Notes from Festival of Treasury Transformation – Day 4
Treasurers as a target: Tackling Increased cyber risk and fraud
Simon Viney - Cyber Security Financial Services Lead, BAE Systems
Andy Bates - Executive Director, UK, Middle East & India, Global Cyber Alliance
Nithai Barzam - Chief Operating Officer, nsKnox
Jeff Ando - Director, Content & Production, Global Trade Review
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Background
- Cyber security has been an issue for a long time – escalated during the current crisis.
- 80% of organisations a target for cybercrime, 90% of companies over $1bn
- FBI estimate – Last 3 years $26tr lost to email fraud
- Added problem of reputational risk
Variety of threats
- More complexity, especially working from home
- Changes in behaviour
- All digital creates easier targets
- Many businesses in survival mode
- Security processes need to catch up
- Supply chains are being expanded rapidly
- Problems with validation, controls relaxed
- Fraudsters have ability to access ERPs directly bypassing email security
Minimising cyber attacks
- Need to understand processes in their entirety
- Break down silos between IT/Cyber teams and finance teams – cross-team communication
- Fraudsters take advantage of the gaps
- Cyber security needs to be taken as seriously as physical security
- Need for gaming/simulation
- Wider aspects, comms during attack, board responses
- Data sharing
- Companies need to cooperate, attackers do
- Cyber Defence Alliance of high street banks - good example of cooperation
- Opportunity for ACT to share best practice
- Regulators now focussing on operational resilience
- Resilience planning needs to be strategic, holistic and not completed in silos
Trends in Cybercrime
- Number of fraudulent COVID-19 domain names est. 2.5 million
- Cyber defence growing by 13%, cybercrime growing by 20%
- Cybercrime now looking at volume rather than high value, moving to SMEs
Additional resources - Financial services ISAC fsisac.com
CFO and transformation
Neil Garrod - Chief Financial Officer, Greensill
Matthew Hurn - Chief Financial Officer, Alternative Investments & Infrastructure, Mubadala
Pooja Gupta - Head of Finance, Oncology, Novartis
Caroline Stockmann - Chief Executive ACT
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The COVID-19 crisis has led to a compulsory shift of changes and accelerated the transformation in many ways:
- The way of working is one of the biggest transformational changes and it will go through significantly
- Transformation in people’s mindset
- Technology has enabled more real-time financial involvement and operation
- CFOs and their finance/treasury teams are more aware of liquidity issues and keen to generate cash quicker.
Prioritizing the priorities:
- Changes appearing in the risk profile - more attention and awareness paid for data protection/cybersecurity
- Compliance and mitigation: different shape of changes in different context which will change the way we look at it
- Introduction of AI technology in strategic processes, such as cash flow forecasting
- Adapting to the new working environment: working from home but connected
- Social responsibility on the top of the agenda - what’s the impact on staff/customers/community?
- Shift to stakeholder value from shareholder value;
The panel also highlighted that inventory finance is in high demand as a consequence of crisis management, while the e-invoicing process becomes standard process. These will ultimately change processes and mindsets going forward.
In order for CFOs to ensure business continuity remains, the key is to bring in/together people. As a result of working remotely during lockdown, mental health issues have come to the front of CFOs’ minds. It was a risk before but now even more so. People are more sensitive to changes and uncertainties, therefore, CFOs and senior leaders need to know how they best react and respond, and how they can make people work cohesively during this crisis.
CFOs need to re-define risk management and prove its true value to the organisation. It is important to pull together the right stakeholders to make informed decisions in the best interests of all stakeholders.
What could we do better?
- How do we want to be remembered during this time?
- Technology acceleration - the catalyst of change
- Finance can work remotely
- Building relationships with teams: learn and figure out how best maintain/build relationship
- The role of treasury becomes ever more important: it’s time to show the value of treasury team and what they worth for the business
CFO leadership:
- Embrace the ‘new normal’ and evolve
- Learn more stakeholder values with humanity and honesty
- Be considerate/compassionate to staff, stakeholders, and suppliers
- Build on trust and tolerance for team members
- Be prepared to speak the language to the board
Virtual handshake
Ginny Wu - Group Financial Controller, Walkershop footwear
Jean-Marc Servat - Chair, European Association of Corporate Treasurers
Jose Carlos Cuevas - Associate Partner, Strategy and Transactions, EY
Jeffery Allen - Managing Director, Client Management, Willis Towers Watson
Caroline Stockmann - Chief Executive, ACT
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The main purpose of this session was to understand how different cultures have different ways of greeting each other and how we can greet people appropriately with the right tone and showing the right level of respect.
This session started with a short presentation by Jeffrey Allan on phases we’ve been going through during the crisis and how to make virtual meetings a success. Allan kicked off with an overview of human capital across three stages of responding to the COVID-19 crisis. First, a lot of reactive measures were taken to preserve business and human capital value, followed by the second stage which is to restore stability by adopting coping measures to protect business and human capital while minimizing disruption. The last stage sees new models being implemented, capital being optimized with more strategic measures taken to invest in business and human capital. As we go forward, we will see new ways of working, employee safety improvement, and capital re-allocation evolved.
Similar to holding physical meetings, it is just as important to stick with the fundamentals and fully understand the meeting dynamics in the virtual space, including its purpose, its participants, its size, etc. Allan then shared a few tips of holding successful video meetings:
- More preparation needed and gain comfort using the technology
- Remember you are on video
- Remain eye contract and avoid distraction
- Dress up for the meeting as appropriate
- Look to build in the interactive component
- Use the video to engage with your audience
In the treasury world, working remotely is new to almost everyone. Those treasurers who find observing body language very useful are finding they sometimes miss cues and, especially with their own teams, are asking people to be more expressive so that nothing is missed. Caroline Stockmann gave her advice for treasurers and their teams to focus on keeping up energy and engagement through voice/video, so the whole experience can be very rewarding.
One positive impact of COVID-19 is that people can see working from home is possible for almost sectors and bringing in a more diverse team across borders is not so difficult after all. The panel agreed that ‘the greater the diversity in a team, the more effective it is, outperforming other teams as long as the team itself accepts its diverse elements and appreciates them’. It’s critically important to make the working environment inclusive for all.
Communication in our virtual teams has to be a real focus:
- A fully virtual team meeting can work better than when only some of the team are physically in the same place
- A different form of leadership is required
- Always incorporate some social elements and interactions
- Be respectful to different cultures
- Empowering people and rotating leadership on different topics and projects.
Cutting through the noise to make treasury transformation happen
Andrew McMichael - Group Treasurer, Agility
Charlotte Morgan - Non-executive Director, Audit Committee Chair, Sumitomo Mitsui
Eugene Banja - Treasurer, African Guarantee Fund
Risk Watson - Managing Director and Head of Capital Markets
Iain Anderson - Executive Chairman, Cicero/AMO
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Liquidity during pandemic
- Different from previous global banking crisis
- Bank regulation has addressed liquidity, so few problems
- Some initial squeeze in some regions due to initial drawdown by corporates
- Now being repaid due to carry costs
- Large range in rates and tenor at different banks
- Treasurers needing to act pragmatically
Regional variations
Africa
- Net beneficiary of asset managers’ search for growth
- Market flooded with $
- Easy Access for borrowing
Europe
- EU broke record on issuance
- 20% of volume underpinned by Central banks
- Loan market also supported by national and supra-national actors
- But support not open-ended
What’s progressing/stalling?
- A lot of time taken up by adapting the basics
- Big picture not affected majorly (in general)
- Focus on digitisation and automation
- Some issues with 31st March accounting dates in Japan
- 1st region to provide audited accounts – with different standards due to IFRS9
- Remote working happened quickly
- Focus starting to shift towards normality
Trade wars
Africa
- Caught in the middle of China/US/EU trade war
- Colonial alignments had affected trade alliances
- Now moving away
- Looking at alternate routes to market – Potentially following the path of least resistance re: access to finance and burden of regulation
Brexit
- Financial services unlikely to be part of any agreement
- But unlikely to be affected by Hard Brexit
- Equivalency agreed for Clearing Houses
New economy post COVID-!9
- Currently situation has highlighted the ability to adapt
- Changes in working practices
- Humanising workforce due to contacts via Zoom etc.
- Different approach to health care
Financial Services
- Will change how institutions work
- Change in need for real estate and attitudes to travel
- Investors to become more proactive in the ESG arena
- Capital markets – balance between capital market and debt market in Europe likely to change
Building back better
Sir Roger Gifford - Chairman, Green Finance Institute
Caron Bradshaw - Chief Executive, Charity fiance Group
Ines Faden Da Silva - Group Treasurer, Tideway
James Winterton - Associate Director, Policy & Technical, ACT
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Need to identify risk in ESG arena – measure risk – mitigate/stop
- Regulation is coming – get ahead o the curve and help to build resilience
Environmental
- Challenges are global – solutions are local
- Why bother?
- Demonstration of commitment
- Investor and bank desire
- Institutional investors have an appetite for ESG
- Corporates
- Need to provide more ESG information for banks and managed funds
- Need to understand supply chain integrity – especially in developing economies
Green Finance Institute are working on:
- Greening finance
- Mobilising green finance – moving finance to green funds
Social
- Drivers that pushed charities to change previously, now useful for corporates
- Move from CSR to a more holistic approach
- Need to understand what shifts are needed
- Ability to stand up to scrutiny
- More understanding of value creation
- Understand supply chains
- Broaden horizon of impacts
Governance
Needed to connect ESG to corporates, advice for treasurers
- Use treasurers’ wider view of the organisations to highlight risk
- Know your company
- Understand TCFD
- Broaden horizon of thinking including indirect relationships
- Discussion with Boards – What’s our purpose
Doing digital: lessons from leaders
Chris Skinner - Author, Commentator and troublemaker
Caroline Stockmann - Chief Executive, ACT
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Necessity is the mother of invention.
- Current crisis has accelerated technological advances
- 2030 is with us now
- Zoom went from 10m to 300m users in 3 months
Digital transformation
- Pandemic has accelerated digital use
- Long term behavioral change – Why do you need an office
- Forced to do thing differently
- Crises accelerate change – 2008 Global Banking Crisis created a wave of Fintech
- Change from physical to digital distribution
- Move to online services
- What to do and how to do it
Transforming to Digital
40 key questions in 4 buckets – Can take up to 5 years to achieve.
- What to do
- How to do it
- Implementation
- Monitoring and continual improvement
Most adaptable to change most likely to survive.
- Adaptability is about communication and culture
Change culture
- Need to make people uncomfortable
- Without change, there will be peril
- Introduce vision and direction of travel
- Needs strong internal comms team
Implementation
- Difficult
- Needs flexibility
- Need to change thinking
- Human transformation most interesting
