The US dollar and debt yields falling on the North Korea missile test, treasury being a top target for cyber criminals and why treasurers aren’t into real-time payments all hit the latest headlines in the world of treasury this week. Don’t miss our ten top news stories from around the world.
BNY Mellon and Hazeltree launch treasury and cash management solution
BNY Mellon, in partnership with Hazeltree is planning to deliver an independent platform that will streamline cash management for buy-side and corporate firms. On the platform, BNY Mellon’s full suite of cash, treasury and custody services will be available through Hazeltree’s treasury management technology platform.
Through this strategic partnership, not only will BNY’s clients will be able to access and see their entire portfolio on one single platform, but will also help them to optimise the sourcing of collateral, funding and liquidity.
The platform is set to be phased in to select BNY Mellon clients that will be provided access to both the Hazeltree technology platform and the existing BNY Mellon infrastructure.
Treasury is top target for cybercriminals – DB research
Economic Intelligence Unit (EIU) and Deutsche Bank’s latest research reveals that corporate treasury has become the top target for cyber criminals. The research found that cyber criminals prefer to target corporate treasuries as they have an authority that allows them to move large amounts of cash around and have a slew of personal and confidential corporate data that appeals to the hackers. Michael Spiegel, head of cash management at Deutsche Bank states that the research has found that most sophisticated cyber criminals often use social engineering and inside information to organise high-value thefts in corporate treasuries. He also states that the research has identified gaps in corporate defence, including vulnerabilities hidden with third parties and their subcontractors, which gives cyber criminals full opportunity to organise thefts.
According to the research, nearly one-fifth of the companies surveyed do not conduct verification and authentication on their supplier, leaving an open door for fraud. These organisations and their suppliers also do not coordinate cybersecurity strategies, compliance and regulations. It stated that while 92% of the surveyed companies performed internal penetration testing, only 33% of the companies conducted external testing and only 38% required all their suppliers and third party organisations to perform interpretation testing.
With the launch of real-time payments, corporate treasurers have shown less enthusiasm for this mode of payment, as compared to consumers. In fact, a survey conducted by TD Bank in 2016 had revealed that corporate treasurers had found mobile payments and self-service tools to be essential than real-time payments. In the survey, 47% of the respondents had reported of real-time payments not being important for their roles.
This aspect was reflected in a new report released by EuroFinance Corporate Treasury Network and SWIFT. The report consisted of responses from over 300 treasury professional and had highlighted that less than half of the respondents had wanted to make instant payments. The report stated that while 44% of companies that had a turnover between $1 billion and $10 billion had expressed interest in real time payments, only 40% of businesses with a turnover of greater than $10 billion were interested in instant payments.
Analysts have also noticed that corporate treasurers also show a lack of interest in adopting alternative financial service providers and fintech players. The companies have cited concern over security and fraud protection as the key influencers for the adoption. Analysts have stated that it is due to this reason that Fintechs are struggling to convince large companies to let go of their well established solutions and service providers.
Hurricane Harvey’s impact on the global supply chain will be unprecedented and widespread, as predicted by supply chain experts, Bindiya Vakil and Joe Carson, from supply chain risk and resiliency solutions provider, Resilinc. The experts have attributed the interconnectivity of global supply chains, the dependence on chemical and chemical intermediate products and the lack of sub-tier visibility as the primary factors to influence the disruption.
The experts have also warned that the hurricane’s disruption will be felt through the supply chain and be realized at factories and facilities far away from the impacted area. According to Resilinc’s data repository, this is primarily because Texas is currently responsible for almost $600 billion in economic activity and is home to ports that trade with many countries around the world. Its chemical industry forms the foundation block for the interconnected global supply chain, as 68 key chemicals and intermediates manufacturers originate from the Texas region. Many of these chemicals are used in high-tech electronics and semiconductor industry. Resilinc’s data repository tracks millions of parts and raw materials through multiple supply-chain tiers, by mapping the global supply chain connections.
The risk and resiliency solutions provider data repository has also indicated that the average time to recover from an intensive disaster like Hurricane Harvey is 10-20 weeks, with the maximum time to resume full pre-production volumes being as long as 52 weeks. Vakil says, “If the roads leading up to the factory are damaged, that is a 2-4-week disruption, but if the factory is flooded, then equipment procurement or repair time, setup and qualification time, production lead time and transit times, all become a critical path to recovery. The closer you are to the suppliers in the region, the sooner the disruption will hit your supply chain. If these suppliers are in your sub-tier supply chain, and if you have not mapped your supply chain dependencies, the capacity and material constraints will be realized in the weeks to come.”
Resilinc’s experts have assessed that suppliers’ have not invested in and resiliency technologies, processes and tools, and have recommended these organisations to verify extensively when suppliers state that impact is expected to be 1-4 weeks long.
Risk management continues to climb up the corporate agenda as geopolitical and supply chain risk soar
Sword Active Risk, a supplier of specialist risk management software and services has released its annual “ARM Global Customer Survey” that highlights the growth of risk management in the corporate sector.
The report’s initial findings, that concur with the latest report from the Chartered Institute of Procurement & Supply (CIPS) Risk Index, reveals that with the growth in political and geopolitical risk, both UK and US have witnessed an increase in demand for risk management in the corporate sector. While, 93% of risk managers in the UK have reported an increase demand for risk management over the last 12 months in their organisation; 75% of risk managers in the US claimed that the importance for risk management has grown.
The survey had respondents who were risk managers from over 80 global companies in energy, oil & gas, critical national infrastructure, construction, transportation and other sectors.
IBM argues benefits of blockchain
Carsten Stoener, IBM’s competence leader in travel and transportation, stated that IBM is working on more than 400 blockchain projects in industries such as banking, financial services, supply chains, retail and more. According to Stoener, blockchain has the potential to eliminate “all kinds of middlemen”. He stated that blockchain used machine networks in which devices could engage in transactions themselves. Stoner also mentioned that the platform would enable participants to share data more efficiently while creating transparency and eliminating fraud because it doesn’t allow the modification, deletion or additions to any record without the consensus of other users on the network, making it useful for ensuring the durability of contracts and documents.
Deutsche Boerse steps up clearing fight with London ahead of Brexit
Deutsche Boerse has rolled out a new profit-sharing scheme on interest rate swap, in a bid to gain more trade from the London Stock Exchange. This move comes after banks are increasingly facing uncertainty over cross-border markets ahead of Britain’s exit from the European Union.
The German company is planning to launch the partnership program in November 2017 at its Eurex Clearing Business. The program will enable members to receive a share of profits from clearing interest rate swaps (IRS) depending on the volume of business they provide. In the program, around 10 members would be eligible for a “significant” share in revenues of IRS clearing, and would also have a say in how Eurex is run.
German politicians have stated that this new program would aid Frankfurt in its wider battle with other EU financial centres to attract business from London ahead of Brexit. As per Thomas Schaefer, finance minister for German state of Hesse and one of Deutsche Boerse’s regulators, “Frankfurt as a financial center will profit from this because clearing will become more attractive for German and international players.”
Hedge funds stick to their misfiring FX guns: McGeever
Hedgefunds have been sticking to their inaccurate forecasts in regards to betting on a weaker dollar, stronger UK pound and rising US interest rates. However, the latest market positioning data from the Chicago Mercantile Exchange suggests that the two foreign exchange trades from that trio may be a cause for concern. Hedge funds remain extremely assertive in regards to the sterling, even though the currency has registered its biggest weekly fall in a year while their bets on a weaker dollar remain largely unchanged despite the fact that the greenback is on the rise and has been appreciating for four weeks in a row, which is almost 4% since September. However, their short-term US bonds appear to be more fruitful in comparison.
China’s foreign exchange (FX) reserves rose modestly for the eight-straight month in September 2017. This increase, which is being attributed to tighter regulations and a stronger yuan that continued to discourage capital outflows, was slightly more than the markets expected.
According to the People’s Bank of China, the forex reserves had risen from $17 billion in September to $3.109 trillion, as compared to an increase of $10.5 billion in August. This was the first time that China’s reserves had climbed for eight months in a row since June 2014, and brought its stockpile the highest since October 2016. China’s reserves are the largest in the world.
China’s heightened scrutiny on capital movements has helped to reduce outflows, while a stronger yuan against the dollar this year has reduced Beijing’s need to use foreign reserves to prop up the local currency.
US dollar, debt yields fall on North Korea missile test report
A new report that highlights North Korea’s plans to test a long-distance missile, has led to a drop in the US dollar rate and debt yields recorded sharp gains on September 6 2017. The report also reversed earlier jumps that had resulted from the September US jobs data report that had raised the likelihood of an interest rate hike in December.
Analysts have also noticed that with news of conflict between two countries, the markets have become quite nervous. As per Boris Schlossberg, managing director of FX strategy at BK Asset Management, “the market is getting more nervous about the prospect of some kind of a conflict. If they do something over the weekend, even if it’s a mild test, I’m sure we’re going to open up a with little bit of risk aversion on Monday.”
Cash-flow based metrics now feature prominently alongside traditional revenue measures of business performance in the key figures or financial summary pages of any public company.
There are various ways for financial institutions to benefit from advanced technologies and business models provided by FinTech's. Whether a business' approach is radical or incremental, data management can help a company to increase their return on investment, argues André Casterman, INTIX.
Tim de Knegt, strategic finance and treasury manager for the Port of Rotterdam, discusses how he is using blockchain, the challenges he will face in his role of treasury over the next 12 months and the advice he would give to someone starting out their career in treasury.
Far and away, the largest financial market on the planet is the foreign exchange currencies market, where on average individuals and organisations trade more than $5 trillion daily. In the FX world, the ability to master the market isn't considered a luxury for treasury officers–it's a necessity.