What is possible? The Europe edit

Data-driven treasury – Part 1
Podcast featuring:
- Daniela (‘Dany’) Eder, Head of Payments and Cash Management for Barclays Europe
- Martin Runow, Global Head of Payments and Digital, Barclays Corporate Banking

Dany: Hello, and welcome to our first podcast in our series exploring what is possible for treasurers in the new Europe. My name is Dany Eder, Head of Payments and Cash Management for Europe. And today I'm joined by Martin Runow, Global Head of Payments and Digital at Barclays Corporate bank. We’ll be focusing on the topic of data-driven treasury.

Hello and welcome, Martin. I hope you're well.

Martin: Hi Dany, I am. I hope you are too.

Dany: Absolutely! These are some challenging times we've been going through. And you know, data is all around us, even more evident today than ever before. What have you experienced? Have you seen changes in the behaviour of treasurers, and how they're using data and the tools that they are using?

Martin: Not drastic change in behaviour; more like a strong need to get stuff at your fingertips and obviously have accuracy. And that's not new; that’s always been there, but it's probably a bit propelled by Covid.

I mean, on the topic of data, it's there in abundance – that obviously does lead to a bit of a problem as well, to make sense of the data that's really relevant and try to cut out the noise – and forecasting and predictions, especially in times like these where we don't actually have a proper historic data set to work with in terms of economic forecast.

Actually it's quite interesting; I was speaking at a conference the other day together with one of our economists, and when your day job is making sense of data and then creating predictions out of it, what we see now is that there is data but there's no history, so it's really hard to predict the future. So if you then turn that into Treasury – so some of the models and the forecasts and the things that our clients and customers or corporate treasurers have been dealing with – it's really hard, and in day-to-day that means that you have to deal with very, very high volatility in currencies. You have an interesting interest rate environment everywhere in the world. And trying to make sense of that, trying to make that jive with your Treasury policies, is actually really, really hard.

Dany: So, data is at the heart of everything we do. Have you seen any rise in the usage of our online tools as a result of the crisis? I mean, there must be more activity now than ever before?

Martin: Yes definitely.

And you can see that with the number of stats – obviously we're tracking people logging in and things, but we’re also tracking self-serve. So, you need to go in and amend a Direct Debit or maybe cancel a standing order or do other things online, and those have gone massively up, with spikes in March and April. We're seeing it kind of stabilised now at a much higher level. So I would say – and it's probably true for most of us – those of us who haven't been totally embracing digital in the sense of communicating with your bank, getting information from your bank, you know, doing payments through digital means, have been pulled kicking and screaming into the digital age, I would say. That’s definitely happened.

Dany: Yeah, the online tools, it’s becoming a wide variety as well to choose from as payment service providers also offer services to help collect data. Like, I'm thinking about the account information aggregators that are out there that are collecting information from various balances for the use of APIs and bringing that all together on a dashboard so I can have a look. Or my pension planning, my insurances and so forth, and how all that data is kind of being streamlined into a bit of a picture.

And similar to the treasurer as well; he has so many things that he needs to plug in, and so many various forms of data, I can imagine the online tools are for him an absolute necessity. But also going beyond that making really intelligent decisions from the data that he's viewing.

Do you think, taking us a little bit off track – I'm thinking about the big ecosystem around data – do you think Cloud is an absolute necessity nowadays? That you have to build your new data lakes, and data technology and digitalisation transformation can't live without the Cloud?

Martin: I think that you can live without the Cloud, it just wouldn't be smart and/or practical anymore today – and certainly not in the future. So Cloud technology has become quite mature, and we are seeing, both for us internally – our online banking platform iPortal has recently moved to an internal Cloud environment – but we do see the same with our clients as well. So moving things into a Cloud – whether that's on premise, which is sort of an in-between technology I would almost say, or it's really going into one of those bigger Cloud providers out there – it's almost a necessity, for a number of reasons.

One is it gives you flexibility, and it has massive cost benefits. It also has resilience built in. So when we talk about our own technology, our ambition, especially in online banking or front-end services as a bank, resilience is a key factor for us. So how do we make sure that our systems don't go down, or if something happens that you can bring them up quickly in that you have what we call an active-active environment where you have several databases running at the same time, mirrored all the time? All of those things you can do without a Cloud environment; it would just be so prohibitively expensive and complicated that it just wouldn't make sense. So it's kind of just happening. That's the world that we live in now. So for me, Cloud is one of those massive enablers of digital overall.

Dany: For us at Barclays it's a big part of our strategy as well. But what would be some examples of how I've been able to utilise products and services for a better client experience if I'm utilising Cloud technology in the background.

Martin: I would say as a client of ours, you shouldn't have to know whether we use Cloud or not. The difference in client experience is naturally a driver. Our client experience is the outcome, and that should drive what technology you deploy. It's not tech looking for a problem to solve. You have the problem; you solve it with tech.

So in the digital front-end space our mantra is actually that we want to make it easier for our clients to do their business, and that means not spending too much time trying to learn our systems. So, what you get with the Cloud environment and a bit more agile technology application and development process that we've built over time, is a much quicker release cycle. What we get with Cloud is, for example, a rapid release – or actually, a simultaneous release.

So, instead of having to shut down online banking systems over the weekend so I can do a massive release, I can actually release parts of the infrastructure without taking the system down. Should we find an issue we can actually roll back on all of that without our clients ever noticing. So that's the kind of stuff that the Cloud brings. Good tech and good services, especially in our world, are just the ones that run, that work. Always-on, right?

Dany: And you know, that's exactly why I mention it, because a lot of these buzzwords have been kind of floating around for quite some time, but sometimes just for a normal treasurer it's hard to kind of connect the dots. So, what are these buzzwords and how do they fit into what I need?

From my experience it's really the foundation of everything that you want to do going forward that's a little bit more digitalised and automated. So prediction and forecasting and the numbers getting back to our data and how to use that.

I just wanted to go into a little bit of some of the things that we're doing around automating processes, and reporting and predictions. Tell us a little something about our roadmaps. What are we looking at in terms of client experience, but also automisation so there's a cost benefit for both sides?

Martin: When we look at these data topics, data-driven treasury, I think it's time for us to throw some of these acronyms and buzzwords around ourselves.

Obviously we did cover the Cloud, there is API , there is robotics RPA, and there is the AI topic, but when I look at it from our end and how we connect with our clients, then we have a pretty wide variety of companies that we bank, basically, and the ecosystem starts really with the slightly smaller, maybe not so complex, companies out there and they're quite happy to actually log on to some sort of online banking tool, maybe have some mobile app, and look at account information and send us payments etc. And then you move into the slightly more complex space and all the way up to the multinational corporations, as well as financial institutions and non-bank financial institutions that we deal with. And then this is where APIs and other means of full systems integration come into play.

So this is where we want to basically live within our clients’ ecosystem, or whether we want to or not our clients want that, so they are running their big ERP systems, so we need to be there. So, in the past we've done that through SWIFT connectivity or SWIFT for corporates host-to-host protocols, or direct integration into those systems where data then moves back and forth from machine to machine. And the API – so more real time ‘I need this done now’, ‘Give me this piece of information’, or ‘Here's a payment I need you to execute’ – is coming in now. So it's very interesting how that then integrates into your client systems.

And through those things we are pushing data. We are trying obviously to make sense of the data as well, and we call that providing insights. And I think there's still a long way to go before you hit AI and predictive analytics where your computer or the AI actually tells you what you should be doing, where you should be investing or whatever else there is. There’s sort of the first and the second level of data, and we want to make sure that we have data in a timely fashion and it's fully accurate and rich – so it has a lot of information that I can work with. And it's sort of, how do I glean basic things out of it before I have a basic cycle, I know when my payment runs are and those things. So for us the trick is, it's a bit of a toolset that we want to build and give things to our clients, and then there's also the need for many of our larger clients to do something like that or they want to do that themselves within their ecosystems because they’re aggregating data from different financial institutions. Maybe they're even using other service providers to get all this data together and do something with it.

So that's a very interesting space, but the enablers for those are definitely, I would say, the technology of making sure that the data that gets transmitted, is in rich format; we haven’t talked about ISO, you know the big industry-wide ISO migration that's happening – that's helping, of course. And then things like API that are really emerging, or have emerged, where payments become more granular and quicker and part of a transaction that our clients are doing on their end, really.

Dany: You touched on the big ISO migration that's happening within Europe, and that will obviously foster more of the interoperability you were referencing, globally, as well as more will be able to connect with one another on a central banking basis as well, in a common format.

I think that's really important and you know, as you mentioned the APIs and how massive amounts of data our host-to-host sent to me and then uploaded in my reconciliation and my risk programming, it allows me to really quantify the data and then also selectively use it for my various forms of business and what I'm looking to do with my business. And risk plays a big role in that as well. So I couldn't agree with you more on the APIs – ironically not a technology that’s so brand new if I read correctly – but it's just now getting major attention. And the uses of it – also the security of it – I believe, plays a big role in this as well. Would you agree?

Martin: Oh, absolutely. So APIs are not new. They’re definitely one of those lovely buzzwords that are quite frequently used these days, but people who have been into programming have been around APIs for quite some time. But the notion of open APIs, which ties into the Open Banking journey that we've been on – in Europe, at least – it ties nicely together. But I think API is definitely an additional channel for us and we clearly see that. It's also not the Holy Grail; it's not the one thing that does everything for you. So if you're a corporate out there then it really depends on what you're trying to achieve. So the API, despite common belief, doesn't actually solve every problem in the world. It doesn't make coffee either, but what it does do is give you more options for things where speed, for example, is of the essence. So I see obviously huge benefits.

But then, if you look at the profile of payments that a company does, then there are things that are not super urgent. They need to be accurate; you need to know what happens etc. – I'm talking about normal supplier payments or maybe payroll etc. So, if you are a very traditional company that does payroll once or twice a month, you do know days, if not weeks, ahead of time what you're going to pay and whom, so those things lend themselves to classical batch process, going through classical ACH systems like they do today. There's nothing wrong with that.

But we do see real-time payments emerging, and in combination with an API it does allow us to do things in a better way, for maybe new business areas or where, I don't know, you're in a new economy and you're ridesharing, or you're selling something, or you want to give someone a refund, or there’s insurance – it doesn't matter. There are things where, as a client pushes that button or taps that button on their smartphone, you want to either pull in some information or maybe push out a payment, and that's where an API comes in. So it's a really interesting toolset that wasn't quite there before, maybe, outside of card payments. So I think it's a really cool piece of technology that's enabling certain journeys, or even new business models, and for that I think it's quite cool.

Dany: Thank you for listening to Part 1 of our podcast. Join us again for Part 2 where we will be looking at ways that corporates can battle cybercrime and what Barclays are doing behind the scenes. We’ll also touch on the new digital products and services that Barclays will be introducing for corporate clients over the coming 12 months.

Data-driven treasury - Part 2
Podcast featuring:
- Daniela (‘Dany’) Eder, Head of Payments and Cash Management for Barclays Europe
- Martin Runow, Global Head of Payments and Digital, Barclays Corporate Banking

Dany: Hello again. My name Dany Eder, Head of Payments and Cash Management for Europe. On Part 1 of our previous podcast, we spoke to Martin Runow, Global Head of Payments and Digital at Barclays Corporate Bank, about the importance of data for treasurers, the impact of Covid-19 and developments in new technologies. In Part 2,

Martin and I will be discussing the rise in cybercrime and what treasury teams and banking partners can do to counter that. We’ll also look at the new digital products and services that Barclays will be introducing for corporate clients over the coming 12 months.

Dany: There's more and more activity now in the Net, and there's more and more demand. And there’ll be more and more cybercrime as a result. A lot of banks, including ourselves, are investing heavily in our infrastructure and monitoring this. What would be some of your tips to give to our corporates when they're dealing with the cybercrime topic? Good question, right?

Martin: I think it's an interesting time, Dany. I mean, as more and more payments move into real time, there's obviously even higher risk of not getting your money back. If there's something gone wrong with an old-fashioned payment, a wire etc., there's still a recall option. That doesn't exist with a real-time payment. Once it's booked, it's booked. And on top of that, because of Covid and all these things, you see more and more volume going into electronic and away from cash and cheques.

But on electronic payments in general, my number one tip for everyone is: do also trust your gut. When we look at fraud vectors in corporate banking, there's always the notion that people are hacking systems etc. That's actually not usually how things work.

So the classic problems are people writing their PINs or their passwords on a dongle and they get stolen, basically. The classic problem is internal fraud. The classic problem we see a lot externally is the CEO impersonation, which still works; we still have clients, regularly being defrauded because someone sent you an email, and it was the CEO, and managed to get someone within the company to send out a payment, duly signed, hard for us to find as a company – as a bank – and/or vendor scams.

So someone manages to come in and manages to get the vendor management team within the corporate to change the IBAN to that of a fraudster.

So, from those two angles, as I said, there's trust your gut. How likely is it that your CEO is going to give you an email and ask you to send away a couple of million pounds and no one else in the company needs to know? So it's probably okay to hang up and call back on the office phone line of your actual CEO and see if that's actually true.

That's just one idea.

The other one is invoices: have good processes in place that prevent these things from happening. Just, you know, training, knowledge. We, for example, do a scam test: every now and then we get scam emails and we get to click on it and see that we’ve managed to find them, or get reminded that it was very stupid that we tried to open this important invoice ‘please open here’, right? So that's one thing.

The other thing is obviously on our end we're deploying more and more technology that uses clever algos and maybe some form of AI to look for patterns and where patterns break. So to give you the invoice fraud example, if one of our clients has been paying the same vendor regularly and all of a sudden there's a payment coming in that fits that pattern but has a different IBAN, these things get flagged up now; our system will find them, so we can go and alert the client and ask them. But it is obviously a race. So as systems’ security prevention and detection systems get cleverer, so get the fraudsters. So be vigilant and make sure that you have a bit of an angle on these attack vectors yourself, and using common sense is also quite important.

Dany: I think one of the things that's important is, again, analysing my data in all of this and making sure that I have a full overview of my ecosystem. It's not only the forecasting and predicting and all the tools that are necessary to carry out my business, but also making sure that my environment is secure. And I think one of the things to point out here that you just mentioned at the end, Martin, is the investment that we're making into this, into making sure that our customers have a safe and secure partner they’re banking with, that's not only innovative in some of the things that we're doing around API and improving the client’s experience – you mentioned self-service types of services; I think that's exactly what customers are looking for nowadays.

You want to spend the time with your relationship manager on the phone about really important business matters, and not around your infrastructure and the administrative part of your job. And I think having such a strong partner as Barclays on your side, you can be confident of doing so. And again, managing your data lake, your access points, your connectivity that you have to your various banking partners, making sure they’re standardised and highly secure according to certain standards that obviously you have to set for your own industry. I think they’re some of the key messages that I'm hearing from you – as well as the training and awareness. You mentioned some of the old-fashioned stuff, traditional fraud activity that, because we're thinking so ‘digital’ we're constantly thinking it's just about hacking, but it's still some of these traditional tools that are being used, so training and awareness are obviously still also key in all of this.

Martin: Exactly. A lot of the fraud these days is very clever social engineering and, I mean, these guys are professionals – this is an industry. This is very elaborate. And with social engineering people do get passwords and are able to capture accounts and build on it. So this is not the clichéd teenage hacker sitting in his parents’ home and hacking into machines or trying to do stuff. This is an industry, these are pros, and we have to protect ourselves from them with technology, but also training and awareness.

Dany: And making sure that we continue to – obviously – there’s regulations like GDPR and other regulations about data security that are localised and across the EU as well, throughout Europe that play into this as well. So it's a larger governance topic, I agree with you. It's also one that needs investment and, going back to data, how do I collect the data that is appropriate for my business case, for the innovative investment that I'm doing, while making sure that I keep my systems secure in the background?

Just to close off or maybe to get some insight to our listeners, what's the one innovative project that you're really excited about at the moment at Barclays, on our digital journey?

Martin: I don't think I can break it down to one – there's so many! But I'll give you a few. I have to, I'm sorry about that! But I'm quite excited about virtual accounts.

So what we're doing there, which is building a very cool virtual account solution - that’s still in a relatively early stage, but with a lot of progress.

We have been doing a lot of work around basically moving things bit by bit and business by business onto iPortal, our online tool for corporate clients – which does include things like much better UI/UX but also practical things like payment tracking, like the SWIFT gpi. And then of course there is API in general, which I find just super exciting as a topic, creating, for example, ‘make a faster payment’ as an API and rolling that out into our clients.

But in general at Barclays we are basically building a digital stack - it's a multi-year exercise - and at the same time we obviously have been opening branches and building capability across Europe. So it's actually super exciting to be able to support both with the proper digital toolkit.

Dany: I had a feeling you might say APIs as there’s so much going on in this space. And the virtual accounting is the next level of Treasury cash management, I think, what we're building here.

And having that kind of virtual overview of my cash management position, that's just so advantageous for corporates to utilise, especially with a large stack of currencies as well. And then I think also really important is obviously that cross-border, the multi-entity type of service – that part of the product is quite important as well. So I'm looking very much forward to your team giving us such a fine tool to use and to share with our clients going forward.

Do you think data is the key ‘golden’ tool going forward in every area of business?

Before, we always used it to collect and make a decision, and now we're adding speed, efficiency, transparency – I'm thinking of SWIFT gpi in this sense as well; there's so many developments going on in this space. You have to get a handle on your data lakes today, going forward, I think, as a treasurer if you're not doing it already. Or you partner with us as a bank to help you with these self-service tools. What do you think going forward? Data is the golden key – not the way we process or the way we connect, but the way we use it to make our decisions?

Martin: So data is obviously interesting, and if you listen across the industry then there's this notion that data is the new oil – data is like gold – we just need to mine and it's there, and that's how the business models of the future will work. But data is also sensitive, in the sense that a multi-banked corporate doesn't want one of their many banks to have all the data about them. So in that sense we're trying to do more around insights, and make sure that our clients will find it easier to make sense of the stuff that we give them. Or can we glean certain things from their data, the payments that run through us, etc.? So we give them good quality dashboards etc., but also give them, maybe, an insight about their suppliers who are paying you later, or other things that you can build up.

I think to a large extent data is gold, but it's much more sensitive in the corporate and also for our clients in the financial institution space, and the notion that we as consumers always push that button ‘I accept. Yes, here is my soul, I accept all terms and conditions and as long as I can get this shiny new app you can basically own all of my life, that's fine.’ that I don't think applies as much to corporates. They do want to know the terms and conditions – they want to keep ownership of their own data – and so these business models where I could use all of my clients’ data and then create something cool out of it and sell it back to all of them, I don't think that works that easily within the corporate segment. And I hope that's going to stay the case for a bit.

Dany: Interesting your discussion with the corporates and their response to this. I think it's a journey that we continue. And you're right, we have to be wise about what we select and what really adds value, because investment doesn't come for free and business cases are very difficult anywhere, in any industry.

So Martin, it's been such a pleasure spending time with you this afternoon talking about data and the importance of data, and sharing your insights. And I can only say I'm truly excited about the journey that Barclays is on in digital, but also in the global payment space as we do cover a broad array of clients and there are synergies to be gained from the various developments. I can only encourage everyone to take up the dialogue with us and see how we can help, because I'm certain we can. Thanks for sharing your insights this afternoon. It's been a joy, thanks so much.

Martin: Thank you Dany, and I’m looking forward to maybe our next one. I enjoyed this. Bye

Dany: Bye bye.

Dany: Thank you for listening. That concludes our podcast for today. You can learn more about how we can support corporates across Europe online at Barclayscorporate.com/Europe

A fresh look at post-Brexit treasury
Podcast featuring:
- Daniela (‘Dany’) Eder, Head of Payments and Cash Management for Barclays Europe
- Robin Terry, Vice Chairman for Payments and Cash Management Products, Barclays Corporate Banking

Dany: Hello, and welcome to our latest podcast in our series Exploring What is Possible for Treasurers in the New Europe. My name is Dany Eder, Head of Payments and Cash Management for Barclays Europe, and I'm delighted to be joined by Robin Terry today – our Vice Chairman for Payments and Cash Management Products. Together, we’ll be discussing how we can support corporates with positioning for growth in this new Europe. Welcome, Robin.

Robin: Thanks, Dany.

Dany: Robin, what are some of the key areas for the treasurer to consider when looking at Brexit?

Robin: Good question, Dany. I mean, I think there's been a number of key areas which treasurers have had in their minds in the run up to Brexit. I mean, this is nothing new for a treasurer as they’re always reviewing and risk-assessing their cash management arrangements.

However, alongside Brexit, the Covid-19 emergency has heightened this once again, much as it did back in the financial crisis days of 2008. And I think, firstly, liquidity has been absolutely key, and corporates will have looked at their internal cash reserves, and to their banks for additional funding through somewhat difficult times. In addition, clearly the government loan schemes that are announced and the way banks have helped to deploy these, have also been seen as fairly critical.

So, I think the constant review of banking partners is always a key consideration, and those banks that have supported them through difficult times by extending their balance sheet, will be remembered by corporate treasurers for sure.

And in relation to Brexit, selecting the right banking partner that can really seamlessly transact across the region, and has the right legal structure to do so, is a very important consideration, I think, that links into this relationship piece.

That banking partner, I think, really must have access to all the right clearing systems – so, it was particularly important for us to ensure this at Barclays. We really continued access to both high and low-value Euro schemes from multiple locations, and that was seen as an early priority for us. And additionally, when the European

Payment Council agreed last year that the UK could remain a member of SEPA, that gave us an additional geography on top of our continental European locations, from where we had full reach.

I think moving on, ensuring Euro liquidity management structures worked post Brexit was also important, and that's both from an in-country perspective and cross-border, to allow for liquidity optimisation from multiple country and customer bank account locations. Also taking into account things like treasury and shared service centre, or payment factory structures.

Finally, the loss of passporting has had issues for both banks as well as some corporates and how they are structured, and how they operate on a legal entity basis. And reviews for that have been another important consideration in Brexit planning because in some cases, it's been required to have a change of legal entity for an operation to continue to be able to operate in that post-Brexit environment. So they're kind of some of the high-level things which I think treasurers have been considering.

Dany: Thank you Robin, that is a very long list of individual key topics to consider. Looking at the individual products associated with those key areas that you just mentioned, share with us some of the trends that you’ve been seeing across these key areas and their focus.

Robin: Sure, absolutely, Dany. So let me return, I think, first, to the subject of liquidity. And I think in tough times, this is number one for a corporate treasurer. So clearly, better visibility and how to optimise the use of corporate cash, is always on the agenda for a treasurer. And we found through experience, that too often, funds just sit in a huge number of bank accounts in different countries, and balances are not optimised to really make the best use of that liquidity. And I think the increased use of electronic balance reporting tools, you know, where they are linked to automated liquidity structures, is always a good place to start with, or indeed, to continually review as treasurers look at those structures.

I mentioned too many bank accounts a moment ago, and I think this is really a very important issue for most companies, and something we see coming out in many RFPs. As you can imagine, the rise in interest of virtual account structures has therefore been increasing, and is one area, really, where treasurers can look to reduce the number of what I'll call ‘real’ bank accounts and substitute a virtual account structure underneath it.

So, virtual accounts have been used for a long time to really aid reconciliation where you could open up many, many accounts for every payer. But more and more, they've been used to reduce the burden and cost of running real bank accounts.

Often, they create an in-house bank structure, and by using that in-house bank structure, it will allow for payments on behalf of, receivables on behalf of, POBO and ROBO payment schemes, to be implemented under that structure. Indeed, you know, really, the way in which virtual accounts exist, with all the funds on one real bank account but literally broken out on the underlying virtual accounts, also gives an automatic and immediate concentration of liquidity, and that's a real benefit.

However, clearly there are inter-company loan considerations if that structure contains multiple legal entities on a POBO or ROBO basis.

Dany: Yes, I totally agree, and it’s good to know that we at Barclays are in the midst of planning a new virtual accounting solution for our European treasurers to manage these types of structures. And I’m looking forward to that going live, and I believe we’re hoping to launch that in the second half of 2021.

Back to the trends, is there anything else that you’ve been seeing?

Robin: Alongside Brexit, and also, importantly, during the COVID-19 crisis, attention has also been focused on reviewing and improving supply chains as well as their financing. This has been really fast-moving, and optimisation of working capital through the cycle can really be seen as a real benefit and something that treasurers have been working really hard on. Because obviously, there's some real liquidity benefits that come out of that optimised and improved working capital.

Dany: We touched on what we were doing at Barclays, and the exciting news around virtual accounting. Share with us, though, a little bit more on past, present and future. What have we been doing at Barclays to prepare for Brexit?

Robin: Well a lot, Dany, to be sure. Barclays has been looking at Europe, I guess, for some years now, and it's a strategic growth area for the bank. And my role at Barclays is to ensure we have a full and really sophisticated cash management proposition in place in Europe. And great progress has been made in this respect over the last few years, especially as we get ready for Brexit.

Firstly, Barclays reorganised its legal entity structure to replace the upcoming loss of UK financial services passporting, by creating Barclays Europe. That institution has its hub in Dublin, and our network in Europe are now branches of our Irish entity. So that was the first legal entity change that we did. We also migrated our Euro high-value clearing to be out of our Frankfurt office, and alongside our Brexit preparations, we were keen to deploy a number of new corporate and cash management offices in some key European locations.

This gave us in-country account holding capabilities, payment access, and the ability to link in those liquidity structures we talked about earlier across that range of countries.

So as I mentioned earlier, Barclays has a strategic goal to be a key European cash management player servicing our global clients, and particularly so from our biggest franchise in the UK.

So, Barclays have been preparing for a number of years, and obviously, with the transition period coming to an end in December, we are well placed to have those discussions and to help our customers to navigate the real post-Brexit period.

Dany: Thank you Robin. This clearly shows the importance of Europe and how Barclays has continued the journey, establishing that European bank. In addition, by the end of this year, we are also planning to have completed the roll-out of our single banking platform, providing consistency and streamlining processes for our European treasurers, so this is really great news too.

Now, there have been a lot of topics that we’ve touched on, both in terms of choosing banking partners and infrastructures, the individual product usage trends, and preparing for Brexit and how we prepared for Brexit. Putting that all in summary, what would be your final words of advice to the treasurers who are preparing for post-Brexit?

Robin: Yeah, good question, Dany. I mean, I think there's already been a huge amount of preparation for Brexit over many years, both from banks like Barclays and our corporate clients. We've been talking to many of them for many years, and they've often joined our seminars and webinars to get the very latest.

However, I think my advice would be that the world is a very dynamic place these days, and whilst a final Brexit deal has not been agreed as of this date, it's only right that our Treasury community should remain alert to the news headlines, continue to review and talk in detail with their banking partners, and review the proposition they provide, always having an eye on the continual improvement of cash management services and the structures that they put in place across the European landscape; particularly as we get closer and closer to that end-of-year transition period end in December.

And I think it is that continually looking at the structures, reviewing the banking partners, always being alive to what's potentially coming next around the corner, and as we've seen with Covid-19, this came a little bit out of the blue for most people. And, you know, the way in which banks and corporate treasuries have responded has been remarkable, to keep their businesses flowing and, you know, the world trade moving on. Remember, the world doesn't turn unless money goes through bank accounts, and payables and receivables happen.

So, a very important area to look at, so keep your eye on what's going on in the market and always be thinking about how you can continually improve your structures. That would be my advice.

Dany: That was really useful, Robin. Thanks for taking the time to join us today.

Robin: No problem, Dany. Thanks very much for inviting me.

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.

Automating transactional FX
Podcast featuring:
- Daniela (‘Dany’) Eder, Head of Payments and Cash Management for Barclays Europe
- Sat Khuntia, Head of FX Sales, Barclays Corporate Banking

Dany: Hello and welcome to our latest podcast in our series, exploring what is possible, for treasurers in the new Europe. My name is Dany Eder, and I’m Head of Payments and Cash Management for Europe and today I’m joined by Sat Khuntia, Head of FX Sales for Barclays Corporate Banking. And we’ll be discussing how we can support corporates with unlocking efficiencies and growth opportunities through the automation of transactional FX. Welcome Sat!

Sat: Thanks a lot, Dany, and I look forward to speaking with you on this very important topic.

Dany: We’re more than six months into the Covid-19 crisis and we’ve seen a lot of movement in the market. What have been some of the largest lessons learned in terms of FX transactional activity? Is more automation needed?

Sat: Thanks Dany. The short answer to your second question is ‘yes’; but let me elaborate a little bit. 2020 has been a very eventful year, right, and definitely so in FX. So, two major things happened in this particular space. One is the macro events – the way they unfolded after mid-March leading to lockdowns across all the major economies in the world. That resulted in epic FX volatilities, which lasted through for several weeks after that. Those volatilities certainly made it very difficult for our corporate clients to manage their FX exposure. That was one big thing that happened. The other thing that happened was disruption in the workplaces and work life – not only for us but also for our clients. The stay-at-home and the work-from-home environment became the go-to model for everyone and that just meant that clients who had automated their FX workflows were certainly in the pole position. They were in a much better position to harness the efficiencies of said solution.

We heard great, positive feedback from our clients who had implemented automated FX solutions. And other clients who were on that journey, they have started reviewing their current workflows, and they are looking to automate as much of their FX risk management, execution and payments as possible. So yes, the short answer is yes, automation has certainly surfaced as a key topic amongst the corporate treasury audience.

Dany: You touched on efficiencies and I want to dig a little bit deeper with you into that topic. So, what are some of the efficiencies that FX transactional automation can bring to the treasurer?

Sat: Yeah, I mean three things come to mind, essentially. The first is of utmost importance in the current environment, is resiliency. So, as I mentioned, this work-from-home model has been adapted widely across industry sectors. So, clients definitely need automated FX solutions which are resilient, which can work without any human intervention. And that has been a critical learning lesson in this pandemic.

The second one is risk reduction. If you automate your FX workflows, be it for risk management or for execution or payment purposes, you are certainly reducing the risk within your business. And finally, what it leads to is efficiency. It frees up the staff time and they can focus on more value-added functions. Now, these three trends are not new, but I think what has happened post-pandemic, these trends have accelerated and they will get much widely adopted across industry sectors.

Dany: Thank you, Sat. So, putting that more into context with us here at Barclays, how are we supporting some of those efficiencies with FX transactional processes, and what have we seen that has really been some of the key services of how we've helped our corporates through these challenges in the last couple of months?

Sat: Thanks Dany, really good one. You know there are just so many client examples that come to mind when I think about the benefits of the automated FX solutions. But one that I'm particularly pleased to share is actually the example of one of our key clients who is in the global travel business.

It's a fairly diversified business that they have, and they have automated the FX workflow, both risk management as well as the execution of it, through one of our products known as BARX NetFX. So, this part of their business is actually a travel wholesale business; their customers or clients are essentially the travel agents, including the online travel agents, and their suppliers are essentially hotels and properties all over the world. So, as you can imagine, if you have a business model of this sort, it just exposes you to a number of currency risks. So they had luckily automated all of this exposure management through us on BARX NetFX. And when the pandemic hit, there was a huge amount of cancellations that started happening, a lot of the UK travellers, for instance, started cancelling their Easter holidays to continental Europe, and so on and so forth.

Now, one of the features that we have in this automated FX product is that, any cancellation that happens up to a pre-agreed level, we can honour the original FX rate. So basically, it eliminates the FX risk for the client. And that came in very handy when those cancellations happened. And at least our client had one thing less to worry about, and they've been very thankful about that.

And similarly, I can also say that a lot of our clients who use our FX payments channel to make or receive payments in different currencies, those channels performed fabulously, and it was really good that those electronic channels helped the cash flow, which is a lifeline of these global companies, work smoothly throughout this period.

Dany: Thank you Sat, that is a very interesting example and we are really helping our clients rise to the occasion, especially in these challenging times. That is a really a positive message to hear, and I'm sure that this product will now be highly in demand going forward.

I want to come back to a little bit more around the digitalisation as well, and the emerging technologies, and how this is supporting much of the automation that we've been talking about. And, maybe some of the investment that is going on globally is obviously on the APIs, and we are also very much investing in this technology. Share with us a little bit how this is affecting FX transactional business.

Sat: Really good question. I mean, digitalisation is very much the future, not only in FX but almost all other aspects of business. But when I look at FX specifically, there are two broad areas that come to mind. One is that most of our clients’ businesses are also moving online. So, their business model is kind of morphing or evolving. And it's not only the retail sector. Clearly, the retail sector was very much at the forefront of this disruption along with the travel sectors, but there are many other parts of the industry sectors which are digitising very rapidly. So, we need to develop FX solutions which can adapt to that environment and help our clients manage the FX risks and execution in their eCommerce channels. That's kind of the first part of it. The second one is that the solutions that we deliver to our clients also should be leveraging the latest digital technologies that are available.

And that certainly brings to mind things like APIs – you are 100% right, APIs are absolutely revolutionising this space because of light connectivity – it’s what increasingly more and more clients are preferring – but there are other technologies also which are increasingly being leveraged, and I can think of machine learning, to again automate processes and leveraging big data and data analytics as well. So, these three technologies, I would say, which is APIs, machine learning and big data, are already finding evolving application in this space. And I think you will see much more on this front.

Dany: We do cover a very wide range of client segments at Barclays and APIs, we're seeing, is in demand and also is a much-needed development going forward, considering the evolution with this technology. What's ahead for us, Sat?

Sat: So, the way I look at it, Dany, is clearly these are very difficult times – for all of us and for our clients. And I sincerely hope this will pass. But they say never waste a crisis, so I always request my clients when I speak to them, this is a good time to review your FX management processes and look at the workflows, look at things that we can automate. There's a wide range of digital solutions that are available that they can leverage. So I think, going forward, what we will see is rapid adoption of some of these digital technologies that I mentioned earlier. And it will just be an accelerating trend.

As I mentioned earlier, this is not the beginning. I mean, I think we are already in the middle part of the journey; it just will accelerate much further. It's taken us the last 20 years to grow eCommerce businesses globally and the digital channels. I think the next leg will be much faster and quicker.

Dany: I couldn't agree more with you. Your final words of advice to our treasurers listening today?

Sat: Yeah, so the final advice would be, please engage with us; engage with your relationship banks and FX providers. Keep this dialogue ongoing because it's a collaborative process. We get to know about the pain points only when we speak to the clients, and then we evolve solutions which meet their requirements. So let's maintain this two-way dialogue, and that will help all of us evolve.

Dany: Thank you for joining me today on this podcast, it was a very interesting 10–15 minutes of sharing of insights. Thank you so much.

Sat: Thanks Dany, it was my pleasure.

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.

Dany [00:00]: Hello, and welcome to our latest podcast in our series, Exploring What is Possible, for treasurers in the new Europe. My name is Dany Eder, Head of Payments and Cash Management for Europe, and today I’m joined by Srini Kasturi, Head of Mass Payments and Country Product Management at Barclays Corporate Banking. And we’ll be discussing how treasurers can plug in to the new potential upsides of digital business models whilst managing the associated risks. A warm welcome to you, Srini! [00:24]

Srini [00:25]: Thank you, Dany. It’s a pleasure to be here. [00:28]

Dany [00:29]: And we are delighted to have you. I want to jump right in. This past – or this year – has been highly challenging. We have seen so much change driven by Covid-19; and especially the business changes. Share with us what you have seen, especially on the change in buying power, or buying behaviour. [00:45]

Srini [00:46]: That’s a great question, Dany – and it’s very topical.  We’re seeing economic results coming out from various countries declaring a contraction due to the lockdown. And while that is very much an expected outcome of the lockdown, what is not clear is the shape of the recovery and, again, various projections have been put forward by economists.

What we have seen, in terms of the business and the transaction volumes that go through our platforms, is a mirroring of this contraction. Definitely, volumes have come down; but what is interesting is that there is a disproportionate decrease in certain kinds of volumes, specifically cash and cheque volumes. They went down much more than electronic transactions did. And now there’s a bit of a bounce back coming through; we’re seeing transaction volumes pick up again, but we’re not seeing cash and cheque volumes pick up at the same speed. We expect that they will not bounce back to pre-Covid levels. Definitely there is a digitisation of the buying chain that’s going on. 

In line with this, and also because of the lockdown, definitely the retail industry has taken the biggest hit. So, we’re seeing an increase in online spend, that’s also borne out by results from some of the largest eCommerce businesses globally. It points to a shift in consumer spending habits. There have been whimsical purchases; there have been impulse purchases, but they’ve all gone online and not over the checkout counter. 

With this level of rise in eCommerce, there’s a shift in the structure of the supply chain, and that needs serious examination. There is no guarantee that this will go back to pre-Covid levels; but this growth, or a large part of it, is here to stay.

So, the most interesting shift of the supply chain is in large businesses realising that they need to go direct to consumer. The retail footfalls aren’t there; participating and taking control of the digital supply chain is becoming an imperative. And the direct-to-consumer shift points to the need for a receivables factory. So overall, quite a large transformation going on right now; and it’s interesting times to live in. [03:05]

Dany [03:06]: I couldn't agree with you more. We're really seeing in front of our eyes today how a larger transformation in economics is happening, and it is really a rise of eCommerce in a very short period of time. And, rightfully so, you've already touched on the receivables factories. So, what developments do you see in this area? Also – excuse me, again – in terms of consumer payment preference?  [03:29]

Srini [03:31]: The consumer payment preferences and the consumer behaviour changes are driven largely by the extent of optimism in the economy. So, large purchases, capital expenses from businesses, all of these are under pressure. The asset ownership model is shifting towards a leasing model from an ownership model, including for individuals and retail consumers. There is an increase in funding offers from retailers – six months’ interest free or more – for large purchases. Anywhere from televisions through to automobiles. And the automobile leasing industry should see an uptick.

The other interesting change that we will see in consumer behaviours – and we're witnessing right now – is how businesses need to adjust to the eCommerce shift. And consumers drive how they want to pay. Would they want to use an electronic wallet? Would they want to use a push payment through open banking? Would they want to use a credit card online? Everybody has a different answer on what they prefer, and businesses need to absorb this complexity and resolve it at the point of purchase.

That checkout screen has never been more important in terms of offering a diversity of choices while resolving the Treasury processes that sit behind it to enhance reconciliation processes. So, consider a diversity of payment methods, and diversity of payment options like part payments; deferred payments; government subsidised payments, as you see in the case of the UK government’s Eat Out to Help Out scheme. There is a reconciliation problem sitting behind all of this now, and these were problems that traditionally did not exist at this scale for many businesses. [05:17] 

Dany [05:19]: Srini, that's quite interesting around the receivables that you just mentioned. I wanted to share with you, and maybe our listeners as well, a quick encounter that I had as a consumer. So, during the lockdown here in Germany, we were helping the local pizza parlour, and you could pay online via PayPal to him over a third-party provider. And you could order your pizza, but you couldn't get the delivery boy or the delivery individual a tip for bringing you the pizza. And so what we would do here in the neighbourhood, we would put a couple of coins in an envelope and tape it to the doorbell, and then he would come and ring the doorbell he would take the envelope and it was a joy to see the expression on his face as well, because we hadn't forgotten him.

And it didn't take very long, and digitalisation took place. And about, I would say, two or three weeks after the experience, I went again to order pizza. And this time I had the choice of giving a percentage tip to the person that was going to deliver my pizza. And I thought, wow, in the past stuff like that took years to develop, and here within three weeks everybody was getting their fair share. What's an interesting story. What do you think?  [06:16] 

Srini [06:17]: Isn't that amazing? And that's the magic of the rapid digitalisation that we're seeing in the face of these headwinds. It's probably accelerating us into the future. [06:25]

Dany [06:26]: Yeah, I think it's really neat. I'm a big fan of digitalisation. And we shouldn't forget the risks that are associated with it, but it was a joy for me to see how quickly we can develop if we really, truly put our minds to it. 

It kind of leads a chain reaction to Treasury. As Treasury has become vital and more strategically important, or fast-tracking Treasury nowadays, as mass amounts of data and quicker expediting digitalisation, expediting payment flows and so forth, and reconciliation.

Share with us your views on the fast tracking Treasury, and the impact of the processes associated with that. It's not just a matter of making that payment; it's what happens in the background, and how it is processed as well. Share your views on what you're seeing, not only on the instant and real-time payment infrastructures, but also the treasurer’s need to consider how to make that transition. [07:19]

Srini [07:20]: Fast tracking of Treasury – I love that you use that phrase, because there's enough and more chatter about real-time Treasury, but Treasury processes are lagging behind significantly, and haven't really stepped up to take full advantage of real-time clearing.

So, fast tracking of Treasury – what is that? And how do you get there?

We've already spoken about the receivables factory, which is already a shift for large treasuries – to move from just having payment factories to having reconciliation factories for receivables. But the fast tracking of Treasury has to do with the payments as well. And it has never been more important to be timely in payments. A payment too early or too late amplifies the vulnerabilities that exist in the supply chain today. The supply chain is made up of a number of businesses delivering different kinds of value to the supply chain, and they all need to get paid on time because they just don't have the cashflows through the lockdown.

So the fast tracking of Treasury is really not about ripping out all of the batch processes and replacing them with APIs today, right now, urgently, because that's not going to be feasible, especially with the availability of resources to work on such large projects. So the transformation can be in steps. Start with examining the batch-based processes, shrink the batch sizes down, increase the frequencies of batches, and run more payment runs, as it were, from the Friday afternoon to perhaps every day. Many times a day.

So, there's a lot of transformation that can happen with existing processes without ripping the wires out. And that's my view of the fast tracking of Treasury. I think it's an exciting place to be, simply because there is a social responsibility too that gets addressed with the fast tracking of the Treasury, but without ripping out the guts of the Treasury to replace it with something new and shiny. [09:20]

Dany [09:21]: Many thanks, Srini. Those were some very helpful tips and good advice.

When we think of fast tracking Treasury – or maybe, as it's been referred to, real-time Treasury – we always automatically think that we have to jump to the next emerging technology, and APIs; but actually the steps or the tools that we have available today can help us fast track Treasury to get to that real-time Treasury. And I'm delighted to say that we are assisting our clients along the journey, and we’re implementing SEPA Instant for inbound receipts in our Frankfurt office later this year. And taking those phased steps to make sure that our clients are part of the journey, and we're not just imposing new processes on them.

That kind of gets me into my last question around the digitalisation and the models, and general digitalisation. We see the impact to the back offices, and we have kind of a manual and digitalisation coexistence at the moment. Share with us your views on the impact to the back offices and the processes, and those that remain manual today. [10:20]

Srini [10:21]: You’ve touched upon a significant pain point there, Dany, and one that became quite visible as the lockdown started. Teams found themselves with team members distributed at home around the globe and unable to support processes that were never considered to be digitalised in the past. These are processes around account management, service queries, even offline payment approvals, and there's been an urgent effort to get as many of these digitalised as possible. And many of them with workarounds, like email approval instead of paper trails.

But this shift to digital, there's no going back. But certainly, over the months of the lockdown, there's been a maturing of these processes; there's been a re-evaluation of these interim workarounds; and there's definitely a plan with all clients that we talk to and support in their journey to make these processes more permanent and robust.

So, we've had to do this ourselves, as a bank, to support our clients, to digitalise a number of processes to support the diverse ways that our clients are responding to the digitalisation of various back office processes. So we're seeing a maturing of that conversation and a more standardised approach coming in. [11:36]

Dany [11:37]: Thank you so much for sharing your thoughts with us today, Srini. It was really great to have you with me on this podcast. Come back and see us anytime. Thank you very much. [11:46]

Srini [11:47]: Thank you Dany, always a pleasure to talk to you. Thanks for having me [11:51]

Dany [11:52]: 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. [12:03] 

Dany: Hello, and welcome to our latest podcast in our series, exploring what is possible, for treasurers in the ‘new Europe’. My name is Dany Eder, Head of Payments and Cash Management for Europe, and today I’m joined by Yera Hagopian, Managing Director of Liquidity Solutions at Barclays Corporate Banking. And we’ll be discussing the impact of Covid-19 on liquidity and the priority areas for treasurers when they’re looking ahead. Hello and warm welcome to you Yera!

Yera: Hello, Dany.

Dany: It's truly a pleasure to have you with us today, with your experience and your knowledge, and you've been at the heart of much of the activity that we've seen much of the year. Taking us back a little bit, maybe to the last financial crisis that we had, where it was very much about liquidity – in fact, its origins and its roots stem from liquidity – what role would you say liquidity has played in this one?

Yera: Well, in many ways this crisis has been very different. If we think back to previous crises, most of them have been financial crises, and it has not been surprising that liquidity was a primary consideration. But I think in this crisis – which obviously has a medical origin – nonetheless, some of the outcomes have been very similar. In every crisis, let's face it, the first instinct of every institution is to safeguard its survival, and liquidity is one of the first areas to be addressed. As I said, it's not surprising. If you don't have enough liquidity to meet your obligations, it's game over.

This consideration resulted in a liquidity squeeze, when every institution – every corporation – reached into the market, and it soon led to very, very elevated prices. But what was different in this crisis compared to many of its predecessors, is that this liquidity squeeze was really quite short-lived, because governments and central banks were well prepared. And on this occasion, they acted really fast. They responded, as we know, with a cocktail of Central

Bank rate cuts; eye-watering amounts of quantitative easing; and other government support schemes to help businesses and individuals all get through the crisis.

So where we’re left now, some months later, is that we almost have the opposite problem – that you could say there's almost too much liquidity in the market.

Dany: Thank you, Yera. And we've seen much of that activity throughout the year as we've been at the heart of that, in March and in April and in May. We know the crisis continues, and now it's somewhat, to a BAU, back to normality in what you can consider under these circumstances. We've looked, in previous podcasts, we've talked a lot about emerging technology and innovation transparency, efficiencies, and so forth, but I'm delighted that we're going to talk a little bit more about liquidity management in business practices, and the response in terms of that. So, putting that all in a nutshell, how have corporates responded in terms of their liquidity management practices in this crisis?

Yera: So, corporates were obviously faced with a huge amount of uncertainty. There’s very little that we know about this disease now, but if you think back to March, we knew even less. And we didn't know how this crisis would play out. Corporates wanted to ensure that they could go on paying their bills, their suppliers, their salaries and so on, and they were seeing whole countries going into lockdown, whole industries grinding to a halt. Their response, understandably, was to draw on any liquidity they could find. The larger corporates obviously accessed the markets; the smaller ones needed government help. Almost all turned to their banks irrespective of whether they actually had any use for the liquidity or not.

Now, some of that liquidity has been returned, because in the event, it was not all needed. We have to remember that this crisis has impacted different sectors in different ways. So, for example, some sectors such as travel, hospitality and leisure, have been very hard hit, while, let’s say, an online retailer may actually have flourished. So, very, very different impact to their cash flows.

Now funnily enough, both can be very, very stressful situations if you're the treasurer. On the one hand, a business that can't trade sees its cash flows drying up, but a business where demand doubles or triples overnight, could see itself overtrading very, very rapidly. So, different problems, but still very difficult to deal with.

And of course, another response that we did see was much greater risk aversion. One of the primary ways in which this manifested itself in the corporate response was not just in relation to counterparty risk, but also in relation to any sort of term for their investments; nobody really wanted to see beyond the next few days or few weeks.

Dany: It really has been transcending from one side of the corporate business – like you mentioned, Hospitality & Leisure and Travel interruptions in cash flow, where on the other hand with eCommerce, we see expansions of the cash flow. It's quite fascinating to see the transformations in the midst of all of this crisis.

One area, one sector which we haven't touched on yet, is financial institutions. In your opinion, what has been the biggest, or some of the main impacts, for financial institutions during this crisis?

Yera: Well, for financial institutions as for their clients, this has of course been a very volatile and trying time. But I'm pleased to say that I think our industry has taken on the challenge quite well. And this is largely down to the huge investment that the financial services industry has been making in digital services.

This has been going on for some time now, but I think it’s been in the background to some extent, and what this crisis has done is to really expose that. And of course, no doubt it will also accelerate the trend. But what is truly extraordinary, is that, at a moment’s notice, our clients were able to run their businesses from their living rooms. It's almost unthinkable. So I think, in many ways, the crisis has enabled financial institutions to step up and really play an important part in the economy.

But the current economic outlook is problematic for financial institutions, and in particular the low rate environment. Now of course, the low rate environment has been around for some time in the Eurozone and we're all quite used to that, but it does present challenges to banks. And I think what is particularly challenging in this crisis is that it has actually become the global norm, and we have never seen this many central banks cut their rates; we have never seen rates at such a low level all round. Other crises have been much more regional in nature. There's always been an offset somewhere, what we're seeing in this one is there's no real clear epicentre.

We are seeing a lot more risk aversion, obviously. Our asset management clients are undoubtedly more inclined to hold cash; clients who need to hold margins, etc. So that rush towards greater liquidity is evident in the financial institution sector as well as in other sectors.

Dany: Thank you Yera. And especially the negative interest rate in our environment, thank you for touching on that. We're all challenged with this, and you're right it is more or less part of the new norm with the negative interest rate in Europe. I think, going forward, we will continue to be challenged by that, as you mentioned. There are so many key priority areas for the treasurer, especially the whole emerging technology, the innovation that's also, kind of, out there hanging as something to do – something much needed to do – in the midst of the crisis. The list of priorities seems endless.

If we narrow it down a little bit, what in your opinion would be some of the really main priority areas for the treasurer to focus on as we continue? We've not overcome the crisis yet. There is still uncertainty, great unknowns. Going forward in 2021, what would in your opinion be the main priorities for our treasurers?

Yera: Well, I think in a crisis – and we are still in a crisis, let's face it – the top priorities will always be security, and liquidity. And I do sort of group them together. And particularly, let's think about security first, because it is often the one that people will list first.

I was recently asked a question as to how should we perform counterparty risk assessments in a crisis such as this? How should we adapt our view of counterparty risk crises? And, you know, was that the top consideration when it came to security? And I have to say that, when we evaluate risk and we evaluate liquidity, counterparty risk and security and liquidity risk, and yield were three normal priorities of the corporate treasurer. Obviously, your risk assessment has to come first. There is no other response that I could give. Risk assessment, to me, is the most important consideration. And only when you've determined what your risk appetite is, then can you consider other metrics.

Now, risk assessment is a complex topic. Security is a complex topic. Counterparty risk is an important component, but it is not the only component of security risk. Security needs to consider not just the counterparty, but also the market and the instrument. And this is why it is so very closely linked with the topic of liquidity.

But there are other aspects, too, which need to come into that risk assessment. For example, operational risk. If an organisation does not have the operational sophistication to manage the instruments which it is using, then operational risk quickly becomes a top consideration and can lead to losses.

So all these things really need to work together. Now, I think, the main area, the main document in which all these things are considered, is usually the corporate Treasury policy. The corporate Treasury policy, let's face it, probably has not been updated for this crisis in many organisations. Mostly because corporate treasurers have had so much to deal with in adjusting to the situation. And I do think probably now would be a very, very good time to review it. Maybe because we have a little bit of a hiatus, but also because we have learned so much from the crisis. It probably needs to be reviewed to reflect the risk that we are living in a re-stacked world.

And finally – and I do want to mention yield – does it consider yield in the super low rate environment in which we're now all living? Obviously yield is always a bit of a poor relation in terms of most treasurers’ priorities, but then, as I said, we are living in an unusual situation where lots of corporations are holding very large amounts of excess liquidity. They're probably going to be holding on to that for some time, and we are living in an environment where it is very hard to achieve returns on that cash. And therefore, that is why the re-evaluation of Treasury policies is required to ensure that they contain at least the flexibility to ensure the best outcomes are being achieved for the company.

Of course, I'm not suggesting in any way that that would be primary over the considerations of security and liquidity. It's just worth remembering that at some point shareholders will turn around and wonder whether the company’s resources are being used in the best possible way.

Dany: Thank you. That is also quite a list. My first reaction is counterparty risk, as well, when you mentioned security and liquidity. I think that's how we normally associate the two. But you're absolutely right, the Treasury policies – and this is, I think, where we can help at Barclays. Help to identify, and also help to diversify some of the risk in liquidity portfolio management. So thank you for sharing that with us.

So, last words of advice? We've given our treasurers a lot today to think about. But any last closing words of advice to our treasurers?

Yera: Well, in addition to revisiting Treasury policies, I think this would also be a very, very good time for our clients – and for all of us, actually – to go back to basics.

Let's face it, the cash flows of many businesses have changed materially during the crisis. Most businesses will have processes in place to revisit their budgets, and that will happen automatically, but they probably haven't had a chance to consider some of the broader implications.

Let's take account structures, for example. Most account structures will probably reflect a business model that is out of date now. Most clearing and cash concentration structures would have been put in place when cash flows looked very different, businesses looked very different; very, very detailed, no doubt, cost benefit analysis would have been done, but it would have been based on cash flows and businesses as they were operating at a point in time. And they probably bear little resemblance to today's reality.

We need to consider also that, in addition to the huge interest rate volatility that we've seen, there's also been huge FX volatility. So the outputs, the outcomes, of anything that was put in place prior to the crisis, could now look very, very different.

And last but not least at all, I mentioned operational risk and operational processes, but they really need to be reassessed from a resiliency perspective. Particularly a digital resiliency perspective. Now, the thing is, all these areas are actually interconnected. Treasury policies, account structures, operational processes, and they probably should be reviewed hand in hand, and reconsidered in essentially a world where everything’s been turned on its head.

Dany: Changing with the times and staying agile – I think – it really is true; constant assessment of best practices.

Thank you for joining us today on this podcast and for sharing your valuable insights with us. It's been a delight. Thank you so much.

Yera: Thank you very much Dany, it's been a pleasure.

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.

Closing music

Dany: Hello and welcome to our latest podcast in our series, exploring what is possible, for treasurers in the ‘new Europe’. My name is Dany Eder, Head of Payments and Cash Management for Europe, and I’m joined by Aoife Wallace, our Head of Trade and Working Capital in Europe.

Today we’ll be discussing the impact of Covid-19 on global trade flows, the associated commercial payments, and the drive to digital. Plus, we’ll share our thoughts on what roles treasurers can play in supporting the recovery. A warm welcome to you Aoife.

Aiofe: Hi Dany, glad to be here.

Dany: And it's a delight to have you.

In recent podcasts, we've kind of set the scene around the current crisis looking at past, present and future outlook. And it's all over the papers, right? I mean, global trade flows have declined; they’ve not recovered. I myself, as a consumer, have experienced it in interruptions in supply chains, which here in Germany are unknown to me. But looking ahead to recovery, what do you feel are some of the tangible ways we as treasurers can play our part in supporting the recovery?

Aoife: Yeah, that's an interesting question Dany. And I suppose you're right – it has been tough times all around, but I'm glad to say that in trade, we're definitely seeing a few more green shoots over the past couple of months, which is quite positive.

I suppose, when talking to treasurers, their focus is now on re-evaluating, I suppose, their cash positions, and also looking at things like their supply chains and trying to see where they might be able to gain competitive advantage; and also where, I suppose, they might be able to help some of the suppliers. So I suppose, up to now, if you think of supply chain finance as an example, it would have been used by treasurers to optimise their payment terms and try and reduce down their cash conversion cycles.

However, I think that they're looking at it now in a new light, and what they're trying to do is see if they can use supply chain finance in order to be able to assist and aid their suppliers. And that's just not the top ten – this goes right down, systematically, all the way down to their smaller suppliers; and they're going to try and help those smaller suppliers by using their own financial strength and credit rating. And that should be a win-win for both parties, because in that way the treasurers are ensuring that they have a resilient supply chain while they’re assisting their suppliers to keep up the production that they are required to provide them with.

I also think that what they're looking at it is where there might be new opportunities. So as we said, they're looking for resilience – so perhaps diversifying their existing supply chains, onboarding new suppliers, and I suppose, if everybody is trying to do that at the same time that does create competition. And I think what they're trying to do is try and differentiate themselves from others and, I suppose, looking to solutions such as supply chain finance is one of those ways which they can try and differentiate themselves and give something back.

Some of the other things that I see treasurers looking at is, I suppose, as we said, resilience. And it also comes down to resilience of how they interact with their banks and their other providers, and they are looking to digitise as much as possible. And I suppose that's something that we're definitely looking to work with them on and improve how we can be ready if there is second, third or fourth waves. I suppose we're in a second wave now, unfortunately.

Dany: Thank you Aoife. We are unfortunately, at the moment, in the second wave, but we've seen a lot of activity among our clients – especially also in the cash management side. But even prior Covid-19, wouldn’t you see challenges in the future of global trade and supply chain pre-Covid, considering all the political topics around the world?

Aoife: Tensions, yeah, I suppose it’s nearly an understatement. Earlier in the year you had the US–China tensions, which have continued to rumble on, unfortunately.

We have that, and then we also had, I suppose, what's on the tip of every person’s tongue at the moment – Brexit. And I suppose we're back to Brexit now, with the transition period looming large at the end of the year. And I do think that our corporate treasurers are looking now to redirect their attention back to Brexit preparations and contingency planning.

Dany: Our two businesses are very much intertwined – global payments and global trade. When there's a dip with you, there's a dip with us as well. And you know, we've seen the trend in the change of trade winds through the payment flows globally, as a result of the challenges.

And do you think the pandemic has intensified this trend though, in general?

Aoife: Oh God, yeah. Definitely. Look, I don't think we've ever seen anything like this before. But I suppose there are some positives, and for us, I suppose, there’s still business to be done. And I know that you're seeing that on your side as well.

Like, not all international trade is finance trade. Actually, on the contrary, a lot of international trade is on an open account basis. But trade finance isn't all about just funding. I suppose the other thing that we use trade finance to do, is to mitigate risk. So, mitigate risk between two parties that may have lost confidence in each other, but also maybe two parties who are new to working together – so a new supplier or a new buyer.

And in times of uncertainty like we’ve had now, people do tend to kind of come back towards these more traditional trade products, and I think that maybe some of the volume that we saw falling off, because of all of the issues that we have mentioned before, will probably start to kind of come back on now as people increase their percentage of use of the kind of trade products that we would traditionally use for mitigating risk.

We see that in some of our customers already. When we were talking to aviation lessors and lessees in terms of the deferment of maintenance reserves and lessee payment. And they're looking at things like avalised bills of exchange now and discounting avalised bills of exchange – things that they wouldn't have thought of using before. And I suppose that's where trade finance comes in – it is useful when you have these situations, to be able to pull out a suite of products, look at the situation that is before you and what you need to resolve, and then be able to pick from that suite of products what is the best product or service there for you to be able to resolve that issue.

Dany: It's interesting that you mentioned the traditional trade finance products. I remember during the financial crisis, a rebirth of letters of credit were on the horizon. As I was reading various articles around this in various publications.

I’m going to throw you a little bit of a curveball – but in relation to the financial crisis and what we saw there in trade, it's nowhere near what we're seeing today. Would you agree? Or is it a rebirth of traditional trade products, but maybe digital?

Aoife: I think we will go back to traditional trade products, most definitely. I think I'm already seeing that, to be honest with you, in the figures that I've had over the past two months. I do think people are looking back towards letters of credit, guarantees and indemnities etc. But I do agree with you that, I suppose, we've moved on, thankfully, and now people are looking at, kind of, how they can get things faster, quicker and more effectively.

And unfortunately, with trade finance, I suppose, we've always had this issue of having an over-reliance on paper. And that was, I suppose, brought out in a very stark way during Covid-19, when there were disruptions to courier services etc. And I suppose what it prompted was a collective move towards trying to resolve these issues through digitisation, in order to kind of keep the cogs turning.

And some things that we would have looked to bring in prior to Covid-19 which may have taken us months and years to be able to get the financing, and then all of the people and stakeholders that you needed approval from – that all came about unbelievably quickly. Like, in mere weeks we were able to bring in thee-signatures in lieu of wet signatures, and that really wasn't easy across Europe, as you can imagine – dealing with multiple countries and different laws and regulations in each of those. We also were able to bring in a policy where, if clients weren't able to receive their DHL couriers at their place of work, that we could have it delivered directly to people’s home addresses.

And then little things like helping our aviation lessors, who need to be able to draw down on SBLCs (Standby Letters of Credit). If they are not receiving their maintenance reserves or payments – rental payments – then we changed – or, we didn't really change, I suppose – we amended some of the standard terms and conditions in those SBLCs so that they could present their claims in digital form by email in lieu of having to send over original copies to us. And all of those things might seem small, but they were huge in terms of the change that we were able to bring in so rapidly to be able to assist our clients. And I'm just hoping that, I suppose, all the momentum that we've gained over the past few months won’t ebb away now – that we’ll continue on this journey, and that we’ll – I suppose, all of the stakeholders – will continue to see how we might be able to make the change happen while managing risks and protecting ourselves against money laundering and cybercrime and fraud, which I know you've spoken on, on previous podcasts.

Dany: And all of that while running the bank from our living rooms!

Aoife: That’s exactly it! And quite well, I think. I don't think any of us thought we would be able to run a bank from, as you said, our living rooms as well as we have. And our clients as well. It's been amazing what we've been able to achieve from our bedrooms and living rooms or cupboards, or wherever people are located at this moment.

Dany: Absolutely. It's quite amazing, it really is. It's one of the positives coming out of this crisis, is how we've come together to make sure that we keep the global economy running.

And I have to bring you back to resilience. You mentioned it a while ago, around supply chain in this period. Share with us a little bit – what do you think, what do you feel we need to be doing to ensure resilience across the supply chain? We're not out of the crisis yet.

Aoife: No, I think it is all about what I mentioned earlier, which is, I suppose, having a holistic view of the full underlying supply chains that people have, and trying to find systematic funding for it. That's definitely something that's extremely important. I think, looking at your cash –and you'd know this better than I – but ensuring that you're able to get quick access to it still is very, very important. Even though, I suppose, rates aren't as attractive as you would like, but trying to keep it somewhere where you would be able to get it when needs be.

I also think that, like, there are other things that people can be looking at; for instance, discounting VAT receivables in order to ensure that you have that cash at the ready. They are all things that I think treasurers and our corporate clients are definitely looking at, and, I suppose, trying to be smart about what they're doing and who they're doing it with. So, I think it's important as well, like as this draws on, there will be winners and losers – and it's ensuring that you have the right partners around them being buyers, suppliers, or indeed financial institutions that you deal with.

Dany: I couldn't agree with you more on the liquidity side. It has been a pure year centred around liquidity. And in a short period of time, the various phases of accumulating and then going into some kind of normality control situation, and trying to diversify the risk and optimise the liquidity. And we’ve worked intensively with our clients on this topic. It's not an easy story considering the negative interest environment that we have, you're absolutely right.

So on a positive – we’ve got to bring our listeners to a positive as well – you know, what are some of the small green shots of recovery that we're starting to see and emerge; going back a little bit also to the suppliers that may be at risk. How are they looking to address this?

Aoife: Well, look, I think overall, as you said, everybody is coming together around this and I think what can't be overlooked is also, I suppose, governments’ role to play in all of this. And I think that we have seen governments across the world stepping up and stepping in to see what they can do. And in terms of European credit agencies, for example, they're getting extremely hands on and seeing what they might be able to do to assist their exporters to do more business and providing funding for buyers in various countries where it might be quite difficult for them to do so.

I suppose there's also, as we said earlier, the government intervention that, I suppose, it can only go so far. So after that I think it's up to each company to kind of look to make their supply chains as agile and nimble as they possibly can. And I think all of that will help to generate efficiencies.

I think one of the other things – and we haven't really mentioned it – but we're talking about kind of the positives that came out of this; we talked about digitisation; but another thing that was positive that came out of all of this is the Green agenda. And I suppose it's crystal clear nowadays that it's go green or go home, really – across industry sectors, supply chains and businesses. You have to have an ESG strategy. It's no longer an option – it's now a strategic imperative.

And I think stakeholders – be that investors, banks, clients, suppliers, employees – they all need to see a strong drive towards transparency and sustainability in the widest sense. And they need to see our corporate clients having – as well as ourselves – a positive impact on the environment. So I do think that it's really clear now that ESG and CSR plans have to be at the heart of people’s strategies going forward in terms of trying to reduce emissions, traceability, fair treatment and pay for workers etc. And I think that Covid has definitely meant that the light has been shone on that whole area.

Dany: I’m glad you brought that up – ESG. I couldn't agree more. As a private individual, I think we've become so aware of our environment and that is a very positive that's come out of this pandemic. And also on a corporate level I've seen dramatic changes alone here, and here in Germany and across Europe in this area; and that is really one of the most important topics, now and in the future. But you're right, there's the missing transparency as well. So we have work to do there as well. And we've touched on it a couple of times already – digitalisation and innovation –we've seen business models change into more of an eCommerce model during the crisis as well, and I'm sure we'll see a lot of that. But we also have to look at, from an individual bank perspective, we're supporting our clients with more digital signatures.

But does it have to happen on a wider level? You know, wider digitalisation – the collaboration across the industry bodies and broader banking community?

Share your thoughts on this, and what you're seeing as the trend at the moment.

Aoife: Yeah, I agree with you. I think – look, everybody was talking about Blockchain a couple of years ago, and they continue to talk about Blockchain; but I do think that until everybody comes together in terms of ensuring that we have the right regulations behind us and that it becomes some sort somewhat systematically approved, it's going to be hard to move forward with this.

I do think now that there is a willingness to look at it a bit more. If we think about ourselves in terms of the banks, I think what the banks are trying to do is ensure that they have their own houses in order so that they’re able to partner up with some of the best fintechs that are out there in the market. And let the fintechs do what they do best. So for instance, setting up cloud-enabled platforms where you can link in to these trade finance providers will be extremely important going forward, whether that's ensuring that you have SWIFT for corporates etc., or that you can link in to a supplier finance platform where that supplier finance provider can offer things like supplier finance, but also dynamic discounting – all of those things are going to be extremely important going forward.

So I suppose banks are kind of realising that we are good at what we do, but it's often better if you can look outside of that and bring in people who would have thought maybe a couple years ago we were looking at as competition, but now we're looking at them as partners and trying to use their digital know-how and ability to be able to further ourselves in our offering for our clients.

Dany: It's interesting because we always talk about the technology and what it does, and what it gives us – the optimisation, the efficiency and also the security. But it's also the services that it gives us. And I, just one of the things that that I wanted to mention – we just launched this week SEPA Instant income and receipt in Germany. And what a service. Look at the technology behind that!

And so it's not only what we can do to become more efficient and to optimise ourselves but it's also the services they we’re creating from that. So, delighted to hear your opinion on that. And, our businesses are very much aligned with one another, as I mentioned, and also the API journey. I mean, we’ve had a huge uptick in our host-to-host services, and obviously the next journey is then to transform that into an API environment as well – even more security, faster transmission of data.

Interesting world that we're living in at the moment, as everything seems to be so fast paced that it's hard to keep up.

Aoife: Yeah, I suppose though we’re kind of nearly being influenced by the next generation who are coming after us, and I suppose they’re used to this rapid pace of change and, I suppose, everything being on their fingertips. If you want something and you order on Amazon etc., it’s delivered within the day or the next day. And I think that they're looking for the same thing from their service providers and from their banks, and it's up to us to be able to step up and try and, I suppose, keep with that relentless pace as best we can.

Dany: And all that from our living room!

Aoife: As you said, yeah!

Dany: So, so wrapping this up a little bit – we could probably speak endlessly – you want to give us an outlook? What do we have to be conscientious about during the time of change? Last final words?

Aoife: Yeah, I suppose, look, I'm an eternal optimist, and I'm really excited about the future. I think that there is definitely going to be big change coming down the tracks. And I think that we have seen some of the trends that we saw before Covid, kind of, I suppose, intensifying or becoming more accelerated now, post-Covid. I think a lot of those are positives, actually, so I do think that there's a lot to be happy about in terms of where we're going with international trade, where we're going with ESG and getting greener for finance and for the future.

Dany: That only leaves me to say, come talk to us, to our listeners. We have much to share. It has been such a delight. Thanks for coming and sharing, and please come see us again. Aoife, thank you so much.

Aoife: Thank you very much Dany, it's been a pleasure. Take care, bye bye.

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.