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EuroFinance 2017 Recap: Moving Treasury Forward

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Tuesday, October 10, 2017 - 18:45
Barcelona

This year's EuroFinance conference took place in Barcelona, set against a backdrop of political turmoil in the Catalonia region of Spain. The irony was not lost on conference attendees that the political instability in the host city could be compared to the increasing turbulence that treasurers face every day. Treasury must rise above currency volatility, sovereign risk, regulatory compliance challenges, payment fraud schemes, proposed tax reform and other issues.

To better equip treasurers with new insight and experience, this year's marquee European treasury event did not disappoint. EuroFinance has always been a step ahead, featuring a program that appeals to treasurers of all types. From a vendor perspective, EuroFinance is an amazing platform to showcase treasury technology achievements through the voice of the customer. There were many themes to consider at the event, but the net result was a clear message to treasury: regardless of the challenges, there are opportunities to progress.

Perhaps the first theme is that security is becoming the paramount concern for treasurers. While FX risk remains a top CFO priority, treasurers are slightly more operational and realize the threat of data and/or financial loss – should it occur – would be more debilitating than a penny or two loss in earnings per share that can happen from a poorly executed hedging program. Losing money on paper due to market conditions demands apologies. Losing real money due to successful fraud attempts means job loss with little hope of immediate re-employment within the field. While CFOs can be forgiven for prioritizing optimization over protection, they can only do this if their treasurer implements an effective defense against fraud and cybercrime.

Additional reading: The Rise of the Chief Treasury Information Security Officer (CTISO)

Another key learning from this year's conference was the role of treasury technology. Most every organization in attendance uses a treasury management solution. The days of relying on manual process and spreadsheets to run treasury are in the rear view mirror. Yet, those in attendance for presentations within the Treasury Technology stream heard repeatedly that having a treasury system is not enough. How you use the technology will determine if you simply meet your treasury objectives versus establishing oneself as a strategic treasurer with a seat at the table. Treasury systems are more than automation – they drive insight, analysis and improved decision making. 

Fortunately, attendees gained many perspectives on the role of emerging technology to take treasury performance to further levels, including fraud detection algorithms, machine learning, robotics and distributed ledgers. While we can (and will) dedicate a blog series to each of these individual topics, the larger theme was quite clear. New, emerging technology is fundamental to the innovation of treasury management systems.

Without technology innovation, the treasurer's ability to succeed is constrained and the platforms that support them will ultimately fail and exit the market. Innovation is the key to progression in every industry, including treasury.

Article 2

HCSC’s Treasury Transformation and Other AFP 2017 Highlights

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Thursday, October 19, 2017 - 14:00
AFP 2017 conference view from Kyriba's booth

The sun has set on another AFP annual conference, and the insights, education and networking, as usual, were invaluable: detailed discussions with hundreds of customers, prospects and partners; jam-packed customer presentations; and a big announcement from Kyriba on the launch of new industry first capabilities for payments fraud detection. Here’s a quick recap of our experience at the conference:

HCSC’s Strategic Evolution

On Tuesday, Health Care Services Corp. (HCSC), the nation’s fourth largest healthcare insurer, discussed in detail how it changed its treasury operations into a highly strategic unit -- with results far beyond expectations -- thanks to smart thinking and innovative technology.

During the session, “How Health Care Services Corp. Transformed Treasury into a Best Practices Treasury,” Forrest Vollrath, Executive Director of Treasury Operations at HCSC, discussed how passage of the Affordable Care Act (ACA) and desire to be more strategic sparked a need for change. To enable this transformation, the company decided it needed to ditch its on-premise solution for a more flexible and easier to use cloud solution: Kyriba.

According to Vollrath, HCSC’s initial objectives were to boost cash visibility, enhance payment controls and boost the productivity of its treasury staff. “I wanted people to be analyzers, not processors,” Vollrath told the audience. “I was very adamant that we needed to automate the cash position.”

The results have been spectacular, including:

  • 100 percent cash visibility, including automated connectivity to all HCSC banks
  • Reduced working capital balances from $4B to $50M through improved forecasting
  • A 5 percent increase in investment returns through more strategic investments
  • Savings of $2.4M in bank management fees through optimized bank relationships
  • Automation of key capabilities and comprehensive business continuity planning

The company has earned widespread recognition for its transformation, including the coveted Adam Smith Award. “The industry is acknowledging what we are doing, so that goes a long way,” he said.

Kyriba Launches New Payments Fraud Module

On Monday, as part of the conference, Kyriba announced new industry first capabilities for payments fraud detection. The new module delivers real-time fraud detection and prevention using scenario-based rules. The offering received high praise from attendees, who have long struggled with the issue, while also garnering coverage in CTMfile, Pymnt.com and other publications.

During an on-site interview with Strategic Treasurer, a prominent consultancy, Kyriba’s Bob Stark talked about the value of protecting against questionable payments outside the purview of standard controls (e.g. international payments to a country where there is no known supplier, or first payment to a new bank account).

Financial leaders need “scenario-based protection, where you can say, here are some rules that are aligned with my payment policies, I want to make sure I have a backstop to protect all the activity going on, in addition to the standard payment controls I have in place,” Stark said.

Finding Value for Cash

The value of cash is hard to find in the current low interest rate environment. At a session on Monday entitled, “Trapped Cash and Other Pitfalls of a Managing Global Balances,” three treasury professionals discussed how to unlock the value of idle cash. They included Tom Wolfe, CTP, Senior Director of Global Treasury at Marriott Vacations Worldwide; Sam Pallotta, CTP, VP Treasurer at Rockefeller Group International Inc.; and Josh Ormond, VP Liquidity Product Manager at JP Morgan. Both Marriott and Rockefeller are Kyriba clients.

The panel collectively defined trapped cash as “cash that an international business has generated overseas, but is unable to repatriate to their own country.” The panel agreed there are multiple reasons for why cash can be trapped overseas, including foreign exchange controls, capital requirements, restrictions on intercompany lending and punitive withholding taxes. If treasury can move the cash back to the U.S., the organization benefits “by reducing interest expense and freeing up cash to pursue additional investment and earn greater corporate profits.”

With a burdensome repatriation tax, most overseas cash either sits idle or is used to invest in local projects. However, treasurers are now incentivized to look for ways to unlock trapped cash due to rising interest rates. While intercompany loans, in-house banks and global earnings credit programs were suggested methods to mobilize cash, knowing where your cash is and how much you have is fundamental to finding value for cash, they said.

Additional reading: Proposed U.S. Tax Cuts May Give Treasurers Reason to Celebrate

Making the Business Case: Accenture & Halyard Health

Also on Monday, Accenture and Halyard Health teamed up for a session entitled, “The Art of the Business Case,” which detailed how to sell the value of a TMS to internal stakeholders. The key elements of a winning business case are: framing the challenge, describing the current state, assessing the solution landscape, and providing estimated ROI, according to presenters David Lieber, Senior Treasury Manager at Halyard, and Phil Capodice, Treasury Practice Manager at Accenture.

When it came to technology, Halyward ultimately chose a cloud solution -- Kyriba -- because of the quick implementation and the ease of use. Halyard was able to show how Kyriba could reduce risk, reduce labor costs and support the overall business strategy.

Article 3

3 Keys for Treasury Success in Asia

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Monday, October 23, 2017 - 16:30
Hong Kong

Recently, I had the pleasure of learning more about corporate treasury in Asia during visits to our local offices; meetings with clients in Hong Kong, Malaysia, and Singapore; and by attending several treasury conferences. It should be no surprise that corporate treasury is becoming more sophisticated across Asia as firms continue to demand “best of the best” best practices and scalable, easy to use technology.

What I found most interesting about treasury in Asia was:

  • Chinese firms are poised to expand internationally– From a treasury perspective, this interest in growing beyond China has heightened interest in treasury technology that delivers onshore/offshore visibility into cash and currency exposures alongside the need to establish more complex treasury structures such as cash pooling to support onshore/offshore sweeps. Chinese firms are continuing to explore establishing regional treasury centers in Hong Kong or Singapore to align with RMB clearing locations. This is an opportunity where treasury best practices are seen as a significant asset by hiring firms.
  • Automation is not the only goal of treasury technology– Asian-based companies are embracing financial and treasury technology, yet are building ROI models and business justification on variables other than just automation and productivity. With costs of FTEs often much lower than we see in Europe or North America, automation is not the solution to increased workloads. As a result, the driver for technology is implementation of best practices, decision optimization (e.g. improved hedging), and support for treasury transformation.
  • Regional treasury centers are becoming more involved in strategic decision making– Organizations that embrace the opportunity to allow Asian treasury teams to manage key functions (e.g. developing pooling structures or designing hedging programs) are able to deliver more strategic value and drive greater bottom line value than those that try to manage all treasury functions from afar. The knowledge and experience being hired into regional treasury centers, especially in Singapore and Hong Kong, rivals and even exceeds treasury talent in other parts of the world. This expertise is obviously in addition to local knowledge and the ability to work face to face with offshore internal and external partners to treasury.

Additional reading: Overcoming Cash Forecastng Challenges: Best Practice Tips for Treasurers

Treasury organizations that are already well established in the region already know where the right locations are; how to secure experienced staff; and the importance of adopting world-class treasury technology to ensure global visibility over cash, exposures and financial controls. For organizations considering a greater investment in Asia, it is important to:

  1. Choose locations that can offer support in English and local languages, with workable time zones that can also overlap with the head office at some point during the day. Locations that have financial proximity to China (e.g. Hong Kong, Singapore, Macau) are critical so your offshore treasury center is a financial gateway into China itself.
  2. Secure experienced staff who not only have global treasury experience, but know how to balance this with local expertise. The right people need to be motivated and trained well, earning new opportunities to leverage their growing treasury knowledge
  3. Have the right treasury technology in place that supports global requirements, but also local needs (which could be preferred language, local regulations, specific payment or bank account controls, or dashboards that highlight local treasury KPIs). The reduced footprint offered by the cloud helps, as does the ability for a cloud TMS to enable all treasury offices to support each other to deliver a complete business continuity plan.

Asia is an opportunity and those treasury teams that embrace it will be on the road to global treasury success.

Article 4


Nine Scary Stats Keeping Treasurers Up at Night

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Tuesday, October 31, 2017 - 05:15
scary numbers

Once again, it’s the time of year when we worry about things that go bump in the night. And for treasurers around the world, there’s plenty to be concerned about. Here are nine stats that are likely to strike fear in the heart of every treasurer.

1. 74%--Percentage of U.S. financial professionals that were victims of payments fraud in 2016

According to the 2017 AFP Payments Fraud and Control Survey, a whopping 74 percent of respondents experienced attempted or actual payments fraud last year. This was the highest level recorded by the survey in the last decade and much higher than the 62 percent recorded in 2014. The problem is particularly severe for large corporates, where 84 percent of those with at least $1 billion in revenue have been the victim of fraud.

2. $31M--Amount stolen from Xoom in 2014

Money transfer company Xoom’s worst fears came true a couple of years ago when the company was hit by a $31M international scam. The fraudulent attack targeted the company’s finance department via employee impersonation, with the massive sum being transferred to overseas accounts, according to reports. In a statement, the company’s chief executive noted that the fraud “was sophisticated enough to overcome numerous internal protections.” The company was subsequently acquired by PayPal the following year – but not before the CFO had resigned.

3. 10%--Percentage of executives who say their finance teams have strong fraud detection processes

Companies need to have strong processes and technologies in place for detecting fraud and ensuring fraud-related compliance. But only one in 10 financial executives strongly believe that most teams in their industry have achieved this, according to a study published earlier this year by CFO Research, in collaboration with Kyriba. Respondents identified technology as the biggest challenge in combatting payments fraud, followed by budget and time.

Additional Reading: 5 Key CFO Challenges for Addressing Payments Fraud

4. 18 months--The average length it takes for an organization to discover fraud has occurred

The sooner a fraud scheme is detected, the smaller any financial loss is likely to be. But some fraud activities are not discovered for months, or even years. The Association of Certified Fraud Examiners (ACFE) 2014 Global Fraud Study found that the median time from when a fraud commenced to when it was detected, is 18 months. And a fifth of the cases included in the report were not discovered for more than three years.

5. $1M--The amount lost by 22 percent of companies affected by fraud

The ACFE study also reported that the median loss caused by fraud was $145,000, with half of the cases covered by the research losing less than $200,000. But in many cases, the cost of fraud is much greater than this. According to the research, over a fifth of the cases involved the loss of at least $1 million. Likewise, the largest loss reported in the 2016 Kyriba/ACT survey was $2.5 million from a single incidence.

Beyond fraud

While these figures are frightening, treasurers have more to worry about than the risk of fraud. Also concerning are the dangers present in everything from Brexit to inaccurate cash flow forecasting:

6. 60%--Percentage of CFOs who think the business environment will be worse after Brexit

With less than 18 months to go before the UK leaves the EU, the implications are still uncertain. Many issues are yet to be decided, from trade plans to the rights of EU citizens already in the UK. And CFOs continue to worry about the longer-term impact: Deloitte’s Q3 2017 survey of UK CFOs found that 60 percent believe the overall environment for business will be adversely affected by the UK’s exit from the EU. Meanwhile, just under a third expect to reduce investment over the next three years as a result of Brexit.

7. 75%--Percentage of treasurers who are not actively monitoring risks using ‘at risk’ measures

Deloitte’s Global Corporate Treasury Survey 2017 found that FX volatility was the biggest challenge faced by treasurers – hardly surprising in light of Brexit and other political turmoil. Yet, the report also found that treasurers’ analytical capabilities are lagging behind. Three quarters are not actively monitoring risk using ‘at risk’ measures such as VaR (value at risk), CFaR (cash flow at risk) and EaR (earnings at risk). And less than half are using sensitivity analysis to monitor individual risk factors such as FX and interest rate risk.

8. 53%--Percentage of treasurers who update their cash flow forecasts monthly

Cash flow forecasting continues to be a challenge for treasurers, with many companies struggling to predict their future flows accurately. Eighty percent of respondents to PwC’s 2017 Global Treasury Benchmark Survey ranked forecasting as being of high or critical importance. However, the survey found that over half only update their cash forecasts on a monthly basis, while 23 percent did so quarterly. Challenges cited by treasurers included the accuracy of data collected, as well as their ability to collect forecast input on time.

9. 88%--Percentage of spreadsheets contain errors

Last but not least, spreadsheets continue to represent a very real threat for treasurers everywhere. Research carried out a few years ago by Ray Panko, a professor of IT management at the University of Hawaii, found that 88 percent of spreadsheets contain errors. Panko analysed a number of different studies and concluded that spreadsheets contain errors in 1 percent or more of all formula cells. Consequently, “for large spreadsheets, the issue is how many errors there are, not whether an error exists.” Terrifying.

Additional Reading: 7 Truths Treasurers Won’t Accept About Spreadsheets

Modern Treasury Management and Beyond at Kyriba Live! 2017

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Thursday, September 7, 2017 - 09:45
Kyriba Live 2017 logo

The boundaries of modern treasury management are rapidly expanding as a result of global CFOs’ mandate to reduce loss with improved risk management solutions, and to unlock value with optimized cash management and working capital solutions such as supply chain finance. Innovative treasury practitioners and Kyriba, the No. 1 cloud platform for treasury and finance, are behind the evolution of the modern treasurer. The rate of departure from traditional treasury operations is rapidly increasing, and common manual practices that may have been sufficient just five years ago are no longer viable, not only because of the inherent risk exposures, but also because of lost opportunities related to lack of cash visibility and ability to navigate volatile currency markets.

This year’s agenda for Kyriba Live!, our annual customer conference scheduled for Sept. 10-12 in Atlanta, focuses on innovative approaches to modern treasury and finance challenges from leaders who are using Kyriba’s finance and treasury cloud solutions to go beyond the status quo and unlock strategic value at their organization. Client and partner experts such as Spotify, Sempra Energy, Brightstar, Delphi Automotive, Health Care Service Corporation (HCSC), Deloitte, EY, Oracle + NetSuite, and many more will present on a comprehensive range of topics, from cash forecasting and hedge accounting, to payments and working capital optimization. 

The exceptional list of client and partner workshops at Kyriba Live! will help increase awareness of how Kyriba’s treasury solutions are driving change in the industry and help attendees bring back critical information to improve their organization.  Kyriba subject matter experts will also participate in the workshops and continue to raise awareness of the impact of payments fraud and why treasurers need to participate in fraud prevention at their company. Below are several highlights of the conference workshops and topics. View the full agenda here.

Highlights of Client Workshops

  • Spotify will discuss derivative valuations and hedge accounting with Kyriba, including regulations such as FAS133 and IFRS9 that require extensive compliance and reporting.
  • Sempra Energy and Oil States International will present how automation eliminates burdensome processes, but frees up time so treasury professionals can unlock value in other areas.
  • HCSC is an award winning high performance treasury team. In their session, HCSC will explain how they became a strategic treasury operation and how Kyriba helped them get there.

Highlights of Partner Workshops

  • Deloitte Advisory explores the future of treasury in a digital world. From cloud computing and robotics to analytics and artificial intelligence, a new class of digital disruptors is transforming how business gets done.
  • EY presents why we should not view robots as a threat. Instead, we should embrace them as an opportunity to focus on more strategic and creative tasks that can drive value in the treasury function.
  • Oracle + NetSuite uncovers the complexities of accounting regulation changes since Sarbanes Oxley such as IFRS 15 and ASC 606. The changing revenue recognition guidelines that are required as of Dec. 31, 2017 will affect every aspect of business.
  • The Accenture team will examine three common perspectives of cash forecasting and how to maximize forecasting capabilities with Kyriba, including variance reporting and trend analysis.
  • Actualize Consulting demonstrates how a platform utilization study (PLUS) can show attendees what features may help create even more value for their company.
  • FiTech reveals integration between platforms and ERP automation as the key to our digital future. Marking the advantages of a fully integrated cloud solution for electronic data exchange and data aggregation.
  • GPFX Consultants will share a proven methodology to reduce foreign exchange-related risks and costs when doing business internationally.
  • ICD will demonstrate the depth of the Kyriba/ICD integration, and explore the risk, liquidity, yield and operational characteristics of various treasury investment alternatives.

Kyriba is excited to bring together more than 250 clients partners and Kyriba teams to discuss how they have pushed the boundaries of treasury management at this year’s client and partner conference. The Kyriba team is looking forward to the networking, dialogue and knowledge exchange among colleagues and peers that enables us to prepare now for next year’s challenges and opportunities. 

3 Reasons You Should Start Your Treasury Management RFP Today

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Thursday, November 30, 2017 - 08:00

The reasons why companies should adopt a treasury management system (TMS) are even more compelling today than they were five years ago.

A new report by Strategic Treasurer, The Definitive Guide to Treasury + Risk Management Systems, includes a checklist to help firms decide whether they need a TMS. While some of the items listed are perennial, others are becoming more pressing due to increased loss from fraud, rapid changes in currency markets and onerous regulatory requirements.

We’ve picked out three compelling reasons why treasurers who are not yet using a TMS should get start the RFP process today:

1. Fraud

The board of directors knows the company is at risk and is looking for treasury to protect company assets and shareholder value. According to Strategic Treasurer’s 2017 Treasury Fraud & Controls Survey, a staggering 86 percent of organizations have experienced fraud attempts in the last two years.

This is a very real threat – and treasurers and CFOs need to do everything they can to protect their organizations from the possibility of financial loss and reputational damage. A dedicated TMS can play a key role in detecting and preventing fraud, for example, by:

  • Introducing payment workflows with multiple levels of approval
  • Encrypting all treasury data
  • Providing central visibility over bank accounts, authorized signers and bank account documentation
  • Providing a treasury-wide audit trail

Free Download: Strategic Treasurer's Definitive Guide to Treasury + Risk Management Systems 

2. Risk

A recent survey carried out by CFO Research in collaboration with Kyriba identified risk management as a key area where CFOs can add strategic value. But in practice, much of this responsibility falls to the treasurer. As Strategic Treasurer points out, “In many organizations, a significant portion of these risk management responsibilities have been delegated to treasury.”

Managing risk is becoming a bigger responsibility for treasurers because recent geopolitical developments -- like Brexit or inflation in Venezuela -- have triggered significant currency movements, denting many companies’ profitability.

Without a dedicated TMS, treasurers may struggle to manage FX and other risks effectively. A powerful, cloud-based TMS can support risk management in a variety of ways, from offering direct connectivity to FX trading platforms to supporting derivative and hedge accounting. In today’s high-risk environment, these benefits should not be overlooked.

3. Compliance

Also increasing in importance is the compliance burden faced by many treasurers and their organizations. Against a backdrop of increasing regulatory requirements – and hefty penalties and fines – non-compliance is a significant risk. A TMS can support and ensure compliance by providing financial controls and streamlining financial reporting.

Bank account management (BAM) is one area where a TMS can add particular value. Citing developments like FATCA, Basel III and Dodd-Frank, the Strategic Treasurer checklist notes that BAM modules included in treasury systems “can track and report on a long list of bank-related data and information.” According to the report, 70 percent of organizations list BAM as a needed functionality, while 28 percent see BAM tools as the focus of significant investment in the coming five years.

Act now

There have never been more compelling reasons for investing in a TMS, especially as we head into a new year. The many long-standing benefits still apply: a dedicated treasury system can reduce costs, increase productivity, and unlock working capital. But today’s challenging risk and regulatory environment – not to mention the growing threat of fraud and cybercrime – means that for many, purchasing a TMS has become a matter of urgency.

Download the new Strategic Treasurer report todaytolearn more.

Bots, Cryptocurrencies & Faster Payments: 2018 Treasury Predictions

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Wednesday, December 13, 2017 - 08:00
2018 horizon

2018 is almost here! That means we are obligated to recap the past year and make deep, insightful predictions for 2018. While there is much to draw from, our predictions focus on the following:

  • Payments fraud
  • Faster payments
  • Hedging
  • Lease accounting
  • CISO and treasury
  • Robotics
  • Tax reform

Payments Fraud
There were more payments fraud attempts in 2017 than in any other year. Treasurers also reported more fraud successes, as criminals’ attempts grew beyond the basic BEC scams that treasury is trained to recognize. Fortunately, we have also begun to see greater sophistication in fraud prevention, including the introduction of real-time payment screening algorithms to ensure that treasury technology aligns with internal payment policies to stop unauthorized payment activity. The combination of external fraud screening (e.g. watchlists such as OFAC) along with internal, scenario-based real-time detection offers a critical protection against this increasing threat of payments fraud in 2018.

2018 Prediction: Increased number of payment fraud attempts, but less success by cybercriminals meaning actual fraud starts to go down

Faster Payments
Several new faster payment initiatives were introduced or expanded in 2017 including SWIFT GPI, same-day ACH, SEPA Instant Payments, and the very recent introduction of The Clearing House’s Real-Time Payments (RTP) platform. The trend is clearly moving to instant delivery and settlement of payments; the only question being whether existing players will continue to stay relevant amidst the potential disruption of incoming FinTech payment providers. For now, treasury teams will continue to send the vast majority of payments through banks. But the temptation to explore new channels will be too much to resist for those that face extremely high FX translation costs for international payments. Newer Blockchain and distributed ledger technologies will also reduce the perceived risk of working with new types of payment providers.

2018 Prediction: Major banks will support the option of real-time, low value payments in the EU and US. But it will be a costly option, initially limiting the attractiveness to treasury teams.

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Read about use cases for real-time payments

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Hedging
IFRS9 went into effect in 2017 and, somewhat surprisingly, this has been reported as primarily a compliance issue. What IFRS9 actually represents is an opportunity to hedge more easily, with the reigns being loosened for those that used anything but forward contracts to hedge FX or commodity exposures. And even for those ‘simple’ scenarios, the elimination of retrospective effectiveness testing to determine if a hedge was highly effective represents a huge win for those that saw hedge accounting rules as prohibitively difficult to follow. With IFRS9– and the soon to be updated ASC815 in the US – treasury teams can no longer point to accounting compliance as a reason not to hedge currency and commodity exposures.

2018 Prediction: Simpler compliance offered by IFRS9/ASC815 will encourage companies that previously sat on the sidelines to adopt hedge accounting programs.

Lease Accounting
ASC842 (or IFRS16) is a year away. Considered by some as hedge accounting for leases, the new lease accounting standards will have a profound impact on treasurers who have to manage leases alongside liquidity instruments. 2018 will be the year that treasury starts paying attention to both the processes and technology used to support lease accounting. 2018 will also be the year that treasury systems expand their capabilities to not only manage the accounting for leases, but also upgrade the tracking and reporting of lease instruments.

2018 Prediction: Momentum for lease accounting will build throughout the year, as procrastinators realize there is value to preparing early

Cryptocurrencies
Bitcoin is once again at an all-time high, with a price reaching $20,000 USD per bitcoin at one point. Yet, bitcoin will still be a quasi-commodity in 2018 owing to the very limited supply that drives the price escalation (and volatility) we have seen over the last several years. While bitcoin itself is unlikely to become a mainstream cryptocurrency that treasury can use in any practical way, cryptocurrencies will make further inroads in 2018 and subsequent years. The use case that we are starting to see is with aspiring FinTech’s developing cross border, peer-to-peer (P2P) solutions. These providers, often leveraging distributed ledger technology (note: blockchain is one of many distributed ledger technologies), are finding opportunity in the FX spread for cross-border payments that banks so often thrive upon. Many of these solutions are using their own cryptocurrency as an intermediary with net settlement occurring later. While the payment provider absorbs some currency risk, there is enough headroom for money to be made without having to charge sending or receiving fees on the payments themselves.

2018 Prediction: This is not the year for cryptocurrency to hit the mainstream (although the revolution is coming, likely led by e-commerce giants). Bitcoin may be exposed for what it really is: a commodity rather than a currency

CISO in Treasury
This year also saw the Chief Information Security Officer – or CISO – pay more attention to safeguards protecting treasury systems and treasury data. Part of this is regulation driven (e.g. GDPR in the UK, similar to PII in the US), but for the most part this is the best practice of having standardized security and controls across the entire organization. Data hacks – in addition to payment fraud – are becoming more common and no CISO wants the department that manages the organization’s cash to be the weakest link. CISO’s are providing treasury a checklist of requirements including two factor authentication, IP Filtering, and better business continuity planning. The CISO is, in many cases, also taking over security of the treasury systems by implementing single sign-on to their internal environments.

2018 Prediction: Treasury finally gets on board with best practice application and information security practices. And payments fraud is reduced, as a result.

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Read this article about securing treasury operations

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Robotics
Treasury robots are coming. In fact, there are already examples of robotic software managing specified treasury workflows in the US and in Europe. Yet the technology remains limited in that robots are only capable of what we program them to do. While the algorithms may be complex, today’s treasury robot is still at the mercy of predictable data and scenarios. There isn’t much distinguishing a properly implemented TMS from a treasury robot … yet.

But we will see further progress in 2018 where robots with artificial intelligence, including machine learning, will make further commercial inroads. Artificial intelligence offers the tipping point where a technology can actually replace people – giving rise to new types of roles within treasury. This isn’t going to happen overnight; various technology experts across all industries predict disruption to take place within 10 years or less.

Treasury isn’t likely to at the front of the line; there are other functions within organizations that are more likely to benefit from significant process automation. But that should not be an excuse to wait; treasury should begin preparing for its future role as an advisor rather than a processor.

2018 Prediction: 2018 is not the year of ‘treasury as a robot,’ although we are getting closer. Get ready for more press releases and stories about treasury ‘bots.

Tax Reform
Tax reform is almost here, with a few more steps before it becomes legislation. While there remains much political discussion, there is also optimism that the key tenets of what were promised by the current administration will be implemented. These include the cuts in corporate tax rates that support repatriation of overseas cash. There are other complexities, of course, but what the market was promised seems destined to occur.

Most treasurers have begun preparing for repatriation of cash, knowing that if their boards and investors haven’t demanded action yet, they soon will. Repatriation isn’t as simple as wiring everything back to America; there are questions to be asked and answered to optimize shareholder value. Not all overseas cash will be repatriated just like not all cash will be returned directly to shareholders. Yet, all parties seem to agree – this will be a good problem to have compared to the current tax environment.

2018 Prediction: Some investors and analysts will struggle to understand why every penny of overseas cash can’t be repatriated, putting more pressure on CFOs and treasurers to explain what they do to the board and shareholders.

In summary, 2018 should be full of opportunities for treasury. New legislation and regulatory compliance will go into effect, and we will continue to see glimpses into what new treasury technology innovation can deliver.  

5 Ways Treasurers Can Align with the CISO to Reduce Fraud Risk

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Tuesday, January 30, 2018 - 12:30
CISO and treasury team discussing a data breach

In a recent article in Treasury & Risk magazine, Kyriba’s VP of Strategy Bob Stark opined on the significant and wide-ranging risks that treasurers face when they do not team-up with their CISO (or CIO, CTO, IT) to ensure their financial data is safe. In the context of a persistent and increasing number of payment fraud attempts, where more than three quarters of organizations report attempted payments fraud, aligning with your internal security team’s best practices has never been more critical. 


One of the ways to ensure data is safe is to update treasury security policies and to review the policies with internal IT. While many CISOs today prefer a third-party vendor to manage finance solutions in the cloud as a way to eliminate onsite liability and reduce IT workloads, they will still want to know if the solution meets or exceeds data security standards. Here’s a list of five tips from the article to help the treasury team work with the CISO and reduce organizational risk:

  1. Request a list of security best practices, or the company’s security policy, from your CISO. It’s an easy ask and will enable treasury staff to identify any areas where treasury security policies differ from corporate policies in significant ways.
  2. Acquire a list of data-security best practices and policies from the vendor of your treasury management system, and present it to your CISO. Your vendor should have this information readily available. The treasury team’s ability to adhere to policies and establish workflows that effectively protect corporate data will be useful in company compliance audits.
  3. Establish security KPIs with your team. Effectively monitoring access to the corporate treasury management system will impress the CISO. Request a simple report on security access from your treasury management system vendor.
  4. Request training on securing your treasury management solutions. As part of today’s ongoing education for treasury certifications, many webinars and conference training sessions offer tips and best practices that reinforce the importance of secure passwords and multi-factor authentication. It’s a good idea to ask your team to provide a list of the security training they’ve undergone, and to include that information in reports on the treasury function’s security practices.
  5. Treasury systems via VPN. New, best-in-class cloud solutions run in data centers and utilize data security services that most CISOs prefer to see. Nevertheless, there are options for enhancing security for companies that run their treasury management systems on-premises. One key security measure is ensuring that employees working from remote locations can access treasury data only via a locked-down and secure VPN.

In the event the existing solution fails the CISO’s audit, it may be time to seek a new treasury and risk management solution. An astute treasury professional will conduct several reviews before selecting and investing in a treasury and risk management solution (TRM). A typical search for a new TRM will involve:

  • An audit of company KPIs
  • The development of a business case to present to senior leadership for budget approval
  • A review of the market for a proven, world-class solution that will fit your needs today and be able to grow with you

Among the top concerns, however, for any solution should be its ability to provide a secure environment, reduce operational risk by aligning to the CISO’s policies and standards, and eliminating payments fraud. 

How CFOs Can Deliver More Value to the Board

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Tuesday, February 13, 2018 - 15:15
corporate CFO presenting to the board of directors

The overwhelming majority of senior finance executives (94%) believe that boards of directors regard their CFOs as critical strategic business partners, according to a survey conducted last year by CFO Research, on behalf of Kyriba.

Yet while CFOs provide a breadth of support to boards, they do not always provide them with sufficient information and decision-support data in the following six key areas: fraud monitoring and mitigation; performance risk management; strategic and operational risk management; growth strategy support; cost control and strategic decision-making.

A recent webcast, hosted by Chris Schmidt of CFO Research and sponsored by Kyriba, explored the key findings of the survey and addressed the issue of what boards are really looking for in their CFOs. The expert panel of speakers comprised John Granato, Chief Financial Officer of The Andersons, Inc., Roxi Wen, Chief Financial Officer of Elo Touch and Bob Stark, Vice President of Strategy at Kyriba.

Fighting fraud

Fraud has long been a concern for boards because of the huge financial and reputational risks it presents. Today the threat is heightened further by the rise of cybercrime and hackers who target payment systems. It sits squarely within the CFO’s remit because boards expect that payment and other financial systems will be sufficiently protected to prevent fraud from happening and that processes exist to mitigate losses in the event that the organization is hacked. Granato observed that it is also part of the CFO’s role to educate employees on cybersecurity – for example, explaining what a phishing attack might look like – and to improve processes so that fraud can be uncovered sooner rather than later.

“Boards don’t want to have fraud,” said Granato. “As a CFO, I get 10-15 wire based phishing emails a week that get through, and thousands get stopped! This is a problem that is ongoing. We need to continue to educate the board about how we are managing, preventing the hacks. We need good master data governance.”

According to Stark, the four components of a successful fraud prevention strategy are:

  1. Data security– financial data must be protected both within the organization and in transit.
  2. Application security– it should not be possible to access financial systems through the combination of a user ID and password alone; other security measures must be in place.
  3. Workflow controls– these include segregation of duties and separation of processes.
  4. Real-time detection and monitoring– these should be applied to everything from payment systems and bank account management through to supplier portals.

Additional reading: 5 Key CFO Challenges for Addressing Payments Fraud

Business continuity planning

As organizations become more complex, and supply chains grow ever longer, the threats to business continuity increase. A natural disaster in one country can threaten the viability of a company on the other side of globe. “It is important that the organization has an in-depth understanding of the components of its global supply chain and how its business model is impacted by that supply chain,” said Wen.

Boards expect their CFOs to contribute to robust business continuity plans that allow the organization to keep serving its customers even if it has been plunged into a state of emergency. These plans need to address the immediate emergency as well as the shorter- and longer-term scenarios. They also need to be updated as conditions change. Stark highlighted that part of business continuity planning involves ensuring that IT systems have the same level of protection in a business continuity scenario as they do in “every day” mode.

Technology as an enabler

Since technology is an enabler of strong business decision-making, it can represent the difference between success and failure. So there is the same onus on CFOs as there is on other business leaders to make good use of technological tools. “It’s definitely a very important part of our job, having the right understanding and capability in the organization with regard to technology,” said Wen. She added that it is not possible to have a sound internal control environment unless the right systems and infrastructure are in place. 

Granato observed that technology is critical to retaining customers and driving the “fast, analytically based decision making that is essential to compete today”. He also noted: “It isn’t just about the quantity of data. It’s about having an understanding of what data is usable and actionable. I think finance has a unique perspective on that, along with operations.” Nevertheless, Granato said that while CFOs are well placed to assess how various systems and tools could be used together, they also have a responsibility to get the right balance between investing in technology that enables the business to perform better and paying for functionality that is surplus to requirements.

The CFO of the future

Boards expect a broad range of results from their CFOs today, so what will they ask of them five years down the line? With the business landscape changing rapidly, and automation set to play a much bigger role in how companies operate, Wen anticipated that CFOs would need to have a high level of strategic involvement with data and support the board with far-ranging analysis. “I’d say that what-if scenarios are increasingly going to be expected by the board,” she commented.

“It’s going to move toward a more strategic conversation between the CFO and the board,” Granato predicted, “covering topics like how markets are evolving and how we align to stay competitive.” He also highlighted that condensing data into useful packages of information that inform the board will become an important part of the CFO’s remit. “It’s going to be really strategic, but also tactical in terms of getting the right information to the board to make decisions,” he said.

Stark commented that CFOs will be expected to use technology as an enabler for the business to do things better in future than it’s doing them today. “Using technology just to automate what you do today doesn’t have the right value,” he said. “You need to understand the value that technology is bringing to determine whether an investment needs to be made.”

Clickhere to find out more about the six areas where CFOs must deliver more value to the board and to listen to the webcast in full. 

How CFOs Can Deliver More Value to the Board 

Global CFOs and Treasurers Face 5 Massive Business Risks in 2018

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Thursday, February 15, 2018 - 13:30
risk management global

While this is a prosperous period for the world economy, the recent volatility in the stock markets globally is an indicator of changing times. The World Bank has forecast growth of 3.1% for 2018, which will benefit businesses, but at the same time a healthier trading environment brings with it the prospect of wage inflation, interest rate rises and the end of cheap money. As we saw from the dramatic reaction to figures that showed US wages were rising faster than expected, the markets are jittery about the end of loose monetary policy.

Besides macroeconomic developments, other significant changes are afoot. The established political order in the US and Europe is being questioned, tensions are rising again in the Middle East, technology is transforming the way we live and work, and the US is overhauling corporate taxation. Change brings opportunities, but it also presents risks.

So what are the five key risks that CFOs and treasurers should have on their radar in 2018 and how can they manage them?

1. Cybercrime

Cybercrime is an ever-growing and an ever-present threat. It is a particular concern for treasurers since money is of obvious interest to cyber criminals. In 2016, research by the Association for Financial Professionals found that almost three-quarters (74%) of the organizations that it had surveyed had been the target of attempted or actual payments fraud, including check fraud and unauthorized transfers of funds associated with business email compromise attacks. Almost a third (29%) of those that had been targeted by fraudsters had lost $250,000 or more.

Additional reading: Dangers of Bad Cash Forecasts

Corporates that don’t have the right systems to detect unusual behavior and suspicious payments run the risk of their organization suffering serious reputational damage and possibly significant financial loss. Yet, the Hiscox Cyber Readiness Report 2017 found that more than half (53%) of the US, UK and German companies that were assessed for the research were ill-prepared to deal with an attack. Meanwhile, cybercrime cost the global economy over $450 billion in 2016. So CFOs and treasurers must talk to their technology vendors to make sure they are investing in the most effective security capabilities for their systems.

2. Rising interest rates and the end of cheap cash

For years, large corporates have been able to borrow money at extremely low rates. In the seven years that followed the financial crisis, US corporates were typically borrowing from banks at interest rates in the region of 3.25% while the UK corporate borrowing rate dipped as low as 2.65% in the last quarter of 2009. Meanwhile, even in December 2017, the average interest rate for a fixed bank loan of over €1 million for a period of 10 years or morewas 1.75% in the euro area, according to the European Central Bank. In the bond markets, borrowing costs plunged even lower with some companies, such as French pharmaceutical multinational Sanofi and German consumer goods producer Henkel, even managing to issue negative-yielding debt.

Now the clock is ticking on cheap money, however. The US Federal Reserve has hiked interest rates five times since December 2015 while the Bank of England announced its first hike in more than a decade in November 2017. The European Central Bank is expected to follow suit and the Bank of Japan is cutting back on its bond-buying program, suggesting that rates will rise in due course. Corporates should expect their funding costs to increase over the coming months and years, with highly leveraged businesses set to feel the biggest squeeze.

To avoid unwanted questions from the board about being penalized by the high cost of cash or a, global CFOs and treasurers will look to mitigate the risk of more expensive funding by refinancing early and for an extended period of time. They can also mitigate the risk of higher borrowing costs through effective cash management, by better utilizing global cash  surplus balances to reduce short-term borrowings and, and doing thorough due diligence on M&A deals to make sure their company doesn’t overpay for an acquisition that it later regrets.

3. US tax reform

US corporate taxes were slashed to 21% from 35% with effect from 1 January 2018. What’s more, as part of the reform package, there is a one-off repatriation tax on corporate earnings held overseas (15.5% for liquid assets and 8% for illiquid assets) that is intended to encourage US companies to bring back cash they have previously stashed abroad.

On the face of it, the tax reform seems beneficial for foreign companies doing business in the US since their subsidiaries there will pay less tax. Yet some of the rules, including a base erosion and anti-abuse tax (BEAT) and a cap on the deductibility of interest, present challenges for some multinationals that have a US presence and move money in and out of the country. As a result, CFOs and treasurers will need to have greater visibility of their organization’s cash flows in and out of the US and review its strategy for intercompany loans.

4. Brexit

Although the UK is set to leave the EU on 29 March 2019, there will almost certainly be a two-year transition to smooth its departure. During the transition, the UK will have to abide by EU rules in the same way that it does today. It is not clear what the longer-term implications of the split will be, however, since a trade deal has yet to be thrashed out. In the past, UK regulators have been highly influential in influencing EU law for financial services, but going forward, there could be a divergence between UK and European rules – for example, in terms of how the Basel capital and liquidity standards for banks are adopted.

According to PwC, the uncertainty associated with Brexit poses a number of specific challenges for treasurers, including foreign exchange volatility, possible funding shortages and increased counterparty risk if companies have to suddenly develop relationships with unfamiliar financial institutions. So it suggests that organizations put in place processes and systems that enable them to readily access their cash, monitor their treasury risks, adapt their financing strategies to changing markets, and manage their relationships with financial institutions.

5. Economic shock

So far the volatility that we’ve seen in the equity markets in 2018 can be better described as a correction rather than a crash, nevertheless a catastrophe may well lie around the corner. It is no coincidence that the fall in equity prices happens to coincide with the rise in bond yields that has come about as a result of governments buying fewer bonds. In early February, the benchmark US 10-year Treasury bond hit 2.85%, its highest point in four years, as investors pulled out of equities to invest in bonds.

The current market conditions have two significant implications for treasurers. Firstly, as the yields on government bonds rise, it will become harder for companies to issue corporate bonds with historically low coupons. Secondly, if there is a major stock market crash, this could dent consumer sentiment and cause both people and businesses to cut back on their spending, squeezing companies’ cash flow. Also, difficult market conditions may prompt banks and bond investors to refuse funding to companies that are not seen as desirable credits. Of course, it is virtually impossible for a company to buffer itself from the full impact of a major economic shock, but sound working capital management can pay a vital role in helping an organization to survive even the toughest of times.

Ready to react?

In an environment of constant flux, it is crucial to be able to respond quickly. So CFOs and treasurers who can’t capitalize on the opportunities presented by change put their organizations at risk of falling behind. Fortunately, effective cash management is a great foundation for long-term business agility, especially when it is combined with powerful technological tools such as in-house bank capabilities, notional cash pooling and payment fraud detection systems. Our client, Ohio-based plastics supplier A Schulman, is a great example of a treasury that made substantial time and resource savings, and established itself as best in class, by using cash pooling and an in-house bank to reduce bank charges, lower borrowing costs and achieve tax efficiencies.

Ultimately, change does not have to be a threat to organizations. Thanks to technology, it can be a great opportunity for them to profit and grow

 

Global CFOs and Treasurers Face 5 Massive Business Risks in 2018


CFO Perspective: How Corporate Finance Can Enhance Operational Execution to Meet Rising Global Threats

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Thursday, February 22, 2018 - 12:00
CFO Perspective global threats

Global finance leaders are collecting data to support their plans to grow in spite of known and growing challenges that lie ahead. It’s time for finance executives to fully empower the execution of these plans because the future of their companies truly depends on it.

The good times are here, for now. We are elated by a strengthening U.S. economy, falling unemployment, lower taxes and the progress being made in obstructing terrorism. Corporate earnings are projected to rise as a result of lower taxes and like kids in a candy store, we are wide-eyed as we zero in on what to do with cash repatriation. With the extra cash, we might earmark a little bit for a one-time bonus, maybe add to the 401(k), upgrade equipment, buy back a few shares – it’s fun to contemplate and communicate these plans.

Additional reading: Cash Repatriation: The Bar is Now Set

The sobering side of the coin is that the success we are enjoying does not come without higher political risks, which have escalated to unprecedented company and country-specific levels.

The following issues have real potential to menace companies across industries and borders:

  • Growing deficits. We operate in an environment vulnerable to growing deficits driven by social programs and lower taxes. Demographic discontinuity is real and rising in the United States and other developed countries. Support of the elderly and unemployable is a central political issue because America has no working economic or political theories to address it.
  • Terrorism. Beyond our shores, the recent battlefield defeat of the Islamic State (IS) means hundreds if not thousands of IS fighters are scattering around the globe. Implications are serious for companies already facing threats from the group and its supporters.
  • Government black-listing. In countries such as India, an established offshoring destination, and Kenya, an emerging one, and many, many others, the living conditions for working classes can be harsh. Companies are facing greater threats of unrest and hits to their reputations. At the same time, populist movements are gaining ground around the world, resulting in governments nullifying corporate contracts.
  • Trade wars. Continued weakening of the EU, NATO and the UN is doing little to improve stability. Trade conflicts continue to destabilize regions. Migrant crises and terrorism are fueling ever more reactionary populism and stimulating far right violence.

It’s time to prepare for a more challenging future

Times are good, funding is available and companies have a window to act. Now is the time to make an investment that ensures access to trustworthy, global, on-demand information to make sound decisions and run the company – not only during the best of times, but also under the most challenging of circumstances.

Renowned businessman and author Larry Bossidy said it best: “In its most fundamental sense, execution is a systemic way of exposing reality and acting on it.” Is there a better reality than cash? I don’t think so. It is the one measurement we all understand and is every company’s value driver. The company’s cash position is never fake news. In my opinion it is the leading indicator, and what’s more, your treasury department can tell you within minutes when major developments happen anywhere in the world and if they need immediate attention, such as: You reached a milestone on a project because you have set up payment to the vendor; a high-value customer has received and paid for a product or service; a downsizing plan is complete with severance payments scheduled to be paid and the payment amount is above or below expectations. I could go on.

In the current environment, treasury has become the proverbial lighthouse.

           "Treasury is often the first department to identify potential

          issues in our group of companies because problems tend

          to appear in cash flows first."

               Sachio Matsumoto, EO & EVP, Chief Financial Officer,
               LIXIL Corporation

Use technology to remove obstacles to execution  

Accuracy and speed mean everything when managing risks and opportunities alike. The sooner a plan is executed that is monitored on a real-time basis, the better off your company will be. For global companies with events happening at the same time in different countries, global and decentralized operations need the ability to execute as one through demonstrated processes and systems. This is achieved through an integrated business forecasting system that interfaces with a treasury forecasting and business intelligence reporting tool.

Making a business decision, proactive or reactive, starts with reviewing historical, current and forecasted data with a team of advisors, including the board of directors. Dealing with political risk is the same. You need to know how, how much, and where a risk will impact operations. You need to know what resources are available and where, so you can develop a plan.

Once you have a plan, you want to conduct sensitivity analyses to anticipate and understand the what-if’s. Information is also shared with subject matter experts who can assess potential legal, tax, accounting, regulatory, loan compliance, personnel or customer implications.

Generally, changes are made and the plan is updated; however, everything comes to a halt if information is dated, or if people have different data or there are questions about the accuracy of information under review. Strategies most often fail because they are never fully executed, and one of the issues is that a geographically diverse team cannot act in real time with the same information. An even worse scenario is acting on faulty or unreliable information.

The enlightenment that changed my outlook

I recently received an in-depth demonstration of a cloud-based treasury management solution called Kyriba. In it, I saw the answer for a progressive finance strategy, and how to get there. The right treasury management technology, and the real-time role it plays in organization-wide analysis and decision-making, underpins a solid business model for the present and the future.

The platform demonstrates how the treasury function has the power to change the business cycle (cash to cash); provide early warning indicators about the performance of the business; and most importantly, drive the structuring of new business deals to minimize the need for hedging, currency movement and other less reliable strategies. 

Operate with a reliable, current view of the company and world

If you believe as I do that the next big corporate challenge is political risk, especially for multinational organizations, start investing now in the ability to enhance and speed execution with the right talent, processes and information at your command. Procure the ability to monitor progress and cash, and generate reports on a real-time, on-demand basis.

A treasury management system with integrated business intelligence reporting is not a luxury. In today’s environment it is a requirement, and I dare say it is irresponsible for a global company to continue operating without these capabilities. There is no equivalent means of providing real transparency to operations leaders, the executive team, the board and shareholders – or for quickly reaching consensus on the best moves to execute under any given circumstances.

Cash is king and the best early warning indicator available to your organization. 

About Michael

Michael Dinkins

Michael Dinkins is president and chief executive officer of Dinkins LLC, a financial services firm connecting business owners seeking capital with lenders seeking borrowers. Michael has spent more than 40 years in finance, including a distinguished 17-year career with General Electric and GE Capital, and CFO roles with five different publicly traded and privately held companies.   Michael currently serves on the board of directors for Community Health Systems and the National Council on Compensation Insurance. 

 

 

 

 

CFO Perspective: How Corporate Finance Can Enhance Operational Execution to Meet Rising Global Threats

How to Select the Right TRM: Why Cloud Innovation Matters in a Digital Economy

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Monday, February 26, 2018 - 13:30
Cloud based treasury innovation - solution selection

Modernization in cloud financial management software solutions is driving positive change for finance teams, allowing CFOs and senior leaders in treasury and finance to improve their decision making and enhance their business outcomes, according to a new IDC MarketScape report. Organizations that have adopted modern solutions benefit from a number of improvements such as automation, integration with third party applications and a measurable-repeatable set of best-practices that enable senior finance leaders to hit their growth targets. These new operating models are set to greatly enhance status quo business operations.

Additional reading: CFO Perspective: How Corporate Finance Can Enhance Operational Execution to Meet Rising Global Threats

The development of new digital tools for working capital optimisation, FX, account management and payments has done a great deal to ease the burden on corporate treasury professionals, who are inundated with more complex demands from CFOs. In this scenario, automating functions such as cash management, cash flow, working capital, payments and internal transfers allows users to shift their focus to higher level requirements, including cash forecasting, financial risk management, FX management, compliance and more.

Selecting a treasury and risk management solution (TMS - TRM)

Treasury and risk management solutions are evolving rapidly to better serve CFOs and treasury teams. It is extremely important for end users to understand not only how vendors and their solutions are positioned currently, but also how they might be positioned over the next three to five years.

In fact, Kyriba is hosting a webinar with IDC to dive deeper into the IDC MarketScape report findings, addressing "How to Select the Right Treasury & Risk Management Vendor" on March 15, 2018, 2 pm ET. This webinar will be presented by subject matter experts Kevin Permenter, Sr. Research Analyst, Enterprise Applications at IDC and Bob Stark, Vice President of Strategy at Kyriba, and has been approved for up to 1.2 CTP and 1.2 FP&A credits from AFP for the full session attendees. Register today to reserve your seat.

Some of the factors to consider when making purchasing decisions on SaaS and cloud-enabled treasury and risk software and will be covered in the webinar include:

  • Experience in successfully implementing treasury solutions
  • Vendor’s knowledge of financial regulations and guidelines, both local and global
  • Availability of support
  • Vendor’s commitment to the market and strategic investment outlook
  • Ability to integrate with existing internal and partner IT systems

The 2017-2018 IDC MarketScape Worldwide SaaS and Cloud-Enabled Treasury and Risk Management Applications Vendor Assessment has placed Kyriba in the Leaders category, positioning vendors according to “Capabilities” and “Strategies”. The analysts considered a broad range of criteria including customer feedback, platform architecture and security, depth of capabilities such as reporting, bank connectivity, cash and risk management and more. It is a very in-depth and comprehensive analysis of global vendors who provide treasury and risk management solutions.

Importance of data security

The IDC report refers to security as a key strength for Kyriba, for the platform as well as within the application. The SOC2 Type II audit details the enterprise level encryption, single sign-on, and multi-factor authentication among other safeguards to protect user access and data.

Move to the cloud

A growing number of companies are moving their treasury and risk management information into the cloud. IDC estimates that the split between on-premise and public cloud software will shift from 82.2 percent and 17.8 percent in 2016 to 70.7 percent and 29.3 percent, respectively, by 2021. In other words, in the next few years, on-premise applications will decrease by 11.5 percent while, conversely, cloud solutions will increase at the same rate. Kyriba has grown at 32 percent year over year in the past years, suggesting Kyriba is taking the lion’s share of the market segment and that adoption rates may be accelerating.

Future opportunities

Adopting modern treasury and risk management applications is a smart move for treasury and finance professionals to help them deliver more strategic decision support to the CFO and also to generate positive change for their company. Looking to the future for benefits that modern finance solutions should offer, IDC concludes that leveraging business intelligence to provide more insight into cash positions and cash mobilization through working capital strategies will be a significant value in the near term.

 

How to Select the Right TRM: Why Cloud Innovation Matters in a Digital Economy

Preventing Payments Fraud: Is Your CFO Taking the Right Three Steps?

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Wednesday, March 14, 2018 - 14:00
Payments fraud CFO

Protection against cybercrime is a major priority for CFOs and corporate treasurers in organizations of all sizes and geographies. Payments management is the most vulnerable financial process of all – and it is the most attractive target for cybercriminals. This following analysis reviews corporate treasury vulnerabilities, best practices to minimize fraud risk, centralization of payments, and implementing payments processes. Maintaining a low-risk payments environment is achievable, and senior financial executives are well advised to stay abreast of current fraud schemes; the processes that increase exposure to fraud; and solutions that can prevent loss from fraud (and possibly save their jobs). 

Significant and well-known fraud events have hit banks and corporates around the globe, including major cyber heists incidents in Bangladesh, Ecuador, Vietnam, the United Kingdom, Germany and Denmark. The fallout from these incidents are downgraded earnings, significant loss of cash and, in some cases, CFO resignations. Globally, cybercrime is escalating in scope and frequency with company losses from fraud up 23 percent to €10 million Euro ($11.7 USD) on average compared to 2016, according to The Wall Street Journal.

Additional reading: CFO's Guide to Reducing the Risk of Fraud

David Stebbings, director and heard of treasury advisory at PwC London, confirms the high priority that corporate CFOs and treasurers are presently giving to the prevention of cyber fraud. In addition to implementing preventative measures, Stebbings emphasizes the importance of having treasurers define fraud liabilities and responsibilities in their agreements with FinTechs and banks.

“In the worst case, when money has been moved fraudulently out of an account, it is essential that the corporate has an agreed and effective remedial plan and process in place, working closely with their banks. The process should focus on intercepting and reversing the fraudulent payment before it has moved out of their bank – and out of reach,” Stebbings said. 

The primary risk for corporate treasury is the phishing and BEC scams that plague payments workflows so that fraudulent payments can be inserted and executed. 

Corporate Cyber Fraud Vulnerabilities

Treasury is an obvious target for cyber criminals, given its responsibility to execute payments.  So, what are the main factors that render corporate treasuries vulnerable to fraud? 

Payments risk factors commonly encountered include:

  • Decentralized payments management. Without standardised methodology or control, corporates are open to multiple channels of vulnerability, administrative inefficiencies, complexities and costs.
  • Lack of visibility of the payments execution workflow. No central visibility or management of cash, including limits, authorizations, approvals, controls and payment releases, inhibits real-time detection or errors and fraud attempts.
  • Manual entry of payments. Home-grown solutions are not able to adequately create and track payments workflows, including request, initiation, transmission, or separation of duties. This leaves the door open to internal and external fraud.

Modern finance leaders will take heed of the warnings from consultancies, associations and other experts to lock down their payments operations.

There are several steps that finance leaders can – and should – take to minimize fraud risk. Ella Yu, financial services practice Manager at Crown World Mobility, which uses Kyriba’s cloud-based treasury management system, recommends that “technology solutions should be implemented so that automatic messages are sent to key users whenever a payment is flagged or rejected.”

Read the case study from Crown World Mobility to gain a deeper understanding of how Crown leveraged Kyriba to protect their payments and increase productivity by 20 percent. 

Automated communication provides timely information support and addresses a potentially vulnerable point in the payments workflow. With critical and timely feedback, treasury can reduce risk by researching questionable activities before any loss has occurred. 

Step 1: Adopt a World Class Treasury Management Platform

World-class cloud treasury platforms reduce risk for CFOs and treasury teams while aligning to the CIO’s need for corporate security requirements by:

  • Eliminating the need for dedicated internal IT resources
  • Simplifying bank connectivity and bank on boarding
  • Streamlining platform deployment to remote users that improves financial controls for de-centralized finance operations
  • Supporting shared services and on-behalf-of operations
  • Incorporating sanctions list screening and real-time fraud detection and prevention

In addition to leveraging the cloud, modern treasury platforms add significant controls to payment processes to help satisfy internal compliance. Payments technology built within treasury management systems often provide better security features than bank portals with the added benefit of standardizing payment security in a single platform regardless of payment type, geography, or user.

Treasury and payments technology innovations enable greater real-time protections and communication support for corporate finance departments. Further, the most advanced treasury platforms incorporate real-time screening against complex payment scenarios to ensure that unauthorized payment activity is stopped before it’s wired to the bank.  

Additional reading: Fraud in Record Numbers: Why Treasury Needs to Act Now

Step 2:  Centralize Payments Through a TMS

The implementation of a modern TMS platform enables a standardized approach to payments management, eliminating vulnerabilities for corporate treasury (outlined above). Central control delivers a uniform solution that standardizes payment processes, streamlines staff training and delivers a high level of visibility to facilitate effective process management, as well as error detection and correction – including fraud handling. 

In addition to standardizing payments through a modern TMS, launching a payments hub can decrease risk while improving cash flow and further increase visibility into cash. When payments are routed through a payments hub, the number of bank connections and bank service fees are reduced. This centralization of payments via a payments hub allows for complete visibility into outgoing cash flows, and gives treasurers the ability to make strategic decisions about deploying cash.

Centralizing payments or using a payments hub secures the end-to-end payments workflow for single payments or bulk payments concentrated in ERP files.

It’s worth noting that the use of a centralized solution does not require that all responsibilities be centralized. With world-class treasury platforms, local executives have the flexibility to retain origination and approval powers that may be required by internal or external compliance. 

Free download: How Kyriba's Payments Fraud Detection Module Stops Suspicious Payments in their Tracks

Step 3: Implement Payments Policies and Processes Best Practices

Best practices require detailed treasury policy and process standards to be maintained and regularly reviewed. The active participation from the CFO, driving an external expert and peer group, can help the process review and design activity, including the creation and documentation of a safe and effective operation.

Key areas to be addressed include:

  • Full risk review of current processes to help achieve best practice standards.
  • Developing a clearly defined and complete incident response plan to deploy when an actual fraud attempt is detected. This must include the individual responsibilities for contacting the bank involved to intercept and block the fraudulent payment quickly and effectively where necessary.  Establishing rules for assigning payments limits, with segregation of duties and procedures for defining and securing standard instructions, and robust methods for amending and over-riding.
  • Rules for validating and approving high-value payments, based on amount, counterparty and other risk factors.
  • Detailed real-time process monitoring, reporting and error handling procedures; these ideally include sophisticated real-time fraud detection and prevention solutions.

Treasury professionals caught off-guard by a payments fraud attempt will appreciate having an up-to-date and tested payments policy in place. However, those who have ignored these best practices may fall behind their competitors who have.

In Conclusion

Corporates will benefit from centralising and standardizing payments management with modern treasury and finance platforms. Reducing the threat of cybercrime requires the awareness of payments operations’ vulnerabilities and also the creation and regular maintenance of payments policies. Senior finance leaders who are empowered by real-time decision support and the confidence that cash flow is secure, have a better opportunity to improve the strategic function of their team and drive growth for the organization.

 

Preventing Payments Fraud: Is Your CFO Taking the Right Three Steps?

Kyriba Brief: What The Board Really Wants From The CFO

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Wednesday, March 28, 2018 - 17:15
What the Board Really Wants from the CFO

CFOs are being challenged by their boards to deliver strategic guidance. In fact, 94 percent of senior finance executives believe that boards of directors regard their CFOs as critical strategic business partners, according to a recent CFO Research survey of 157 finance chiefs across the US.

During our recent webinar with CFO Research, and special guests CFO John Granato, CFO Roxi Wen, and VP Strategy Bob Stark, the main research findings were examined and guidance on what the CFO of the future would prioritize was provided. Both CFOs offered poignant responses related to the factors impacting business growth including fighting fraud—the number one area where boards are underserved is monitoring and mitigation, according to the survey;” tax reform; business continuity planning; technology and tools.

Download our eBook: What the Board Really Wants from the CFO

Both CFOs agreed that technology-driven business intelligence is a critical new aspect of decision support for the board, and expectations for more complex business analyses will increase in the future.

  • “I’d say that what-if scenarios are increasingly going to be expected by the board,” said Roxi Wen, noting that data and far-ranging analysis will be key to support board level decisions.
  • “It’s going to move toward a more strategic conversation between the CFO and the board,” John Granato predicted. “It’s going to be really strategic, but also tactical in terms of getting the right information to the board to make decisions,” he said.

The challenges CFOs and boards face today are directly related to the acceleration of competition on a global scale. As boards demand more data-driven business strategies, CFOs need to be closely involved in helping define the modern financial technology stack.

Is Treasury Winning the Fight Against Payments Fraud?

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Thursday, April 12, 2018 - 12:45
Payments Fraud Survey 2018 AFP

AFP released its 2018 Payments Fraud Survey this week and it reports that payments fraud attempts have risen, again. Fraud attempts were found at 78 percent of organizations, up from 74 percent the year before. While this is no surprise (in fact, it was easily predicted in this 2018 Predictions blog), the survey did include some other interesting metrics that we in corporate treasury can draw from.

Who finds fraud?

Treasury finds fraud, at least in 2/3 of the organizations surveyed by AFP. While this deserves a round of applause for treasury (yay treasury!), it also masks a darker conclusion. Payments and A/P staff identified fraud in only 41 percent of organizations – meaning that both A/P and Treasury were successful in stopping fraud in only a small amount of scenarios. Why is this?

Additional reading: Ten Best Practices for Addressing Payments Fraud

The answer is that organizations continue to rely on human eyes to enforce payment policies. And people can make mistakes, especially as they take on more responsibilities and have to review more data or match payments against more fraud scenarios. Fortunately, AI-based payment detection is increasing in sophistication, with complex algorithms now able to detect custom fraud scenarios in real-time. This will build a better line of defense and, in some cases, these tools are built into payment workflows in treasury management systems.

Who cannot be expected to find fraud?

The answer is your bank. This is not to say that your bank is not a partner in protecting your organization against payments fraud. In fact, banks invest heavily in complex screening solutions to help ensure that the payments they clear are legitimate.

There are two reasons not to rely on your banks for fraud prevention:

  1. It is not their job. Banks are certainly responsible for OFAC and other sanctions list screening (although an argument can be made that treasury should have their own watchlist screening abilities), but they are not your fraud detection solution.
  2. Real-time payments. Payments are getting quicker all the time, with SWIFT recently reporting that a majority of GPI cross-border payments clear within 30 minutes. That does not leave much time to claw-back a payment should a problem be found. Further, real-time initiatives such as SEPAInst and The Clearing House’s RTP promise immediate settlement of low value payments. And these developments are coming at the same time as the emergence of non-bank payment solutions such as Ripple, who leverage distributed ledgers (“Blockchain”) for immediate payment delivery.

It is likely that real-time payments will become the market standard in the very near future, increasing the importance for corporates to have similarly real-time detection methods to prevent cybercriminals and internal fraudsters from exploiting the expedient settlement of these payments.

Is there any good news in the fight against fraud?

Yes! While fraud attempts predictably increased, fraud success – especially via BEC schemes – is starting to fall. In fact, according to the new survey, 86 percent of organizations indicated they either had or were in the process of implementing controls to fight BEC schemes.

This decline in successful BEC schemes demonstrates two important developments:

  1. Corporate treasury teams are working with their information security counterparts to identify risk exposures and better protect payments systems from attack.
  2. Resources are being made available to corporate treasurers to combat fraud, including strengthening controls, data security, login protection, and fraud detection software.

There is more work to do, especially as fraudsters evolve their own methods of attack by adopting AI technologies themselves. But the fact that corporate treasury is starting to invest in better fraud protections is a positive sign and a critical step in the continuing fight against fraud.

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