The risks facing the European economy from Brexit were a hot topic on the 15 May opening of the Association of Corporate Treasurers (ACT) Conference 2018 in Liverpool, UK. Economic stability, the legality of certain contracts, customs arrangements, and growth prospects all face an uncertain future during and after Britain’s exit from the European Union (EU). Perhaps the worst-case scenario is a disorderly Brexit that will occur if the EU and UK cannot agree on withdrawal terms by the March 2019 deadline set when Britain’s parliament voted to trigger the European Union Treaty’s exit mechanism. A disorderly Brexit could mean falling back on standard WTO rules.

A live poll of the 1,100 treasurers attending the ACT conference about the status of Brexit planning at their companies found that:

“All of our information tells us the majority of corporates aren’t ready for Brexit,” said ACT Chief Executive Caroline Stockmann, speaking to Global Finance. “It’s a challenging issue and somewhat of a moving target presently. Treasurers aren’t clear what they should be planning for until it is known whether the UK will stay in the customs union and on what terms; leave it with its own unique deal and tariffs; or suffer a disorderly Brexit.”

Treasurers fear that by the time they get clarity on Brexit’s details it will be too late to plan and implement possibly considerable changes to ways of working, business models and documentation.

Stockmann recently met with the UK Financial Conduct Authority to discuss continuity of contracts and other issues, noting that the government seems eager to understand the view from the real economy. “It is also not clear in my interactions with continental European treasurers either that they have thought through the implications for themselves of Brexit,” she continued. “People are reluctant to prepare for something when they don’t know what that something is.”

An unquantifiable risk is something that every business hates and that is precisely what Brexit is and may be up until the last possible moment.

The Brexit transition deal—a period of stasis to ensure continuity for business until any new divergent rules come into place—hinges on a satisfactory final withdrawal agreement by the UK and remaining 27 EU member states.

Differences over British contributions to the EU budget have largely been resolved and an exit from the EU single market is certain with the present UK government since Prime Minister Theresa May wants to end the free movement of Europeans and the jurisdiction of the European Court of Justice (ECJ) that comes with it.

How goods move across borders with or without the customs union, whether there will be a border between Ireland and Northern Ireland (part of the UK), and whether banking and professional services will have “passporting” rights are also bones of contention in talks and sources of uncertainty for treasurers.

The nexus of technology and cash management dominated the opening day of the Association of Corporate Treasurers (ACT) Conference 2018 in Liverpool, UK, on 15 May against a backdrop of trade wars, debt and wage growth worries, the unwinding of quantitative easing (QE), Brexit, and rising US interest rates.

“Technology is very important to us,” said Graham Taylor, Assistant Treasurer at Vodafone, to Global Finance at the ACT Conference, attended by 1,100 corporate treasurers from across the UK and Europe. “I’m very interested in open banking and application program interfaces (APIs) at the moment, for instance, and what new services, cash monitoring and reporting tools it might deliver to us in the future.”

“The use of financial technology (FinTech) start-up tools in supply chain finance (SCF) and other areas is also of interest, particularly with the second EU Payment Services Directive (PSD2) starting this year,” added Taylor, during a mid-day panel session at the conference that discussed future-proofing corporate’s cash management operations.

PSD2 encourages open APIs and new entrants to the European payment provision marketplace. Many other countries, including the US, are monitoring the regulation. “It could mean possibly getting rid of interchange fees. That could be massive for us and all corporates,” said Taylor.

Catherine Porter, EMEA Treasury Director at CBRE, stressed the need to communicate and collaborate with colleagues to get buy-in and also to run effective cash centralisation and efficiency projects, noting: “Technology is key in the operation of shared service centres (SSCs).” She and Taylor outlined the respective cash and liquidity projects both businesses are undertaking at the moment during the ACT Conference session and their utilisation of technology.

Fellow panelist Nick Haslehurst, Chief Financial Officer (CFO) at Moneycorp, agreed that getting buy-in is important to greenlight projects, explaining that it was necessary “to expose the hidden cost of treasury” to colleagues, especially if cash hasn’t been centralised yet. He brought a service provider’s view to the debate, as Moneycorp mainly caters for small to medium-sized enterprises (SMEs) that want to improve their treasury operations.

“SMEs cannot afford or scale up to SSCs. But they still want to pool money efficiently or hedge foreign exchange (FX) risk as effectively as they can, which is where third parties come in,” Haslehurst explained to Global Finance after the session.

There are many and multiplying tactics that you can use to better your cash management, such as pooling and payment factories (PFs), better use of technology or just better tracking. “The journey never ends and there are always improvements to be made,” said Vodafone’s Taylor in conversation with Global Finance after the ACT Conference session ended.

According to Matt Sielecki, Director Digital Product Development, Deutsche Bank, speaking during the panel debate, “education is important too.” Putting technology on top of a process can help, but you need to align people and processes as well. “Some procedures may be made redundant by new technology if you can reimagine them,” thereby saving the business money, he added.

Macroeconomic conerns were the other major theme of the ACT Conference. The recent warning from the International Monetary Fund (IMF) that global debt levels were too high at $164 trillion, equivalent to 225% of global GDP, struck a chord with attendees and panelists alike. A live poll of the 1,100 atttendees found that one in five audience members agreed that their own companies had too much debt:

“Fiscal policy needs tightening to reduce debt, but there are risks,” said Michael Sawicki, senior economist, Lloyds Bank, no doubt thinking about Argentina’s recent problems, during a panel debate about the economic risks facing the global economy.

Jim Reid, Global Head of the Fundamental Credit Strategy Group at Deutsche Bank, agreed. “We need a better balance between fiscal and economic policy,” he said, alluding to the ending of QE and the associated debate about when interest rates will rise globally.

Interest rates have already started their upward trajectory in the US. “I expect to see three US rises this year and three in 2019,” said Marilyn Watson, Head of Global Fundamental Fixed Income Strategy, Blackrock, as she outlined what the corporate treasury audience in Liverpool can expect in the years ahead and plan accordingly for their cash management, currency risk and other activities. Among the attendees were senior figures, such as Frances Hinden, VP Treasury Operations, Shell and Joanne Bates, Treasurer at Worldpay, plus the European Group Treasurer at Honda, Kevin Pinnegar.

The panel also agreed that the deflationary pressures that have kept inflation and wages low were likely to come to an end in the near future, as the unique downward pressures of the last deade receeded. Principally, these were:

“The protectionist threat is also a possible threat to investor sentiment in what is a generally good economic picture with growth evident in most markets,” concluded Blackrock’s Watson. She was no doubt thinking of the recent imposition of US steel tariffs and its on-going face-off with China and the sanctions against Russia and now Iran once again and how this might impact the oil price and global trade.

One central focus for cross-border transactions is Swift’s global payments innovation initiative (gpi), a framework that mandates that payments made through its system be credited the same day, have transparency of fees and contain remittance information that remains unchanged for straight-through processing.

“It’ll effectively be a quasi-new global payment standard,” says Wim Grosemans, global head of product management, payments and collections in cash management at BNP Paribas. There are initially two “products”: a gpi directory, which will identify payment routes and aid speed; and a gpi tracker, which could help corporate treasurers improve working capital and financial controls. Phase one of the project is live, enabling customer-credit transfers. Phase two is to offer digital transformation capabilities via data-rich payments in the Cloud, application-program interfaces (APIs) and other services banks may develop using the framework. A third planned gpi phase will involve a Swift-sponsored proof of concept.

Integration work is required from banks participating in gpi phase one to align Swift’s existing series of financial-message types. Hundreds of banks are expected to join the system eventually.

“Swift gpi is growing. It has now surpassed three million payments, with more than 40,000 messages a day,” says Wim Raymaekers, head of the gpi project at Swift. “Currently we have seen 120 leading transaction banks, representing over 75% of all Swift payments, signing up to the service.” Twenty-four banks are now live, with another 20 expected by year end. “The next phase of gpi will include additional digital services to further transform the cross-border payment experience,” he adds, “such as a payment assistant to provide more intelligence at origination.”

Distributed ledger technology (DLT), which relies on a system known as blockchain, is another promising technology. “Blockchain was much discussed at Sibos, but it’s still a few years away in payments and only really applicable cross-border,” says Grosemans. “It makes more sense on trade finance or compliance applications presently. But we are monitoring the technology, participating in consortiums and using it internally.”

More immediately, the launch of the US instant-payment infrastructure and other such real-time-payment (RTP) backbones around the world “oblige banks to move from batch to real-time-processing operational bases,” says Grosemans. Such efforts “require a 360-degree effort by banks to be ready” and involve “serious costs” to address financial-crime compliance, fraud and other such procedures. RTPs are “more for consumers and ecommerce applications initially,” he says, “not for corporates yet.”

The Single Euro Payment Area (SEPA) instant credit transfer (SCT Inst) system is one such effort. It will enable instant payments across the 34 SEPA countries in Europe and is eagerly awaited; though initial uptake is expected to be low, as it is not mandatory.

The EU’s PSD2 presages an open data-sharing and API environment, bankers say. “We see future banking based on platforms connecting third-party service providers as well as customers,”  says Michael Spiegel, head of cash management at Deutsche Bank. “API future-proof technology is the cornerstone for further development of value-added services at Deutsche Bank.”

Spiegel notes that there are around 25 RTP systems launched or in development with many others under consideration. Apart from EBA Clearing’s SCT Inst-compliant real-time pan-European platform, which went live in November, there is also the eurosystem’s Target Instant Payment Settlement (TIPS) platform due in November 2018, alongside the domestic platforms, he says.

The European Central Bank also announced at Sibos a new real-time gross-settlement system to be greenlit before the end of the year. It will replace the decade-old Target2 platform and align with the Target2-Securities single securities settlement engine and the new TIPS platform. The move is designed to consolidate and enhance securities, collateral and cash-management services from the eurosystem.

The promise of blockchain is already part of corporate-finance folklore. For instance, Swedish bank SEB used the technology to fund a US dollar account in New York for a corporate client in just nine seconds.

Others, like Bank of America, are furiously experimenting as well. Earlier this year the bank completed a proof of concept, working with Microsoft for a blockchain-based standby letter of credit. The project is now moving to a pilot stage, and further trade finance instruments and other applications may follow.

Blockchain, based on a shared- or distributed-ledger system that allows any participant in a network to see all records since inception, is set to have a transformative impact on a number of industries, especially global financial services. “In any instance where there are multiple relationships interacting to coordinate a particular activity on behalf of a single party, the blockchain could bring a streamlined, cost-effective solution,” says Thomas Hunt, director of treasury services at the Association for Financial Professionals (AFP), a US organization for corporate treasurers.

IBM has already run an internal treasury project on the Hyperledger blockchain platform. The project looked to record and retrieve data for fast dispute resolution and reconciliation. IBM’s vice president of blockchain markets, James Wallis, speaking at last year’s Sibos conference, mentioned that the project initially covered $100 million every day and released $50 million via improved working capital optimization, a key benefit of the technology. These figures have since risen, the company says.

Not only did IBM work on its own project, but it took the experiment global, partnering with firms such as India’s Mahindra Group. The joint Cloud-based blockchain supply-chain finance solution created a shared ledger to reduce errors, improve monitoring and boost efficiency. Initially used by Mahindra Finance, the Group’s loan subsidiary, the technology is now available to everyone and anyone seeking to enhance traceability, certainty, speed and transparency. IBM is separately involved in another Indian blockchain project, with Bajaj Electricals, to pay its suppliers more easily and quickly—and to negotiate discounts.

A former treasurer, AFP’s Hunt cites loan syndications, accounts receivable securitizations and trade settlements on foreign-exchange hedging and capital markets as possible end uses. He also points to bank fee analysis, trade finance applications that could impact existing import/export letters of credit, stock repurchases, fixed income securities and so on. “Blockchain has the potential to disrupt the treasury-technology landscape,” he says.

Ultimately, the benefits of the technology will be available to many. “We expect that blockchain generally will move closer to commercialization in the near term,” says Dean Henry, head of innovation in the global transaction services unit at Bank of America.

Blockchain is best described as a distributed electronic ledger that provides a record of events for all participants in that network. This ledger can be open source and public—similar to the Internet and the original bitcoin cryptocurrency ledger—or it can be a private, “permissioned” chain that enforces standards and vets and manages invited participants. While permission-based chains lessen the beneficial effects of broad access and enhanced transparency, they provide greater control. The end use, whether it is for a cryptocurrency like bitcoin, a payment transaction or something else altogether doesn’t matter. The digital ledger operates globally, across borders.

Many distributed-ledger technology (DLT) ecosystems of varying speeds and flavors are now available. Ethereum offers “smart contract” capabilities for the supply chain, while the Linux-hosted Hyperledger project is of interest to banks and manufacturers. SAP now offers a Cloud-based “Blockchain-as-a-Service” solution using Hyperledger standards and protocols in its Leonardo product line.

With the underlying technology in rapid transition, it’s unclear which platforms will emerge as most practical. The  R3 consortium is a prominent name in the space, along with companies like Digital Asset Holdings, Axoni, Ripple and collectives like Swift and others. These organizations often partner with banks and other financial technology firms that want to incorporate DLT into their packaged solutions. R3, for example, attracted $107 million in May from over 40 financial institutions, tech giants like Intel and others—although prominent early members such as Goldman Sachs and JPMorgan Chase dropped out. Banks, finance institutions and corporate entities are looking to hedge their technological bets.

Competition is heating up, as illustrated by the tussle between Swift and Ripple. Ripple hopes to displace Swift as the platform of choice for global cross-border payments, and has more than 100 banks—including Tier 1 names like UniCredit and Santander—signed up as partners. Swift, of course, is fighting back, with a DLT proof-of-concept planned for stage three of its present global payments innovation (gpi) technology overhaul.

DLT could be the simple solution that global commercial companies seek. “The complicated technology stack that presently manages global commerce collapses and can eventually be simplified with DLT connectivity,” says Marcus Treacher, global head of strategic accounts at Ripple. “Data is freed, and cash need not get stuck anymore.” He believes this is blockchain technology’s key benefit, along with the internal efficiencies it offers corporate finance institutions.

“DLT could also allow major corporations to become financiers themselves,” he adds, “unlocking some of the huge pools of liquidity that are currently locked away around the globe.”

This obviously has consequences for banks; conventional cash-pooling and zero-balancing treasury techniques may become redundant if the technology develops as hoped. Of course, banks and incumbents like Swift could harness it for their own use, negating any displacement threat.

As is usual with new technology, not everyone is convinced. Royston Da Costa, who oversees treasury systems at UK-based Ferguson Group Services, says he views DLT as an interesting technology, worth monitoring. Still, his firm, like many of its peers, has adopted a wait-and-see approach.

“The possibilities are endless, but remember, treasurers are not rapid technology adopters,” cautions former treasurer Hunt, of AFP. Hunt refers to treasury, but the hurdles are similar across finance industry verticals.

Stephen Phillips, head of IT for Europe, the Middle East and Africa at Bain & Company, notes that the drivers of new tech development impact its ultimate forms. “How DLT is adopted in financial services is the trickiest question,” he says. “Will it be consensus-driven or competitive?”

In other words, will DLT advance via industrywide collaboration or in rival ecosystems, with processing times and usefulness deciding which platforms win out in what areas. If it is competitive, says Enrico Camerinelli, senior analyst at Aite Group, “interoperability between blockchains must be ensured” to guarantee uptake and true frictionless commerce.

Another word of caution comes from Bank of America’s Henry: “There is no shortage of regulatory topics or issues that need to be addressed,” he cautions, “since almost no country’s regulatory framework for banking and payments anticipated this type of technology.”

But Henry, like many others, hasn’t let the challenges cloud his optimism. “Potentially, DLT could have dramatic, positive implications for corporate treasurers and banks,” he says. If so, blockchain will be in the corporate sector to stay. But it may take a little bit longer to become widespread.

“Regulatory technology, or regtech as it is commonly known, is not a new phenomenon,” says Ruth Wandhofer, global head of regulatory and market strategy at Citi’s Treasury and Trade Solutions unit. “For decades, technology firms have provided solutions to address the financial industry’s regulatory requirements.”

But it is the combination of increasing regulation and the rise of the financial technology (fintech) sector, says Wandhofer, that has led to the emergence of a plethora of regtech start-ups.

Those start-ups include fast-maturing technology companies with new data-rich analytical capabilities like San Francisco–based Merlon Intelligence, which raised $7.65 million in seed financing this year from Data Collective venture capital fund and other venture capitalists to fight money laundering and improve Big Data analysis.

Regtech firms are trying to bring artificial intelligence (AI), machine learning and Big Data analytical techniques to bear on more stringent anti–money laundering, tax, sanction and financial crime controls, as well as cyber and other risks. They are also attempting to help financial institutions (FIs) master their structured internal data, so that it’s not stuck in silos, a legacy of banks’ existing IT environments.

Palantir Technologies is a Palo Alto–based company that specializes in Big Data analysis. Founded in 2004 by CEO Alex Karp and PayPal co-founder Peter Thiel, among others, it was valued at $20.33 billion in late 2015 when the firm closed a major $880 million round of financing. FIs know the company for its Palantir Metropolis software for data integration, information management and quantitative analytics. The software connects to commercial, proprietary and public datasets and discovers trends, relationships and anomalies by interrogating vast data lakes, producing predictive and pattern-spotting behavioral analytics, which can be useful in fraud prevention, for example, as well as many other tasks.

Simility is a younger Palo Alto fintech founded by ex-Google employees. It uses AI and machine learning to help fight fraud. The company’s chief technology officer and co-founder, Kedar Samant, admits that regtech isn’t a phrase he is that familiar with, but it is obvious, he says, what it refers to—helping FIs meet their regulatory obligations. Equally obvious, says Samant, is that regtech  is just a subset of the fintech approach to finance that looks to new technology to help with increasingly digital processes. “It’s a nice label,” he adds, “but just describes how analytics, AI and other technologies can combine to help FIs [or indeed their fintech challengers].”

“Connecting the dots is what matters,” continues Samant, adding that the trend is toward establishing data lakes for investigation. “This can include exported data from legacy IT or siloed systems and unstructured data from social media, news reports and so on. More data translates into better insights, but examining what you already have—and exposing structured data—is also important for FIs.”

Citi’s Wandhofer says the UK is a hotbed of regtech firms, followed by the US. “The market is still small,” she says, “but growth is also supported by several regulators around the world that offer regulatory sandboxes.” The Financial Conduct Authority in London provides a sandbox where start-ups can play with new technologies and methodologies in a safe environment, with mentor and regulatory assistance, before progressing to a final, approved solution at the end of their temporary, experimental license to operate. The Abu Dhabi Global Market regulatory laboratory (RegLab) is one such example in the United Arab Emirates; there is another in the Dubai International Financial Center.

The Association of Southeast Asian Nations trading bloc  established an ASEAN Financial Innovation Network this year, in partnership with the Monetary Authority of Singapore, which is considering a regional sandbox later this year. In the US, fintech charter discussions have debated whether state or federal regulators should take the lead in such initiatives.

Regtech relies on a more collaborative, rather than a displacement model—more so than the bank, insurance or loan provision segments in the overarching fintech market, where some players want to displace incumbent FIs. Displacement isn’t possible in regtech unless a firm obtains a banking license, rather than supplying its solutions to an established FI or indeed to a financial market infrastructure provider such as SWIFT. The latter has its own Know Your Customer (KYC) Registry and a suite of financial crime compliance software and watch lists. That demonstrates confidence in its own solutions and certified partners, who use aggregated data from bank members in noncompetitive areas where economies-of-scale are considered desirable.

It is better for banks to pay for one financial utility, in the case of the KYC Registry, rather than each have their own compliance dataset, although many rival vendors can and do aggregate data.

“Regtech offers a huge opportunity to simplify compliance operations and drive out cost from governance, risk and compliance,” says Andrew Yuille, head of risk business solutions at Thomson Reuters.

When launching its new IBM Watson regulatory compliance software earlier this year, IBM cited a global annual spending figure on regtech of $270 billion. The figure comes from an article on the regtech universe published by Deloitte Luxembourg. The same IBM Watson product launch cited a Boston Consulting Group report entitled Global Risk 2017: Staying the Course in Banking, that estimates FIs spend $18-$21 billion on anti-money laundering; $16-$19 billion on KYC requirements; and $11-$15 billion on conduct surveillance. It’s a big market for vendors to target. Cyberdefense risks, regulatory reporting and other utilities are also likely to grow the market further.

Financial market trade surveillance applications and numerous other uses fall within the scope of regtech. The key defining characteristic is that data and customer intelligence can be more easily accessed, aggregated, controlled and exposed for regulatory scrutiny or customer protective purposes. “Regtech can also provide analysis tools to regulators themselves,” says Citi’s Wandhofer, helping them to digest the welter of data and information flowing from the stricter regulatory environment evident since the 2008 financial crisis.

Bipin Sahni, head of Innovation and R&D at Wells Fargo, confirms that the new focus on start-ups is what’s new about regtech, not the function itself. “The banking industry trend is to move away from internal FI-developed solutions or relying exclusively on governance, risk and compliance processing firms,” he explains. “These existed before fintech became a hashtag and associated with start-ups and are still operative, but the newcomers provide competition for FI contracts.” Sahni has seen an increase in regtech-focused companies applying to the Wells Fargo Startup Accelerator program in recent years, which he interprets as an indicator of its growing importance. 

But Alistair Rennie, general manager of IBM Watson Financial Services, believes regtech is a new phenomenon and cites AI, unstructured data and analytical capabilities emanating from today’s cheaper computing power—plus the availability of Cloud computing—as key technologies. “It is the confluence of these new cognitive technologies that are collectively causing a generational change in capabilities,” he says.

The key characteristics of cognitive technologies, in Rennie’s opinion, are:

The idea here is that a platform will be created in which all data is accessible in the Cloud, and open to outside scrutiny when necessary. Any such system will have to be scalable, says Rennie, so that it can cope with new regulatory obligations, market norms or future technologies as they arise.

Bradford Cross, CEO of Merlon Intelligence, which applies AI to regulatory compliance, predicts that FIs will move over to software-as-a-service solutions in the Cloud, because they won’t want to manage point solutions and numerous vendors anymore. “Our bet is the future market will [be composed] of a small number of very large vendors that roll up a lot of functionality into platforms that allow the banks to simplify operations and cut a lot of risk from uncontrolled processes,” he explains. “It’ll be a very disruptive model,” he argues, adding that existing compliance-solution providers will have little or no market share within a decade.

Eugene Ludwig, a former US Comptroller of the Currency and founder and CEO of Promontory Financial Group, an IBM company, is clear that: “Technology must be a bigger part of banks’ compliance procedures as the world, including regulators, digitizes everything. Spreadsheets or paper-based compliance aren’t on anymore.” 

In the wake of numerous fines against FIs for non-compliance with regulations, stricter enforcement of capital and liquidity reporting, anti-money laundering oversight and tougher consumer protection duties, Ludwig says the boards at FIs are aware that compliance isn’t going away. “Monetary and reputational damage await any FIs that get it wrong,” he says, “with social media ballooning the latter risk.”

The fall in banks’ return on equity since the 2008 crash and the extra cost of compliance are factors driving FIs to seek improvement in their compliance functions. They hope new technologies can reduce operational expense and increase controls. But as with any new system or approach, aligning people, processes and technologies is a vital management component to any regtech implementation.

A stricter Know Your Customer (KYC) regulatory regime has been evident in recent years. Large fines, reputational damage, counterparty risk and lost business efficiency await those that don’t align their operations with stronger financial crime rules on money laundering and sanctions screening, or new tax-reporting duties such as the US’s supranational Foreign Account Tax Compliance Act.

“KYC is a nightmare for our operating units currently and is quite onerous,” says Royston Da Costa, group assistant treasurer at Wolseley Group Services. He oversees treasury systems at the UK-based plumbing, heating and engineering firm.

In extreme cases, strengthened rules may even mean banks ‘de-risk’ by exiting certain countries, such as Syria or Russia, from fear of fines, making operations and cross-border payments harder.

“I haven’t seen banking partners withdraw from ‘at risk’ countries yet,” says Michael Connolly, an experienced corporate treasurer and former chair of the Investment Committee for Jewelers of America. “But the scrutiny on transactions and movements of funds and documentation burden is certainly increasing.”

A move toward more transparency after the 2008 crash is a major factor why treasuries—and the banks they use—must report more KYC information than ever before. The US Dodd Frank rules and European Market Infrastructure Regulation also mandate that derivative trades be stored to make it easier to unwind any future Lehman Brothersstyle collapse. This and other transparency, capital adequacy and anti-terrorist financing and corruption mandates are all adding to the data load on financial institutions. The surge of customer due diligence and trading data requests is clogging up on-boarding processes and hampering efficiency, while adding to costs at a time when most financial institutions are seeking to cut them.

No wonder that these entities, including treasuries, are turning toward utilities such as the SWIFT KYC Registry, Thomson Reuters’ Accelus Org ID managed service, the Depository Trust & Clearing Corporation’s Clarient Entity Hub and Markit’s kyc.com offering, among others. By sharing the compliance burden, instead of relying on expensive proprietary systems in noncompetitive areas, financiers gain economies of scale.

There is no need to reenter data for multiple requests if counterparties are on the same platform. “Corporates can register themselves on our platform and upload documents that are normally requested from their banks,” says Darren Thomas, head of counterparty management at Markit.

Most such utilities are aimed at specific audiences in the securities hedging or corporate arena, or correspondent banks in SWIFT’s case, but there is crossover and competition. Some offer direct access to corporate treasuries; some don’t. All operate on the basis that users can upload their own details for others to access as required and benefit from the same collaboration in return.

The Clarient utility, for instance, used by 120 firms worldwide, enables corporates to establish handshakes with their banks, broker dealers and asset managers to exchange content and provide the necessary KYC and new account documentation. “Institutions are looking to reduce the time and complexity required to begin banking or trading, while ensuring all regulatory and compliance requirements are met,” explains CEO Matthew Stauffer.

Connolly believes that banks, as the conduits of international finance, “will be more the target of regulators,” and consequently looks to them to take a lead—if not exclusive—compliance role. “I expect banks to continue to be diligent in their review of documentation,” he says, and adds that KYC utilities will only be extremely useful once the banks and regulators get comfortable with the standardization of their information.

“We use Thomson Reuters’ KYC platform at Groupe SEB,” explains Istanbul-based chief financial officer Mustafa Kiliç. “It is a help, as is the fact that banks are more willing to share data with us than they were previously. However, not all companies use the same platform, of course, and there is a limited amount of cleansed, verified information. There are too many platforms, in my opinion. Ideally, you just want one overarching utility for efficiency purposes.”

Thomson Reuters is targeting corporates and, indeed, won a Process Innovation award in Global Finance’s Innovation Leaders in Corporate Finance 2016 event this year for its KYC partnership with Vodafone. According to the citation, the project “provided a secure intermediary for the distribution of KYC documents.” It’s an ideal description of what a utility should do.

Once upon a time, a treasury management system (TMS) was enough for a multinational corporation wanting to consolidate its treasury operations and introduce more automation, tracking and technology to support operational centralization. But increasingly, treasury and risk management (TRM) solutions are wanted instead, as treasuries become more eager to mitigate, track and report on their risk while complying with a raft of new regulations.

Corporate treasury departments have always been attuned to risk, according to Michael Connolly, former chair of the Investment Committee for Jewelers of America and treasurer at Tiffany & Co. But more recently, awareness has spread to other decision-makers. “Boards, executives and colleagues are now more risk-aware,” says Connolly. “Therefore, treasury’s challenge has expanded to explaining risks and mitigation strategies to a broader audience.”

A TRM can help in this reporting duty, but Connolly, who chaired the Association for Financial Professionals board of directors in the US from 20102012, is not convinced the addition of advanced risk metrics and automated risk reporting to the traditional cash and liquidity management functions of a TMS is anything more than a marketing ploy.

“The ‘new’ technology is more of a repackaging than anything else,” he says, noting that risk data alerts and other associated capabilities can be added to traditional TMS platforms as bolt-ons.

Mustafa Kilic, chief financial officer at Groupe SEB, a French appliance maker of Moulinex, Tefal and other brands, disagrees. “Honestly, there are some differences,” says the Istanbul-based professional. “TMSs generally don’t have the pre-installed links to key risk indicators that treasurers want. Traditionally, they have key performance indicators instead, but nowadays we want in-built, integrated risk metrics too. In my opinion TRMs are a welcome development.”

Looking at the history of the TRM name helps gauge its value. Reval started using the term in 2011 when it added cash and liquidity management (previously the forte of TMS) to its preexisting financial risk management and hedge accounting software-as-a-service platform. The firm was founded in 1999 as a way to help corporates account for derivatives under the new US Financial Accounting Standards Board regulation, which stipulated that trades involving derivatives had to come onto the balance sheet. This resulted in profit and loss volatility and corporate restatements.

Reval’s move into the TMS arena used the TRM name to make it stand out—with a product to meet corporate demands for an all-in-one risk, cash, liquidity and compliance. According to Justin Brimfield, Reval’s chief marketing officer, it was also “a direct reflection of the market’s move toward risk.”

“It is hard and expensive to build out corporate risk management capabilities and associated reporting,” he adds.

Kyriba uses TMS and TRM inter-changeably. “Both terms describe our solution. TRM isn’t a registered or nonregistered trademark, so anyone can use it,” says Bob Stark, Kyriba’s vice president of strategy. “I wouldn’t say TRM is as widespread a term among corporates. It is less popular than TMS—even for treasurers seeking advanced risk management and hedging solutions.”

Further integration is available, however, claims Bloomberg, which launched its own Bloomberg TRM branded treasury technology in 2014, aligning it with its preexisting data and news provision. The use of the TRM name is telling and emphasizes the risk focus. “Our offering has a fully integrated risk capability leveraging Bloomberg’s risk tools, which are used to better identify, monitor and mitigate market risks,” says Bruce Manson, global head of corporate treasury product at Bloomberg.

Thomson Reuters wants in on the act as a similarly global data provider that is also now targeting the treasury and risk management space. As Sanjeev Chatrath, regional Asia-Pacific head of its financial and risk business, says: “Risk management has become a core responsibility for most C-level executives.”

Enrico Camerinelli, senior analyst at Aite Group, advises against getting hung up on the name: “It’s about being able to intercept signs of possible disruptive events and anticipate potential outcomes. A sort of risk portfolio analysis—that’s the key point of a TRM. In principle the shift is rather important, but today, for now, it’s largely cosmetic.”