Treasury in a Time of Crisis

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Treasury in a Time of Crisis
April 28, 2020

Kyriba.com Copyright © 2020 Kyriba Corp. All rights reserved.Kyriba.com Copyright © 2020 Kyriba Corp. All rights reserved.
What is the treasurer's
biggest priority today?

What is the treasurer's biggest priority today?
4
March 2020 April 2020
Remaining productive Active Liquidity
Integrity of process and controls Managing costs
Active Liquidity Integrity of process and controls
Risk of fraud FX Volatility
Managing costs Risk of fraud
FX Volatility Remaining productive

What are treasurers being asked to
prepare?

What are Treasury Teams Being Asked to Prepare?
1) Cash Forecasting
• 88% of AFP Survey respondents said they wanted to improve
cash forecasting
• Question: how long will my cash last?
• Requirements:
o Precision has become incredibly important
oFlexibility to model different scenarios and ‘what-ifs’
6

Path to success…
a) Collaboration – involving the right people
b) Building – incorporating the right data streams
c) Measurement – feedback loop to measure and report
on forecast accuracy
Cash Forecasting

Building the Forecast
Bank Reporting
Cash
Forecast
Business Units
Spreadsheet Models
ERP
Investments and Debt Historical Data
Internal TeamsDerivative Positions Payments
Forecasting success is about
choosing the right sources and
models for the different
forecasting line items
a) Importing
b) Modeling
c) Copy/Paste
Cash Forecasting

Account A
Transaction Date Status Amount Last Update Date
06/01/2020 Estimated Forecast 800 01/01/2020
06/01/2020 Estimated Forecast 1000 04/01/2020
07/01/2020 Confirmed Forecast 1000 04/28/2020
Version 1
The forecast is created
Example of the life of a
cash forecast
Version 2
The amount is modified
Version 3
The status is modified
Challenge: Capture Every Version of the Forecast
Cash Forecasting

Can be managed
through data
visualization or “business
intelligence” tools that
your IT team can support
(or your TMS/ERP)
Retaining all the data is the answer
Versioning helps users to
monitor and improve
the convergence of their
forecasts to real cash
flows
Cash Forecasting

Measurement
• By capturing every version of the forecast
a) Can accurately measure forecast accuracy
b) Precisely uncover forecast variances
c) Implement feedback loop by fixing the variances
Cash Forecasting

Working from home challenges
• March: Being productive while
meeting diverse needs
• April: Fully operational and secure

Is security a concern for
treasury right now?

Fraud isn’t a new problem – but we are more exposed
14
81%
Percent of companies
reported being targets
of payment fraud in
2019
80%
Percent of
organizations who
experienced
Business Email
Compromise (BEC)
in 2019
54%
Percent of
organizations
reporting financial
loss as a result of
BEC
64%
Percentage of
payment fraud
committed by an
individual outside the
organization

15
Working Remotely Introduces New Risks
Using personal networks and devices
• Most workers will be in their homes where they are responsible to secure their wireless internet connection. Organizations have
little control over how remote workers configure their wireless networks, or what other devices could be connected to them.
• Some will have to use unsecured public networks which are prime spots for malicious parties to spy on internet traffic and collect
confidential personal and business-related information.
Lack of training and awareness
• In addition to the technical considerations, cybersecurity training and awareness-building initiatives are critical to reducing
risk. Most notably, how to keep work and personal activities as separate as possible.
• Organizations need to ensure employees know how to use the tools and technologies that support remote collaboration, as
well as how to recognize and prevent COVID-19 cyber threats, such as phishing, fraudulent emails, and phone calls offering
tech support or posing as solicitations from charities.
Phishing and other scams by bad actors
• The COVID-19 related spike in malicious phishing emails has seen cyber criminals using the pandemic to steal data and blackmail
individuals for money.
• Researchers found a 667% increase in phishing emails using the coronavirus as the hook to trick individuals into clicking links or
downloading attachments that included malware, ransomware, and viruses.
Using personal devices and applications
• Many workers are using personal devices for work tasks. These often lack the tools built into their organization’s approved
devices such as strong antivirus software, customized firewalls, and automatic online backup tools.
• This increases the risk of malware finding its way onto devices and both personal and work-related information being leaked.

Protecting Access to Treasury Systems
• UserID/Password by themselves should not grant access
to the system
• 81% of data breaches from stolen/weak passwords Source: Verizon DBIR
• Especially when working from home, your systems should
use a combination of password controls and encryption:
Strong password policy controls
Multi-factor authentication (hard or soft token)
IP Filtering
Single Sign-On
Data encryption at rest and in transit

• Global Financial Services Firm – lost
$18M in payment fraud in less than a
week in a phishing scheme.
• Large Manufacturing Firm – lost
~$3M over 1 year in a drip campaign
• Tech Firm – released $1.2M wire
from Deepfake CFO impersonation
• Engineering firm – lost $31M over
several years due to internal wire
fraud
Fraud Examples: Breakdown of Controls

• Multiple ERPs with different approval processes
• Regional treasury/shared services require lesser
numbers of approval due to limited in-country
staff
• CEO and/or CFO have ability to execute or
influence payments with only one other approval
• Payments backup documents stored in a
different system than payment approvals
• Payment files can be opened and modified
• No automated detection for duplicate and
unusual payments
• Lack of real-time visibility into all payments
Scenarios that are ripe for payments fraud

To detect fraud, finance must…
Payment Policy Screening Rule
Payments should only go to approved
suppliers in approved countries
All payments to non-approved countries must
be stopped
Payments initiated by A/P within the ERP are
only approved or rejected by finance
Any payments that are modified after import
must be stopped
Single or multiple payments to same
beneficiary must not exceed a specified limit
Hold for review any payments that
cumulatively exceed specified limit per
day/week/month
All payments to a newly modified bank
account must be reviewed by Treasurer
First payment to a new or modified bank
account must be held for review
Exceptional payments should be reviewed by
Controller
All payments with a standard deviation of x%
from typical payments of the same type must
be stopped for further review

Rules-based automation and machine learning to detect violations of
payment policy and detection of payment anomalies (from normal behavior)
Dashboards expedite the
review process
Screening Payments: enforce payment policy

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Is market volatility a
driving concern?
- FX
- Equities and Fixed Income
- Central Bank rates to zero

Currency Risk
22
This was
before the
COVID crisis

Currency Risk
23
Observed during the pandemic
• Flight to major currencies
• Persistent upward movement in USD
• Volatility
What it means
• FX headwinds for Q1 not the biggest priority
• Q2: Everything will be scrutinized
• CFOs expected to know what FX exposures they have and
demonstrate action to remedy: hedging or organic reduction in
net exposure to 1% of EPS

Zero Interest Rates
24
Consequences
• Low borrowing costs (for those with
high credit quality)
• Effectively no return on cash
Especially problematic for the
56% of organizations where
treasury is viewed as cost-
neutral or a profit center
• Must be more intentional and
‘active’ with your liquidity

Is this crisis the straw that breaks the
camel's back for using spreadsheets in
treasury?

Why not just use Excel?
• Spreadsheets are easy…when managing cash is easy
• Become less effective when integrating data sources
• Not truly multi-user
o Lacks controls
o Lacks audit trails
• Terrible for data-driven treasuries
o Have data maximums
o Can’t store multiple versions
o No drill downs
oTakes significant time to change formulas and create entirely new
dashboards and analyses

To Summarize…
• Liquidity continues to be the number one priority
• The Cash Forecast is the number one deliverable
• Payment Fraud has become a bigger threat
• Fraudsters target weak or inconsistent controls
• 36% of payments fraud is internal
• Treasury teams that can actively manage market
risks will become permanent strategic advisors
27

Treasury in a Time of Crisis

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