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- 09/17/17--13:29: Article 0
- 10/18/17--14:26: Article 1
- 10/10/17--17:47: EuroFinance 2017 Recap: Moving Treasury Forward
- 10/19/17--14:32: Article 2
- 10/19/17--11:19: HCSC’s Treasury Transformation and Other AFP 2017 Highlights
- 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
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.
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:
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.