FXBEACON: 75 HARD, 100% SMART: CURRENCY HEDGING LESSONS FROM MY “75 HARD” JOURNEY
Imagine that at the beginning of July, you decided to join me on a personal journey. To transform physically and mentally by taking on the “75 Hard” fitness and mental wellness challenge (which I started 66 days ago). For those who are not familiar, “75 Hard” consists of 5 daily challenges: A) Two 45-minute workouts (one has to be outside) B) Stick to a diet of your choosing (no alcohol and no cheat meals) C) Drink a gallon of water each day D) Read 10 pages of a non-fiction book, bonus rule E) Take progress pictures If you skip a day, you start over. Throughout the process each day, I wake up knowing that I’ll face grueling workouts. Couple with mental toughness exercises, and strict discipline requirements. Meanwhile, in the business world, many companies are navigating their own set of daily challenges. Like the hurdles I’ve encountered on my journey. Surprisingly, there’s a striking similarity between a commitment to “75 Hard” and a business strategy called Currency hedging. Hedging or protecting against/mitigating risk. Currency exchange uses the same principles of resilience and adaptability you need to complete “75 Hard.” And each is equally vital for businesses seeking success in an unpredictable world. Think about how important your health is to you. That headache that lasted a little too long, that cramp in your calf, the lower back pain that keeps you from sitting in certain positions. People regularly spend hundreds of thousands of dollars on their physical health. If you ask anyone over the age of 70 if they would rather have the health they had in their 20’s or a few million dollars, they will unanimously choose their health. We can all agree that the financial health of a company is just as important to the longevity of that business as physical and mental health are to humanity. By Currency hedging, businesses are able to reduce the effect of adverse market movement. Such as fluctuations in interest rate differentials or currency exchange rates, similar to the way mental and physical exercise combat the adverse effects of aging. By doing so, these companies can safeguard their profitability and long-term viability. So far, I’ve learned that the daily consistency required by “75 Hard” has created both physical and mental predictability in my life. Although challenging, I know what to expect each day. Without that predictability and routine, there is no way I would have been able to make it this far. Almost identically, hedging strategies provide businesses with stable financial footing by minimizing volatility and eliminating a variable from their business. This stability is crucial for effective planning and decision-making. This enables companies to pursue their strategic and FP&A goals with far greater confidence. Although predictability is the ultimate goal, nothing happens exactly as planned. Because of the unpredictability that life has around every corner, “75 Hard” also emphasizes adaptability. By requiring participants to complete their daily tasks, rain or shine (my run in southern California during Hurricane Hillary can attest to that), it forces participants to stay nimble in the face of uncertainty. Similarly, businesses need to have the ability to adapt to shifting market conditions. Hedging allows them to respond to unexpected changes by providing at least one concrete aspect of the business as a safety net that cushions the impact of adverse events. This protection ensures that companies remain agile in a dynamic business environment. Locking into metaphorical sunshine for the foreseeable future. Kiss those rainy runs goodbye. Every day, companies invest significant resources in various projects and operations. Wouldn’t it make sense for these same companies to do everything in their power to protect those investments? Hedging their currency exposure safeguards these investments, ensuring that they yield returns even in unfavorable circumstances. The ever-changing economic markets have become a nonfactor. In the world of business, competition is fierce, and companies that hedge effectively can gain a competitive edge over their rivals by reducing their vulnerability to market fluctuations. This allows them to focus on strategic growth rather than reacting to external crises. Doing the physical part of “75 Hard” In the same way that I’ve committed to diet, exercise, and mental improvement over the past 66 days, businesses need to demonstrate the same discipline if they stand a chance at surviving our current market. It’s crucial to manage risk so that, regardless of the uncertainties that may arise, these companies are protected. Lifting weights, going on hikes and runs, and daily reading have cultivated the necessary mental toughness, teaching me to push through discomfort and setbacks. This has better prepared me for the unpredictable challenges that life throws my way. In a similar sense, companies that hedge are better prepared to withstand economic downturns, emerging stronger on the other side. Both “75 Hard” and foreign currency hedging require a long-term perspective. The short-term sacrifices that I’ve made each day have led to long-term gains in my personal fitness and learning. In the same way, in order to help secure a company’s long-term financial success, they must practice delayed gratification. Make small sacrifices now, and reap huge rewards later. By taking time now to consider and protect against potential risks over time, companies are protected from whatever the market throws at them. Throughout “75 Hard,” I have strived for continuous improvement in the same way that most businesses that work with GPS do. This improvement mindset is such an important piece to the equation in order for companies to refine their hedging strategies and learn from past experiences to be better equipped to protect their assets and investments. The correlation between hedging in the business world and the principles behind the “75 Hard” regimen, although unorthodox, is striking. These similarities emphasize a strong connection rooted in discipline, resilience, adaptability, and a forward-thinking approach. Just as individuals take on the “75 Hard” challenge to cultivate physical and mental fortitude, companies adopt hedging strategies to safeguard their financial stability and mitigate FX risk. Embracing these fundamental principles can empower both individuals…
Oscar AugustineUnderstanding IBAN Discrimination and How to Combat It
This article is written by Pecunia Treasury and Finance What is IBAN Discrimination? International Bank Account Number (IBAN) discrimination occurs when individuals or businesses are denied financial services or face obstacles in making or receiving payments due to the country code in their IBAN. This form of discrimination undermines the efficiency and inclusivity of the European payments market. Leading to challenges in cross-border transactions and affecting economic development. The Legal Framework The European Union addresses IBAN discrimination through SEPA Regulation (EU) 260/2012. This ensures the smooth functioning of the European payments market. Article 9 of the regulation explicitly prohibits specifying the Member State in which an account to be debited or credited is located. This rule aims to guarantee that any IBAN from an EEA country is treated equally. And can be used to make or receive cross-border euro payments as efficiently as domestic transactions. Prevalence and Impact Despite the regulatory framework, IBAN discrimination persists across the EEA. This discrimination can manifest in various forms, including: The practice has a direct impact on individuals and businesses, disrupting financial stability and operations. For example, individuals may struggle to receive wages, while businesses face challenges in conducting international trade. Efforts to Combat IBAN Discrimination To address IBAN discrimination, the European Commission has made efforts to simplify the reporting process and increase awareness of the issue. In 2014, a registration center was established to track reports of IBAN discrimination. Additionally, the website www.acceptmyiban.org provides a streamlined way for individuals and businesses to report incidents of discrimination. Increased reporting has shed light on the extent of the issue, with several thousand reports in 2021 alone. This has led to greater scrutiny of companies and institutions that engage in discriminatory practices. How to Address IBAN Discrimination If you encounter IBAN discrimination, follow these steps: Conclusion IBAN discrimination poses significant challenges to financial inclusivity and cross-border transactions. By understanding the issue and taking action when faced with discrimination, individuals and businesses can contribute to the ongoing effort to eliminate this unfair practice. Increased awareness and streamlined reporting mechanisms will help ensure the smooth functioning of the European payments market and support economic growth across the region Also Read
Franklin
A New Practice Area Emerges for CFOs: Enterprisewide Liquidity Management
This article is written by Kyriba For CFOs, treasurers, and corporate boards, the COVID-19 pandemic represented a moment of clarity. Seemingly overnight, CFOs were faced with a crisis bigger in many ways than the 2008 financial crisis. In the space of days, treasurers had to shift from managing long-term strategic initiatives of the business to ensuring immediate access to cash to fund basic business operations. Corporate finance leaders long burdened by dwindling IT budgets and limited head count were forced to lean heavily on their treasury and cash management tools. Unfortunately, some treasurers were hampered greatly by their legacy software packages, thwarted by a lack of agility and visibility with their legacy software. Yet, as with all major events, CFOs are often the powerful catalyst for change. The role of the CFO was already changing, but now, because of the past year, the CFO’s environment has changed as well. Key Pain Points for Today’s Liquidity Management Teams To better understand these changes, IDC conducted a survey of more than 800 corporate finance leaders and practitioners in August 20211 to explore the emerging importance corporate finance leaders are assigning to liquidity management, both during times of crisis and to leverage opportunities for growth. The results of the survey were compelling in many aspects including findings that strongly indicate urgency for CFOs, treasurers, and other financial leaders to design and deploy strategic initiatives to manage liquidity holistically. Effective and efficient liquidity management is among the top priorities for survey respondents2. Here are a few reasons driving increased urgency for liquidity management for treasurers and other financial leaders: Liquidity Management Emerges as a Practice Area The events of 2020 have forced CFOs to prioritize business resiliency and continuity by optimizing liquidity management. This will mean a greater focus on working capital management3 including sourcing external funding and providing financing for critical suppliers efficiently. Given the current economic uncertainty, cash and liquidity management have been top of mind for financial leaders. The pressure to maintain liquidity is tremendous as companies of all sizes fight to retain market position and, in some cases, simply stay alive. As a result, businesses have found themselves needing to reforecast their liquidity and cash flow more frequently (weekly or even daily). However, this is a difficult proposition for any company considering the following survey data points, according to the IDC survey of more than 800 corporate finance leaders: In addition to being able to forecast and reforecast quickly and efficiently, financial leaders found that they desperately needed the ability to simulate future what-if scenarios and to create plans based on those what-if scenarios4. The benefit of this capability is that business leaders can remain in lockstep around core business objectives even as the business environment changes rapidly. Unfortunately, many financial leaders don’t have the tools to support scenario planning for liquidity, and as such, they must cope with limited visibility for decision making. The most prominent area of impact is in decision making for treasurers and their executive teams. CFOs with limited visibility are slower to make decisions regarding money movement, internal funding of projects, or M&A activity. Furthermore, a lack of visibility can even impact the bottom line, as companies may choose to be less aggressive in moving money into/out of the exchange markets and may opt for expensive external funding sources unnecessarily. Managing Liquidity Enterprisewide Requires Unification More and more, organizations are coming to the realization that liquidity management is not only a critical aspect of functioning in this “new normal” but also a team sport. Organizations must have a unified approach to all data, processes, and human capital related to liquidity management. Here are the key characteristics of an enterprisewide unified liquidity management process: Centralized liquidity and cash data The centralization of liquidity data streamlines financial operation, allowing for better control for financial leaders. Centralization provides financial leaders with the opportunity to standardize cash management across all legal entities, reduce the number of bank accounts in use, and provide a more holistic view of bank or FX exposures. Deep liquidity analytics Having access to deep analytics provides users with the ability to better predict future liquidity. More importantly, it allows them the chance to find patterns or overlooked items that have business significance (e.g., identifying cash as a revenue-generating asset and monitoring bank fees and deposit rates). Partnering environment Financial line-of-business professionals are often left on an island. This is often the case for finance directors, controllers, and heads of accounting. In fact, only 20% of survey respondents have their CEO as their champion who initiates unified liquidity management initiatives. The key to executive participation goes beyond simply getting the CEO involved in liquidity management decisions. The key here is to develop a partnering environment for all operational decision makers and stakeholders. This can be exceedingly difficult without the proper tools to support partnering and collaboration across business leaders. Dedicated tools to quickly expose key liquidity metrics to all stakeholders within the business are essential. Seamless integration Data must flow between all the relevant cash functions, including treasury, accounts payable, accounts receivable, FP&A, order management, and procurement. In addition, the data must flow outside of the finance teams as well including investors and lenders, certain government agencies, credit rating organizations, and evens to certain customers and suppliers7. Only then will financial leaders be able to gain a holistic view of the organization’s current cash/liquidity position. Real-time massive data Finance leaders need real-time information to optimize decision making, but often they must wait till the end of day/period/quarter to get an accurate and holistic view of the current state of enterprise liquidity. Today’s liquidity managers need real-time data to build accurate forecasts and market simulations. Real time is also essential in effective communication of the business cash position between stakeholders. Follow the Leader The process of managing treasury at the corporate level is complex and ever changing. In these cases, it is not unusual for CFOs and their treasury managers to reach out to gather advice from trusted sources. Leader companies,…
Reviewing Treasury Best Practices for Bank Account Management in 2023-2024
This article is written by TIS What is Bank Account Management & Why is it Important? Within the context of corporate treasury, bank account management (often referred to as “BAM” or “eBAM” for electronic BAM) is one of the most fundamental responsibilities of modern practitioners. Bank account management refers traditionally to the strategic and operational processes involved in effectively overseeing and controlling a company’s bank accounts. It includes all functions related to opening, maintaining, and optimizing bank accounts to achieve financial efficiency, security, and compliance. It also covers the process of systematically managing the transactions and cash balances that flow through these accounts. As well as any data related to bank addresses, IBAN and routing numbers, the “signers” with approval rights over each account, and so on. Today, a significant portion of these tasks can be performed using a variety of software tools. They range from Excel and e-banking portals to ERPs, TMSs, and other Fintech solutions. We will explore the use of these solutions more in a later section. As it stands in 2023-2024, treasury professionals that oversee their company’s bank account management functions are typically responsible for the following operations: 1. Core Bank Account Management Tasks i. Developing an Account Structure When it comes to BAM, determining the appropriate number and types of accounts needed for different financial functions. Such as operational accounts, payroll accounts, tax accounts, and interest-bearing accounts. Perfecting this structure may also require Treasury to introduce in-house banks, cash pooling, and sweeping structures. ii. Tracking Open & Closed Accounts Managing open and closed bank accounts across the company globally is considered a standard bank account responsibility for the Treasury. In today’s fraud-laden environment, maintaining near-real-time visibility over account opening and closing activity is critical in order for treasury to maintain compliant, risk-free, and transparent bank account operations. iii. Managing Approved Signer Lists Tracking the approved “signers” with authority over each of the company’s bank accounts across each bank, country, entity, etc. is another standard component of BAM. This is another role that is vital for reducing the threat of fraud, especially as it relates to having duplicate signers on accounts (or forgetting to remove signers after they leave the company). Managing a clean signer list is also important for keeping up with various banking regulations that impact corporations, such as FBAR in the US. iv. Maintaining Updated & Accurate Account Data As a part of BAM, treasury will be expected to maintain organized and accurate data related to bank addresses, financial statements, account numbers, relationship managers, and routing information. This includes responsibility for updating these records over time as employee turnover, company growth, and bank relationships dictate. 2. Correlated Bank Account Management Tasks v. Bank Relationship Management One of treasury’s main responsibilities relative to BAM involves establishing and maintaining relationships with each of their company’s banking partners, negotiating the related terms and fees, and evaluating the quality of services provided. vi. Reporting on Bank Account Transactions & Cashflows As a function closely tied to their oversight of company bank accounts, treasury will be relied upon to monitor and report on the various payments, cash balances, fees, and general activity that occurs within each account over time. This includes the process of cash positioning and workflows for bank statement management. vii. Performing Bank Fee Analysis & Account Reconciliation While it can be tedious to undertake, the process of analyzing bank fees and service charges to identify opportunities for cost-savings can become a significant portion of treasury’s BAM responsibilities. Such projects are often necessary for ensuring the company’s accounting structure is as streamlined and optimized as possible. In addition, reconciling bank account statements with internal records to identify discrepancies, ensure accurate accounting, and detect potential fraud is an area of BAM that the Treasury will certainly have a stake in, typically in alignment with accounting. Why are Bank Account Management Roles Usually Entrusted to Treasury Teams? Over the past decade, industry data from the consulting firm Strategic Treasurer has consistently shown that the vast majority of treasury teams hold primary responsibility over bank account management operations at their respective companies. This is, of course, with the help of HR, legal, and other finance groups to perform various related tasks surrounding account compliance, reconciliations, and reporting. In large part, corporate treasurers are the ideal department to manage the company’s banking operations due to their unique blend of financial visibility, operational control, and risk management oversight. As the natural stewards of payments and liquidity and with a deep understanding of company cash flows, treasury professionals are perfectly positioned to analyze and allocate funds across various banks, manage the associated account structures and bank relationships, monitor account activity to identify fraud, maintain compliance, and report on balances and transactions. Because most Treasury teams are already working to foster strong banking relationships, negotiate favorable service terms, and stay abreast of regulatory changes that impact banking activities, their holistic perspective on the organization’s financial landscape enables them to naturally align bank account management with their other existing responsibilities. What Technologies are Typically Used by Treasury to Manage BAM & eBAM? For modern treasury teams, there are five main types of software solutions used to assist with bank account management. Depending on the stage of a company’s maturity, the size of their global footprint, and the complexity of their banking operations, a diverse mix of these different solution types may exist within any specific organization. Usually, it is Excel and banking portals that are used most prominently by small and mid-market companies, while larger and more complex companies use these tools in conjunction with more sophisticated ERPs, TMSs, or specialized BAM solutions. Let’s quickly review each of these five standard BAM software tools in more detail: 1. Microsoft Excel Microsoft Excel has held a prominent position in the corporate finance realm since it was first introduced in the 1980s and remains the go-to tool for many Treasury teams when it comes to tracking and managing bank account data. Despite a myriad of solutions developed…
How AI and ML are used in payment fraud detection (16 use cases)
This article is written by Nomentia Artificial Intelligence (AI) and Machine Learning (ML) are two technologies that have been widely discussed in recent years. They offer a range of tools that are gradually being integrated into our personal and professional lives. These technologies are particularly useful in situations where there are many time-consuming and manual tasks. Or where there is a large amount of data to analyze. One such application is payment fraud detection. Before diving into the use of AI and ML in fraud detection, it is important to address them separately. What is AI exactly? AI systems are designed to integrate vast amounts of data with intelligent algorithms. They mimic or simulate human-like actions and decision-making processes. AI can be utilized for various techniques like problem-solving, natural language processing, image recognition, reasoning, learning, and more. The technology functions in a way that collects data, processes it, and selects an algorithm. It trains a specific model, modifies the model’s parameters, and evaluates the results. This can then potentially be deployed in the real world. As it operates, AI typically uses feedback loops from its users to improve over time. What is machine learning exactly? Machine learning is a form of AI that teaches a system to think in similar ways to humans, as it learns and improves based on previous experiences. Machine learning algorithms typically need little supervision because they are learning by themselves. We usually distinguish between three techniques of machine learning: Supervised learning Supervised ML algorithms are taught to make predictions or decisions primarily based on previous data patterns. Here, the ML learns based on already labeled data. So, input data needs to be categorized beforehand. So that the algorithm will use it as a benchmark to come to conclusions when analyzing new data. Unsupervised learning In unsupervised ML, there is no need for labeled or categorized data. Instead, the algorithm tries to find patterns or relationships in the data without explicit guidance. Typically, the goal of unsupervised ML is to explore data and find clusters or relationships. Reinforcement learning With reinforcement learning, you train the algorithms to make sequential decisions. In an environment with a reward or penalty feedback mechanism that it learns from to improve its subsequent decisions. Usually, no labeled data is available. The algorithm needs to learn from its own experiences and the feedback it receives. The difference between AI and machine learning AI refers to the simulation of human intelligence in machines that are programmed to mimic human-like actions and decision-making processes. AI encompasses as a wide range of techniques, including problem-solving, natural language processing, image recognition, and expert systems, among others. It aims to create systems that can perform tasks that typically require human intelligence. Tasks such as reasoning, learning, perception, and problem-solving. Machine Learning is a subset of AI that focuses on developing algorithms. This enables computers to learn from and make predictions or decisions based on data. ML algorithms allow machines to improve their performance on a task through experience without being explicitly programmed for that task. It does so by using statistical techniques to enable computers to learn patterns and relationships from data and make decisions or predictions. Why are these topics relevant to payment fraud? Recent research by PwC showed that 51% of organizations have experienced fraud in the past two years. A 20-year high compared to previous survey results. Fraud mainly impacted organizations in terms of financial losses. Respondents highlighted that many of them will require new, advanced technologies to tackle the issue. Some respondents also mentioned that fraud had more considerable consequences. Like operational disruptions or damage to the brand or customer loyalty. Ultimately, AI has the potential to assist businesses in maintaining a secure payment environment. Thus safeguarding a company’s customers, revenue, and reputation. RESEARCH BY PWC SHOWED THAT 51% OF ORGANIZATIONS HAVE EXPERIENCED FRAUD IN THE PAST TWO YEARS — A 20-YEAR HIGH COMPARED TO PREVIOUS SURVEY RESULTS PWC’S GLOBAL ECONOMIC CRIME AND FRAUD SURVEY 2022 With the rise in cybercrime and the evolving sophistication of financial threats, we’ve come to an era where humans cannot keep up with processing an abundance of data efficiently and securely. We can by no means compete with the speed and thoroughness of data interrogation that AI and ML can deliver today. As a result, we need to embrace and team up with such technologies. To support this view, a recent study by the Association of Certified Fraud Examiners revealed that 17% of organizations already leverage AI and ML to detect and prevent fraud, and 26% of organizations are actively planning to adopt fraud detection AI or ML in the next two years. On top of that, technology providers are now heavily investing in developing practical AI-driven solutions to tackle payment fraud. How can AI and Machine Learning be used in fraud detection? These days, ML and AI can help you with fraud detection in various ways. Let’s focus on some of the main ways how organizations currently leverage the technologies and what the future may bring: For example, AI and ML can streamline payment processes and enable faster risk identification in payables, receivables, and reporting. They can help manage exceptions or spot anomalies in large data sets based on previous patterns it has studied. AI can analyze large datasets much faster than human beings, and it provides good insights and points to pay attention to. Faster analysis will also help speed up decision-making. Especially with more data than ever and little time to analyze, it will become essential to save time while deriving insights by leveraging tools like AI and ML. AI can help automate essential but manual tasks such as data entry, reconciling payments, or generating reports. Minimizing manual processes, in turn, reduces the room for errors and fraud. Reconciliation of payments is essentially comparing two data sets with each other and finding matches, which AI and ML are incredibly good at. Even when anomalies arise, you can train AI to handle them in pre-set ways. Machine learning…
There is No More Ignoring ESG in Treasury
Despite many other burning issues, ESG is a major concern for treasurers. It appears to be moving higher up their agenda every year. But sustainable finance solutions do not always align with fundamental treasury principles. Treasurers’ first, second, and third priorities are, understandably, to secure/protect/optimize cash respectively. And yet green bonds seem to offer less attractive interest conditions than traditional bonds. Moreover, time and cost of developing sustainability frameworks are significant factors. And synchronizing the implementation of ESG projects and raising debt continue to be challenging for a number of corporations. That being said, sustainable finance presents enormous opportunities for growth. and the cost and time of ESG reporting are decreasing, thereby removing a major impediment. Indeed, many treasurers are starting to see the benefits and opportunities arising from ESG investments, such as green deposits. The ESG trend is also increasingly reflected among employees, new talent being recruited, and treasury’s business partners. Asking the right questions Since treasurers sit at the intersection between numerous internal departments and external partners, such as banks, fintechs, and technology vendors, they are well-placed to drive their company’s ESG agenda forward. To assist in this endeavour, treasurers should routinely ask their stakeholders: And when speaking to asset managers, treasurers should also ask: One of the main obstacles here is the lack of visibility around metrics of ESG impact of investments. And I sometimes ask myself whether ESG investment isn’t better suited for longer-term investment because there seems to be a paradox between ESG and the notion of ‘short term’. That being said, I believe that ESG tenets will become increasingly compatible with the needs of Treasury short-term investments because the offering is widening and appetite is growing. Those treasurers who still do not have ESG on their priority lists should familiarise themselves with the ESG success stories of other treasury teams. These case studies illustrate how treasury can be a pioneer in this area, accelerating a company’s ESG agenda and being seen as an example not only to other departments with the company but to other treasury teams. A thorny issue Despite the positivity surrounding ESG in general, there are dark clouds on the horizon. A notable concern is greenwashing. I believe everything hinges on building the right relationship with business partners like banks and fintechs, asking for transparency over ESG metrics, and sharing data. If a treasurer happens to be exposed to greenwashing, they will know the long-term relationship will change—there is significant reputational risk. Due to the fear of greenwashing, investors are taking far more time and care to carry out due diligence. Investors now want to be 100% certain that there will be no reputational damage as a result. As such, greenwashing is not helping ESG investment gain traction, and to protect themselves, treasurers must ask for full transparency from their investment partners. Finally, let’s not forget that not all funds are suitable for ESG. Yet there is a risk that certain funds will be neglected simply because they are not ESG-compliant. Rather than only investing in ESG funds and excluding others, we should apply judgment and common sense when assessing investment opportunities. It’s a matter of enacting the crucial investment risk management rule: diversification is key. Also Read
Benjamin Defays
How API and ERP Integrations Are Transforming Corporate Treasury
This article is written by Kyriba While there are many benefits, businesses are yet to grasp the full potential of API connectivity, especially for ERP integration, and even more importantly, how non-technical teams such as treasury can take full advantage of API solutions. During KyribaLive 2023, Kyriba’s Félix Grévy, VP of Connectivity and Open API, and John Brandt, VP of Product Connectivity, explored the transformative potential of APIs. Providing updates on Kyriba’s Connectivity-as-a-Service solutions, Félix and John also shed light on how a technology partner like Kyriba assists treasurers on their API journey. APIs Empower Financial Professionals Simply put, an API is a program that allows multiple pieces of software to “talk” to each other. APIs are like “bridges,” enabling two separate applications to work together and share data. They allow developers to access certain features or functionalities of software applications without having to understand the underlying code or architecture. In the world of finance, APIs are enabling real-time treasury management and empowering finance professionals like never before. They connect internal and external systems, facilitating real-time data retrieval for use cases such as bank balance and transaction reporting, cash flow forecasting and FX exposure management, integration of trading portals, market data providers and AI tools. Building on this point, Félix and John elaborated on the three pillars of Kyriba’s API connectivity solution as an example to demonstrate how APIs can be used in finance and treasury: Looking towards the future of API adoption, John explored the untapped possibilities of APIs. John emphasized how Kyriba envisions exciting developments in how to integrate ERP with TMS, including expanding ERP integrations, incorporating third-party data sources, enabling event-driven orchestration through webhooks and even AI-generated integrations. Expanding on the topic of artificial intelligence (AI), John and Félix remarked how AI presents real opportunities for ERP integrations. Although there is still a lot of maturing to do, developments such as Open AI ChatGPT and Microsoft Copilot Artificial Intelligence show the potential for AI to assist treasurers with complex tasks. By leveraging these powerful AI tools, finance professionals can transform their daily work, ask questions on reports, uncover valuable insights and receive intelligent suggestions. APIs play a pivotal role in enabling these tools to interact seamlessly among the systems, allowing technology vendors to harness the growing power of external AI technologies and natively integrate them to their own solutions. How Kyriba Enables Embedded Treasury for Clients Recently there has been a growing interest in embedded finance and embedded treasury. John delved into Kyriba’s APIs for ERP integration, spotlighting how Kyriba already offers a set of packaged integrations that extend and embed the treasury core workflows into other business systems: Despite the high interest level for embedded treasury, clients are often lacking the expertise or IT resources to implement such integrations. Kyriba’s Connectivity-as-a-Service is designed exactly for such client needs. John overviewed the options Kyriba makes available to our clients, prospects and partners. With a versatile array of ERP integration scenarios, Kyriba guarantees the freedom and flexibility to accommodate enterprise IT complexity and sophisticated business needs. INTEGRATION SCENARIO DESCRIPTION SUITABLE FOR Bring Your Own Data (BYOD) Client handles data extraction, transformation and transmission to Kyriba. Customers with legacy applications or broad existing SFTP landscape Kyriba Packaged ERP Integrations End-to-end solution. Kyriba handles data extraction, mapping transformation and transmission via API to Kyriba. Clients with new integrations or with minimal workflow customizations À La Carte Hybrid custom integration. Allows use of individual Kyriba integration components. Clients can mix and match integration methods. Clients with complex landscapes, including middleware or legacy platforms Custom Direct API Connect Custom-built extract and mapping. Clients can use open APIs from the Kyriba Developer Portal to build workflows to meet their specific processes. Companies with complex workflows or those who desire full control of their API orchestration Transforming Treasury with API-Driven Connectivity Connectivity is key to successful treasury management and APIs are the catalysts for treasury transformation. With real-time data exchange contributing to a more connected and efficient financial ecosystem, API connectivity empowers treasurers with the latest financial information and the flexibility to meet evolving business needs. The benefits are many and the untapped potential of API connectivity, especially for ERP integration, remains a growth opportunity for treasury. With embedded ERP workflows to support core treasury needs, treasury can streamline processes and make more informed decisions. To stay ahead, it is time for treasurers to take advantage of exciting possibilities in API adoption, including AI integration opportunities. With its Connectivity-as-a-Service solutions, Kyriba offers flexible, game-changing solutions for the office of CFO to build a truly connected and comprehensive financial ecosystem. Also Read
15 Questions for Treasury to Ask Themselves & Their Vendors During Technology RFPs
This article is written by TIS In 2023, data shows that treasury teams are expected to continue investing significantly in new technology solutions. These plans include the adoption of new ERP and TMS solutions. As well as more “disruptive” technologies like artificial intelligence (AI) and machine learning (ML). As practitioners and business leaders prepare their budgets and move forward with their selections, the following questions can be used as a guide for determining the key ingredients of a successful project. Our hope is that these tips for treasury management will help treasury refine their strategy for securing project approval, collaborating with other internal stakeholders, preparing an RFP or RFI, measuring the ROI of their project, and planning for onboarding to avoid hurdles and common sources of delay. Context: Treasury’s Technology Spend Remains Elevated in 2023 Despite the economic headwinds that have impacted much of the global business environment throughout 2022 and early 2023, data from recent months has shown that treasury groups are still planning to invest significantly in both additional headcount and new technology. As evidence, a recent TIS survey found that at least 40% of practitioners were expecting to bolster their technology stack across numerous functions in 2023, with a focus on areas like cash management, forecasting, working capital, payments, and security. Additional research from prominent industry bodies like AFP and Strategic Treasurer have yielded similar results. However, in order for these technology projects to have the desired effect and yield positive results, treasury teams must be very strategic and intentional with their approach. Because there are a variety of internal and external challenges that can obstruct an onboarding timeline, it’s critical for organizations to perform as much due diligence as possible before the project kicks off. It’s also important to collaborate with other internal stakeholders ahead of time to ensure adequate buy-in, approval, and planning. To help Treasury walk through all the potential factors that could impact their project, the following questions can serve as a point of reference: 15 Questions for Treasurers to Ask Themselves & Their Vendors During Technology RFPs & Implementations 1. What is typically included in a request for proposal (RFP) or request for information (RFI) as treasury groups begin the technology selection process? How is this process managed? How many vendors should be considered? RFIs and RFPs delivered by treasury to potential vendors often request information related to the scope of capabilities offered by each vendor, as well as info related to their size, location(s), staff count, client base / composition, revenue, and ownership structure. Additional questions related to the hosting setup, pricing schema, customer support structure, and onboarding approach are also common. Although the number of vendors included in an RFP or RFI varies, what’s important is that practitioners include enough options to establish an adequate understanding of what’s available in the market, without overwhelming themselves with an excessive number of applicants. In most cases, practitioners may reach out to 10-15 vendors before creating a shortlist of 3-5 and taking a more comprehensive look into these select few before making a final selection. 2. What other internal stakeholders should be involved in a treasury technology implementation or onboarding project? Commonly, treasury will need to work with their CFO as well as peers in accounting, IT, AP, AR, Legal, and HR to ensure a successful project. For the most part, collaborating with other financial departments will center on ensuring adequate buy-in and approval, with ample consideration of how it will benefit all of these stakeholders, and not just treasury. At the same time, treasury must plan to work with accounting and AP to determine how the new solution will integrate with existing processes and systems to streamline communication, reporting, and payment workflows. Regarding IT, treasury must pay careful attention to ensure that any required in-house configuration or support is properly planned for and documented, especially in cases where internal bandwidth is already constrained. And finally, Legal assistance will be needed to review contracts and ensure compliance, while HR teams may support by managing user permissions and admin roles as the new solution goes live. 3. How can treasury most effectively ensure buy-in from other stakeholders for their projects, including the CFO, AP, and Accounting? Showcasing the benefits that a treasury new solution will provide to other stakeholders in terms of improved reporting, more accurate data, faster insights, cost-savings, or greater control and security will all go a long way in winning approval. It is recommended that treasury approach their peers, particularly in accounting, AP, and IT, long before an RFP or RFI is launched to learn more about the needs of other departments and determine how any new solution they implement could also work to address their requirements. For instance, identifying ways that the adoption of a treasury solution that offers real-time financial reporting and payments workflows will help accounting, AP, and the CFO all better perform their own responsibilities can make a huge impact in winning their support. And if a CFO also sees widespread support for a project internally and understands that the benefits are multifaceted, there will be much greater impetus to push forward. Similarly, if IT understands up-front what their responsibilities are and has time to plan, there will be much less confusion and delay after the project begins. 4. How should treasury balance collaboration with their IT teams, banks, and vendors when handling onboarding and other configuration tasks? Given the predominantly cloud-based era of treasury software that exists today, practitioners may find that a growing proportion of onboarding and implementation tasks can be handled by the vendor’s team, rather than their own. However, there will almost certainly be tasks that are assigned to themselves and internal IT, and there’s also the potential for banking partners and other external sources to be involved as well. If treasury plans to connect their new solution with various banks and back-office platforms – including those at other entities – then the effort required by all associated teams will become more significant. For this reason, treasury should…
How to improve payment security for treasury & finance teams
This article is written by Nomentia Most larger companies process hundreds, if not thousands, of outgoing payments every day. These payments are crucial for the business and must be handled accurately and punctually. Yet, as the number of payments increases, their management can become challenging. Particularly when dealing with tens or even hundreds of bank accounts. Oftentimes, treasury and finance teams have to deal with a layer of complexity when they need to improve payment processes. To protect themselves against payment errors, fraud, or making payments to sanctioned beneficiaries. Which often requires implementing payment security process controls and other security measures. In this article, we’ll talk about why it’s critical to have secure payment processes in place. What threats could your organization be facing. And how treasury and finance can tackle payment security within their own scope of work. While keeping processes as efficient as possible. As a bonus, we’ll provide a fraud risk management framework that can make dealing with process improvements less overwhelming. Why are payment security and controls more relevant than ever before? Financial scams are often directed towards treasury and finance teams, making these teams important stakeholders in payment security projects. In collaboration with IT and security professionals, they play a crucial role in ensuring payment security. Trustpair, SAP, and Accenture, payment did a survey that showed payment security is a top priority for finance and treasury professionals. With the increase in incidents of fraud and cyberattacks, companies can no longer ignore payment security. As a result, most teams are now actively reviewing their organizational processes to enhance safety. The survey also revealed that 56% of US-based companies fell prey to payment fraud in 2022. IN 2022, 56% OF US COMPANIES HAD STILL FALLEN PREY TO PAYMENT FRAUD. TREASURY & RISK SURVEY COMMISSIONED BY TRUSTPAIR & GIACT The research study revealed that treasurers expect banks and system providers to take active role fighting against fraud attempts. To meet this growing demand, many advanced payment and TMS vendors have developed solutions to enhance payment security. Differentiating between the types of payment issues that can occur Even though some solutions provide the full suite of technical features for tackling payment errors, sanctions, and fraud. It is still important to differentiate between the security threats treasury and finance face because they require different approaches. Let’s consider some of the most common threats that can occur: What belongs to payment security from a treasury and finance perspective, and how can you tackle it? The question remains: what is really included in payment security from a treasury and finance perspective? And which threats can actually be fought by them? This can vary greatly, depending on the organization. The experience of teams, and the policies treasurers have established regarding security, among other factors. Different treasury professionals may have different opinions on what payment security entails. However, we have noticed some common themes that treasurers at our clients focus on from a technological standpoint: Avoiding erroneous payments Manual processes are susceptible to errors, particularly when they are performed repeatedly, leading to handler fatigue. This commonly results in erroneous payments through typos, outdated vendor master data, or mixing up beneficiaries, for example. These errors can be compounded over time. Resulting in time-consuming efforts to correct them, such as liaising with all involved stakeholders or seeking assistance from banks. “MASTER DATA IS CRITICAL FOR PROCESS CONTINUITY. DATA ARE ASSETS, AND IF WE TALK ABOUT MASTER DATA, THAT IS REALLY A KEY ASSET, AND YOU NEED TO MANAGE MASTER DATA LIKE YOU MANAGE OTHER KEY ASSETS.” MARK ROELANDS, RISK & COMPLIANCE CONSULTANT, GRC CONSULTING An automated payment system, connected between your ERP and banks, can keep your master data automatically updated. And also, avoid outdated information. You can also avoid errors by setting up rule-based process controls. Or automated matching processes for reconciling financial records with bank statements. For larger single payment sums, double verification by a second person can be helpful in preventing errors. Ensuring payments aren’t sent to any sanctioned beneficiaries To comply with regulations and ensure security, most companies must check their payments against unwanted beneficiary lists. This can be achieved by verifying payments against public lists like OFAC’s, EU’s, and other institutions. As well as private blocklists or allow lists. As world politics continue to shift, these lists keep evolving, and hence, they need to be updated regularly. Manual sanctions screening, i.e., uploading and downloading spreadsheets against sanction databases,. Or manually searching lists each time a payment batch is processed, can take a lot of time. Therefore, our customers have found that sanctions screening is most suitable as an automated step of a payment process flow in a payments hub every time payments are executed. Preventing fraudulent payments Fraud is a recurring topic for many companies and is challenging to spot when hundreds of daily payments go out to various stakeholders. However, preventing fraud is critical, as the losses can affect cash flow and liquidity planning. Organizations must tackle multiple types of fraud, each requiring a slightly different approach. Some of the most common frauds are wire transfer scams, phishing, and fake invoicing. On the one hand, most of these derive from human vulnerabilities; hence, you should educate employees to identify such fraud. On the other hand, intelligent payment technologies can recognize some of these irregularities as they stand out from ordinary payments. By scanning vendor master data automatically, for example. And, of course, larger payment sums should always be verified by several people. So that the financial loss is not too significant. To avoid internal fraud, users should be given limited rights in payment processes. There should always be several people checking payments regularly. And the consequences of fraud should be made clear in Treasury policies to avoid any ambiguity. Ensuring that payment processes are standardized and creating company-wide visibility Most companies we help have many local payment operations worldwide, where processes and systems can differ per location. This usually leads to a lack of transparency over processes and security, even the cash flow, on…