1. Home
  2. Bank Relations & KYC
  3. Cash & Liquidity Management

CTMfile’s Top 10 for 2020

Goodbye, and indeed good riddance, to 2020! For all the optimism around innovation in treasury and finance that was felt as the year begun, nobody predicted the scale of the health and economic devastation that the COVID-19 coronavirus - already spreading on 1 January 2020 - would bring.

Faced with perhaps the most challenging year in treasury management since the 2008 global financial crisis, treasurers leapt into action to protect their businesses capital to the best of their ability. From finding ways to manage cash smarter, to innovative financing deals to secure liquidity, the strategic role of the treasurer that we have seen evolve since 2008 took a quantum leap in 2020, advising corporate boards, on a daily basis in some cases, on the organisation's expected cash flow, providing input on changes to the supply chain, and much more.

Here at CTMfile, we've been working to publish advice, insights, news and case studies from across the entire treasury spectrum this year. Looking back at the content we've provided in 2020, it is great to see this reflected in the statistics of the most read articles of the year, which cover everything from cash management to bank relationships, digital trade management to optimising FX hedging, and more.

Without further ado, here are the top 10 most popular stories and webchats on CTMfile in 2020:

  1. A balanced “diet” is the key to efficient cash management
  2. What’s next for corporate instant payments?
  3. How to prepare a paper for a board presentation
  4. Transaction banking: “What an advantage starting from scratch is”
  5. Top 10 market structure trends for 2020
  6. OH NO, not another Request for Proposal
  7. Marco Polo’s innovative Irrevocable Payment Commitment breaks new ground
  8. The critical role of bank treasuries in the COVID-19 crisis 
  9. Highly automated FX risk management and optimised hedging at Dräger
  10. How COVID-19 can impact your FX cash flow hedge program

 

Driving efficiencies in cash management

Our most read article of 2020 was provided by global treasury technology provider Bellin, and it explored the concept of a "balanced diet" being the key to efficient cash management. The balanced diet in question involves addressing both the technology and the structure that corporates utilise for their cash management - too much attention to just one of these (or too little!) will result in some unhealthy treasury outcomes.

"The first step in optimising any process is analysing existing systems and workflows to determine where weaknesses lie," writes Bellin's Ron Jaradat in the article. He makes two recommendations in this regard:

  • Holistic cash flow review: Having reliable insights into your cash flow movements is the healthy vegetables to your treasury diet. This will allow you to determine where discrepancies may be and act on them.
  • Consistent data analysis and feedback - After implementing your new cash flow structure, the next step is ensuring you have an automated or scheduled workflow to give users feedback on their data accuracy. This cash management solution is the vitamins and supplements to your treasury diet as it allows your subsidiaries to correct previous inefficiencies.  

Adding a flexible treasury management system (TMS) to this style of organised and data driven approach to cash management can bring everything together and deliver the much needed efficiencies that treasuries are under pressure to deliver today.

One area of cash management that has been particularly in focus in 2020 is cash flow forecasting, as many companies were forced to essentially rip up their existing forecasts when the global pandemic hit, moving to far more frequent forecasts and scenario analyses as lockdown measures around the world turned supply chains and customer behaviours on their head. 

With forecasting in focus to this degree, Cashforce demonstrated perfect timing when revealing their forthcoming next generation cash flow forecasting platform. Jack spoke with Cashforce's CEO Nicholas Christian back in September, to get an understanding why this new approach has been developed and what differentiates the platform that is due to launch in Q1 2021 from its competitors.

Payments accelerate into a sprint

The second most read CTMfile article this year concerns payments, specifically instant payments. Most treasurers are aware of the work that has been going on in the financial services world to build the rails that enable instant payments, from initiatives like Faster Payments in the UK that started in 2008, right up to Pix going live in Brazil last month. With developments such as the transition to the ISO 20022 payments standard, and SWIFT building on it's gpi payments solution to head towards a transaction management platform, cross-border instant payments are incoming and treasurers need to be ready.

For corporates, instant payments offer a variety of benefits, of which speed is naturally one, but there are more besides.

"The payments are irrevocable, which removes the risk of non-payment while negating the need for additional transaction fees," writes the article's author, Michael Knetsch, Director, Business Product Expert - Payments at Deutsche Bank. "They also operate 24/7/365, which means that companies can initiate payments at the exact moment they are due without concerns about weekends or bank holidays, thereby allowing liquidity to be put to better use elsewhere."

Open banking is one of many developments that is enabling the further development of easier and more convenient payment solutions, and Knetsch draw particular attention to Request to Pay in this regard: "...a solution that allows corporates to instantly send the payer a payment request - can increase certainty, transparency and convenience of payment processes by, for instance, speeding up the end-to-end process, reducing risk, and easing reconciliation for corporates."

Amongst all the innovation taking place in the payments world, some challenges are evergreen including, sadly, the need to protect against payments fraud. This has been particularly challenging in 2020 as fraudsters have used the COVID-19 pandemic as an opportunity to try to hack and subvert corporate payment processes. Kyriba drew attention to payments security in an article in May that included a number top tips for treasurers on how to mitigate fraud, information security best practices, workflow controls and payment screening, all of which can help prevent corporates succumbing to the fraudster.

Getting comfortable in the board room

Treasury's visibility to board level senior management this year is highlighted in CTMfile's Top 10 for 2020, as the third most read piece of content is all about how to prepare a paper for a board presentation

"The key thing you should keep in mind is that these people have the power to accept your ideas or break them, depending on how well you perform," writes Janine Miller, technical writer at EssayPro. "With proper preparation, you can perform successfully and ensure the board makes the decision in your favour. If this happens, it can really accelerate your career."

Just as treasurers take a methodical approach to their daily tasks, the same should be the case when preparing a board presentation - don't rush it! The article recommends beginning with an outline and building from there.

"Write down the key ideas and concepts, adding a few main points to each of them," Miller suggests. "Once you have a clear and well-structured outline, you will see a bigger image of your future presentation, which should help in the process of writing."

Evolution of bank relationships

Corporate bank relationships continue to play a vital role in the smooth running of the treasury function. This year, a new and powerful entrant announced themselves, as Goldman Sachs revealed they were launching the first new transaction banking service in the US for 30 years. Jack wrote about Goldman's plans in October, which shot to become the fourth most read article on CTMfile this year.

"Goldman Sachs literally started from scratch with no legacy systems and no batch systems and processes holding them back," Jack writes. "The whole project was about being different with all the systems on the cloud, all real-time and all API driven. Working with several partners - including GTreasury and SAP Ariba - they were able to deliver a very different range of transaction banking services using fully integrated APIs."

The services include:

  • Self-service client onboarding and account opening (in less than an hour) as well as secure mobile authentication.
  • Virtual account-based liquidity management, e.g. it as easy to set one million accounts as it is to set up one.
  • Payment services including Intelligent Routing and Swift GPI.
  • Escrow services.

Another innovation in the corporate bank relationship space hit our Top 10 for 2020, as at number 6, Jack explored the implications of the Treasury Delta platform for one of the most fiddly and time-consuming treasury processes, the request for proposal (RfP). Through intelligent data management on the platform, treasurers don't have to start from a blank page when compiling an RfP.

"When the corporate is ready to send out the RFP, the corporate populates the relevant information within the application and then submits to their chosen banks/TMS providers through the platform," Jack writes. "These potential counterparties then sign in, digest the information which is presented in a structured format and respond through the platform with their bespoke offering which includes pricing. Treasury Delta’s platform then produces a summary table comparing all quotes." 

The next stage is for the company and their advisor to carry out their evaluation which can also be carried out within the Treasury Delta platform. Treasury Delta does not get involved in this stage, and once completed the company can then give feedback to their potential suppliers through the chat function and move to shortlist, presentations and final evaluation stage. 

Digitisation has been one of the key themes of the year, and in the bank relationships space it is helping corporates get visibility into their accounts, fees, and cash positions. The recurring theme of how to minimise bank fees was tackled in a well-read checklist originally published by Strategic Treasurer, which walks the reader through a 9-step process to understand and manage bank fees around the world.

Getting a handle on the markets

2020 has been a wild ride for the financial markets. Our fifth most read story, published in the first full week of the year, tried to predict the top 10 market structure trends for 2020. Of course, hindsight is a wonderful thing and it's possible we may have found a place for COVID-19 in the list given a crystal ball, but many of the points on the list have proved to be at least partially borne out. The protracted nature of the US election result, for example, added some unnecessary stress to the financial markets, which jumped in late November when it appeared that the White House incumbent Trump, loser of the 2020 election, had authorised President-elect Biden's presidential transition process to begin. There may still be another sting in the tail or two left, but the world is looking forward to breathing a huge sigh of relief in January.

One of the most interesting predictions in the list from January is around the increasing importance of data scientists. 

“One could argue that most if not all of the market’s evolution over the past decade has come because of access to data and the ability to put it to work,” says Kevin McPartland, head of Research in Greenwich Associates Market Structure and Technology group. “So it should come as no surprise that experts in that field are taking over.”

While the point in the article is around their importance to market trading, the role of data scientists in the treasury realm has also been growing, as sophisticated treasury functions are pooling vast quantities of data from around the business in data lakes, in order to extrapolate behaviours and inform decision-making. The downside for treasury in this regard is that there are only a finite amount of data scientists in the financial sector, and they are also coveted just as keenly by financial institutions and trading houses. Just last week, in our Industry Roundup on 10th December, CTMfile reported a survey by SIX among 113 representatives from buy-side and sell-side firms, exchanges, regulatory bodies and other organisations, that showed respondents ranked data management - including the sourcing and provision of data - and data analytics as the first and second most important initiatives at their firms currently, and nearly all (90%) of the financial institutions surveyed are set to increase their data consumption to varying degrees over the next 12 months, with more than half (52%) looking to generate meaningful insights from data as a strategic priority.

For corporate treasurers, one of the most important market data points is how their short-term investments perform in the various instruments available. In April 2020, ICD-Portal provided five efficiency checkpoints for investment portals, as an alternative to corporates only using their banks to trade.

Digital trade comes of age

Nowhere has digitisation been more hotly discussed, and perhaps even hyped, in the past year than in the trade space. It is a space very much in transition as we speak, a sector that is desperate to overturn entrenched processes, some that have existed for centuries, in favour of seamless, instant delivery of funds and data.

At number seven in our Top 10 for 2020 is the story from February that outlined how Marco Polo’s Irrevocable Payment Commitment breaks new ground

"The new Payment Commitment module combines some of the features of a Documentary Letter of Credit (LC) and the Bank Payment Obligation (BPO) allowing to meet the needs of open account trade transactions," writes Jack. "As a conditional payment mechanism, it is issued to support financing by the buyer or seller bank and facilitates the settlement payments, based on the irrevocable payment undertaking (IPU) of the buyer’s bank towards the seller’s bank. The matching of trade data on the Marco Polo Platform triggers the IPU."

Rival to Marco Polo, Contour, has also been making strides in their efforts to digitise the letter of credit (LC) in 2020. Indeed, this week they revealed HSBC as their first production member. But are Contour, Marco Polo and the other big bank digital trade consortiums missing the point of the problem they are trying to solve? This is the interesting point alluded to in an article published in October written by Tim Nicolle from PrimaDollar, who sets out in detail a solution that takes the best parts of supply chain finance and trade finance to create something new - supply chain trade finance (SC-TF).

"SC-TF should only be used for the more distant international suppliers who need a trade finance solution and where the benefit of getting early payment at shipment is significant," says Nicolle. "Typical SC-TF clients are retailers and manufacturers whose supply chain extends out into the emerging markets."

Tim also hopped on the CTMcast with Jack and Ben in October to explain why this concept really is the next big thing in the global trade space.

Treasury versus COVID-19

With the pervasive nature of the pandemic this year, it is perhaps no surprise that some of our most read articles in 2020 looked at how treasurers could best protect their organisations in the face of the rapid changes caused by COVID-19. In the case of our eighth most read article, the focus was on the critical role of bank treasuries in the COVID-19 crisis. Exploring a report from Oliver Wyman, the article flags up two pillars of activity that applied to treasurers in any organisation - to get a grip of liquidity and to align closely with the business. The third key pillar suggests bank treasurers should proactively interface with government, the central bank, and regulators.

"...pro-actively engaging with policy makers using bank data and information will benefit all parties," the report suggests. "At the same time, bank regulators have recognised the key role expected of banks and have reduced the capital requirements, and cancelled annual stress tests. Keeping the regulators updated, not waiting for engagement, will be important..."

As the year went on, it became clearer that the situation would be prolonged and a focus on infection numbers informed businesses to be braced for spikes in cases throughout the year. An article from GTreasury in September suggested steps for how corporate treasury can get ready for the next spike in COVID-19.

"I do think that businesses behind the curve in automating their treasury processes will have more difficulty with a potential second wave," Mathilde Sanson, GTreasury's chief customer officer, told Jack. "Considering the sharp rise in real-time cash reporting tasks (reporting that is now more often including broader executive team engagement), organisations that lack a treasury management system with effective automation will struggle to complete those tasks efficiently. Treasury and finance teams will then apply their available bandwidth and resources to deliver that reporting rather than to projects that advance their automation capabilities, which will only exacerbate ongoing challenges."

With working capital management to the fore, particularly early in the crisis, a detailed checklist from Bank of America in July looking at how to manage working capital through an economic downturn also proved popular this year. The checklist covers essential considerations for how to agree clear working capital definitions, how to establish a working capital framework approach, how to identify working capital drivers, and how to drive improvements in DIO, DPO and DSO. Given the cyclical nature of the economy, this piece provides plenty of evergreen advice that is well worth bookmarking!

Optimising FX hedging

Of course, foreign exchange (FX) management is a key role for many treasurers, and it wouldn't be a true top 10 list without some inclusion of FX. In 2020, this topic is responsible for both the ninth and tenth best read CTMfile articles.

At #9 is a detailed case study of how medical technology firm Dräger was able to automate its FX risk management and optimise its hedging, in partnership with TIPCO. The pair initially set up a cash flow at risk (CFaR) model which gave an initial indication of group-wide FX risk and cemented the value that the firm could achieve through an investment in the TIP system. The case study shows how the TIP system was integrated with Dräger's existing SAP ERP infrastructure, and how the treasury team was then able to fully automate its FX exposures and risk calculations.

“The TIP RiskSuite allowed us to implement a solution within six months which, due to automation and seamless integration with SAP, has drastically reduced the time inputs for exposure calculation," says Mark Blatt, Strategic Projects, Finance & Controlling at Dräger. "The optimisation of our hedge portfolio reduces hedging costs and the integrated reporting is the most practical basis for the Board to reach decisions."

For revolutionising its FX risk management, Dräger went on to win the AFP 2020 Pinnacle Grand Prize for excellence in treasury and finance, ahead of fellow nominees Peloton and Google's parent company Alphabet.

Rounding out CTMfile's Top 10 for 2020 was a piece from Hedge Trackers looking at how COVID-19 can impact treasury FX cash flow hedge programmes. Published at the start of the pandemic, the piece quickly identifies three sources of cash flow that would be disrupted - supply chain weakness, fall of sales demand, and financiers withholding cash due to the uncertainty.

"As a result, companies that hedge anticipated transactions might find their forecasts related to foreign sales, costs, and even operating expenses at risk," writes Karen Gubler, director of FX and Commodities at Hedge Trackers. "At the same time, economic stresses have historically impacted currency volatility.  Your cash flow hedge program sits at the intersection of this increasing currency volatility and increasing exposure uncertainty."

Gubler goes on to explore the varies considerations treasurers should take with their FX cash flow hedges in this volatile environment, and makes the crucial point for treasurers to be prepared for a forecast conversation with their auditors.

"Treasury needs to prepare for an audit conversation around the impact of changing business conditions on their hedge portfolio," Gubler concludes.

Here's to 2021!

So, that was the year that was. It is heartening to see such a wide spread of treasury topics in CTMfile's Top 10 for 2020, demonstrating the multi-faceted nature of the role but also underlining treasury's importance to business success, particularly in a turbulent year.

With vaccines for COVID-19 beginning to roll out now, it is hoped that 2021 won't be quite as volatile as the year we're leaving behind. Undoubtably there will still be some surprises along the way, but treasurers are emerging battle-hardened from 2020, and ready for anything.

Like this item? Get our Weekly Update newsletter. Subscribe today

Also see

Add a comment

New comment submissions are moderated.