Junior Treasurers Interview: A Session with Sean Howlin
This is the second edition of our Junior Treasurers Interview series, where we explore the experiences and insights of young Treasury professionals. In this series, we continue to learn how new treasurers are building their careers and adapting to the changes in the Treasury field, including the impact of new technologies. In this interview, we talk with Sean Howlin, who discovered his passion for treasury during his first internship. Starting with a choice between Treasury and Accounting, Sean found himself drawn to the variety and challenges of Treasury work. He shares important moments from his internships that confirmed his decision to pursue a career in Treasury, his excitement about taking on more responsibility, and his interest in the systems that support Treasury operations. Sean also talks about the skills he has developed, the challenges he has faced and his goals for the future. We discuss how he balances work with his personal life and why he believes curiosity and flexibility are key to success in treasury. Join us as we dive into Sean’s experiences and find out what makes a career in treasury both rewarding and challenging. Path to Treasury Q: What sparked your interest in corporate treasury and led you to pursue an internship in this field? When entering my first internship in a retail bank in Ireland, I was given two options as to which area I wanted to enter within the finance department: accounting or Treasury. I had never heard of treasury before, and when I looked into treasury, I saw that the job typically involves areas of cash management, fund raising, liquidity, investments, and more. These areas interest me a lot more than just typical accounting. Q: Can you share a defining moment during your internship that reinforced your decision to build a career in treasury? In my second internship at a reinsurance company, it was an 8-month internship and after about 3 months, I could feel myself getting more confident in the role and this also came with more trust. I felt like I was given a lot more responsibility within the team, including being one of the main team members working on an upgrade for the electronic bank account management. This was one of the biggest motivations for working in Treasury—not only the work but also the ability to be given responsibility and work well in a team. Q: What aspects of Treasury work do you find most exciting and why? As I have said earlier, the ability to be given more and more responsibility quickly, as well as the fact that the two teams I have worked on were smaller groups, means that most people tend to be multifaceted as they can cover different areas of Treasury. I have spent most of my time in Treasury Governance, which is mostly looking at systems, including TMS and data systems, while also looking at controls. The front office has also been very exciting, as you can see the work in Treasury governance and in the building of systems and how that can inform decisions and actions taken in the front office. Seeing the two come together can be the most informative and exciting. Internship Experience Q: What were your main responsibilities during your eight-month internship in Treasury? Initially, my main responsibilities were all around learning and getting to know the team and the different systems that are involved. Then, while I was there, a project began around upgrading their current EBAM system. This started with a complete data cleanup of the existing static data, which moved to an analysis of the static data to ensure that the layout was optimal. This was followed by a data transfer to the new system. This was my main responsibility of my internship, under the supervision of other team members and my manager. Q: Can you describe a challenging project you worked on and how you approached it? Another project I worked on was determining target balances for each bank account we held. This was in an effort to track and identify particular accounts that had little to no movement. This could mean that those accounts could be closed, and that would reduce the number of bank accounts we held, which would make it easier to maintain the remaining accounts. I used a variety of analysis methods to identify these accounts which was helped by my degree in mathematics and statistics. Q: What did a typical day look like for you as a Treasury intern? My main work related to the two projects above but as any intern would agree, I also had numerous smaller jobs that were mainly just helping the senior people on the team, examining user permissions, helping user get setup on systems, etc. Skills and Learning Q: What are some key skills you developed during your internship that you believe are crucial for a career in treasury? I think one of the most important skills that I realised I needed was communication! I was only starting out but I quickly realised how important it is. Not only do you have to be able to relay your thoughts and problems but you also have to be able to pick up on what other people are highlighting for you. This would tie into what I call the internal network—knowing who to go to with certain problems. Treasury tends to touch on different areas of the business You would have your own team but it’s also good to have people in other areas so you know who to reach out to when issues or problems came up. These would have been the main skills I developed during my internship. Q: How did your internship help you understand the complexities of corporate treasury operations? Those two projects really highlighted the complexities; there was over 2000 bank accounts with a wide variety of banking connections. It was also on a global scale so with 100’s of locations, this would make what seems like a simple task a challenging one….
Franklin
How to prepare for a successful payment factory implementation
This article is written by Nomentia Checklist for successful payment factory project A payment hub offers organizations a centralized platform to streamline payment processes and enhance financial management, especially in complex payment landscapes. Forward-looking treasury and cash management professionals are increasingly looking to safeguard and future-proof their business-critical processes with a payment hub. Proper preparation is essential for successfully building a payment factory. Here’s a comprehensive checklist for organizations planning to build a payment factory: What is a payment factory? A payment factory is a centralized system that optimizes and enhances payment processes for businesses. By consolidating and automating these processes, it allows organizations to streamline operations, improve control, and boost efficiency. Why it is important to prepare for building a payment factory Building a payment factory requires careful planning to ensure that it meets the organization’s needs, integrates smoothly with existing systems, and delivers the expected benefits for all stakeholders. Preparation helps mitigate risks, minimize disruptions, and maximize the success of the implementation. Assessing your current payment processes Evaluate existing payment workflows and processes: Before embarking on your payment factory journey, it is vital to understand what’s beneath your current payment operations, and what’s behind the processes. Things like what systems you have in place, how many bank accounts you have, where your payment files are located, which banks you work with, and how much your processes differ based on locality. Start by assessing your current payment processes to understand how payments are currently managed, the systems in place, and any pain points or inefficiencies. Identify pain points and areas for improvement: Identify bottlenecks, manual processes, errors, and inefficiencies in your current payment workflows. You should account for the fact that operating across borders can require finding a balance between centralization and local autonomy. For further understanding, read this article. Determine the scope and objectives of the payment factory project: Define the scope of the payment factory project, including its objectives, goals, and expected outcomes. Check out this article discussing payment hub scope and objectives. Stakeholder engagement in payment factory project Identify key stakeholders: Identify key stakeholders, including finance, IT, procurement, and executive leadership, who will be involved in the payment factory project. Make sure that you have buy-in from all the stakeholders and you will have clear roles and responsibilities going forward once the project kicks off. Communicate project goals and objectives: Clearly communicate the goals, objectives, and expected benefits of the payment factory project to all stakeholders. Communication is perhaps the most difficult part of the project. Managing change is never easy as some of customers can testify. Earn buy-in and support: Gain buy-in and support from stakeholders by demonstrating the value of the payment factory and addressing any concerns or objections. Cross-functional project team: Establish a cross-functional project team to oversee the implementation, with representatives from finance, IT, procurement, and other relevant departments. While it may be the finance team that will be the main user of the payment solution, other departments could also be affected. Make sure you take it into consideration from the beginning. The IT and security departments will be your biggest stakeholders as you will need to team up with them to ensure that the payment factory project is delivered, and the solution meets all compliance expectations. Setting clear objectives and requirements for payment factory implementation Define objectives and goals: Clearly define the objectives and goals of the payment factory project, like improving efficiency, reducing costs, enhancing control, and minimizing risks. Best payment factory objectives and goals are always aligned with wider organizational business goals. While some seek to be more compliant, others want to put in place uniform global processes, but in the end, all share a common drive to enable their teams to work better together while improving transparency. Specify functional and technical requirements: Specify the functional and technical requirements for the payment factory based on the organization’s needs and objectives. For example, the system should automate the end-to-end payment process, including payment initiation, validation, authorization, and execution while providing real-time reporting and analytics on payment transactions, which enables your organization to monitor cash flows, identify trends, and make informed decisions quickly. On a technical level, these requirements could include things like integration with ERP and financial systems while supporting high availability and scalability. Prioritize requirements: Prioritize requirements based on their importance to the business and their impact on achieving project goals. When prioritizing requirements for payment factories, you should consider the strategic objectives, geographic focus, and operational complexity of your operation. For example, a company looking to streamline operations in a specific region should prioritize setting up the payment factory in that location first. This requires them to focus on local compliance, integrating with regional banks, and automating processes to enhance efficiency. Once the initial implementation is successful, the company can then expand to other countries, scaling the system to handle additional bank connections and accounts. By starting small and gradually expanding, businesses can manage system complexity effectively and ensure a smooth transition to an optimized, centralized payment process. Document requirements: Document requirements in a detailed project plan or specification document to guide the implementation process. The right partner can help organizations identify their payment factory needs by leveraging their expertise to conduct thorough assessments and gap analyses. They can also assist in crafting a comprehensive RFI/RFP that captures all critical requirements, ensuring that once the scoping of the project begins, the implementation is aligned with the organization’s strategic goals and operational needs. Selecting payment factory vendor or solution Research available solutions and vendors: Research available payment factory solutions and vendors to identify those that best meet your requirements. Collaborating with an experienced partner can streamline this process, as they can provide valuable insights into the strengths and weaknesses of various solutions based on your specific needs. Additionally, they can facilitate vendor evaluations and comparisons, ensuring that you select a solution that aligns perfectly with your operational goals and technical specifications. Evaluate vendors: Evaluate vendors based on criteria such as functionality, scalability, integration…
Young Treasurers Interview: A Session with Fabian Bohner
In this series, we interview treasurers and younger treasurers about their careers, motivations, knowledge, and priorities. But also on tech, IT, and AI data science. We kick off this series with Fabian Bohner from Germany, Treasury Manager at Peri SE. Fabian has recently earned a certificate in data science and it got us curious why he chose that. Path to Treasury Q: Can you tell us a little about your background and how you ended up in the field of Treasury?Studied business administration with a focus on finance and IT. I took some modules at my university in the field of bank treasury and did an IT semester abroad in Dundee, Scotland. I jumped right into corporate Treasury after graduating. Q: What drew you to a career in treasury, and what do you find most rewarding about it?A practice semester in 2010 within an international robotic manufacturing company during their refinancing due to the aftermath of the global financial crisis/euro crisis. Corporate Treasury has connections to all other departments and is, from my point of view, the true heart of a company. Treasury and IT Integration Q: How do you see the relationship between Treasury and IT evolving in today’s business environment?Treasury Management Systems being the standard and the acceleration in the last years in IT, the impact on Treasury is getting more and more. Q: Can you provide some examples of how technology has impacted your work in Treasury?Automation of repetitive tasks and straight-through processing wherever possible to leverage human brain activities to solve complex problems. Q: What are some of the main benefits and challenges you’ve encountered with the integration of IT in Treasury functions?If there is no understanding of the benefits of IT usage, it is usually quite difficult to convince several stakeholders. Often, IT speaks a different “language” than Treasury/Finance. Role of Data Science in Treasury Q: What motivated you to take a course in data science, and how has it influenced your work in treasury?For me, IT is a crucial part for getting things done efficiently in Treasury. Data is the new gold and with Data science, you can dig for it. In Treasury I can see the most benefits in cash flow forecasting, FX risk management and fraud prevention. Q: Can you share any specific projects or tasks where your data science skills have been particularly useful?Automated cash flow forecasting via machine learning based on SAP financial data (debtors and vendors). AI and the Future of Treasury Q: What role do you see AI and machine learning playing in the future of Treasury?From my point of view, AI and machine learning come to stay. You either adapt and start working with those tools, or you lose your edge. AI-based cash flow forecasting will be the standard part of Treasury Management Systems in a few years. Q: What advice would you give to young professionals or students who are interested in pursuing a career in treasury with a focus on data science and AI?Be aware that there are Corporate Treasury departments out there. Get your hands on Treasury as working student or during practical semesters. Try combining IT and Finance and start tinkering with data science and AI. Conclusion Q: What are the key takeaways from your experience that you’d like to share with our readers?Treasury is the best profession you can take 😉 Also Read Join our Treasury Community Treasury Masterminds is a community of professionals working in treasury management or those interested in learning more about various topics related to treasury management, including cash management, foreign exchange management, and payments. To register and connect with Treasury professionals, click [HERE] or fill out the form below to get more information. Notice: JavaScript is required for this content.
Instant Payment fraud: Head of Antifraud at UniCredit gives best practices
This article is written by Trustpair Executed in 10 seconds, instant payments remove the possibility of after-the-fact controls. More than ever, companies need to strengthen their payment process, thanks to robust internal control measures and improved collaboration. Giovanna Guidolin, head of Anti-Fraud at UniCredit, shares her insights and best practices to stop instant payment fraud. For more insights and best practices, download Trustpair and UniCredit’s latest white paper about Instant Payments. I’m Giovanna Guidolin. I’ve been working for Unicredit for 25 years. Before taking responsibility for the Antifraud department, I built up a solid experience of more than 12 years in Internal Controls and Investigations. I have a strong interest in understanding criminal behaviors and new Fraud scenarios. Yes, the shift toward digital payments has indeed increased fraud risks. As more transactions move online and rely on digital platforms, cybercriminals have adapted their tactics to exploit vulnerabilities in these systems. Some of the main trends observed in payment fraud are driven by techniques known as Social Engineering. Cybercriminals use several methods, including phishing, credential stuffing, spoofing, or artificial intelligence to gain unauthorized access to individuals’ or businesses’ accounts. The exponential increase in the use of social networks, as well as the pandemic period, have also contributed to the change and increase in the target audience of possible victims. Business Email Compromise (BEC) scams target businesses, often using social engineering tactics to trick employees into transferring funds or providing sensitive information. These scams can result in significant financial losses for organizations. These trends highlight the evolving nature of payment fraud and the importance of implementing robust security measures, such as multi-factor authentication, encryption, fraud detection alerts, and user education, to mitigate risks and protect consumers and businesses from financial losses. Certainly, instant payments present both benefits and risks. While they offer convenience, speed, and efficiency in transferring funds, they also introduce several risks that need to be carefully managed. For example: Fraudulent TransactionsThe speed of instant payments means that there is less time for financial institutions to detect and prevent fraudulent transactions. Fraudsters can take advantage of this window of opportunity to conduct unauthorized transactions before they are identified and stopped. Account TakeoverInstant payments can be used to facilitate account takeover fraud, where cybercriminals gain unauthorized access to individuals’ or businesses’ accounts and initiate fraudulent transactions in real time. Transaction ReversalsUnlike traditional payment methods where transactions can be reversed or disputed, instant payments are typically irrevocable once initiated. This means that if a payment is made in error or as part of a scam, it may be challenging to recover the funds. To mitigate these risks, financial institutions and payment service providers must implement robust security measures, such as transaction monitoring, authentication controls, encryption, and fraud detection alerts. Additionally, customer education and awareness programs can help individuals and businesses understand the risks associated with instant payments and take appropriate precautions to protect themselves against fraud and financial loss. Businesses can take several strategic measures, for example: Implement Robust Fraud Detection and Prevention MeasuresBusinesses should deploy advanced fraud detection software that can monitor transactions in real time, detect suspicious patterns or anomalies, and flag potentially fraudulent activities. This may include machine learning algorithms, anomaly detection techniques, and behavior analysis to identify and prevent fraudulent transactions. Enhance Authentication and Authorization ControlsBusinesses should implement strong authentication measures, such as multi-factor authentication (MFA) and biometric authentication, to verify the identity of users and prevent unauthorized access to accounts or payment systems. Additionally, they should enforce strict authorization controls to limit access to sensitive systems and data only to authorized personnel. Invest in Secure Payment InfrastructureBusinesses should invest in secure payment infrastructure and technology to ensure the reliability, availability, and security of instant payment systems. This may involve adopting encryption protocols, tokenization techniques, and secure communication channels to protect sensitive data transmitted during payment transactions. Educate Employees and CustomersBusinesses should provide comprehensive training and awareness programs for employees and customers to educate them about the risks associated with instant payments and how to identify and respond to potential threats. This may include raising awareness about common scams, phishing attacks, and social engineering tactics used by fraudsters. Establish Clear Policies and ProceduresBusinesses should establish clear policies and procedures for conducting instant payment transactions, including guidelines for verifying the authenticity of transactions, reporting suspicious activities, and resolving disputes or errors. These policies should be regularly reviewed and updated to address emerging threats and regulatory requirements. Monitor and Analyze Transaction DataBusinesses should continuously monitor and analyze transaction data to identify emerging trends, patterns, and anomalies that may indicate fraudulent activities. This may involve leveraging data analytics tools and techniques to gain insights into customer behavior, transaction patterns, and potential fraud indicators. Collaborate with Industry Partners and Regulatory AuthoritiesBusinesses should collaborate with industry partners, financial institutions, and regulatory authorities to share information, best practices, and threat intelligence related to instant payment risks. This collaboration can help businesses stay informed about emerging threats and regulatory developments and enhance their overall security posture. By implementing these strategic measures, businesses can better prepare for instant payment risks and leverage this payment method to improve the customer experience, increase operational efficiency, and drive business growth while safeguarding against fraud and financial losses. Also Read Join our Treasury Community Treasury Masterminds is a community of professionals working in treasury management or those interested in learning more about various topics related to treasury management, including cash management, foreign exchange management, and payments. To register and connect with Treasury professionals, click [HERE] or fill out the form below to get more information. Notice: JavaScript is required for this content.
FX Averaging: Pros and cons for your currency hedging
This article is written by HedgeFlows FX Averaging helps remove the risk of picking the wrong timing for your FX transactions. Instead of risking the uncertainty of selecting the wrong day or time for your currency purchase, where you may encounter an unfavourable exchange rate, FX averaging breaks down the transaction into smaller increments, spreading them evenly over a designated period. Businesses commonly opt for monthly averaging, although the timeframe can be adjusted to suit individual business requirements. This approach ultimately results in more consistent exchange rates, steering clear of the short-term highs and lows of currency fluctuations: Using FX averaging in practice Utilizing an averaging strategy proves beneficial for businesses experiencing consistent FX exposures over time. Take, for instance, a retail e-commerce enterprise where daily foreign currency sales flow steadily and predictably. Rather than incurring substantial (2%+) FX conversion fees through payment processors like PayPal or Stripe, businesses have the option to accumulate funds in foreign currencies and employ FX averaging with a provider such as HedgeFlows. This approach not only saves on FX conversions but also eliminates the FX risks associated with holding foreign currency balances. By leveraging cloud-based technology and API integrations, averaging contracts can align seamlessly with the frequency and settlement timing of payouts from e-commerce platforms, ensuring currency proceeds are converted at stable and foreseeable rates. What’s wrong with FX averaging for medium- and long-term currency risks While averaging proves effective in managing short-term timing risks, its effectiveness diminishes over longer periods, spanning months or quarters. Despite this, some businesses still rely on averaging for their extended currency management needs, often overlooking the real FX risks they face. Consequently, these businesses remain vulnerable to currency fluctuations over prolonged durations. For example, raising capital in foreign currencies often creates the financial risk that the foreign currency depreciates, making the raised funding worth less in the home currency. Thus, this leads to a reduced runway. As explained in this post, these risks are greatest for longer periods, where currencies may have more time to move unfavourably. In this scenario, the averaging strategy would delay fixing exchange rates until future periods, focusing on spreading out transactions over a set timeframe, such as one month before the settlement date. Consequently, this leaves the business vulnerable to long-term FX fluctuations—a predominant risk in such situations. For more effective currency management in these cases, a static FX forward strategy or a more sophisticated, layering approach proves to be significantly more robust and beneficial. Also Read Join our Treasury Community Treasury Masterminds is a community of professionals working in treasury management or those interested in learning more about various topics related to treasury management, including cash management, foreign exchange management, and payments. To register and connect with Treasury professionals, click [HERE] or fill out the form below to get more information. Notice: JavaScript is required for this content.
Treasury for Non-Treasurers: Is Treasury a Strategic Function?
We closed last week with the question: “Is Treasury a strategic function?” Ask 1,000 treasurers the question, 999 will say “Yes”. 🙄 I’m being unkind. There is no agreed definition of ‘strategic,’ so every function is strategic in some way or another. Let’s tighten that up. Here’s my definition: “A strategic Treasury: 1. Is one whose focus is on value-add for itself and, more importantly, for more than itself. It’s willing to have worse results if the results of the company or those of customers, suppliers, or anyone in the value chain increase more than the Treasury losses (or extra work and costs.) 2. Is proactive. It puts forward ideas for value creation without needing to be asked by higher management or other functions. 3. Differentiates itself from an operational treasury, which processes and is generally reactive, and from a tactical treasury, which, although still mainly a processing function, does innovate to some extent but only to improve its results, not others’. 4. (and this one might be surprising) Is one that has lower-level functions within it that are at the tactical and operational levels. Dreams without the ability to deliver are useless.” Many of you will find it unlikely that such functions exist. 😠I respectfully disagree and thank one of my first bosses at IBM, Ray Pillai, and ABB and Nokia at the height of their success for showing me that they do. 👠I was fortunate enough to help build IBM’s first Regional Treasury Centre, so I saw it develop from nothing into a world-class operation. Are many Treasuries strategic according to this definition? Answer: No, in fact, very few are. Trying to put some figures on this, research on the diffusion of innovation (a key requirement for proactivity) suggests that 2.5% of an average set of people or organisations are innovators. But Treasury operates within and surrounded by finance, a necessarily conservative environment, and many of its participants have an accounting background, where, again, necessarily, they are trained to be conservative. Many also operate within company and country cultures that don’t encourage risk-taking and bottom-up proactivity. For any of these reasons and more – that we will talk about in later articles – a much smaller figure is likely to be correct. In my experience, less than 1% of organisations meet all the criteria above. Early adopters are supposed to be 13.5% of the population. I think I think this figure for Treasury organisations that meet many but not all criteria is more likely to be between 5 and 10% for the same reasons. The rest (early majority, [34%+], late majority [34%+], and laggards [16%+] go from being tactical treasuries to operational ones. Note that these are high-level numbers, and if you concentrate on an individual Treasury, it can be the exception that proves the rule. Also, Treasury project teams and sub-functions can have different orientations. And all these can change at times and over time: If external cultures, context, material adverse impacts (‘Black Swans’), significant needs, key personnel or other aspects change, so does the Treasury orientation. Some become more strategic, some less. At a higher level, though, the numbers probably don’t change that much. Some go up and some down. Long-term, truly innovative Treasuries are rare, and so are fast followers. Working with strategic Treasuries These strategic Treasuries are the trendsetters. They are the customers that suppliers work with when developing new products. They face problems and learn how to control undesirable aspects of cutting-edge products. If they innovate frequently, they become good at spotting undesirable elements in advance and managing them. Other Treasuries don’t. Seduced by tales of success by others, they buy products and services but don’t realise the dangers until it’s too late. Current example: As Treasuries become increasingly automated, who’s left to design and implement change in a crisis? Why should non-Treasurers care? So, OK, it’s clear why a treasurer might care. But why should a non-treasurer care? Answer: Because a strategic Treasury will initiate change for the benefit of the whole organisation, working for you, the non-treasurer, and for those who will deliver maximum benefits for the company. As we’ll see in the next article, these benefits are substantial and translate into better financial results, freer budgets, and happier work environments. And best-in-breed Treasuries can communicate effectively with you in your language. You don’t have to add ‘gain treasury expertise’ to your list of priorities. Tactical Treasuries also work well with others. But they will not initiate. And they won’t be the driving force for improvement. They don’t add as much value as strategic Treasuries but instead help you achieve it. They are more business partners than value-added functions. How can you tell if a Treasury operation is strategic? Over time, non-treasurers see this difference. Non-treasurers realise they get more value out of strategic Treasuries – and vice-versa. Strategic Treasuries accumulate political capital, which translates into more staff, bigger budgets, and more opportunities for value-add. This last point is a big ‘tell’ for non-treasurers – like a poker tell that tells you what cards the player is holding. How do you recognise strategic or tactical Treasuries from the outside looking in? Look for those with large staff, resources and budgets compared to similar organisations or other back-office functions in the same organisation. The staff will seem happier and more motivated. They will be more flexible. They will try to see situations from your point of view. These are the strategic and tactical Treasuries. And remember: They do exist. Next article: What’s Treasury’s impact on business performance? To read the first series of this article, please check: Treasury for Non-Treasurers: What is Treasury? Join our Treasury Community Treasury Masterminds is a community of professionals working in treasury management or those interested in learning more about various topics related to treasury management, including cash management, foreign exchange management, and payments. To register and connect with Treasury professionals, click [HERE] or fill out the form below to get more information. Notice: JavaScript is…
Nicholas
Treasury expert’s insights: Payment hub implementation
This article is written by Nomentia Summary. A payment hub solution is a key technology to centralized cash management. Fragmented payment systems, manual payment processes, and the lack of real-time cash flow visibility pose significant challenges that can quickly lead to inefficiencies and risk management issues. In this article, based on our chat with treasury expert Pia Charron, we’re answering questions on how to implement a payment hub and what the best practices are payment hub implementation. We cover what a payment hub is in detail in this article, top 9 best payment hub solutions in 2024 here, and how to choose a payment hub solution here. As the financial landscape evolves ever more rapidly, many finance professionals are looking to implement a payment hub to streamline cash management processes and payment operations. To delve deeper into this topic, I had the privilege of interviewing Pia Charron, a lead consultant at Nomentia with over two decades of experience in treasury and cash management systems. With her extensive expertise, Pia provided invaluable insights into the intricacies of payment hub implementation and the key factors driving its success. Meet Pia Charron: A treasury expert Pia’s journey in the realm of treasury began over 20 years ago and with an extensive experience like that, there’s precious little she doesn’t know about implementing cash management and payment management systems. At Nomentia, she plays a pivotal role as a lead consultant, guiding clients through their cash management projects. Whether it is working with large multinational corporations or SMEs, Pia’s expertise spans various sectors, offering tailored solutions to meet each client’s unique needs. The role of payment hub in effective cash management Today’s finance professionals face increasing challenges from fragmented payment systems, manual processes, and lack of real-time visibility into cash flows. It’s well known that this can result in inefficiencies, errors, and difficulties in managing liquidity and risk effectively. As things stand, it’s no wonder that forward-looking finance professionals are considering implementing a payment hub that can centralize payment operations, automate manual tasks, and gain real-time visibility into financial transactions. During our chat, Pia emphasized the critical role these hubs play in enhancing efficiency and accuracy within cash management systems. By centralizing payment operations, businesses are able to significantly reduce errors and manual work while gaining better control over their financial processes. But success in payment hub implementation, as in so many other things, depends on having a clear understanding of what customers want and what they need. Understanding customer payment hub needs At the heart of payment hub implementation is the need for organizations to consolidate their payment operations. Instead of dealing with multiple banking platforms and disparate systems, a payment hub integrates all payment activities into a single, cohesive system. Central to any successful payment hub implementation is understanding how these diverse customer needs are recognized and fulfilled. Pia highlighted two primary categories of customer requirements: those seeking centralization and efficiency, and those aiming for visibility and control over their payment ecosystems. Whether it’s a multinational corporation or an SME, the customer’s goals dictate the approach to payment hub implementation. The payment hub implementation process Although each business has its own goals and requirements, all payment hub implementations start with the same situation; with an understanding of three key things: First, what goals the customer has for their payment operations; second, analyzing their current payment ecosystem and processes; and finally, collaborating to devise a strategy on how the customer’s goals can be achieved through the implementation of a payment hub: Payment hub requirements: To get your payment hub up and running, you have to start by defining the specific requirements for the payment hub implementation, including master data, required bank connections, necessary user roles, and security controls. Payment hub system setup and configuration: Once the scope of your payment hub is settled, next up is setting up and configuring your payment hub system based on defined requirements. Payment hub testing: Before being deployed, your newly set up payment hub requires rigorous testing to ensure the system functions as intended and meets requirements. Payment hub user training: The key component to effective payment hub implementation is training the admin users who can best communicate and engage internal stakeholders and train payment hub end-users on how to use it effectively. Payment hub deployment: Once the testing of your new centralized payment hub is done and users are trained, it’s time to go live. Navigating through the implementation process of a payment hub requires a systematic approach. Pia outlined the various steps involved, starting from defining customer requirements to system setup, testing, training, and deployment. Each stage is important and should be meticulously planned and executed in collaboration to ensure payment hub implementation success. Payment hub implementation challenges and solutions Despite the benefits, payment hub implementation comes with its own set of challenges. As Pia emphasized during our interview, these challenges often stem from the complexity of integrating the payment hub with existing systems and processes, which can require meticulous planning and coordination. Other common payment hub implementation challenges include: Resistance to change: Change can be scary so, it’s not entirely unheard of that employees may resist adopting new processes and technologies, which can lead to implementation delays. Scope creep: Once initial plans for payment hub implementation are made, the project scope may expand beyond the initial plans. This can, if not carefully managed, lead to additional costs and increased timelines. Payment hub customization complexity: As the payment hub is an important system that needs to support business payment operations comprehensively, customizing or tailoring the payment hub to meet specific business needs often comes up. It’s vital to be mindful of the fact that these emergent needs can be complex and time-consuming, while not serving the initially defined goals of the payment hub implementation project. Resource constraints: The limited availability of skilled resources, both internally and externally, can hamper the payment hub implementation process and lead to delays or suboptimal outcomes. It is always wise to be aware of possible pitfalls in payment hub implementation, as they can…
Understanding Project Nexus: The Future of Cross-Border Payments
In an increasingly interconnected global economy, the need for efficient, secure, and cost-effective cross-border payment systems has never been more pressing. Enter Project Nexus, an initiative spearheaded by the Bank for International Settlements (BIS) with the ambitious goal of revolutionizing the way cross-border payments are conducted. As treasury professionals, it’s crucial to stay informed about such groundbreaking projects that have the potential to reshape the financial landscape. Let’s delve into what Project Nexus is, its objectives, and what it means for the future of international finance. What is Project Nexus? Project Nexus is a collaborative effort initiated by the BIS Innovation Hub to create a framework for linking multiple national instant payment systems (IPS) into a unified cross-border payments network. The primary aim is to significantly reduce the time, cost, and complexity involved in transferring money across borders. This initiative leverages the capabilities of existing IPS and integrates them into a cohesive, interoperable system that can facilitate near-instantaneous cross-border payments. Objectives of Project Nexus The overarching objectives of Project Nexus are: How Does Project Nexus Work? Project Nexus builds on the existing infrastructure of national instant payment systems (IPS) by establishing a standardized protocol for interoperability. Here’s a simplified overview of the process: Real-World Examples and Use Cases Several pilot projects and collaborations are already demonstrating the potential of Project Nexus. Here are a few notable examples: 1. Singapore-Thailand Linkage One of the earliest and most prominent examples is the linkage between Singapore’s PayNow and Thailand’s PromptPay. This initiative, facilitated by the Monetary Authority of Singapore (MAS) and the Bank of Thailand (BOT), allows users in both countries to transfer funds using just the recipient’s mobile number. This cross-border linkage offers near-instantaneous transfers and transparent fees, showcasing the practical benefits of Project Nexus. 2. Europe-Asia Connectivity Another example is the collaboration between the European Central Bank (ECB) and the Hong Kong Monetary Authority (HKMA) to explore linking their respective IPS. This initiative aims to streamline transactions between Europe and Asia, providing faster and cheaper payment options for businesses and individuals alike. 3. ASEAN Region Integration The ASEAN region, with its diverse economies and high volume of cross-border trade, is a prime candidate for Project Nexus. Efforts are underway to connect IPS across ASEAN countries, facilitating seamless transactions within this economically vibrant region. Implications for Treasury Professionals For treasury professionals, the implications of Project Nexus are profound: Future Outlook Project Nexus represents a significant leap forward in the realm of cross-border payments. As more countries and payment systems join this initiative, the network effects will amplify, leading to even greater efficiency, cost savings, and accessibility. For treasury professionals, staying abreast of these developments and understanding how to leverage them will be key to maintaining a competitive edge in an increasingly globalized marketplace. Insights from Treasury Experts We thought it would be valuable to get perspectives from Treasury professional, Patrick Kunz, who is also Treasury masterminds board member Patrick Kunz, CEO and Founder of Pecunia BV Treasury and Finance, Comments Instants payments are nice but not a need for treasury, more often a nice to have. Besides the obvious savings mentioned in the article. Instant payments cross border and cross currency would be a game changer. More often problems in payments and settlement arise when it is cross border and cross currency. Settlement times of 1-2 days are still common. even though it’s 2024, not of this time anymore. Especially if money is sent wrongly or “lost in limbo” by the bank. The questions of where my money during the transfer is is solved by connecting instant payment schemes. Treasurers want this now! Timelines and connectivity between schemes will take time though but every steps towards it is a win. The use cases mentioned are great examples of treasurers cross border payment struggles which would be solved. In conclusion, Project Nexus is poised to transform the landscape of cross-border payments, making them faster, cheaper, and more transparent. By embracing this innovation, treasury professionals can enhance their operational efficiency, manage liquidity more effectively, and ultimately support their organizations’ global growth objectives. Also Read Join our Treasury Community Treasury Masterminds is a community of professionals working in treasury management or those interested in learning more about various topics related to treasury management, including cash management, foreign exchange management, and payments. To register and connect with Treasury professionals, click [HERE] or fill out the form below to get more information. Notice: JavaScript is required for this content.
A Slightly Contrarian View On Cash Flow Forecasting Accuracy
This article is written by Kantox Time after time, FX management surveys confirm treasurers’ concerns with the degree of accuracy in their cash flow forecasts. In our own sample measurement, this concern is given more weight than potential episodes of high FX volatility or shifting interest rate differentials between currencies. Worries about cash flow forecast accuracy are easily understood given the current uncertainty in financial markets. As a corporate treasurer, the last thing you need is to be caught off-guard in terms of your company’s funding needs, a point recently made by investor Warren Buffett. No one would seriously challenge that assessment. Yet, when it comes to currency management, the importance of having accurate cash flow forecasts is overstated. Let us see this in more detail. Cash flow forecasting in hedging programmes There are three main FX cash flow hedging programs: Here’s our point: the degree of forecasting accuracy is not a pressing concern in any of these programs. This is almost obvious in the case of micro-hedging programs for firm sales and purchase orders, which are very popular in the Travel industry and others where companies frequently update their prices. The reason is clear: a firm commitment is a legally binding agreement. Its probability of occurrence is very high. Arguably, it is not even a forecast at all. Forecasted exposures and FX hedging: layering Things get more interesting in hedging programs where the FX exposure is unmistakably in the shape of cash flow forecasts. Layered hedging programs are used by companies that desire to smooth out the hedge rate over time. Consider a linear layered hedging program with 12-month granularity, one of the most used. To achieve the necessary commonality between hedge rates, currency hedges in layers of 8.3% are applied, month after month, to the forecasted cash flows (100%/12 = 8.3%). For example, if a forecasted exposure with a January 2024 value date needs to be 100% hedged at the end of December 2023, by the time we reach the end of August 2023, that particular forecasted exposure will have received 8 layers of hedges. And accuracy will be required for less than 70% of the forecast (8.3% x 8 = 66.6%). This is well within the range of what is considered achievable by most standards. Forecasted exposures and FX hedging: protecting the budget rate In companies whose main goal is to protect the FX rate used in pricing during a particular campaign, risk managers may feel tempted to hedge most of the forecasted exposure at the start of the campaign. While this allows them to remove the inherent pricing risk of a ‘catalogue-based’ model, it does require a high degree of forecasting accuracy. The solution is to set a program that guarantees a ‘worst-case scenario’ FX rate equal to the budget rate used in pricing. This rate can be protected with conditional orders that are set, for example, at 1%, 2% and 3% to the budget rate, each for a third of the exposure.The worst-case scenario rate, in turn, is set at a level that includes a buffer to the spot rate. What do we gain from this buffer? Flexibility. As time goes by and no hedges are executed on the back of the budgeted exposure, cash flow forecasts are continuously updated. With an added bonus: managers can leverage the information from incoming firm sales/purchase orders to fine-tune their forecasts. Automation requirements The operational complexities of the FX hedging programs outlined above make it impossible to manually execute them without error. Here are some examples of why automation is necessary when it comes to managing FX risk: Do you wish to set yourself free from the constraints of super-accurate cash flow forecasts when managing FX risk? Currency Management Automation solutions allow you to do just that, while the Treasury team seamlessly executes the entire FX workflow. All the while, the most precious asset of all—time—will be at your disposal to further improve those irksome forecasts. Also Read Join our Treasury Community Treasury Masterminds is a community of professionals working in treasury management or those interested in learning more about various topics related to treasury management, including cash management, foreign exchange management, and payments. To register and connect with Treasury professionals, click [HERE] or fill out the form below to get more information. Notice: JavaScript is required for this content.