Five challenges CFOs face from a “deadweight” economy

CFOs are facing a “deadweight” economy that challenges an organisation’s ability to meeting corporate performance expectations, according to Gartner. CFOs now contend with tepid demand growth, stubbornly higher costs and constrained access to capital, making it harder to sustain the corporate performance stakeholders have come to expect. Gartner characterises this combination of headwinds as the deadweight economy.

Confronted with these challenging economic conditions, Gartner suggests CFOs must address the following five emerging challenges to drive profitable growth in this environment: 

1. Zero-sum growth: Given cooling demand conditions in advanced economies, CFOs and their executive teams will have to deaverage their segmentation of markets, customers and value chains to identify new growth opportunities and customers that are underserved by industry titans.
2. Waning pricing Power: Greater price sensitivity from indebted consumers and B2B customers reduces the viability of pass-through pricing to neutralise the impact of cost pressures. CFOs should reconsider their automatic pass-through pricing strategies and assess opportunities for dynamic pricing.
3. Expensive productivity malaise: As productivity stagnation continues, organisations must drive scalable outcomes from expensive digital investments. The impending commercialisation of generative AI and the rise of machine customers make strengthening the working relationship between humans and technology essential.
4. Institutional knowledge cliff: The tacit and experiential knowledge required to digitalise processes fully is quickly eroding due to the ageing workforce and labour market trends. Organisations seeking to accelerate digital must do so in a seller’s market for technical skills, as the demand for digital talent far outstrips its supply. Expensive digital talent requires institutional knowledge to implement and run digitalised processes and analytics that deliver against lofty ROI expectations. 
5. Bank lending squeeze: As many organisations come up on maturity dates for debt and revolving lines of credit and encounter higher costs when refinancing, their CFOs will now have to consider alternate sources of financing for growth and maintaining cash reserves. This means exploring nontraditional funding sources, such as secondary equity issues, public-private consortia, private investment in public equity, venture capital, peer-to-peer lending and non-dilutive financing options.

Gartner suggests three strategies that CFOs can use to cultivate outperformance for their organisation are to focus spending, resources and efforts on points of differentiation to inform pricing and supply chain optimisation decisions; adopt a capital activist posture to grow market share and secure funding; and relentlessly drive digital cohesion to realise productivity gains.

 

43% of treasurers cite macroeconomic risk as a serious challenge 

Forty-three per cent of treasury professionals consider macroeconomic risk (including the pace of GDP growth, inflation and interest rates) to be one of the most challenging risks to manage, according to the 2023 AFP Risk Survey, supported by Marsh McLennan. This figure is up 24 percentage points from 2021, when only 19% thought this to be the case.

Additionally, nearly half (49%) of survey respondents indicated that macroeconomic risk will significantly impact earnings in the next three years. Fifty-two per cent of survey respondents report that their organisations are currently exposed to greater uncertainty in earnings overall, and 53% believe their organisations’ earnings will be exposed to more uncertainty over the next three years.

Cybersecurity risks, cited by 50% of respondents, remain the most challenging risk for treasury professionals to manage. Furthermore, over 80% of respondents reported that their organisations are more vulnerable to cyber risk due to the expanded use of technology.

Elsewhere in the survey, 65% of respondents reported that their organisations have plans to curb costs or control expenses in the next 12 months. The primary reasons for these plans were fears of recession and uncertainty in the economic environment (59% of respondents) and inflationary pressures (58%). To protect against instability with banking partners, nearly half of the treasury departments focus on concentrating their organisations’ partnerships with larger banks for services (cited by 48% of respondents).

Treasury professionals view treasury as adding value through risk management by demonstrating short-term and long-term financial sustainability (cited by 67% of respondents) and delivering insights on access to liquidity to meet obligations (66%).

“The evolving risk environment calls for treasurers to broaden their risk management scope, develop robust risk intelligence tools, and strengthen collaboration with internal and external stakeholders,” commented Reid Sawyer, Head of the Emerging Risks Group at Marsh. “By aligning risk management strategies with economic trends and internal growth strategies, treasurers can proactively protect their organisations’ financial stability and enhance their overall risk resilience.”

 

ION Treasury launches new Wallstreet Suite

ION Treasury has announced the launch of its new Wallstreet Suite solution. The suite is an enterprise-level treasury management system and payment hub solution. It is designed to handle treasury needs, including high payment volumes and sophisticated risk management while providing global visibility to cash, liquidity, and exposures. 

In a statement, ION said that its vision when developing the new Wallstreet Suite was to enable finance teams to achieve more through automation and exception management, making it possible to scale operations and bring greater visibility to the finance organisation.

ION Treasury gathered research through its ‘day-in-the-life’ program, customer interviews, implementations, and feedback from treasury advisory firms to better understand the sector’s evolving needs. The research showed that treasury processes were suboptimal, lacking automation and visibility, and needed tighter integration between operational payments and treasury. To address these needs, the firm reimagined treasury processes, improved data management and technology and re-engineered the Wallstreet Suite solution.

The solution’s exception-based approach uses visual design to inform users of processing errors or required actions. Wallstreet Suite is designed to simplify collating data from many external sources and then display new information in real-time across all process areas to ensure complete alignment.

Also new to Wallstreet Suite is the payment hub, which establishes a link between payment and treasury operations. The payment hub aims to support high volumes, centralises bank messaging and connectivity, and delivers payment services such as sanction screening and fraud detection globally. The firm says that connecting the end-to-end process reduces operating costs by optimising working capital decisions and managing in-house banking services.

 

JPMorgan developing a blockchain-based digital deposit token - Bloomberg

JPMorgan Chase is exploring using a blockchain-based digital deposit token to speed up cross-border payments and settlement, according to a report from Bloomberg.

The bank has built much of the infrastructure needed for the project, but citing a source, the Bloomberg story says the bank will not create the token unless it receives approval from regulators in the US.

JPMorgan’s current digital token, JPM Coin, has been used for several years to help corporate clients move funds in dollars and euros from accounts within the bank. The difference with this new token is that it could be used to send money to clients of other banks and settle trades of tokenised securities, the Bloomberg story notes.

A statement from the bank to Bloomberg noted that: “Deposit tokens bring plenty of potential benefits, but we also appreciate that regulators would want to be thoughtful and diligent before any new product gets developed and used. Should that appetite develop, our blockchain infrastructure would be able to support the launch of deposit tokens relatively quickly."

 

Northern Trust developing digital platform for voluntary carbon credit transactions

Northern Trust has announced it has completed the first stage toward an industry-wide voluntary carbon credit ecosystem that would allow institutional buyers to access carbon credits from leading project developers digitally.

The announcement follows Northern Trust’s milestone of completing fully automated transactions on the initial minimum viable product (MVP) digital carbon credit platform it has developed with carbon avoidance and removal project developers, including Go Balance Limited, ReGen III (TSXV: GIII) and a direct air capture company in addition to institutional buyers.

The ecosystem uses private ledger digital blockchain technology to connect institutional buyers with carbon credit suppliers who are focused on solutions to reduce greenhouse gases, including carbon dioxide. The fully digital platform allows purchasers to transact tokenised carbon credits directly with project developers and retire these against their carbon footprint.

Project developers transact with buyers of voluntary carbon credits via an online platform. Legal agreements are generated using smart contracts via the Avvoka legal contract tool, with the agreement outputs creating the basis of the transaction, driving complete straight-through transfer and settlement of the digital credits for fiat currency on the specified settlement date.

“The use of digital technology to manage the lifecycle of carbon credits gives both the buyer and project developers confidence and transparency through the lifecycle of their voluntary carbon credit transactions,” said Justin Chapman, global head of Digital Assets and Financial Markets at Northern Trust.

 

NAB technology unlocks digital invoicing for healthcare providers

NAB’s dedicated healthcare claiming solution – HICAPS – has developed new digital invoicing technology to simplify and accelerate how healthcare and disability providers interact with National Disability Insurance Scheme (NDIS) participants.

HICAPS NDIS Invoice Anyone is designed to help NDIS providers streamline how they transact with NDIS participants, which, in turn, grants participants better access to their choice of health practitioner.

The solution has been specifically developed for businesses that provide healthcare and disability services to plan managed or agency-managed NDIS participants, which accounted for 88% of the estimated AU$36bn spent on National Disability Insurance Agency (NDIA) services in FY23. An accompanying HICAPS Terminal can be used by NDIS providers for self-managed participants.

 

Deutsche Bank launches DB Investment Partners

Deutsche Bank has announced the launch of DB Investment Partners (DBIP), an investment manager established to give institutional and high-net-worth clients access to private credit investment opportunities. The entity will operate independently of Deutsche Bank, and the bank will retain its existing balance sheet-driven private credit business.  

DBIP will be independently chaired by Jon Aisbitt, the former chairman of Pension Insurance Corporation and Man Group. It will be run day to day by CEO Raheman Meghji.  

DB Investment Partners will invest across a range of private credit investment strategies and asset classes, including corporates, real estate and asset-based finance. This will include renewable finance and energy transition financing as well as infrastructure financing globally.  

 

2tokens, ABN AMRO, Assetblocks and Rabobank team up in the European Blockchain Sandbox

Rabobank, 2Tokens, ABN AMRO, and Assetblocks have partnered on a joint application for the European Blockchain Sandbox (EBS). The EU has accepted the use case in the 1st Cohort 2023. The partnership aims to legally explore the use case of a tokenised financial security and a stablecoin integration. Together, the firms want to bridge the gap between the physical world and the digital economy by tokenising real assets and the euros used for the payments.

The existing Assetblocks ‘base case’ presents an opportunity for individuals to invest in tracking stocks representing renewable energy sources. By acquiring the tokens, investors gain co-ownership of solar, wind, or battery parks and are entitled to receive profits generated by these assets. The proof of ownership is represented by a non-fungible token (NFT), classified as a security under the MiFID II regulations. This ensures compliance and provides investors with confidence in the asset-backed nature of their holdings. The NFT purchase or sale and the distribution of dividends are currently conducted via “conventional” euros.

The use case aims to explore using euro or bank deposit stablecoins in a sandbox setting. Both non-hosted and hosted wallets provided by banks will support these stablecoin transactions, ensuring new ways of accessibility and convenience for investors. Other options to tokenise these assets as a financial instrument (security tokens) can also be explored. Having been accepted in the EBS, the parties involved can safely discuss relevant regulatory topics with EU and individual European member state regulatory frameworks.

The NFTs have embedded metadata, providing critical information about the underlying assets. Each NFT can be verified at the lowest aggregate level, enabling investors to track production and access real-time value data. In compliance with regulatory requirements, all investors must complete a KYC procedure during onboarding. Once whitelisted, investors can easily purchase NFTs using euros. The applicable procedures include the whitelisting of non-hosted or hosted wallets.

 

Visa research highlights emerging fraud schemes in retail and e-commerce

The ‘Fall 2023’ edition of Visa’s Biannual Threats Report highlights emerging fraud schemes targeting the global economy. This edition showcases a significant rise in phishing schemes proliferated through generative AI tools and a marked increase in enumeration and ransomware. 

While the global fraud rate trended lower than usual expected fraud levels during the report’s time period (January – June 2023), Visa shared that it proactively helped block US$30bn in that time. However, threat actors successfully conducted targeted and sophisticated fraud schemes impacting specific institutions, technology, and processes. 

The report shows that ransomware attacks continue to evolve and grow in prevalence. March 2023 surpassed prior ransomware attack records for the most attacks in one month with nearly 460 attacks, a 91% increase over February 2023 numbers and 62% higher compared to the same period in 2022.

Enumeration attacks continue to impact merchants and consumers alike. The period covered in this study saw a 40% increase in enumeration attacks over the previous six months. Visa used its Account Attack Intelligence to identify these attacks in real-time to alert merchants and stop fraud.

Card-not-present merchants have also emerged as a bigger target. Online merchants were responsible for 58% of total fraud and breach investigations, while brick-and-mortar merchants made up 20%, and ransomware/fraud schemes made up 7%.