Association of Corporate Treasures (ACT) March 23 Cash Management Conference

The ACT Cash Management conference held in London last week was a well attended, outstanding event covering many issues facing the Corporate Treasures, banks and our selves in these uncertain times. 

What was clear, real time information and transactions are now a strong driver in business. The arrival of the New Payment Architecture (NPA) in the UK from May is as the Bank of England, noted “Payments will be coming with complete information as opposed to data on a post card”. This enables complete verification of the payment, a subject close to the heart of the FCA (Portfolio Letter: FCA priorities for payments firms). Verification of data at the point of transaction was a strong message through out the conference. 

The arrival of the modern day menace of Cyber-Security and On-line Payment Fraud highlighted the need to prioritise remediation, validate the data and increase collaboration.

The closing session on the new economy chaired by ACT CEO focused on the current vitality created by Silicon Valley Bank and Credit Suisse. Handled very sensitively and reassured the audience of the positives and showing alternative ways of handling cash safely.

My congratulations to the ACT team in holding an event that was perfect for these times. Explaining the situation, often with figures, and showing how technical innovation can help even the tightly resourced Treasuries. 

Details:

Opening sessions: Barclays Chief Investment Officer

Sterling will be under pressure for the next two years. The US economy is Number 1 and will grow. 

Inflation is the enemy and confidence is key.

Panel discussion: importance of technology in evolving treasury objectives

Corporates: Anglia Water, uses Oracle ERP (Enterprise Resource Planning) system and VirginMedia, uses SAP ERP system

Agreement on:

• ERP system vendors need to be more proactive in providing, in the digital age, changes needed for running the business in real time. Too many ERP systems are still using batch processes
• More APIs are needed, for example with A/R and A/P to validate and use the data only once (no more keying in): ERP + API links is the future
• Instant payments will continue to grow as this is what our clients require and we must forget about offering five (5) working days for returning money 
• Data is the key and must be verified to make certain it is true

Managing FX during High Volatility

Polls showed:

• 17%    All digital
• 83%    Voice and digital combination

FX should be embedded in A/R and A/P to show the areas of FX exposure.

Multicurrency is now a matter of fact with corporate treasurers.

Barclays offers two services:

            High Volume – strategic with transactions over $100,000

            Operational FX – low value transaction, trades under $100,000

Online payment fraud

 A Poll of hands to the question “ Do you know what Confirmation of Payee is?”: 90% of the audience did not know CoP. When the same question was asked at The European Association of Corporate Treasurers’ in November 2022 found 56% knew about CoP. This suggests further CoP training is required.

The audience was impressed that invoice fraud, the most common fraud scam, was reduced by 80% when 99% of banks use CoP. A number of corporates admitted they had been defrauded. What surprised them was the professionalism of the scam. For example, a successful CEO fraud came with the right email and the same type of language of the CEO – just like the real thing.

Many in the audience had been offered scams and there was a sense of who should be responsible for the final check before the payment is sent.  One corporate verified each A/P transaction manually before payment. 

The audience did agree that more business was coming through a mobile phone (67%) and the mobile call needs to be validated at the very start. New payee and changes to an existing suppliers’ bank account were the biggest fraud risks.

The concerns implementing CoP are centred upon the technical requirements and positioning the process of final verification in the Treasury area. The key areas to verify are: new payees, changes within existing payees bank account details and performing an annual check on the existing corporate payee data-base.

Panel discussion: protecting cash in high interest rate/inflation environment

Royal London offer four liquid funds: two daily overnight funds, one with 6 month and the fourth offering 12 month money. Just recently the two-year interest curve was flat but now the spreads are volatile. 

Intelligent payment routing

 Bank of England, noted, payments today come with the data that could fit on a post card.  Under New Payment Architecture (NPA) that uses ISO 20022, payments will now be accompanied by 20,000 data fields.

The UK NPA switch over starts in May 2023 and ends with final completion Q2 2025. Recommend corporates transfer data in their ERP systems directly into the message formats via API. Soon corporates will be able to send a photo of the invoice, if needed. 

Cyber-security: what role does the treasurer actually have? 

Barclays presented cyber security and noted it was a big step change for all and should include Board Members. The biggest issue was Criminal Risk and gave an example of crypto currency theft of $200 million.The concern for the Treasurer is that of reputation risk, risk appetite and a sense of security in an every increasing 24x7 business world.The key messages are do not ignore cyber-crime and plan to stay ahead of the criminals.  

To do so: 

1.     Prioritise threats, vulnerabilities and remediation 

2.     Validate - validate - validate the data

3.     Collaborate by sector sharing  

Closing discussion: utilising technology to manage cash in the new economic environment

 As the economic environment is currently taking in the shocks of Silicon Valley Bank (SVB) being absorbed by the Fed (USA) and UK’s HSBS buying SVB (UK) for £1 and further more, UBS taking over Credit Suisse for $3.2 billion brokered by the Swiss FMS Authority it was the appropriate place to start. 

SVB had taken on long term bond collateral believing the interest rates would stay low.  As the interest rates rose, the collateral dropped in value and depositors rapidly removed money causing a run on the bank. SVB significantly funds FinTech failed on March 10 and The Fed stepped in by making SVB “too big to fail”.  

While the amount of assets at SVB were small ($212 billion) prompted a review of the other banks that could be in a similar position. Credit Suisse, with a history of unfortunate incidents, was perceived as the bank that could go next, and the Swiss Authorities was saved CS. Given the payment systems technical capabilities large amounts of money moves instantly making a quick solution essential. 

The above caused concern and speculation that could lead to another bank failure. 

Technology in the form of online platforms is becoming readily available. Coupled with the democratising investment instruments such as bonds, repos and other money market activities corporates are in a much better place to manage cash. 

Corporate Boards are rightly concerned about where their cash is safely located. Technology now can deliver all types of financial instruments to the Corporate Treasury community to securely look after cash.