Cash Management

Elevating the Role of Treasury in a Crisis

January 9, 2021 by Tom Vu

COVID-19 has highlighted the importance of cash flow forecasting, data analytics and cybersecurity, and in so doing the pandemic has elevated the role of treasury.

More than 80% of treasury professionals globally said they believe treasury has become more valuable to their organizations during the pandemic.

Treasurers are tackling unforeseen challenges almost daily. Digital transformation has been fast-tracked. Security risks are growing. Work culture is being reimagined.

In the spring of 2020, our Journeys to Treasury alliance surveyed treasurers in search of practical insights applicable to senior finance leaders worldwide.*

The findings illustrate treasury’s rapid evolution and offer actionable ideas for navigating COVID-19’s impact.

Toward a Simplified, Modernized, Centralized Treasury

Companies of all sizes want streamlined operations, improved visibility into cash flow, and to optimize liquidity and manage risk. Treasury centralization can deliver all those advantages.

In our survey, 28% of treasurers identified centralization as a priority reflecting a long-term trend as treasurers push for better efficiencies and increased control.

The barriers to centralization have included: fragmentation and lack of standardization across processes and controls, bank relationships, account structures, and technology platforms.

But during the pandemic, the liquidity position has changed markedly for many businesses, underscoring the urgency of better managing liquidity and risk through centralization.

And with centralized treasuries adapting more quickly to the current business environment, some organizations are also seeing an injection of resources and support for the transition from senior management.

Top Priorities for Treasurers

Treasurers are reshaping how they work with teams and get work done. Creating the right culture and using the right tools has become crucial. With uncertainty clouding the horizon, finance leaders are asking themselves: What should I prioritize and how can digitization empower my team to make better-informed, data-driven decisions?

Cash flow forecasting is the highest priority for 55% of treasurers, continuing a long-term trend, and reflecting the importance of liquidity management during the crisis.
62% use, or plan to use, data analytics—compared with just 43% in 2019.
35% use, or plan to use, application programming interfaces (APIs) to facilitate integration for on-demand or real-time transactions or data exchange.
More than half (52%) of treasurers are interested in exchanging information in real time, and 47% are interested in real-time liquidity, real-time payments and collections.
37% reported that working capital management is a significant priority for them. But more than half (56%) indicated that they either have no role in working capital decision-making, or have influence rather than responsibility.

Cybersecurity: Heightened Vulnerability and Risk

The pandemic is proving a lucrative opportunity for scammers, fraudsters, and organized cyber-crime gangs.

Whether it’s Zoom meetings, fitness classes or virtual happy hours, work and social life have moved almost completely online. This can make them more susceptible to fraud.

Cyber criminals are exploiting this convergence of forces to spread malware and steal financial and personal data. The FBI calls the spike in fraud the “other” coronavirus crisis, and the SEC has warned of the growing cybersecurity risk to corporations.

Cyber criminals are using an array of attack methods and techniques that require organizations to respond to threats across multiple channels. At the same time, the proliferation of payments types has introduced new risks to organizations. Advanced technologies like multilayered security with adaptive authentication can help protect against threats, but treasury must also adopt a risk-management approach across the function. For example:

Treasury best practices:

Ensure processes and controls remain rigorous given the extraordinary circumstances
Allow extra time for key tasks to avoid making rushed decisions or taking action hastily and under pressure
Build backups into approval processes and provide mobile access for critical business users to enable remote approvals
Centralize master data handling
Digitize processes, avoiding manual and undocumented workarounds
Ensure systems deliver end-to-end traceability and drill down on individual transactions
Use data analytics as an additional layer of protection and be particularly careful when dealing with new clients and/or suppliers
Sanctions screening can be another potential line of defense

Payments best practices

Make sure employees know you will never ask to make urgent payments that do not follow normal procedures. Make clear in your policy that refusing to act on an instruction that is outside normal processes would never be a disciplinary offense.
Maintain vigilance against the risk of identity fraud.
Check and double-check that you know whom you are communicating with. Contact them using known and verifiable details, particularly when onboarding suppliers or amending suppliers’ settlement instructions.
Do not assume that callers are who they say they are (and don’t trust caller ID).
Never give anyone bank or security codes.
Check with management if you have doubts before executing a payment.
Participate in community fraud prevention and supplier validation programs.

The COVID-19 crisis unexpectedly elevated treasury’s role in managing existential issues around liquidity and risk. Although the way treasury functions operate has been reshaped, priorities have remained largely consistent.

Treasurers remain motivated by a long-term, strategic view of business needs, as opposed to being impulsively reactive to the day-to-day demands of the crisis. They have been empowered by technology providing transparency, real-time data and analytics that supports transactions, maintains flexibility and accelerates supply chain and cash cycles.

In the face of the crisis, the priorities of treasurers have not changed significantly, reinforcing the stability of the function during uncertain times. But the role of treasury continues to evolve in the drive to deliver ever greater organizational value.

We are marking the fifth anniversary of our Journeys to Treasury alliance with a “COVID-19 Special Edition” series to help treasurers navigate this unprecedented period. Read previous articles on Cyber Threats, Business Continuity, Managing Liquidity Risk, Cash Flow Forecasting, FX Hedging in Volatile Markets, and Managing the Working Capital Gap.

* Journeys to Treasury is a unique collaboration between BNP Paribas, PricewaterhouseCoopers (PwC), SAP, and the European Association of Corporate Treasurers (EACT). The European Association of Corporate Treasurers (EACT) surveyed 200 treasury professionals from across Europe on treasury’s role and priorities. Survey responses were received between March 11, 2020 and April 15, 2020.

Streamline Payments with SWIFT

January 20, 2020 by Emily Wu

Multinational corporates, such as Vilmorin & Cie, the fourth-largest seed company in the world, face the challenge of having to manage complex payment implementation projects that involve specific message formats, and legal constraints depending on the jurisdiction in which they operate in.

To ensure local treasury teams can test their international payments as efficiently and quickly as possible, BNP Paribas introduced the use of SWIFT’s MyStandards Readiness Portal prior to production testing as a prerequisite for every payment implementation project. This allows their clients to work autonomously through the message specifications testing phase and progress at their own pace, thereby significantly decreasing the number of iterations required between the different teams involved and reducing implementation time.

Business Challenge

Vilmorin & Cie embarked on an ambitious project to implement a new Treasury Management System solution linked directly to BNP Paribas for all subsidiaries of the Limagrain group. Each subsidiary needs to test and implement a number of different payment message formats, which are often quite complex and country-specific.

Without instant and direct access to all specifications in a centralized place and without a validation tool, this process is cumbersome and time-consuming: It requires numerous sequential iterations, based on a trial-and-error approach, between both parties.

When BNP Paribas adopted MyStandards in early 2017, its primary goal was to enhance the customer experience, in particular the onboarding process. MyStandards enabled BNP Paribas to offer a dedicated and customized self-testing portal where its corporate clients can work autonomously and at their own pace to validate the syntax.

BNP Paribas offers Global Channels in 48 countries and has endeavored to centralize usage guidelines for all countries where it operates within MyStandards. This will make it easier for their corporate clients around the world to independently validate message formats and structure. By removing issues with the message in the initial testing phase, the overall implementation project timeline can progress considerably faster.

Greater autonomy

Always available online, MyStandards Readiness Portal allows Vilmorin & Cie to benefit from direct access to the exact usage guidelines it needs, to understand message definitions and specifications, to test messages at their own convenience, and to spot and correct all errors in one go.

“MyStandards is very simple to use,” says Stéphanie Martins, Finance Business Project Manager, Vilmorin & Cie. “Even as a first-time user, I was able to manage the majority of the implementation process on my own.”

“MyStandards is very simple to use and allows us to work autonomously, which makes the implementation project much more predictable, efficient, and fast.”

Stéphanie Martins, Finance Business Project Manager, Vilmorin & Cie

“Thanks to MyStandards Readiness Portal,” says Martins, “Vilmorin & Cie was able to build a message format from scratch and have it match with the guidelines before we went to production. Being able to work independently has been the greatest benefit of using the tool.”

Time savings

BNP Paribas’ testing process consists of several phases: validation of message syntax and business rules in MyStandards, followed by verification of connectivity parameters in BNP Paribas’ testing environment, and finally the “Penny” test in the production environment before go-live.

The message specifications testing process used to be slow, manual, and error-prone. Before using MyStandards, message errors were typically communicated one by one via email. The corporate client had to wait for the bank to provide feedback on syntax and structure, and if changes were required, the IT team of the corporate client would have to make corrections during the production phase—a stressful, hard-to-predict, costly and time-consuming method.

Since using MyStandards Readiness Portal, Vilmorin & Cie has been benefitting from significant time savings. With the validation report, all errors can be handled at once, leaving only those issues that are impossible to anticipate before the next testing phases.

On BNP Paribas’ side, implementation managers valued the decreased need to explain guidelines or to help correct basic message errors via email. They can now focus more on complex and technical issues and engage with the client directly via MyStandards.

Centralized documentation of specifications worldwide

For BNP Paribas to be able to fully meet the worldwide needs of corporate clients, they must create and centralize their usage guidelines for all countries in MyStandards.

BNP Paribas started this journey in the first quarter of 2017. A year later, they had published more than 200 usage guidelines. They are well on track to meet their deadline of completing the documentation phase for global coverage.

Being able to offer such extensive coverage of usage guidelines in a single online repository represents a major benefit for both BNP Paribas and its corporate clients. The era of having to save message specifications locally, where they can get lost and where team members across the globe cannot access them, is officially over!

“The biggest benefit of using MyStandards is making our clients happy.”

Isabelle Volckaert, Marketing e-Channels – Cash Management, BNP Paribas

Results

The MyStandards Readiness Portal enables BNP Paribas to enhance its multinational corporate customers’ onboarding experience. Implementation projects are accelerated, and global teams can work off a single documentation repository and are able to proceed through the initial testing phase autonomously.

Although the project is still ongoing, both BNP Paribas and Vilmorin & Cie have already captured tangible results.

Vilmorin & Cie was able to remove the vast majority of syntax and structure errors before proceeding to the next testing phases. In addition, it was able to build and test complex XML message formats from scratch in less than six weeks—three times faster than before it was using MyStandards. Vilmorin & Cie works with other banks, too, but it mentions use of MyStandards for the testing phase as a major benefit of working with BNP Paribas.

After the adoption of MyStandards in early 2017, BNP Paribas started onboarding corporates using the MyStandards Readiness Portal in September 2017—a mere nine months into the project—quite an achievement for a financial institution of its size and complexity.

More important still, BNP Paribas is able to offer its multinational corporate clients a streamlined implementation solution at a global scale.

Treasury Strategies for High-Growth Tech

July 17, 2019 by Emily Wu

Treasury managers at high-growth tech companies operate in an unusual environment. The fast pace of these companies can lead to growing pains, but it also offers Treasurers a unique opportunity to contribute to their businesses’ success.

To discover the common issues that this group faces, Bank of the West sponsored the first meeting of the Tech 20 High-Growth Treasurers’ Peer Group in Silicon Valley. The sessions focused on top issues at fast-moving companies. Three primary areas stand out among the Treasurers’ concerns:

Setting up treasury for future success
Creating successful banking relationships
Solidifying the role of treasury inside the company

Here’s what the peer group had to say about each area.

1. Setting up treasury for future success

Among the most fundamental responsibilities, these participants said, is ensuring that the reason for the corporate treasury function is fully understood. Beyond cash management, they believed a forward-looking Treasurer should anticipate future funding needs, support daily operations, and manage financial risks.

This is particularly challenging as many high-growth tech companies are in hyperproductivity mode. Treasurers at the Tech 20 sessions were likely to have fewer than five people in their department and only one or two direct reports. Even so, they have to match the pace and integrate solutions that are quickly scalable throughout the company.

“Including myself, we are a relatively small treasury organization, and members are expected to be cross-functional,” a Treasurer said. “For instance, the same [Assistant Treasurer] will work on liquidity as well as capital structure and capital markets.”

Cash awareness is also especially vital for these companies, where cash reinvestment, rather than funding returns to shareholders, is paramount. As such, the Treasurers agreed that a pervasive culture of cash awareness should be created to ensure reliable forecasting and planning.

2. Creating successful banking relationships

Banking relationships—and making sure that both sides understand their mutual expectations—are also a top concern.

The first recommendation among Treasurers is to clearly assess whether their bank fully understands the company’s business, to ensure that the bank is making appropriate commitments, and that the bank has the right capabilities.

For example, the credit underwriting process should meet the particular needs and match the growth status of the company, including whether the account will be handled by the commercial or corporate banking area. Ensuring access to the right bankers is vital, they said.

The banking relationship with treasury should also be understood by the board and the CEO, these Treasurers said. As the senior executive who often has the most experience with bankers, the Treasurer should set internal expectations that the relationship resides fully within treasury management.

But a solid banking relationship should not necessarily inhibit Treasurers from looking beyond traditional banking. They should consider seeking new technology and financial solutions that would bring efficiencies and cost savings to the company.

Treasuries with bank-agnostic infrastructures, together with ensuring end-to-end service delivery and speed-to-market capabilities, might help position their companies for significant opportunities in the future.

3. Solidifying the role of treasury inside the company

For a Treasurer at these high-growth companies, one of the most important elements is solidifying at the highest levels a clear understanding of treasury’s role and responsibilities.

To help ensure treasury objectives reinforce the company’s goals, a firm understanding of the ongoing strategic vision of the CEO is critical, as well as an analysis of the company’s mission statement for current and future cash flow needs. Many Treasurers believe any mention of capital or business objectives that are capital intensive should be incorporated into treasury planning.

One important way to win support for the treasury function is to deliver specific accomplishments early, the Treasurers said. Specific and quick-to-deliver wins that address the concerns of the C-suite can ensure treasury management is understood as a vital and respected part of the company’s operations.

Finally, as treasury strategy is developed with a global view for expansion, either now or in the future, a multicurrency mindset should be adopted to accommodate the acceptance of local and foreign currencies in payments and receipts. Anticipating future needs and building them into current practices is one of the best ways to ensure relevant and successful treasury management, according to many treasury managers.

How Ingram Micro Centralized Payments

July 17, 2019 by Emily Wu

In the wake of their European counterparts, Indian global organizations are looking at treasury centralization as a smart, forward-thinking way of doing more with less, with shared service centers and payment factories at the forefront of change. In a nutshell, here is what leading Indian corporates have implemented to streamline their treasury processes, and the tremendous leap forward that they have made as a result.

Present on the whole distribution chain from order to delivery, high-technology distributor Ingram Micro (IMIL) is a Fortune 100 group handling more than 44 million orders each year on behalf of prominent manufacturers.

Why Cash Management Is Strategic

Generality – IMIL’s business is highly working-capital intensive. Margins are tight and competition is harsh. Collections and reconciliation are critical to optimize IMIL’s working capital; and from both perspectives, time is of the essence.

Collections – At a domestic level, IMIL relies on its extensive, sophisticated supply chain and distribution infrastructure based on thousands of local distributors across 37 locations in India. Whereas yesterday, checks were still widely used (with IMIL supporting all the associated costs), the shift toward selling through large retail stores has led to a significant increase in high-volume, low-value electronic payments.

These local vendors are the backbone of IMIL’s sophisticated delivery infrastructure and the channels that are critical to its reputation and success.

Payments – At an international level, IMIL’s suppliers are a relatively small number of large, leading vendors like HP, Samsung, Microsoft, Apple, and Vodafone. International bills are settled via cross-border foreign currency payments. Challenging and time-consuming administrative and import-related tasks are important parts of the procurement process, too.

The Solutions Implemented

To gain efficiency and support for its ambitious development program, IMIL aimed to centralize payments and collections, and to do this, the company started working with a smaller number of banks. The ability for its banking partners to integrate technology was key to IMIL, with a particular focus on host-to-host connectivity between banks and the company’s SAP infrastructure.

Chosen further to IMIL’s request for proposal, BNP Paribas provided fully integrated solutions and was put in charge of IMIL’s most labor-intensive paper-based activities, with reduced costs and risks as a result. In addition to payments and collections, BNP Paribas provided intraday electronic balance and transaction reporting to enhance cash visibility and control.

Among the solutions:

Payments: Electronic processes are now centralized for both domestic and international vendors.
Collections: A virtual account solution (eReceipts) provides structured information that allows for identification of each remitter and performance of a fully automated reconciliation. Among other benefits, customer credit limits are updated throughout the day, which gives way to renewed business opportunities.
A mobile solution transmits dematerialized check information in real time, thus reducing the collection float and improving the reconciliation process.
Thanks to a dedicated warehousing solution, the resource-intensive process for managing import documents to pay international vendors is now outsourced.

More than merely implementing solutions for payments and collections, IMIL has restructured its entire cash and working capital management—replacing heterogeneous and fragmented systems and processes with a centralized, standardized approach, bringing the company tangible and measurable benefits as a result.