Across Europe, we provide corporate banking services supported by deep local market knowledge.
In this series, we discuss the latest developments and innovations to help treasurers answer the question ‘what is possible?’. Each episode is accompanied by an in-depth article, packed with useful information and guidance.
Susan Barron, Global Head of Sustainable Capital Markets, Barclays Investment Bank and Helen Kelly, Head of Europe for Barclays Corporate Banking shine a light on the fast-evolving topic of ESG and the importance of a collaborative approach.
(Recorded December 2021)
Dany Eder: Hello and welcome to our latest podcast in our Europe Edit series, exploring what is possible for treasurers. My name is Dany Eder, Head of Payments and Cash Management for Europe. And I’m delighted to be joined today by Susan Barron, Global Head of Sustainable Capital Markets, Barclays Investment Bank, and Helen Kelly, Head of Europe, Barclays Corporate Banking. Today we’ll be discussing the challenges and the opportunities presented when establishing an ESG-centric treasury. A warm welcome to you, Susan, and welcome back Helen.
SB: Thanks very much, Dany, a great pleasure to be here today and to have an opportunity to speak about this really exciting topic and opportunity of ESG.
HK: Likewise, Dany, I’m really excited to be back again with you at the mic.
DE: Maybe to get us started today, with the first obvious question, Susan, is ESG an opportunity? Or is it just another challenge?
SB: We definitely believe that ESG is an opportunity. We do recognise and see the importance of ESG and how that as a theme has grown for corporate treasurers in recent months and years. And whilst we do acknowledge that as a theme it’s very broad, and it’s constantly changing, we do also see that it creates an opportunity for corporate treasurers to be able to learn more about what they’re doing, but also a provide an opportunity for both internal and external collaboration: collaboration internally across their own organisations, with investor relations, with regulatory and policy teams, and with various other reporting teams; as well as externally with counterparts and various industry forums. We do encourage it to be seen as an opportunity and not daunting, and for our corporate treasurers to be able to take the opportunity, but one step at a time.
HK: You know, I kind of think it’s both an opportunity and a challenge, and it kind of depends where you are on your journey. So, as we see more pressure from consumers and investors, I think treasurers have to really grasp this now. And I know that’s very hard, because, you know, if you’re having weekly calls in your treasury department, and priorities, it’s very difficult to pick this up. But I just agree with what Susan has said that there’s plenty support out there both externally and internally to get yourself up the curve, and you’ve really got to start to embrace this.
DE: Thank you both. What I’m hearing from your responses that for treasurers, it can be daunting. What can they do? Who can they reach out to internally and externally for support?
SB: From our experience, as I mentioned, it’s around collaboration. So first and foremost, we would encourage internal collaboration for treasurers to reach out to teams internally such as sustainability, or investor relations, to understand more broadly what their individual institutions are doing, and to allow them to start to learn how individual institutions are integrating ESG into all that they do, but also to Helen’s point recognising that different institutions may be at different stages of their own journeys. And so, taking the time to understand where those individual institutions are, as well. What we would also say is that there is so much now public discussion, developing industry and regulatory forum debate and guidance, to look for these external points of contact or sources of information, to really be able to further inform and learn more deeply about the topic and how it may in fact be relevant to the institution. Or, indeed, learnings from peers that potentially could be incorporated into an individual institution.
HK: Dany, I would just echo the final point there. There are many kinds of treasurers’ associations around Europe, you can learn best from your peers and from other treasurers here on this journey. And, some companies are, are further ahead than others. But I would certainly encourage your peers to talk to other treasurers as well.
DE: Thank you, thank you. Those are absolutely very valuable recommendations. Bring us back more to the product suite. What products are available here for consideration?
SB: From a financing perspective, we’ve definitely seen the product landscape develop and in fact accelerate, informed by industry standards and growing regulatory guidelines. Often we see for consideration the mention of green bonds, which are acknowledged to be the first bond product of its type issued. But subsequent to that, we’ve seen the market develop. So we’ve seen the evolution of social bonds, which unlike green bonds, would use the proceeds raised to finance eligible social expenditures, rather than eligible environmental expenditures as is the case in green bonds. We’ve equally seen the development of sustainability-linked bonds, which is a complementary product to the sustainability-linked loan market, whereby the individual instrument is incorporated and includes specific environmental and/or social KPIs or targets. One thing we do note is that, and we do see, is that the market is keen to encourage individual institutions’ ability to find the right product that best suits that institution, acknowledging their different stages of their own journeys, but equally the different, specific requirements. The market is also looking to provide rigour and guidance to institutions, which where various industry bodies, such as the Loan Market Association, or the International Capital Market Association, provide best-practice guidelines to help inform and encourage best practice in this market. As these financial products continue to grow and develop, we hope that it will afford a broader range of institutions to be able to look at ways that they can formalise their ESG and sustainability commitments through the use of individual financing products.
HK: And maybe I could comment there, we are definitely also seeing a huge increase in sustainability-linked debt finance. It’s now part of almost every revolving credit facility refinance discussion. We can also offer green loans, we can offer green BGIs [Bonds, Guarantees and Indemnities], green selective receivables finance. So, right through from your basic working capital needs to your longer-term financing, there are now green solutions. And we’re also seeing clients look at the other side of the balance sheet and looking at investment solutions for their surplus liquidity, and treasurers are looking to adapt their treasury policies to accommodate this. Treasurers used to only look at financial institutions with a credit lens and now they’re looking at us with a blend of credit and ESG ratings as well.
DE: It’s truly a developing world. You both have touched on various products and services. How are we seeing clients transition towards ESG and how are we supporting them?
SB: From a debt financing perspective, there are a broad range of products as we have just been discussing. But we see individual sectors or clients looking to find the most appropriate product for themselves. So, for example, a business that is more focused around real estate may believe and choose to see a green bond as the most appropriate means by which they can formalise their commitments, and finance their transition, specifically, with a view to financing green buildings as they define them. Alternatively, we also see and support utility clients with a specific desire to finance their own expansion into renewable energy and other forms of energy efficiency. I think the opportunity here is that for all sectors, there is increasingly an opportunity to be able to identify whether it’s specific capital expenditures, or anticipated projects, or equally transactions whereby we can allow and work with companies to be able to use either bonds or loans to formalise their GHG or carbon emission reduction targets, as they’re looking to move towards a net zero sustainable future.
HK: Maybe just to add, if you want to apply sustainability metrics to your financing, what I would say is just start and look at what you’re doing already, in both your organisation and in your banking covenants. Most companies start with looking at the obvious area, which is emission levels. So treasurers can consider emissions-linked margin adjustments in your RCF. But we’re also seeing much more focus on the ‘S’, which is the social, and the ‘G’, the corporate governance aspects, rather than just the green side of things. So for example, a university we have been working with recently, we’re seeing their covenants and KPIs linked now to attracting students from underrepresented inner-city areas. It’s something that they were trying to do already within the university, and we’ve just tried to bring that into their covenant package. So, another example in that real estate area which Susan mentioned: it’s not all about just going for a full green loan, you can opt for a green element to a broader financing. So that’s something, you don’t have to go full belt initially.
DE: It’s been fascinating. Thank you for joining me on this podcast today, Susan, and Helen; it’s been really, really interesting to hear about the opportunities surrounding an ESG-centric treasury and I strongly encourage our listeners to contact their relationship director and find out how we can support you on this journey. Thank you again, both, for sharing today.
SB: And thanks so much, again for having me here today to be able to talk about this exciting opportunity. But also, hopefully, to portray that each step is an important step of being able to find the right solution for individual institutions along their journey to being able to formalise their ESG commitments through specific financing and other interesting alternatives. So thank you again.
HK: Thank you, Dany, also, from me, but maybe a final word to treasurers: I think it’s really important that you form a strong partnership with a bank that has the resources and expertise to help you, but also one that can itself be seen to be taking positive steps in the same direction.
DE: That concludes our podcast for today; thank you for listening. You can learn more about how we can support corporates across Europe by going online at barclayscorporate.com/Europe
Daniela Eder, Head of Payments & Cash Management Europe, Barclays Corporate Banking, and Maarten van Rossum, Head of Global Sales, Financial Institutions Group, Barclays Corporate Banking outline practical ways to leverage opportunities.
(Recorded November 2021)
Dany Eder: Hello, and welcome to our latest podcast in our Europe Edit series exploring what is possible for treasurers. My name is Dany Eder, Head of Payments and Cash Management for Europe, and I’m joined today by Maarten van Rossum, Head of Global Sales, Financial Institutions Group. Today we’ll be discussing developments in Open Banking across treasury services. A warm welcome to you, Maarten.
Maarten van Rossum: Thanks, Dany. Thanks very much. I’m happy to be here. It’s my first podcast, so I’m really excited.
DE: And we’re delighted to have you today. Let me kick us off. As you know, since 2018, PSD2 has really changed the banking landscape dramatically. It’s promoted innovation in digital payments, along with harmonisation, and improving cross-border EU payments. But the directive also enabled regulated third-party providers – so-called TPPs – to access customer data held by a bank via application programming interfaces – so-called APIs – in order to develop new products and services and apps, really the blueprint for Open Banking. To some of us that sounds like a large selection of new acronyms, Maarten. So let me level-set with everyone that’s listening, and ask you the first question. What and who are regulated third-party providers, so-called TPPs?
MvR: Right. Well, I’m afraid I’m going to answer your question with even more abbreviations. Actually, there’s quite a few of them. This term was introduced by the PSD2, and within the context of Open Banking, and simply put a third-party provider is an authorised service provider that is not part of your relationship with the bank, but they may be involved in the online transactions that you perform, or how you access your accounts. And within this particular TPP context, we identified two primary types within the payments world, and here’s where the abbreviations come in. The first one is an AISP, or an account information service provider. And the other one is a PISP, which is a payment initiation service provider. And simply put, these are just providers that will be able to obtain information from your bank going back as far as two years, or, in the second case, they can go and they can initiate payments on your account on your behalf. And there’s all kinds of parties to answer the question there, Dany; there’s all kinds that connect as a third-party provider in PSD2 in an Open Banking context. FinTechs are often called third parties, they’re the most obvious ones. Others, of course, are platforms that you might see that are consolidating information across bank accounts from a reporting point of view, or potentially also a payment initiation point of view. But there are also some less obvious players that are entering the market here. Such as, for instance, you’ve got notaries that are using this functionality to be able to look at accounts that their customers have monies held on that they may need for transactions, kind of in lieu of an escrow, or auditors, they can go directly to your bank and obtain the information and you don’t need to go and ask for that on their behalf. So increasingly, there are more and more parties that are starting to identify as a third-party provider within PSD2.
DE: Interesting enough is the rails that are used for this as well, Maarten. So the APIs that I just mentioned, did you want to share additionally a little bit around the rails, as well, that are being used?
MvR: Indeed, the primary way of communication within this new Open Banking world is through APIs, and APIs have been around for longer, but this has really brought them to the fore within this context. And the APIs, what PSD2 did is it required all of the banks to open up their infrastructure to other third-party providers through an API. And what it didn’t do, is it didn’t say what that API had to look like. It gave some requirements, but it didn’t say it must look like this. So what you have is everybody developing different kinds of APIs. But that is a primary channel within which communication takes place between the banks, and the third-party providers. And the interesting thing here is that these banks, they don’t really have a say in this; you must allow third parties access to your systems, as long as they’re regulated and they’re authorised to do so by your customer.
DE: Yeah, the individual consent by consent transaction is really the real-time and new concept, and there’s the security that’s involved with using the new technology. And it’s like you said, the PSD2 gave us the framework under which the third-party providers are actually the actors. And then the secure customer authentication process, as well, that’s involved gives us the necessary comfort. So this is really a truly a new world, and the APIs bring Open Banking to life. So, you mentioned some of these services already a little bit. Would you like to elaborate? How do these services really support the concept of Open Banking? You mentioned payment initiation, you mentioned account information services. Do you have some more examples to share with us?
MvR: Yeah, sure, Dany. So there’s really no limit to the number of things that you could do with this. But the first use cases that came about were primarily around the consolidation of bank account information on a third-party platform. And, it’s not just third parties, you know, let’s not forget that a bank could be a third-party provider as well. I know my personal bank that I bank with here in the Netherlands, they started to give me the option to bring in information from other banks so that I could have it all nice and neat in one place. And that’s all based on the back of this Open Banking, that was made possible by PSD2. So, that was the initial, most quick use case that came about, but then it quickly expanded. So you have treasury management platforms that are integrating this into their systems, into the software, so that you can have consolidated reporting in one place - you don’t need to go and obtain every morning all of your bank information from different sources, it’s just already there, when you get started. And the reversal – so if you want to make payments that you can do from a single place, so the treasury management platforms really jumped on the Open Banking opportunity there. And from thereon, all kinds of other use cases have started to emerge, some of them not as obvious as the ones I’ve just mentioned. So I talked about, earlier, the auditors, who can access information on your account there. But I think what’s interesting here is, this is a classical example, really of a technological change, where we overestimate the speed of adoption. We think, ‘oh, it’s going to be available in 2018, the latter part’, and then within a couple of weeks, we’ll have all these applications. That didn’t happen, the speed has been relatively slow in the beginning. But at the same time, we totally underestimate the long-term implications of this change. Because over the long term, there will be many, many more use cases that we potentially haven’t even thought about, that will be made possible by this. And one of them that I can think of right here is you know, I have my Alexa assistant sitting on my desk right here, and I could ask her to link into all of my banks and, once they are connected, then start managing my finances and maybe find the best place to put my money and give me some tips as to where I should move it, or which savings account has the best rate, or which investment option would be the most optimal. So you know, those are just a few things, but really the use cases ultimately are unlimited.
DE: It’s fascinating. I myself as well have used especially the payment initiation services as a consumer. And it is really, obviously very strong in the retail sector. It is, and one of the interesting things that you mentioned, Maarten, was also how corporates or banks or FinTechs, as you mentioned, could become either one; account information service providers or payment initiation service providers. So it becomes a mixed market and lots to choose from, but what I’m hearing from all of the services that you mentioned was the convenience, the seamlessness, the user experience – how positive – and the real-time that comes from this as well. So it grew in retail, as you and I just mentioned, as we personally use these kinds of third-party providers, but you can really see this growing now in the corporate sector, as well as also the rails in real-time payment adapt to these kinds of new third-party providers. It’s a very interesting ecosystem that is really developing out there, and kind of brings us back to us here and Barclays, I know you are at the forefront of supporting FinTechs and also, obviously, financial institutions. Share with us what we are doing at Barclays really to support banks, but also third-party providers or other FinTechs across the transactional lifecycle.
MvR: As I said before, the banks play a number of different roles in the Open Banking world. The first one is, of course, the passive role, where we are providing access to our systems to third-party providers. And this is a regulated thing, it’s something that everybody must do. From a banking point of view, from our point of view, there are no opportunities here. And in fact, there’s mostly just threats to our business. But there are other roles that we play, so we ourselves can become a third-party provider. And we ourselves can partner with other third-party providers, and here is an interesting area that is really starting to develop. So one example here is, when we have discussions with our corporate customers right now, the very first thing we start talking about is, well, how would you like to connect to us? You know, is that going to be a SWIFT connection? Do you want to use electronic banking? Do you want to use a host-to-host connection, all those kinds of things, and then from there, that very often starts to drive the further solution that we can look to work out with our clients. But there’s also an opportunity here to turn this around. And in which case, we work together with treasury management systems, and build in our connectivity there through the third-party access through an API. And then the discussion with our customers becomes very different. We cut out all of this noise, if you will, all this technical mumbo jumbo, and we just ask our customers, ‘which treasury platform do you use?’ And then, based on the answer, we say, well, then you have to go into this menu. And in that menu, you click on ‘Connect to Barclays’, and that’s it, done. Then the discussion focuses in much more around the solution, the actual value-add service that we provide, rather than the technicality of how we provide it. So that is a first case that we’re already starting to work with, with other providers in order to embed Barclays into those platforms, into those services, and make it easier for our customers to access their accounts and services that they have with us. So that’s the part where we are partnering. Now, I get, you already alluded to it, we work together with banks and third parties and FinTechs, especially, quite closely and have done for many years. And that’s also on the back side of all of this, because on the downstream requirements that customers have, you know, the Open Banking component here that’s between the user and the bank and the third-party provider. But depending on who that third-party provider is, and what they’re going to do with that money, if they potentially collect it, or the information, they then may need to make further downstream payments. And that’s where banks come back into the picture because they become required in order to make those transfers. So we work closely together with our FinTech customers, to allow them to connect to schemes, to payment schemes, to make cross-border payments through the traditional correspondent banking networks, and allow them to do the further-on services, to execute those further-on services that they have used Open Banking to initiate. So there’s a lot of different ways that we can work together with third-party providers as partners, as competitors, and ongoingly to build out this Open Banking world.
DE: Maarten, it’s fascinating to hear you talk about this. And I know that especially from the customers that you service, there are fascinating services that are coming. And it’s interesting how we play on both sides of the coin. Yes, on the one hand competitors, but on the other hand in partnership to better service our clients. I want to thank you for joining me today for this podcast, Maarten, it’s been really, really interesting to hear about the developments in Open Banking, but also the positive impact on treasury. You know, I encourage our listeners to contact their respective relationship directors, let us discuss more how we can help you. Thanks again for sharing today, Maarten, it’s been a pleasure.
MvR: Thank you, Dany for having me. It’s been a great first podcast.
DE: That concludes our podcast for today; thank you for listening. You can learn more about how we can support corporates across Europe by going online at barclayscorporate.com/Europe
Listen to Paul Gillen, Chief Information Security Officer, Barclays Europe and Helen Kelly, Head of Europe, Barclays Corporate Banking discuss the growing threat of cybercrime and strategies you can use to keep your business safe.
(Recorded November 2021)
Daniela Eder: Hello and welcome to our latest podcast in our Europe Edit series, exploring what is possible for treasurers. My name is Dany Eder, Head of Payments and Cash Management for Europe. And I’m joined today by Helen Kelly, Head of Europe Barclays Corporate Banking, and Paul Gillen, Chief Information Security Officer, Barclays Europe. Today we’ll be discussing the growing impact of cybercrime and the importance of cybersecurity. Welcome back to our series, Helen, and welcome Paul.
Paul Gillen: Thank you very much, Dany.
Helen Kelly: And thanks, Dany. Delighted to be back.
Dany: It will come as no surprise to you both that in the increasingly digital environment, data and cybersecurity is a top regulatory concern. Coming off the recent survey that we did in collaboration with TMI, 76% of the treasurers mentioned it as one of their top three concerns. Oh. And there has been an increase in fraudulent attacks since the COVID-19 pandemic as well. Helen, that leads me to my first question. Why do you think this is the case?
Helen: Hi, Dany. Unfortunately, the COVID-19 pandemic has in many ways created a perfect storm for ransomware attacks. In early 2020, we saw organisations having to shift to entirely different ways of working almost overnight, so employees began working remotely and businesses inevitably prioritised digital channels and direct relationships with customers. But this rapid pivot in the operating environment opened up technology vulnerabilities that had not prepared for these eventualities. For example, employees in some corporates were using their own personal devices to access company systems. So the organisation was not able to respond quickly enough with a corporate setup to work remotely. And during the pandemic, you know, logical thinking around cybercrime was put to one side in some organisations, and people opened emails and clicked links that they wouldn’t have under normal circumstances. And then you also have, at home, there being so many distractions, which was another factor.
Dany: We did really transition into another world. Paul, coming back to you, in particular statistics from the Cyber Defence Alliance and Comparitech show that there is an evolution taking place in ransomware attacks. How seriously should our listeners be taking this? And can you describe what an attack might even look like?
Paul: Yes, Dany, you’re absolutely correct. Ransomware is by far the top cybersecurity threat that we’ll say we would face in Barclays, our third parties, and to literally an array of major industries, it is the top threat. When we look at attacks around the world, companies in the consumer and industrial product sector are particularly hard hit, as are companies in the consulting and professional services sector. I mean, we’ve seen a 500% increase in ransomware attacks since 2018. And at the time of writing, at the time when we wrote the article, there’d been more than 1,500 confirmed ransomware attacks on the year to date alone, and that number is only growing. Since 2020, we’ve been seeing so-called ‘big game hunting’ ransomware attacks emerging as a significant threat to organisations around the world. And what I mean by ‘big game hunting’ refers to a strategy by sophisticated, financially motivated criminal groups, targeting high-value companies and assets; companies that are highly sensitive to downtime and/or data exfiltration are often targeted, and the criminal groups are attempting to extort large sums of money from the organisations simply by essentially holding their systems and their data to storage. So without a doubt, it’s globally at the moment, the number one cyberthreat to every organisation, whether they realise it or not.
Dany: Those numbers are really frightening that you just quoted. What are some other types of fraud that treasurers should be wary of? And what’s our experience here?
Paul: Yeah, so I think especially with ransomware gangs what you are looking about is something called initial access brokers. So you get organised crime gangs, who basically break into systems, get a foothold onto the system, and then they use the whole ‘crime as a service’ model. And the ‘crime as a service’ model means that they basically sell access to the systems, we’ll say, for example, to a ransomware threat actor who would then deploy ransomware onto that system and pay the initial access broker for the services of getting them onto that network. That’s something that from an intelligence perspective and ‘crime as a service’ perspective that we’re seeing, and without a shadow of a doubt email as a vector of attack. Almost nine out of 10 threats to an organisation that end up with something bad happening to that organisation, start with an email, so I would say the number one thing that people should look out about is email-borne attacks which are looking for phishing, getting information credentials: ultimately, what enterprise cybersecurity professionals would say is getting access to endpoints in an organisation, or machines in an organisation, and then ultimately escalating from one machine to another, until the threat actor gets where they need to be. So email, or all of those different types of attack, generally nine times out of 10 the initial vector of attack is a malicious email sent into the organisation, so people should be looking out for that.
Helen: So, I was just going to mention, Paul, there’s a couple of the old chestnuts, I guess: the CEO or CFO fraud, which I know some people call business email compromise, but that type of threat has been talked about in treasury circles for a number of years. And Covid-19 has disrupted workflows to such an extent that business email compromise has found holes in some corporates’ armour in recent months. Senior execs such as the CFO are most at risk and arguably more than ever with cybercriminals using online collection through social media and social engineering campaigns to get personal information on them, and we’re definitely seeing that on the rise. And the other one is invoice fraud and that’s always an easy one to target. It’s where cybercriminals send fake invoices or are looking to change the bank details of an existing supplier to divert monies into their own coffers. So you really have to look out for unexpected changes in personnel, bank account details, or telephone numbers. These are the real red flags to watch out for here, and everything should be double or triple checked with the supplier by phone, using the original contact details. And it’s a wee bit of a cliché, Dany, but people are one of the best defences against cybercrime and fraud, and you’re really only as good as your weakest link.
Dany: Thank you, Helen. It seems the threats just continue to increase and become more and more sophisticated in the process. How can banking partners support their clients with fraudulent attacks? For example, what are we at Barclays doing to support?
Helen: Well, Barclays are placing a significant emphasis on education and training. And that’s both staff and clients, so working really closely with organisations to help identify weaknesses in their cybersecurity protocols and bringing employees up to speed on threats to look out for, and knowledge is really one of the most powerful tools against cybercrime. We also have, of course, our fraud protection hub, but things like sharing case studies, we collect them. We clearly don’t share client information, but sharing what happened, so that other people can learn from it is an important one. Paul, have you anything to add on that?
Paul: We’ve obviously helped a lot of customers and clients through some very difficult attacks as well. So here in Barclays we’re constantly engaging with our corporate customers to share our knowledge on the experience that we have when it comes to dealing with ransomware attacks and various other different types of cyberattacks. So in cases where we’ve identified particular ransomware groups or ransomware variants that are targeting particular countries or sectors, we share that information so that our customers and clients can be in a position to proactively defend against those particular attacks in their organisation. Certainly in Barclays in the UK, for our retail customers, we’ve had a robust programme in place so that individuals are able to spot potential cyberthreats to themselves and to their businesses. We provide email advisory messages via our Barclays Mobile Banking app, advisories on our website so that we again can share our knowledge about the threat landscape. And sometimes this can be, as Helen says, as simple as advising our customers not to click on a suspected link in an email; I spoke about the threat of email-borne attacks, how to spot suspect emails and text messages, phishing attempts, smishing attempts – which are phishing via SMS – in the first place. And then last and not least we work with our customers, it’s ideally about building a culture of collaborative resilience. Fundamentally, you know, no organisation is alone. We’re not an island, we’re all in this together. And we can all support each other to build what I call a cyber herd immunity, which is perhaps an overused phrase maybe in these times, but it reflects the criticality of building, collective defence and ultimately ensuring that the ransomware operators are not in a position to continue carrying out their incredibly disruptive attacks against any of our businesses. So working together is really important, we take that very seriously.
Dany: Thank you, Paul. Excuse me, Helen, did you want to add onto Paul’s comment?
Helen: Well, I was just going to go back to our Barclays fraud protection hub, Dany. It was a great place to start, and we have a super checklist there and I talked about, you know, educating your people, training We also offer regular webinars that can help as part of an awareness programme. And it also, you know… one really important thing is testing your processes. Good treasurers will often, sort of, simulate issues such as CEO fraud and fake emails. In fact, on the top of our Outlook page, we have a nice picture of a fish, so we can report phishing easily. But I would say that that things like automating processes is another good way because if you reduce the manual touchpoints that lessens the opportunity for cybercriminals and fraudsters. But also having the right culture is really, really important. And team members, no matter how junior, need to feel able to question instructions, even if they purport to come from the CFO or the CEO. It’s far better to stop and question payment instructions and potentially send a payment late than to send a fraudulent payment at all.
Dany: That is a good point. That is a very, very good point. Bringing it all together, what advice would you give to companies who are concerned about these and other cyberthreats? Just maybe a couple of lines around the critical advice needed on this topic?
Paul: I think, take it seriously. I can’t overstate how prevalent ransomware attacks are in the wild. It could happen to you even if you think you’ve got nothing of interest. Be in a position that your organisation is able to collaborate internally and externally in order to make sure that you’ve got a good cybersecurity posture. I would say pay very close attention to the fundamentals of cybersecurity, making sure that you’ve got strong multifactor authentication access to all of your systems. Secondly, make sure that you have a checked and mature cyber-patching programme to ensure that any vulnerabilities that exist on any of the systems, operating systems or applications that you use are constantly patched with the latest patch to avoid the execution of any vulnerabilities against you. Make sure that you’ve got a strong monitoring capability that’s on constantly, 24 hours a day, 365 days a year, monitoring for irregularities on your network that should be fully investigated and never cast aside, as any anomalous behaviour should not be cast aside as something that shouldn’t be investigated. So, basically building the right culture in your organisation, leveraging intelligence to keep on top of all the various different evolving threats is really, really important regardless of the size of your organisation. I think that’s probably the top tips from me, anyway.
Dany: Thank you, Paul. That is a long list, but obviously all needed nowadays as well. Helen, was there anything else that you wanted to add?
Helen: I’d just like to reiterate, Dany, that people are one of the best defences against cybercrime and fraud, and that point about you’re only as good as your weakest link. So for me, it’s about education and training; you can’t do enough of it. I just say that cybersecurity is no longer an add-on to the treasury role; it’s the backbone for best practice.
Dany: Thank you, Helen and Paul, for joining me today on this podcast, it was very interesting. No doubt cybersecurity is a critically important topic that should not be neglected. Thank you again for sharing.
Paul: Thank you, Dany. It’s been a pleasure to be here. Thank you.
Helen: Thanks, Dany, and I do hope our listeners found it useful.
Dany: That concludes our podcast for today; thank you for listening. You can learn more about how we can support corporates across Europe by going online at barclayscorporate.com/Europe.
Denis Merendet, our Head of Europe Cash Management Product, and Daniela discuss the adoption rate of Real Time Payments (RTPs) in Europe – and when treasurers should be considering this.
(Recorded September 2021)
Daniela Eder: Hello and welcome to our latest podcast in our Europe Edit series, exploring what is possible for treasurers. My name is Dany Eder, Head of Payments and Cash Management for Europe, and I’m joined today by Denis Merendet, our Head of Europe Cash Management Product. Today we’ll be discussing the importance of real time payments and its benefits. Warm welcome, Denis.
Denis Merendet: Thank you very much Dany for having given me the opportunity
Dany: You know, Denis, I was recently reading a fascinating article from TMI on real time payments which also included a survey, and 70% of the participants quoted that either they’re already using, or they’re intending to use real time instant payments. Especially 40% have plans for usage in the next 12 months. Quite an amazing number. So are real time payments here to stay, and why now?
Denis: Absolutely, real time payments is here to stay. Why now? It’s because we just see that there’s a rapid adoption, mainly in the peer to peer space – but not only – more and more in the B2B space, mainly driven by the ecommerce and mcommerce. And this adoption is now. We are using this instant payments because we have the capability to do it, that’s real time payments, that’s frictionless, and a cheap means of payments. Faster payments that have been launched 13 years ago, only reach, I would say, 30% of the overall traffic of payments across the UK. SEPA Inst, that has been launched only three years ago, already reached 8% of the overall Euro traffic – Euro credit transfer traffic – which is very fast adoption if we take into consideration the size of the European market. So the global level of adoption is pretty good, however there is still disparate adoption. Euro countries, and especially continental Europe countries, have a very high level of adoption, whereas some other countries having already some domestic real time payment solutions, or some countries where Euro is not their home currencies, have a very low and limited adoptions. So there’s a very different experience and capabilities depending on countries. But ultimately treasurers may be already paid by the consumers or by the resellers in instant payments. They do not really choice being paid or not with this new means of payment. The only way treasurer would have to prevent receiving instant payments today is just by selecting partner banks not having the capability to receive instant payments, which I don’t think that’s something that is sustainable in long term. And the answer is it really depends on your needs and, for the treasurer, should I embrace instant payments today? That's really depending on your business, that really depends on your needs, but if you are selling goods to consumers you have to seriously think about it.
Dany: I couldn’t agree with you more, Denis. As we’ve seen, you rightly said, we’ve seen the evolution of real time and of instant, and it’s quite amazing in three years the adoption considering the volume also in the Euro compared to Sterling. 8% may seem like a small number but it’s quite, quite large, and there’s values and benefits, as you just mentioned, to gain from instant. A very long list and we’ve heard of many of them. Real time payments, real time treasury, it really is a bit of a transition that we’re undergoing. What in your opinion though Denis, what are some of really the values that stand out, the true benefits for the corporates now? You just mentioned peer to peer, however we are now going into the corporate scheme. 40% are intending in the next 12 months of our treasurers to implement those. Where’s the value, where’s the benefit?
Denis: So, from my perspective, instant payment should be seen by treasurers as a new way to reach the Holy Grail. Being paid instantaneously before releasing or shipping goods, frictionless and at low cost. This is what the e and m commerce seek for a while, and the reason why and it is the reason why the e wallet solution, the card payments, and a set of many other initiatives/solutions have been rapidly adopted. So from my perspective, real time payments have the role to develop the new pay to bank solution, which is a much cheaper, frictionless and real time payment method that was missing to the ecommerce. So a lot of benefits having the same solution than today: cheaper, frictionless and harmonised – having, you know, pay by bank is just what is missing to ecommerce today, and real time payment paves the road for the development of this new solution. It also triggers, you know, change or adaptation of new business model, better cash flow management, cost control, revenue growth, technology advancement, innovation, but also security, instant availability of funds, enhanced cash flow, better cash management. Also, in terms of FX rates, better risk control, better security, a lot of added value by embracing, you know, the real time payment. Could also become a customer engagement tool, especially one more time on the ecommerce. In the C2B world, for instance, there’s another example where train companies and at that’s a real example in the UK, can instantly reimburse a client of the cost of his ticket when a train has been cancelled in order to facilitate the purchase of a new one. So real time has many, many use cases with a lot of potential developments. In B2B segment, the situation with cash and cheques are currently widely used and cost a fortune just to collect money. We will reduce the cost of managing cash, cheques, cards, a lot of other means of payment that are much more costly for the company just to collect the money or to be paid. So I guess, from my perspective, the real time payment will facilitate electronic mobile commerce payments also.
Dany: That was a long list of benefits, a long list of values. But the innovation doesn’t stop there, does it? We’re setting the rails today for further innovations tomorrow. Just bringing APIs back into the conversation as well, as one of the innovative trends, the real time treasury, the forecasting, you mentioned the cost controlling, but it’s also the very important aspect of client experience, what we’re talking about here is the client experience as well. I’m a big fan of instant payment as a consumer, I’m sure you are as well, Denis.
Denis: Absolutely. [crosstalk]
Dany: But now as we branch out into the B2B space, there are other innovations that are coming along as well, and you mentioned one of them, and – well, actually you mentioned two – tools that we’re still using today which is obviously cheques but also cash and cards. And there are other tools like Direct Debits, as well, which require mandate management and quite an ecosystem to process. Share with us a little bit, what are your thoughts around some of the innovative trends that are looking to address or replace instruments, but also looking forward in the future as we build this instant environment and this ecosystem in Europe, the many, many benefits that you just listed. But what are some of the innovative trends that you see coming in the near future as we build this framework?
Denis: From my perspective, the upcoming innovation are mainly around building this ecosystem. What we can see coming as an innovation is for instance, Confirmation of Payee, where it is an account name checking service that helps to make sure that the payments are not sent to the wrong bank, or, it contributes basically to improve the security and that’s fundamental. We have to put in place the appropriate ecosystem to ensure that that security level provided around this instant payment – which, by the way, I remind, that is an irrevocable payment method – it has to be as secure as the existing one and even better, even more secure. So the Confirmation of Payee is definitely one of the trends that we see in the UK, within Netherlands, within other countries now in Europe, that will bring and will contribute to build this ecosystem. Another very important piece of this ecosystem is the Request to Pay. That’s another innovative trend around real-time payments. Request to Pay is basically enabling new real time means of payments to emerge and close to, but much cheaper, than the card transactions. It is also, you know, around initiating payments through QR codes. So there’s a lot of innovative or added value services within the ecosystem that is developed around the real time payments, that’s where we are. And I would say if I can mention last very upcoming trend is over the development of instant reporting. And with the instant reporting there’s APIs, open banking, that’s the appropriate tool in the instant payment world. If you have instant payments, you need instant reporting, you need instant FX ageing, you need instant risk management, you need to work on non-working day liquidity management by pre-funding or managing your working capital or even, you know, in non-working days. So there’s a lot of other components that are impacted by introducing the real time payments and that’s where most of the innovations will come, and is coming.
Dany: It truly is an exciting ecosystem that we're building and to see this transformation is quite… yeah. You and I have been in the industry for quite a long time and to see all of this now developing and the pace that it’s developing, it is quite remarkable, and Barclays is part of that journey. So kind of my last question for you today, as you’ve been so involved in this topic, why have we invested in SEPA Instant and the connectivity to TIPS as well?
Denis: So maybe, if I may, maybe remember what is TIPS, because we know exactly what it is but I mean that’s pretty new and could be maybe not known by everybody. So TIPS stands for Target Instant Payment Settlement. TIPS has been built as a response to the growing number of instant payments national solutions being developed across Europe in the last few years. And the challenge for the Euro system, and for Europe in general, was to ensure that these national solutions do not reintroduce a fragmentation into European retail payments market. So TIPS basically aims to minimise this risk of fragmentation by offering a service that can help ensure that any bank accounts all in Europe can be reachable through this settlement system. And to ensure that the full development of this instant payments – which is key and I will explain just later why – across Europe, the European Central Bank requires that by the end of 2021 that whole payment service providers, so basically the banks or company that are providing payment services, that adheres already to instant payments in Europe are also reachable through TIPS. And also all the clearing houses across Europe offering instant payment services are migrated and reachable through TIPS. So in practice, TIPS will turn the current set of fragmented domestic instant payments settlement mechanism into a single pan European one. So that’s very important transformation in the instant payment landscape in Europe. It’s passing through the same streamlining process that the credit transfer went through when we introduced SEPA Credit Transfer.
And that’s a key achievement for instant payments to move from a multi-domestic and fragmented instant payment solution to a pan European instant payments solution, that's very key. Another reason why we invested – so we invested initially in SEPA and now we invested in SEPA real time, I would say. So the development of this ecosystem is still in the progress, but the core infrastructure already exists and thanks to the Payment Services Directive, I would say, the conditions are met to foster innovative solutions in a true and very competitive environment. And I would like to give you an example - it’s about the European Payments Initiative, called EPI. And EPI aims to create a new pan European payment solution, leveraging instant payment and card, and now we have the infrastructure, the core infrastructure, we can innovate and there’s a bunch of examples – I’ve just gave you one, European Payment Initiative, but there’s a lot of other initiatives that will drastically transform the way we will pay in Europe going forward. We did it not for pleasure, we did it because we need it, to stay on the course of the ecommerce and real time world economy.
Dany: Denis, thank you so much today for joining us on this podcast, it’s really been very interesting. I can only encourage our listeners to reach out to you, to me, to us here at Barclays. Thank you again, Denis, do come back to see us and hear from you around real time payments, thank you.
Denis: Thank you Dany for having given me the opportunity to discuss about one of the most interesting topics. It will impact also our day-to-day life as a consumer, not only as an employee of a big bank.
Dany: That concludes our podcast for today; thank you for listening. You can learn more about how we can support corporates across Europe by going online at barclayscorporate.com/Europe.
Daniela is in conversation with Gibran Maqsood, our Director of Transactional FX Sales, Europe, and Loic Merlot, our Head of Cash Management for France, Belgium and the Netherlands, about achieving FX transparency and efficiencies.
(Recorded September 2021)
Daniela Eder: Hello and welcome to our latest podcast in our Europe Edit series, exploring what is possible for treasurers. My name is Dany Eder, Head of Payments and Cash Management for Europe, and I’m joined today by Gibran Maqsood, Director of Transactional FX Sales, and Loic Merlot, Head of Payments and Cash Management for France, Belgium and the Netherlands. Today, we’ll be discussing transactional FX and the growing importance of automation. A warm welcome to you both.
Gibran Maqsood: Hi Dany, a pleasure to be here.
Loic Merlot: Thank you, Dany, I’m delighted to be here.
Dany: And it’s a pleasure to have you both. I want to start us off today referencing a recent TMI survey, where 58% of the participants quoted that transactional FX needed more automation. Even more so, 24% specifically quoted needing more transparency, which leads me to my very first question for you both. Why is transactional FX becoming more relevant just now? Gibran, would you like to start?
Gibran: Sure, Dany, and I think you’re right. There is a lot of renewed interest and focus on the space, especially in the post-pandemic world. So in my mind, Dany, there are three or four reasons that are really driving this interest. The first one is the fact that there’s a lot of underlying growth in cross-border payments, and I think a lot of that is fuelled by the fact that global trade is increasing across borders. There’s fewer and fewer barriers to transacting cross-border, and at the same time, there’s a lot of development within the payments technology space. So all of that has really made it easier for businesses and consumers to transact with each other. There’s obviously also the fact that the internet economy and eCommerce have given a massive boost to cross-border payments. So overall, the first theme is that there’s a lot of growth in the cross-border payment space.
The second factor is awareness. If you look at it very sincerely, businesses today are a lot more aware of their FX costs than they were 10 or 15 years ago, and that is even true for us as consumers, right? 10 or 15 years ago, there was very limited transparency of FX costs, and now primarily because of technology and because of the role that FinTech and a lot of the new breed of providers are providing to the industry, it is a lot easier for businesses to have access to FX rates and really understand what’s happening in the FX markets.
The third factor is regulation, and it’s not just regulators that are asking for more transparency, but it’s also the global FX community that is focusing on transparency within FX. And in the TMI article that you just referenced, Dany, we talked a little bit about the FX global code, which is really driving a lot of this behaviour in the industry.
And lastly, the real disruptor is technology. Again, 15 years ago, you and I did not have access to live FX rates in the market. We relied either on the morning newspaper, or relied on what was screened on television, which in any case was heavily delayed, and did not represent real-time FX rates in the market. But now, primarily because of API technology, we can access FX rates; most of us, most businesses, have the ability to transact FX real-time, and at Barclays this is a space that we’ve invested in significantly, and we’ve invested a lot of our capability, a lot of our FX capability within our transaction banking channels. So that’s, that’s kind of the theme broadly within the FX space and there’s very similar thoughts within the cash management space as well, Loic, if you want to talk about those?
Loic: Yeah, thank you, Gibran absolutely. So the payment landscape is really evolving fast. It’s fair to say that globalisation made easier access to new markets. We can see during the pandemic some booming sectors and cross-border B-2-C commerce market is anticipated to recall the compound gross rate of nearly 28.4% from 2020 to 2027. In this context, also important to highlight the rise of emerging technology. Everybody’s heard about: APIs, artificial intelligence, robotics, data mining, automation, instant payment. For corporate treasurers, it can be translated into new types of challenges, accuracy of data, faster integration, and obviously one of the most important components impacting the cash management business is dynamic balance sheet management which becomes a prerequisite. Some treasurers may think, “So hard to do, so easy to say”. That’s where transactional FX comes into play. We can offer multiple configuration solutions through transactional FX, but when embedding transactional FX in your setup, you can improve drastically your risk management and simplify your account structures. This can provide you with better control of your balance sheet.
Dany: Thank you both for the very comprehensive response. There truly has been an evolution in transactional FX. So if I were to put it in the context of the cash management framework, in conjunction to the FX mindset, that really would help a treasurer with their strategic goals, what as a treasurer, should I be thinking about?
Loic: There is immediate linkage with the cash management account structure. Constantly treasurers are evaluating the currency set required to run their business. They have to anticipate, and to have agreed that at any point in time the balance sheet exposure in all their used currencies. Now with transactional FX the question is our how can these new tools and solutions be integrated in some cash management structure. Should it be a partial integration or a full integration? This leads treasurers to challenge the pros and cons of traditional structures, or it can lead treasurers to seek additional efficiencies, mixing old and new tools when considering account structure. Let’s talk about, I would say traditional cash concentration or notional pooling structure. Treasurers may face some issues with the time to implement these types of solutions. They have also to negotiate with banks, these types of tools require sometimes some legal advice. It’s not an easy play, and there is a cost to serve, to maintain such an account structure. So maintenance, legal costs, integration of all these accounts into the treasury management system or ERPs, or within the accounting systems. Plus, audit costs, which are attached to this account structure might become quite important. The objective now, in a dynamic environment with emerging technologies is that our treasurers can ensure they find a way to simplify to strengthen their account structure to get it simpler, and to get a better control of their accounts.
Gibran: And from an FX standpoint, what I would add, Dany, is that if we take a step back and we look at what the needs of a corporate are, and we put them on a spectrum, and I’m talking specifically about the FX needs of a corporate treasury, you will find that there’s a broad range of needs, uh, from simple vanilla solutions to potentially more complex risk management needs. As we mentioned in the article, if we broadly split a corporate treasury’s needs, they would fall into two buckets. So the first one is what I would call the discretionary or strategic needs of a client. The second one is perhaps what we can call the systematic or the transactional FX needs. And what we focus on within transactional FX is the FX that exists within the payments workflow of a corporate treasury. So there’s essentially a lot of focus on where FX meets payments and friction within that. It’s important also to point out that within transactional FX, we’re looking at a very broad diversity of solutions. So oftentimes it’s something very simple as simplifying a client’s account structure, enabling them to use a single account to make multicurrency payments. But we often also see treasurers implementing more complex solutions that may involve a consultative approach to understand their pain points, and potentially use more than one tool to help them simplify their FX workflows. So as I said, there’s many applications and many different use cases, but there are certain environments where there is more transactional FX, and those would typically be what we call the ‘low-value, high-volume’ environments. So again, just to give you a few examples that could be in a payroll environment, could be in an accounts payable team, it could be for an organisation that often receives funds from their clients that are overseas or based in different jurisdictions. There are also certain types of organisations where there’s more relevance of transactional FX, either because they have a lot of the low-value, high-volume FX flows, or because of the type of organisation that they are. For example, regional treasury centres often have a lot of transactional FX flows. Certain organisations like funds and asset managers are often keen to look at automating a lot of their FX flows. But ultimately what we are advocating is that clients who have manual FX workflows will find lots of benefits in potentially automating them, and those benefits are in transparency. So transparency of FX costs and rates that they’re receiving, and also the overall benefits of automation and the potential cost savings that that brings. And ultimately it all kind of feeds into what Loic just spoke about, which is enabling and helping a treasurer to be able to focus on the more strategic needs. We can help them reduce a lot of the friction within their FX workflows.
Dany: It truly is a diverse topic with diverse solutions across a broad client segment, as you just mentioned Gibran and Loic. And if I’m a treasurer, you shared a lot of information with me around the automation, the transparency, reducing the manual work that is involved and freeing up my resources as a treasurer to deploy them elsewhere. Just visualise with me: what would a solution look like for a treasurer in transactional FX, especially on the low value that you just mentioned, Gibran?
Gibran: Sure, Dany. So I think it’s best demonstrated in a very simple example, right? So let’s take a hypothetical situation and let’s assume that we are looking at a business whose functional currency is in euros. And also just for simplicity, let’s just assume that we’re looking at an environment where we are looking at outward payments, and let’s suppose that this business needs to make one single payment, a US dollar payment on a Friday. Now, if you deconstruct all the steps that go into enabling that transaction to happen, you will find that there’s a number of steps and potentially a number of inefficiencies that exist if an organisation chooses to do this manually. So first, someone from the treasury team would typically book an FX trade. Again, that can either be electronically or it could be over the phone. And they would typically do this with the dealing desk of the bank that they transact with. Let’s assume this happens on a Thursday, so one day prior, although oftentimes it may even happen before that. So that’s the first thing that happens. The second step then is that once the FX transaction settles, the US dollar is credited to a US dollar account and the euro needs to be debited from the organisation’s euro account. In parallel there are some post-trade processes that happen now; they could be - again, depending on the way the organisation is set up and the way they interact with the bank - there could be reconciliation activities, some matching, some confirmation… and so all of that happens in parallel. And then separately, as a final step, the treasury team then has to log in to a payment channel to be able to instruct that outward payment. And sometimes they may even have to link the FX transaction to the actual payment that is happening by way of a reference number or something. Now analysing the workflow that I just walked through, I think it’s very clear that that process is cumbersome. There’s a lot of friction in there and it can take at best several hours, although often it takes several days. And all of this, despite the fact that the actual payment activity is very fast. I mean, in many cases, the payment itself is real-time. So as an alternative, a much more efficient solution would be to use an automated, or rather an integrated, FX and payments solution. So the workflow that I just described can be replaced by a simple payment instruction on the Friday for a payment on the same day, with the business instructing that the outbound payment in US dollars be made from a Euro account. And obviously in this case, what we would do is we would work with that organisation to ensure that we have an appropriate FX pricing plan, and that’s the space that I was referring to previously. There’s been a lot of development and a lot of improvement within the ability of banks, and certainly within Barclays, we have now the ability to be able to price even those low-value transactions a lot more accurately, and across all types of transactions. So even though the example we spoke about right now is for an outward payment, the same would apply for an inward payment, and even inter-company accounts within the same organisation that would be able to benefit from one harmonised FX price plan that we could potentially even implement across different jurisdictions.
Loic: On the cash management standpoint, the benefit of this is, is that you’re dealing with less accounts, so you’ve got a better control of what’s happening on your account. When you’ve got less accounts, it’s easier to enter. You’ve got the simple implementation and implementation is really key because when you start opening accounts in different currencies, you have to plug all these accounts into your treasury management system, your team’s accounting system. So I foresee a lot of benefits relying on the transactional FX solution also in terms of better using the cash available within the company. Let’s imagine that in your example, you booked a trade, but you received the dollars a little bit earlier than scheduled. So then you asked to park these dollars until you have to perform the payments. Whereas it’s not the case with transactional FX. So definitely, I really encourage treasurers to have a look at where we can introduce transactional FX within the account structure to optimise the time they are spending on just managing their risk management and performing payments.
Gibran: Just one final point I wanted to add to that was that I think it’s also very important to point out that a transactional FX solution such as the one we’ve just described does not necessarily replace what an organisation is doing right now. They can absolutely work in parallel with a traditional FX execution platform or a traditional method that an organisation is using. It’s just very important to reinforce that point because that is perhaps where the most value lies in being able to look at transactional FX in line with the existing tools that an organisation is using to manage their FX risk.
Dany: Thank you both. I’m sure many of the treasurers can relate to what you’ve just shared with us. And in closing comments, I can only agree with you. I think treasurers really need to pay more attention to this because there’s a lot of advantages that the emerging technology can offer. Thank you for joining me today on this podcast, Gibran and Loic. It’s been really, really interesting to hear about transactional FX and the tools available to solve for some of the hurdles our treasurers have. I encourage our listeners to contact their respective relationship director, or you, Gibran or Loic, and start utilising those tools today. Thank you so much for joining us.
Gibran: Thank you.
Loic: Thank you Dany.
Dany: That concludes our podcast for today; thank you for listening. You can learn more about how we can support corporates across Europe by going online at barclayscorporate.com/Europe.
Hear Daniela talk to Helen Kelly, Head of Europe, Barclays Corporate Banking, about the importance of setting KPIs and what role the treasury team has to play in ESG and D&I matters.
(Recorded September 2021)
Daniela Eder: Hello, and welcome to our latest podcast in our Europe Edit series, exploring what is possible for treasurers. My name is Dany Eder, Head of Payments and Cash Management for Europe, and I am delighted today to be joined by Helen Kelly, Head of Europe Barclays Corporate Banking. Today we’ll be discussing the dynamic topic of ESG, the associated KPIs and its growing importance in conjunction to diversity and inclusion within treasury. Warm welcome to you Helen, thanks for joining us today.
Helen Kelly: Thank you Dany, it’s great to be joining you.
Dany: And it’s such an exciting topic we have to discuss today as well. So let me set the scene a little bit. In a recent survey we conducted in partnership with TMI, we had over 200+ European treasurers respond. Approximately 31% quoted that ESG measurements were not reflected in their financial objectives, which leads me to my first question: is it really time to get serious about ESG, Helen?
Helen: Well Dany, I think it’s definitely time, and firstly I’d say because we’re seeing client engagement really step up. And it’s fair to say that the social side of ESG has been more pronounced with Covid, and we’re seeing some great examples of corporates donating to impacted charities, for example, but what’s really changed over the last couple of years is the corporates are realising that caring about their communities and their employees gets both a more engaged employee and actually more buying loyalty, which is good for business. So it’s not just about rolling out some green initiatives anymore, there’s an awful lot more to it.
Dany: Continuing on from that, so if I’m a treasurer what financial instruments are in the highest demand, so to speak?
Helen: Well I guess that the topical subject is surface liquidity in Europe, and we’re definitely seeing clients seeking ESG-focused investment solutions. But what we’re seeing also now are more sustainability-linked debt finance. That’s something that’s growing rapidly, now part of almost every RCF [Revolving Credit Facility] refinance discussion. And we can offer it, and green loans, to clients pretty much everywhere. We’re also seeing it in trade finance, so clients are asking for the development of ESG solutions there, so things like Green BGIs [Bonds, Guarantees and Indemnities], Green Selective Receivable Finance, so those are probably the most popular.
Dany: It’s really nice to hear and see that there’s so much development in financial instruments. And it has a lot of attention at board level as well. Coming back to our survey, while ESG is a board-level priority for 70% of the organisations that we surveyed, only 25% of the treasury teams have really set ESG KPIs. This is like an overarching topic for ESG. Can you truly achieve a solid ESG strategy without KPIs?
Helen: I don’t think so, Dany. It’s that old phrase, no matter what industry you’re in: “What’s measured gets done.” And I think businesses need targets to achieve this, and certainly to get us off the ground, so we definitely need targets.
Dany: And sustainability reporting in ESG decision-making. I’ve been reading a lot about this topic, and the various areas of concern. Should we wait for regulatory directives to come along? What are some of the areas of sustainability reporting that treasurers can look at, in your opinion, Helen?
Helen: Well in answer to your first question about importance of reporting and timing, you can’t wait. You have to be ahead of the game now. So what are the large corporates doing in this area? Most companies are starting with looking at the obvious area, which is emission levels. Treasurers can then consider emissions-linked margin adjustments, for example, in your RCF, which I mentioned earlier. But probably the easiest place to start is just going to your own Head of Sustainability or your sustainability team and talk to them first about what their priorities are, and then you can talk to the banks. So, if you took something like a large industrial using water in their manufacturing process, are they doing any kind of engineering projects to repair water pipes, to improve water quality or efficiency? We can now link in those types of savings into an RCF facility, so it’s not creating things that aren’t there. Most organisations are doing things already about water, or about recycling waste materials, so I would encourage people to start talking to their own experts in-house and then talk to your bank as well.
Dany: That’s excellent advice. We talked a bit about the “E” of ESG, now let’s focus on the “S” – specifically in the area of D&I. D&I combined with other ESG programmes can truly foster employee satisfaction. So, what’s been your experience, and please do share with us your views, especially around how important D&I measures are within the whole ESG package.
Helen: I think this is a very important subject it its own right, and younger generations really care about this. Money is still important – we can’t get away from that – future employees still want to get paid well. But they also want to work for a really good organisation, so we’re seeing more new hires asking what we’re doing in this space. The importance of employee engagement was really, really highlighted during the pandemic. So people want to work for organisations that care both about the society that we live in, and the communities, but also that care about them as individuals. And one of the things we’ve done a huge amount about in Barclays in the last 18 months was spend time helping board leaders on this journey – of understanding your employees and caring about them. And we’ve done a lot of external and internal training on that, but this is all about developing a really supportive culture, and that’s something that’s a wee bit different than in the past. The younger generation now, they also want a better work-life balance over a pay rise, so we have to try and adapt our recruitment strategies around that.
Dany: I couldn’t agree with you more. The diversity & inclusion programmes, developing ESG products and services for our clients or even setting and promoting our own group environment targets and measurement methodologies, you can feel the impact. And I know that especially you, Helen, you have been at the forefront of diversity and inclusion, mentoring, and especially supporting the younger generation coming into the workforce. What are some of the Barclays initiatives that you feel are really making an impact for us today?
Helen: Well I guess, again, just to bring it back, banking operates in a really changing world, and whether that’s ESG or technology, regulation… there’s so much going on, that for us to make the most of the opportunity ahead, attracting and retaining the right people is key, and diversity is a really, really important part of that. And it’s been shown in many, many surveys recently that companies that are in the top quartile for gender diversity are more likely to have better profits, if you bring it back home to commercial imperatives. So what we’ve done, particularly, I guess, if we look at gender diversity, we’ve set ourselves targets to increase our female director and managing director population. We know we need to engage men and women to do that, we’ve connected and partnered with lots of external organisations who also want to try and achieve this goal: things like the HeForShe campaign, the 30% Club, celebrating International Women’s Day, all of these things are really important, but it’s not just about gender. We have disability, we have LGBT, multi-generational, and multicultural has become even more important in the last year or so. So we want to really try to improve our opportunities, say, for our black colleagues, so we’ve now got a 12-point action plan for race at work, where we’re sponsoring our top black directors, we’re providing black directors with access to training and development programmes, we’re offering mentoring opportunities, establishing executive search teams to proactively approach black professionals about joining us, so this is all about proactivity. We know that diversity is going to be essential to our success, and we also then need to bring our own people with us here, in terms of training, so training is really fundamental in all of this as well, for our own people.
Dany: Changing mindset is never easy, and it’s truly a journey we’re all on. I really appreciate you sharing this valuable information with us today. My hope is that we’ve enticed our listeners to invest more time into ESG. I can truly say we have many initiatives here at Barclays and they are all making an impact, it’s difficult to choose really only one. But I encourage our listeners to contact us. Let us help you on your ESG journey. Helen, thank you for joining us, and please do come back and share more!
Helen: Thank you, Dany, I certainly will.
Dany: That concludes our podcast for today, thank you for listening. You can learn more about how we can support corporates across Europe by going online at barclayscorporate.com/europe
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