Published: May 26, 2020
With the coronavirus pandemic impacting economies, businesses and individuals, TMI asks what treasurers can do to help their organisation weather the storm. In this no-nonsense guide, we take a pragmatic look at best practice during times of crisis, ranging from contingent funding facilities to proactive communication with rating agencies and tackling elevated FX risks and cybercrime.
As a treasurer battling the fallout from Covid-19, the last thing you need is to be told that “a crisis is an opportunity riding the dangerous wind”. Yes, Chinese proverbs have their place, but for most practitioners, the moment for viewing the crisis as a turning point for treasury is a little further down the line. That’s not to say it won’t come, or that some lucky treasurers aren’t already using the current situation to future-proof their operations and drive digital agendas, but for those firefighting on the frontline, practical help is what’s needed most.
This is a time for pooling collective knowledge. For sharing best practice and experience. For relying on business partners to pull out all the stops. One industry expert using his spare time to support others is Paul Byrne, Group Treasurer, Crisis Restructuring/Management, Strategic Advisor & Interim Executive. “Over the last few weeks, I have been contacted for assistance by two CFOs – one from a regional airline and one from a specialist lender – and treasurers from nine different firms, all public companies,” he notes.
When asked about the most pressing short-term concerns for these individuals, Byrne says that liquidity is inevitably top of mind. “Eight out of the 11 people I spoke to had sized their liquidity buffers based on the output of their board-approved ‘severe liquidity extreme scenarios’ and were already breaching these. In six instances their cash inflows had all but stopped, as a direct result of the shuttering of non-essential businesses, closing of international borders, debt moratoriums, unemployment spiking and so forth.”
He adds that, for five of the 11 companies, the situation was amplified, as they had material short-term outflows such as aircraft lease payments, significant IPDs, bond maturities, or drawn credit facilities that needed to be repaid. Of course, their working assumption was that they would refinance within the same quarter or fund from cash flow – but then the crisis hit.
Also worrying, says Byrne, is that “in four cases they did not have a playbook or contingency funding plan on the shelf to act as a roadmap of how to navigate the crisis. And in two instances, it was the first crisis for the CEO/CFO or the treasurer and there was a concern around decision-making based on a lack of prior experience.”
Byrne is far from alone in these observations. A TMI poll of readers found that cash and liquidity issues are top of mind for 64% of treasurers right now. And as David Shinkins, Global Head of Cash Management Sales, Corporate Banking, Barclays, notes: “The core focus for treasurers should be on maintaining liquidity and effective cash flow to ensure each of their respective entities are funded adequately to ensure continuity of their businesses.”
 David Shinkins |
Lisa Robins, Global Head, Transaction Banking, Standard Chartered, agrees: “Arguably the biggest threat is cash flow, with some industries more impacted than others. For industries such as travel and hospitality where revenues have contracted drastically but fixed costs remain largely unchanged, the threat is existential. Access to cash/liquidity becomes paramount in such instances. As an example, Boeing Co announced on 11 March 2020 its plan to draw a $13.8bn loan to address this imbalance.
“Similarly, companies with positive working capital but also high volume of accounts receivables and inventories need to be concerned about potential late payments and/or cancelled orders impacting their ability to fund short-term liabilities as they fall due. In both cases, achieving positive operating cash flow should be the target for such companies, with the aim of increasing liquid assets as a buffer against future shocks and continued market distress,” she says.
And as the pandemic situation changes rapidly, treasurers play an even more critical role in managing liquidity and leading the organisation through to the other side of the crisis. John Laurens, Group Head of Global Transaction Services, DBS notes: “The silver lining amidst this uncertainty lies in the opportunity for organisations to take advantage of digitisation to address disruptions to their supply chains, treasury processes and information flows, access to liquidity etc. The adoption of digital solutions, including cloud and API technologies, helps organisations move quickly to non-physical, contactless operations and online engagement with customers, suppliers and employees”.
What, then, can treasurers do to help beat their cash and liquidity worries – when they have limited resources, are stressed to the max, and are working from home? (See box 1 for more information on remote-working).
| Box 1: Treasury from home: best practice In many cases, treasurers are being asked to plan for temporary and continued work-from-home scenarios. And while many treasury teams already have some degree of business continuity planning (BCP) for short disruptions, today’s crisis may demand longer-term planning, meaning that treasury’s business continuity plan must incorporate security, IT support and controls. According to Simon Shorthose, Managing Director Northern Europe, Kyriba, the first priority for teams working remotely is to ensure that data and/or workflows are secure, and that working remotely does not create more risk for the organisation. “If there are any concerns over log-in procedures, e.g. requiring only user ID and password to access your TMS, you shouldn’t be working from home until your information security team can ensure remotely accessing treasury systems does not create unnecessary risk. However, a SaaS system is designed to be accessed securely from anywhere at any time.” Ideally, no IT support is required to utilise all treasury systems while working from home. “Unfortunately, emergency work-from-home scenarios can yield many surprises – and some treasury teams find out too late that their TMS requires accompanying software, access to local networks for import of data, e.g. from ERP, separate custom reporting software or other IT requirements. To be effective, your treasury systems should not require additional IT support just because you are working from home – and they should be device independent so you can use your phone or tablet without losing key features,” Shorthose adds. He believes that treasury team members must have all the same capabilities and tools available regardless of their location so that the team is just as productive remotely as it is in the office. Especially in times of crisis, information demands from the CFO, CEO and the board will come in real time, making it critical for treasury to operate at full capacity even when working from home. A challenge many treasury teams have is that procedures may change when treasury employs business continuity plans. For example, some treasury teams’ backup plan is to initiate and approve payments in bank portals, instead of the TMS or ERP, when working remotely. “This can be especially troublesome as payments wouldn’t be centralised, meaning that treasury gives up global visibility into payments and has no way to run fraud detection screening,” Shorthose comments. Further, physical security keys may be required if a system is not SaaS. Approval procedure workflow could be difficult to change remotely and will differ when using multiple payment systems and/or bank portals, meaning that backup documentation would not be centrally stored, also making global policy and approval limits difficult to track. “This not only drives inefficiency, but also creates an opportunity for policy non-compliance and potentially payments fraud. Unfortunately, anyone that knows of these procedural inconsistencies – or uncovers them through social engineering – is in a good position to exploit those exposures to their advantage,” he cautions. See the ‘Beating Cybercrime and Fraud’ section of this article for more information (p5). |
First and foremost, gaining visibility over cash is critical. Diane S. Reyes, Group General Manager, Global Head of Liquidity and Cash Management, HSBC, comments: “In this environment, having visibility and control over your cash is more important than ever before. Treasurers will want to be monitoring balances daily, or even intraday, to ensure inflows and outflows are as expected. They will want to know exactly what balances sit within each account and/or liquidity structure. And they will want accurate, up-to-date forecasts for the days ahead. Liquidity dashboards and payment tracking tools can provide this visibility. Having access to information on the go – on a mobile platform – has become that much more critical in the current work environment.”
Having visibility and control, Reyes explains, means that if something unexpected happens – like a large payment from a customer does not arrive on time – the treasurer can react quickly to redress it. “For example, we recently helped one client use receipt of funds information to trigger the shipment of face masks and other personal protective equipment from China to Italy so that they reached health workers in hospitals as quickly as possible.”
Box 2: 9 Tips for Flattening the Impact of Covid-19
Source: Paul Byrne |
Meanwhile, Laurens notes: “Given the uncertainty and rapidly evolving situation, having real-time visibility of cash can be pivotal for the business. For example, treasury can make prompt decisions on refinancing at lower rates, availability of credit facilities, maturity of short-term cash holdings and so on. It’s also imperative to start tracking the overall net position for the group and calling out any specific risks to regular cash flows.”
Some treasurers have systems in place that can help them do this; others are not so fortunate. But vendors and banks are coming up with rapid-response solutions for clients. Several treasury management system (TMS) vendors, for example, are offering free access to their cloud solutions for the months ahead, with installs of useful modules available in as little as one week. These are largely temporary solutions to help treasurers through the eye of the storm, but could lead to longer-term changes in digital treasury set-ups once the dust has settled (more on this later in the article).
Diane S. Reyes |
And, according to Byrne, a sticking plaster is what many will need at the moment. “If you don’t have cash visibility available from your TMS or a consolidating single bank reporting tool, I would be looking to leverage underlying online banking platforms to get that visibility and invest some funds in building short-term fixes or manual workarounds to allow you to receive good-quality information and consider re-prioritising the longer-term solution.”
It is important to be realistic, though, says Bruno Mellado, Global Head of Payments and Receivables, BNP Paribas. “Putting any kind of new technology in place is not going to be an instant solution. Often, the timeframe is not about how quickly the solution itself can be implemented, but how quickly you can clean up your data. The success of any technology in the cash visibility and forecasting space depends on accurate, timely data – if that isn’t there, then treasurers won’t see the true benefits of the solutions they put in place.”
The good news, says Mellado, is that business partners like banks can offer other tools to help improve the visibility of cash by providing more detailed and accurate data. “This includes alerts to be made aware when cash has arrived, in which account, and for which client – which in turn aids speedier reconciliation,” he notes. “In the current crisis, it is important to have data that allows treasurers to anticipate – not just look back at historical patterns. I doubt that the past will be an accurate reflection of what is happening at this time of crisis. So forward visibility is critical, in my view.”
Box 3: Making cash cushions more comfortable By and large, the extreme stress scenarios that companies have been using to size their liquidity buffers did not envisage a symmetrical global lockdown, says Byrne. As a result, “buffers may be understated and require revisiting”. Kalati adds: “Many companies have already drawn down on their credit lines or shortened their investment horizon – making early withdrawals on longer-dated deposits and placing the money into on-demand accounts. It makes sense to have a readily accessible pot that they can dip into when they need that liquidity. Right now, yield is not a primary concern.” Reyes echoes this: “In recent years, treasurers have focused on how to optimise cash and maximise returns, whereas now the priority is ensuring they have sufficient cash in the short and medium term. In the weeks to come, we expect to see more clients increase cash cushions by moving funds from term deposits to cash accounts, or to near-cash equivalents such as money market funds.” In these unprecedented times, treasurers should ‘plan’ for a range of base, best-, and worst-case scenarios, says Robins. “This analysis may result in some having to adjust their current cash buffers.” As such, treasury policy may also need to be reviewed and updated – more on this in box 4. |
Laurens explains that, besides sweeping and pooling for improved cash visibility, balance sharing is an innovative and invaluable liquidity management tool that can be employed to good effect in the current situation. Balance sharing allows companies to share balances from entities with a cash surplus to those with a deficit without the need to set up intraday or overdraft limit agreements. “The benefits accrue to both local entities and to the treasury centre. Treasury retains visibility over the net cash position and can take a more strategic approach to analysing and addressing working capital needs at a regional or group level.”
Many banks also offer multi-bank reporting, so a treasurer can request for intraday and daily balances to be sent from their various banking providers to their main bank for a consolidated view of their cash balances, adds Robins. “Next, treasurers can have their TMS providers accelerate the integration of this information from bank portals to their TMS dashboards. Daily end-of-day positions of those markets or entities not inter-connected will need to be manually consolidated to provide a truly comprehensive view, however.”
Digital treasury developments such as application programming interfaces (APIs) could be useful at this time. “Treasury can also leverage API connectivity to integrate instantaneous payment and collection capabilities into their processes. Solutions such as DBS RAPID (Real-time APIs with DBS) enable clients to receive instant payments, automate accounts reconciliation and provide improved real-time visibility of cash flow,” Laurens notes.
| Box 4: Revisiting treasury policy Byrne believes updates to certain treasury policies may be required, outside of traditional review cycles. These include:
Shinkins adds: “Given the increased level of instant access liquidity available, treasurers should ensure they have an up-to-date treasury policy in place with the appropriate counterparty limits based on the level of risk appetite for each organisation. Treasurers should always ensure they continue to diversify their risk across the multiple asset classes they have available to them.” Whereas Robins highlights that reviewing enterprise risk plans, including a focus on supply chain disruption and second supply options, will be important. “It may also be opportune to review investment policies to ensure counterparty risk is still relevant and sufficient to protect the organisation’s assets,” she says. And while completing a post-crisis review of the treasury contingency plan, she recommends identifying areas of weakness and determining how to address them. Elsewhere, the rapid adoption of new technologies such as cloud solutions and API connectivity – with their associated benefits and risks – may require further refreshing of digital policy frameworks, points out Laurens. “As a consequence, treasury and technology policies will become more interconnected and interdependent, as organisations embark upon the accelerated adoption of digital tools and connectivity solutions in response to the Covid-19 crisis,” he notes. |
In addition, host-to-host connectivity can help to ensure treasurers receive automatic feeds into their ERP or TMS platforms to make sure the data and information is as up to date as possible, says Shinkins. He also recommends that treasurers “utilise embedded transactional FX solutions and automatic execution capability to maximise their overall liquidity position”.
With cash visibility achieved, or at least improved, forecasting and scenario analysis will inevitably come into play. As Robins explains: “Scenario analysis with cash flow forecasting including internal and external source of funds will be a top priority as treasurers manage the current situation.” As such, she believes treasurers should increase the frequency and granularity of analysis and forecasting to, for example, three-month rolling weekly - or even more often depending on the industry - cash flow forecasts to reflect changing organisation and geopolitical factors. This can help ensure that payment and escalation thresholds are reflective of the organisations’ liquidity, for instance.
Suraj Kalati |
Similarly, Shinkins says treasurers need to consider if they have sufficient instant access cash and liquidity in place for a number of scenarios and ensure they have the ability to access more cash dependent on the type of business sector they operate in. “This will be based on the cash flow forecasting required and should be defined with clear communication with the business and sales functions,” he notes.
It is also important to ensure active regular dialogue with the sales and supplier management teams, Shinkins comments, to ensure that the forecasts accurately reflect the current business environment. In turn, this will help identify the need for increased liquidity, or other types of products, so that structured conversations can take place with banks or funding providers.
Suraj Kalati, Global Head of Liquidity and Investments, Global Liquidity and Cash Management, HSBC, adds: “The majority of treasurers use cash flow forecasting tools to help them understand their cash flows, ensure they have access to necessary funding, and know where to invest their surplus cash when it comes in. But these tools are capable of so much more. Used properly, they can give treasurers the ability to stress their cash flows in different situations and offer advice around how to prepare for contingency. Using the tools at their disposal to full effect, treasurers can become even better risk managers, and easily determine whether new liquidity structures or funding sources are required to help the company through the crisis.”
Alongside scenario analysis, treasurers will inevitably be looking for ways to optimise working capital. “In these unprecedented times, internal funding has become more important than ever. Entities that are short of cash can draw down on a shared balance to fund working capital needs and reduce the need for external borrowing,” says Laurens. Treasury can also consider moving their available cash to ‘safe havens’, such as banks with strong credit ratings and capital ratios, for security and returns on cash in line with their risk appetite, he notes. “For organisations with existing facilities, drawing down on them is a viable option too.”
Robins also suggests that target balances left with subsidiaries (automated sweeps) might be reduced to increase liquidity centrally where it can be used and dispersed more actively. She adds that “some short-term tactical actions including discounts or incentives for receivables, improving suppliers payment terms and chasing delinquent receipts, accessing revolving credit facilities [RCFs] and reviewing loan covenants may deliver some success”.
Bruno Mellado |
Meanwhile, Shinkins encourages treasurers to ensure they use technology and automation to ensure they have a clear view of their transactional activity and also to maximise the efficiency of their treasury functions. “In addition, manage your inventories and associated payables tightly to ensure there is minimum cash flow exposure whilst also ensuring that debtors are paying on time to avoid any unnecessary liquidity challenges.”
As well as making sure that customers are paying promptly, maintaining timely payments to suppliers is vital. “In times of crisis, large organisations focused on cash preservation may be tempted to improve working capital by delaying payments,” says Shorthose. This is not a new concept – SME suppliers have been feeling the crunch for many years, especially as many industries extend payment terms to 45, 60, 90 days and beyond. And recent data from Sidetrade suggests that the volume of unpaid B2B invoices has risen by 58.8% (at the time of writing) since the start of the pandemic.
While this days payable outstanding (DPO) strategy obviously ‘generates’ cash, it does so at the expense of suppliers who may be especially feeling the crunch of quarantines, intermittent production cycles and distribution challenges, Shorthose notes.
Instead of delaying payment, he suggests that treasurers can actually help suppliers by offering early payment terms in return for a small discount or via supply chain finance (SCF) programmes. “Injecting liquidity into the supply chain may offer a financial lifeline to suppliers while at the same time reducing the risk of supplier disruption. Further, treasurers will either improve their own return on cash – especially as money market rates have plummeted – or increase DPO by collaborating with a financing bank. Whatever the cash and working capital KPIs, early payment financing can offer a win for treasury while simultaneously supporting the liquidity needs of their SME suppliers.”
Fig 1: Percentage of unpaid invoices |
Mellado agrees: “Previously, many treasurers have been keen to keep hold of their cash as long as possible. But sometimes it is beneficial to pay early – not only to secure a discount, but to help your strategic suppliers. Maintaining the integrity of the supply chain has never been more critical, and the treasurer can play an important supporting role here.”
What’s more, Shorthose believes that by injecting liquidity into supply chains and preserving the health of their suppliers, organisations also ensure a faster restart after the crisis has passed. “Treasurers who excel in each of these areas will not only support their management teams but also emerge as valued strategic advisers, creating further opportunities to influence and drive success,” he says.
For those unable to implement SCF quickly, Laurens says that, in some cases, large ‘anchor’ organisations keen to help their SME suppliers and business partners struggling with the impact of the virus can leverage banks’ liquidity and relief measures. “For instance, DBS is distributing collateral-free business loans of up to S$200,000 to SMEs in Singapore within 24 hours of approval for cash flow support. In China, DBS has activated multiple green channels for credit loan and remittance services to meet the sharply increased credit needs of many suppliers, manufacturers of medical raw materials and pharmaceutical companies.”
Banks are also teaming up with governments to offer financial assistance. Shinkins highlights the example of the UK Government working together with banks including Barclays to support businesses through schemes including the Coronavirus Business Interruption Loan Scheme (CBILS) for businesses with turnover up to £45m and the Coronavirus Large Business Interruption Loan Scheme (CLBILS) for those with turnover above £45m. “These schemes are evolving and as such the latest information can be found on our own website, and also those of the British Business Bank and Bank of England websites,” Shinkins comments.
John Laurens |
Indeed, global or regional companies may find that they have access to a number of different government schemes in each jurisdiction, ranging from furlough-type schemes to direct governmental support for specific industry sectors, such as the aviation sector. Byrne suggests that companies, where they are eligible, should be looking to avail of each of these supports to the fullest extent possible.
Of course, banks are also still offering more traditional financial support – not just crisis-specific schemes. Shinkins notes: “Treasurers should engage with their bank and explore all the funding sources open to them to determine those most relevant to meet their needs, whether that be through their RCF, trade lines or access to the capital markets.”
And for those engaging with their banks around potentially needing to amend or extend their existing facilities, Byrne offers some advice: “It is important to remember in these conversations, that lenders will be incentivised to show flexibility and work with you to get the right outcome. This is not a name-specific credit event and is not precipitated by poor trading performance, financial or balance sheet management by the company.”
Together with banks, the entire financial technology or fintech ecosystem has also mobilised to offer support, including many alternative financing solutions such as crowd lending, financing of purchase orders, factoring or leaseback. “These are also worth considering alongside more ‘traditional’ alternatives,” Shorthose believes.
Another external partner that many treasurers will need to engage with as a result of the crisis is their rating agency/agencies in order to reaffirm financial ratings. The general consensus among treasury experts is to be proactive around dialogues with the agencies – and to arm them with as much information as possible.
For treasurers in sectors such as travel and hospitality, insurance, food service, and oil and gas, now could be a good time for conversations with the ratings agencies, and for treasury to provide strategic guidance and analysis to the CFO and management teams, projecting the message of financial strength and resilience. These can lead treasury teams to clarify cash balances, working capital requirements, access to liquidity and confidence in cash forecasting scenarios.
Shorthose has the following advice: “treasurers who have access to data visualisation tools are empowered to make better decisions and have found it easier to allay management fears, instead instilling confidence that treasury is a reliable strategic partner through these difficult times.
External partner discussions are of course not complete without conversation about optimising digital set-ups. While treasurers have naturally already engaged with their technology vendors and banks around remote access to systems, there are further discussions to be had – ones that can make a real difference now, and also once the eye of the storm has passed.
 Lisa Robins |
“The future will tell us how companies weathered the crisis, but there is no doubt that the maturity of their digital tools will have an impact on their resilience,” cautions Shorthose. “To be effective and fully play its role alongside other management teams, treasury must rely on a platform capable of managing its treasury, payments, risk, and supply chain finance. It must interconnect with the company’s ERP and the whole of its banking and supplier ecosystem whatever the geographic area.”
Ideally, the technology platform that Shorthose describes should also be provided on a Software as a Service (SaaS) basis. “SaaS platforms centralise information, simplify and automate a wide variety of tasks - regulatory, banking, operational, etc. Unlike on-premise systems, a SaaS-based system requires minimal IT support, which can be vital during a time of crisis.”
Some technology vendors are offering services to help clients to make the move towards a SaaS system, or to optimise their current SaaS set-up. Kyriba, for example is offering free support and training services to help its clients continue to meet their strategic objectives and more effectively operate in the ‘new normal’ environment.
Banks are also playing their part, focusing the attention of treasurers on the possibilities of digital transformation – and the benefits on offer. Reyes comments: “Digital tools are essential for anyone wanting to continue operating in the current environment. Already we can see that businesses who have relied on more traditional banking methods are now seeing the value of digital tools. As a result, the strong trend towards digital treasury, based on real-time insights, will accelerate even further.”
Reyes highlights that HSBC has seen a large increase in the number of clients using digital channels for their day-to-day activities as a result of the Covid-19 crisis. “For example, the number of customers downloading the HSBCnet mobile app increased by 32% in the first three months of this year compared with the previous quarter – part of this is as a result of customers moving to soft tokens to remove the dependency on hard token delivery.”
Other interesting digital developments from HSBC include a pilot of remote deposit capture for cheques in Canada – and Reyes says the bank is now fully rolling out the solution in both Canada and the US. In addition, HSBC is increasing the roll-out of e-signatures to support the digitisation of service requests.
Paul Byrne |
Meanwhile, in the UAE, HSBC clients have increased their use of smart safes, which are secure devices that validate and store cash at the point of sale or the company’s back office. Kalati explains: “Cash-in-transit vendors have reduced or eliminated cash pick-up given the risk to their employees, and clients are less able to visit branches to deposit funds themselves.” He adds that smart safes can be used to offer provisional credit, as funds placed in the safe can be credited to a client’s account before the cash itself reaches the bank. “This provides our clients with greater convenience and lower internal costs, while maintaining continuity of service.”
Some of the digital transformation projects HSBC has been working on have by no means been small-scale, either. “We have supported one of MENAT’s largest shopping mall operators on a full-scale digital transformation to improve cash visibility, enable remote cheque printing, and remote data scanning which enables an operator to scan and clear cheques on their own premises. This work has helped keep malls open for essential access to pharmacies and medical facilities during the crisis,” notes Reyes.
Enabling treasurers through digital solutions is also a major focus at DBS. Laurens notes: “In addition to the clear and essential role that treasuries play in stabilising the financial resilience of an organisation during crisis, there are also opportunities to rapidly adopt digital solutions and processes. Indeed, such adoption may be imperative to the survival of the enterprises or business lines within them. Leveraging cloud platforms, API technologies and new instant payments infrastructures in markets to drive and support the rapid digitalisation of commercial business units across the enterprise should be on the ‘to-do list’ right now. The need to move quickly has never been more apparent.”
Digitisation comes with inevitable risks, however. Reyes cautions: “As companies adopt new ways of working, we see heightened fraud risks, particularly from business email compromise.” To illustrate the point, she gives a pertinent example: “We recently intercepted two payments, worth circa $5m, which a client had been manipulated into making as a result of business email compromise fraud. A finance manager at the client, a global technology company, received an email from her manager instructing her to make the priority payments, as well as a call from someone claiming to be an attorney. Due to looking suspicious, the payments were held – and it was only upon confirming with the client that the finance manager noticed that the email purporting to be from her manager, with the same email address, directed her to a suspicious email once she clicked the reply button.”
The bottom line here, Reyes says, is “if a payment doesn’t look quite right, contact your banking partner who will be able to help check whether it is legitimate”. Treasurers should also keep an eye on their payment systems, advises Shorthose. “It is reasonable to expect that fraudsters will increase their efforts to exploit vulnerabilities in payment controls. Many successful payment fraud schemes prey on lack of communication between treasury and finance team members, e.g. CFO is out of the office, and emergency circumstances.”
He believes that adopting a standardised, streamlined and centralised payment process – especially now – will help protect organisations from unauthorised and/or fraudulent payments being successful. “In a prolonged crisis scenario, the need for speed and certainty will increase. Treasurers may consider more effective cross-border payment services, including SWIFT gpi and specialised banking services that could offer more predictability into payment delivery and FX translation rates. In addition, real time artificial intelligence and fraud detection should be part of any modern platform”
| Box 5: Joining the liquidity dots Boards of directors, CEOs and CFOs are all focused on liquidity, which starts with cash but extends much further. For long-term survival, organisations must fully understand their liquidity and need to do so proactively, says Shorthose. This ranges from precisely forecasting incoming customer receipts and payments, to identifying and mitigating risks, improving controls and fraud prevention, and finding innovative ways to preserve cash flow from operations. Yet, performed individually, none of these activities optimises performance. Rather, he advocates active liquidity management – the discipline of continuous value creation leveraging all enterprise liquidity channels. Not one channel, but an interconnected wave ensuring liquidity can be seen, moved, protected and grown. “Taken together and actively managed, liquidity becomes the only medicine for long-term survival. The treasurer, albeit always considered important, is now relied upon to be the organisation’s co-pilot, who must fly the plane during turbulent times,” he says. “Covid-19 is showing us is that the adoption of an active liquidity management strategy is no longer optional. It is mandatory. For those not equipped to actively manage their most valuable financial resource, liquidity, they are paying the price and possibly adding unnecessary risk to the survival of their enterprise.” |
There has been a huge increase in fraudulent activity. Reyes observes that, in particular, there has been an uptick in ransomware attacks on companies, further emphasising the need for treasury teams to have robust contingency plans in place for these type of strikes. Again, she highlights this with an example: “We recently helped an ASEAN customer to recover from a cyber-attack within 24 hours, in time for them to make payroll on Monday morning for their staff – essential in any circumstances, but especially so in the current environment.”
Alongside prevailing cybersecurity and fraud threats, working from home arrangements present additional security concerns. Treasury therefore needs to ensure that the relevant secure access and user authorisation management is up to the task of having large numbers of employees working from home, says Laurens. “With employees working remotely from one another, even relatively simple workflows such as ‘maker, checker, approver’ need attention to ensure continued operation without incurring unnecessary risks,” he cautions.
Robins agrees: “The scale and pace at which organisations have had to institutionalise working from home may mean less than perfect remote working practices. Adherence to protocols, engaging employees as the first line of defence and extra vigilance is required.”
| Box 6: Working From Home: Reducing Cybercrime and Fraud Risk Listen to TMI’s TreasuryCast episode with Nicolas Trimbour, Head of Fraud Prevention and Data Management at the Cash Management Competence Centre, BNP Paribas, for tips on how treasury teams can manage heightened cybersecurity and fraud risks during the Covid-19 pandemic. Visit treasury-management.com/podcast to listen to this episode and more |
She advocates multi-factor authentication, strong end-point security, segregation of duties, and call-back authorisation practices. Regular employee and client conduct, control and best practice reminders can also help reduce threats. “Verification of payment instructions separate from the details contained in the instruction can also help. As an example, a call to the requestor using known records instead of relying on an email or using the details provided in the email. It goes without saying that acting with caution in making a payment, including validating it before processing is essential, while implementing two-factor authentication for processing payments and static data changes adds an important protective layer,” she notes.
Additionally, says Robins, staying connected and monitoring use of virtual private network (VPN) should be high on the agenda to minimise internal fraud. Keeping in touch with staff working remotely has added benefits too. Treasury teams may be finding it tough working in isolation, without their usual in-office discussion. Keeping the team happy and motivated is key to productivity, especially during times of crisis.
A productive and engaged team is also more likely to look for opportunities to improve processes going forward – and be ready to tackle the next wave of challenges. Speaking of which, there is one notable hurdle to have on the radar, says Byrne: “New bank lending may be harder to come by in the medium term and could be more expensive as regulators look for the banks to rebuild capital buffers that were depleted during the crisis, or potentially to build new ones entirely.” Treasury teams will need to be nimble and innovative in response to this potential drought.
Perhaps this will tie in well with what Shorthose describes as “the need to truly transform treasury from its traditional role of transactional custodian of cash to a more active, prominent and strategic function whose primary focus is to optimally manage enterprise liquidity”.
Rethinking the traditional role of treasury as an active liquidity management (see box 5) discipline will require organisational repositioning, investments and a renewed strategic charter, he says. “This is one of the main lessons learned during this crisis.
Corporations will need to seize the moment to ensure their success and resilience, both in the short-term mitigation and recovery phase, and long-term re-ignition of growth phase. Despite the current turbulence, the future is bright, especially for those who draw the right conclusions and take control of their financial destiny,” he opines.
Box 7: Covid-19: The Treasurer’s To-Do List
Source: Lisa Robins |
Others have a slightly more pragmatic view of what will change as a result of the crisis. Robins, for example, highlights the move towards Industry 4.0 as a potential learning point for companies. “The Covid-19 crisis has highlighted supply chain vulnerabilities and the need for resilience in supply chains. While some organisations are considering a move from just in time [JIT] to build larger reserves to cushion for disruptions, a contrarian but burgeoning view is to shift the supplier base closer to the manufacturing facility or the consumer thus becoming locally/regionally self-sufficient, even if it increases sourcing costs, and is more reliant on JIT.”
Simon Shorthose |
In her view, this as an opportunity for organisations to move to an Industry 4.0 model where modular production, the Internet of Things, and machine learning-enabled smart ordering will help organisations be efficient while also weathering disruptions in the future. Robins also sees greater business model change on the horizon, with an inevitable impact on treasury. “With governments, regulators and organisations recognising the valuable role of technology during this crisis, the drive to digital will accelerate across B2B and B2C business models. We expect the momentum behind digitisation to continue. Where many treasurers had previously been driving the digital transformation agenda as a secondary activity, we expect that to change. Bringing their TMS partners and banks together, treasurers have the chance to help lead their organisations to fully embrace the digital era.”
Laurens echoes this: “The leap in digital adoption will likely permanently change aspects of a company’s business operations and working practices, indeed it is unlikely that companies will fully revert to their pre-Covid-19 working practices once this crisis is behind us.”
Banks are also pushing for crisis efficiencies to remain as lasting practices. Reyes comments: “We have worked hard to pick up the pace in our ability to deliver for clients – by modifying internal procedures where it makes sense in the current environment. My hope is that we can retain those streamlined processes once the crisis passes, thereby providing the right balance of speed and security to clients.”
Mellado also hopes that working practices will shift as a result of the crisis, with treasurers and banks working more collaboratively on digital solutions, as they have done through this period of unprecedented turbulence. Above all, though, Mellado believes that the true learning from the Covid-19 pandemic will be to “think the unthinkable when it comes to extreme business continuity.” He concludes: “The secret is being ready for change – because you never know when it will come, or at what speed.”
Showcasing the 2021 Award Winners The nominations for TMI’s 2021 Awards for Innovation and Excellence were not only more numerous than ever, but also pushed the boundaries of corporate treasury development further than ever before. All of the bank, technology vendor and fintech winners have created solutions that respond to real needs – present and […]
Spanish-based hotel group, NH Hotel Group, was operating a manual, decentralised treasury structure, which was hampering cash visibility and control. Here, Luis Martínez Jurado, SVP Financing & Treasury, NH Hotel Group and Máximo Sanz, Senior Cash Management Executive, BNP Paribas, explain how they collaborated to deliver an impressive digital transformation for the group, resulting in […]
According to this year’s responses to the EACT’s annual pan-European survey, the pandemic has not changed the top priorities of corporate treasurers. Instead, it has crystallised the need for increased digitisation. The European Association of Corporate Treasurers’ (EACT’s) annual survey reveals the top priorities for treasurers during the year ahead, identifies critical challenges facing the […]
When data flows are connected, it’s so much easier to make quick and accurate decisions. This is the principle behind the emerging notion of the connected financial office. But how can finance teams achieve the level of unity required to start unlocking the benefits? Gareth Priest, Chief Platform Officer, Bottomline Technologies, considers the keys to […]
