon, however, it certainly offers a worthy goal to aim for, especially if it eliminates the current experience of a bank being able to ‘sit on funds’ indefinitely with seemingly no accountability to anyone! Regulatory Harmonization and Cooperation To reduce the regulatory burden on correspondent banking, there is a need for greater harmonisation and cooperation among international regulatory bodies, another seemingly impossible challenge! By aligning AML and…
Unlocking new potential: integrate your Payment Service Providers
This article is written by Cobase Many businesses are familiar with integrating banks and other financial service providers into centralized platforms to streamline financial operations. However, what many do not realize is that you can now also integrate your Payment Service Providers (PSPs) with Cobase. This feature, facilitated via API, opens up new possibilities for enhancing efficiency, security, and control over your payment processes. Best of all, this integration makes your accounts immediately available within minutes of setup. The hidden potential of PSP integration Seamless payment processes Traditionally, businesses have had to manage multiple payment gateways and interfaces separately, leading to fragmented processes and increased operational complexity. With Cobase, you can integrate your PSPs directly into the platform, unifying all your payment processes in one place. This integration means that payments, whether local or international, can be initiated, tracked, and reconciled seamlessly through Cobase. For example, an e-commerce business handling transactions in multiple currencies can now manage all payments from different PSPs through a single, intuitive dashboard. Enhanced security measures Security is a critical concern when dealing with payment transactions. Integrating PSPs into Cobase enhances your security by incorporating advanced fraud detection and prevention measures directly into the platform. The Cobase platform’s robust security protocols, including multi-factor authentication and encryption, ensure that all payment transactions are protected against unauthorized access and cyber threats. Improved cash flow visibility Having real-time visibility into your cash flow is essential for effective financial management. By integrating PSPs with Cobase, you gain a comprehensive view of all your payment transactions across different providers. This holistic perspective allows for better cash flow management, accurate forecasting, and informed decision-making. For example, a retail chain can monitor daily sales and payment inflows from various PSPs in real-time, enabling better inventory management and financial planning. Automated and efficient operations Manual handling of payments can be labor-intensive and prone to errors. The Cobase integration with PSPs automates many of these processes, reducing the need for manual intervention. Payment files can be automatically distributed to the appropriate banks in the correct formats, ensuring accuracy and efficiency. This automation not only saves time but also minimizes the risk of errors and fraud. Businesses can focus their resources on strategic activities rather than getting bogged down by routine payment tasks. Simplified reconciliation of transactions Reconciliation of transactions is a critical aspect of financial management that ensures accuracy and completeness in your financial records. Cobase makes it easy to reconcile PSP transactions by automatically matching incoming payments with outstanding invoices and identifying discrepancies. This process reduces the manual effort required for reconciliation and improves the accuracy of financial statements. For example, a company dealing with high transaction volumes can benefit from automated reconciliation, which helps in identifying and resolving mismatched payments quickly, ensuring that the financial records are always up-to-date and accurate. Real-world applications and benefits Case study: global retailer Consider a global retailer with operations in multiple countries, each using different PSPs for local transactions. By integrating these PSPs into Cobase, the retailer achieved a unified payment process. This integration allowed the retailer to streamline its payment operations, gain real-time visibility into global cash flows, and enhance security across all transactions. The result was a 40% reduction in payment processing time, a significant decrease in operational costs, and more accurate transaction reconciliation. Strategic advantage Integrating PSPs with Cobase not only improves operational efficiency but also provides a strategic advantage in the competitive marketplace. With centralized control and real-time data, businesses can respond quickly to market changes, optimise their payment strategies, and enhance customer satisfaction through faster and more secure payment processes. The 7 habits of highly effective treasurers (E-book) Why are some treasury teams more adept at managing the financial challenges faced by their enterprises than others? Cobase decided to identify some of the factors that contribute to intelligent treasury management and operational excellence. Download this e-book now and you will be well on your way to better cash flow and working capital management. 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.
Winners announced for the EuroFinance Treasury Excellence Awards 2024
Spotify, Bristol Myers Squibb, DEME, Crocs, Inc, GE Healthcare and UNHCR named as the winners. Roche were given a special commendation for the annual awards recognised as the benchmark for Treasury excellence globally. EuroFinance has unveiled the winners of the annual EuroFinance Treasury Excellence Awards 2024 recognised as the benchmark for treasury excellence globally. Each year, the theme changes to reflect the key trends that have emerged in treasury over 12 months. This year’s winners have been awarded in 5 categories; Strategic change, Technology transformation, Cash champion, Financing and liquidity and Risk and resilience. Roche has been named Specially commended for industry-wide digital transformation for its leadership in driving digital transformation and making treasury operations a driving force behind the company’s broader mission. Specially commended for industry-wide digital transformation Roach Roche has been specially commended for its leadership in driving digital transformation across treasury. The treasury team has leveraged innovations to enhance cash flow forecasting, optimise capital allocation, and improve real-time decision-making, all of which are critical for funding its ambitious research and development initiatives. This transformation has allowed Roche to navigate the complexities of global financial markets with greater agility and precision, ensuring that the company remains financially robust while pursuing cutting-edge healthcare solutions. The treasury’s role in this digital evolution underscores Roche’s commitment to not only advancing medical science but also to setting new standards for financial innovation within the industry. By pioneering these changes, Roche is leading the way in making treasury operations a driving force behind the broader mission of delivering more personalised and efficient healthcare solutions. Cash Champion Spotify (Winner) Digital music-streaming services company, Spotify, faced challenges in managing account receivables across its 180+ markets. With premium customers paying in local currencies, the treasury team encountered high FX costs and operational complexity, especially in minor currencies where in-house management was challenging. To address this, Spotify implemented a virtual account setup that allows the collection of funds in more local currencies through payment service providers (PSPs). This forward-thinking approach by the treasury team not only meets immediate needs but also positions Spotify to adapt to global challenges, demonstrating its strategic foresight and commitment to operational excellence. Marelli (Highly commended) Marelli, a leading name in the automotive industry, has adeptly managed recent industry challenges, including supply chain disruptions and market volatility. The company’s treasury team played a pivotal role in overcoming these hurdles by implementing a cutting-edge cash management system. This strategic solution has significantly improved Marelli’s liquidity management and cash flow optimization. By leveraging advanced financial technologies and enhancing operational efficiency, Marelli’s treasury team has successfully navigated market uncertainties, demonstrating the vital role of effective treasury management in driving stability and growth. Financing & liquidity Bristol Myers Squibb (Winner) Bristol Myers Squibb (BMS) has effectively navigated a challenging landscape marked by regulatory changes and increased competition. The company responded with strategic acquisitions, including Karuna Therapeutics and RayzeBio, to bolster its portfolio and address high unmet medical needs. BMS’s Treasury team played a crucial role by designing and executing a $16 billion financing plan, including a notable $4.5 billion debt offering. Their strategic foresight and adept management of cash flow and liquidity underscore BMS’s capability to maintain financial stability and support long-term growth despite evolving industry pressures. Sodexo (Highly commended) Sodexo, the world’s second-largest provider of on-site food and facility management services, faced a complex challenge in 2023 with the spin-off of its Benefits & Rewards business, now known as Pluxee. The Group Treasury team played a pivotal role in ensuring that Sodexo’s strong credit rating and attractive financing terms were retained, in addition to raising new financing at Pluxee. This achievement not only created significant shareholder value but also positioned both Sodexo and Pluxee for robust future growth with strong balance sheets, setting a new standard for successful corporate restructurings. Risk & resilience DEME (Winner) DEME, a global leader in dredging, marine engineering, and environmental solutions, continues to demonstrate exceptional resilience in managing the complex risks inherent in its operations. The company’s proactive risk management strategies, combined with cutting-edge technologies and sustainable practices, enable DEME to navigate environmental uncertainties and stringent regulatory demands effectively. Central to this resilience is DEME’s treasury team, which plays a critical role in ensuring financial stability and liquidity. Through strategic cash flow management and careful financial planning, the treasury team supports DEME’s ability to deliver on ambitious projects, even in challenging conditions, underscoring the company’s leadership in both operational and financial resilience. Strategic change Crocs, Inc (Winner) Crocs, Inc., renowned for its iconic footwear, has undergone significant strategic changes to adapt to evolving market demands and consumer preferences. In recent years, the company has diversified its product offerings, expanded its digital presence, and embraced sustainability initiatives, all while maintaining its brand identity. Crocs’ treasury team has played a vital role in this transformation, ensuring financial stability and providing the flexibility needed for strategic investments. These efforts have revitalised the brand, enabling Crocs to tap into new customer segments and position itself for sustained success in a competitive retail environment. The company has also focused on collaborations and limited-edition releases to create buzz and tap into new customer segments. Salesforce (Highly commended) Salesforce, a cloud-based CRM software, is redefining its strategic direction to meet the demands of a rapidly evolving digital economy. Recognizing the need to offer more than just CRM, Salesforce has aggressively expanded into new territories like artificial intelligence, data-driven insights, and industry-specific platforms. The acquisition of Slack marked a bold step towards transforming how organisations collaborate in the digital workspace, signalling Salesforce’s shift towards becoming a comprehensive business solutions provider. Salesforce’s treasury team has been pivotal in managing the financial complexities, from optimising capital allocation to securing liquidity for major investments. Their strategic oversight has ensured that Salesforce can pursue growth opportunities while maintaining financial stability. Alongside these initiatives, Salesforce has committed to ambitious sustainability goals, reinforcing its intent to shape the future of digital business. Technology transformation GE Healthcare (Joint Winner) GE Healthcare is at the forefront…
Treasury for Non-Treasurers: A Tale of two Operational Treasuries – Basic and Control-Oriented
A case study: Building a Control-Oriented Treasury out of a Basic One Background: “You want to reduce the chances of losses due to foreign exchange movements; First you need to set up a controlled treasury environment” Once upon a time, I was fortunate enough to have a senior Treasury position in a fast-growing company. My first contact with the company was as a consultant, advising on foreign exchange risk management, part of the pillar we’ve called profitability support (see the 1st article – link below). As the company had become more international, the possibility of significant losses due to foreign exchange rate movements had increased to an uncomfortably high level for management. My advice as a consultant was ‘Fine, you can do this. It makes sense. Treasury functions tend to start when the company has about $ 200 M in sales, and you have that. But having a more active treasury will increase the number and value of financial transactions and associated high-value payments to be done. Your current setup and processes are not well controlled. Frauds and material errors are possible and could become more likely. You first need to change this”. Saying yes would turn their basic treasury into a control-oriented one. They did agree, and I was appointed to set that better treasury up. What did the basic treasury look like? The situation was unsatisfactory both from solvency and profitability support perspectives. When I first arrived, the Treasury function had one employee. He would manage head office’s borrowing and lending needs and provide cash to or from subsidiaries based on monthly reports prepared by the operations (cash forecasts) or as requested. The forecasts were not normally challenged, and it was clear to me from the subsidiaries’ accounts they were sitting on a lot of cash. This was happening at the same time as the company had significant borrowings at the parent level, where the cash could be used to reduce debt, and where the cash was providing no return to offset the inefficient borrowing. The situation was unsatisfactory both from solvency and profitability support perspectives. Everything was seen through the lens of accounting It was also clear that the current Group Treasurer (by title) lacked significant treasury skills and could not influence the CFO to do the basics. One example was that when funds were provided to the companies, no repayment date was set. Borrowings and loans were treated the same way as non-repayable payments and collections (accounts payable and receivable.) Since no date for repayment was set, no foreign-exchange hedging could take place (a specific date for the return cashflow is needed to protect the company against FX risk). But management was fine with this because the accounting treatment on accounts payable and receivable was that they were long-term in nature, not planned to be repaid, and therefore not regularly revalued. Therefore not causing a volatile foreign exchange gain or loss. This was acceptable from an accountant’s point of view. From a treasury perspective, it was not. Providing money at one exchange rate and receiving it back at another would cause a real economic exchange gain or loss. It was a risk that was not tracked and would not show up until it was too late to be managed. We’ll discuss this difference between treasurers and accountants more in a later article. Unlike in this case study, most Treasury and Accounting departments get on well together. However, in my experience, both frequently struggle to explain WHY they are different. It’s important both for accountants and CFOs directly to understand this difference better (CFOs usually come from an accounting background.) It’s equally important for non-Treasurers to understand the differences so that they can get most out of their interactions with each. Note that neither is right or wrong; they are just different, like someone who is Japanese and another American. Nobody should confuse one for the other. Productivity and management strategy impacts were immaterial All of this was typical in a basic treasury. Accounting was understood, while treasury was not. Solvency was not optimised, profitability not supported and productivity and management strategy impacts immaterial. Building the Control-Oriented Treasury How did it go? It was difficult I’d love to tell you that the transition was smooth, but it was not. This highlights why moving to even a ‘simple’ controlled treasury operation is not a no-brainer or easy to implement. It is difficult and helps explain why moving even further from an operational to a strategic treasury is so hard and, therefore, happens so rarely. What went right? People with experience were recruited and efficiently tasked People with experience were recruited. One became the expert in cash management (payments and receipts, borrowing and investing), another in risk management (mostly foreign exchange), a third in interfacing with the subsidiaries over their cash needs and availability, the last with supporting long-term financing needs and internal controls. We selected a global banking partner I managed the team and worked on getting a common bank in place, to achieve automatic visibility over global cash balances, reduced banking costs and a controlled environment. Banks with the right capabilities were asked to present, and one was selected as the global provider. The implementation of transferring accounts from other banks to this one was started. A specialist treasury management system would be bought once the basics were in place It was accepted that a specialist treasury management system would be purchased when we started getting more sophisticated in our FX risk management, the strategic end-goal, by which point automation would be needed to make the function productive more productive and better controlled. Note, in passing, this was in the days when treasury management systems were significantly more expensive than they are now. These days, one of these systems would be co-equal on the shopping list as a global bank. What went wrong? The company culture Showing figures that were different from the accountants’ was taken as an attack on their previously unchallenged dominant position. Several…
Ripple USD (RLUSD): A New Player in the Stablecoin Market
Ripple Labs, a prominent player in the blockchain and cryptocurrency space, has introduced a new stablecoin, Ripple USD (RLUSD). This stablecoin, currently in its beta phase, is designed to be pegged 1:1 to the US dollar, offering a stable value that is fully backed by traditional financial assets. Ripple’s RLUSD represents a significant step in the evolution of the company’s offerings, potentially reshaping the landscape of digital payments and finance. The Concept Behind RLUSD Stablecoins have emerged as a critical component of the cryptocurrency ecosystem, providing a bridge between volatile digital assets and stable traditional currencies. Ripple’s RLUSD is no different in its core objective—offering stability. What sets RLUSD apart is its backing by US dollar deposits, short-term US government treasuries, and other cash equivalents, ensuring a high level of trust and reliability. These assets will be regularly audited by independent third parties, with Ripple committed to publishing monthly attestations to maintain transparency and build confidence among users. Recommended Reading Integration with Ripple’s Ecosystem Ripple has been at the forefront of blockchain innovation, particularly in the realm of cross-border payments. The introduction of RLUSD is expected to further enhance Ripple’s ecosystem, particularly on the XRP Ledger (XRPL) and Ethereum. By leveraging these platforms, Ripple aims to integrate RLUSD into its existing payment solutions, providing a seamless, low-cost option for international transactions. The integration of RLUSD into the XRPL and Ethereum is part of a broader strategy to enhance liquidity and support institutional use cases. As Ripple continues to test RLUSD with its enterprise partners, the company is focusing on ensuring that the stablecoin meets stringent standards of security, efficiency, and reliability before its full launch. This beta phase is crucial for ironing out any potential issues and ensuring that RLUSD can handle the demands of a global market. The Strategic Importance of RLUSD The launch of RLUSD is timely, given the growing importance of stablecoins in the global financial system. According to market projections, the stablecoin market is expected to grow to over $2.8 trillion by 2028. Ripple’s entry into this market with RLUSD could position the company as a key player in providing stable, reliable digital assets that are integrated into traditional financial systems. RLUSD also aligns with Ripple’s broader vision of transforming global payments. The stablecoin is expected to enhance the efficiency and reduce the cost of cross-border transactions, a core focus area for Ripple. By offering a stable digital currency that is fully backed and audited, Ripple is addressing some of the key concerns that have historically limited the adoption of cryptocurrencies in traditional finance. Corporate Treasury and Stablecoins: A Natural Fit? In recent years, corporate treasurers have increasingly recognized the potential of digital assets, including stablecoins like RLUSD, to enhance treasury management. Corporate treasurers are responsible for managing a company’s liquidity, funding, and financial risk, and stablecoins could offer several advantages in these areas. Stablecoins like RLUSD can enable real-time, cross-border transfers of funds without the delays and costs associated with traditional banking systems. This ability to move funds quickly and cheaply across borders can help treasurers manage liquidity more effectively, ensuring that capital is available where and when it is needed. One of the primary roles of corporate treasury is to mitigate financial risks, including currency risk. Stablecoins pegged to the US dollar, such as RLUSD, provide a means for companies to hedge against currency fluctuations, particularly in volatile markets. By holding stablecoins, treasurers can maintain exposure to the US dollar without the need for complex hedging strategies. Traditional cross-border payments often involve multiple intermediaries, each adding fees and delays to the process. Stablecoins eliminate many of these intermediaries, reducing the cost and time involved in international transactions. For companies with global operations, this can result in significant savings and improved cash flow management. The regular audits and public attestations associated with RLUSD can provide corporate treasurers with confidence in the stability and backing of the stablecoin. This transparency is crucial for ensuring that RLUSD can be relied upon as a safe asset for Treasury functions. As DeFi (Decentralized Finance) continues to grow, treasurers may find additional opportunities to deploy idle funds in yield-generating strategies within DeFi ecosystems. Stablecoins like RLUSD could serve as a gateway for treasurers to explore such opportunities, balancing the need for liquidity with the potential for returns. Future Prospects and Challenges While the introduction of RLUSD is a significant development, it is not without challenges. Regulatory scrutiny is a major hurdle that Ripple must navigate before the stablecoin can be fully launched. Ripple has emphasized that RLUSD is not yet available for trading or purchase, as it is still awaiting regulatory approval. This cautious approach underscores the complexity of launching a stablecoin in today’s regulatory environment, where authorities are increasingly vigilant about the risks posed by digital assets. Ripple has also warned the public about potential scams that might falsely claim to offer early access to RLUSD, reinforcing the need for caution in the rapidly evolving crypto space. Insights from Treasury Experts We thought it would be valuable to get perspectives from a Treasury professional, Royston DaCosta who is also a Treasury masterminds board member Royston Da Costa, Assistant Treasurer at Ferguson PLC, Comments Ripple USD (RLUSD) being pegged to the US dollar is a promising development, as no treasurer prefers volatility in their currency balances. This stablecoin, backed by US dollar deposits and short-term government securities, offers a reassuring option for corporate treasurers considering cryptocurrency. However, a key question remains regarding whether cryptocurrency deposits backed by these assets are covered under local regulations around bank failures, such as the £85k guarantee in the UK or the $250k guarantee in the USA. The integration of RLUSD into Ripple’s ecosystem is a fantastic idea that could prevent banks from unnecessarily sitting on funds for prolonged periods. It makes sense for Ripple to focus on security, efficiency, and reliability during this beta phase, as these are critical for handling global market demands. As central bank digital currencies (CBDCs) and digital assets…