treasury barometer 2019 - dact · • marnix verhoef, rabobank on ibor phase out • lisanne...
TRANSCRIPT
1PRESENTED BY RABOBANK AND ENIGMA CONSULTING November 2019
Treasury Barometer2019
Table of contents
• About p. 3• General Results p. 5• Sustainability p. 8• Compliance, Fraud & KYC p. 10• Treasury Organisation, Business & Development p. 16• Financial markets, IBOR phase out p. 22• Cash Management, Connectivity & Treasury road map p. 26• Epilogue p. 32• Contact p. 34
You are invited to read the 6th Treasury Barometerdeveloped by all participating treasurers, Rabobankand Enigma Consulting in the online TreasuryBarometer 2019.
Enjoy reading!
3
About
The Treasury Barometer is anindependent survey for and bytreasurers, developed jointly byRabobank and Enigma Consulting.
This report presents the key results ofthe 2019 survey and presents the latesttrends and development.
This survey is created to give insight inthe most important items on theagenda of treasurers.
The report provides a representativeunderstanding of this agenda for Dutchcorporate treasurers.
We especially would like to thank allrespondents for participating in thisyear’s survey.
The Treasury Barometer 2019 focuseson the following topics and themes:
1. Sustainability
2. Compliance, Fraud & KYC
3. Organisation & Development
4. IBOR phase out
5. Cash Management, connectivity, Treasury roadmap
A number of interviews are held togain a deeper insight into the topics ofthe Barometer 2019. Our special thanksgoes to the participants of theseinterviews:
• Edwin Slutter, Added Value onCompliancy, Fraud and KYC
• Marnix Verhoef, Rabobank on IBORPhase out
• Lisanne Rijnders, Heerema, onTreasury organisation (and theresults in general)
• Nico Strauss, Rabobank on CashManagement and Innovation
The Editor Panel, consisting ofmembers of the treasury community,has been established to set thedirection of the Barometer and tomonitor the quality and relevance ofthe content.
We thank all members of the EditorPanel for their participation and advice.
In 2019 the Editor Panel consists ofthe following members:
About
Dennis Baljeu Vanderlande
Frans Boumans HU Utrecht
Jeroen Custers Q-Park
Wim Lambrecht Ammega
John van Roon FedEx
Lisanne Rijnders Heerema
The results of the Treasury Barometer 2019 will be available as an online report as from 14 November 20194
Licht blauw:
General Results
General Results
83% of the respondents are
(assistant) treasurers. The remainder of
the respondents are cash managers (10%)
or back- / front office employees (7%).
€ $
How many persons are involved in treasury in your entire company?
In which branch or industry is your organisation active?
84% of the respondents expect
that the size of their treasury
team will remain stable in the
future…
1-5
70%
6-9
10% 20%
>10
…as treasurers expect their
processes to become more
efficient and the size of treasury
teams will remain stable, there is
more time for the available
treasury staff to add true value.
“The treasury department at Heerema is a two women show.” Lisanne Rijnders, Treasurer at Heerema.This is remarkable since last year’s results showed that over 85% of the treasurers is male.
6
In which regions does your organisation have operational / business units?
Customer base breakdown:
55%
North-America
97%
Europe
48%
South-America
30%
Africa
36%
Pacific
61%
Asia
B2B 58%
B2C 12%
Combination 30%
General Results
Operational / business units in this region
No operational / business units in this region
7
It seems a long road, from the Paris Agreement and thesustainable development goals to the treasury desk. However inthe last 15 years sustainability has developed into a cornerstonetopic in most of the boardrooms. Today, treasury departmentsare more and more involved as well. This is also reflected in theoutcome of the 2019 Treasury Barometer.
Sustainability
What was the effect of Sustainability & CSR requirements on your treasury activities in the last 3 years?
Decreasing the ecological footprint
In case of an effect on your treasury activities, to which topics did it apply?
24% Cash & liquidity management12%
Treasury technology
21% Other
24% Evaluate banks
on Sustainability and CSR criteria
35% Corporate finance
Note: the percentages add up to more than 100% as it was possible to select multiple answers
0% 10% 20% 30% 40% 50% 60%
I don't know
Not at all
To a certain extent
A lot
6%
32%
53%
9%
3%
36%
48%
12%
2019 2018
0%
5%
10%
15%
20%
25%
30%
Completelyclear
To a certainextent
It is not clearto me
To a certainextent
It is not clearto me
I have neverthoughtabout it
18%
27%
3%
15%
6%
27%
Yes No
Sustainability
If you have ever considered the issue of a green financing instrument, is it clear to you what the process will look like and what parties you need to involve?
......In 2019, a total amount of
was issued as green
bonds in The Netherlands. In 2019,
the total volume of green bonds
globally was Source: Rabobank
48% 48%
Have you ever issued or considered the issue of a green bond, green loan, green RCF or other green financing instrument?
of the respondents experience a
Sustainability & CSR effect on their
treasury activities. This is
comparable to last years results,
despite increased media attention
and the growing number of green
financing issues .......
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Payments fraud and cybercrime appears to be the“new norm” for corporates. They need to be awareof increasing threats and in many cases are activelyimplementing measures to control payments fraudand cybercrime. What role is treasury playing inthese topics and what measures/controls are taken?
Compliance, Fraud & KYC
Could you elaborate on what this rating is based?
• segregation of duties and 4-eyes-principle applied• all the staff have done a training on cyber crime
and fraud prevention• it is impossible to be 100% protected
What measures have been taken to prevent, detect and combat payment fraud & cybercrime?
has been a victim of attempted or
actual payment fraud/cybercrime.
has not sought advice from
external parties to prevent, detect
& combat cyber risk and
(payment) fraud.
Stricter adherence to internal policies
Training users to create awareness
Automate processes to diminish human intervention
Has the increased payments fraud / cybercrime activity had impact on the processes in your organisation?
0% 10% 20% 30% 40% 50% 60% 70% 80%
Not at all
To a certain extent
A lot
6%
73%
21%
7,2
5,8
Respondents rate their treasury
department with a 7,2 for
protection against payment fraud / cybercrime
Respondents rate their treasury
department with a 5,8 for the
incident response and backup plan to recover from
payment fraud / cybercrime
Could you elaborate on what this rating is based?
• there is no written back-up plan• focus on prevention instead of back-up plan• responsibility lies within IT
In a recent interview with The Financieele Dagblad, Minister Grapperhaus from the Dutch Ministry of Justice and Security announcedthat the government will take more aggressive action against companies that are not in control of their cybersecurity.
Compliance & Fraud
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Have you considered changing banks due to bank-specific KYC processes?
Has the average lead time changed to open a new bank account for a new entity operational
compared to 5 years ago?
Because of the legislative and
regulatory focus on anti-money
laundering (“AML”) and combating
the financing of terrorism (“CFT”),
there is a lot of pressure on
financial institutions to meet the
compliance expectations.
Of all respondents has considered
changing banks due to bank-
specific KYC processes
Reasons why 24% of respondents has considered changing banks due to bank-specific KYC processes:
• The average lead time to open new bank account for new entity is considered too long
• The growth and the management of its business from the increased KYC requirements are hindering operational efficiency
Do you have an example of best practices to lighten the burden / shorten the lead time of the KYC process, internal or external?
• Standardised set of KYC documentation that works for all banks• Complete overview of KYC requirements at start of process to avoid additional requests along the way • Use KYC technology that connects multiple banks to one KYC platform like the SWIFT KYC Registry for
Corporates (Go-live in Q4 2019) where KYC information can be shared with banks
of all respondents experience an increased average lead time compared to 5 years ago
27%
67%
6%
> 3 months
1 - 2 months
< 1 month
Average Lead Time New Bank Account New Entity
KYC
It is remarkable that for of the correspondents the KYC
process is not an important indicator in cash management bank selection
of all respondents see that the increased KYC requirements are hindering operational efficiency, the growth and the management of its business.
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Can you briefly explain how the "CEO fraud" took
place at Pathé?
It all started when the managing director of Pathé
Netherlands was requested by the CEO of Pathé to
transfer money for a foreign acquisition. Because of a
double authorisation policy, I was (as Financial
Director) also involved in this transaction.
Both the managing director and I were convinced we
were dealing with the real directors in Paris because
the transaction was confirmed with supporting
documents with signatures from the majority
shareholder and the CEO.
Additionally, the treasury department of the head
office also transferred the necessary funds to the
Dutch subsidiary. In the end, more than € 19 million
was stolen, the majority of which came from our cash
pool.
The Treasury Barometer survey shows that 82% of
the companies are - or have been - victims of actual
payment fraud and/or cybercrime. What do you
think of this result and to what extent have you
noticed that payment fraud has increased in recent
years?
This does not surprise me, and I can therefore
endorse this result from the Barometer. Many CEO’s
and directors have had to deal with this, but I find it
shocking that only 5% of the fraud (attempts) are
being reported to the police. People are afraid to be
open about the fact that this happened to them so
that it will be difficult for the police to solve fraud
cases committed by large scale operating gangs.
The interesting thing in this context is that
cybercrime was number 10 on the list of concerns of
CEO’s in the Netherlands last year and is now number
4. This also indicates that it is now more prominently
on the boardroom agenda.
The fraud attempts are also becoming more
sophisticated: with the use of voice computers, voice
distortion, artificial intelligence and with the
deployment of actors. Sometimes the communication
is set up via Facetime or Skype, which can be very
sophisticated and can make it difficult to distinguish
fake from real messages.
In my opinion IT systems are also still all too easy to
hack.
Of the respondents, 21% indicates that the
increased payment fraud and/or cybercrime had a
significant impact on organisational processes. 73%
indicates that there is a moderate impact and 6%
indicates that there is no impact.
What do you think of this result?
I am shocked by the fact that 79% of the respondents
answer that there is only a moderate or no impact.
Only 1 in 5 appears to have made a serious efforts.
Perhaps it is just labelled as a one-time incident: “It
was bad luck, let’s pay more attention to it next
time”, without taking harder measures and
implementing or adjusting procedures. Whether
people feel ashamed, have only a short-term horizon
or an arrogant attitude such as "it doesn't happen to
me", I don't know.
We asked the respondents an open question on how
they prevent, detect and combat payment fraud.
The most frequent answers are: 1. stricter internal
procedures, 2. train users to create awareness and
3. automate processes to reduce human
intervention. What do you think of this result and
can you add to it?
In the case of CEO fraud, pressure on people and
social engineering is used. I don't read that
anywhere. Fraudsters analyse the communication
and authorisation lines within the organisation, but
also have a good understanding of the corporate
culture. Otherwise you would not be able to target so
much money by using fraud in such a short period of
time. I totally miss that aspect.
Companies mainly focus on procedures and AO/IC
but hardly at all on the cultural aspects. You should
ask questions like: How could this have happened
within our company? Why were we vulnerable? Why
didn't you call?
Interview Edwin Slutter, Added Value FinanceCEO fraud “It can happen to anyone”
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Edwin Slutter,Added ValueFinance
How do you change the corporate culture, which
you have identified as an important underlying
reason for making corporates more vulnerable to
payment fraud?
It is not only payment fraud; it is also about the rest
of the organisation. How is your “speak-up culture”?
Do people actually walk easily into the director’s
office? Are you really as “open” as you would like to
be?
Many directors and managers like to display a bit of
their power and create some distance from the rest
of the organisation. In almost all cases of CEO fraud,
organisations become vulnerable through the
behavioural- and cultural component.
Of the respondents, 58% indicated that they did not
use an external party to prevent, detect and combat
payment fraud and / or cybercrime. Do you think an
external party could deliver added value in this? If
so, how?
Some of my contacts sometimes invite "mystery
guests". Then someone just walks in at the reception
and before you know it, they got their hands on a
pass, which gives them access to the boardroom.
Next, they present themselves and claim that they
work within the company. This is also the case with
IT. Let’s be honest: who knows everybody in very
large companies? You can quite easily introduce
yourself as a new employee and ask the reception to
make an access pass. I think it's always a good idea to
have someone from the outside check on the
procedures within your company.
The majority of respondents indicates that there is
only a limited or no response and / or backup plan
for their treasury department in the case of
payment fraud. Do you think such plans have added
value?
I recognise that this is not well organised in many
organisations. Also with respect to payment
processes, I think that many organisations do not
have a back-up plan. They tend to have these for
their primary processes which are critical to the
business, but not always for their payment processes.
In your white paper dated May 2019, you mention
that with respect to CEO fraud "the corporate
culture is the greatest danger". Can you explain
that?
In my white paper, I describe 3 important topics:
• Pressure
• Occasion
• Rationalisation.
Pressure is an important topic as in two-thirds of the
CEO fraud cases, pressure is identified as one of the
main causes of vulnerability. “You are made
important; you are being asked to keep it confidential
and keep the number of staff involved restricted”.
Instructions are sent from top management and you
become part of the inner circle.
Fraudsters who know how to use the right tone of
voice in their communication, who have insider
knowledge and how to build it up well, can get a long
way. At Pathé, it was not about a few e-mails, but a
three weeks period of intensive correspondence.
Which type of organisation has the highest chance
of payment / CEO fraud?
In my white paper I refer to Hofstede's model of
cultural dimensions (see Figure 2). The message I
want to give is: “The closer you get to the core of the
web diagram; the more critical a company’s exposure
will be. The more components, the more critical it
becomes.” Examples are closedness, decision-making
by a few individuals, a high degree of geographical
and hierarchical distance and organisations where
results are more important than procedures.“ A lot is
shared between friends, but people in organisations
behave in a more restricted way because of the
power relations.
“If you manage to run a company in which people are
open and honest with each other and where there is
a true ‘speak up culture’, you will make much better
decisions.”
Edwin Slutter,Added Value Finance
Figure 1: Slutter, E. (2019). CEO-fraude: Bedrijfscultuur vormtgrootste gevaar. Added Value Finance
14
Could the Pathé fraud case have been prevented?
"With just one phone call to the Holding in Paris, a lot
of damage could have been prevented….”, but this
was forbidden.
Was it because of the pressure from the corporate
culture, that this phone call did not take place?
At Pathé Netherlands there were no second thoughts
in the three-week period in which the fraud took
place. We have asked many critical questions and
flagged that we always needed two signatures. But
those documents were presented by the fraudsters
and the funds were received from Paris.
All communication was via email. The
recommendation is nevertheless always to call in
case of doubt, despite confirmations, with the risk
that you might embarrass your top management by
not solely trusting on their instructions.
In many corporates (in the Netherlands) the sole
communication is via email and there is hardly any
face to face contact. People believe that
communication by email is safe. It is “on paper” and
that can also lead to a certain "cover-your-ass”-
behaviour.
Edwin also points out that the
intergroup/intercompany authorisation structure
should be properly structured. There are situations
where the local subsidiaries have a manual system
with insufficient clearing procedures for invoices.
Local subsidiaries are dependent on funding from the
holding entities to be able to meet the payment
instructions of the fraudsters. There is then a high
chance that you will find out too late that the
Treasury transfer has already been executed.“
The chance that CEO fraudsters focus on subsidiaries
is more likely than that they focus on the holding
company.
Treasurers should be more critical about why
intercompany funding is needed. When the cash flow
is positive, don’t be afraid to ask why they still need
funding.” The Pathé head office should therefore
have asked to the Netherlands: “Why do you need
those large amounts of funding as a subsidiary? "
Fraudsters also target subsidiaries that are profitable,
because when there is no cash generated, there is
nothing to steal. And intercompany funding is also
more easily available for the profitable subsidiaries in
an organisation than the less profitable parts.
Treasury therefore also has an important role in
preventing CEO fraud.
Why did you set up Added Value Finance?
I wanted to share my experiences and for that reason
I started Added Value Finance with 3 service lines:
CFO Services, Financial Management and Corporate
Finance. I am a Registered Accountant and have 30
years of experience in Finance.
I also support organisations in identifying, solving and
preventing the risk of CEO fraud, based on my
analysis and improvement of the corporate culture.
By reducing the weak spots, the organisation is better
protected and is more resilient to these so-called
"whaling" attacks.
I also act as a speaker at seminars and business
presentations or as an in-company trainer.Edwin Slutter,Added Value Finance
Figure 2: Slutter, E. (2019). CEO-fraude: Bedrijfscultuur vormtgrootste gevaar. Added Value Financing
15
In general, treasurers are being asked to play a more strategic role in corporate activities such as capital allocation.
This is in reaction to increased focus by stakeholders (internal and external) on optimising the use of cash on their companies’ balance sheets and on ensuring holistic risk management.
Treasury Organisation, Business & Development
Respondents rate
their career with a
7,5 compared to
6,5 5 years ago
How would you rate your career in treasury now versus 5 years ago?
On which treasury subject did you have your most rewarding success?
58% Cash- and liquidity Management
21% Corporate finance
27% Treasury organisation and development
24% Financial risk management
27% Technology
9% Bank relationship management
A remarkable result is that the
majority of the respondents
name Cash Managementas the topic which gave them
their most rewarding success.
This is surprising as treasurers
also name Cash Management
as the subject they
unintentionally spend most
time on.
Apparently, this effort pays off.
0
2
4
6
8
10
12
14
3 4 5 6 7 8 9 10
5 years ago Now
What do you like most about the treasury function?
• Dynamic, many projects and high impact• Connecting with internal as well as external parties• Varied: not a single day is the same and never a dull
moment• Being in the centre of all finance functions• Adding value to business by optimising financial
architecture• Balance between strategic and operational issues• Multi-disciplinary / multi-tasking/ international
aspects / macro economic aspects / financial markets
Treasury organisation
Reasons for improved rating are:• Broader responsibilities • Progress in development• Seniority
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81%Of the treasurers is earlier
involved in sales/tender
processes than 3 years ago.
On what subjects is treasury involved in / working with the business? (Multiple answers possible)
77%Of the respondents make use of
scenario analysis as part of risk
management.
Best practices in sharing knowledge / treasury policies with the business:
“Business engages into risks. Treasury can support the business to mitigate this.”
“Better relations with business and sharing of knowledge can lead to the fact that Treasury is (earlier) involved with certain purchase contracts, which can lead to recognising embedded derivatives.”
“Sharing a one-pager is better than sharing a full policy doc. When visiting discuss the policy”
“SharePoint with guidelines/policies. This needs to be frequently reviewed.”
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
Supply chain finance
Purchase to pay
Trade finance
Cash collection
Risk management (tender) process
Payment terms and conditions (incl. currency)
Cash flow forecasting
Business & development
“Treasury can support the Business through financing & risk management solutions to win Business.”
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Can you please tell us how you first came in contactwith the Treasury business?
After my graduation internship, I continued to work forHeerema. My first job for Heerema was in anoperational department, where I did administrativework. Via a mobility program within Heerema, Iswitched to the financial department. Here I wasmainly responsible for management reporting. Soonafter that I switched to the Treasury department,where I started as a Cash Manager. After a year asbeing Cash Manager, the function of Treasurer becameavailable, which I have been doing for the past 2 years.
Is it a one woman show?
The Treasury department at Heerema is a two womenshow. In my team I have a Cash Manager reporting tome. My team reports directly to the CFO, which meanswe are all closely connected to each other. Our goal isto be in the middle of the organisation. We try to beinvolved in both the Commercial side and the Legal,Tax and Finance side.
What do you spend most of your time on?
A lot of time is mainly spent on communication, bothinternal and external, making sure that we areinvolved in commercial projects or in theimplementation of certain projects. We basically haveto make sure that we are well informed, by all internalparties in the organisation. Next to that we have thecommunication to and with the outside world,specifically with the banks. This is because we alsospend a lot of time on KYC these days. If you do notmaintain this, it can have considerable consequences.
On sustainability, a few years ago Heerema issued agreen finance product. Were you also involved inthis?
I was not involved in the issuance of the green bond.Back then I was still working in another departmentwithin Heerema. At that time Heerema did aconsiderable investment in one of our ships in anattempt to make them greener. Another kind of fuelwas used in our ships, subsequently reducing theiremissions of carbon dioxide.
Heerema has had many of these initiatives in the pastyears. One of them being the usage of shore power,instead of letting ships run on their engines, while theyare docked.
Could you perhaps tell us a bit more about the greenproduct Heerema issued back then? Did you have tomeet certain goals?
Back in 2015, when Heerema issued the product, itwas issued in accordance with the Green BondPrinciples. Rabobank acted as Green Advisor andKPMG in conjunction with Lloyd’s Register asindependent verifiers. Right now there aren’t newgreen financing initiatives in which Heerema isinvolved in addition to the sustainable activities theydo themselves. Heerema wants to contribute in thisway to a sustainable future. We are quite proud onwhat we are achieving, especially when parties like theport of Rotterdam acknowledge our efforts. Thinkingabout a sustainable future is one thing, but actuallytaking action to support this is a second. It takes timeand a lot of effort, but we are delighted to see theeffects of our actions.
We also asked about CEO fraud, and in thebarometer, we see that 82% of the respondents hasbeen in contact with payment fraud or cybercrime.Did you ever experience that with Heerema?
I acknowledge many attempts to fraud, but we have alot of internal rulebooks and procedures, that tell ouremployees how to act when certain events happen.We had one example in which I had to initiate apayment which was instructed by someone who wasnot an employee of Heerema.
The way, in which fraud attempts are made, aresophisticated. Signatures, phone calls, certain data,everything is exactly copied.
Organisational culture is a big factor when it comesto fraud and the prevention of it. Do you just pick upthe phone and call the CEO when you don’t trustsomething?
Our culture is like: “Please call each other, if only todouble or triple check it. We don’t want to make thesekinds of mistakes.”
We are also very open to discuss the chance of amistake. We have had one payment, which slippedthrough to the authorisation stage. The entire financeteam came together to check it and we eventuallywrote new procedures on how to identify suchfraudulent payments.
Since then, we just consult with each other to preventsuch incidents, which is also supported by the CFO andCEO. A completely open culture, in which checking apayment or each other is completely normal. Somefraud attempts are even discussed in board meetings,just to let everybody know to be on their guard.
19
Interview Lisanne RijndersTreasurer, Heerema Marine Contractors
Lisanne RijndersTreasurerHeerema Marine Contractors
Lisanne RijndersTreasurerHeerema Marine Contractors
Examples of payment fraud, where multiplecountries and multiple cultures are involved, arementioned by the interviewer. The differences inculture being the main reason why it went soterribly wrong.
What possibly also contributes to Heerema’s solidprocedures is that we are fully centralised. Whenevera company is decentralised the responsibility is a bigfactor in how thoroughly an employee checks apayment.
The next results from the Barometer are about KYC,and what we see is that KYC bank processes haveincreased substantially. Do you also experience this?
I see that in the past three years, since I am workingin treasury, the amount of time spent on KYC hasincreased tremendously. Banks should be enablers ofthe business, but right now that statement is notentirely true. KYC updates used to be a yearlyprocess, but right now we see banks doing theseupdates every three months. It feels like a neverending process.
Certainly banks do not want to do this, they areobliged to. Banks just want to do it right and theyhave to comply to the regulators.
Do you have best practices in place at Heerema torelieve the KYC burden?
We try to cluster KYC processes at the bank’s side. Ifone of the entities is due in 4 months and two otherentities are in KYC process right now, we ask the bankto do them all at the same time.
“I always have a kick-off call with the KYC employeesof the bank, just to set things straight and manageexpectations from both sides.”
I also hope that banks will standardise the processesof KYC; at the moment it’s a yellow paper at thisbank, a green one with another. There is no commonstandard in the process. We hope this will be betterin the near future, just in order to save time on theprocess. Heerema would love to participate inworking groups on how to improve these processes,both for ourselves and for the banks.
The Treasury Barometer result shows that 24% ofthe correspondents are considering changing itsbank due to the KYC-process. Do you noticedifferences between banks in the KYC-process interms of for example transparency, lead-time,quality?
We experience significant differences between banksregarding the KYC-process. Heerema is notconsidering switching their cash management banksdue to KYC-process, primarily because it considerstheir relationships with their banks as a long termrelationship. However, I can imagine that there arecorporates who are considering a change of bank ifthe KYC-process is causing business disruption,especially if you have ‘backup’ banks in your bankconsortium that could deliver a better KYC-process.
Are you aware that the LIBOR and EURIBOR rateswill be phased out during 2019 to 2021? Have youperformed an impact analysis of what the IBORphase out will mean for Heerema?
Heerema has gathered information about the IBORphase out. In 2020 a company-wide impact analysis isplanned in which Legal, Tax and Finance will beinvolved. Heerema will assess the impact of the IBOR
phase out and it will share the results both internallyas well as externally where needed. I recognise thatprocesses, procedures and policies will need to beadjusted, and also systems in particular becauseHeerema’s lean Treasury department is highlyautomated. I expect that resources from systemproviders, lawyers and other market parties willbecome scarce, because they will be fully bookedwhen the deadline approaches.
The IBOR phase out will impact many aspects andstarting early with an impact analysis is necessary,because time passes very quickly.
Does Heerema have a Treasury roadmap? WhichTreasury topics are highly on the agenda? Is OpenBanking on the agenda of Heerema?
The Treasury roadmap of Heerema is integratedwithin Heerema’s broader Finance roadmap.However, topics such as the IBOR phase out will beinitiated and led by our Treasury department. In myopinion Heerema’s Treasury department has alreadybeen positioned quite well. “My team is followingmarket developments and we are pushing ourselvesto continuously develop and improve processesfurther.” Regarding technology, we are using SWIFT,host-to-host connections and electronic bankingsystems as bank connectivity channels. The host-to-host connections and electronic banking systems areused as a security backup. My department tries todiversify in banks as well as in bank connectivitypossibilities.
20
Developments around Treasury technology, such asinstant payments and instant reporting areindicating that the Treasury job is growing towards a24/7 job. How do you perceive this development?
It depends strongly on the sector in which a companyis active. Heerema is not active in the retail businesswhich means that for instance cash flow forecastingon weekend days is not relevant for Heerema. “It isimportant to be aware of new developmentsalthough they might be less relevant for yourcompany.” For example, on the instant reporting sideit becomes relevant when banks are deliveringaccount statements on Saturday’s and Sunday’s.Systems need to be adjusted accordingly. I do notforesee a 24/7 Treasury job at Heerema.
One of the results of the Treasury Barometer showsthat regulation is becoming increasingly importantbut is apparently not a big driver behind theTreasury roadmap. How would you explain this?
I think that regulation is a requirement by banks, forexample, and that it is therefore not separatelymentioned on the Treasury agenda. For instance,Heerema has an improvement of the KYC-process onthe agenda and is exploring the possibility ofconnecting to a KYC platform. However, I think thatKYC is a must and therefore pure KYC regulation isnot part of the Treasury roadmap of many corporatesas compliance to regulation is fundamental to your“license to operate”.
21
Lisanne RijndersTreasurerHeerema Marine Contractors
As the world’s premier benchmark for short-term interest rates, LIBOR is published in five currencies and underpins around USD 300 trn. worth of financial contracts, derivatives, bonds and loans.
Treasurers will now have to untangle LIBOR from
their operating models, renegotiating contracts and
shifting the way risk is calculated and managed
within their organisations.
Financial MarketsIBOR Phase out
It is remarkable that most of the respondents who
have performed an impact analysis conclude that
the impact is modest or low.
Most probably this is caused by the fact that these
corporates are predominantly or only exposed to
EURIBOR for which there is no phase out planned
yet.
Financial Markets IBOR phase out
“We strongly recommend that corporates perform an impact analysis and become operationally ready for the
IBOR phase out as soon as possible.”
Marnix Verhoef, Programme Director IBOR, Rabobank
15% is not aware of the
IBOR phase out
Are you aware that the LIBOR and EURIBOR rates will be phased out in 2019-2021?
Have you performed an impact analysis of what the phase out will mean for your treasury?
42% 58%
If you have performed an impact analysis: what have you concluded that the impact will be?
0%
10%
20%
30%
40%
50%
High Modest Low
14%
50%
36%
Of the respondents that have
carried out an impact analysis
remarkably concluded that the
impact will be modest or low.
23
Background
Marnix Verhoef is the Programme Director for theRabobank IBOR transition programme sinceDecember 2018. The programme team is responsiblefor the worldwide preparation and migration fromthe current interbank offered rates (IBORs,specifically LIBOR and EONIA) to new AlternativeReference Rates (“ARRs”).
Before joining this workgroup, Marnix was atRabobank amongst others an equity derivativestrader and most recently, as COO of FinancialMarkets, he was globally responsible for businessdevelopment and (IT) change processes such as EMIR,MiFid etc.
As such, Marnix has hands-on knowledge of thefinancial products currently affected by the IBORmigration.
Organisation and challenges
Marnix explains that the IBOR Programme
coordinates globally the massive efforts of Rabobank
to migrate in about 2 years the IBOR benchmarks that
have been on the market for about 40 years.
The IBOR transition programme is organised around
the various business lines and involves all business
areas impacted by this migration. The size of this
migration exceeds many of the previous regulatory
developments as for this purpose the Rabobank
needs to ‘rebuild its infrastructure’ around the new
ARRs with respect to a high number of areas such as
(cost of) funding, ALM, risk management, financial
markets and the product offering to clients with
respect to for instance working capital, cash
management, lending and financial risk management.
Marnix explains that it is very much a dynamic
process in which Rabobank considers the guidelines
and observations from the risk working groups of the
Central banks and the market consultations from the
side of ISDA and LMA as input for the upcoming
migration process.
A major challenge for this migration is, in the view of
Marnix, that there are many aspects of LIBOR
replacement that still remain unclear as thinking
continues to develop. The accounting treatment for
changes to LIBOR based instruments and hedge
relationships is one example. Indeed, certain key
unknowns may not be resolved until the final few
months before the transition as new industry norms
become clear.
The programme team is responsible for collecting all
data in the Rabobank, analysing the impacted
exposures, setting up dash boards and coordinating
the action plans. This includes the internal
communication with Rabobank product owners and
relationship managers and also the external
communication with clients thereafter.
Implications for corporate clients
The programme team is currently preparing the
upcoming external communication towards corporate
customers. Rabobank wants to engage in an early
dialogue with its clients to discuss the impact and
consequence of the transition to alternative
reference rates.
Marnix emphasises that for the exposure analysis, it
is not only important to take into account the first
level exposure (amounts related to financial products
impacted) but also the 2nd level exposure, i.e. the
impact on processes.
24
Marnix Verhoef,Programme Director IBOR,Rabobank
Marnix Verhoef’s view on IBOR TransitionProgramme Director Treasury IBOR, Rabobank
He says: “We strongly recommend that corporates
perform an impact analysis and become
‘operationally ready’ for the IBOR phase out as soon
as possible” as time for preparation is limited (1st of
January 2022, publication of IBOR rates is expected
to be stopped) and resources needed such as
lawyers, market data providers, valuation advisors,
tax specialists, technology vendors, treasury
consultants, bank migration teams, etc. will become
increasingly scarce in the coming months.
Awareness on the side of the client should therefore
soon be translated into action so that their
infrastructure and processes are updated and
upgraded (just as the banks are doing).
Corporates should also be aware that liquidity and
market pricing of IBOR products may deteriorate
well before the above deadline as market
participants will stop issuing IBOR based products
with a maturity over the deadline of 1st of January
2022.
Note also that liquidity and a robust pricing and
valuation of the new ARR based products will need
to be built up from scratch. Current volume in ARRs
is still low and Marnix predicts there will be a
‘turning point’ when volume in new ARRs will
increase and pricing of the new products improves.
The anticipated dialogue with the clients can
preferably be held after this turning point but it is
difficult to predict when the turning point will be
there.
The corporate clients will in the coming period be
invited (client per client) for a dialogue with
Rabobank to discuss how to migrate from the
current IBOR based product towards the ARR
alternatives.
Term rates or not?
Currently the ARRs are overnight rates and at thismoment it is uncertain if and when term fixings willbe developed by the industry. Clients may have toswitch to overnight rates, compounded and paid inarrears. That would lead to uncertainty as to whatthe exact amount of interest will be until the last dayof the interest period for all parties involved.
EURIBOR
For EURIBOR there is currently no replacement rate
foreseen. Instead the administrator of EURIBOR has
sought to strengthen the calculation methodology. In
the meantime, ECB has already launched an
alternative for the EURO overnight rate, €STR, as per
2 October 2019.
25
Marnix Verhoef,Programme Director IBOR,Rabobank
In a time of increased digitalisation,payments acceleration and newbusiness models in the whole valuechain of payments processes and bankconnectivity, treasurers are becomingincreasingly keen to leverage on theopportunities.
However for a treasury department tomanage and steer away from currentmultiple separate systems, managingolder technology and interfaces, anddealing with multiple bankrelationships, is not an easy task.
Cash Management, Connectivity & Treasury
Roadmap
Cash management &connectivity
How many cash management banks provide bank accounts to your organisation?
Which channels do you use to submit payments to and receive bank account statements from your bank?
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
Electronic bankingsystems
SWIFT Host-to-Host Ebics
How would you describe your organisation’s payment processes now?
How do you want your organisation’s payment processes to look in the near future?
The instant and real time
payments schemes around the
world and the expansion of
technology will transform
treasury departments into a
world of real time 24/7
liquidity, based on more
centralised control and local
empowerment.
Decentralised43%
Combination18%
Centralised39%
Decentralised18%
Combination33%
Centralised49%
Shift
from decentral to central 27
Cash management& connectivity
Regulation is becoming
increasingly important but is
apparently not a big driver of
the treasury roadmap.
Do you have a Treasury Cash Management Roadmap?
Yes 42%No 58%
Do you have an IT Roadmap to support your treasury processes?
Yes 58%No 42%
What are your drivers to include one of the above topics on the Treasury roadmap? (Multiple answers possible)
88% Operational efficiency
39% Increased control on payment processes
36% Cost reductions
33% Centralise processes
24% Bank rationalisation
15% Regulation & Legislation
Which topics will be (less) relevant for your treasury department in the upcoming years?
The reference rates debate is a
hot topic in the upcoming 2-3
years. After those 3 years we see
a decline in importance
Cash pooling is considered less
important in the upcoming years
There is a trend to further digitalise
the Treasury department:
• E-Signing
• Blockchain
• Digital identity
Are we migrating towards a 24/7
Treasury job? 24/7 reporting and
Instant payments grow in
importance in the upcoming 3-5
years.
Open banking & PSD2 is currently
not high priority of the Treasurer.
To gain the full value of new
cloud-based solutions, multiple IT
solutions can be set up. On the
other hand communication and
interfacing between those
systems is a challenge, since data
will be exchanged in different
formats.
However, the perfect solution
doesn’t exist and treasurers are
encouraged to define their
Treasury and IT roadmap.
28
BackgroundNico Strauss has not followed a standard typical bankcareer path.
He started his working life at Dun & Bradstreet as asales manager, after which he moved to the paymentprocessing fintech Worldpay where he worked insales functions for the first five years. He thenswitched to take up responsibility for strategicalliances where he was responsible for negotiatingwith many banks. These negotiations were not easyas banks were at that time neglecting or ignoring thefull potential of the payment revolution that wasabout to change the value chain of banking.
In 2018, Nico started at Rabobank “to change thebanks from within instead of from the outside” andhe has had no regrets about this move ever since.
Nico, as tribe lead, reports now to the board and isresponsible for developing the B2B Services in itsmission to unlock the bank and create “a cooperativefor the 21st century”. In this unit Rabobank hascombined, for the first time, its payments services,identity and open banking expertise into a singlebusiness unit.
They operate as a start up within the bank with theirown end-to-end services adding sales and support towhat is often just a product unit within most banks.
Rabobank has hired many others (besides Nico) with anon-standard background from various sectors and onall levels to develop Rabobank in this transition. Theunderlying reason for this is simple: “because the
client asks for it”.
Co- creation with customers
The Rabobank developer portal is also part of the B2Bservices unit and is an open collaboration platformwhere Rabobank, clients and developers worktogether on new applications via ApplicationProgramming Interfaces (APIs), which is softwareintermediary that allows two applications to interfaceto each other. Rabobank was the first in TheNetherlands with all API’s live in test and production.
Nico expects that the developer portal will increaseexponentially in the coming years. In the view of Nico,a good developer portal is the place where, overmultiple dimensions, multiple options are shown formultiple stakeholders (such as developer, productmanager, management) as a showcase for what ispossible.
For example, in the old days you could set up theportal with as many API’s as you wanted and thenwait for the audience to come. That is not how itworks, as what counts is how many APIs are used.
It is not only about the portal; with APIs you shouldalso have a team with commercial people that canhelp the clients make use of the improved or newfunctionality. In the end, all stakeholders involvedneed to see the showcase in order to see how theycan make use of this functionality.
In addition, a good implementation team is needed aswell, since customers need solutions that are tailormade for their needs. In this sense real "self service”is difficult to achieve, because customers initially have
to rely on the Rabobank. The current developer portalis a starting point but will certainly progress in thecoming years.
Nico emphasises internally that products should bedeveloped into an API from the start, by design.Years ago at Amazon they said: “nobody buildsanything here if you cannot communicate it to therest of Amazon and/or to the outside world.”Rabobank has the same ambition.
Rabobank aims to develop “Banking-as-a-platform”and “Banking-as a-service” in which FinTechs andother third parties are allowed to connect withRabobank's systems directly via APIs so they can buildbanking offerings. The strategy is twofold: (i) improvethe Rabobank platforms (such as Rabo app) radicallytowards the best in class and (ii) to facilitateRabobank’s presence in the third-party platformswhere the customers are present.
Nico Strauss’ view on Rabobank’s innovationTribe lead B2B Services, Digital Transformation Centre, Rabobank
29
Nico StraussTribe Lead B2BRabobank
With respect to Innovation, Rabobank has set up a full-scale innovation-hub to generate ideas from inside theRabobank organisation, including the so-called “moon-shot” programmes, under which several ventures havebeen founded (like Peaks, Tellow, SurePay) and theestablishment of an EUR 150 mln. fund to financefintech and ag(ri)tech start- and scale ups.
In addition, Rabobank invests in ideas from the marketthat fit in with the strategic portfolio.
It is all about change and partnersBanking has always been a somewhat closed andintroverted sector and they were accustomed to doingtheir things on their own. That is now rapidly changingas everyone needs to cooperate with everyone andpartnerships with the stakeholders in the ecosystem(clients, clients of clients, innovators etc.) are key tothe development of the bank. Nico: “We shouldbecome better, the user experience should improve,and we should lighten the burden of our customers,but everything within the boundaries set by theregulators, so with the same security standards asbefore.”
You can see that the world is at a massive turningpoint: Bigtechs like Google and Facebook, which weremassively loved by the public, are now also havingdifficulties with the regulators. Banks are wellpositioned to step into that space as they have putmore emphasis on trust and security in the recentyears than these Bigtechs.
Nico explains that the transition the Rabobank is goingthrough nowadays, is not so different from thetransition that he experienced when he worked forWorldpay, as that transformed from a banking
department of RBS into one the world’s biggest startups.
Multi-bankingMany banks are now positioning themselves as inwardlooking and are building multi-banking platforms toprovide account (real time) visibility and paymentinitiation as an alternative to the SWIFT connectivity.
For example, Rabobank is active with an InstantPayments API, but is also building a lending platform.Via this platform SME’s can obtain funding for theirbusiness much more quickly than formerly, via astraightforward KYC.
For the corporate treasurer, Rabobank did research onAPI aggregation to make sure that all requirementsfrom Rabobank and its clients are included in thebusiness desks so that more functionalities can beoffered, such as payment initiation and instantpayments.
It is not Rabobank’s ambition to roll this out globallybut mainly to focus on The Netherlands and WesternEurope.
An often-heard internal question is: ”Are we going todevelop it ourselves, via partnerships or via third-partydevelopment?” The bank used to be all about, if it’snot invented here, we are not going to use it.
But via these partnerships and third-partydevelopment programmes Rabobank is rapidly losingits syndrome of “not invented here so we don’t do it”.They are now capable to develop much more quicklyvia partnerships than it did in the past, fully on its own.
Open Banking and the value of dataPayment Initiation (PIS) is possibly not the mostwanted functionality right now, but AccountInformation Services (AIS) is.
And with AIS the big question is, what do you do withthe data, as Nico emphasises that - although we cando a lot right now- we are not going to do it all asRabobank is to a certain extent more restrained thanother banks as Rabobank claims that security of thecustomer data is for them a vital concern.
An interesting development will be when variousportals will start to cooperate with each other.As an example: if you see a house you want to buy onFunda, you can in one click check whether you canfinance it and with the next click you make anappointment with the estate agent as well.
Nico StraussTribe Lead B2BDigital TransformationRabobank
30
Barometer resultsNico is not surprised at the Barometer’s result that OpenBanking and PSD2 is not high on the corporate treasurer’sagenda. Just as retailers were sceptical about the internetin the early years, many corporates have a wait-and-seeapproach and are stuck in a classic chicken and eggproblem. The merchants want to do it only when allconsumers use it and the consumers only start using ituntil all merchants provide it.
It is up to the banks, Fintechs etc. to market solutions.Start small and make the pool of users larger over time. Inthat way, Ideal was also invented in 2004. That startedsmall scale, then increased exponentially until in the end itbecame market leader with the majority share of themarket.
Solving treasury issues through co-creationWith respect to 24/7 reporting, Nico says: “be carefulwhat you wish for”, as 24/7 reporting and instantpayments and technology will turn treasury into 24/7 realtime dashboards, but many treasurers are still hesitant tomanage these exposures in the weekends as well as aresult of that new technology. But Nico is open for ideasto turn that challenge into a solution so that treasurerscan go home for the weekend.
Links for further readinghttps://www.creditexpo.nl/rabobank-en-mollie-werken-samen-aan-beter-overzicht-voor-consument/
https://www.finextra.com/newsarticle/33965/money-2020-europe-2019-qa-rabobanks-nico-strauss-and-signicats-john-erik-setsaas
Nico StraussTribe Lead B2BDigital TransformationRabobank
31
Epilogue
In March each year, the Editor Panel meets toshare ideas on content and improvements tothe next edition of the Treasury Barometer.
The Editor’s Panel increased from 3 to 6, ofwhich 4 are new members. That resulted in anEditor’s Panel meeting with a lot of fresh ideasand insights both from the corporate treasuryas well as from the treasury educationcommunity (via Frans Boumans of HogeschoolUtrecht).
Together with the Editor’s Panel, we decided tobroaden the number of themes from 3 themes(in 2018) to 5 in this year’s survey.
This year’s questionnaire was completed by 35respondents. We will evaluate the options toincrease the number of respondents for nextyear’s survey.
This year’s edition walked you through many ofthe hot topics that the Treasury face nowadays.
Sustainability seems to be established as acore value and has moved beyond the initialhype, but the results of the Barometer showno increased activity.
With Fraud, we have clearly chosen a trendingtopic as the treasurers are still trying to findthe right responses to the increased cyber andpayment fraud activity, advanced technology
techniques and social engineering that is beingused nowadays.
The KYC topic has never disappeared from thetreasury agenda, but the treasury departmentsare now ‘flooded’ by new regulation and evenstricter rules and more questions and,therefore, longer lead times for opening bankaccounts and other bank products.
The IBOR phase out effect will be temporarybut will lead to a total rebuilding of the bank’sinfrastructure which will be pushed through totheir corporate clients, who are just beginningto become aware what is ahead of them.
With the development of cash managementand technology innovations and massive value
chain changes, treasury departments areincreasingly in need of a Treasury and IT roadmap to guide them to the multiple solutionsavailable.
The content-interviews were again a greatadded value to the results of the survey. Weare therefore very grateful to the 4 personsthat agreed to be interviewed for the TreasuryBarometer, as they gave more insight into thesubjects.
We are also very grateful to the DACTorganisation that the Round Table, at which wepresent this year’s edition, can be held on 14thNovember 2019 at the location of the DACTTreasury Beurs 2019 before the Eat, Meet &Greet event and that invitations for this eventare being sent out together with the DACT.
We trust that you have enjoyed reading TheTreasury Barometer and we would welcomeyour ideas, participations and thoughts fornext year, so that we can make the 2020version even better.
In summary, we are really proud of this editionand would like to thank all that have been partof creating the Treasury Barometer 2019.
Kind regards,
The Treasury Barometer team 2019
From the Treasury Barometer 2019 Editorial staff
33
ContactIf you have any questionsabout the contents of this TreasuryBarometer report, or if you would like to contribute to future reports or to participate in the Editor Panel, please contact:
Robert-Jan WekkingEnigma ConsultingManaging PartnerPhone no. +31 6 24 32 08 78E-mail [email protected]
Bart JonkheerRabobankHead Transaction BankingPhone no. +31 6 53 17 03 15E-mail [email protected]
For further information please go to www.Rabobank.nlwww.enigmaconsulting.nl
Contact