Designing a Robust and Scalable Treasury Policy for an International Business
This article is a contribution from our content partner, Salmon Software Key objectives of the new treasury policy Dechra Pharmaceuticals is a global leader in the veterinary healthcare market, with a presence in over 50 countries worldwide. Founded in the UK in 1997, Dechra has expanded rapidly over the past two decades, both organically and through acquisitions, to become a major player in the animal healthcare industry. As the company has grown, so too has its need for a robust and scalable treasury policy that can support its global operations. Before 2014, Dechra’s Treasury operations were decentralised, with each subsidiary managing its own cash and treasury functions. This approach led to a lack of visibility into the company’s consolidated cash positions and foreign exchange (FX) exposure, making it difficult to manage risk and optimize cash usage. To address these challenges, Dechra implemented a central group treasury and adopted a netting system in Europe. The cash pool became a zero balancing cash pool and also expanded into the USA when the company implemented a Treasury Management System (TMS) from Salmon Software, known as Salmon Treasurer, to support its treasury operations. The primary objectives of the TMS were to provide better transparency into Dechra’s consolidated cash positions and FX exposure, as well as to enable the company to hold intercompany positions and capture zero balancing and netting movements. To achieve these objectives, Dechra established a close relationship with Salmon Software and implemented MT-940 reporting of bank account balances and transactions. This allowed the company to account for daily interest and taxes arising from those balances and transactions. “Dechra manages risk in its treasury operations by centralising FX risk in the UK at group treasury”, explains Steve Card, group treasurer at the pharma specialist. “For acquisitions, Dechra matches the currency of the acquisition price with borrowings in the same currency. For transactions, we use a daily zero-balancing cash pool for the majority of our operating subsidiaries to centralise FX risk.” FX position is monitored throughout the month, with actions taken to reduce the impact of currency movements on the group P&L. “No transaction hedging is undertaken at subsidiary level, nor is there any other translation hedging undertaken by the group. Dechra relies on the Salmon Software TMS for the processes, information, and reporting needed to execute this strategy efficiently,” Card further clarifies. “Dechra’s approach to liquidity management and funding is reactive, using a combination of cash, committed RCF facilities, private placements, and equity funding. The company’s treasury policy requires that group leverage (total group borrowings/EBITDA) be maintained at a ratio of 2:1 or below. If the ratio rises above this, it must be returned to 2:1 or below within a 12-month period.” Dechra’s investment strategy to date has been conservative, holding deposit funds only on a short-term basis because of the opportunistic nature of acquisitions and the desire of both the group and its rating agency to minimize outstanding debt. Dechra does not currently have any treasury KPIs in place. A conservative approach to tech infrastructure Card is a strong proponent of a policy-led treasury tech stack, rather than having software guide decision-making. “Dechra is not an early adopter of new technology, and its treasury technology is based around proven technologies such as intercompany netting, TMS from Salmon Software, fed by MT-940 feeds from participating banks, and centralized daily zero-balancing cash pools,” he states. “Dechra has tailored these technologies to its particular requirements, especially in the areas of intercompany accounts, transfer pricing, FX exposure reporting, and dividend management.” Dechra approaches capital structure management and debt management primarily at the time of assessing the funding structure of an acquisition. There are no hard and set rules, other than the leverage requirement to be 2:1 or below, which is a key element of the company’s treasury policy. 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.
Franklin
The Changing Face of Corporate Treasury: Why Adapting Matters
Let’s face it—corporate treasury isn’t what it used to be. Gone are the days when we were just number crunchers tucked away in the back office, counting beans and managing cash. Now? We’re right in the thick of it, helping shape company strategy and making big decisions. It’s been quite a ride, and it’s all thanks to a perfect storm of globalization, tech advances, new regulations, and a laser focus on managing risk. But here’s the thing: with all this change, we’ve got to be nimble. That’s where change management comes in. It’s not just a buzzword; it’s our ticket to staying relevant and thriving in this fast-changing world. And don’t get me started on generational differences; that would be a whole separate article. Out with the Old, In with the New Remember when our biggest concerns were making sure there was enough cash in the bank and we weren’t breaking any rules? Those were simpler times. Now, we’re juggling a whole new set of balls: Why Change Management is Our New Best Friend So, how do we keep up with all this change? That’s where change management comes in. Here’s why it’s so crucial: 1. Getting Everyone on the Same Page Treasury doesn’t operate in a vacuum. We’re part of a bigger picture, and our goals need to align with the company’s overall strategy. Change management isn’t just about updating our own processes; it’s about making sure we’re moving in lockstep with the rest of the organization. For example, if the company’s pushing for aggressive growth in new markets, we need to be ready with strategies for managing increased foreign exchange risk and setting up efficient cash management systems in those regions. Change management helps us stay tuned in to these big-picture goals and adapt our approach accordingly. 2. Embracing the Chaos If you’re not changing, you’re falling behind. Building a culture of agility in treasury means fostering an environment where people aren’t just okay with change—they’re excited by it. This might look like encouraging your team to experiment with new fintech solutions, even if they sometimes fail. Or it could mean setting up regular brainstorming sessions to reimagine how we approach traditional treasury functions. The key is to make change feel like an opportunity, not a threat. And it is ok to fail! 3. Leveling Up Our Skills As Treasury becomes more strategic, we need a whole new skillset. Gone are the days when Excel prowess was enough. Now we need people who can analyze big data, understand complex financial instruments, and communicate effectively with stakeholders across the business. Change management helps us identify these skill gaps and address them proactively. This might involve setting up training programs, hiring new talent with different backgrounds, or partnering with other departments to share knowledge. The goal is to build a team that’s always learning and growing. As a manager, be open to hiring different skillsets, not only technical but also soft skills. 4. Playing Nice with Others Effective treasury management today requires collaboration across the entire organization. We need to work closely with IT on cybersecurity and system integration, with legal on regulatory compliance, with sales on customer payment terms, and so on. Change management gives us the tools to build these relationships effectively. It’s about creating open lines of communication, understanding other departments’ needs and constraints, and finding ways to align our goals. When we’re implementing a new treasury management system, for instance, change management helps us bring all these stakeholders on board from the start. Working together in cross functional teams is the key to success. 5. Keeping Score How do we know if our changes are actually making things better? That’s where measurement comes in. Change management isn’t just about implementing new ideas – it’s about tracking their impact and being ready to pivot if needed. This might involve setting up key performance indicators (KPIs) for new initiatives, like measuring the reduction in cash conversion cycle after implementing a new working capital strategy. Or it could mean conducting regular surveys to gauge how well the Treasury team is adapting to new technologies or processes. The point is, we need to be data-driven in our approach to change. It’s not enough to have a gut feeling that things are improving—we need hard numbers to back it up and guide our next steps. The KPI’s are not the goal but the tool. The Bottom Line Look, the world of corporate treasury is changing faster than we can keep up. It’s exciting, it’s challenging, and sometimes it’s downright scary. But here’s the thing – with the right approach to change management, we can do more than just survive. We can thrive. By focusing on these five aspects of change management, we can transform Treasury from a reactive function into a proactive, strategic partner for the business. It’s not always easy, but in today’s fast-paced business environment, it’s absolutely essential. In this wild new world, it’s not the strongest or the smartest who come out on top. It’s those who can adapt. So let’s embrace the change, roll with the punches, and show everyone what modern treasury can do. Trust me, it’s going to be one hell of a ride. This article is the first of a series of 9. A zoom in on essential soft skills for treasures. Enjoy the weekly read and let us know what you think of them. We appreciate every feedback and compliment. info@treasurymastermind.com 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.
Patrick Kunz
Charting new paths in FX risk management across Latin American markets
This article is written by EuroFinance Latin America’s economic environment, with its unique challenges and opportunities, demands a tailored approach to FX risk management. Companies like Roche Finanz AG and Holcim are not just adapting to these changes—they’re driving them. The strategies employed by treasurers today are more crucial than ever, requiring an acute awareness of both the global financial landscape and the intricacies of regional markets. Latin America’s economic environment, with its unique challenges and opportunities, demands a tailored approach to FX risk management. By leveraging strong banking relationships, staying adaptable to shifts in U.S. monetary policy, and exploring innovative financial instruments like cryptocurrency, companies can position themselves to navigate these complexities successfully. Companies like Roche Finanz AG and Holcim are not just adapting to these changes—they’re driving them. By centralising operations, establishing in-house banks, and enhancing cross-border connectivity, these organisations are setting new standards in treasury management. At the 2024 EuroFinance Global Treasury Americas Miami conference Jesus Portillo, Senior cash manager at Roche Finanz AG a biotechnology company, and Carmelo Mendoza, Regional treasury manager at Holcim a Swiss multinational company that manufactures building materials, shared insights into the strategic approaches their teams have implemented. From optimising liquidity management to navigating the intricacies of foreign exchange risk, they reveal how their forward-thinking strategies are enabling their organisations to stay ahead in a complex and volatile market. Centralisation and efficiency at Roche Finanz AG Roche Finanz AG has adopted a highly centralised approach to its treasury operations, a strategy that has proven effective across its global and regional operations. Portillo highlighted that the company’s treasury functions, including front office, back office, and cash management, are all managed centrally. This setup ensures that processes are streamlined, efficient, and transparent, with the entire operation managed through a single ERP system. “Everything is centralised,” Portillo emphasised, noting that the team, comprising over 25 members, oversees 450 affiliates worldwide, with a particular focus on Latin America where Roche works with two core banks. Despite the efficiency of this centralised model, Portillo acknowledged that the region is not without challenges, particularly in terms of connectivity and regulatory limitations. These challenges require constant engagement with banks to ensure that the solutions provided meet Roche’s stringent requirements for accuracy and efficiency. Portillo also discussed Roche’s strategy of disintermediating banks through its in-house banking structure. While the company leverages its internal capabilities, it still relies on core banks for certain functions, particularly in Latin America. He noted that the company stresses connectivity and efficiency in its dealings with these banks, pushing them to meet the demands of the region’s dynamic environment. Holcim’s approach to financial solutions and connectivity Holcim, on the other hand, faces different challenges due to its diverse operations across various segments, including retail, roofing, and construction products. Mendoza explained that Holcim has had to adapt its treasury operations to support its broader business goals, particularly in providing financing solutions to customers. “Our main role as a company is to generate progress for people and the planet,” Mendoza said, underscoring the company’s commitment to supporting customers through tailored financial solutions. Holcim’s approach requires close collaboration with banks to develop customised solutions that meet the needs of its diverse operations. However, Mendoza pointed out that working with banks in Latin America, especially in Central America, is not without its difficulties. The region’s banking systems are often complex and fragmented, making it challenging to establish the necessary connections for seamless financial operations. To overcome these challenges, Holcim has been moving towards identifying and partnering with core banks that can handle the majority of their treasury processes across the region. Managing regional specificities: Argentina as a case study Both Portillo and Mendoza touched on the complexities unique to certain countries in Latin America. Giving the example of Argentina, Mendoza pointed to the high levels of trapped cash and the restrictive regulatory environment. He noted that companies operating in Argentina need to be highly creative in managing their cash and navigating the regulatory landscape. Portillo echoed these sentiments, sharing how Roche has to come up with solutions, such as utilising real bonds, to free up funds. Collaboration and innovation: the path forward Despite the complexities, both treasury managers see significant opportunities in the region, particularly through collaboration with banks and leveraging technology. Portillo emphasised the importance of maintaining frequent, straightforward communication with banks to address limitations and explore new opportunities. He highlighted Roche’s ongoing efforts to standardise and automate processes across the region to improve efficiency and transparency. Mendoza, meanwhile, stressed the importance of building strong, flexible partnerships with banks. He shared an example of how Holcim collaborated with a bank in Mexico to develop a financing environment tailored to the needs of their franchise network. This collaborative approach allowed Holcim to offer its customers better financial solutions, ultimately benefiting both the company and its clients. Conclusion The insights from Portillo and Mendoza underscore the complexity and dynamism of managing treasury operations in Latin America. The resilience of the U.S. economy and the Federal Reserve’s ongoing policy decisions will undoubtedly continue to influence Latin American markets, making it imperative for companies to stay ahead of the curve. Through careful planning and strategic foresight, treasurers can mitigate risks and capitalise on opportunities, ensuring their organisations remain stable and poised for growth in an increasingly interconnected world. 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.
Junior Treasurers Interview: A Session with Prakhar Sinha
In the latest series of our Junior Treasurers Interview session, we sit down with Prakhar Sinha, a junior treasurer making strides in the world of treasury management. Prakhar shares his journey into this dynamic field, offering insights into the core aspects of treasury that inspire him—from managing liquidity and risk to optimizing financial resources in a rapidly shifting landscape. Throughout this interview, Prakhar sheds light on the challenges, learning experiences, and key skills he’s developed along the way, providing valuable advice for aspiring treasurers. Whether you’re new to treasury management or looking to deepen your understanding, this conversation with Prakhar offers a firsthand look into the rewarding and impactful work of a junior treasurer. Join us as we dive into Prakhar’s experiences and find out what makes a career in treasury both rewarding and challenging. Q.1: What attracted you to a career in Treasury management? What attracted me to a career in treasury management is its dynamic and central role within an organization. Treasury operates at the intersection of financial markets, risk management, and strategic decision-making, which creates a constantly evolving environment. The complexity of managing liquidity, capital, and funding needs requires a balance of quantitative analysis, strategic foresight, and sound judgment. The opportunity to contribute to key financial decisions while navigating challenges on a daily basis is both stimulating and rewarding. I am particularly drawn to the multifaceted nature of the role, as it requires wearing many hats and addressing diverse issues, from risk mitigation to optimizing financial resources. Q.2 Which aspects of treasury management do you find most appealing, and why? For example, do you enjoy cash management, risk assessment, or investment strategies? What I find most appealing about Treasury management is the focus on liquidity and asset-liability management (ALM). Liquidity risk, while critical, has not received as much quantitative research attention, yet it is one of the most pivotal risks for financial institutions. As Professor Moorad Choudhry emphasized, mismanaging liquidity risk can cause a bank to collapse in a single day, as evidenced by the failure of SVB. ALM itself presents an optimization challenge, which I find intellectually stimulating. It aligns well with my natural inclination to seek optimal solutions, whether in professional tasks like managing financial resources or in personal aspects such as optimizing daily routines. This combination of strategic thinking and problem-solving in treasury makes it a highly appealing area for me. Q.3: How do you see your project management skills transferring to a career in Treasury management? What specific skills or experiences from project management do you think will be beneficial in your role as a treasurer? My experience in project finance closely aligns with many core functions of treasury management, making the transition seamless. In project finance, I’ve dealt extensively with key elements such as credit risk and liquidity risk, both of which are critical to Treasury operations. The ability to conduct sensitivity and scenario analysis, which I’ve frequently utilized to assess project viability under different market conditions, is directly transferable to managing liquidity and financial risks in a treasury context. Financial modeling, another essential aspect of project finance, is a valuable skill I bring to treasury management, especially for forecasting cash flows, optimizing capital structure, and evaluating funding strategies. I have also developed expertise in hedging project-specific risks, a skill that is highly relevant to managing interest rate, currency, and liquidity risks within a Treasury role. My experience in assessing complex financial structures, coupled with risk mitigation strategies, equips me with the analytical and strategic approach necessary for Treasury management. Q.4 How do your studies in financial risk management and bank treasury risk management enhance your understanding of treasury operations? Do you recommend these programs to your fellow budding treasurers? My studies in Financial Risk Management (FRM) and Bank Treasury Risk Management (BTRM) have greatly enhanced my understanding of Treasury operations, particularly in asset-liability management (ALM), liquidity, and capital risk. The BTRM program’s strong emphasis on ALM governance has been invaluable for learning best practices in bank treasury management. In today’s regulatory environment, with Basel III mandating conservative capital and liquidity management, BTRM has provided practical, practitioner-led insights that are essential for safeguarding a bank’s stability. I highly recommend this program to anyone serious about building a career in Treasury. The FRM certification, on the other hand, offers a broader risk management perspective. It underscores the interconnectedness of various risks, a crucial lesson highlighted by the 2008 financial crisis. Understanding how one risk affects another is critical for effective Treasury and risk management, and FRM equips professionals with the skills to manage risks holistically. Both programs complement each other and are excellent for aspiring treasurers. Q. 5: What is the biggest challenge you currently face in your role as a junior treasurer, and how do you approach overcoming it? What I find most rewarding about Treasury is also my biggest challenge—its dynamic nature. With so many moving parts and interrelated risk types, it can be challenging to maintain a clear understanding of how each action, whether internal or external, impacts overall operations. This complexity requires a constant mental map of how various financial risks and decisions intertwine. To overcome this, I’ve adopted a highly structured approach, formalizing my thought process through mind maps and categorizing key ideas wherever possible. This structured method acts like Theseus’s string in navigating the labyrinth, helping me trace my steps back when needed to identify gaps or understand what might have gone wrong. It provides a clearer framework to monitor interdependencies, allowing me to manage complexity more effectively and ensure nothing is overlooked. This approach helps me stay organized in an ever-changing environment, making the challenges more manageable. Q.6. What advice would you give to someone looking to transition into a career in Treasury Management? What steps or strategies do you recommend for gaining the necessary skills and experiences? For anyone looking to transition into a career in Treasury Management, I recommend several key strategies. First, pursuing relevant certifications, such as Financial Risk Management (FRM) or…
Managing Your Professional Brand in Treasury
An impactful professional brand can drive the career momentum of any treasury professional, and a lack of commitment to investing in it or even knowing and carrying about it can create an inherent barrier to career success. In today’s world of all things AI and technology treasury professionals need to stand out amongst their peers and demonstrate they have skills that matter no matter where technology takes the finance profession. This is the initial blog in the Managing Your Professional Brand in Treasury blog series. This series will give you actionable advice to build and manage an impactful professional brand that will set you apart from your treasury peers, and empower you to control your career. In this blog we will introduce the key components of a professional brand. A professional brand consists of many components. The components need to align as that alignment amplifies the impact of a professional brand within a finance team, beyond a finance team to work colleagues, and to professional peers and current and potential new employers. Five key components of any professional brand are: Your professional value proposition demonstrates the value that you deliver to your employer, colleagues, and professional peers. It is what many people used to call your “elevator pitch”. The task of crafting a professional value proposition can seem daunting to any finance professional regardless of the stage a person is at in his or her career. I have come up with questions that each person wanting to craft a professional value proposition can asak of themselves to illuminate the key pillars of that value proposition. Your LinkedIn profile serves as the foundation of your online brand. If you do a Google search on your own name, the link to your LinkedIn profile will be the first result. Your LinkedIn profile is the first impression you will make on thousands if not tens of thousands of people who are interested in learning more about you including current and potential new employers, colleagues, and professional peers. As the saying goes “there s nothing more important than making a good first impression” in any relationship, so finance professionals need to invest in creating and managing an impactful LinkedIn profile. Each section of a LinkedIn profile is important. In a future blog we will share how to build and manage an impactful LinkedIn profile. Even in today’s digital world resumes matter. Your resume should reflect your professional value proposition and align with your LinkedIn profile. Creating a top-notch resume is as much about what to avoid as it is about what to include in your resume. Your skillset is critical to job success at any stage of your career. Investing in new skills as well as updating and upgrading existing skills is important. Given the explosion of AI and automation soft/human skills are more important than ever for every finance professional. In future blogs we will dive into which skills are most important in the evolving treasury landscape. This will include sharing how to develop your human skills ranging in areas from effective listening to negotiating with purpose to telling the story beyond the numbers. A powerful professional network has many components and needs to be managed in order for it to deliver value. You need to have it in addition to knowing how and when to leverage it. In developing each dimension of your network, it is important to keep the following questions in mind: A robust network has people from these groups of people from a professional life: In future blogs I will share how to develop your professional network within your treasury department, beyond your treasury department at work, with your treasury peers across the globe, and with your banking and technology partners. Treasury professionals need to invest in their professional brands and do so with the mindset of continuous improvement. A great brand can drive the career success of any Treasury professional. 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.
Ernie Humphrey
Where companies fall short with cash forecasting, and how to avoid those pitfalls
This article is written by Palm Cash forecasting often takes centre stage in board meetings, strategic business discussions, and auditor reports. Having a reliable cash flow forecast model can steer the course of a business. Conversely, a neglected model can sit in a folder, unused, leaving CFOs and treasurers feeling blind and unable to make key strategic decisions. Whether you opt for a decentralised model that collects inputs from subsidiaries or have the treasury team forecast for the entire business, the level of human intervention is key in determining the efficiency and accuracy of your forecasts. This blog explores common pitfalls in cash forecasting and offers solutions to enhance your forecasting accuracy with Palm’s predicative modelling capabilities and AI toolbox. Over-reliance on External Inputs Many companies depend heavily on inputs from subsidiaries or other entities. Unfortunately, contributors often lack consistency, motivation, or the capacity to prepare accurate forecasts, making this a considerable challenge. When various subsidiaries apply different forecasting methods, it leads to inconsistency. This inconsistency can distort the overall cash flow picture, making it hard to trust the forecast. Contributors may not fully understand the importance of their input or may not have the time to dedicate to accurate forecasting. This lack of engagement can result in half-hearted efforts that compromise the quality of the data. Without proper training, employees might not be equipped to provide reliable forecasts. This knowledge gap can lead to errors that cumulatively affect the entire cash flow model. The Challenge of Combining Data Combining data from various sources can be a painful and time-consuming process. Even with standardised formats, variations in how regions classify entries and inconsistencies month-on-month can occur. Time-consuming Data Combination Merging data from different sources requires significant time and effort. This process can delay the finalisation of forecasts, making them less useful for timely decision-making. Variations in Data Entry Despite using standardised formats, regions may still classify entries differently. These variations can create discrepancies that need to be reconciled, adding another layer of complexity. Inconsistencies Over Time Month-on-month inconsistencies can arise due to changes in classification or data entry mistakes. These inconsistencies can make it difficult to compare forecasts over time, reducing their reliability. The Difficulty of Assessing Submissions for Errors Assessing submissions for erroneous figures can be challenging without in-depth local knowledge. This difficulty can lead to overlooked errors that compromise the entire forecast. However, even small errors can snowball, without providing quality feedback to those preparing the entries. Currency Challenges in Forecasting Currency challenges often arise when forecasts are prepared in local currencies. While this approach provides detailed insights, converting these forecasts into the reporting currency can be complex. Converting local currency forecasts into the reporting currency can be challenging. Using spot rates or budget rates can distort the numbers. If using a hedge rate or a forward rate, this could increase the accuracy of the long-term forecast specifically. Enhancing Cash Forecasting with Palm Palm provides a solution that addresses these common pitfalls. By consuming and analysing historical data, Palm’s AI and predictive models can generate a reliable cash flow forecast you can start using in days. Automated Data Collection Palm automates data collection from your bank statements, and TMS via API connectivity, reducing the time and effort required for manual data collection. This automation ensures that your forecasts are based on the most up-to-date information. Then, utilising AI and predictive to identify patterns and trends that are not obvious to the human brain. This gives you confidence in your forecast and numbers, by verifying your assumptions and seeing them brought to life through the cash forecast. In Palm forecasts refresh daily with all the latest information available, ensuring that your numbers remain current and reliable. Adding Human Insights to AI Models While Palm’s AI models provide a solid foundation, your insight and knowledge give Palm valuable information to help refine the forecasts in the future. Palm employs machine learning technology to take your understanding, apply it to the forecast and enhance accuracy over time based on the adjustments you make. As you feed more data into the model, it learns about your business, this continuous learning, makes Palm’s models more accurate the more of your gut instinct you share in the platform. Reducing Time Spent Updating the Forecasting Palm reduces the time spent creating, collecting, and consolidating forecasts. This reduction allows you to focus on important tasks like variance analysis. Focus on Variance Analysis Palm’s variance analysis feature highlights notable areas, helping you focus on differences where you can have the largest impact on forecast accuracy. This focus ensures that you are making the most of your efforts. By completing regular variance reviews, you can continuously improve your forecasts and iron out those deviations. Improving Cash Management for Treasurers Having a cash forecast you can rely upon allows treasurers to run tighter cash management programmes and optimise interest income or reduce debt drawings to ensure that you can make the most of your available cash. Reduce buffers held in bank accounts, and use that idle cash to generate positive cash flow into the business. Taking the Next Step with Palm If you’re interested in learning more about Palm, book a demo with the team today and see how the model works using your data. This opportunity allows you to experience the benefits of Palm firsthand and understand how it can transform your cash forecasting process. 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.
Choosing the Right Banking Partners: Navigating Treasury Needs Amidst Industry Shifts
In light of HSBC’s recent structural changes, corporate treasurers worldwide are, once again, considering reassessing their banking relationship strategies. The age-old question of whether to partner with global banking giants or smaller specialized institutions has taken on new relevance. How should treasurers balance the advantages of scale against the stability and focus of smaller banking relationships? Progressive corporate treasurers are rapidly moving away from their traditional role as stewards of cash management and funding to become strategic business partners driving digital transformation. In today’s volatile business environment, forward-thinking Treasury leaders recognize that maintaining the status quo is no longer sufficient. They seek banking partners who can support their journey toward Treasury 2.0, where real-time visibility, predictive analytics, and automated decision-making become the norm. Restructuring Impact on Treasury When large banks undergo restructuring, treasury departments often face both opportunities and challenges. Such reorganizations can lead to enhanced focus on specific market segments or regions, potentially resulting in improved services and more targeted solutions. However, they may also create temporary service disruptions, relationship management changes, and uncertainty about long-term strategic alignment. Smaller banks, meanwhile, often maintain more consistent organizational structures and service models. Their relative stability can provide treasurers with more predictable relationship management and service delivery, though they may lack the comprehensive global capabilities of larger institutions. The Technology Investment Equation Large banks undergoing restructuring often emerge with renewed focus on technological investment, particularly in areas like API development and real-time payment capabilities. These transformations frequently come with substantial technology budgets aimed at modernizing legacy systems. However, the implementation of these changes can be complex and time-consuming, potentially affecting service delivery during transition periods. Smaller banks, while operating with more limited resources, often demonstrate greater agility in technology adoption. Their partnerships with fintech providers and cloud-native solutions can result in faster deployment of new technologies, though perhaps with less extensive feature sets than their larger counterparts. In many cases, banks tailor solutions for their largest clients, which can be a significant benefit for large companies. Security and Risk Management During Transitions Major bank restructuring events often lead to enhanced security protocols and more sophisticated fraud prevention systems, as organizational changes provide opportunities to implement improved controls. Large banks can leverage their scale to invest in advanced AI-driven security systems and maintain global fraud prevention networks. However, periods of organizational change can also introduce operational risks and temporary vulnerabilities. Smaller banks, with their more stable organizational structures, often maintain consistent security protocols and may offer more personalized fraud prevention services based on intimate knowledge of their clients’ operations. They, however, might be unable to offer greater protection from potential hacking attacks. Service Continuity vs. Innovation One of the most significant considerations during bank restructuring is the potential impact on service quality and relationship management. Large banks typically promise enhanced service capabilities post-restructuring, but transitions can lead to temporary disruptions in service delivery and relationship continuity. Treasury departments may find themselves navigating new organizational structures or adapting to changed service models. Smaller banks generally offer more consistent service levels and relationship management, with fewer organizational changes affecting day-to-day operations. Their ability to maintain stable relationships can be particularly valuable during periods of market uncertainty or when rapid decision-making is required. Infrastructure Evolution Bank restructuring often catalyzes significant infrastructure modernization initiatives. Large banks may use these organizational changes as opportunities to overhaul legacy systems and implement new technologies. While these changes promise long-term benefits, they can create short-term challenges for Treasury departments relying on established processes and integrations. Smaller banks, typically operating with less complex infrastructure, can often implement technological changes more smoothly, though perhaps with less comprehensive feature sets. Strategic Considerations for Modern Treasurers In this environment of ongoing banking sector evolution, treasurers must carefully weigh several factors when selecting and maintaining banking relationships: Looking Forward As the banking sector continues to evolve, treasurers must remain adaptable in their approach to banking relationships. The distinction between large and small banks may become less about size and more about their ability to provide stable, innovative services that align with treasury departments’ strategic objectives. The coming years will continue to reveal whether treasurers predominantly opt for the stability and personalized service of smaller banks, the comprehensive capabilities of restructured global institutions, or maintain a hybrid approach that balances both. The most successful treasury operations will likely maintain a balanced portfolio of banking relationships, combining the innovation and global reach of large banks with the stability and personalized service of smaller institutions. This hybrid approach allows treasurers to mitigate the risks associated with bank restructuring while maintaining access to necessary services and capabilities. 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.
Bank statement fraud: how to avoid it?
This article is written by Trustpair Last year, the FBI reported that US companies lost over $6.9 billion in cybercrimes. The bulk of those? Crimes by business email compromise, bank statement fraud, and wire transfer fraud. When hackers steal your hard-earned money and financial data, it compromises your entire business operation. Businesses stand to lose much more than cash—trade secrets and passwords can be accessed. Assets from all departments are at risk. In this piece, you’ll learn about bank statement fraud and how to protect your company from falling victim to it. What are some examples of bank statement fraud? Wire transfer frauds have been around since the internet began. But each year, businesses are susceptible to more creative hacking techniques that leave them vulnerable. The most common type of wire transfer fraud is a phishing scam. Phishing scams A phishing scam is also known as business email compromise. Scammers start by cloning your company emails or buying up similar domains for one of your suppliers. When they reach out, they are able to fool employees into believing that the email is real. They send a fake email requesting either money (via an invoice) or asking your employee to reveal sensitive information. Some examples of phishing emails include: Since the hackers use urgency techniques, employees can be fooled easily into wire transfer fraud without checking the details of the email. Moreover, sometimes criminals can gain access to the system for weeks or months before they target your people. Scammers can make their attempts sound more genuine by confirming a relationship with a certain supplier or using familiar language. How to detect and avoid phishing These days, there are a number of security or software programs that should help protect your business against unauthorized access. However, criminals can still slip through the cracks with wire transfer fraud. There are two major workplace culture ways to prevent phishing in your business. The first is to build an environment where your employees work without time pressures and trust their supervisors. This would make spotting a suspicious email easier: since there’s usually a generic greeting, spelling mistake, or problem in the sender address. Moreover, the employee would not succumb to the urgency pressures inside the email. Secondly, you can avoid falling victim to phishing scams by building in a set of controls around invoices and security. This makes it harder for criminals to steal your information, and money. For example, ensuring that invoices are validated by three-way matching and then account details are verified with the real name and address. Likewise, the authority to wire money should only be granted to a handful of individuals. Fraud training is also important. Some of the other things that your business can do to spot and prevent phishing include: What are the types of bank statement fraud in the corporate world? Corporate fraud can have similar results to phishing, with companies losing out on millions if it’s not spotted on time. The types of corporate fraud you should be aware of include: Bank transfer fraud The most common type of bank wire transfer fraud is through an authorized push payment. Most people are familiar with these since banking apps and online payments technologies are so common. How does it work? The criminal poses as your bank, an official body or another genuine payee by sending a notification. Since authorized push payments act as an anti-fraud measure, employees are usually not suspicious at all. But this is a malicious attack. Granting the payment means that the criminal walks away with your money, and as an instant payment, clear out the cash before your accountants can catch up. False supplier fraud As the name would suggest, this type of fraud leads a criminal to impersonate one of your known suppliers, or create a new supplier persona. They send an invoice for work they haven’t completed or intercept a genuine invoice by changing the bank details from a real supplier. This is another form of wire transfer fraud. Many businesses fail to protect themselves against false suppliers since the technique relies on social engineering. After initial verification, most businesses won’t continue monitoring their suppliers’ details. But this is when criminals strike – so it’s required for companies to detect and prevent falling victim to false supplier fraud. CEO Fraud This technique involves the hackers impersonating your CEO or another senior figure in the business. A version of this fraud became very popular during 2021, known as the gift card scam. Here’s how it works: Fraud on the President can also happen through invoicing, cloning the CEO’s email address and urgently requesting finance to pay a fake invoice. Luckily, we’ve created a larger resource about CEO fraud so that your people can detect it, and protect the security of the business. Click here to read it. False customer fraud There are a number of different ways that fraudsters impersonate your customers, through: False customer fraud typically affects small businesses more than large, since they use third party programs to take payments instead of their own systems. This creates a responsibility gap, leaving the companies vulnerable to unfair chargebacks. Plus, it’s harder to three-way matching the documents – which could miss any payment detail discrepancies. Internal fraud Corporate fraud includes the likes of your own employees skimming money from the business. Most commonly, internal fraud is done through expenses, where your member of staff claims false expenses or for costs unrelated to their work. This is incredibly common, with 85% of employees admitting to lying on their expense reports. And it’s even easier to get away with for those working from home as it’s harder to verify how employees are spending their working hours. How to spot a fake bank statement Financial professionals must be vigilant in detecting fraudulent bank statements. To help identify fake documents, start by examining the overall layout and formatting. Legitimate statements typically maintain consistent fonts, spacing, and alignment. Check the bank’s logo and contact information for any discrepancies or low-quality images. Carefully review account details and transaction history. Look for inconsistent numbering patterns in…
Treasury for Non-Treasurers: Sophistication in Solvency Management (Part I)
Introduction In the last chapter, we reviewed different types of treasuries at a high level: the operational ones, internal and control-oriented, and the strategic ones, sophisticated and externally oriented to work with and support other organisational functions as well as customers and suppliers. We also reviewed tactical treasuries, neither completely operational nor entirely strategic, that either had too little underlying business cash flow to create value from or were constrained by cultural and contextual factors. We described these tactical treasuries as being in ‘The Chasm’ – trying to resolve too many conflicting objectives with too few resources. We reviewed methods of getting out of the chasm and making treasury strategic and materially value-adding to non-treasurers. This new chapter concentrates on corporate treasury’s most important objective, keeping the organisation solvent. We’ll start with an overview and then review solvency management in operational treasuries. After that, we’ll follow up with tactical and strategic treasuries in the next articles, and then, next, other objectives like profitability support. Note that this article builds on the previous ones. For example, we talked in detail about the impact of cultures and contexts in the two articles about crossing the chasm. You will find it harder to follow without reading these articles first. Each article is short – If you want to read or re-read them, the links are below. Overview: What are the different levels of sophistication in solvency management? Remember this diagram from the article on operational treasuries? Let’s look at all the different levels of sophistication relevant to solvency at all levels of sophistication, along with the associated-level productivity and management strategies: There are six types of treasury with six levels of solvency management sophistication. Before we dive in and talk about each, it’s important to note that these are descriptions of the ‘average’ treasury managing solvency in an ‘average’ way. There are variations in real-life treasuries: Organisations may be more or less sophisticated; Individuals may have unusual innate or previously learnt skills. These variations are noteworthy, especially when we compare sophistication in solvency management with sophistication in profitability support, productivity and management strategy. These can and do get misaligned. We’ll talk about this and its impacts in a later article. The six levels of solvency management sophistication are: 1. Cash management 2. Liquidity management 3. [New] Skills development and application 4. Working capital management 5. Financing optimisation 6. Value-chain financing We will investigate each in turn, including Who needs sophisticated solvency management? Not all companies need sophisticated solvency management, but it’s hard to think of anyone who shouldn’t be interested in whether these companies have appropriate solvency management in place. Imagine an international consultancy like McKinsey or a recruitment consultancy like Adecco. Compare these to manufacturing companies like car companies, long-term research and development investors like GSK or Johnson & Johnson, and even housebuilders like China’s Evergrande. This last one is now famous because it did, in fact, become insolvent. We can only speculate what would have happened if it had had more sophisticated solvency management. Consultancies’ costs, even global ones, are primarily related to their employees. Employees can be decreased or increased quickly in line with sales. In other words, outflows can be reduced fast if there aren’t sufficient current and future inflows. Manufacturing companies, long-term investors in research and development, owners of large amounts of inventory and work-in-progress, on the other hand, cannot adapt so fast. They must borrow or issue shares to remain solvent even in worse economic environments. They, therefore, need to be more sophisticated in managing their solvency. What’s this got to do with you, non-treasurers? It’s hard to think of anyone who shouldn’t be interested in knowing in advance whether these companies have appropriate solvency management and adapt the actions they take as a result. It’s too late once the companies hit hard times. So, imagine you’re a leading decision maker in Acme Manufacturing Corporation, a multi-billion-dollar turnover company that needs large amounts of funding. What kind of treasury do you have now, and what should it be like? You are not the Treasurer, however. How can you tell from the outside looking in? Let’s find out by looking at operational treasuries first. Operational treasuries’ solvency management For a reminder of operational Treasury types, see the article Operational Treasuries. Basic treasuries Basic treasuries do cash management only. They move money between head office, subsidiaries and or banks, doing the same day-to-day unless the CFO or head of the finance function says differently. They follow an ad-hoc management strategy with, usually, no written policies or processes. They have little specialised technology and a small staff – often just one person. This person or small staff will have little or no specialist training. They rely on on-the-job practical experience. What can you expect from this type of treasury if it’s what you’ve got in Acme Manufacturing? Not much – This type of treasury won’t have the tools and skills to assess future solvency. This type of treasury is likely to be found in a smaller turnover organisation, a startup-, a small- or medium-sized enterprise – my experience suggests one with $ 200 million or less in sales – or in organisations where the CFOs do not realise that treasury should be the guardian of solvency management. My experience working on the sales side in banks and as a consultant tells me that many multi-billion $ sales companies have treasuries like this. Let’s describe these basic treasuries in an easy-to-read format consistent with how we’ll describe other types later on: 1. Solvency management sophistication level: 2. Management strategy: 3. Focus: 4. Productivity: Technology: Outsourcing: Banking products and services: 5. Skills: 6. Organisation structure: 7. Ability to handle future funding shortfalls: The accounting department will usually handle all longer-term cash flow planning, not treasury. 8. Unintended consequences at this level: 9. ‘Tells’ non-treasurers might see from outside the function: As a multi-billion $ turnover company, ACME needs a more sophisticated treasury than this. This type is unacceptable except in any…
Nicholas