Treasury Contrarian View: Do We Really Need Treasury Centers in Every Region?
For decades, multinational corporations have established regional treasury centers to manage cash, liquidity, and risk closer to their operations. But with advances in automation, AI, and real-time banking connectivity, is the traditional regional treasury center model still necessary, or is it time for companies to rethink their treasury structures? The Case for Regional Treasury Centers Managing FX exposures and liquidity on a regional level can reduce transaction costs and allow for tailored hedging strategies based on local market conditions. WEBINAR ALERT: Fighting Fraud in 2025: Are You Ready for the Next Generation of Threats? Over 70% of businesses have experienced fraud attempts, and the financial impact continues to rise. As fraud tactics become more sophisticated, relying on outdated prevention strategies simply isn’t enough. Join Tom A. (Senior Fraud Consultant UK at Trustpair) and our very own Royston Da Costa (Assistant Treasurer at Ferguson PLC) on February 20, 2025, at 11:00 AM for an essential webinar that will equip you with the latest insights and strategies to protect your organization from evolving AI-driven fraud threats. Moderated by Patrick Kunz, FRM QT What you’ll learn: This session is tailored for finance professionals, treasury leaders, and risk managers who want to stay ahead of fraud risks. The Case for Centralizing Treasury Functions The Hybrid Model: A Flexible Approach Rather than choosing between full decentralization or complete centralization, some companies are adopting hybrid models: Let’s Discuss We’ll be sharing insights from treasury leaders and industry experts—join the conversation and share your perspective! Ricardo Schuh, Treasury Masterminds board member, comments: The hybrid model is the most effective treasury structure, as it balances regional agility with central oversight. Based on my experience, fully centralized models risk losing critical local expertise, while fully decentralized approaches may lack standardization and control. A hybrid approach ensures that regional treasury teams can respond swiftly to local financial challenges, regulatory shifts, and banking relationships while still adhering to a global strategy set by headquarters. This setup enhances efficiency, supports compliance, and allows for tailored risk management and FX strategies without sacrificing strategic alignment. Additionally, maintaining strong regional teams is crucial for fostering close and effective relationships with banks—there is no substitute for an in-person meeting when it comes to securing trust and ensuring smooth financial operations. Moreover, technological advancements, such as AI and real-time banking connectivity, should complement rather than replace regional treasury hubs. While automation improves visibility and standardization, on-the-ground teams remain essential for navigating local complexities and ensuring quick decision-making in different time zones. A hybrid model optimizes costs by centralizing core functions like policy-setting and liquidity management while enabling regional execution for market-specific needs. This structure maintains strong internal controls while preserving the operational agility necessary for treasury teams to add value in a dynamic global environment. Finally, I would point out that having regional teams also helps in talent development and sourcing. 😉 Lorena Pérez Sandroni, Treasury Masterminds board member, comments: Each approach has its own benefits and challenges. The decision should depend on the current stage of the Treasury departments in different regions. It is crucial to ensure local Treasury operations are maintained, as local knowledge, requirements from central banks, banks, and language barriers are key factors. I am definitely in favor of achieving centralized control of liquidity management as soon as possible. This involves establishing proper minimum cash balances and working closely with Tax and Legal departments to create a structure that allows for the physical centralization of funds. From there, proper FX and risk management will be easier to centralize. Only basic local operations should remain decentralized, and wherever possible, opportunities should be sought to rely on centralized liquidity (e.g., in-house banking). I am also a strong advocate for implementing advanced technology, where standardization and control can significantly improve liquidity management and data accuracy for decision-making. Johann Isturiz Acevedo, Treasury Masterminds board member, comments: Current news and context about USA imposing tariffs to countries (mainly Mexico – Canada and China ) and geopolitical discussions (Panama Channel and immigration) are showing that having a regional treasury center in a specific place is something serious to consider. Hybrid model and well detailed processes are key today. Below some takeaways as a must. – A proper DoA – what can be done by local team and done by regional treasury centers.- Localization, is the regional center located in a country which can be impacted by sanctions or restrictions? Country risk assessment.- Cash management set up with local bank and corporate bank. Cash upstream policy is critical- FX risks, are the local team quick enough to share FX exposures to the risk management team in order to take decisions and mitigate FX risk ? Avoid volatilities. Also Read Join our Treasury Community Treasury Mastermind is a community of professionals working in treasury management or those interested in learning more about various topics related to treasury management, including cash management, foreign exchange management, and payments. To register and connect with Treasury professionals, click [HERE] or fill out the form below to get more information. Notice: JavaScript is required for this content.
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Trade Digitalization: How to Start?
This article is a contribution from our content partner, PrimeTrade There’s a growing and visible push to get trade digitalized – and trade documents digitized. See more here. Read this short post to understand the “what” and the “who” of trade digitalization – and then crucially, “how” you might start the journey yourself. Below the body of this post (below the line) are some definitions and a framework that we use to make sense of the complicated world of international trade: The “why” of trade digitalization? International trade still uses paper documents that may as well have been invented by Queen Victoria herself. It all works, but there are a lot of costs, delays and frictions. Estimates for the annual cost to all of us for these inefficient processes go into the many US$billions, see for example McKinsey’s analysis of the impact of electronic bills of lading here. But digitalization is not a one-size fits all story. Two digitization approaches The big and immediate wins come from the use of new digitization techniques for documents. There are two types: The “what” of trade digitalization This table shows which type of digitization approach is appropriate and in which context (definitions are below the line later on): So what do we see here? That should not be controversial but we do recognise that not everyone would agree with us on the last point. See here for why manufacturing supply chains can be efficiently financed using non-DNI digitization. The “who” of trade digitalization This table shows who is interested in the digitization discussion and who has the power to initiate change: What do we see here? Putting the what and who together This is how we drive the digitalization agenda forward: So what next with trade digitalization? Trade digitalization: how to start? How you start depends on who you are, the wins available, and which part of the ecosystem you can influence: Background materials – trade digitalization: how to start? Trade digitalization – a framework There are two dimensions to international trade in goods: Moving the goods involves transport documents, customs paperwork and certificates. Moving the cash involves purchase orders, invoices, payments and trade finance. There are two kinds of international trade in goods, and they work differently: To put some numbers on it: There are also different people involved: And they work in different kinds of organisations: For the terms we are using: For more on that discussion, see here. Standardization – digital standards There is a significant value in standardising the data that the documents involved in international trade contain. This allows handshakes across borders and between systems can be improved. We must do this. But this is not the subject matter for this short post. See more about this here. DNIs, for example, are a specific class of documents that are supported by the Electronic Trade Documents Act 2023 in the UK and similar legislation (based on MLETR) that is being passed in jurisdictions around the world. This class of documents typically has special characteristics and requires specialist systems to support them. But DNIs are not the whole story and only need to be used in specific situations. When do I need a DNI? Only very few documents are capable of being created as a “DNI” – a digital negotiable instrument. In the context of digital trade, we are only talking about: Other documents, like certificates, packing lists, invoices, purchase orders, inspection reports etc. are not capable of being DNIs. And it is important to think about the features of a DNI: A DNI, typically, is: An example where a DNI is helpful is where control of a cargo is being transferred by multiple parties (eg: commodity traders and their lenders) who need to be able to pass on easily the digital document (eBL) in which that control is vested. Another example where a DNI might be to organise post-maturity financing of an invoice by settling the invoice on its due date (or earlier) with an electronic bill of exchange or electronic promissory note incorporating a delay in payment that can subsequently be sold and easily transferred to a financier by the receipient (the supplier) for cash. An example where a DNI might be unhelpful is where a corporate wants to control the identity of financiers that it has to pay money to, and so would prefer not to issue debt to financiers in the form of a DNI, since the claim (and all the rights) might be transferred. Also Read Join our Treasury Community Treasury Masterminds is a community of professionals working in treasury management or those interested in learning more about various topics related to treasury management, including cash management, foreign exchange management, and payments. To register and connect with Treasury professionals, click [HERE] or fill out the form below. Notice: JavaScript is required for this content.
Understanding Bank Treasury: Managing Liquidity, Risk, and Regulatory Compliance
Written by Renea Mahadeo Introduction Bank treasury is fundamentally different from corporate treasury in its objectives and operational complexities. While corporate treasury focuses on ensuring liquidity for business operations, bank treasury is responsible for managing the financial institution’s balance sheet, optimizing liquidity, and ensuring regulatory compliance. Banks operate within a highly regulated environment where capital adequacy, liquidity risk, and interest rate exposure must be carefully managed to maintain financial stability. The treasury function in a bank is central to its profitability and resilience, as it directly influences the institution’s ability to lend, invest, and generate returns. Bank treasurers must continuously assess market conditions, funding sources, and regulatory requirements to optimize capital allocation and maintain a robust liquidity position. The increasing integration of technology, particularly in risk analytics and automation, has transformed how bank treasury teams operate, enabling real-time decision-making and greater efficiency in regulatory reporting. WEBINAR ALERT: Fighting Fraud in 2025: Are You Ready for the Next Generation of Threats? Over 70% of businesses have experienced fraud attempts, and the financial impact continues to rise. As fraud tactics become more sophisticated, relying on outdated prevention strategies simply isn’t enough. Join Tom A. (Senior Fraud Consultant UK at Trustpair) and our very own Royston Da Costa (Assistant Treasurer at Ferguson PLC) on February 20, 2025, at 11:00 AM for an essential webinar that will equip you with the latest insights and strategies to protect your organization from evolving AI-driven fraud threats. Moderated by Patrick Kunz, FRM QT What you’ll learn: This session is tailored for finance professionals, treasury leaders, and risk managers who want to stay ahead of fraud risks. Bank Treasury: Key Functions One of the most critical functions of a bank treasury is asset-liability management (ALM), which ensures that a bank’s assets and liabilities are structured to minimize interest rate risk while maintaining profitability. Interest rate risk arises when there is a mismatch between a bank’s lending and borrowing activities, potentially affecting net interest margins. Treasury teams use financial models and scenario analysis to measure exposure and implement hedging strategies, such as interest rate swaps, to mitigate risk. Liquidity and funding management is another essential responsibility. Banks must ensure they have adequate liquidity to meet customer withdrawals, loan disbursements, and regulatory requirements. This involves managing short-term funding sources such as interbank borrowing, repurchase agreements (repos), and wholesale funding. Compliance with Basel III liquidity regulations, including the Liquidity Coverage Ratio (LCR) and Net Stable Funding Ratio (NSFR), requires treasury teams to maintain sufficient high-quality liquid assets and ensure stable funding structures. Funds Transfer Pricing (FTP) is a mechanism used by banks to allocate the cost of funds to different business units. Treasury determines the internal pricing of funds based on market conditions and regulatory constraints, ensuring that lending and deposit-taking activities are appropriately priced to maintain profitability. This internal pricing system is critical for optimizing a bank’s overall balance sheet performance. Regulatory compliance is a key pillar of bank treasury operations. Compliance with Basel III, IFRS 9, and stress testing requirements ensures that banks are prepared to withstand financial shocks and maintain solvency under adverse conditions. Treasury teams work closely with risk management and regulatory reporting functions to ensure accurate reporting and adherence to capital adequacy standards. Technology in Bank Treasury Advanced treasury technology is essential for managing the complexity of bank balance sheets. Platforms such as Murex, QRM, and Moody’s Analytics provide sophisticated risk modeling, ALM analytics, and liquidity stress testing capabilities. These solutions enable banks to simulate economic scenarios, assess funding risks, and optimize capital allocation. Blockchain technology is being explored by financial institutions to enhance liquidity management, reduce settlement times, and improve transparency in interbank transactions. Central banks and commercial banks are testing blockchain for real-time gross settlement (RTGS) systems, reducing counterparty risk in large-value transactions. Decentralized ledgers also provide enhanced security and auditability for treasury operations. Artificial intelligence is being integrated into treasury operations to enhance liquidity forecasting, automate compliance reporting, and optimize hedging strategies. Real-time data analytics has become increasingly important, allowing treasury teams to respond quickly to market fluctuations and regulatory changes. Managing Interest Rate Risk in a Regional Bank A regional bank primarily funds its mortgage lending activities through short-term deposits. If interest rates rise, the cost of deposits increases, but mortgage rates remain fixed, reducing profitability. To manage this risk, the treasury team implements an interest rate swap strategy, converting floating-rate liabilities into fixed-rate obligations. By leveraging ALM models, they continuously assess interest rate scenarios and adjust their hedging positions, ensuring stability in net interest income. Blockchain for Liquidity Optimization A global bank with operations in multiple financial centers faced challenges in real-time liquidity visibility across jurisdictions. Delays in settlement and fragmented cash balances resulted in inefficient use of capital. To address this, the bank adopted a blockchain-based liquidity management solution, enabling instant cross-border settlements between its subsidiaries. Smart contracts automated intercompany transfers, reducing idle cash and ensuring compliance with Basel III liquidity requirements. The adoption of blockchain streamlined treasury operations, improving capital efficiency and regulatory compliance. A recent example of blockchain technology being tested in Real-Time Gross Settlement (RTGS) systems is the Jasper-Ubin Project, a collaborative initiative between the Bank of Canada and the Monetary Authority of Singapore. This project explored the use of distributed ledger technology (DLT) to facilitate cross-border RTGS transactions. The pilot demonstrated that blockchain could enable real-time settlement between financial networks, reducing the expense and complexity of global payments. Conclusion Bank treasury is a critical function that ensures financial institutions remain liquid, profitable, and compliant with regulations. Unlike corporate treasury, which focuses on operational liquidity, bank treasury is deeply involved in balance sheet management and risk mitigation. As financial markets evolve, the integration of AI, blockchain, and advanced risk management platforms will continue to shape the future of bank treasury operations. Also Read Join our Treasury Community Treasury Mastermind is a community of professionals working in treasury management or those interested in learning more about various topics related to treasury management, including cash management, foreign exchange…
What is Currency Risk?
This article is a contribution from one of our content partners, Bound Currency risk, or exchange rate risk, refers to the exposure faced by investors or companies that operate across different countries, in regard to unpredictable gains or losses due to changes in the value of one currency in relation to another currency ~CFI definition. If you are a business that trades with suppliers or customers in other countries, or your business has employees based abroad, you’re probably dealing with foreign currencies, and have currency risk hiding in your finances. Currency risk explained Currency risk can be as insidious as it is complicated. Understanding exactly where and how currency fluctuations affect your business’s cash flows can involve many different factors—from macroeconomic trends across countries to competitive behaviour within market segments. FX risk comes in many shapes and sizes, here are examples of the main types can distort your company’s value: Picture the scenario: you’re a Dutch tech firm, and need to pay your engineers in US dollars as they are based in the US. These monthly salary payments require frequent bulk conversions from EUR to USD. If the USD gets stronger compared to the EUR, then you’re suddenly spending more euros to cover costs every month. Not ideal. Okay now let’s look at one of your subsidiaries in the US. You’re pleased because recently it’s been generating stable returns in USD. However, when you translate the earnings into EUR for your quarterly financial statements, it doesn’t look so great anymore. What happened? EUR strengthened compared to USD and the financial statement values are affected, that’s translational risk. Sticking with the same scenario, say you are only selling your tech products in Europe. No FX risks here, right? Wrong! You are still in contention with imports from Asia and the US, which will get cheaper and more competitive if the EUR strengthens. Economic risks tend to be very difficult to account for, and even more difficult to predict. If you want a deeper look into the different types of risks and what to do about each one, take a look at this article we’ve written. How much currency risk do I have? Let’s look at some real numbers. Using our earlier example, assume the US subsidiary generates $100K with a cash margin of 10% of sales. Taking only translational risk into account, a ~5% change in exchange rate would lead to a proportional ~5% change in the company’s cash flows from its foreign operations. Not good but potentially manageable. Now let’s take it a step further and look at a more risky case. If this subsidiary is structured such that it generates sales in USD but the costs are incurred in EUR, then the situation looks much worse. In this simple hypothetical case, a mere 5% drop in USD compared to EUR would deflate the cash margin to 5.7%. The operating cash flow would also take significant hits – a 42.9% decline in dollar cash flow and 45.5% in euros. In this case the company’s cash inflows and outflows are structured such that they react differently to fluctuations, which has exposed them to far greater currency risk. Differences in timing of paying costs and collecting revenue can exacerbate the problem. In 2022, EUR/USD exchange rates varied almost 20%. A USD drop of that size would have swung the cash flows of our Dutch tech company way into the negatives and annihilated our margins. Most real-world examples are not so clear-cut and have more moving parts, but hopefully, this illustration makes the principle clear. To completely understand your currency risk, you’d need to: Is currency risk worth solving? But is solving currency risk worth it for you? Perhaps you’ve been doing business without managing your currency risk for many years and you just view this as a cost of doing business. You also might be thinking that these are all negative examples, surely I will win as often as I lose? Should it not all balance out? A reasonable argument. If you have a small amount of money at risk and you can weather potential losses, sometimes it makes sense to do nothing. However, most CFOs prioritise predictability and protection instead of letting their cash flows ebb and flow at the market’s whim. The examples demonstrate the risk behind currency fluctuations, which can mess with your financial forecasts, strategic plans, and create all sorts of uncertainty in revenue and expenses. Whether or not solving currency risk is worth the effort depends on your business. Some questions to consider are things like: Typical solutions Hedging is the method most companies deal with currency risk. Almost all large companies have professionals that manage currency risk. International conglomerates often have tens of millions at risk and value predictability in costs and revenue. They can afford to hire or work with risk professionals to protect their businesses. For large-scale problems, they may work with a bank or an FX broker on a large-scale solution with financial projections, risk analysis, and use complex hedging strategies. However, most smaller businesses don’t have the time or resources to commit to even understanding where currency risk is hiding in their operations–let alone putting together packages of financial products that would help mitigate these challenges. Recommended Reading 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.
Transform Your Treasury Operations with Seamless Bank Connectivity
This article is written by Palm Introduction Treasurers face the constant challenge of managing cash flow, liquidity, and risk. The need for real-time visibility into cash balances and transactions has never been more business-critical. This blog post explores the benefits of bank connectivity, why it’s essential for treasurers, and how leveraging technology can transform your treasury operations. Discover how enhanced connectivity can streamline your processes, reduce manual work, and empower your team to make data-driven decisions. We’ll cover various connection methods, the significance of cash visibility, and how Palm’s advanced solutions can help you achieve seamless bank connectivity. Why Do Treasurers Crave Bank Connectivity? Treasurers are the backbone of any organisation, responsible for managing cash flow, liquidity, and financial risk. With multiple accounts spread across various financial institutions, having a consolidated view of cash positions is key. It allows treasurers to optimise cash management, avoid unnecessary debt, and make informed investment decisions. In today’s digital age, traditional methods of bank communication are no longer sufficient. Treasurers crave connectivity because it provides the speed, accuracy, and efficiency needed to stay ahead. By connecting directly to banks, treasurers can automate data retrieval, reduce errors, and ensure that they always have the latest information at their fingertips. Why Cash Visibility = Efficiency Visibility into cash balances is a game-changer for treasury teams. It eliminates the need for manual data collection and reconciliation, freeing up time for more strategic tasks. With consistent and unified access to cash positions, treasurers can swiftly respond to changes in the financial landscape, ensuring that the organization remains agile and resilient. Efficiency is not just about saving time; it’s about making better decisions. When treasury teams have accurate and up-to-date information, they can identify trends, forecast cash flow more accurately, and mitigate risks. Enhanced visibility also fosters collaboration within the team, as everyone has access to the same data and can work towards common goals. Why Do Some Treasury Teams Still Rely on Manual Reports? Despite the clear advantages of bank connectivity, some treasury teams continue to lean on manual reporting methods. One significant barrier is the lack of technical support to implement new systems. Many organisations may not have the internal resources or expertise to set up automated solutions, leaving teams to rely on traditional methods that are more familiar but less efficient. Another prevalent concern is the belief that enhancing connectivity will incur prohibitive costs. Budget constraints can make it daunting for treasurers to invest in new technologies, leading them to continue with the status quo instead of seeking innovative solutions that could ultimately save money in the long run. Lastly, time constraints play a crucial role in this reliance on manual reporting. Treasury teams are often inundated with day-to-day operations, making it challenging to allocate time for evaluating and deploying new systems. The pressure to maintain ongoing operations can overshadow the potential benefits of transitioning to automated processes, thus perpetuating a cycle of inefficiency. Ultimately, addressing these concerns is vital in helping treasury teams embrace the transformative How Can You Connect to Your Bank to Retrieve Data? Host to Host Host-to-host connectivity is a direct link between your treasury management system (TMS) and the bank’s servers. This very common method is highly secure and reliable, allowing for the seamless transfer of files and data. It is ideal for organizations with high transaction volumes, as it ensures that data is transmitted efficiently. Bank statements are sent in standardized file formats such as MT940, BAI, and Camt.053. The challenge, however, is that bank branches may leverage differing fields within the format, which results in inconsistencies when creating reconciliation or mapping rules to translate the data. Host-to-host files are typically delivered on a schedule, which also limits the ability to receive and send information in real time. Setting up host-to-host connectivity requires technical expertise and coordination with the bank’s IT team. However, once established, it offers a robust and scalable solution for real-time data exchange. Treasurers can benefit from automated file transfers, reducing the need for manual intervention and minimizing the risk of errors. Electronic Banking Internet Communication Standard (EBICS) EBICS is a standardized protocol for electronic banking that allows the secure transfer of large files and data between banks and businesses. It supports various file formats such as XML, SWIFT MT messages, and EDIFACT. EBICS also offers multiple security features such as digital signatures and encryption to ensure the confidentiality of data. EBICS is not a widely used protocol, so the international treasury team will need to be mindful of whether their bank supports it before proceeding. SWIFT Connectivity Larger corporates may choose to use their own SWIFT connectivity. This enables them to connect directly with their banks via SWIFT messaging. This method is highly secure and standardized, providing real-time access to bank balances, statements, and transaction status updates. However, setting up a SWIFT connection requires significant resources and expertise. It can also be costly for smaller organizations that may not have the volume of transactions to justify the investment. For these reasons, SWIFT connectivity is more commonly used by large corporations with complex international cash management needs. API APIs (Application Programming Interfaces) are revolutionising bank connectivity. They enable real-time data exchange between systems, providing instant access to account balances, transaction details, and other critical information. APIs are flexible, easy to integrate, and can be tailored to meet specific business needs. Using APIs, treasurers can create customised dashboards, automate workflows, and gain actionable insights. The real-time nature of APIs means that treasurers can make decisions based on the latest data, enhancing their ability to manage cash flow and liquidity effectively. However, not all APIs are created equal and treasurers will need to be mindful of the APIs they choose to leverage to support the business . We will cover the key differences here. Connectivity Partners For organisations that lack the technical resources to implement direct connections, partnering with a connectivity provider can be an excellent solution. These providers offer comprehensive services that include setting up and maintaining…
Treasury Contrarian View: AI in Treasury—Hype or Reality?
Artificial Intelligence (AI) is one of the hottest topics in corporate finance, and treasury is no exception. Vendors promise smarter forecasting, faster reconciliations, and real-time risk management. But here’s the big question: Is AI in treasury living up to the hype, or is it just another buzzword with limited real-world impact? Where AI Is Making a Real Difference Where the Hype Outpaces Reality The Balanced View: AI as an Enabler, Not a Replacement Instead of viewing AI as a silver bullet, treasury leaders should see it as a tool to enhance existing processes: Let’s Discuss We’ll kick off the conversation with insights from our board members and treasury tech partners who are actively experimenting with AI. Share your thoughts below—we’d love to hear your experiences! James Kelly, Co-Founder, Your Treasury, comments: We’re in the early stages of use of generative AI in treasury and teams are getting real value from chatbots and meeting summaries, but these are quite small use cases. While machine learning has been used in some very large treasury departments and banks for forecasting, it’s use has been far from widespread and so for most of the market, there’s a new skill to learn. It’s also the case that it won’t work for all businesses or all cash flows as the ‘huge datasets’ described above aren’t available in many businesses or for certain cash flows. Where there is genuine potential is in reducing reliance on key staff by becoming an ‘organisational memory bank’, offering how to guides instantly, as well as the ability to produce reports and guides. Over time, we should see AI infused into most treasury processes. For example, if a transaction is reclassified once manually, this is remembered for the future. Ultimately we’ll move away from modular systems where modules don’t talk to each other, to tools that can manage whole processes in one place. This may be the current chatbot style or may be controlled by voice or other means Does that mean that treasury is going to be fully automated and without people? It’s highly unlikely for a number of reasons: 1. Our start point is pretty manual, with a lot of complex ad hoc tasks, so from where we are to full automation is a huge leap.2. It’s unlikely that this would be acceptable for many boards and auditors given the sensitivity around cash.3. To achieve that level of automation would require significant use of AI agents and generative AI, which has been repeatedly shown to be power hungry and devious. See Glass Almanac’s AI: OpenAI’s New Model (o1) Lied and Manipulated Its Way to Survival During Testing and Bank Info Security’s Models Can Strategically Lie, Finds Anthropic Study For these reasons we always look to balance the benefits of generative AI (which are significant and unlock problems we previously couldn’t automate efficiently) with the risks and only use it to the minimum extent required. It’s almost certain that new treasury roles will emerge in managing and maintaining models, as well as roles requiring the hugely important soft skills (anyone who’s done a bank refinancing will tell you that the legal clauses are a small part of the process). Overall, there are significant opportunities but deployment needs to be done thoughtfully Matthew Harlan, Chief Treasury Officer, Nilus, comments: AI in treasury is neither hype nor a magic bullet—it’s a tool, and like any tool, its value depends on how well it’s applied. While AI has made meaningful strides in areas like fraud detection and automation, its effectiveness in forecasting and risk management are dependent by the data that feeds it. The real opportunity lies in using AI to augment treasury teams, not replace them. At Nilus, we’ve seen firsthand how AI-driven insights can enhance liquidity management and operational efficiency when paired with strong data and centralized fragmented systems. I’m excited that presently, we are living in the future and believe that now is the time for Treasury teams to engage with technology and reimagine the future. Lorena Pérez Sandroni, Head of Treasury, PayU GPO, comments: AI provides valuable insights, and I truly believe it can enhance the role of a treasurer by automating routine tasks, which leads to high levels of turnover in our teams when these tasks are too tedious and there is no room for further personal development while things still need to be done! I believe the success of AI, like any other technology, will depend on proper implementation and integration into existing treasury systems, requiring investment in technology and training. Are we doing this while enhancing the use of AI in corporates? However, AI will never replace the strategic insights that a human treasurer brings. 😉 Also Read Join our Treasury Community Treasury Mastermind is a community of professionals working in treasury management or those interested in learning more about various topics related to treasury management, including cash management, foreign exchange management, and payments. To register and connect with Treasury professionals, click [HERE] or fill out the form below to get more information. Notice: JavaScript is required for this content.
Why Your Manual Reconciliation Process Doesn’t Scale
This article is written by our content partner, Nilus We know that reconciliation is hard to get right. You or your team have most likely mentioned the challenges of reconciliation. At the surface, it can sound like a simple task—match a transaction recorded in your system to a transaction recorded by your provider. As a company scales, however, the complexity of managing reconciliation increases. According to PWC, finance teams spend up to 30% of their time just reconciling transactions with barely any time to focus on more strategic value-add work. Anyone who has been tasked with reconciling thousands, or even just hundreds, of transactions has experienced firsthand how challenging it can be. This is especially true as new payment providers are onboarded and new payment methods or terms are offered to customers. What do we mean when we say reconciliation? Reconciliation processes can look different from company to company, but generally, if you process customer payments at scale, as your company grows, you will likely start performing at least a few of the reconciliation processes below. If you already perform a number of these processes, then you likely already feel the pain of getting a real-time view of your cash, trying to understand your AR and AP mid-month, and the struggle of trying to close your books on time. There are a few key reconciliation types: Payment processor reconciliation Bank payments reconciliation WEBINAR ALERT: Selecting a Treasury Management System (TMS): An Important Decision That’s Never Easy What drives your decision-making? We’re here to guide you in making the right choice. In the upcoming webinar, I’ll be moderating and asking the tough questions every treasurer wants answers to. With 10+ TMS selections and implementations under my belt, I’ve seen what works and what doesn’t. Join us! Expert panel of seasoned treasurer Jeremy Reedus, MBA and Chief Treasury Officer Matthew Harlan from Nilus. You can’t afford to get reconciliation wrong If financial reconciliation is done incorrectly, it can have serious consequences for a business or organization. Here are some downsides of getting financial reconciliation wrong: The challenges of scaling reconciliation Our team has spent years building and streamlining financial operations and seen firsthand how and when reconciliation processes break. Here are some of the most common challenges to look out for that can have large impacts on your business and operations. Transaction volume can become unmanageable It might be fine to manage reconciliation over spreadsheets in the early days. However, manual matching over reports, files, queries, and spreadsheets becomes highly inefficient and error-prone once your business grows and you start reaching tens or hundreds of thousands of transactions a month. All of a sudden a process that took days might now take weeks. Global operations introduce new complexities and risks Once you go global, you have to start dealing with multiple entities, new providers, cross-currency and multi-currency reconciliation—which means new recon flows to prepare, new logic and data to handle, and matching transactions across multiple currencies with fluctuating FX rates. Systems that don’t speak to each other While you may start with one payment processor and one bank, you’ll eventually need to manage across multiple bank accounts, payment processors, and ERP systems. As none of these systems communicate with each other, you’ll find yourself with the headache of logging into dozens of portals and patching together different data sources and systems that don’t speak the same language. Risk of human error, fraud, and money leakage As your payment volume grows, human error that seemed like a small detail in the past all of a sudden becomes a real concern. What was once a $100 mistake can now become a $100,000,000 mistake. With cross-functional input required across product, engineering, finance, data, and customer support, the opportunity for human error only grows. This can lead to significant losses and money leakage that your company can’t afford. Delayed financial and cash flow reporting Running reconciliation manually means you won’t have real-time cash visibility, but it also means that closing the books every month can take weeks. This means that you won’t know your April numbers until deep into May, when it’s time to start the process all over. You won’t be in a place to identify issues, manage real-time balances or invoices, or optimize cash flow in real time, which can impact your customers and your revenues. Scaling your reconciliation processes Reconciliation is one of the most mission-critical tasks in a company, especially when it comes to properly managing your cash flow. While many companies address the problem by hiring growing teams of bookkeepers and financial operators, it doesn’t have to be this way. By automating your reconciliation process, you can keep your headcount under control and keep your team focused on the strategic tasks that move the needle. More from Nilus 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.
Trends Transforming the Current Treasury Management System (TMS) Landscape
Written by Royston Da Costa The Treasury Management System (TMS) industry is undergoing a significant evolution, driven by technological advancements, regulatory changes, and the ever-growing demand for real-time financial insights. As treasurers navigate complex financial environments, TMS providers have had to innovate to address emerging needs. Here are some of the key trends I believe will transform the current TMS landscape in 2025: 1. Adoption of Artificial Intelligence (AI) and Machine Learning (ML) This first point shouldn’t surprise anyone, as AI and ML are reshaping the way treasurers manage data and forecast financial outcomes. These technologies enable TMS platforms to analyse large datasets, identify patterns, and deliver predictive analytics. AI-powered tools help optimize cash forecasting, detect anomalies in transactions, and support decision-making by providing actionable insights. As these capabilities mature, they are becoming integral to TMS offerings. It is also true that this technology is still evolving and we should continue to tread carefully, as the data produced using AI must still be checked and validated. 2. Focus on Real-Time Payments and Liquidity Management The shift toward real-time payments is driving the need for TMS platforms to offer instantaneous liquidity updates. With the advent of initiatives like SWIFT GPI, ISO 20022, and domestic real-time payment systems, treasurers require tools to monitor cash positions in real time as well as FX and interest rate risk management solutions driven by live market data. TMS solutions are integrating with banking APIs and utilizing cloud technology to provide treasurers with a 24/7 view of their financial landscape. The significant ‘game changers,’ in my view, are API aggregators like Necto that do the ‘heavy lifting’ for corporates by connecting to multiple third parties, including banks. It is worth noting that APIs can also be used to connect to internal systems, offering additional automation and efficiencies. WEBINAR ALERT: Fighting Fraud in 2025: Are You Ready for the Next Generation of Threats? Over 70% of businesses have experienced fraud attempts, and the financial impact continues to rise. As fraud tactics become more sophisticated, relying on outdated prevention strategies simply isn’t enough. Join Tom A. (Senior Fraud Consultant UK at Trustpair) and our very own Royston Da Costa (Assistant Treasurer at Ferguson PLC) on February 20, 2025, at 11:00 AM for an essential webinar that will equip you with the latest insights and strategies to protect your organization from evolving AI-driven fraud threats. Moderated by Patrick Kunz, FRM QT What you’ll learn: This session is tailored for finance professionals, treasury leaders, and risk managers who want to stay ahead of fraud risks. 3. Cloud-First and SaaS Models Cloud-based TMS solutions are rapidly gaining traction due to their scalability, lower implementation costs, and ease of integration with other enterprise systems. This has been particularly true since the Pandemic. Software-as-a-Service (SaaS) models allow treasurers to access their TMS from anywhere, enabling a more agile response to market changes. Further Treasury Centralization has also been achieved through (i) Global Cash Management: unified management of multi-currency accounts and global cash pools, and (ii) In-House Banking (IHB): tools for managing intercompany transactions efficiently. Additionally, cloud-first architectures facilitate regular updates and enhance cybersecurity measures. Increasingly, SaaS solutions are migrating to the largest cloud-based providers like Amazon (AWS), Microsoft Azure, Google Cloud, IBM Cloud, and Snowflake (to name but a few), preparing the path for a more centralised platform for multiple solutions to be accessed from. 4. Enhanced Risk Management and Compliance Tools With regulatory frameworks becoming increasingly stringent, treasurers face growing challenges in compliance and risk management. Modern TMS platforms are incorporating advanced compliance modules to help organizations adhere to regulations such as GDPR, SOX, and global tax standards. Automated risk assessments and stress testing are also becoming standard features, empowering treasurers to prepare for unexpected market shocks. Again, AI is playing a significant role in shaping the functionality that TMS’s can offer in risk Management. In particular, the ability to process vast amounts of data and generate scenario analyses is very powerful. 5. Increased Integration with Enterprise Systems Interoperability is a key demand in the current TMS market. Treasurers seek seamless integration between their TMS and Enterprise Resource Planning (ERP), Customer Relationship Management (CRM), and Business Intelligence (BI) tools. This integration ensures a unified financial ecosystem, streamlining data flow and enhancing decision-making across departments. The additional benefit of enhancing cash flow forecasting is also extremely attractive. 6. Emphasis on Sustainability and ESG Reporting As Environmental, Social, and Governance (ESG) considerations gain prominence, treasurers are looking for TMS platforms that support sustainability reporting. This includes tracking carbon footprints, analyzing the impact of green financing, and ensuring alignment with ESG standards. TMS providers are incorporating features to help companies measure and report on their ESG commitments effectively. 7. Advanced Cybersecurity Measures Cybersecurity remains a top concern for treasurers, given the increasing sophistication of cyber threats. Modern TMS platforms are embedding robust security features, such as multi-factor authentication, advanced encryption, anomaly detection powered by AI, and vendor validation. These measures are critical to safeguarding sensitive financial data. 8. User-Centric Design and Automation Ease of use is becoming a critical differentiator in the TMS market. Platforms with intuitive user interfaces, customizable dashboards, and automation capabilities are seeing higher adoption rates. Automating repetitive tasks, such as reconciliation and reporting, allows treasurers to focus on strategic initiatives and includes tools that optimize processes based on past behaviour and predictive insights. 9. Blockchain and Distributed Ledger Technology (DLT) Although still in its nascent stages, blockchain technology is making inroads into treasury management. Applications include improving transparency in payments, streamlining trade finance, and enhancing fraud prevention. As adoption grows, blockchain could redefine transactional processes within TMS platforms. 10. Data-Driven Decision-Making Data analytics is at the heart of modern treasury operations. TMS platforms are leveraging big data to provide deeper insights into cash flow trends, investment opportunities, and risk exposure. By harnessing advanced analytics, treasurers can make informed decisions with greater confidence. Customizable dashboards offering clear, actionable insights for CFOs and treasurers. 11. Future-Proofing Through Innovation Quantum Computing: Although in early…
Confirmation of Payee (CoP) Regulation: All You Need to Know
This article is written by Trustpair The CoP was launched in 2020 to lower payment fraud and errors in the UK. Today, 90% of faster payment methods are managed by the CoP. The EU will introduce similar Eurozone regulations, such as the Validation of Payee (VoP). This will develop further, so keep reading to learn what you need to know about the Confirmation of Payee regulation. Trustpair is an anti-fraud software that goes beyond the CoP. Our solution protects your company from third-party fraud, even with international suppliers, thanks to automated account validation. What is confirmation of payee? Confirmation of Payee (CoP) is a verification system that checks if the name on the bank account matches the name of the intended recipient. CoP is used in the UK for digital payments for both personal and business accounts. To ensure the information is correct, users have to go through it when they: The goal of the confirmation of payee regulation? To lower transfers sent to the wrong account, either through: WEBINAR ALERT: Fighting Fraud in 2025: Are You Ready for the Next Generation of Threats? Over 70% of businesses have experienced fraud attempts, and the financial impact continues to rise. As fraud tactics become more sophisticated, relying on outdated prevention strategies simply isn’t enough. Join Tom A. (Senior Fraud Consultant UK at Trustpair) and our very own Royston Da Costa (Assistant Treasurer at Ferguson PLC) on February 20, 2025, at 11:00 AM for an essential webinar that will equip you with the latest insights and strategies to protect your organization from evolving AI-driven fraud threats. Moderated by Patrick Kunz, FRM QT What you’ll learn: This session is tailored for finance professionals, treasury leaders, and risk managers who want to stay ahead of fraud risks. How does CoP work? The Confirmation of Payee regulation is quite straightforward. When entering a new recipient’s bank details, the payor must indicate the recipient’s name. The CoP services then check account details to ensure the name matches the bank’s records. The system will carry out this verification automatically (and instantaneously) and will come back to the sender with a response. There are four main possible answers: If the entered information doesn’t match the account, the payment initiator is then asked if they want to proceed with their transfer. This additional step creates another layer of protection against mistakes and fraud. While the payment sender always has the final say, the confirmation of the payee puts the onus onto the payer to double-check payment details. They need to pause and ask themselves if they really trust the recipient in case of inconsistency (answers 2, 3, and 4) and assume responsibility for their decision. To be effective, confirmation payee CoP must happen before the payment is initiated and processed by the banking establishment. It’s a peer-to-peer service with no centralized infrastructure, which works through an API. What is the CoP calendar? The Confirmation of Payee regulation was introduced in the UK in 2020. Originally, the CoP only applied to mobile and online payments. Its scope has broadened with the years, demonstrating the intention of making more payment methods secure. The confirmation payee first became mandatory for the six largest banks in the country in June 2020, as specified by the Payment Systems Regulator (PSR). A few waves of integrating more banking establishments into the CoP followed throughout the years. More than 400 payment service providers (PSPs) have now adopted the CoP. All PSPs handling faster payments and CHAPS (Clearing House Automated Payment System) are due to abide by the CoP standards by October 2024. Every day, about 2 million checks are completed on the CoP in the UK. Over 90% of faster payments (instant payment methods up to 24 hours) are managed through the system. It is now widely recognized as an anti-fraud tool and is due to be adopted in the EU through the Validation of Payee (VoP) regulation. Which banks are part of the confirmation of payee regulation? The Confirmation of Payee regulation was set up by the Payment Systems Regulator PSR in the UK. Its goal: reduce fraud misdirected payments in the country. This interbank system is managed by Pay.UK and works directly and indirectly with customers and payment service providers. While many big banks (such as Barclays, Halifax, HSBC, and Nationwide) were mandated to join in 2020, many have followed since. The PSR regularly produces new directives calling for more banking establishments to implement CoP regulations. Payment service providers can also choose to join the regulation of their own accord by working with aggregators such as SurePay, Bottomline, and Banfico. Those systems connect third-party banking establishments, customers, and businesses to the Pay UK CoP system. It allows smaller actors to benefit from the CoP’s added safety without having to wait. In the EU, the arrival of PSD3 will change the regulatory landscapes, no doubt including the VoP for all SEPA payments. Why is the confirmation of payee regulation not enough to stop fraud? An incomplete protection While the Confirmation of Payee regulation was much needed to prevent push payment APP fraud, it isn’t enough to protect businesses against fraud. CoP only checks if the name on a recipient’s account matches with the intended beneficiary. That’s not nearly enough protection against common types of B2B payment fraud, where scammers come up with elaborate payment schemes. For example, in vendor fraud, criminals can create a fake company and ask you to pay for invoices for services or goods never delivered. The CoP would come back clear because the information matches, but it doesn’t help to check if the transaction is legal or legitimate. Moreover, the CoP regulation only covers transfers sent to the UK. For companies with international suppliers, this creates a massive security gap. Scammers often have bank accounts located abroad, meaning the CoP doesn’t actually protect you against cybercriminal activity. Lastly, CoP still requires manual validation of payments—a task that’s both inefficient and error-prone. Using Trustpair for 100% fraud protection Fortunately, there is a solution that covers all the failings of the CoP and provides complete…