Some 70% of corporate treasurers in the Europe, Middle East and Africa (EMEA) region think that a shift from bank to non-bank solutions will occur within their firms in the next two to five years – that’s according to a new report from software provider Finastra, in partnership with Microsoft and Accenture. Compiled from a survey of 380 EMEA treasurers, the report also found that 74% of them believe that access to real-time payments reporting is the key treasury opportunity for 2019.
Entitled Digital Disruption Comes to the Corporate Treasury, the report points out that finance and accounting teams have been exposed to sophisticated technology in the form of enterprise resource planning (ERP) suites. With that in mind, it argues: “If treasury departments at banks can’t offer something similar, the contrast will be jarring.” In the spirit of that warning, the report explores a simple hypothesis: “that the growing expectations of corporate treasurers have reached a tipping point, and as a result… banks will need to change their IT strategies, operating models and business models to find new ways to meet customer demand, unlock new revenue opportunities and protect shareholder value.”
Finastra head of payments Anders Olofsson said: “Demand for convenient, real-time, digitally enabled services has finally come to the corporate treasury. Treasurers are seeing first-hand the benefits of powerful technology platforms that use open application programming interfaces (APIs) to connect cutting-edge services and are open to collaborating with third parties to benefit from these technologies. Banks need to act fast to strengthen their relationships with customers and offer the innovative services they demand.”
Microsoft’s EMEA financial services lead Patrice Amann added: “As we move into a new era of open standards, APIs and interconnected business models, the cloud will underpin new business ecosystems that will enable corporate treasuries to thrive and their businesses to grow. Those that fail to participate… might stay behind and face risk of disruption.”
Download Finastra’s full report here.
A patchy integration of treasury software with wider business functions is posing risks for corporates around the world, says a recent report from Citi. Based on data from 400 firms in a range of different sectors and territories, Managing Risk and Opportunity through Uncertainty highlights gaps in the implementation of treasury management systems (TMSs) that may come back to haunt firms if the provisions aren’t tightened up. Among the treasurers who contributed to the report…
As a result, respondents are starting to embrace new technologies for efficiency and integration, with 58% leveraging robotic process automation and 54% using APIs. Some 54% of respondents are calling for continuous improvement in operational treasury efficiency, with 77% expecting technology advances to drive fundamental changes in the overall function.
Citi Treasury Advisory Group EMEA head Duncan Cole said: “As corporates increasingly recognise technology as an important enabler to meeting risk management objectives, they are searching for ways to effectively integrate their ecosystem – and, while doing so, automate repetitive tasks. Trusted partners with long-standing relationships are well placed to provide critical support and help corporates navigate this rapidly changing landscape.”
Money market funds (MMFs) in the US and Europe have set sound, core investment goals of liquidity and preservation of capital, a recent Fitch opinion has found – with their high-quality, low-risk investment profiles naturally aligned with environmental, social and governance (ESG) principles. However, the rating agency warned, funds with a more central focus on ESG may suffer from reduced effectiveness.
In its 15 July statement, Fitch explains that recent launches of ESG-based funds – plus conversions of existing funds – have spurred a growth of assets under management (AUM) within MMFs of this type. Examples include the BlackRock Liquid Environmentally Aware Fund, which debuted in April, and the State Street Global Advisors ESG Liquid Reserve Fund, which launched last month. The latter is the first MMF to restrict its offerings solely to investments that meet ESG criteria at the time of purchase. While ESG funds’ total AUM at the end of 2018 was a relatively low $57.2bn, that sum grew by 16% in the first half of this year.
However, Fitch cautions: “Depending on the jurisdiction, ESG fund managers face a reduction of eligible investable universe, additional costs of tracking and incorporating ESG metrics, as well as heightened regulatory and reporting requirements relative to traditional non-ESG-focused MMFs. Managers may also have to adjust allocations to account for evolving ESG considerations, which could result in increased asset sales and potential portfolio volatility.”
Fitch estimates that around 60% of ESG-focused MMF managers conduct internal research to incorporate ESG ratings into their portfolio considerations, with the rest using third-party sources. It adds: “Challenges include screening for ESG weakness in complex instruments such as asset-backed commercial paper, which is typically backed by banks, but also used for activities such as funding finance receivables.”
Some 30% of European companies admit that they are still not operating in compliance with the region’s General Data Protection Regulation (GDPR), according to a survey carried out on behalf of tax, audit and consulting firm RSM. Even though the provisions came into force more than a year ago – and regulators have so far extracted €56m in fines for breaches – only 57% of EU firms are confident that they follow the rules. A further 13% are unsure either way.
The research has found that there are several issues behind the compliance gap. More than a third (38%) of non-compliant firms don’t understand when consent is required to hold and process data, while 35% are unsure how they should monitor staff use of personal details, and 34% don’t understand what procedures are required to ensure third-party supplier contracts are compliant. But despite those problems, GDPR is having a positive impact on European cybersecurity. Almost three quarters (73%) of EU firms say that GDPR has encouraged them to improve their management of customer data, while 62% say they have increased their investment in cybersecurity.
RSM UK technology risk assurance partner Steven Snaith said: “With so much pressure on organisations to meet complex requirements, we saw GDPR fatigue setting in last year… businesses were overwhelmed by information from the press, industry bodies and stakeholders. Many organisations simply gave up and reverted back to the old way of doing things. But there are signs that this fatigue is about to fade. High-profile fines across Europe have demonstrated that regulators across the EU are serious about enforcement. Businesses are scrambling to catch up once again. GDPR compliance is far wider than just policies, procedures and training. Underlying technology controls need to be robust to safeguard the leakage and unauthorised access of personal data.”
Companies in the professional services field must urgently tighten up their approach to anti-money laundering (AML) compliance, according to a know your customer (KYC) technology specialist. In a 9 July statement, Encompass Corporation head of solutions consulting Henry Balani reflected upon a new report from the Financial Conduct Authority (FCA), in which the regulator summarised its recent AML activities and highlighted ongoing challenges.
Among the FCA’s achievements, the report cites a recent thematic review of money laundering in the capital markets, which found that risks were mitigated to some extent by the nature of the firms involved. In cases where awareness was patchy, the FCA was able to provide support. However, the report notes, after launching the Office for Professional Body AML Supervision (OPBAS), the FCA found evidence of “clear weaknesses” in how legal and accounting associations conveyed the AML message to their sectors – with many of them focused “more on representing their members rather than robustly supervising standards”.
Balani said: “From this report, it is clear that the FCA is taking real action across the board when it comes to tackling money laundering. It is important to note the focus on capital markets. Given the reputation of London as a major financial centre, this is increasingly relevant and positive to see.”
However, he added: “Professional services firms have weak AML compliance procedures. Accounting firms, especially, must prepare for increased regulatory oversight and will require robust KYC solutions moving forward if they are to meet their obligations. The overriding message is that firms must remain vigilant and not become complacent where compliance is concerned. It is no longer just an option.”
Read the FCA’s full Anti-Money Laundering Annual Report 2018/19 here.